National Practice Area: Employment and Industrial Relations
[2]
Counsel for the Applicant: Mr S Prince SC and Mr A Davis
[3]
Counsel for the Respondent: Mr J E Fernon SC and Ms K E Holcombe
[4]
BETWEEN: AEI INSURANCE GROUP PTY LTD (ACN 123 670 002)
Applicant
AND: CRAIG MARTIN
Respondent
[5]
order made by: THAWLEY J
DATE OF ORDER: 24 september 2024
[6]
THE COURT ORDERS THAT:
The respondent pay to the applicant damages in the amount of $500,000.
The respondent pay the applicant's costs as agreed or assessed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
THAWLEY J:
[7]
OVERVIEW
AEI Insurance Group Pty Ltd (the applicant) is an insurance broker with a focus on heavy vehicle insurance. Mr Craig Martin (the respondent) was employed by AEI from 26 July 2011 until 2 September 2022. Before that, Mr Martin had worked for many years in the trucking and repair industries. One of Mr Martin's roles at AEI was to grow the business in Queensland. By 1 June 2020, the Brisbane branch had four full-time employees apart from Mr Martin and a branch income estimated to be $1,320,000 for the year. A significant amount of Mr Martin's earnings from AEI was driven by commissions of 30% for new business and 5% for renewals.
Although he did not give evidence in the proceeding, the evidence indicated that Mr Martin had an attractive demeanour and personality and was engaging with people. By reason of the skills he had acquired before he worked at AEI, and those which he acquired at AEI, he was adept at assisting clients when their vehicles were involved in accidents, in arranging repairs and in assisting with claims. Likewise, he came to know about the insurance needs of his clients and assisted in meeting those needs although he did not have formal qualifications as an insurance broker. From the perspective of many of AEI's clients, Mr Martin was in practical terms the face of AEI's business in the Queensland market.
The telephone number for Mr Martin's Oppo AX5 mobile phone (which was the property of AEI) was AEI's 24/7 emergency accident assistance number. This was used for providing assistance in relation to accidents whenever they might occur and was also used by Mr Martin for his day to day work and personal life.
Mr Martin resigned his employment on 29 August 2022. Although he initially declined to say where he was going, on 31 August 2022, he informed AEI that he was moving to work for MA Brokers, an insurance broker which was (and remains) in direct competition with AEI in the Queensland market.
Understandably, AEI diverted its emergency accident assistance telephone number to one of its director's phones, Mr Donaldson.
On 1 September 2022, Mr Martin sent a short text message (SMS) to a number of contacts. The SMS provided his new telephone number (the New Telephone Number).
Mr Martin's resignation was accepted by AEI on 2 September 2022.
By 5 September 2022, AEI came to learn that Mr Martin had sent an SMS to at least one of its clients informing the client of Mr Martin's New Telephone Number. On 8 September 2022, AEI wrote to Mr Martin requesting, amongst other things, that he acknowledge and comply with the various post-employment restraints contained in his written employment contract and that he return all AEI property and delete all AEI client contact details.
Mr Martin retained solicitors (then Kennedys). AEI also retained solicitors (Chamberlains). Chamberlains continued to pursue the issues raised in AEI's letter of 8 September 2022. On 30 September 2022, Kennedys wrote to Chamberlains stating that there was "no basis to seek or necessity for our client to take any further action".
On 1 November 2022, AEI received at least 12 notifications from insurers that AEI clients (perhaps more accurately ex-clients) had signed letters of appointment nominating a new broker. Each of these was signed in the last 10 days of October 2022. The new broker was not identified, but it would have been obvious to AEI that the new broker was MA Brokers.
By 3 November 2022, AEI had received notifications that 21 AEI clients had signed letters of appointment nominating a new broker. To put this into perspective, the total income from these 21 clients in the year ended 28 August 2022 was just shy of $402,000 (in a branch with total income in the 2020 financial year of about $1,320,000).
On 8 November 2022, AEI commenced proceedings and, on 9 November 2022, the Court granted an interlocutory injunction which, amongst other things, restrained Mr Martin from soliciting AEI's clients. A further 24 clients were lost to MA Brokers after the injunction was granted. To put this into perspective, in the year ended 28 August 2022, the total income from the 45 AEI clients which moved to MA Brokers was $752,978.07.
AEI's claims were pleaded in a Statement of Claim dated 8 December 2022, later amended on 28 May 2024. The Statement of Claim raises claims for breach of contract, breach of an equitable duty of confidence, breach of fiduciary duties and breaches of ss 182 and 183 of the Corporations Act 2001 (Cth). The adequacy of these pleadings was hotly contested at trial as was almost all the evidence relied upon by AEI. Senior Counsel for AEI accepted that the principal case was for breach of contract and that the other claims were really "different formulations dealing with the same issue".
AEI also accepted that the damages would be the same in respect of each cause of action. For this reason, the closing submissions of both parties were focussed predominantly on the contractual claims and, in that respect, on breach of cl 12(c) of the employment contract.
AEI's claim was ultimately framed by reference to 51 clients which it alleged had moved to MA Brokers and its case on damages was quantified by reference to those clients. In closing submissions, AEI accepted that it could not make out a claim in relation to 6 of those clients. They are not further mentioned.
AEI's case with respect to many of its ex-clients is circumstantial. Much can be inferred from the general circumstances, including those just mentioned, particularly when that is supplemented by various contemporaneous communications which have been obtained and which are referred to below.
AEI encountered significant challenges in securing certain evidence to establish its case. AEI sought to obtain information which would be expected to have been available from Mr Martin's mobile phones. When AEI ultimately obtained the mobile phone which AEI had issued to Mr Martin, the Oppo AX5, that phone had been reset and so damaged by water immersion that no information could be retrieved from it. All that could be obtained was a list of contacts which was able to be extracted from the SIM card. A second mobile phone (an Oppo A94), probably acquired by Mr Martin on 31 August 2022, met with the unhappy fate of being run over by a lawn mower on 4 December 2022, five days after the Court had made an order for standard discovery. A third mobile phone (a Samsung Galaxy A53) was eventually discovered. It had no call logs or messages before 24 February 2023, in circumstances which suggested information had been deleted from it.
Whilst AEI issued many subpoenas for the production of documents, it did not adduce evidence from any of its ex-clients. This was not surprising given that, if anything, those clients were more likely to have been in Mr Martin's camp. Mr Martin also did not call direct evidence from any AEI client which moved to MA Brokers. It follows that there was no direct evidence from any client as to why the client moved to MA Brokers, supporting either AEI or Mr Martin.
AEI adduced evidence from one its directors, Mr Donaldson. He was cross-examined. AEI also relied on reports from forensic experts, two of which examined Mr Martin's mobile phones (Mr Yang and Mr Khoury) and on the report of a handwriting expert, Ms Holt. None of these experts were cross-examined by Senior Counsel for Mr Martin.
Questions of loss were addressed by a Court appointed expert, Mr Tony Samuel, whose instructions were agreed between the parties. He was asked questions by Senior Counsel for Mr Martin and then by Senior Counsel for AEI.
Mr Martin did not go into evidence. Parts of his sworn affidavits filed in the proceedings were tendered by AEI and that tender was supplemented by Mr Martin. Uncontroversially, this was done without Mr Martin going into evidence - see: Re Vassis; Ex parte Leung [1986] FCA 19; 9 FCR 518 at 519; Wimpole v Mcllwraith [1923] VLR 553; 29 ALR 427 at 555.
For the reasons which follow, AEI has made out its claim for damages for breach of contract. It is entitled to damages in the amount of $500,000.
[8]
FACTUAL BACKGROUND
AEI is a specialist insurance broking business with a focus on heavy vehicle insurance. As explained by Mr Donaldson, its services include:
Insurance broking services. The role of an insurance broker is to identify appropriate insurance cover for the client, give advice to the client as to appropriate cover, and negotiate a policy for the client with the insurer. The service involves structuring an insurance "program" for the client and includes negotiating with the various insurers on their product lines to come up with the best overall package for the client. Ongoing advice is provided throughout the year. Changes made to the client's program might be made as and when required. For example, additional cover might need to be put in place if a client purchased new vehicles.
Claims handling. When a client has an incident, AEI provides advice on whether coverage is provided by the policy and, if so, which policy. AEI works with the client and the insurer in ensuring a smooth and fair process for the client in relation to their claim. This may also involve communication and negotiations with third party providers such as assessors and making sure that the outcome that the client receives is the best possible outcome for the client.
Premium funding services. Where a policy or renewal is negotiated on behalf of a client, a premium funding contract can be arranged to pay the insurance premiums over a period of time. AEI organises the contracts with the premium funder. The premium funder then pays the entire premium to the insurer and the client pays off the premium funder over a period of time.
After hours and emergency response services. A client can contact AEI at any time in relation to an incident. Depending on the situation, salvage of the vehicle or load can be organised - the load may be delivered where it needs to go or be destroyed. Arrangements can be made for a damaged vehicle to be taken to a repair facility to be assessed by an assessor.
It was not in dispute that AEI competes in this industry with MA Brokers, which also provides the services identified above in the Queensland market.
AEI's income is derived mainly through:
commissions paid to it by insurers: A client which placed or renewed an insurance policy would pay the premium to the insurer through AEI and AEI would retain its commission;
the charging of brokerage fees to clients: The brokerage fee was an upfront fee that would be negotiated with the client to recoup the work that was anticipated for the client for the following year; and
fees earned from arranging premium funding. The commission on premium funding is obtained where AEI arranged for a client to receive finance for the payment of their insurance premiums. Where this occurred, AEI received a commission on settlement of the finance.
[9]
Mr Martin's employment with AEI
Mr Martin approached AEI as a person who could provide emergency accident support, including after-hours support, for AEI clients. Before commencing with AEI, Mr Martin had worked for many years in the vehicle repair and transport industries. Mr Martin had developed good relationships with participants in the trucking industry, including truck owners. He developed relationships with repairers and knew how they operated.
On 26 July 2011, Mr Martin commenced employment with AEI. At the time, AEI was known as Austbrokers AEI Transport Pty Ltd. Mr Martin was employed as an "account manager". Mr Martin's role as an account manager was different to other account managers employed by AEI because Mr Martin was not a licensed broker and did not have the formal qualifications for the required licence. Mr Martin brought to the role particular skills, including an ability to keep smash-repairers "honest", which AEI considered would advantage its business, including the growth of its business.
Mr Martin's duties included assisting AEI with new business growth opportunities, the retention of current clients and being a key contact person for clients, predominantly in Queensland, who had suffered collisions or incidents where claims assistance was required outside business hours. The telephone number for Mr Martin's mobile phone (which was the property of AEI) was AEI's 24/7 emergency accident assistance number. This was used for providing assistance in relation to accidents and also by Mr Martin for his day to day work and personal life.
From 1 July 2020, Mr Martin was paid a base salary, superannuation, a motor vehicle allowance and sub-agent commission of 30% of income for new business and 5% for policy renewals. At that time, the income of the Brisbane branch for the 2020 financial year was estimated to be approximately $1,320,000: CB1952. It was $1,031,543, $1,253,702 and $1,427,727 in the preceding three financial years: CB1952. This might suggest that AEI's new business was slowing by 2020 and, necessarily, that Mr Martin's commission from new work was reducing. Apart from Mr Martin there were four full time staff employed in the Brisbane branch. Mr Martin was probably the highest paid employee of AEI after Mr Donaldson and Mr Wedlock, who were not part of the Brisbane branch. Mr Donaldson would attend Brisbane once or twice a month and visit clients or potential clients with Mr Martin.
On 1 November 2020, Mr Martin and AEI entered into a written "Employment Agreement": CB1954-1980. Clause 4.1 provided:
Duties of the Employee
The Employee must carry out the tasks set out in the attached job description (Schedule 1), all tasks which are reasonably incidental or related to the tasks in the job description, and such other duties as the Company may specify from time to time. The Company reserves the right to alter the Employee's duties and responsibilities from time to time. Unless otherwise agreed in writing, in the event that the Company alters the Employee's position, duties and responsibilities, reporting line, working hours, remuneration or location of employment, the remainder of the terms set out in this employment contract continue to apply.
Schedule 1 specified that the work location was in Milton in Queensland and included:
Position Summary
To protect and grow the wealth of our clients by supporting their individual and business needs.
Provide professional financial services which are designed to identify and fulfil clients needs and objectives thereby maintaining client satisfaction and retention levels.
Achieve new business growth objectives by pursuing new business growth opportunities.
…
Clause 4.2 included:
General duties
During the Employee's employment and subject to the terms of this Agreement, the Employee must:
…
(d) avoid any actual or apparent conflicts with the interests of the Company or the Group and notify the Company immediately if, despite this duty, an actual or apparent conflict arises;
(e) serve the Company to the best of the Employee's ability;
(f) act in the best interests of the Company and the Group;
(g) use all reasonable endeavours to promote and develop the interests of the Company and the Group;
…
(i) promptly notify the Company of any information received by the Employee which is likely to be of use or benefit to the Company…
Clause 5.4 included:
Other benefits
The Employee may be entitled to the following benefits, subject to the Company's policies as amended from time to time:
…
(c) mobile telephone - The Employee may be provided with a mobile telephone for business and reasonable personal use. On the cessation of your employment with the Company, the Employee must return the mobile telephone and establish to the reasonable satisfaction of the Company that no business-related information and/or Confidential Information has been copied, sent, downloaded or otherwise transferred from the mobile telephone and sim card to any other source.
Clause 12 included:
Restraint
The Employee must not either directly or indirectly:
(a) accept any engagement intended to commence after termination of the Employee's employment with the Company which requires the Employee to use or disclose any Confidential Information;
(b) during their employment with the Company and for the Restraint Period, in the Restraint Area, engage or prepare to engage in any business or activity that is the same or similar to or in competition with the business of the Company in which the Employee was employed at any time during the last 12 months' of the Employee's employment;
(c) during their employment with the Company and for the Restraint Period, solicit, canvass, deal with or approach or accept any approach from any person or organisation who was at any time during the last 12 months' [sic] of the Employee's employment a client or customer of the Company in that part or parts of the business of the Company in which the Employee was employed and with whom the Employee had dealings with or influence over, with a view to obtaining the business of that client or customer in a business that is the same or similar to or in competition with the business of the Company;
…
12.4 Remedy for breach
The Employee acknowledges that any breach by the Employee of this clause 12 would cause irreparable harm and significant damage to the Company and accordingly that the Company has the right to seek and obtain immediate injunctive relief in relation to any such breach in addition to any other remedy available.
12.5 Acknowledgements
The Employee acknowledges that:
(a) each of the restrictions specified in this clause are reasonable and necessary to protect the legitimate interests of the Company and the Group;
(b) they have received, or had a reasonable opportunity to receive, independent advice about the terms and effect of this Agreement, including clauses 12 and 13;
(c) having taken such advice as the Employee deems appropriate, the terms of this Agreement are fair and reasonable; and
(d) the Base Remuneration has been determined by reference to, among other things, the terms of clauses 12 and 13.
12.6 Severance
Each restraint contained in this clause (resulting from the combination of the wording in subclauses 12 and 12.7) constitutes a separate and independent provision severable from the other restraints. If any part of the restraint (including any associated definition) is judged to be void or unenforceable or illegal because it goes beyond what is reasonable to protect the interests of the Company or for any other reason, it will be read down so as to be valid and enforceable. If it cannot be so read down, the provisions (or where possible, the offending words) will be severed from this clause without affecting the validity or enforceability of the remaining provisions (or parts of those provisions) of this clause, which will continue to have full force and effect.
[10]
29 August 2022: Mr Martin's resignation
Mr Martin resigned on 29 August 2022, to cease employment on 23 September 2022: CB4113. Mr Donaldson gave evidence that the following conversation occurred between himself and Mr Martin on that day: Donaldson 1 at [16]. References to "Dono" are to Mr Donaldson:
Donaldson: It's good of you to ring me and welcome to Queensland
Martin: I'm not Dono
Donaldson: Is everything ok?
Martin: No mate, I am going to hand in my notice.
Donaldson: Are you serious?
Martin: Yes mate.
Donaldson: Why what's wrong?
Martin: I don't really want to talk about it. I can't deal with stress at the moment because of my health condition. Please don't contact me, I will give you a call in a couple of days.
Donaldson: Mate I'm worried about you. I'm in Brisbane, I will come and see you.
Martin: No Dono, I don't want to see you, please don't contact me.
Donaldson: I'd like to have a chat with you to understand your decision, I will talk to you when you are ready.
Martin: I've expressed numerous times that I wanted to be a broker and AEI won't let me. I don't need the pressure I'm currently under with working after hours and working all day. Your structure doesn't allow me to provide a nest egg for my kids, and your structure doesn't allow it because you keep the clients. AEI isn't in the same place it was a couple of years ago, and I just don't want to work here anymore.
Later that day, Mr Donaldson sent Mr Martin a text message (Donaldson 1 at [18]):
Hi mate, thanks for your call this morning, I understand that it was tough for you, but that was really strange for me. I had no idea you were feeling that way and I'm still at a loss. I would like to be able to discuss this in more detail. I don't believe you have ever shown any interest in being qualified, so if that was my mistake on my part, then I will own it. As for a nest egg, when I look at what you have been earning while at AEI it is pretty significant dollars compared to previous roles and in words you have passed on from Sandra [Martin] when I have asked about your workload she has said 'does Dono know how hard you used to work'. We took the pressure off when you had the health scare earlier in the year and can do that again if you need it. While I understand that there has been a high turnover in the last 6 months, I - maybe mistakenly - put that down to 1 bad egg upsetting the team. Happy to hear more if you think it is more than that. We are rebuilding and I don't want to see you go. I'd like the chance to meet up and discuss this please, so let me know when suits. I'm not going to put pressure on you, but feel there is something strange that this has all come out now when we have previously been close enough to be able to talk through any issues. I'd also like to know where it is you are going as depending on the role, it may add more pressure to you personally. Talk when you're ready. Thanks. Dono
On 30 August 2022, Mr Donaldson had a further conversation with Mr Martin. Mr Donaldson gave evidence that the following was said:
Martin: I'm just coming back from Alistair McKay. I have all the renewal paperwork.
Donaldson: Thanks Craig, the guys in the office will deal with this when it was received. Can we have more of a chat about your reasons for resigning?
Martin: I don't really want to talk about it.
Donaldson: After 11 years, I think you owe it to us to have at least a chat about your decision, particularly because we have been such good mates during this time. There must have been a misunderstanding between the two of us as to what the other person was after.
Martin: I don't really want to talk about it because I can't deal with the stress.
Donaldson: I don't want to stress you mate, all I want to do is understand from our side what went wrong. As a mate, I want to make sure that you're ok and discussions around a nest egg sound strange to me when you're on pretty good money with us. If you received another offer, I'm happy to talk to you about it and I can give you some advice based on my experience on what to look out for.
Martin: I don't want to talk about it, I don't want to be talked around about it and I don't want to come back to AEI.
Donaldson: Why not?
Martin: It's just not the same business as it was. It's a big business now and it has lost what it once had. You've lost touch and don't know everyone anymore - it isn't the fun days we used to have when you and I would run around picking up clients.
Donaldson: The business has grown to a point where this just can't happen anymore, but that was exactly what we set out to do - we wanted to grow the business.
Martin: I don't want to work at AEI any more Dono, I just don't.
Donaldson: Well mate, did you not think you could have this chat with me?
Martin: Dono, it's always your way or the highway.
Donaldson: What does that mean?
Martin: Sometimes we can't talk to you.
Donaldson: Can I ask where you're going?
Martin: I don't want to tell you that.
Donaldson: Don't you think we have a right to know?
Martin: I'm not going to do the wrong thing Dono. I've already referred … a new client to Liam in the North Sydney office this morning.
Donaldson: On one hand, you're asking me to trust you, but on the other you won't tell me where you are going. Can you see how that is making me not trust you? In time, I would like to know where you are going and keep in contact with you.
On 31 August 2022, Mr Donaldson revoked Mr Martin's access to AEI's computer systems and diverted Mr Martin's work email address and telephone number to Mr Donaldson: Donaldson 1 at [22]. It was necessary for Mr Donaldson to do this because the telephone number used by Mr Martin was AEI's 24/7 emergency accident assistance line: Donaldson 1 at [22]. The telephone which AEI had provided to Mr Martin was an Oppo AX5.
At 2:59pm on 31 August 2022, Mr Donaldson sent Mr Martin a message informing him that the telephone number had been diverted. Shortly after, Mr Donaldson received a call from Mr Martin. Mr Donaldson gave the following account of the call (Donaldson 1 at [24]):
Martin: Why has my phone been diverted?
Donaldson: I diverted it as you have said earlier in the week that you can't deal with the stress, and you also haven't advised AEI as to where you were going. Under these circumstances, AEI thought it was best for all concerned for me to divert the phone number.
Martin: How can you divert the phone? It's my phone which I have had forever.
Donaldson: As far as I know, and I'm not in charge of the phone plans, the phone is owned by AEI.
Martin: It isn't.
Donaldson: I'll look into it and let you know.
Martin: If I lose that number, I will lose all my contacts.
Donaldson: Well how do you think it is fair that you get to keep the number that we have provided to AEI clients as our after-hours number and main number for contact purposes for the past 11 years?
Martin: If I don't get that number back, there will be fucking dramas.
Donaldson: Calm down. You said earlier in the week that you couldn't deal with the stress and there will be an answer. I don't deal with the phone accounts so I don't have an answer right now. Can you tell me where you are going?
Martin: I don't want to and I don't know why you need me to tell you.
Donaldson: In these circumstances, it is normal for people to advise where they are going.
Martin: Did you make Wal and Dora [former AEI staff members] tell you where they went?
Donaldson: I didn't make them mate. They are professional and they told us when they resigned where they were going. Maybe that's the difference between you and them.
Martin: Fine then. I am going to MA.
Donaldson: Fair enough mate. Barry is a good bloke. In relation to the phone, ask Barry if he has a solution as he may have come across this issue before. If there is a way that none of us need to lose, we'll be happy to explore it.
Martin: Ok.
At some point in August 2022, Mr Martin acquired a new mobile phone, being an Oppo A94, with the New Telephone Number: CB4717.
[11]
1 September 2022: Mr Martin sends text messages to AEI clients
On 1 September 2022, Mr Martin sent a text message to various contacts. In his affidavit, Mr Martin stated (Exhibit 5 at [18]):
By reason of the Telephone Diversion, I immediately made arrangements for a new mobile telephone number as I was concerned that my family and friends could not contact me in the event of an emergency (noting I had a stroke in January 2022). On 1 September 2022, I sent an SMS text message to contacts that I had saved to my previous mobile telephone to notify them of the new mobile telephone number that I had obtained, and that SMS text message said "Craig martins new phone number [New Telephone Number]".
AEI tendered the last sentence in the passage extracted above and Mr Martin tendered the first sentence of the paragraph extracted above.
There was direct evidence that the message "Craig Martin's new phone number [New Telephone Number]" was received on 1 September 2022 by two AEI clients: Mr Frederiksen (CB4120) at 4:32pm and Mr McMahon (CB4642) at around 5:00pm.
The evidence also directly established that the message "Craig martins new phone number [New Telephone Number]" was received on 1 September 2022 by one client, Mr Douglas at 6:34pm (CB4126). I infer that the message was sent only to AEI clients (that is, not to personal contacts or employees of AEI) and that it was sent to all of the AEI contacts which were contained in the SIM card in the Oppo AX5. In addition to this inference arising from the circumstances referred to above and later in these reasons, this inference arises from:
Mr Martin's evidence that he "sent an SMS text message to contacts that I had saved to my previous mobile telephone to notify them of the new mobile telephone number that I had obtained" and the impersonal and simple terms of the message which suggest it was a message sent to multiple people: Exhibit 5 at [18].
The fact that Mr Martin dealt with each of the clients and that Mr Martin had been the 24/7 emergency accident assistance contact for AEI for 11 years. Indeed, it is likely that the emergency accident number was "the number the clients contact for day-to-day service for 11 years" as Mr Donaldson stated in his email of 2 September 2022: CB4127.
The absence of any direct evidence that the SMS was sent to any person at AEI or to any family or friends of Mr Martin. Mr Donaldson did not receive the message: Donaldson 1 at [30].
An inference available on the evidence may "be more confidently drawn when a person presumably able to put the true complexion on the facts relied on as the ground for the inference has not been called as a witness … and the evidence provides no sufficient explanation of his absence": ASIC v Hellicar [2012] HCA 17; 247 CLR 345 at [168] citing Jones v Dunkel [1959] HCA 9; 101 CLR 298 at 308 per Kitto J; see also at 312 per Menzies J, 320‑321 per Windeyer J.
Mr Martin could obviously have given evidence in relation to the identity of the contacts to whom he sent the message. There was no explanation of a kind contemplated by the Jones v Dunkel principle for his failure to give evidence.
[12]
2 September 2022: Mr Martin's employment ceases
On 2 September 2022, Mr Martin's employment ceased. At 1:41pm, Mr Donaldson sent an email to Mr Martin which included (CB4127):
Hi Craig
Thanks again for your phone call on Monday and your subsequent resignation via email the same day.
I'm glad that we had the opportunity to chat on Wednesday to understand more of the reasoning behind your decision and I thank you for sharing what you did. Whilst I don't like your decision, I can appreciate it.
Due to your admission of stress related concerns we removed your access to the system and also have had the AEI Emergency response number which you managed while employed diverted to my phone to ensure continuity of service to the clients and also to take the pressure off you. I will ensure that any emails of a personal nature are forwarded to this email address [being Mr Martin's wife's email address]. I did send a few via one email last night which I trust you have received, it [sic - if] not let me know and I can re-send them.
We did look into the phone situation we discussed and Telstra have confirmed that the number is an AEI number, reflected on our accounts and as such we plan to retain the number given that it has been our emergency response number, plus the number the clients contact for day-to-day service for 11 years. We trust that you can appreciate this. I received confirmation via email yesterday also that you have set up a new number.
We have noted that you were prepared to work out your full notice period and make your final day Friday 23 September, but under the circumstances, we have decided to end your time with us immediately. We will continue to pay you until the 23rd of September and we will ensure that all outstanding leave entitlements are paid into your account. This will be calculated and paid to you today and Lisa will provide you with the calculations on how this has been done for your records.
…
We appreciate your confirmation that you don't plan to do anything wrong by the business (AEI Insurance Broking Group), but formally we need to outline the following conditions which form part of our employment agreement;
You cannot retain or record any Confidential Client information in any form after termination from the Company.
You are currently under a 12 month restraint, which means you cannot contact any clients or staff of AEI.
We would like to thank you for all you have done to build our brand over the past 11 years. I've personally enjoyed all we have done work-wise (OK, maybe not PNG), but more importantly our friendship and I hope that this can continue into the future.
If you feel up to it, I would like to organise an appropriate farewell for you with the AEI QLD team, so let me know if you would like to do this and we can lock something in.
Finally, we wish you and your family all the best into the future.
[13]
Mr Martin commenced employment with MA Brokers
The evidence does not directly establish when Mr Martin commenced employment with MA Brokers. However, I infer from the course of events referred to above that Mr Martin resigned from AEI in order to commence employment with MA Brokers.
Although the precise terms of Mr Martin's employment with MA Brokers are not known, it is known that his employment is "largely on the same terms" as his employment with AEI: Exhibit 6 at [18]. That is, Mr Martin would receive a 30% commission on new business which he brought to MA Brokers and 5% for renewals of that business. In the year ended 28 August 2022, the total income from the 45 AEI clients which moved to MA Brokers was $752,978.07 - derived from: Samuel at CB4783-4784.
[14]
5 September 2022: AEI becomes aware of 1 September 2022 text message
On 5 September 2022, Mr Donaldson became aware that Mr Martin had sent a text message on 1 September 2022 to one of AEI's clients, namely Mr Tyler Douglas of Douglas Transport: CB4126. Mr Douglas sent Mr Donaldson a screenshot of the message which he had received. It is clear from the course events which followed that AEI considered that the text message had been sent to a number of AEI clients.
On 8 September 2022, AEI's Managing Director, Mr Wedlock, sent an email to Mr Martin and attached a letter which included (emphasis original):
…
We refer to the contract of employment between you and Austbrokers AEI Transport Pty Ltd (AEI). As you are aware, that updated contract of employment (the Contract) commenced on 1 November 2020 and ceased to have effect on 2 September 2022 when your resignation was accepted with effect from that date.
We appreciate the efforts you have made on AEI's behalf whilst you were employed with AEI, and out of appreciation, aim to remain amicable with you despite the fact you are no longer employed with us. However, an incident has come to our attention which has made it appropriate for AEI to remind you of your ongoing responsibilities to AEI pursuant to the Contract.
In accepting the updated Contract on 1 November 2020, you agreed to a restraint which survived the termination of your employment. For ease of reference, we note that clause 12 of the Contract reads as follows:
[Clause 12(a), (b) and (c) are set out]
The term Restraint Period is defined at clause 12.7(b) in a cascading fashion, with a period of 12 months initially nominated. The term Restraint Area is similarly defined in a cascading fashion at clause 12.7(c), with an Australia wide geographic limit initially nominated. Confidential Information is defined at clause 13.1(a), but for the purposes of this correspondence, we note that client contacts are included within that definition.
…
From AEI's perspective, there can be no dispute that the restraint as outlined above is in place for 12 months from 2 September 2022. Furthermore, whilst AEI understands that you may be entering into new employment which is in breach of clause 12(b) identified in italics above, at this point, AEI will not seek to enforce the restraint identified within that subclause to prevent you from engaging in this line of business. This step is taken without prejudice to AEI later changing its position and attempting to enforce this restraint if the relationship between you and AEI cannot remain professional and amicable.
What will not be accepted by AEI, in any way, shape or form, is a breach of the restraint identified in subclause 12(c) above. That is, to protect AEI's business interest, we cannot accept any form of action or steps taken to solicit, canvass, deal with, approach or accept any approach from AEI clients who you dealt with whilst you were employed with AEI during the relevant period. Regrettably, if such a breach occurs, not only to protect AEI's commercial interests with the relevant parties, but to ensure that other employees of AEI are not encouraged to depart from their obligations to AEI upon terminating their contract of employment, we are left with no option but to commence litigation to enforce AEI's rights and seek damages for loss of business.
We also note that, as part of the Contract, you agreed that you would only use Confidential Information for the purposes of performing your duties for AEI pursuant to the Contract (Clause 13.2(a)). You also acknowledged that, in the event that there was a suspected or actual breach of this responsibility, you would notify us of that suspected or actual breach (Clause 13.2(c)) .
It has come to our attention that, on 1 September 2022, a number of AEI clients with whom you were dealing with have received a text message from you simply stating "Craig martins new phone number [New Telephone Number]". The basis upon which this text message was sent is not clear to us, but to the extent that the text message was an approach to AEI clients with a view of obtaining business from that client, it is in breach of your responsibilities outlined above. If an AEI client were to subsequently contact you within the Restraint Period and seek to do business with you, you would also be in breach of the Contract. Furthermore, it is our view that the sending of the text, utilising Confidential Information, was a breach of your obligations under the contract pursuant to Clause 13.2(a) as there is no discernible basis we can identify that suggests this text was in the interests of AEI. Finally, it was a breach of your obligations pursuant to the Contract to not tell AEI that the text was sent, following the transmission of the message.
Notwithstanding the present position, the text being sent and the failure to report the text being sent, AEI is prepared to overlook the current issues on the basis you agree to the following by way of return correspondence, and take the relevant action required as per the following 5 points;
You confirm that you understand your obligations pursuant to the Contract and that you undertake to ensure that you will not further breach any of the terms of the Contract, including but not limited to the restraint;
2 . You will return all property of AEI within your possession, including but not limited to anything that represents Confidential Information belonging to AEI within seven days. This includes all documents physically within your possession and copies thereof;
You have deleted all AEI client contact details, and will ensure that if you discover any further AEI client contact details from AEI material, you will delete them (an obligation you agreed to at clauses 15.6(c) and (d) of the Contract);
You have deleted all electronic material belonging to AEI within your possession, including but not limited to emails and documents on any computer or telephone within your possession and control;
You will not make contact with AEI clients during the Restraint Period.
Whilst AEI regrets that it is necessary to seek this confirmation from you, in light of the text message sent to AEI clients as identified above, it is our view that it is appropriate that this step is taken and you identify your position in relation to same. We seek you provide this confirmation, by way of reply correspondence, within 48 hours of the date of this letter. We will accept this confirmation by email to: hr@aeigroup.com.au
In the absence of confirmation from you as requested, AEI will be left with no choice but to assume that you do not wish to comply with the clauses of the Contract that survive your termination of employment. As noted above, there is an inherent requirement for us to protect AEI's business interests and enforce AEI's rights pursuant to the Contract. This being so, if the above timeframe is not complied with, we put you on notice that we intend to brief our solicitors to take appropriate action in relation to the breaches of Contract that have already occurred, and to prevent any further breaches occurring. This may necessarily lead to the incurring of legal costs, which ultimately, we will seek to recover from you in a Court of competent jurisdiction.
We trust this step is not necessary, and we hope that no further action needs to be taken. AEI wishes to maintain a professional and respectful relationship with you without the need for recourse to litigation, however, steps will be taken if we consider it is necessary to protect AEI's business interests. We do not consider that litigation will be in your interest, but AEI cannot allow any further breaches to occur without taking action.
On 9 September 2022, Kennedys sent a letter to AEI requesting more time to respond on behalf of Mr Martin: CB4133. On 21 September 2022, AEI's solicitors, Chamberlains, wrote a letter to Kennedys seeking a response to Mr Wedlock's '5 point request' as set out in his letter dated 8 September 2022: CB4136. On 30 September 2022, Kennedys wrote to Chamberlains stating (CB4145):
Your client has not specified any facts nor circumstances tantamount to non-compliance and in those circumstances, there is no basis to seek or necessity for our client to take any further action.
[15]
November 2022: AEI clients move to MA Brokers
On 1 November 2022, AEI received notifications by email that 12 letters of appointment had been received by insurers in relation to clients (or ex-clients) of AEI. The letters of appointment each appointed MA Brokers as the relevant client's broker, although this fact was not divulged to AEI by the relevant insurer. The email notifications were as follows:
Johnnie Bundy Liquids Pty Ltd: CB4175 (NTI Limited). The appointment was made with effect from 24 October 2022: CB4175. The relevant letter of appointment was dated 24 October 2022: CB1651. This client moved to MA Brokers: Exhibit 5 at [78].
Wilton's Transport Pty Ltd: CB4176, 4196 (NTI); 4162 (Specialist Underwriting Agencies (SUA)); 4165 (Berkley Insurance). The relevant letter of appointment was dated 23 October 2022: CB4176; 1643. This client moved to MA Brokers: Exhibit 5 at [50].
Hanicourt Transport Pty Ltd: CB4158 (SUA); 4174 (NTI); 4192 (Berkley); 4195 (NTI). The relevant letter of appointment was dated 27 October 2022: CB1654; 4528. This client moved to MA Brokers: Exhibit 5 at [87]. Ms Holt's evidence was that parts of the letter of appointment were filled out in Mr Martin's handwriting: CB4528.
Freightshift Pty Ltd: CB4167 (Berkley). The relevant letter of appointment was dated 31 October 2022: CB1637. This client moved to MA Brokers: Exhibit 5 at [35].
Dellmex Pty Ltd trading as Barellan Freighters: CB4161 (SUA); 4171 (Berkley). The relevant letter of appointment was dated 21 October 2022: CB1638. This client moved to MA Brokers: Exhibit 5 at [38].
A Mackay & Son Truckin Pty Ltd: 4159 (SUA); 4180 (Zurich Insurance); 4194 (NTI). The relevant letter of appointment was undated, but must have been signed by 1 November 2022: CB1640. This client moved to MA Brokers: Exhibit 5 at [41].
Bondwoods Transport Pty Ltd: CB4169 (Berkley). The relevant letter of appointment was dated 25 October 2022: CB1641; 4524. This client moved to MA Brokers: Exhibit 5 at [44]. Ms Holt's evidence was that one word on the letter of appointment was in Mr Martin's handwriting: CB4524.
Boardman Sand and Gravel Pty Ltd: CB4163 (SUA); 4172 (GT Insurance). The relevant letter of appointment was dated 27 October 2022: CB1642; 4529. This client moved to MA Brokers: Exhibit 5 at [47]. Ms Holt's evidence was that parts of the letter of appointment were filled out in Mr Martin's handwriting: CB4529.
STA Trucking Pty Ltd: CB4160 (SUA); 4168 (Berkley). The relevant letter of appointment was dated 26 October 2022: CB1644. This client moved to MA Brokers: Exhibit 5 at [53].
Quickwell Express Pty Ltd: CB4164 (ATL Insurance Group); 4166 (Berkley); 4193 (NTI). The relevant letter of appointment was dated 31 October 2022: CB1645. This client moved to MA Brokers: Exhibit 5 at [56].
AJ & KG Frederiksen Pty Ltd: CB4170 (Berkley); 4173 and 4183-4 (NTI). The relevant letter of appointment was dated 31 October 2022: CB1646; 4525. This client moved to MA Brokers: Exhibit 5 at [61]. Ms Holt's evidence was that parts of the letter of appointment were filled out in Mr Martin's handwriting: CB4525.
JM Treeby Holdings Pty Ltd trading as JMT Transport: CB4157 (SUA); 4191 (Berkley). The relevant letter of appointment was dated 22 October 2022: CB1652; 4520. This client moved to MA Brokers: Exhibit 5 at [81]. Ms Holt's evidence was that parts of the letter of appointment were filled out in Mr Martin's handwriting: CB4520.
Mr Martin submitted that Ms Holt's evidence should be given no weight on a number of bases including that she assumed that the specimen handwriting samples she had been given were the handwriting of Mr Martin.
Mr Donaldson, who worked with Mr Martin, identified Mr Martin's handwriting. Further, the specimen handwriting samples include what are clearly file notes written by Mr Martin during the course of his work on AEI file notepaper - see: s 183 of the Evidence Act 1995 (Cth) (EA). Senior Counsel for Mr Martin made a number of other submissions about weight including that Ms Holt's evidence should be given no weight because she assumed that reproduced documents (that is photocopies) were true and accurate copies of the corresponding original. Ms Holt considered she was able to furnish the opinions she did on the basis of the material she had been given. Because she was not cross-examined, it was not put to Ms Holt that the copies she was given were inadequate. None of Mr Martin's other complaints were put to Ms Holt. Ms Holt's unchallenged evidence is persuasive. Mr Martin's handwriting appears on five letters of appointment.
On 1 November 2022, Chamberlains wrote to Kennedys regarding AEI's loss of clients, the letter including (CB4154):
… Today, a number of AEI's clients have provided letters of appointment identifying an intent to cease business with AEI and change to another brokerage. It has been confirmed to our client that these clients were in contact with Mr Martin, who has facilitated and been involved in this transition to the new brokerage, which we understand engaged Mr Martin prior to this action.
In our client's view, this is a direct breach of the restraint that has been previously identified in our correspondence, and agreed to by Mr Martin. Our client has no choice but to take steps to enforce its rights pursuant to the employment contract and seek damages for the losses incurred. We are presently instructed that the damages incurred are significant, and in due course, our client will be seeking judicial intervention to claim damages and stem the further losses that are being incurred by Mr Martin's actions. We note that notice has been provided to Mr Martin directly, and to you, about the restraint and the outcome of breach of same, but this does not seem to have dissuaded Mr Martin from taking steps in direct contravention of his obligations.
Whilst damages have already been incurred, we seek you notify your client immediately of our client's intent to commence proceedings. We also call for Mr Martin to cease taking steps that will further increase the damage to our client.
Please confirm that you have contacted your client and relayed this message, and provide us with his response. We otherwise seek your confirmation that you will act for Mr Martin in the proposed litigation, and whether you are instructed to accept service of any relevant originating process. Please provide this response by close of business, 2 November 2022.
On 2 November 2022, AEI received further emails from various insurers stating that a letter of appointment had been received appointing a new broker (but not specifying the identity of the new broker):
Eastwells Haulage Pty Ltd: CB4189 (Berkley). The relevant letter of appointment was dated 26 October 2022 and related to insurance with several insurers: CB1649. This client moved to MA Brokers: Exhibit 5 at [72].
Lawroad Pty Ltd: CB4182 (Allianz Insurance). The relevant letter of appointment was dated 21 October 2022 and related to insurance with several insurers: CB1639. This client moved to MA Brokers: Exhibit 5 at [38].
JVB Transport Pty Ltd: CB4188 (Berkley). The relevant letter of appointment was dated 27 October 2022 and related to insurance with several insurers: CB1656. This client moved to MA Brokers: Exhibit 5 at [94].
Kedph Pty Ltd trading as Grand Connect Group: CB4181 (QBE); 4190 (Berkley). The relevant letter of appointment was dated 26 October 2022 and related to insurance with several insurers: CB1657. This client moved to MA Brokers: Exhibit 5 at [97].
On 3 November 2022, AEI received an email stating that a letter of appointment had been received appointing a new broker (but not specifying the identity of the new broker) as follows:
Bill Humphries Transport Pty Ltd: CB4156 (SUA). The relevant letter of appointment was dated 24 October 2022 and related to insurance with several insurers: CB1655; 4185; 4186. This client moved to MA Brokers: Exhibit 5 at [90].
Over the course of 1 to 3 November 2022, AEI was also notified by telephone by various insurers that a letter of appointment had been received appointing a new broker in relation to the following clients:
S & J McMahon Transport (Qld) Pty Ltd. The relevant letter of appointment was dated 26 October 2022: CB1648. This client moved to MA Brokers: Exhibit 5 at [69].
WGH & GM Kelly. The relevant letter of appointment was dated 28 October 2022: CB1647. This client moved to MA Brokers: Exhibit 5 at [64].
GF & S Morgan Transport. The relevant letter of appointment was dated 24 October 2022: CB1650. This client moved to MA Brokers: Exhibit 5 at [75].
Nevens Haulage Pty Ltd. The relevant letter of appointment was dated 26 October 2022: CB1653. This client moved to MA Brokers: Exhibit 5 at [84].
[16]
8 November 2022: AEI commences proceedings
On 8 November 2022, AEI commenced these proceedings. At the same time, AEI sought urgent interlocutory relief restraining Mr Martin from soliciting or dealing with AEI clients.
On 9 November 2022, Wigney J granted interlocutory relief: AEI Insurance Group Pty Ltd v Martin [2022] FCA 1384. His Honour's orders included:
Until final orders are made in this proceeding or until 2 September 2023, whichever occurs first, the defendant be prohibited and injuncted from directly or indirectly soliciting, canvassing, dealing with, approaching, or accepting any approach from, any person or organisation who was at any time during the last 12 months of the defendant's employment a client or customer of the plaintiff in the part or parts of the business of the plaintiff in which the defendant was employed and with whom the defendant had dealings or influence over.
Until final orders are made in this proceeding or until 2 September 2023, whichever occurs first, the defendant be injuncted or otherwise restrained from using or disclosing to anyone any confidential information of the plaintiff comprising or including client contacts and client lists which he acquired in the course of his employment with the plaintiff.
[17]
Events from 10 November 2022
On 10 November 2022, a person from Boardman Sand and Gravel sent an email to Mr Martin's MA Brokers email address stating (CB4585S):
We have sold truck 235 SPY and trailer 571QUY - Can they please be removed from our policy.
Mr Martin responded on 11 November 2022: "Thank you done". These emails were obtained from Mr Martin's Samsung Galaxy A53.
On 11 November 2022, AEI received an email stating that a letter of appointment had been received appointing a new broker (but not specifying the identity of the new broker) as follows:
John Patrick Gonzo trading as Market Gate Logistics: CB4274 (Berkley). The relevant letter of appointment was dated 2 November 2022 and related to insurance with several insurers: CB1658. This client moved to MA Brokers: Exhibit 5 at [100].
On 14 November 2022, AEI received an email from an insurer stating that a letter of appointment had been received appointing a new broker (but not specifying the identity of the new broker):
Ricjul Pty Ltd: CB4275 (NTI). The relevant letter of appointment was dated 2 November 2022 and related to insurance with two insurers: CB1659. This client moved to MA Brokers: Exhibit 5 at [103].
The following further 22 clients of AEI moved to MA Brokers between mid-November 2022 and early June 2023:
WSCK Iacono Pty Ltd in around late November 2022: Exhibit 5 at [106]. The relevant letter of appointment was dated 16 November 2022: CB1660.
Harvey's Towing (Qld) Pty Ltd trading as Harvey's Towing Service by mid-January 2023: Exhibit 5 at [113]. The relevant letter of appointment was undated: CB1663.
All Truck Towing Pty Ltd in around mid-November 2022: Exhibit 5 at [109].
The Trustee for M&S Payne Family Trust trading as Mick's Bulk Haulage in around mid-January 2023: Exhibit 5 at [116].
Danlyn (QLD) Pty Ltd in around mid-January 2023: Exhibit 5 at [119].
SJH Heavy Haulage Pty Ltd in around early January 2023: Exhibit 5 at [122].
Fastfreight Transport Pty Ltd on 7 January 2023: Exhibit 5 at [131]; CB4263; 4273.
Woodsbey Transport & Contracting Pty Ltd on 9 January 2023: Exhibit 5 at [137]; 4249-51.
Redline Express Pty Ltd on 12 January 2023: Exhibit 5 at [131]; CB4252-6.
Bonica Holdings in around mid-January 2023: Exhibit 5 at [128].
Rebecca Dargusch as trustee for the Dargusch Family Trust trading as Keep on Truckin in around late January 2023: Exhibit 5 at [125].
Fielding Way Services Pty Ltd on 3 February 2023: Exhibit 5 at [143]; CB4258.
Douglas Transport Pty Ltd in early February 2023: Exhibit 5 at [155].
T & M Magnussen on 9 February 2023: CB4248.
Ozzy Concrete QLD Pty Ltd in mid-February 2023: Exhibit 5 at [140].
JB Trucking Pty Ltd in mid-February 2023: Exhibit 5 at [134].
Sapar Landscaping Supplies Pty Ltd in late-February 2023: Exhibit 5 at [158].
HLE Logistics Pty Ltd in late-February 2023: Exhibit 5 at [149].
Rancroft Pty Ltd trading as Rancroft by 1 March 2023: Exhibit 5 at [161]; CB4257.
MJ Atkins. MJ Atkins and Maurie Atkins Bobcat & Mini Excavator Hire Pty Ltd have been treated as two clients by Mr Samuel.
Maurie Atkins Bobcat & Mini Excavator Hire Pty Ltd in early March 2023: Exhibit 5 at [164].
Barnes Towing and Salvage (Qld) Pty Ltd in early June 2023: Exhibit 5 at [152].
On 30 November 2022, Order 1 of Wigney J's orders was amended, as follows:
Until final orders are made in this proceeding or until 2 September 2023, whichever occurs first, the defendant be prohibited and injuncted from directly or indirectly soliciting, canvassing, dealing with, approaching, or accepting any approach from, any person or organisation who was at any time during the last 12 months of the defendant's employment a client or customer of the plaintiff in the part or parts of the business of the plaintiff in which the defendant was employed and with whom the defendant had dealings or influence over, with a view to obtaining the business of that client or customer in a business that is the same or similar to or in competition with the business of the plaintiff.
The injunctions put in place by the orders made by Wigney J (as amended on 30 November 2022) were dissolved on 1 August 2023, by orders made by Bromwich J: AEI Insurance Group Pty Ltd v Martin [2023] FCA 914. On that interlocutory application, Mr Martin read affidavit evidence (on which he was not cross-examined) which was not read at trial and which was material to the reasoning for dissolution of the injunction.
Before turning to some facts specific to particular clients, it is necessary to say something about what has become of Mr Martin's mobile telephones and the information stored on them and to say something about some of the documentary evidence which AEI sought to tender.
[18]
The Oppo AX5
As noted earlier, the mobile phone which Mr Martin had been provided by AEI was an Oppo AX5. Mr Martin used this phone for both business and personal purposes. AEI sought to recover the Oppo AX5 after Mr Martin's resignation.
From 4 November 2022, Ms Ximena Smith of AEI sent various emails to Mr Martin, via his wife's email address, consistently with what had been earlier agreed: CB4225. Mrs Martin responded to these. On 7 November 2022, Ms Smith wrote an email to Mrs Martin regarding arrangements for a courier to collect the phone and, more specifically, communicating the courier's request that the phone be placed in a box and that labels be printed and attached: CB4230. Mrs Martin responded by stating:
You are kidding, aren't you. The courier will get the phone as is.
On 8 November 2022, Ms Smith responded by stating that the requirements were, unfortunately, ones put in place by DHL and requested Mrs Martin send the mobile phone by registered post to Chamberlains, for which Mrs Martin would be reimbursed: CB4232. Mrs Martin responded by stating (CB4234):
Lol you are a twat.. do you really expect me to go to any trouble sending a phone back to you after yesterday.. Your courier will be touch with you.
Mrs Martin's reference to "after yesterday" is, I infer, a reference to AEI commencing these proceedings.
The Court made an order for standard discovery on 30 November 2022.
On 16 December 2022, Chamberlains wrote to Kennedys seeking the return of the Oppo AX5 and proposing various reasonable arrangements for its collection: CB4240. On 9 January 2023, Chamberlains sent an email requesting a response to their letter of 16 December: CB4241. On 17 January 2023, AEI's solicitors sent a further letter requesting a response to their letter of 16 December: CB4246.
On 17 February 2023, Kennedys responded as follows (CB4277):
We refer to your letters dated 8 February 2023, 17 January 2023, 16 December 2022 and previous correspondence.
We confirm that your client seeks provision of mobile telephones from our client when:
1 no explanation or evidentiary reasons are given for the request;
2 the Court has issued 50 subpoenas to produce documents (at your client's request), seeking production of all relevant communications with our client;
3 no proof of purchase or ownership of the mobile telephones by your client has been established; and
4 paragraph 24 of the affidavit of Michael Donaldson sworn on 7 November 2022, deposed that your client is aware that the 'AEI mobile phone' is not owned by them and that our client has had it 'forever'. This remains undisputed and irrespective of this, your client has had access to the mobile telephone account at all times.
The assertions made in [4] misrepresent the content of [24] of Mr Donaldson's affidavit. AEI's solicitors responded on the same day seeking to agree a timetable to progress an interlocutory application for the Court to address issues concerning production of the Oppo AX5: CB4279.
On 22 February 2023, Mr Martin's solicitors provided AEI's solicitors with Mr Martin's verified List of Documents for discovery in the proceedings. Mr Martin's List of Documents did not include any reference to the Oppo AX5 or any other mobile telephone: CB4656.
By an interlocutory application filed on 10 March 2023, AEI sought orders:
that Mr Martin provide "further and better discovery" or, alternatively, discovery in various articulated categories; and
under rr 14.01 and 20.21 of the Federal Court Rules 2011 (Cth) for delivery up and examination of the Oppo AX5 and any other mobile which used the New Telephone Number, together with various consequential orders.
This interlocutory application was heard on 28 March 2023. At the hearing, Mr Martin (by his counsel) agreed that the Oppo AX5 could be returned to AEI forthwith. That left for determination various other issues, including whether any other mobile telephone using the New Telephone Number in the relevant period should be delivered up. The Court concluded that there should be such an order: AEI Insurance Group Pty Ltd v Martin (No 2) [2023] FCA 277. In the reasons for judgment, I stated:
[27] The remaining issue is whether orders should be made in respect of any mobile phone using the relevant mobile telephone number during the period 1 August 2022 to 24 February 2023 or any other phone used by Mr Martin for work related purposes during that period. During the course of argument, senior counsel for the plaintiff limited the orders sought to any mobile phone using the relevant mobile telephone number during the period and no longer sought production of any other phone used by Mr Martin for work related purposes.
[28] Mr Martin submitted that the proposed orders were invasive, that there was no evidence that the phone number was used for business purposes only and that the orders would lead to a forensic image being taken which would contain a large array of personal information and data including the device's call history, instant messenger chats and logs, locally stored files, cloud storage data, internet history, location data and system data. Mr Martin noted that there was no evidence to suggest that the defendant has stolen confidential information, and no such allegation was made against him. Mr Martin submitted that the evidence did not establish that such an invasive order was necessary or that other processes, such as subpoenas, were inadequate.
[29] Mr Martin also submitted that the orders do not attach to specific property, but rather to property that fits a particular description. He submitted that an order for the inspection of property cannot be made unless the person against whom the order is made is in possession of the property.
[30] No evidence was adduced by Mr Martin on this interlocutory application. It follows that there is no evidence that Mr Martin does not have a mobile phone or phones which fit the descriptions put forward or that such phone or phones are not in his possession.
[31] I am satisfied that it is appropriate to make orders for any mobile phone which used the relevant phone number during the period 1 August 2022 to 24 February 2023 be delivered to an independent court-appointed expert for examination and report, but in a way more limited than that proposed by the plaintiff. The examination should be limited to what is necessary to report on whether any mobile phone fitting the description was used during the relevant period to facilitate communications between Mr Martin and the entities referred to in Annexure A and to report upon the nature and content of any such communication. The Court takes the view that Mr Martin's interests are better protected by the expert being one appointed by the Court under r 23.01 as opposed to being retained by the plaintiff. The Court will hear further from the parties in relation to the precise form of those orders.
his observation of physical damage to the Oppo AX5 and evidence of liquid ingress;
the factory reset state of the Oppo AX5, upon examination (after repair) using forensic software, Cellebrite; and
the absence of any user created files on the Oppo AX5, once repaired.
Mr Fernon SC objected to Mr Yang's opinion about "tampering or damage" on the basis that this was not within Mr Yang's specialised knowledge. Mr Yang supplied the following photograph of the mobile phone he had been provided with:
Mr Yang's observation that there was evidence of damage from liquid ingress was within his specialised knowledge. Forensic examiners in this field repeatedly examine electronic devices which have been damaged. In any event, it is the conclusion which the Court reaches.
Mr Yang expressed the opinion that this damage was not usual or common in the use of a mobile phone and that steps had been taken to delete data from the phone. The Oppo AX5 did not charge and would not power on: CB4455.
Because of the damage to the phone, no data could be recovered: CB4462. On the other hand, it was possible to extract contacts from the SIM card. These included the following 25 AEI clients:
Bill Humphreys (Bill Humphries Transport): CB4477O
Simon McMahon (S and J McMahon Transport): CB4477HH
Mark Eastwell (Eastwells Haulage): CB4477AA
Don Lette (Freightshift): CB4477S
Barellan Freighters: CB4477N
Alastair Mackay (A Mackay & Son Truckin): CB4477M
Kim Woods (Bondwoods): CB4477Z
Jason Boardman (Boardman Sand and Gravel): CB4477V
Wiltons Transport: CB4477JJ
Gareth Frederiksen and George Frederiksen (AJ & KG Frederiksen): CB4477S, 4477T
Gerry Morgan (GF & S Morgan Transport): CB4477T
Jason Treeby (JM Treeby Holdings): CB4477W
Joe Harvey (Harvey's Towing): CB4477X
Mick's Bulk Haulage: CB4477CC
SJH Heavy Haulage: CB4477GG
Joe Bonica (Bonica Holdings): CB4477X
Tyler Douglas (Douglas Transport): CB4477JJ
Jack Barker (JB Trucking): CB4477V
Brad Rancroft (Rancroft): CB4477P
Allison Murrell and Ross Murrell (Murrell Freight): CB4477M, 4477FF
North Coast Towing: CB4477T
Lester Strassberg (Strasburg Towing): CB4477AA
Alan Harper (Allan Harper Transport): CB4477M
Simon Bechly (Bechly Transport): CB4477GG
Barnes Towing: CB4477N
Mr Yang was not cross-examined. The evidence did not disclose any reason for the Oppo AX5 being in the state it was.
[19]
The Oppo A94
Mr Martin acquired an Oppo A94 at some time in August 2022, probably on 31 August 2022 when the AEI emergency contact number was diverted to Mr Donaldson. At the hearing, AEI tendered Mr Martin's Telstra monthly telephone bills for the period 1 November 2022 - 31 October 2023 in relation to the New Telephone Number, namely the number used to send the message "Craig Martin's new phone is [New Telephone Number]". The device referred to in the Telstra bills is an "Oppo A94 128GB 5G".
As noted earlier, an order for discovery was made on 30 November 2022. The Oppo A94 was not referred to in Mr Martin's first List of Documents sworn on 22 February 2023: CB4656.
As also noted earlier, AEI made an interlocutory application for delivery up of any mobile telephone which had used the New Telephone Number during the period 1 August 2022 to 24 February 2023 which was heard on 28 March 2023. Orders were made on 28 March 2023 for a further list of documents to be served by 18 April 2023. On 5 April 2023, orders were made for delivery of any mobile telephone using the New Telephone Number during the relevant period to an independent expert, Mr Khoury, by 17 April 2023.
On 19 April 2023, Mr Khoury was provided with a Samsung Galaxy A53: CB4571. This mobile telephone is addressed further below. Mr Khoury was not provided with the Oppo A94.
On 3 May 2023, orders were made extending the time for the filing of the further list of documents to 5:00pm on 3 May 2023.
On 4 May 2023, Mr Martin swore his affidavit being a second List of Documents. This referred to the Oppo AX5 which had been given to AEI on 28 March 2023, but did not refer to any other mobile telephone: CB4660.
On 8 November 2023, a Registrar of the Court made orders requiring the filing of a supplementary list of documents by 23 November 2023 and made an order that Mr Martin deliver to Mr Khoury by 15 November 2023 for the purpose of further reporting any mobile telephone which used the New Telephone Number during the period 1 August 2022 to 24 February 2023.
On 29 November 2023, Mr Martin swore an affidavit being his third List of Documents: CB4667. Mr Martin discovered Telstra mobile telephone bills for each month from 3 November 2022 to 3 October 2023. These telephone bills referred to the Oppo A94. There was no reference to the Oppo A94 in the third List of Documents.
On 2 July 2024, AEI filed its written submissions for hearing. In those submissions, AEI stated (footnotes omitted):
[44] The telephone records clearly reference an OPPO A94 handset in respect to which a monthly fee is being charged. That monthly fee, which was being charged in the period relevant to the absence of evidence, is a different phone model to the other two phones.
[45] Martin has provided no explanation in respect to this phone. On one view of it, he has misled this court.
[46] Having regard to the findings of the two expert reports, and the evidence contained within the documents referred to being phone records, (and in circumstances where no explanation is provided nor has any reference been made to this telephone in discovery) it is clearly available to the court to find that Martin operated a third mobile telephone which was not provided and, when in conjunction with the saltwater and reset mobile phone of AEI, plus the wiping of the mobile telephone provided for inspection, Martin has set out to destroy and/or hide evidence relevant to these proceedings.
[47] Not only does this lead to inferences, it also reflects incredibly poorly upon Martin's credit.
On 26 July 2024, Mr Martin swore an affidavit being a fourth List of Documents: CB4718A. In "Part 3 - Documents that have been but are no longer in the control of the Respondent", Mr Martin referred to the "Oppo A94 mobile handset" and, in the column "What became of the document", stated: "On 4 December 2022, the Oppo A94 mobile handset was destroyed when run over by a lawn mower".
Absent any explanation from Mr Martin, I infer from this sequence of events, including that a discovery order had been made on 30 November 2022, that Mr Martin destroyed the Oppo A94 on 4 December 2022, and disposed of what was left of it, in order to ensure that no useful information could be obtained from it.
[20]
The Samsung Galaxy A53
As noted earlier, Mr Martin delivered a Samsung Galaxy A53 to Mr Khoury on 19 April 2023.
Mr Khoury provided his report in relation to this mobile phone on 15 May 2023. He made the following findings, in summary (CB4573):
The examination did not identify any active (that is, non-deleted) SMS or MMS messages. The examination identified a total of 12 deleted MMS messages. None of these messages corresponded to any of the telephone numbers listed in the "AEI Client List and Contacts" within the relevant date range. The examination identified a total of 10 deleted SMS messages. None of these messages corresponded to any of the client telephone numbers listed in the "AEI Client List and Contacts" within the relevant date range. No active or deleted chat messages were identified, nor was there evidence of any third party instant messaging applications identified.
A total of 1,899 call log records were identified, ranging from 24 February 2023 to 19 April 2023. None of these records corresponded to telephone numbers listed in the "AEI Client List and Contacts". Notably, no call records (deleted or otherwise) before 24 February 2023 existed on the Galaxy A53, indicating that the call log history may have been cleared sometime before 5:45pm on 24 February 2023, as this was the earliest call record (non-deleted) identified on the phone.
Two email accounts were identified: "c.martin@mabrokers.com.au" and "mumspumper@gmail.com". A review of available emails relating to the "c.martin@mabrokers.com.au" email account identified 75 emails ranging from 17 October 2022 to 21 January 2023. A review of available emails relating to the "mumspumper@gmail.com" email account identified 48 emails ranging from 19 September 2022 to 14 April 2023. A total of six emails corresponding to the relevant search criteria outlined in paragraph 20(b) of the expert instructions referred to in the orders of 5 April 2023 were identified. These emails were extracted and contained in Appendix C: 4585S to 4585BB. They included emails to and from AEI clients in November 2022, December 2022 and January 2023.
Mr Khoury expressed the opinion that it was "highly unusual" for a phone to have no active (that is, non-deleted) SMS messages. Mr Khoury stated that there were a number of explanations for this, including user habits (that is, preferring other methods of communication), manual deletion, factory reset or data transfer.
Mr Khoury concluded that the "absence of any active SMS messages on the [Galaxy A53] suggests that the messages were deleted from the device at some time before the delivery" of the Galaxy A53 to him. That is the inference which I also draw. I infer that this was done in order to attempt to ensure that no useful information could be extracted from the Galaxy A53.
Mr Khoury also expressed the opinion that the lack of historical call logs before 24 February 2023 "may suggest that the call log was cleared sometime prior to 5:45pm on 24 February 2023". Due to the lack of SMS messages and other records, Mr Khoury suggested the possibility that Mr Martin may have been utilising an additional mobile device for communication. The Court draws the inference that the call log was cleared by Mr Martin sometime before 5:45pm on 24 February 2023 and that this was done in order to attempt to ensure that no useful information could be extracted from the Galaxy A53.
[21]
Conclusions
The Oppo AX5 was reset and damaged by water. No useful information was able to be extracted from the Oppo AX5, although contacts were able to be extracted from the SIM card.
The Oppo A94 was used in connection with the New Telephone Number from an unknown date in August 2022, probably 31 August 2022, when AEI diverted its emergency assistance number to Mr Donaldson. The Oppo A94 was probably destroyed by Mr Martin on 4 December 2022 when it was run over by a lawn mower. This was five days after the first order for discovery was made on 30 November 2022.
The Samsung Galaxy A53 was used in connection with the New Telephone Number, probably from early December 2022. I infer that the messages and call logs which were on it as at 24 February 2023 were deleted by Mr Martin on that day before 5:45pm. This phone was provided to Mr Khoury on 19 April 2023. The only useful information able to be extracted were six emails which Mr Martin either sent or received from AEI clients after his employment with AEI ended.
The New Telephone Number was in continuous use from at least 31 August 2022.
The Court concludes that Mr Martin:
destroyed the Oppo A94 on or about 4 December 2022, five days after the Court made an order for discovery;
at some time before 28 March 2023, reset the Oppo AX5 and immersed it in water;
on 24 February 2023, reset the call logs on the Samsung Galaxy A53 and, before 19 April 2023, deleted all MMS and SMS messages on the device.
The Court concludes, on the balance of probabilities, that these steps were undertaken with a view to frustrating AEI in its attempts to obtain information from the mobile telephones.
These conclusions are serious ones which reflect adversely on Mr Martin. The conclusions have been reached applying the standard of proof required in such circumstances - see: s 140 of the EA and Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336.
[22]
ADMISSIBILITY OF CERTAIN DOCUMENTS
Before turning to examine in more detail the evidence relating to particular AEI clients, it is necessary to say something about certain records made by AEI which AEI sought to tender.
As noted earlier, AEI did not adduce evidence from ex-clients. No adverse inference can be drawn from this given that the clients, if anything, would be expected to be in Mr Martin's camp. AEI also sought to adduce evidence from AEI employees about conversations with ex-clients as to what those clients stated about the circumstances in which they left. The relevant parts of these conversations were inadmissible hearsay and rejected. AEI sought to introduce evidence as to what the AEI clients stated via two further mechanisms: first, a Microsoft Word table; and, secondly, screenshots of AEI computer records.
[23]
The Microsoft Word table
AEI sought to introduce, through Mr Donaldson's first affidavit, a Microsoft Word table which purported to record conversations of various AEI employees (including Mr Donaldson) with various clients of AEI which were said to have moved to MA Brokers. The table to which Mr Donaldson referred had the following headings (CB4205-6):
In the "Comments" column, the AEI employee summarised the employee's conversation with the departing client. It was not suggested that this table was something which was prepared in accordance with AEI's usual business practice. Rather, as is explained below, it was something which was likely put together for the purposes of seeking interlocutory relief.
The table was rejected at hearing.
The evidence did not directly address when preparation of the table commenced. Indeed, the table does not even record the dates of the relevant conversations. Nevertheless, preparation of the table could not have commenced before 1 November 2022 (the first notification from an insurer that an AEI client had sent the insurer a letter of appointment) and was completed on or before 7 November 2022 when Mr Donaldson swore his affidavit which was relied upon in support of the application for interlocutory relief (and at trial).
Section 69 of the EA relevantly provides:
69 Exception: business records
(1) This section applies to a document that:
(a) either:
(i) is or forms part of the records belonging to or kept by a person, body or organisation in the course of, or for the purposes of, a business; or
(ii) at any time was or formed part of such a record; and
(b) contains a previous representation made or recorded in the document in the course of, or for the purposes of, the business.
(2) The hearsay rule does not apply to the document (so far as it contains the representation) if the representation was made:
(a) by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact; or
(b) on the basis of information directly or indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact.
(3) Subsection (2) does not apply if the representation:
(a) was prepared or obtained for the purpose of conducting, or for or in contemplation of or in connection with, an Australian or overseas proceeding; or
(b) was made in connection with an investigation relating to or leading to a criminal proceeding.
…
(5) For the purposes of this section, a person is taken to have had personal knowledge of a fact if the person's knowledge of the fact was or might reasonably be supposed to have been based on what the person saw, heard or otherwise perceived (other than a previous representation made by a person about the fact).
AEI submitted that s 69(1) of the EA applied to the table. Senior Counsel for Mr Martin contended that it did not. Mr Martin's submission was that the table was prepared for the purposes of the litigation and therefore could not be a document that "forms part of the records belonging to or kept by a person, body or organisation in the course of, or for the purposes of, a business" within the meaning of s 69(1)(a)(i). Mr Martin submitted that there was nothing to suggest that the table was prepared "in the usual course of business".
A document prepared for the purposes of litigation can form part of the records kept by a person for the purposes of the person's business. Section 69(1)(a)(i) is satisfied.
The next question is whether the table contains "a previous representation made or recorded in the document in the course of, or for the purposes of, the business" within the meaning of s 69(1)(b). I proceed on the basis that this is also satisfied. The table recorded representations about the reasons why clients left AEI and whether those clients left to MA Brokers. Whether or not the table was prepared with litigation in mind, the representations were recorded in the course of AEI's business.
It follows that, unless s 69(3)(a) applies, the hearsay rule does not apply to previous representations contained in the table: s 69(2) EA. This was the real issue.
In my view, s 69(2) does not apply to the representations contained in the documents because the representations were "obtained for the purpose of conducting, or for or in contemplation of or in connection with, an Australian or overseas proceeding" such that s 69(3)(a) disengages the exception to the hearsay rule provided by s 69(2).
The purpose of s 69(3)(a) was described by Barrett J in Vitali v Stachnik [2001] NSWSC 303 at [12] in the following way:
The purpose of the exclusion is … to prevent the introduction through this exception to the hearsay rule of hearsay material which is prepared in an atmosphere or context which may cause it to be self-serving in the sense of possibly being prepared to assist the proof of something known or at least apprehended to be relevant to the outcome of identifiable legal proceedings.
In light of the history outlined earlier, it is plain that the Microsoft Word table was prepared in contemplation of, or in connection with, an Australian proceeding, namely this proceeding. The table was commenced on or after 1 November, after various threats of litigation and after, I infer, it was decided to commence litigation. The table was completed by 7 November 2022, when it was annexed to Mr Donaldson's affidavit in support of interlocutory relief.
The table was prepared after both sides of the dispute had engaged solicitors and it was completed after AEI had been notified that 21 of its clients had appointed a new broker. It is relevant to have regard to the terms of the table - see: s 183 of the EA. This shows that the table was, amongst other things, directed to ascertaining whether or not a client had moved to MA Brokers. The reasons that clients provided for departing AEI was clearly something known to be relevant to the outcome of these proceedings, including the claim for interlocutory relief. The evidence did not suggest that there was a usual practice of preparing Microsoft Word tables of this nature.
The table was certainly prepared "in contemplation of" or "in connection with" the proceeding commenced on 8 November 2022. Indeed, I consider it likely that the table was prepared "for the purpose of" seeking interlocutory relief. When regard is had to the terms of Mr Donaldson's affidavit which sought to introduce the table, in the context of the history of the dispute, there is no doubt that the proceeding played a part in the decision to prepare the table - see: Vitali at [17], [18]; applied in Tuncock v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 1069 (Hely J).
It follows that the hearsay representations in the Microsoft Word table are not covered by the exception in s 69(2). It was not suggested that the table was otherwise relevant to any fact in issue in the proceedings. The table was therefore inadmissible and its tender was rejected.
AEI sought to reintroduce the table in re-examination of Mr Donaldson, its Senior Counsel claiming that questions were asked in cross-examination such that the table had become admissible or that s 69(3)(a) should now be found not to apply. The tender was rejected a second time. Senior Counsel for AEI requested reasons, in the final judgment, for the rejection of the table a second time.
The questions asked in cross-examination, relied upon as giving rise to the table becoming admissible, were ones which touched on whether and when AEI contacted its clients and, to a limited extent, on what might have been discussed.
The tender of the table was not something allowable in order to clarify anything asked in cross-examination. Further, nothing asked in cross-examination altered the fact that the table was plainly prepared "for the purpose of conducting, or for or in contemplation of or in connection with, an Australian … proceeding".
[24]
Screenshots of AEI computer diary notes
AEI also sought to tender ten screenshots of diary notes entered into a computer system and made by Mr Liam Knight, who was an "account manager" with AEI. Mr Donaldson was taken in cross-examination to various emails sent to AEI by insurers who had received letters of appointment. Mr Donaldson gave evidence, consistently with the emails, that the period of time allowed for AEI to confirm whether it had lost the relevant account varied. Examples included 24 hours through to 3 days, although Mr Donaldson stated it could be even shorter: see CB4175 and 4178; T83. Mr Donaldson agreed to the proposition put in cross-examination that this allows AEI "an opportunity to contact the client and retain the client": T83.46.
By way of example, the email from NTI on 1 November 2022 at CB4175 stated:
Thanks for the chat just now. As discussed, we have received a letter of appointment for another broker to take over this account WEF 24/10/2022 .
As always we provide a courtesy 24 hours to allow you to contact the client if you wish; if we haven't heard from you by this time tomorrow we will transfer the policy over.
By way of further example, the email from SUA on 1 November 2022 at CB4163 stated:
Please note that we have received a letter of appointment for the above noted client.
Could you please confirm if AEI have indeed lost this account? Note, we allow 48 hours for a response.
The diary notes relate to ten different clients and are dated between 1 November 2022 and 7 March 2023. Two of them predate the commencement of the proceeding. They record the person making the note (Mr Knight) and the time the diary note was entered. Having regard to s 183 of the EA, I infer from the form and content of the diary notes (examples of which are set out below), the evidence given by Mr Donaldson and the emails from insurers concerning the receipt of a letter of appointment, that the diary notes were records kept in AEI's computer system as a part of its day to day operations and that they were prepared for the purpose of recording the contact with the client upon receipt of the insurer's email indicating that a letter of appointment had been received and addressing whether there should be any response to the email from the insurer.
It is useful to provide two examples. On 14 November 2022 at 8:48am, Mr Knight received an email from NTI stating that NTI had received a letter of appointment in relation to Ricjul Pty Ltd. The email stated (CB4275):
We have received a Letter of Appointment on the above policy from another broker.
The policy will be transferred at close of business today, please let me know if we can arrange for this sooner.
Let me know if any issues.
The screenshot of the diary notes shows that Mr Knight called the client at 9:37am on that day. The screenshot is in the following form (CB4238):
On 9 January 2023 at 12:40pm Mr Knight received an email in relation to Woodsbey Transport & Contracting. The email stated (CB4250):
We have received a LOA for this client unfortunately. We'll hold off transferring for 24 hrs to give you a chance to contact the client. If we don' t hear back from you we will arrange the transfer.
The screenshot shows that Mr Knight called the client at 12:45pm. The screenshot is in the following form (CB4242):
The representations were obtained for the purposes of seeking to maintain a relationship with the client and responding to the insurer's email within a confined time. Notwithstanding this, if the representations were obtained, even in part, "for the purpose of conducting, or for or in contemplation of or in connection with, an Australian … proceeding", then s 69(3)(a) would operate to prevent the operation of the exception in s 69(2) to the document.
In relation to the diary notes after 8 November 2022, AEI was conducting an Australian proceeding and the representations contained in the diary notes were relevant to those proceedings. Nevertheless, and recognising that a different conclusion is open on the limited evidence available, when consideration is given in particular to the timing of the conversations in immediate response to an email from an insurer, I do not consider that the existence of the proceeding was a part of the reason that the representations in the diary notes were obtained by Mr Knight.
In relation to the two diary notes which predated commencement of this proceeding, I also do not consider that the anticipated proceeding was a part of the reason that the representations were obtained. I infer - from a comparison of the two diary notes prepared before 8 November 2022 with the content of the (rejected) Microsoft Word table - that Mr Donaldson subsequently used (but in some respects altered the form of) the diary notes to prepare his table, but it does not follow from that conclusion that the representations in the diary notes were obtained in connection with or in contemplation of this proceeding.
Accordingly, s 69(3)(a) of the EA does not apply to the screenshots of the diary notes and they are admitted. I should indicate that I would not have reached any different conclusion in the proceedings had I rejected these diary notes, although they have to some extent fortified some of the inferences which I otherwise draw.
[25]
THE AEI CLIENTS WHICH MOVED TO MA BROKERS
At the conclusion of the trial, AEI abandoned reliance on 6 of the 51 clients, on the basis that - in the way the trial unfolded, including that Mr Martin did not go into evidence and that evidence in reply was not read - there was no evidence either that the client had left AEI or that the client had moved to MA Brokers. I note that AEI prepared aide-memoires which referred to 50 clients, whilst Mr Samuel referred to 51 clients. This is because Mr Samuel treated MJ Atkin and Maurie Atkins Bobcat & Mini Excavator Hire Pty Ltd as two clients.
The remaining 45 clients are conveniently addressed in 3 categories:
The "First Sixteen" comprise clients in respect of which it is concluded that Mr Martin solicited the client and dealt with the client after he commenced working for MA Brokers. These can be further subdivided:
14 AEI clients in respect of which there is some direct evidence of dealing between Mr Martin and the client at a time when Mr Martin was employed by MA Brokers (one of whom the evidence directly establishes received the 1 September 2022 SMS);
2 AEI clients in respect of whom the evidence directly establishes that they received the 1 September 2022 SMS, but in respect of whom there is no direct evidence of dealing between Mr Martin and the client at a time when Mr Martin was employed by MA Brokers.
The "Second Fifteen" comprise AEI clients where there was no direct evidence of dealings between the client and Mr Martin when Mr Martin was employed by MA Brokers but in respect of whom the inference is drawn that Mr Martin solicited the client, either directly or with the assistance of MA Brokers.
The "Third Fourteen" comprise AEI clients where there was no direct evidence of dealings between the client and Mr Martin when Mr Martin was employed by MA Brokers but where the inference should be drawn in relation to a large proportion of them that Mr Martin solicited the client, either directly or with the assistance of MA Brokers.
[26]
The First Sixteen
There were 14 AEI clients in respect of which the evidence directly established some form of involvement on the part of Mr Martin, apart from the sending of the SMS on 1 September 2022, whilst he was employed by MA Brokers:
[27]
S & J McMahon Transport
AEI tendered screenshots of text messages between Mr Martin and Mr McMahon (CB4642-43):
1 September 2022 at 5:00pm
Mr Martin: Craig Martin's new phone is [New Telephone Number].
25 October 2022 at 3:59pm
Mr Martin: You missed a call, but the caller didn't leave a message.
Mr McMahon: Just on the phone mate. I'll do it first thing in the morning the office girls are fine and I can't figure how to do this stuff. Jamie [McMahon] will do it straight up in the morning mate.
Mr Martin: Cool mate
26 October 2022 at 9:32am
Mr Martin: You missed a call, but the caller didn't leave a message.
1 November 2022
Mr Martin: You missed a call, but the caller didn't leave a message.
4 November 2022
Mr Martin: c.martin@mabrokers.com.au
Mr McMahon: [Three thumbs up emoticons].
As noted earlier, Mr McMahon executed a letter of appointment on 26 October 2022: CB1648. I infer from the unanswered telephone call to Mr McMahon on 25 October 2022 that Mr Martin was intending to speak to Mr McMahon to encourage him to sign and return a letter of appointment in order to appoint MA Brokers.
I conclude that Mr Martin was when employed by AEI, in substance, the principal AEI contact for S & J McMahon Transport having regard to:
the evidence referred to above;
the fact that Mr McMahon's contact number was on the SIM card which was returned with the Oppo AX5: CB4477HH (458);
copies of emails between Mr Martin and S & J McMahon Transport that were sent during Mr Martin's employment at AEI: Donaldson 3 at [96]; CB3512; 3699-3704; 4101-4103;
the growth, structure and operations of the Brisbane branch of AEI as disclosed in the evidence, in particular that: Mr Martin was employed to grow the branch; Mr Martin would visit Queensland clients, on regular occasions with Mr Donaldson; the telephone number which was used on Mr Martin's Oppo AX5 mobile telephone was AEI's 24/7 emergency accident assistance number;
the evidence referred to below of dealings between Mr Martin and S & J McMahon Transport whilst Mr Martin was employed or associated with MA Brokers.
One email chain between Mr Martin and S & J McMahon Transport concerned the preparation or obtaining of a schedule identifying the fleet and values. On 30 November 2022 at 9:28am, Ms Jamie McMahon emailed Mr Martin (CB4613):
Hi Craig
Can we please get a copy of our current insured fleet schedule and values? Our broker requires it for our finance profile.
On 30 November 2022 at 10:58am, Ms Lillie Marrington of MA Brokers wrote to Ms McMahon, copying Mr McMahon and Mr Martin stating (CB4617A):
Please find attached the vehicle spreadsheet including values.
If you have any queries, please do not hesitate to contact me.
Ms McMahon responded, copying Mr Martin, stating:
Please find attached spreadsheet with some amendments highlighted in orange. One of the trucks listed is a Brown and Hurley Hire truck that was returned back in July that we only used for a short period of time. I have also noted a few registrations that weren't listed or changed, and increased the value on the T604 as it has been getting mechanical and cosmetic upgrades so is worth more than when we originally purchased it.
Could you please re-send me this schedule once changes have been made on your end?
Another email chain concerned an insurance claim. On 29 November 2022 at 6:02pm, Mr Horwood of Heavy Motor Insurance Australia (HMIA) emailed Mr Martin at his MA Brokers email address, sending a template for "recovering and settling basic loss of income claims". At 10:39am on 30 November 2022, Mr Martin forwarded this email to "Admin - S & J McMahon Transport", stating (CB4608; 4585T):
Morning Mate,
Have a look at this and give me a call.
On 7 December 2022 at 12:54pm, Ms McMahon emailed Mr Martin (CB4604; 4585T):
Hi Craig
I had done the attached up for the previous broker. There are additional tabs providing supporting information for figures used. Is this acceptable or do you need me to change it to your format?
Mr Martin replied at 12:03pm, "Thanks Jamie [McMahon] all over it" (CB4618).
At 4:27pm on 7 December 2022, Mr Horwood emailed Mr Martin in relation to the claim, stating (CB4610):
This is on file and just awaiting the last of the repairs to be completed (bumper bar) and once all done we will submit our demands to GIO,
Ms McMahon also incorrectly sent emails from S & J McMahon Transport to Mr Martin's AEI email address on 18 April 2023 and 2 May 2023 to remove a trailer from the relevant insurance policy: CB4296-7.
I conclude that Mr Martin contacted Mr McMahon with a view to soliciting S & J McMahon Transport to move from AEI to MA Brokers. I conclude that this was Mr Martin's purpose in sending the text message on 1 September 2022 and in seeking to contact Mr McMahon by telephone on 25 October 2022 and in sending SMS messages thereafter.
[28]
Bondwoods Transport Pty Ltd
Mr Kim Woods of Bondwoods Transport was a contact in Mr Martin's SIM card for the Oppo AX5: CB4477Z (286). I conclude it is likely that Mr Martin sent Mr Woods an SMS message on 1 September 2022 providing the New Telephone Number.
As mentioned earlier, Bondwoods Transport signed a letter of appointment on 25 October 2022: CB1641. Ms Holt's evidence, which I accept, was that one word on the letter of appointment was in Mr Martin's handwriting: CB4524.
On 17 November 2022, Ms Lillie Marrington of MA Brokers sent an email to Mr Alex Matterson of HMIA asking him to add "effective today" a Kenworth Pime Mover: CB4646. Mr Matterson sent an email responding to Ms Lillie Marrington, copied to Mr Martin and Mr Mathison: CB4645. Mr Mathison also sent an email to Mr Matterson, copied to Mr Martin: CB4647.
I conclude that, in addition to sending an SMS message on 1 September 2022 to Mr Woods, Bondwoods Transport either:
contacted Mr Martin and was encouraged by Mr Martin to move to MA Brokers; or
was contacted either directly by Mr Martin, or by MA Brokers on the basis of information provided to MA Brokers by Mr Martin, with a view to soliciting the client's business.
I conclude that Mr Martin was either the principal AEI contact for Bondwoods Transport or the AEI contact which Bondwoods Transport regarded in substance as the face of the business. This inference arises from the nature and structure of the Brisbane branch, including in particular that the AEI emergency accident assistance number was attached to Mr Martin's phone and the evidence concerning client visits by Mr Martin and Mr Donaldson. I have also had regard to communications in which Mr Martin was involved whilst at AEI at CB2488-92; 2494-7; 2570-71; 2578; 2962-5; 2986-90; 3151-4; 3520.
[29]
Boardman Sand and Gravel Pty Ltd
Mr Jason Boardman of Boardman Sand and Gravel was a contact in Mr Martin's SIM card for the Oppo AX5: CB4477V (220). I conclude it is likely that Mr Martin sent Mr Boardman an SMS message on 1 September 2022 providing the New Telephone Number.
As mentioned earlier, Boardman Sand and Gravel signed a letter of appointment on 27 October 2022: CB1642. Ms Holt's evidence, which I accept, was that parts of the letter of appointment were filled out in Mr Martin's handwriting: CB4529.
On 10 November 2022, Ms Annette Stringer from Boardman Sand and Gravel sent an email to Mr Martin's MA Brokers email address stating (CB4585S):
We have sold truck 235 SPY and trailer 571QUY - Can they please be removed from our policy.
Mr Martin responded on 11 November 2022: "Thank you done". These emails were obtained from Mr Martin's Samsung Galaxy A53.
On 2 December 2022, Ms Stringer sent an email to Mr Martin, forwarding an email she had received on 1 December 2022 from AEI which identified the various policies which AEI would not renew given that AEI had been notified by various insurers that they had received a letter of appointment: CB4602.
I conclude that, in addition to sending an SMS message on 1 September 2022 to Mr Boardman, Boardman Sand and Gravel either:
contacted Mr Martin and was encouraged by Mr Martin to move to MA Brokers; or
was contacted either directly by Mr Martin, or by MA Brokers on the basis of information provided to MA Brokers by Mr Martin, with a view to soliciting the client's business.
I conclude that Mr Martin was either the principal AEI contact for Boardman Sand and Gravel or the AEI contact which Boardman Sand and Gravel regarded in substance as the face of the business for the reasons given earlier in relation to the structure of the Brisbane branch and its operations. I have also had regard to communications in which Mr Martin was involved whilst at AEI at CB3164, 3236.
[30]
Quickwell Express Pty Ltd
As noted earlier, Quickwell Express signed a letter of appointment on 31 October 2022, appointing MA Brokers: CB1645. AEI was notified on 1 November 2022 by various insurers that a letter of appointment had been received, but not notified as to the identity of the new broker.
On 2 November 2022, Mr Rod Richards of Quickwell Express sent an email to Ms Kerrie Marrington at MA Brokers referring to an accident on 18 October 2022: CB4585BB. This email was forwarded by Mr Richards to Mr Martin on 12 January 2023. The email stated:
Hi Craig
Claim form & photos as discussed. Also attached is letter from NRMA that Mick received.
Thanks for your help
Rod
On the same day, Mr Martin forwarded the email to Mr Mathison, stating:
Can you give me a call on this please mate.
I conclude that Quickwell Express was contacted either directly by Mr Martin, or by MA Brokers on the basis of information provided to MA Brokers by Mr Martin, with a view to soliciting the client's business.
I conclude that Mr Martin was either the principal AEI contact for Quickwell Express or the AEI contact which Quickwell Express regarded in substance as the face of the business for the reasons given earlier in relation to the structure of the Brisbane branch and its operations. In addition to the communications referred to above whilst Mr Martin was at MA Brokers, I have also had regard to communications in which Mr Martin was involved whilst at AEI at CB3452-60; 3558.
[31]
WGH & GM Kelly
The diary note which Mr Knight entered on AEI's computer system on 1 November 2022 was as follows (CB4155):
Spoke to Bill regarding the LOA we received. He said the guy Craig now works with contacted him and a few of the other businesses who knows Craig well and has worked with for years and have signed LOAs due to their relationship with Craig. The reason they left was not due to servicing issues but because Craig knows their business well and they enjoy working with him.
I conclude that Mr Martin provided to a person at MA Brokers contact details for Mr Kelly with a view to obtaining WGH & GM Kelly to move from AEI to MA Brokers. In the absence of the diary note, I would have inferred that WGH & GM Kelly was contacted either directly by Mr Martin, or by MA Brokers on the basis of information provided to MA Brokers by Mr Martin, with a view to soliciting the client's business.
I conclude that Mr Martin was either the principal AEI contact for WGH & GM Kelly or the AEI contact which WGH & GM Kelly regarded in substance as the face of the business. This inference arises from Mr Knight's diary note. I would have drawn the inference in any event for the reasons given earlier in relation to the structure of the Brisbane branch and its operations. I have also had regard to communications in which Mr Martin was involved whilst at AEI at CB3204; 3522-6.
[32]
Eastwells Haulage Pty Ltd
Mr Mark Eastwell was a contact in Mr Martin's SIM card for the Oppo AX5: CB4477AA (313). I conclude it is likely that Mr Martin sent Mr Eastwell an SMS message on 1 September 2022 providing the New Telephone Number.
As mentioned earlier, Eastwells Haulage Pty Ltd executed a letter of appointment on 26 October 2022 which related to insurance with several insurers: CB1649. Eastwells Haulage moved to MA Brokers: Exhibit 5 at [72].
On 14 November 2022, Mr Eastwell emailed Mr Martin at MA Brokers stating (CB4585Z):
Hi Craig,
Please add the following 2 new moore trailers a 1 new moore dolly, trailers $130000 each and dolly $63000.
On 15 November 2022, Mr Martin forwarded this email to Mr Stewart and Mr Mathison of MA Brokers: CB4585Z. These emails were recovered from Mr Martin's Samsung Galaxy A53.
On 1 December 2022, Ms Lillie Marrington of MA Brokers sent an email to Mr Eastwell providing a Certificate of Currency for the three Moore Trailers about which Mr Eastwell had contacted Mr Martin: CB4591.
On 8 December 2022, Ms Marrington sent an email to Mr Eastwell, copied to Mr Martin, in relation to insurance for a 2022 Ford Ranger: CB4592; see also CB4593; 4593A.
I conclude that, in addition to sending an SMS message on 1 September 2022 to Mr Eastwell, Eastwells Haulage either:
contacted Mr Martin and was encouraged by Mr Martin to move to MA Brokers; or
was contacted either directly by Mr Martin, or by MA Brokers on the basis of information provided to MA Brokers by Mr Martin, with a view to soliciting the client's business.
I conclude that Mr Martin was either the principal AEI contact for Eastwells Haulage or the AEI contact which Eastwells Haulage regarded in substance as the face of the business for the reasons given earlier in relation to the structure of the Brisbane branch and its operations. I have also had regard to communications in which Mr Martin was involved whilst at AEI at CB2975; 2985; 2991-2; 3011; 3013-4; 3017-3041; 3048-55; 3061-2; 3064-5; 3082-5; 3107; 3138-41; 3155-7; 3162; 3165; 3237-45; 3908; 3933-50.
[33]
GF & S Morgan Transport
The diary note which Mr Knight entered on AEI's computer system on 2 November 2022 was as follows (CB4204):
Called Gerry regarding the LOA appointment we received. He advised that Cameron Smith reached out to him who Craig Martin now works with and he said he's known Craig for 30 odd years so wanted to go back with him because of their relationship. He said AEI has always been good and it's nothing to do with our servicing, he just moved because of the relationship he and Craig have. I said that if it does not work out or if he has any issues to feel free to call me and we can help support him again which he was thankful for.
I conclude that Mr Martin provided to a person at MA Brokers contact details for Mr Morgan with a view to obtaining GF & S Morgan Transport to move from AEI to MA Brokers. In the absence of the diary note, I would have inferred that GF & S Morgan Transport was contacted either directly by Mr Martin, or by MA Brokers on the basis of information provided to MA Brokers by Mr Martin, with a view to soliciting the client's business.
I conclude that Mr Martin was either the principal AEI contact for GF & S Morgan Transport or the AEI contact which GF & S Morgan Transport regarded in substance as the face of the business. This inference arises from Mr Knight's diary note. I would have drawn the inference in any event for the reasons given earlier in relation to the structure of the Brisbane branch and its operations. I have also had regard to communications in which Mr Martin was involved whilst at AEI at CB2440-2 and 3974-6. I note also that Mr Morgan was a contact in Mr Martin's SIM card for the Oppo AX5: CB4477T (174). I conclude it is likely that Mr Martin sent Mr Morgan an SMS message on 1 September 2022 providing his new mobile telephone number.
[34]
Hanicourt Transport Pty Ltd
As noted earlier, Hanicourt Transport signed a letter of appointment on 27 October 2022: CB1654. Parts of the letter of appointment were filled out in Mr Martin's handwriting: CB4528.
On 17 November 2022, Mr Bill Stekhoven of Buddii Financing emailed Mr Martin requesting a Certificate of Currency for a Hanicourt Transport vehicle being financed by the Commonwealth Bank: CB4595.
On 8 December 2022, Ms Marrington sent Mr Stekhoven a premium invoice for the addition of a Kenworth Prime Mover. Mr Martin was copied to this email: CB4597.
On 12 December 2022, Ms Rachael Cole of Hanicourt Transport sent an email to Mr Martin in relation to an insurance claim. The email stated (CB4585X):
HI CRAIG,
AS DISCUSSED A MOMENT AGO, PLEASE FIND ATTACHED PHOTOS FROM ARROW TRANSPORT RE DAMAGE DONE TO OUR VEHICLE, WHERE WE HAVE BEEN TRYING TO GET THE MONEY OUT OF JOHN AT KINGS WRECKERS. NTI ADVISED WE HAVE A GOOD CLAIM TO COMMENCE PROCEEDINGS TO RECOVER THESE COSTS, WHERE THERE WOULD BE NO LEGAL COSTS TO US.
ANOTHER EMAIL TO FOLLOW WITH FURTHER CORRESPONDENCE BETWEEN NTI AND OURSELVES REGARDING SAME, AND PROBABLY DOUBLE UP PHOTOS.
PLEASE LET ME KNOW IF THERE IS ANYTHING ELSE YOU MAY NEED.
On 13 December 2022, Mr Martin forwarded this email to Mr Mathison stating:
This one as well
On 10 January 2023, Mr Stekhoven sent Mr Martin (copied to Ms Cole) an email in relation to the insurance of an additional vehicle: CB4600.
I conclude that Hanicourt Transport was contacted either directly by Mr Martin, or by MA Brokers on the basis of information provided to MA Brokers by Mr Martin, with a view to soliciting the client's business. Mr Martin also assisted Hanicourt Transport by completing parts of the letter of appointment.
I conclude that Mr Martin was either the principal AEI contact for Hanicourt Transport or the AEI contact which Hanicourt Transport regarded in substance as the face of the business for the reasons given earlier in relation to the structure of the Brisbane branch and its operations. I have also had regard to communications in which Mr Martin was involved whilst at AEI at CB3078; 3477; 3493-3500.
[35]
JVB Transport Pty Ltd
As mentioned, JVB Transport signed a letter of appointment on 27 October 2022.
On 14 December 2022, a repairer wrote an email to JVB Transport attaching an estimate for the repair of a Volvo (XQ02GH): CB4652. Mr Baker of JVB Transport forwarded the email to Mr Martin on the same day, attaching a large number of JPG image files.
On 11 January 2023, Ms Brooke Stewart of MA Brokers sent an email to JVB Transport, copied to Mr Mathison and Mr Martin, noting that correspondence had been received from the insurer in relation to the claim for the Volvo and making certain inquiries: CB4650.
I conclude that JVB Transport was contacted either directly by Mr Martin, or by MA Brokers on the basis of information provided to MA Brokers by Mr Martin, with a view to soliciting the client's business.
I conclude that Mr Martin was either the principal AEI contact for JVB Transport or the AEI contact which JVB Transport regarded in substance as the face of the business for the reasons given earlier in relation to the structure of the Brisbane branch and its operations. In addition to the communications referred to above whilst Mr Martin was at MA Brokers, I have also had regard to communications in which Mr Martin was involved whilst at AEI at CB3326; 3693-98; 3327.
[36]
Ricjul Pty Ltd
The diary note which Mr Knight entered on AEI's computer system on 14 November 2022 was as follows (CB4238):
Called Rick regarding the LOA we received from NTI. He advised that after I spoke to him last week regarding his renewal outcome, Cameron Smith called him and they discussed where Craig Martin moved to. He said moving brokers had nothing to do with our service, he just said he's had a good relationship with Craig Martin for years so moved over. I said that if he has any issues or needs any assistance down the track to contact me and I can assist. I said that the steps moving forward would be us looking to lapse his 22/23 policies from inception and send out the lapse confirmation. He thanked us for our help and said if he needed anything he would give us a call.
I conclude that Mr Martin provided to a person at MA Brokers contact details for Rick of Ricjul Pty Ltd with a view to obtaining Ricjul Pty Ltd to move from AEI to MA Brokers. In the absence of the diary note, I would have inferred that Ricjul Pty Ltd was contacted either directly by Mr Martin, or by MA Brokers on the basis of information provided to MA Brokers by Mr Martin, with a view to soliciting the client's business.
I conclude that Mr Martin was either the principal AEI contact for Ricjul Pty Ltd or the AEI contact which Ricjul Pty Ltd regarded in substance as the face of the business. This inference arises from Mr Knight's diary note. I would have drawn the inference in any event for the reasons given earlier in relation to other AEI clients. I have also had regard to communications in which Mr Martin was involved whilst at AEI at CB2585-7; 2976-7; 3046; 3076.
[37]
JB Trucking Pty Ltd
The diary note which Mr Knight entered on AEI's computer system on 13 January 2023 was as follows (CB4245):
I called Lyn regarding the LOA email we received from NTI. Lyn said that Barry Matherson from MA Insurance Brokers cold-called her and asked if she wanted quotes. She said yes and he said well I can't quote you until he had a piece of paper signed. I asked if he specifically advised what she was signing and she said no. I explained that she could have signed a Letter of Authority so they could obtain a claims history to begin quoting rather than appointing them as their broker. I advised that as from this point, we can no longer act on her behalf as we are no longer the acting broker. I said I would send her a LOA to have us reappointed.
I conclude that Mr Martin provided to a person at MA Brokers contact details for JB Trucking Pty Ltd with a view to obtaining JB Trucking Pty Ltd to move from AEI to MA Brokers. In the absence of the diary note, I would have inferred that JB Trucking Pty Ltd was contacted either directly by Mr Martin, or by MA Brokers on the basis of information provided to MA Brokers by Mr Martin, with a view to soliciting the client's business. Notwithstanding the content of the diary note, JB Trucking did not move back to AEI. I note that Mr Jack Barker of JB Trucking Pty Ltd was a contact in Mr Martin's SIM card for the Oppo AX5: CB4477V (209).
I conclude that Mr Martin was either the principal AEI contact for JB Trucking Pty Ltd or the AEI contact which JB Trucking Pty Ltd regarded in substance as the face of the business for the reasons given earlier in relation to the structure of the Brisbane branch and its operations. I have also had regard to the fact that Mr Barker was a contact on Mr Martin's SIM card.
[38]
Fielding Way Services Pty Ltd
The diary note which Mr Knight entered on AEI's computer system on 3 February 2023 was as follows (CB4247):
I called Tom after receiving an LOA from ATL. I asked if he moved due to any servicing issues from our end and he said no, it's always been quite good with AEI, it's just that he's always had the relationship with Craig Martin and MA reached out to him and said they now work with Craig so he was happy to move over there. I advised he ensure all policies are taken over and if he has any issues or queries in the future, do not hesitate to reach out to us and we'd be more than happy to help. He thanked us for the help.
I conclude that Mr Martin provided to a person at MA Brokers contact details for Tom of Fielding Way Services Pty Ltd with a view to obtaining Fielding Way Services Pty Ltd to move from AEI to MA Brokers. In the absence of the diary note, I would have inferred that Fielding Way Services Pty Ltd was contacted either directly by Mr Martin, or by MA Brokers on the basis of information provided to MA Brokers by Mr Martin, with a view to soliciting the client's business.
I conclude that Mr Martin was either the principal AEI contact for Fielding Way Services Pty Ltd or the AEI contact which Fielding Way Services Pty Ltd regarded in substance as the face of the business. This inference arises from Mr Knight's diary note. I would have drawn the inference in any event for the reasons given earlier in relation to the structure of the Brisbane branch and its operations. I have also had regard to communications in which Mr Martin was involved whilst at AEI at CB3137 and 3590-1.
[39]
MJ Atkins and Maurie Atkins Bobcat & Mini Excavator Hire Pty Ltd
The diary note which Mr Knight entered on AEI's computer system on 7 March 2023 was as follows (CB4285):
Called Maurie regarding the LOA we received from One Underwriting. I asked why he moved and he advised that Craig Martin reached out to him last week and advised him that he's moved brokerages over to MA Insurance Brokers. He said moving had nothing to do with AEI's service or anything we've done, it's just that he's always been skeptical of insurance brokers and he's had a good relationship with Craig over the years. He said Craig helped him and a few other truck drivers with their claims so he wants to move back over to him; he also mentioned there were a few other drivers moving over but didn't get into specifics. I said if he ever needs assistance to not hesitate to reach out and we'd be more than happy to help him out again which he said he would.
I conclude that Mr Martin contacted Mr Maurie Atkins with a view to soliciting MJ Atkins and Maurie Atkins Bobcat & Mini Excavator Hire to move from AEI to MA Brokers.
I conclude that Mr Martin was either the principal AEI contact for MJ Atkins and Maurie Atkins Bobcat & Mini Excavator Hire or the AEI contact which MJ Atkins and Maurie Atkins Bobcat & Mini Excavator Hire regarded in substance as the face of the business. This inference arises from Mr Knight's diary note. I would have drawn the inference in any event for the reasons given earlier in relation to the structure of the Brisbane branch and its operations. I have also had regard to communication in which Mr Martin was involved whilst at AEI at CB2447.
MJ Atkins and Maurie Atkins Bobcat & Mini Excavator Hire Pty Ltd have been treated as two clients by Mr Samuel. It is convenient to address them as two clients in these reasons.
[40]
Clients in respect of which there is direct evidence an SMS was sent
As mentioned, there was direct evidence that the 1 September 2022 SMS was sent to three AEI clients. It is to be inferred that it was sent to each of the AEI contacts on Mr Martin's Oppo AX5 SIM. One of the AEI clients was S & J McMahon Transport. S & J McMahon Transport has been addressed above given that there was also further direct evidence of further involvement of Mr Martin.
The remaining two are AJ & KG Frederiksen and Douglas Transport.
[41]
AJ & KG Frederiksen Pty Ltd
Mr Garth Frederiksen and Mr George Frederiksen were contacts in Mr Martin's SIM card for the Oppo AX5: CB4477S (150); 4477T (172). In response to a subpoena issued to AJ & KG Frederiksen, a screenshot of an SMS exchange was produced: CB4120. The exchange was as follows:
Mr Martin: Craig Martin's new phone is [New Telephone Number].
Mr Frederiksen: That you Craigie baby?
Mr Martin: Yep
Mr Frederiksen: How you doen ya old mongrel??
I conclude that, in addition to sending an SMS message on 1 September 2022 to Mr Frederiksen, AJ & KG Frederiksen:
contacted Mr Martin and was encouraged by Mr Martin to move to MA Brokers; or
was contacted either directly by Mr Martin, or by MA Brokers on the basis of information provided to MA Brokers by Mr Martin, with a view to soliciting the client's business.
I conclude that Mr Martin was either the principal AEI contact for AJ & KG Frederiksen or the AEI contact which AJ & KG Frederiksen regarded in substance as the face of the business. This inference arises from the friendly terms of the SMS exchange identified above, the nature and structure of the Brisbane branch, including in particular that the AEI accident assistance number was attached to Mr Martin's phone and the evidence concerning client visits by Mr Martin and Mr Donaldson. I have also had regard to communications in which Mr Martin was involved whilst at AEI at CB3059-60; 3169-70; 3176-7.
[42]
Douglas Transport
Mr Tyler Douglas was a contact in Mr Martin's SIM card for the Oppo AX5: CB4477JJ (507). As has been noted earlier, Mr Douglas was sent an SMS by Mr Martin on 1 September 2022 giving him the New Telephone Number.
I conclude that, in addition to sending an SMS message on 1 September 2022 to Mr Douglas, Douglas Transport:
contacted Mr Martin and was encouraged by Mr Martin to move to MA Brokers; or
was contacted either directly by Mr Martin, or by MA Brokers on the basis of information provided to MA Brokers by Mr Martin, with a view to soliciting the client's business.
I conclude that Mr Martin was a principal AEI contact for Douglas Transport. This inference arises from the fact that Mr Martin sent the SMS, and the nature and structure of the Brisbane branch (notwithstanding that Douglas Transport was NSW based).
[43]
Summary of the First Sixteen AEI Clients
A summary of the First Sixteen Clients together with the loss as calculated by Mr Samuel in Table 1 of his report is as follows:
Number AEI Client Approximate Additional Evidence References Loss to 1 September 2023 (Tony Samuel Table 1)
Date of Loss
1 S & J McMahon 26 October 2022 Martin contact: CB4477HH (458) $24,670
CB1648; 3512; 3699-704; 4101-3; 4163; 4296-7; 4585T; 4604; 4608; 4610; 4617A; 4618; 4642-3
2 Bondwoods 25 October 2022 Martin contact: CB4477Z (286) $31,551
CB1641; 2488-92; 2494-7; 2570-71; 2578; 2962-5; 2986-90; 3151-4; 3520; 4254; 4645-7
3 Boardman Sand and Gravel 27 October 2022 Martin contact: CB4477V (220) $14,700
CB1642; 3164; 3236; 4529; 4585S; 4602
4 Quickwell Express 31 October 2022 CB1645; 3452-60; 3558; 4585BB $16,393
5 WGH & GM Kelly 28 October 2022 CB3204; 3522-6 $7,860
6 Eastwells Haulage 26 October 2022 Martin contact: CB4477AA (313) $39,499
CB1649; 2975; 2985; 2991-2; 3011; 3013-4; 3017-41; 3048-55; 3061-2; 3064-5; 3082-5; 3107; 3138-41; 3155-7; 3162; 3165; 3237-45; 3908; 3933-50; 4585Z; 4591; 4592; 4593; 4593A
7 GF & S Morgan 24 October 2022 Martin contact: CB4477T (174) $7,200
CB2440-2; 3974-6
8 Hanicourt Transport 27 October 2022 CB1654; 3078; 3477; 3493-3500; 4528; 4585X; 4595; 4597; 4600 $19,771
9 JVB Transport 27 October 2022 CB3326; 3693-98; 3327; 4650; 4652 $17,783
10 Ricjul 2 November 2022 CB2585-7; 2976-7; 3046; 3076 $1,111
11 JB Trucking Mid-February 2023 Martin contact: CB4477V (209) $1,424
12 Fielding Way 3 February 2023 CB3137; 3590-1; 4258 $2,233
13 MJ Atkins Early March 2023 CB2447 $724
14 Maurie Atkins Bobcat Early March 2023 CB2447 $567
15 AJ & KG Frederiksen 31 October 2022 Martin contact: CB4477S (150); 4477T (172) $13,785
CB3059-60; 3169-70; 3176-7; 4120
16 Douglas Transport Early February 2023 Martin contact: CB4477JJ (507) $23,290
TOTAL $222,561
[44]
I consider it more likely than not that Mr Martin solicited each of these clients, either directly or by procuring MA Brokers to solicit the clients. In addition to the evidence referred to above, the inference also arises from the following:
the fact that 21 notifications were received over the period 1 to 3 November 2022, on the basis of a number of letters of appointment signed over the last days of October 2022, some of which were partially filled out by Mr Martin;
the absence of evidence that the AEI clients were motivated to move for any reason apart from contact from Mr Martin, coupled with the evidence that the AEI clients had remained with AEI for many years previously;
the absence of any evidence of any marketing or other campaign on the part of MA Brokers which might explain how Mr Martin's move to MA Brokers might have come to the attention of AEI clients.
[45]
The Second Fifteen - Additional 15 AEI clients it should be inferred were solicited
I infer that the following 15 clients were contacted either directly by Mr Martin, or by MA Brokers on the basis of information provided to MA Brokers by Mr Martin, with a view to soliciting the client's business and that the client moved to MA Brokers as a result:
Number AEI Client Approximate Additional Evidence References Loss to 1 September 2023 (Tony Samuel Table 1)
Date of Loss
17 Freightshift 31 October 2022 Martin contact: CB4477S (139) $18,854
CB3884; 3894-5; 3989-3994
18 Dellmex 21 October 2022 Martin contact: CB4477N (36) $29,534
CB1518-19; 4108; 2522-6; 2555-6; 3178-81
19 Lawroad 21 October 2022 CB3747; 3928-9 $4,845
20 A Mackay & Son 1 November 2022 Martin contact: CB4477M (12) $14,006
CB2486; 2493; 2527
21 Wilton's Transport 23 October 2022 Martin contact: CB4477JJ (524) $17,609
CB3010; 3063; 3135; 3168
22 STA Trucking 26 October 2022 CB3228; 3231-2 $23,806
23 Johnnie Bundy 24 October 2022 CB2572; 2582; 3042-4; 4063-66 $17,396
24 JMT Transport 22 October 2022 Martin contact: CB4477W (230) $9,188
CB2462; 2554; 2994; 2997-3000; 3166
25 Nevens Haulage 26 October 2022 CB677; 749; 750; 834; 836 $2,687
26 Bill Humphries 24 October 2022 Martin contact: CB4477O (56) $22,274
27 Grand Connect Group 26 October 2022 CB3478; 3580-1; 3886-91 $25,121
28 Market Gate Logistics 2 November 2022 CB3171-2; 3271; 3302 $15,750
29 WSCK Iacono 16 November 2022 CB3471; 3903 $3,544
30 All Truck Towing Mid-November 2022 CB3101; 3160; 3161; 3277-9 $14,056
31 Harvey's Towing Mid-January 2023 Martin contact: CB4477X (249) $74,966
CB4056-7
TOTAL $293,636
[46]
I consider it more likely than not that Mr Martin solicited each of these clients, either directly or by procuring MA Brokers to solicit the clients. In addition to the evidence referred to above, the inference arises from the matters referred to at [229] above.
In relation to each of the Second Fifteen, I am satisfied that Mr Martin was either the principal AEI contact for the client or an AEI contact which the client in substance regarded as the face of AEI's business. This inference is drawn from the nature and structure of the Brisbane branch, including in particular that the AEI 24/7 emergency accident assistance number was attached to Mr Martin's phone, the evidence concerning client visits by Mr Martin and Mr Donaldson and (except in relation to Nevens Haulage Pty Ltd) the documents referred to in the column entitled "Additional Evidence References". The documents relating to Nevens Haulage Pty Ltd did not take matters further with respect to establishing a connection between the client and Mr Martin. In relation to those clients who were a contact in the SIM of Mr Martin's Oppo AX5, I infer that they were sent an SMS on 1 September 2022 providing the New Telephone Number.
[47]
The Third Fourteen - Additional 14 AEI clients a proportion of which were solicited
In relation to the following 14 AEI clients, I have a positive persuasion that a substantial number of them were contacted either directly by Mr Martin, or that he procured MA Brokers to contact them, with a view to soliciting the client's business and that the client moved to MA Brokers as a result:
Number AEI Client Approximate Additional Evidence References Loss to 1 September 2023 (Tony Samuel Table 1)
Date of Loss
32 Mick's Bulk Haulage Mid-January 2023 Martin contact: CB4477CC (343) $7,363
CB3086-92; 2452-9; 2532-3; 2545-6; 4104-7
33 Danlyn Early January 2023 CB3624; 3817-8; 3977 $9,085
34 SJH Heavy Haulage Early January 2023 Martin contact: CB4477GG (452) $7,917
35 Keep on Truckin Late January 2023 CB3517-9; 3554 $3,448
36 Bonica Holdings Mid-January 2023 Martin contact: CB4477X (248) $2,619
CB3167
37 Fastfreight 7 January 2023 CB3119; 3122-3; 4263; 4273 $5,746
38 Redline Express 12 January 2023 CB2557-8; 2915; 2919-21; 3111-3; 3147-9; 4252-6 $2,452
39 Woodsbey 9 January 2023 CB2559-60; 2583-4; 2917; 3120; 4249-51 $4,015
40 Ozzy Concrete Mid-February 2023 CB4071-98 $1,026
41 HLE Logistics Late February 2023 CB3393; 3527 $5,872
42 Barnes Towing Early June 2023 Martin contact: 4477N (37) $5,829
CB4299
43 Sapar Landscaping Late February 2023 CB2463-73; 2477-80; 2509-21 $35,619
44 Rancroft 1 March 2023 Martin contact: CB4477P (71) $7,273
CB1478-96; 4257-8
45 T & M Magnussen 9 February 2023 CB1627-36; 4248 $2,821
TOTAL $101,085
[48]
I infer that a proportion of the Third Fourteen were solicited by Mr Martin either directly or through MA Brokers. However, it is likely that a proportion of these clients have transferred their business to MA Brokers without any solicitation on the part of Mr Martin. It is also likely that Mr Martin has not dealt with some of those who transferred without solicitation.
By way of example, the diary note which Mr Knight entered on AEI's computer system on 9 January 2023 in relation to Woodsbey was as follows (CB4242):
Called Lenita as we received an LOA notice from GT. I asked why they appointed a new broker and they said it's not due to our service, but over the break they did a review and decided to go elsewhere. I asked if there's anything we could do but she said no. I asked which broker they went to out of curiosity and she said it's none of my business. I advised that we would lapse the policies once all confirmation has come through and said if there's any issues or we can assist in the future to not hesitate to contact me again.
By way of further example, the diary note which Mr Knight entered on AEI's computer system on 10 February 2023 in relation to T & M Magnussen was as follows (CB4276):
Spoke to Trevor as we've received an LOA from Berkley. I asked if it was to do with our servicing and he said no, our service has been good, it's just that he's been close mates with Craig for 30 years and wants to stick with him. I asked if Craig reached out but he said no, he reached out to Craig directly and then decided to move back over to him. I said we will look to lapse all policies but will email him the information to, ensure all his insurances are taken over by the new broker. I said if he has any issues in the future to not hesitate to reach out and we are more than happy to help.
It is likely that a number of clients which moved in 2023, did so - not because of any solicitation from, or initiated by, Mr Martin - but because they came to learn that Mr Martin had moved to MA Brokers and that they wished to move for reasons of friendship or continuity of service or both. In relation to those clients, it is likely that some have not dealt with Mr Martin in a relevant period. I have taken this into account in the assessment of damages.
[49]
Breach of cl 12(c) of the employment contract
The principal claim advanced at trial was a claim for breach of cl 12(c) of the employment contract. There was no dispute that the operation of this clause survived termination of the contract: cl 15.6(e). Mr Martin contended, however, that the restraint of trade in cl 12 was wholly or partly invalid.
At common law:
a restraint of trade clause is contrary to public policy and void unless it can be shown that the restraint is reasonable in the circumstances: Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535, 565; Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd [1973] HCA 40; 133 CLR 288 at 315;
the onus of establishing that the restraint goes no further than is reasonably necessary to protect the interests of the person in whose favour the restraint operates lies on the party seeking to support the restraint as reasonable: Adamson v New South Wales Rugby League Limited [1991] FCA 8; 27 FCR 535 at 554 (Hill J); Herbert Morris Ltd v Saxelby [1916] 1 AC 688 at 700 and 707-8;
the onus of establishing that the restraint is contrary to the public interest lies on the person seeking to invalidate the restraint: Herbert Morris at 700 and 707-8.
In New South Wales, whether or not a restraint of trade is valid in any particular case is determined by reference to the common law principles as modified by the operation of s 4 of the Restraint of Trade Act 1976 (NSW) (RT Act), which provides:
4 Extent to which restraint of trade valid
(1) A restraint of trade is valid to the extent to which it is not against public policy, whether it is in severable terms or not.
(2) Subsection (1) does not affect the invalidity of a restraint of trade by reason of any matter other than public policy.
(3) Where, on application by a person subject to the restraint, it appears to the Supreme Court that a restraint of trade is, as regards its application to the applicant, against public policy to any extent by reason of, or partly by reason of, a manifest failure by a person who created or joined in creating the restraint to attempt to make the restraint a reasonable restraint, the Court, having regard to the circumstances in which the restraint was created, may, on such terms as the Court thinks fit, order that the restraint be, as regards its application to the applicant, altogether invalid or valid to such extent only (not exceeding the extent to which the restraint is not against public policy) as the Court thinks fit and any such order shall, notwithstanding sub-section (1), have effect on and from such date (not being a date earlier than the date on which the order was made) as is specified in the order.
(4) Where, under the rules of an association, a person who is a member of the association is subject to a restraint of trade, the association shall, for the purposes of subsection (3), be deemed to have created or joined in creating the restraint.
(5) An order under subsection (3) does not affect any right (including any right to damages) accrued before the date the order takes effect.
There is a question about whether s 4 of the RT Act modifies the onus of proof at common law - see: Idameneo (No 123) Pty Ltd v Angel-Honnibal [2002] NSWSC 1214 at [45]-[48]; Isaac v Dargan Financial Pty Ltd [2018] NSWCA 163; 98 NSWLR 343 at [75]-[78].
The correct approach to the application of s 4(1) of the RT Act was summarised by Gleeson JA in Isaac at [61] in the following way:
[61] The correct approach to the application of s 4(1) of the Restraints of Trade Act is well settled. In Orton v Melman [1981] 1 NSWLR 583 at 587 McLelland J (as his Honour then was) explained that first, the Court determines whether the alleged breach (independently of public policy considerations) does or will infringe the terms of the restraint properly construed. Next, the Court determines whether the restraint, so far as it applies to that breach, is contrary to public policy. If it is not, the restraint is valid, subject to any order which may be made under s 4(3). These principles have been approved in later cases including in this Court: Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 at 328; Woolworths Limited v Olson [2004] NSWCA 372 at [42]-[44]; Jardin and Jardin Investments Pty Ltd v Metcash Ltd and Metcash Trading Ltd [2011] NSWCA 409 at [87].
This passage (together with Isaac at [62]-[66]) was set out with apparent approval in DXC Eclipse Pty Ltd v Wildsmith [2023] NSWCA 98 at [56] by Bell CJ (with whom Brereton JA and Simpson AJA agreed).
[50]
Does the alleged breach infringe the terms of the restraint properly construed?
AEI submitted that Mr Martin either directly or indirectly solicited, canvassed, dealt with, approached or accepted an approach from clients of AEI with a view to the obtaining of the business of those clients for MA Brokers. It should be made clear at the outset that, on its proper construction, cl 12(c) does not prohibit Mr Martin dealing with clients after the client becomes a client of MA Brokers, at least assuming that the client was not solicited directly or indirectly by Mr Martin. The final words of cl 12(c) qualify the whole clause: "with a view to obtaining the business of that client or customer in a business that is the same or similar to or in competition with the business of" AEI. If an AEI client independently moved to MA Brokers without solicitation then Mr Martin would not be in breach of cl 12(c) if he were to deal with those clients.
In relation to the First Sixteen and Second Fifteen clients, I conclude that:
each was contacted either directly by Mr Martin, or by him through MA Brokers on the basis of information provided to MA Brokers by Mr Martin, with a view to soliciting the client's business and that the client moved to MA Brokers as a result;
Mr Martin informed MA Brokers of the identity of clients he dealt with at AEI which he considered were likely to move their business to MA Brokers by reason of:
the relationship he had with those clients;
his knowledge of their forthcoming insurance needs;
the continuity of service he could provide;
to the extent that clients were solicited to come to MA Brokers by direct actions of MA Brokers rather than direct actions of Mr Martin:
in substance, Mr Martin procured MA Brokers to solicit the clients;
either Mr Martin gave contact information in relation to the AEI clients referred to in (b) above or that contact information was readily ascertainable by MA Brokers by reason of MA Brokers being told the name of the client by Mr Martin;
Mr Martin is likely to have divulged information relevant to securing each of their business. In this regard, it is to be observed that:
the stream of clients moving to MA Brokers from AEI broadly suggests that the larger clients (in terms of the income which would be derived from their business) were targeted first;
the evidence directly establishes that Mr Martin provided further information in relation to some clients, including policy information, because it is demonstrated that he wrote some of that information on some of the letters of appointment for the clients;
having regard to what can be directly established, and to the number and timing of the letters of appointment, it is to be inferred that Mr Martin used information available to him about the clients in order to solicit their business;
in relation to those AEI clients a principal of which was in the contacts list in the SIM of Mr Martin's Oppo AX5, an SMS was sent on 1 September 2022, substantially in the form of that sent to the three AEI clients where this was directly proved. The SMS was sent for the purpose of soliciting the client's business.
In further explanation of these conclusions:
There was direct evidence of solicitation by Mr Martin in relation to some AEI clients within the First Sixteen and Second Fifteen, for example S & J McMahon Transport. I conclude that the SMS sent on 1 September 2022 was sent to AEI clients for the purpose of soliciting their business. There was also direct evidence of substantial involvement, including assisting with filling out or completing letters of appointment, as noted earlier. It is likely that many more were directly solicited.
Whilst I reach these conclusions anyway, the inferences may be more confidently drawn on the basis that Mr Martin destroyed two mobile phones (and reset or deleted information in a third) in circumstances where the electronic content in them was the best available evidence of the contact which Mr Martin had (or did not have) with AEI's clients. The likely explanation for Mr Martin's conduct in this regard is that the mobile phones contained information which he knew would tell against him - see: Allen v Tobias [1958] HCA 13; 98 CLR 367 at 375.
It is likely in relation to some of the First Sixteen and Second Fifteen that the main direct solicitation was by MA Brokers on the basis of the information provided by Mr Martin. Nothing turns on this in the result. The evidence did not suggest that MA Brokers was conducting a marketing campaign at or around the time that Mr Martin commenced employment or making independent inquiries which could possibly have explained why such a large number of AEI clients decided to change brokers at around the same time.
As observed above, it is tolerably clear that, broadly speaking, the larger clients were targeted first, mostly before Christmas. The less commercially significant clients came later. This, of course, would suit both MA Brokers and Mr Martin, who left his employment with AEI at least in part in order to seek to earn more via commissions. Mr Martin had a financial interest in the AEI clients moving across given the likely terms of his employment with MA Brokers under which he would receive a 30% commission on new business. With AEI, he would only receive 5% on renewals of the clients which moved.
The timing of the termination of Mr Martin's employment and the signing of a large number of letters of appointment, when assessed together with the direct evidence of Mr Martin soliciting AEI clients, makes the inference irresistible that Mr Martin was soliciting AEI clients, either by himself contacting them or by procuring MA Brokers to contact them.
In relation to the Third Fourteen, I have a positive persuasion that a substantial number of them were solicited either directly by Mr Martin, or with the assistance of MA Brokers on the basis of information provided to MA Brokers by Mr Martin, and that Mr Martin is likely to have dealt with a substantial number of those solicited.
Mr Martin's conduct was in breach of cl 12(c) properly construed.
Clause 12(c) applies whether the solicitation is "direct" or "indirect" or whether Mr Martin did all the solicitation himself or partly by obtaining assistance from individuals at MA Brokers. Senior Counsel for Mr Martin submitted that AEI did not plead that Mr Martin had engaged in any of the prohibited conduct "indirectly". The issue was fairly raised in the pleading, and in the evidence and in submissions. It was always a part of AEI's case that some clients had been contacted by MA Brokers and those advising Mr Martin could not have thought otherwise.
As is addressed further next, the principal interest that AEI sought to protect was its customer connections. Mr Martin used this connection which he had developed for AEI and the information he had obtained (including contact details, policy renewal times and insurance information and needs) to solicit clients, both directly, and by procuring MA Brokers to contact clients which Mr Martin considered were likely to move on account of his knowledge of their needs and his close relationship with them.
[51]
Is the restraint, so far as it applies to that breach, contrary to public policy?
In Belflora Pty Ltd v Vinflora Pty Ltd [2021] NSWCA 178; 106 NSWLR 67 at [46], Brereton JA observed (footnotes omitted):
The identification of a legitimate protectable interest is fundamental; without one, no restraint is reasonable; and where one is established, it informs the extent of what is reasonable to protect it. The legitimate interests which may be the subject of protection by covenant are in the nature of proprietary subject matter, including trade secrets and confidential information, and goodwill including customer connection. It extends to information as to the identity of reliable suppliers, even though not such as to amount to a "trade secret" which would attract equitable protection in the absence of express agreement; and to connection with staff, so that "anti-poaching" covenants prohibiting a former employee from soliciting the employer's staff have been upheld. However, it is well-established that a covenantee is not entitled to protection against mere competition."
In Tullett Prebon (Australia) Pty Ltd v Purcell [2008] NSWSC 852, a case involving restraints in an employment context, Brereton J said at [47] (footnotes omitted):
… Whether a restraint is reasonable having regard to the interests of the parties depends on two, albeit related, considerations: first, whether the covenantee has a legitimate protectable interest, and secondly, whether the restraint is no more than reasonable for the legitimate protection of that interest. A covenantee is not entitled to be protected against mere competition; the legitimate interests which may be the subject of protection by covenant are in the nature of proprietary subject matter, including trade secrets and confidential information, and goodwill including customer connection.
This passage was quoted with approval in Issac at [64] (see also DXC at [56]). Of course, the word "proprietary" is used in a special sense and will include legitimate commercial interests: Isaac at [65]. In Isaac, Gleeson JA observed:
[67] Generally, a stricter and less favourable view is taken of covenants in restraint of trade between employer and employee than in commercial agreements. As Mason P explained in Woolworths Ltd v Olson at [38]:
[38] The courts in general take a stricter and less favourable view of covenants in restraint of trade entered into between employer and employee than of similar covenants in commercial agreements (Geraghty v Minter (1979) 142 CLR 177 at 185). The reasons are explained in J D Heydon, The Restraint of Trade Doctrine (2nd ed, 1999) at pp 68-9. It is nevertheless well established that an employer may have interests capable of protection by a restraint covenant. These interests go beyond protection of goodwill and retention of customers and extend to trade secrets …
[68] The same point is made by JD Heydon in the most recent edition of The Restraint of Trade Doctrine (4th ed, 2018, Chatswood, LexisNexis Butterworths) at 96-97, where four main reasons are given for the court's approach in employment cases. First, the inequality of bargaining power between the parties. Second, the employee may be giving up that employee's only asset, which depends on specialised training and which may not be at all negotiable. Third, when labour is hired it remains valuable whether or not the employee later competes. Fourth, once the employee accepts the post-employment restraints, the employer's power during the contract is much increased by reason of the inhibition on the employee's ability to threaten to leave and seek work elsewhere.
It is well settled that an employer's customer connection is a protectable interest and that, whilst an employer is not entitled to be protected against mere competition by a former employee, the employer is entitled to be protected against unfair competition. In Cactus Imaging Pty Ltd v Peters [2006] NSWSC 717; 71 NSWLR 9 at [25], Brereton J said (citations omitted):
It is plain that an employer's customer connection is an interest which can support a reasonable restraint of trade. Such a restraint is legitimate if the employee has become, vis-à-vis the client, the "human face" of the business, namely the person who represents the business to the customer - or, as it was put by Hoover J in Arthur Murray Dance Studios of Cleveland Inc v Witter 105 NE (2d) 685, 706 (Ohio, 1951): "The personal relation between the employee and the customer [is] such as to enable the employee to control the customer's business". While the employer is not entitled to be protected against mere competition by a former employee, the employer is entitled to be protected against unfair competition based on the use by the employee after termination of employment of the customer connection which the employee has built up during the employment - which, because the employee has in effect represented the employer from the customer's perspective during the employment, might at least temporarily appear attached to the employee, but in truth belongs to the employer.
Senior Counsel for Mr Martin emphasised the following passage from Stenhouse Australia Ltd v Phillips [1974] AC 391 at 400:
The accepted proposition that an employer is not entitled to protection from mere competition by a former employee means that the employee is entitled to use to the full any personal skill or experience even if this has been acquired in the service of his employer: it is this freedom to use to the full a man's improving ability and talents which lies at the root of the policy of the law regarding this type of restraint. Leaving aside the case of misuse of trade secrets or confidential information (which is separately dealt with by clause 3 of the agreement and which does not arise here), the employer's claim for protection must be based upon the identification of some advantage or asset inherent in the business which can properly be regarded as, in a general sense, his property, and which it would be unjust to allow the employee to appropriate for his own purposes, even though he, the employee may have contributed to its creation. For while it may be true that an employee is entitled - and is to be encouraged - to build up his own qualities of skill and experience, it is equally his duty to develop and improve his employer's business for the benefit of his employer. These two obligations interlock during his employment: after its termination they diverge and mark the boundary between what the employee may take with him and what he may legitimately be asked to leave behind to his employers.
AEI is not entitled to be protected against mere competition from Mr Martin. In particular, Mr Martin is entitled to use to the full his personal skill and experience. However, AEI is entitled to be protected against unfair competition based on the use by Mr Martin after his resignation of aspects of the customer connection which he developed for AEI during his employment. The principal interest that AEI sought to protect was its customer connections. This was a legitimate interest for protection.
Mr Martin submitted that "[t]he chapeau to clause 12, and in particular the word 'indirectly' renders the whole clause uncertain and to an extent undefined, to the extent that it purports to prohibit something 'indirect'". The word "indirectly" does not render the clause uncertain or undefined. The meaning of the clause is clear. It prohibited Mr Martin from soliciting AEI's clients directly and also by soliciting them through procuring some other person to make the approach for him.
Mr Martin voluntarily agreed to the restraint and expressly acknowledged its reasonableness - see: cl 12.5 of the employment contract. Although a contractual consensus cannot be regarded as conclusive in this context, it is a matter which is of at least some weight - see: Hanna v OAMPS Insurance Brokers Ltd [2010] NSWSC 781; 202 IR 420 at [69(i)] (Hammerschlag J); Idameno at [51].
The restraint period is defined in "cascading periods" of restraint ranging from 12 months to 3 months after the end of Mr Martin's employment. The clause is not void for uncertainty - see the discussion in Hanna v OAMPS [2010] NSWCA 267 at [41] to [67] (OAMPS Appeal).
As to the test of reasonableness for the duration of a non-solicitation covenant, when it is supported by customer connection, Brereton J observed in Cactus Imaging at [36] (citations omitted):
… Generally, the test of reasonableness for the duration of a non-solicitation covenant, when it is supported by customer connection, is what is a reasonable time during which the employer is entitled to be protected against solicitation, which in turn depends on how long it would take a reasonably competent replacement employee to show his or her effectiveness and establish a rapport with customers. A related, albeit subsidiary, consideration is how long might the hold of the former employee over the clientele be expected to last before weakening…
Insurance books and policies usually have a 12-month duration. That was the case here. The critical time for AEI in securing its customer and business connection is the policy renewal date. These dates are spread throughout the year.
A 12 month restraint protects at least one renewal of a client's policy - see the discussion in: OAMPS at [93]-[99] (Hammerschlag J); and, on appeal, in OAMPS Appeal at [46]-[48] per Allsop P (with whom Hodgson JA and Handley AJA agreed).
Although Mr Martin was not a broker, he was the face of the business with respect to the AEI clients which left to MA Brokers. This is evident from his role in the Brisbane branch of AEI, and in its growth and development, and in him being the person whose phone was linked to AEI's 24/7 emergency accident assistance line. A period of 12 months is a length of time which would facilitate AEI dealing with its clients in a way which might re-establish the connection which would be lost when Mr Martin ceased employment. This was particularly important to AEI because of the special relationship which Mr Martin had with clients in building up the business and giving them special attention, particularly in dealing with their accidents and claims. It is to be inferred that Mr Martin became intimately aware of the client's business operations in order to assist in dealing with the immediate requirements arising from an accident, in making claims, in managing repairs, and in the insurance renewal process (even if not performing the role of broker). It is also to be inferred that Mr Martin built up the trust of those clients.
The period of 12 months was a reasonable restraint in the circumstances.
The restraint in cl 12(c) so far as it applies to Mr Martin's breaches is not contrary to public policy. Mr Martin breached cl 12(c).
[52]
Breach of clause 12(a) and (b) of the employment contract
Both cl 12(a) and cl 12(b) were referred to in the Statement of Claim, but there was no claim that either was breached. In any event, in relation to cl 12(a), there was no evidence that Mr Martin was "required" by MA Brokers to use or disclose "Confidential Information". The claim for breach of cl 12(a) was abandoned by Senior Counsel for AEI in closing submissions.
As to cl 12(b), during pre-litigation correspondence, AEI stated that its concern was with any breach of cl 12(c) and that, without prejudice to it later changing its position, it did not seek to enforce the restraint in cl 12(b): CB4131. The Statement of Claim did not make it clear that AEI sought to resile from this position. If it had, there would have been a good available argument that AEI was estopped from seeking to enforce the restraint in that clause given that it had expressly not sought to enforce the clause when it knew Mr Martin had commenced working for MA Brokers. Further, I would have concluded that cl 12(b) was void as a restraint on trade.
[53]
Breach of cl 13.2(b) and (c) of the employment contract
AEI pleaded breaches of cl 13.2(b) and (c). Clause 13.2(b) prohibits the use or disclosure of "Confidential Information" after employment. Clause 13.2(c) requires the employee to notify AEI of any suspected or actual unauthorised use. The phrase "Confidential Information" includes customer contacts and client lists and "all information relating to persons who have been approached or canvassed" by AEI as potential clients. It was not suggested that any different result would flow from a finding that Mr Martin breached cl 13.2(b) or (c). In the circumstances, it is not necessary to reach any concluded view about breaches of these clauses.
[54]
Breach of equitable duty of confidence and fiduciary duties
AEI also pleaded breaches of an equitable duty of confidence and a breach of various fiduciary duties. It is unnecessary to consider these claims. It was not submitted that any different result would flow if these breaches were established. Any equitable duty of confidence is unnecessary to address where it is clear that the contract adequately deals with the issue. Senior Counsel for AEI properly accepted in closing submissions that these claims added little if anything to the case for breach of cl 12(c) of the employment contract.
[55]
Breach of ss 182 and 183 of the Corporations Act 2001 (Cth)
It is strictly unnecessary to consider the claims under ss 182 and 183 which were, at best, poorly pleaded. The claim under s 182 was not sufficiently pleaded to determine its possible application. The claim under s 183 is perhaps more clearly potentially available, but again, the pleading was in many respects deficient and no submissions were advanced as to its application to the facts in closing submissions.
[56]
Strategic plan
AEI also sought to argue a case that Mr Martin formed a "strategic plan" to divert clients of AEI to MA Brokers of a kind considered in Ancient Order of Foresters in Victoria Friendly Society Limited v Lifeplan Australia Friendly Society Limited [2018] HCA 43; 265 CLR 1. This case was not pleaded and was properly abandoned in closing submissions.
[57]
CAUSATION
Mr Martin made two submissions in relation to causation. First, he submitted that AEI must establish that each of the AEI clients had in fact moved to MA Brokers.
In relation to each of the 45 clients, there is evidence that the client moved to MA Brokers. In most cases, the evidence was contained in Exhibit 5, being Mr Martin's affidavit. Mr Martin submitted that this should be given little or no weight. Mr Martin's affidavit is of significant weight. He worked for MA Brokers and admitted that the relevant clients moved. Each of the 45 clients moved to MA Brokers.
Mr Martin also submitted that there was no evidence that T & M Magnussen moved to MA Brokers. I reject this submission: CB4276.
Secondly, Mr Martin submitted that it does not follow, as a matter of course that, if breach of a restraint is proved, damage flows, referring to the observation of Robb J in Carsal and Associates Pty Ltd v Crozier [2024] NSWSC 26 at [62] that if "individual clients have a personal preference for the former contractor that cannot be replaced by the new one, that is simply a fact of life". According to Mr Martin the evidence left open as an equally available (if not more likely) inference that the AEI clients left for a reason other than a breach by Mr Martin of the employment contract, referring to his professional networks and long-standing friends from the transport industry and his friendly demeanour and unique skills.
Mr Martin submitted that there was evidence that AEI was concerned that another former employee might be approaching clients of AEI in December 2022 and that it could not be excluded from the range of possibilities that clients left AEI to follow other former AEI staff members. The evidence did not go near establishing this as plausible. In particular, it was established that 45 clients moved to MA Brokers.
For the reasons given above, the Court is comfortably satisfied that each of the First Sixteen and Second Fifteen AEI clients left because of Mr Martin's breach of cl 12(c). On the other hand, only a substantial proportion of the Third Fourteen is likely to have left AEI as a result of a breach by Mr Martin of cl 12(c).
[58]
DAMAGES
Mr Samuel calculated losses for 3, 6, 9 and 12 month periods, the 12 month period ending on 1 September 2023. Mr Samuel:
determined the actual income from each of the 51 clients for the years ended 28 August 2021 and 28 August 2022: Samuel at [66] to [74];
determined the income that AEI would have earned by starting with the actual income in the year ended 28 August 2022 and then taking into consideration "account growth" and "churn": Samuel at [75];
pro-rated the loss by reference to the date of departure of the relevant clients: Samuel at [75].
Mr Samuel did not calculate losses by reference to the specific renewal dates of the relevant policies. Mr Martin made the point in submissions that the commission is earned only at the point of renewal and not over the course of the year. A part of the context for assessing the evidence, however, is that the parties agreed the terms of the letter of instructions to Mr Samuel as the Court appointed expert. Mr Martin was free to agree whatever questions he wanted.
Mr Samuel recognised that the income related to any one individual client might be more or less than the income which had been earned in the previous year because each client's needs would be likely to change from year to year and the cost of premiums would be likely to increase. Appropriately, he did not investigate the individual circumstances of each client, considering that - as a whole - it was likely that a reasonable estimate would be provided by looking at the 51 clients as a whole: Samuel at [28]. An investigation of the circumstances of each client would have been disproportionately expensive and time consuming in the circumstances of the case and would have been contrary to the objectives sought to be achieved by the overarching purpose in s 37M of the Federal Court of Australia Act 1976 (Cth).
As to "account growth", Mr Samuel looked at the growth between the year ended 28 August 2021 and the year ended 28 August 2022, concluding that it was 15.46%: Samuel at [81(d)]. Mr Samuel adopted 15.5% as the growth rate: Samuel at [82]. Mr Samuel examined a number of insurance industry reports and the IBIS Industry Report for General Insurance in Australia dated May 2023. The industry reports showed varying degrees of growth in insurance in a wide range of sectors in relevant years: Samuel at [83]. Mr Samuel's opinion was that the growth rates for 2023 were consistent with the growth rate of 15.5% for AEI which he adopted: Samuel at [84]. Mr Martin contended that Mr Samuel should have adopted a lower growth rate by reference to the rates which could be seen to be more relevant to heavy vehicle insurance.
I consider Mr Samuel's opinion on growth rate sound given that he was using the information only to check the reasonableness of the opinion he formed by reference to the actual growth figures which AEI achieved in the earlier years.
Mr Samuel considered that there were no relevant costs saved: Samuel at [86] to [90]. This opinion is logically explained and I accept it.
Ms Tierney gave unchallenged evidence about the retention rates of AEI clients over the 2020 to 2021 financial years. Mr Samuel averaged these to determine a retention rate of 97.5%. Mr Samuel noted, however, that there was some information which might tend to suggest a lower retention rate, although AEI considered this could be explained (but had not done so by the time of the report). Mr Samuel determined a retention rate of 97.5% (being a "churn" of 2.5%): Samuel [91] to [100]. The "churn" recognises that it is likely that some clients would have left irrespective of the impugned conduct. Mr Samuel also performed calculations on the basis of a 90.1% retention rate, which reflected the retention rate on the basis of the information which caused him to question the retention rate of 97.5%.
The losses as calculated by Mr Samuel at the 97.5% retention rate have been incorporated in the three tables set out earlier in the reasons for the 45 AEI clients.
Mr Samuel also performed calculations of ongoing losses and future losses, which overlapped, in the event that the Court were to conclude that it was appropriate to make an award for such losses.
In relation to the First Sixteen and Second Fifteen clients, I conclude that Mr Martin solicited the clients, either by taking the relevant steps himself or by procuring MA Brokers to take the steps by providing names and other relevant details. In relation to the Third Fourteen, I consider that Mr Martin is likely to have solicited a substantial proportion of them, either directly or by obtaining assistance from MA Brokers.
On Mr Samuel's calculations using a 97.5% retention rate, but removing the 6 AEI clients which were conceded, the losses would be $617,282. This represents the upper limit of losses for each of the 45 clients over a 12 month period.
I consider damages should be assessed at $500,000. This takes into account:
that it is probable that a proportion of the Third Fourteen would involve clients which came to learn that Mr Martin had moved to MA Brokers without having been solicited by Mr Martin;
a slightly lower retention rate across all the 45 AEI clients than 97.5%; and
the impossibility of knowing which clients might have left in any event or, necessarily, the dates of their policy renewals.
There should not be an award for ongoing or future losses. After the period of 12 months, Mr Martin would be free to solicit AEI's clients. Even absent this, it was inevitable that AEI clients would come to know that Mr Martin moved to MA Brokers. There was no evidence adduced from which it could safely be inferred that AEI would have retained the clients which left if AEI had longer to cement its relationship with those AEI clients. In particular, there was no evidence to the effect that AEI employed a person with the quite specific and somewhat unusual set of skills as Mr Martin, or someone who might be equivalently attractive to clients,. An award of future losses would in effect be an award for losses from legitimate competition. AEI has not established future losses.
[59]
CONCLUSION
Mr Martin should be ordered to pay damages in the amount of $500,000.
I certify that the preceding two-hundred and ninety (290) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thawley.
The "Restraint Period" is defined in the following terms in cl 12.7(b) of the contract:
Restraint Period means each of the following periods commencing from the termination of the Employee's employment:
(i) 12 months;
(ii) 9 months;
(iii) 6 months;
(iv) 3 months.
Clause 13.1(a)(i) of the contract provided:
13.1 Acknowledgment
The Employee acknowledges that:
(a) all trade and business secrets, other confidential information and any documents (in whatever form, however stored, and including copies and extracts) relating to the affairs and business of the Group or which the Employee acquired in the course of their employment with the Company, whether or not originally supplied by a Group Company, including the following:
(i) client contacts and client lists;
…
(iii) all information relating to the number, nature or mix of products and services supplied by the Group to any of its clients;
(iv) all information relating to persons who have been approached or canvassed by the Group as potential clients of the Group; and
…
("Confidential Information") is the property of the Group;
…
Clauses 13.2(a) - (d) provided as follows:
13.2 Confidentiality and return of Confidential Information
The Employee agrees that:
(a) they must only use Confidential Information for the purpose of performing their duties for the Company under this Agreement;
(b) during the Employee's employment and thereafter, except in the proper course of their duties, the Employee will not use or disclose to anyone any Confidential Information, and will use their best endeavours to prevent unauthorised use or disclosure of the Confidential Information by third parties, unless required by law;
(c) the Employee must immediately notify the Company of any suspected or actual unauthorised use, copying or disclosure of Confidential Information;
(d) at the end of the Term, or at any time during the Term at the request of the Company, the Employee must deliver to the relevant Group Company all Confidential Information in the possession of the Employee; and
…
Clause 15.6(e) of the contract includes:
What happens on Termination
If the Employee's employment terminates for any reason:
…
(e) the Employee's obligations under this clause, and clauses 12 and 13 continue after termination.
The governing law of the contract is the law applying in New South Wales: cl 19.6.
As noted, the Oppo AX5 was delivered to AEI on 28 March 2023. On 12 April 2023, AEI sent the Oppo AX5 for forensic examination. The results were the subject of an expert forensic report of Mr David Yang of KPMG, dated 6 July 2023, which was relied on at the hearing. Mr Yang expressed the opinion that "there is evidence of tampering or damage to the [Oppo AX5] which prevent[ed] recovery of data": CB4454. Mr Yang based this opinion on (CB4454-5):