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[2013] NSWSC 958
Supreme Court of NSW
2013-08-02
Pembroke J, Rein J
Original judgment source is linked above.
Introduction 1This is a restraint of trade case. On 24 April 2013, I gave judgment in which I held that I was satisfied as to both of the following: (a)that prior to their departure from the firm known as Charltons, the defendants Fitzgerald and Kishore provided accounting services to persons or entities who were not existing clients of the firm; that they did not bill those persons or entities on behalf of Charltons; and that they effectively diverted from Charltons the business opportunity that those clients represent; and (b)that after their departure from the firm, the first three defendants (Fitzgerald, Kishore and Prasad) assisted each other, and assisted the fourth defendant company of which they were directors (Intuitive), to solicit and entice away from Charltons a significant number of existing clients of the firm. 2The purpose of this hearing is to ascertain and identify the precise extent of the 'breaches' by the defendants. The hearing is directed to the identification of the individual breaches and will be followed in September by a further hearing before Rein J at which the plaintiff will seek to prove and recover its entitlement to loss and compensation attributable to each of the breaches so found. 3The parties addressed me by reference to four substantial issues which, they agreed, constituted a convenient vehicle for the determination of this aspect of the proceedings. Those issues are as follows: (a)whether the plaintiff is entitled to findings that there were concurrent breaches of contract and breaches of fiduciary duty in respect of the same conduct; (b)whether the defendants are entitled to rely on the principle embodied in the Latin expression 'De minimis non curat lex', the literal meaning of which is that 'the law does not concern itself with the smallest things or trifles'; (c)whether two of the proposed orders (Nos 45 and 46), which relate to the third defendant Mr Prasad, should be reduced in scope; and (d)whether, in relation to a substantial number of findings of fact for which the plaintiff contends, and having regard to the failure of any of the defendants to give evidence, there is a sufficient and rational basis to support the proposed finding.
Concurrent Breaches 4The first issue derives from my findings in paragraphs [42] and [43] of the principal judgment. The plaintiff wishes to have the additional benefit to which it believes it may arguably be entitled, if I conclude that there were breaches of fiduciary duty, as well as breaches of contract, in respect of the same underlying conduct. On the other hand, the defendants contend that the plaintiff should be confined to findings of breach of contract - because in the circumstances 'the concurrent fiduciary duty adds nothing'. 5Paragraphs [42] and [43] of the principal judgment were as follows: 42. Fiduciary and contractual obligations do not always make easy bedfellows however. The express contractual duty of fidelity in Clause 3.1 of the Terms of Employment provides all the protection that the plaintiff could hope to achieve. The concurrent fiduciary duty adds nothing. That is because it is the contractual relationship which is all important. The fiduciary relationship 'must accommodate itself to the terms of the contract so that it is consistent with, and conforms to them': Hospital Products Ltd v United States Surgical Corporation at 97 (Mason J). To similar effect was Lord Browne-Wilkinson in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 at 206 who observed: ... the extent and nature of any fiduciary duty owed in a particular case falls to be determined by reference to any underlying contractual relationship between the parties. 43. For those reasons, the fiduciary obligation of loyalty owed by Fitzgerald, Kishore and Prasad during their employment, rose no higher than their contractual duty. It was equivalent to and existed concurrently with the duty set out in clause 3.1 of the Terms of Employment. 6What I made clear in those paragraphs was that, in this case, the scope of the equitable and contractual duties was the same. The remedy however may not necessarily be so. In Pilmer v Duke Group Ltd (in liquidation) [2001] HCA 31; (2001) 207 CLR 165 at [85], McHugh, Gummow, Hayne and Callinan JJ reiterated the difference in principle between the equitable measure of compensation and that for breach of contract: Various judgments in this Court (177) establish that, in Australia, the measure of compensation in respect of losses sustained by reason of breach of duty by a trustee or other fiduciary is determined by equitable principles and that these do not necessarily reflect the rules for assessment of damages in tort or contract. 7In the same case, Kirby J said at [153]: It is because equitable relief has large objectives that the measure of equitable compensation will often differ from the measure of common law damages. Often, it will be greater. 8This is a long-standing distinction which has been recognised on many occasions. See also Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 493-494; AG Australia Holdings Ltd v Burton (2002) 58 NSWLR 464; [2004] NSWSC 170 at [73] - [74]; Youyang Pty Ltd v Minter Ellison [2003] HCA 15 at [39]; (2003) 212 CLR 484. 9In this case, there will be a separate hearing on damages before a different judge. The grant of declaratory relief is discretionary. I should not foreclose the opportunity for the plaintiff to recover at the damages hearing any greater amount of compensation to which it may possibly be entitled having regard to the principles which govern the assessment of equitable compensation. 10I am therefore satisfied that it is appropriate in this case, as a matter of discretion, to make declarations as to both breach of contract and breach of fiduciary duty, even though the duties are identical and the underlying conduct is the same. Whether the consequence is to entitle the plaintiff to recover a greater amount of compensation than it would otherwise receive for breach of contract, will be a matter to be determined by the judge at the damages hearing.
De Minimis 11The second issue concerns the de minimis principle. The defendants contend that in some instances, the evidence of breach is so slight as not to justify a finding of breach at all. The contention is relevant to those 'shadow' clients where the only evidence is that the defendants carried out a modest amount of work for a person or entity who should have been treated as a client of the firm. Six instances were relied upon: (a)the first defendant carried out work for Timothy Mahli in relation to his 2010 and 2011 taxation returns. He appears to have done this work in conjunction with a Paula Edmonds, who did most of the work. The only evidence of the value of the work undertaken by the first defendant is an invoice for $82.50; (b)similarly, the illicit work done for Nicole Sergeant was very minor and any further work is also likely to have been minor given that her income in the following year was $9,261; (c)as to George Verghese, the offending conduct was said to consist of the first defendant generating access to Charltons' ATO portal to provide information to Mr Verghese about his un-lodged taxation returns; (d)as to Cheree Lloyd, the breach was said to involve the correction of her rate of taxation rather than the preparation of her taxation return; (e)as to Gwen Riggs, it was submitted that any work performed for her would have been minimal because her working life had ended, her superannuation had dissipated and she was moving to New Zealand for five years; (f)as to Wendy Guest, it was said that the work was minimal because, initially at least, the second defendant did no more than indicate that he was happy to act as her accountant and invited her to call him when she next visited Sydney from Chicago. 12The difficulty with the defendants' contention is that each breach was part of a concerted and deliberate campaign to cultivate 'clients' who would otherwise have belonged to Charltons. The loss resulting from the defendants' conduct in relation to such shadow clients will not be measured solely by reference to the value of the initial work done by the defendants for those shadow clients during the process of cultivation. At the damages hearing, the plaintiff will be entitled to prove, and seek to recover, the present value of the future fees that could reasonably have been expected to be earned from those shadow clients, subject to an appropriate discount for vicissitudes and uncertainties. 13For those reasons, the identification of the particular breach, whether or not it appears to be minor, is only the beginning of the enquiry as to the amount of compensable loss to which the plaintiff may be entitled. The circumstances of this case therefore make it inappropriate to apply the de minimis principle. The defendants' conduct in relation to each 'shadow' client, no matter how minor it may now seem, was intended to be a springboard to a profitable successful future accounting relationship. By their conduct, the defendants deprived the plaintiff of the opportunity of having the benefit of that relationship. The nature and quality of the breaches are such, that given the remedy to which the plaintiff may be entitled, it is not appropriate to treat any of the breaches as negligible and to ignore them.
Orders 45 & 46 14Ultimately, there was little controversy about this topic. The plaintiff's proposed orders 45 and 46 should be confined so as to recognise that no case was made against Prasad based on conduct by him during the period of his employment. In fact, the only substantive allegation pleaded against Prasad is that, from the termination of his employment, he assisted Intuitive to do the acts alleged in paragraph 39(a)(i)-(iv) of the amended statement of claim.
Available Inferences 15I repeat what I said in paragraph [2] of the principal judgment in relation to the entitlement of a court to draw adverse inferences when a defendant elects to remain silent. In addition to the authorities which I mentioned in that passage, I should now add the observations of Lord Sumption in Prest v Petrodel Resources Ltd [2013] UKSC 34 at [44] - a decision given on 12 June 2013. Even where the defendant elects not to give evidence, there must of course be a rational basis for the suggested inference. As Lord Sumption explained: There must be a reasonable basis for some hypothesis in the evidence or the inherent probabilities, before a court can draw useful inferences from a party's failure to rebut it. 16The question raised by the fourth issue is whether the evidence that was adduced was sufficiently probative and rational for the purpose of establishing the inference of breach for which the plaintiff contends. It is necessary to deal individually with each of the disputed matters.
Victoria Schuh 17Fitzgerald admits a breach in relation to Victoria Schuh, but only to the extent that he performed work in connection with Ms Schuh's income tax return for the financial year ended 30 June 2011. Charltons accepts Fitzgerald's position. Accordingly, there should be a declaration as sought by the plaintiff.
Sean Blood 18Charltons contends for the inference that Kishore provided services within the scope of Charltons' business to Mr Blood in connection with a consultancy agreement and the formation of a company in order to cultivate Mr Blood as a future client for the business that he set up in competition with Charltons, along with Fitzgerald and Prasad. This plan succeeded. Kishore and Mr Blood continued to correspond in relation to Mr Blood's corporate and personal taxation matters after Kishore's employment with Charltons was terminated. 19Kishore admits the alleged breach, but only to the extent that Kishore performed work in connection with the formation of a company titled 'Code Monkey Pty Limited' including preparation and lodgement of all necessary forms to the Australian Taxation Office (ATO) and the Australian Securities and Investments Commission. Kishore submits that there is no evidence of any consultancy agreement work performed by him for Mr Blood. 20The issue for resolution is therefore whether I should find that Kishore's breach extended to him performing work for or providing services within the scope of Charltons' business to Mr Blood in connection with a consultancy agreement. 21I am satisfied that there should be a declaration as sought by the plaintiff. The inference that Kishore conducted himself as alleged can be drawn from the direct evidence, which remained unexplained. It included the fact that Mr Blood corresponded expressly with Kishore on 20 July 2012 about assistance with a consultancy agreement. And in an email to Prasad on 24 July 2012, Kishore referred to Mr Blood as a 'long term prospect'. Kishore and Mr Blood also exchanged emails and scheduled a meeting in November 2012 for the provision of GST advice.
Angela Edwards & Vivian Edmonds 22Charltons contends for the inference that Fitzgerald provided services within the scope of Charltons' business to: (a)Angela Edwards in connection with financial advice, the preparation of 2011 personal tax returns, and the preparation of 2011 corporate tax returns for Hullabaloo (Australia) Pty Limited; and (b)Vivian Edmonds in connection with professional advice and assistance about the employment of, and the payment of remuneration to, Patricia Edmonds by Hullaballoo (Australia) Pty Limited. 23Fitzgerald admits the breach concerning Angela Edwards, but denies the alleged breach concerning Vivian Edmonds. The issue for resolution is therefore whether I should find that Fitzgerald's breach extended to him providing services within the scope of Charltons' business to Vivian Edmonds in connection with professional advice and assistance about the employment of, and the payment of remuneration to, Patricia Edmonds by Hullaballoo (Australia) Pty Limited. 24I am satisfied that I should make the declaration sought. The inference that Fitzgerald conducted himself as alleged can properly be drawn from the correspondence between him and Vivian Edmonds, especially the communications dated 25 January 2013 and 17 May 2012 to 28 June 2012. 25Fitzgerald benefited from his secret cultivation of Vivian Edmond's business while he was employed by Charltons, and continued to perform work for Vivian Edmonds in January 2013. The reason why the Edmonds Superannuation Fund initially became a client of Charltons is irrelevant. The evidence was that the payment of Patricia Edmond's Hullaballoo remuneration into the Edmonds Superannuation Fund was outside the scope of any service provided by Charltons and Fitzgerald's work in this regard was thus also in breach of his duties to Charltons.
Nicole Serjeant 26Charltons contends for the inference that Fitzgerald provided services within the scope of Charltons' business to Nicole Serjeant in connection with her income tax return for 2010/2011. The unexplained direct evidence is that Nicole Serjeant corresponded with Fitzgerald expressly about her tax return on 5 April 2012, during which Fitzgerald asked her to communicate with him using his private Yahoo email account. The object of the communication was to enable Fitzgerald to perform work for and provide services to Nicole Sergeant. It is reasonable to infer that the object was achieved. I am satisfied that I should make the declaration sought.
David Nelson 27Fitzgerald and Kishore admit this breach, but submit that there is no evidence that their illicit work extended to Mr Nelson's tax return for the financial year ended 30 June 2008. Charltons accepts this position. Accordingly, I should make the declaration sought but excluding the financial year ended 30 June 2008.
Adam Varga and Pauline Burnard 28Charltons contends for the inference that Fitzgerald performed work for or provided services within the scope of Charltons' business to Adam Varga in connection with the provision of general accountancy services. 29Fitzgerald generally admits this breach, although he contends (without making any submissions or pointing to any evidence in support of this contention) that the declaration should be in terms of Fitzgerald failing 'to attempt to make Adam Varga a client of the Plaintiff', rather than for 'performing work for and/or providing services within the scope of Charltons' business to Adam Varga in connection with the provision of general accountancy services'. 30Fitzgerald also contends, and Charltons concedes, that there is no evidence of Fitzgerald performing work for Pauline Burnard. The issue for resolution is therefore whether I should find that Fitzgerald's breach extended to providing services within the scope of Charltons' business to Mr Varga. 31I am satisfied that I should make the declaration sought by the plaintiff. The inference that Fitzgerald conducted himself as alleged can be drawn from the direct evidence, all of which is unexplained. It includes the fact that Mr Varga and Ms Burnard corresponded expressly with Fitzgerald between May and June 2012 about accounting services and a scheduled meeting in connection with a cake shop operated by Mr Varga. And the secret relationship with Mr Varga did not end there, but blossomed, with Ftitzgerald subsequently becoming Mr Varga's accountant.
Jane Hyde 32Charltons contends for the inference that Fitzgerald provided services within the scope of Charltons' business to Jane Hyde in connection with the provision of financial and taxation advice and assistance. 33Fitzgerald generally admits this breach, although he contends (without making any submissions or pointing to any evidence in support of this contention) that the declaration should be 'in connection with advice concerning the capital gains implications of the sale of her United Kingdom residence/investment property', rather than 'performing work for or providing services within the scope of Charltons' business to Jane Hyde in connection with the provision of financial and taxation advice and assistance'. 34The issue for resolution therefore is whether I should find that Fitzgerald's breach extended to providing services within the scope of Charltons' business to Ms Hyde in connection with the provision of financial and taxation advice and assistance. 35I am satisfied that I should make the declaration sought by the plaintiff. The inference that Fitzgerald conducted himself as alleged can be drawn from the direct evidence, all of which is entirely unexplained. It includes the fact that Ms Hyde corresponded with Fitzgerald from 4 June to 30 July 2012 expressly about personal tax matters including concerning Mark Powell. Fitzgerald benefited from his secret cultivation of this business while he was employed by Charltons and continued to perform work for Ms Hyde from November 2012 to February 2013.
George Verghese 36Charltons contends for the inference that Fitzgerald provided services within the scope of Charltons' business to George Verghese in connection with the lodgement of his income tax returns for 2008/2009, 2009/2010, 2010/2011 and 2011/2012. 37Fitzgerald denies this breach, and refers to evidence of his familial relationship with Mr Verghese. He submits that his connection with Mr Verghese is not derived from his position of employment. Fitzgerald also submits that evidence of him accessing Charltons' ATO portal may amount to misconduct of some form but is not a breach of the best endeavours term. 38I reject the defendants' submission. There is no satisfactory evidence of any familial relationship between Fitzgerald and Mr Verghese. Neither Fitzgerald nor Mr Verghese gave any evidence on this matter. 39I am satisfied that I should make the declaration sought by the plaintiff. The inference that Fitzgerald conducted himself as alleged can be drawn from the direct evidence. It includes the facts that Mr Verghese was not a client of Charltons; that Mr Verghese corresponded with Fitzgerald on 11 July 2012 attaching a Tax Agent Portal print-out purporting to indicate that he was represented by Charltons; and that Charltons' ATO portal was for use by Charltons' employees for the benefit of Charltons' clients. I have concluded that Fitzgerald was cultivating the business of Mr Verghese by misusing Charltons' property for his own personal benefit. In addition, while Fitzgerald was still employed by Charltons, Mr Verghese was aware of Fitzgerald's 'new business', for which he wished Fitzgerald the 'best of luck' in an email on 16 July 2012.
Christopher Hodges and Siti Hardyanti/Hodges 40Charltons contends for the inference that Kishore performed work for or provided services within the scope of Charlton's business to Christopher Hodges and Siti Hardyanti (Hodges) in connection with the provision of accounting and taxation advice and assistance. 41Kishore generally admits this breach, although he contends (without making any submissions or pointing to any evidence in support of his contention) that the declaration should be in terms of him 'providing two letters of comfort in connection with their financial position and a personal income taxation return for Siti Hodges', rather than for work 'in connection with the provision of accounting and taxation advice and assistance'. 42The issue for resolution is therefore whether I should find that Kishore's breach extended to providing services within the scope of Charlton's business to Christopher Hodges and Siti Hardyanti (Hodges) in connection with the provision of accounting and taxation advice and assistance. 43I am satisfied that I should make the declaration sought. The inference that Kishore conducted himself as alleged can be drawn from the unexplained direct evidence. It includes correspondence signed by Kishore indicating that he acted as accountant and tax advisor to Christopher Hodges and Siti Hardyanti. And there is also an email from Kishore to Chris Hodges sent on 10 July 2013 containing Kishore's personal banking details.
Cheree Lloyd 44Charltons contends for the inference that Fitzgerald provided services within the scope of Charltons' business to Cheree Lloyd in connection with her 2011/2012 income tax return. 45Fitzgerald denies this breach. His primary submission is that Ms Lloyd is an employee of Medicine Today, a former retainer client of Charltons; that the work performed by Fitzgerald during his employment for Ms Lloyd was a 'value add' under Charltons' retainer with Medicine Today; and that the work involved only a minor amendment to Ms Lloyd's personal tax return to fix a problem arising from the tax deducted from her pay by Medicine Today. The defendants also point to Mr Charlton's evidence in cross-examination that from time to time he would do work and not charge for it with a view to establishing good client relationships. Mr Charlton agreed that this was likely with retainer clients. 46In the alternative, Fitzgerald submits that the declaration should be 'in connection with her [Ms Lloyd's] taxation assessment shortfall for the financial year ending 30 June 2012', rather than for work 'in connection with her 2011/2012 income tax return'. 47The issue for resolution is therefore whether the court can infer that Fitzgerald provided services within the scope of Charltons' business to Ms Lloyd in connection with her 2011/2012 income tax return. 48I reject Fitzgerald's primary submission. There is no evidence that the work performed by Fitzgerald for Ms Lloyd was a 'value add' under Charltons' retainer agreement with Medicine Today. In fact, such work was expressly excluded by the terms of the relevant retainer. 49I am satisfied that there should be a declaration as sought by the plaintiff. The inference that Fitzgerald conducted himself as alleged can be drawn from the direct evidence, all of which is unexplained. It includes the fact that Ms Lloyd was not a client of Charltons; that her tax assessment was the subject of correspondence with Fitzgerald on 17 July 2012; and that Fitzgerald benefited from his secret cultivation of this business while Charltons employed him, in that he continued to perform work for Ms Lloyd from September 2012 to January 2013.
Gwen Riggs 50Charltons contends for the inference that Fitzgerald provided services within the scope of Charltons' business to Gwen Riggs in connection with the provision of financial and taxation advice. 51Fitzgerald denies this breach. He submits that the evidence shows that Ms Riggs was related to the Medicine Today group of companies, and refers to Mr Charlton's evidence that it may be appropriate to conduct work outside the strict limits of a client retainer agreement for client relationship building purposes. 52The issue for resolution is therefore whether the court can infer that Fitzgerald provided services within the scope of Charltons' business to Ms Riggs in connection with the provision of financial and taxation advice. 53I decline to make the order sought by the plaintiff. Fitzgerald and Judy Passlow of the Medicine Today group of companies exchanged email correspondence in connection with Ms Riggs on 22 and 23 July 2013. Both emails indicate that a staff member of Charltons, Galina, was involved in, or knew of, the provision of advice to Ms Riggs. In fact the evidence reveals that Fitzgerald was going to 'talk to' Ms Riggs under the Medicine Today retainer, however, Ms Riggs was to 'pay Galina directly if she was required [to] for anything'. This exchange suggests that Charltons had knowledge of and consented to Fitzgerald talking to Ms Riggs.
Wendy Guest 54Charltons contends for the inference that Kishore performed work for or provided services within the scope of Charltons' business to Wendy Guest in connection with the provision of accounting and taxation services. 55Kishore denies this breach. He submits that the email correspondence between Kishore and Ms Guest dated 5 July 2012 merely shows Kishore responding to a request for a meeting with Ms Guest. He also submits that the contact between Kishore and Ms Guest only amounts to a 'technical breach' in that there is no evidence of any work performed for Ms Guest. In the alternative, Kishore submits that the declaration should be confined to a breach in that 'the second defendant gave his personal mobile telephone number to Wendy Guest', rather than for work 'in connection with the provision of accounting and taxation services'. 56The issue for resolution is therefore whether the court can infer that Kishore provided services within the scope of Charltons' business to Wendy Guest in connection with the provision of accounting and taxation services. 57I am satisfied that there should be a declaration as sought by the plaintiff. The inference that Kishore conducted himself as alleged can be drawn from the direct evidence, all of which is unexplained. It includes the fact that Ms Guest was not a current client of Charltons in 2012; that she corresponded with Kishore about accounting services on 5 July 2012; that in July 2012, the same month in which Kishore gave notice of his resignation, Ms Guest referred to a planned meeting with Kishore for the provision of his professional services in October 2012; and that Kishore gave Ms Guest his personal mobile telephone number.
Andreas Shilling and Qualitas 58Charltons contends for the inference that Fitzgerald provided services within the scope of Charltons' business to Andreas Shilling and Qualitas in connection with the acquisition of a business. Fitzgerald denies this breach. 59The issue for resolution is therefore whether Fitzgerald provided services within the scope of Charltons' business to Andreas Shilling and Qualitas in connection with the acquisition of a business. 60I am satisfied that there should be a declaration as sought by the plaintiff. The inference that Fitzgerald conducted himself as alleged can properly be drawn from the direct evidence, all of which is unexplained. It includes evidence that, despite the fact that Andreas Shilling and Qualitas were never clients of Charltons, Fitzgerald engaged in extensive correspondence with and about them from November 2011 to September 2012. The services provided by Fitzgerald to Andreas Shilling and Qualitas travelled substantially beyond Chris Charlton's authorisation for Fitzgerald to 'run it [a purchase proposal] past David Wong'. The evidence also establishes that Fitzgerald continued to work for Andreas Shilling and Qualitas after his resignation.
The Face Today Group of Companies 61Charltons contends for the inference that Fitzgerald cultivated the Face Today group of companies during his employment by providing book-keeping services with a view to the defendants obtaining their work after Fitzgerald ceased to be employed by Charltons. Fitzgerald does not admit this breach. The issue for resolution is whether the inference for which Charltons contends is available. 62The inference that Fitzgerald conducted himself as alleged can be drawn from the direct evidence, all of which is unexplained. It includes the fact that Face Today terminated its retainer with Charltons in April 2012; and that on 26 July 2012 a bookkeeper (Carol Faulkner) addressed an invoice to Face Today Pty Ltd for work provided to 'Face Today' and 'Today's Face'. At that time Fitzgerald was still employed by Charltons. The invoice was sent to Fitzgerald at his private email address, not his Charltons' email address. The inference is that this was done because Ms Faulkner was providing services to Face Today on behalf of Fitzgerald personally, not Charltons. By using Fitzgerald's private email address, Fitzgerald sought to conceal this fact from Charltons. 63I am satisfied that I should make the declaration sought by the plaintiff. The email by which the invoice was sent asked whether Fitzgerald also wanted 'an invoice for Bourkes'. This was plainly a reference to the Bourkes Transport Industries Group, another of Charltons' retainer clients. An inference can be drawn that Ms Faulkner had done work for Bourkes at Fitzgerald's request. This is significant because Fitzgerald admits that he was wrongfully cultivating Bourkes during his employment. I am satisfied that Fitzgerald was dealing with Face Today in the same dishonest way by making the same use of Ms Faulkner's services. This is consistent with his wider behaviour. Fitzgerald also admits that he used Ms Faulkner to provide services to P&J Harris, another of Charltons' clients.
The Bourkes Transport Industries Group of Companies 64Charltons contends for the inference that Fitzgerald cultivated the Bourkes Transport Industries Group during his employment by providing book-keeping services with a view to the defendants obtaining their work after Fitzgerald ceased to be employed by Charltons. Fitzgerald admits this breach, but only 'as to client cultivation'. The issue for resolution is whether the inference for which Charltons contends is available. 65I am satisfied that there should be a declaration as sought by the plaintiff. The inference that Fitzgerald conducted himself as alleged can be drawn from the direct evidence, all of which is unexplained. It includes the fact that on 14 July 2012, in an email headed 'Bourkes', Fitzgerald wrote to Ms Faulkner about work to be performed. In that email, Fitzgerald explicitly linked the work to be performed by Ms Faulkner to his plans to solicit Bourkes' business and custom by undercutting the retainer fees that the client was paying to Charltons - 'The main thing is I need to convert them to the new 'regime' ($40k fee) and this will swing it comprehensively'.
The Medicine Today Group of Companies 66Charltons contends for the inference that Fitzgerald and Kishore cultivated the Medicine Today group of companies during their employment by providing accounting services to employees and relatives of the principals of that group with a view to the defendants obtaining their work after Fitzgerald and Kishore ceased to be employed by Charltons. 67This breach is admitted by Fitzgerald, but Kishore submits that it has not been proved against him. Kishore submits that the evidence suggests that he was displeased by the treatment of Ms Passlow's ill sister, and that he sought in a purely personal capacity to assist in the resolution of the debts arising from her illness. The issue for resolution is therefore whether it should be inferred that Kishore cultivated the Medicine Today group of companies during his employment by providing accounting services to employees and relatives of the principals of that group with a view to the defendants obtaining their work after Fitzgerald and Kishore ceased to be employed by Charltons. 68I reject Kishore's submission. His motivation for privately performing work at Ms Passlow's request is irrelevant to whether he breached his contractual or fiduciary obligations to Charltons. I make the declarations sought by the plaintiff.
David McCarey 69Charltons contends for the inference that Fitzgerald cultivated David McCarey during Fitzgerald's employment by failing to render bills for accounting services provided to David McCarey with a view to the defendants obtaining work after Fitzgerald ceased to be employed by Charltons. Fitzgerald denies this breach. 70I cannot be satisfied that I should make the declaration as sought by the plaintiff. The evidence is that on 3 August 2012 Jimmy Yin, a staff member of Charltons, performed work for Mr McCarey. Charltons also issued invoices to a David Bruce Muir-McCarey in 2011 for work performed by Mr Yin in connection with tax returns and liaison with the ATO. I do not know whether Mr David McCarey and Mr David Bruce Muir-McCarey are the same person and I am not prepared to make a declaration based on guesswork. Further, the plaintiff relies on an email sent by Mr McCarey to Fitzgerald on 3 August 2012. The email is not evidence of work performed by Fitzgerald; it proves nothing more than Mr McCarey sent an email to Fitzgerald after his employment with Charltons was terminated.
Jessica Tracey 71Charltons contends for the inference that Fitzgerald cultivated Jessica Tracey during his employment by failing to render bills for accounting services provided to her with a view to the defendants obtaining her work after Fitzgerald ceased to be employed by Charltons. Fitzgerald asserts that there is no evidence that he performed work for Ms Tracey. 72I have reached the conclusion that there should be a declaration to the effect that Fitzgerald, after the termination of his contract of employment with Charltons, performed work for Ms Tracey in connection with taxation and accounting services. The evidence is that on 5 November 2012, after Fitzgerald's employment with Charltons was terminated, he and Ms Tracey exchanged emails about a meeting concerning her tax returns. 73However the evidence does not support the inference that Fitzgerald failed to render bills to Ms Tracey with a view to the defendants obtaining her work after Fitzgerald's employment with Charltons was terminated. The evidence is that Fitzgerald failed to render bills to Ms Tracey for work performed in 2009 but there is no evidence to suggest that the defendants were cultivating clients in 2009.
Christopher Jordan 74Charltons contends for the inference that Fitzgerald cultivated Christopher Jordan during Fitzgerald's employment by providing accountancy services to him for a discounted fee with a view to the defendants obtaining his work after Fitzgerald ceased to be employed by Charltons. 75Fitzgerald admits this breach; although he contends (without making any submissions in support of this contention) that the declaration should be in terms of him providing services 'for a discounted fee', rather than for work 'providing accountancy services to him for a discounted fee with a view to the defendants obtaining his work after Fitzgerald ceased to be employed by Charltons'. 76I am satisfied that there should be a declaration as sought by the plaintiff. The inference that Fitzgerald conducted himself as alleged can be drawn from the evidence. It includes the fact that while he was still employed by Charltons, Fitzgerald sent an email to Mr Jordan, a client of Charltons, stating 'I will charge a discounted $120 for BOTH returns . . . but will invoice you in August AFTER I leave Charltons at the end of the month. Do NOT use Charltons email at all . . . just this one'. A clear inference of cultivating Mr Jordan arises from the secrecy attending Fitzgerald's request that Mr Jordan use only his private email address, and the timing of the billing 'after I leave Charltons'.
Leanne Follett 77Charltons contends for the inference that Fitzgerald cultivated Leanne Follett during his employment by providing accountancy services to her with a view to the defendants obtaining her work after Fitzgerald ceased to be employed. 78Fitzgerald admits this breach although he contends (without making any submissions in support of this contention) that the declaration should be in terms of him providing services to Ms Follett within the scope of Charlton's business, rather than that he 'cultivated Leanne Follett during his employment by providing accountancy services to her with a view to the defendants obtaining her work after Fitzgerald ceased to be employed by Charltons'. 79I am satisfied that there should be a declaration as sought by the plaintiff. The inference that Fitzgerald conducted himself as alleged can be properly drawn from the evidence. It includes the fact that Ms Follett was a client of Charltons; and that Fitzgerald, while he was still employed by Charltons in July 2012, emailed Ms Follett asking her to tell 'Joanne' 'only to use THIS email [Fitzgerald's private Yahoo email account] from now for all future correspondence etc.'.
The Medicine Today Group of Companies 80Charltons contends for the inference that, after the termination of his contract of employment with Charltons, Fitzgerald solicited and performed work for the Medicine Today Group of companies in connection with the provision of taxation and accounting services. Fitzgerald admits solicitation but submits that there is no evidence of work performed by him after employment. 81I am satisfied that there should be a declaration as sought by the plaintiff. The inference that Fitzgerald conducted himself as alleged can be drawn from the evidence. It includes the fact that Fitzgerald was the responsible account manager who was assigned by Charltons to manage Charltons' relationship with its retainer client, the Medicine Today group of companies and its principals Judy Passlow and Tony Scott; that after his termination from Charltons, Fitzgerald engaged in considerable email correspondence with Judy Passlow/Medicine Today; and that on 21 August 2012 Judy Passlow emailed Kishore, copied to Fitzgerald and Prasad, stating 'I am so glad you are back on deck. I can't wait for Alden to arrive back too so we can 'do the deed' and get on with a new phase!'
Madeleine Jelfs 82Charltons contends for the inference that, after termination of his contract of employment with Charltons, Fitzgerald solicited and performed work for Madeleine Jelfs in connection with the provision of taxation and accounting services. Fitzgerald denies this breach. He submits that the email correspondence relied on by the plaintiff is not from him (merely copied to him); and that an email sent on 12 September 2012 shows him declining work for Ms Jelfs. 83I am satisfied that Fitzgerald's email of 12 September 'declining' work is self-serving and disingenuous. Fitzgerald sent similar emails to Marion O'Neill of Precision Optics and Tony White in respect of whom he now admits breach as to solicitation. 84I have reached the conclusion that there should be a declaration to the effect that Fitzgerald, after the termination of his contract of employment with Charltons, solicited Madeleine Jelfs in connection with the provision of taxation and accounting services. However the evidence does not support the inference that Fitzgerald performed work for Ms Jelfs following the termination of his employment with Charltons. I am not prepared to extend the declaration to work performed. 85The inference that Fitzgerald solicited Ms Jelfs can be properly drawn from the evidence. It includes the fact that Fitzgerald was the responsible account manager who was assigned by Charltons to manage Charltons' relationship with its client, Ms Jelfs; that on 28 August 2012 Fitzgerald provided his contact details to Paul Jelfs for the express purpose of those details being provided to Ms Jelfs; and that after the termination of Fitzgerald's employment with Charltons, Paul Jelfs of the Cubic Pacific Group invited Ms Jelfs to 'set up an appointment' with Fitzgerald 'who is now located in our office'.
John Penfold and Jessica Tracey 86The defendants admit this breach, but limited to work performed for John Penfold and not Jessica Tracey. Charltons accepts this position. Accordingly, I should make the declaration sought.
Anthony Anderson and Cassie Anderson 87Charltons contends for the inference that, after the termination of his contract of employment with Charltons, Kishore solicited and performed work for Anthony and/or Cassie Anderson in connection with the provision of taxation and accounting services. Kishore denies this breach. 88I am satisfied that there should be a declaration as sought by the plaintiff. The inference that Kishore conducted himself as alleged can be drawn from the evidence. It includes the fact that Kishore was the responsible account manager who was assigned by Charltons to manage Charltons' relationship with its clients, Mr Anderson and Ms Anderson; and that after the termination of his employment with Charltons, Kishore exchanged emails with Mr and Ms Anderson including an email from Mr Anderson to Kishore dated 3 December 2012 that referred to a recent meeting and attached Mr Anderson's last two tax returns.
Marian O'Neill and Precision Optics 89Charltons contends for the inference that, after termination of his contract of employment with Charltons, Fitzgerald solicited and performed work for Marian O'Neill and Precision Optics in connection with the provision of taxation and accounting services. Fitzgerald admits this breach but only as to solicitation. 90I am satisfied that there should be a declaration as sought by the plaintiff. The inference that Fitzgerald conducted himself as alleged can be properly drawn from the evidence. It includes the facts that Fitzgerald was the responsible manager who was assigned by Charltons to manage Charltons' relationship with it clients, Ms O'Neill and Precision Optics; that on 31 August 2012 Fitzgerald wrote to Ms O'Neill of Precision Optics suggesting the terms in which she could terminate the services of Charltons; and that on 12 September 2012 Ms O'Neill emailed Fitzgerald and asked him for assistance regarding 'P&L/depreciation'.
Angela Domenici and The Big Blue Sailing School Pty Ltd 91Charltons contends for the inference that, after the termination of his contract of employment with Charltons', Kishore solicited and performed work for Angela Domenici in connection with an audit by the ATO. Kishore denies this breach. He submits that the evidence does not demonstrate that he did anything more than telephone the ATO, so as to facilitate direct communication between Ms Domenici and the ATO. 92I am satisfied that there should be a declaration as sought by the plaintiff. The inference that Kishore conducted himself as alleged can be properly drawn from the evidence. It includes the fact that in a letter signed by Ms Domenici and dated 7 September 2013 she described Kishore as helping her with some paperwork regarding her ATO tax audit 'as a friend' and that the two discussed the possibility of her becoming one of Kishore's future clients. There are also a number of emails between Kishore and Ms Domenici in August and October 2012 discussing her ATO tax audit and Kishore's communications with David Hale of the ATO on her behalf.
Tony White 93Charltons contends for the inference that, after the termination of his contract of employment with Charltons, Fitzgerald solicited and performed work for Tony White in connection with the provision of taxation and accounting services. Fitzgerald admits this breach, but only as to solicitation. He submits that there is no evidence of work performed by him for Tony White. 94I am satisfied that there should be a declaration as sought by the plaintiff. The inference that Fitzgerald conducted himself as alleged can be drawn from the evidence. It includes the facts that Fitzgerald was the responsible account manager who was assigned by Charltons to manage Charltons' relationship with its client Mr White; and that after the termination of his employment with Charltons Fitzgerald exchanged emails with Mr White and made the following statements 'await my return from hols next Tuesday . . . watch this space . . . you are STILL my clients. . . but just keep silent for a week . . . Discuss soon' and 'Talk soon [regarding] . . . year end returns . . . which we can crack onto shortly'.
Patrick Spedding 95Charltons contends for the inference that, after the termination of his contract of employment with Charltons, Kishore solicited and performed work for Patrick Spedding in connection with the provision of taxation and accounting services. Kishore denies this breach. 96I am satisfied that there should be a declaration as sought by the plaintiffs. The inference that Kishore conducted himself as alleged can be properly drawn from the evidence. It includes the fact that Kishore was the responsible account manager who was assigned by Charltons to manage Charltons' relationship with its client, Patrick Spedding. And that after the termination of his employment with Charltons, Kishore, on 18 September 2012 and 4 October 2012, corresponded with Mr Spedding by email and informed Mr Spedding of his 'new business name . . . Intuitive Accountants and Associates Pty Ltd' and stated that 'in the mean time you can always contact me on this email [Yahoo] or on my mobile'. 97The correspondence also reveals that Mr Spedding sought Kishore's advice regarding the tax implications of setting up a new company on 30 November 2012. Kishore replied to Mr Spedding on 4 December 2012 and wrote 'please give me a call when you get a chance on 0410 690 694'. On 10 December 2012 Mr Spedding again emailed Kishore asking for 'a quote for setting this all up'.
Vanda Chong 98Charltons contends for the inference that, after the termination of his contract of employment with Charltons, Fitzgerald solicited and performed work for Vanda Chong in connection with the provision of taxation and accounting services. Fitzgerald admits this breach, but only as to solicitation. 99I am satisfied that there should be a declaration as sought by the plaintiff. The inference that Fitzgerald conducted himself as alleged can be properly drawn from the evidence. It includes the fact that Fitzgerald was the responsible account manager who was assigned by Charltons to manage Charltons' relationship with its clients, Vanda Wong and David Wong. And that after the termination of his employment with Charltons Fitzgerald had a meeting with the bookkeeper of Ms Wong's dermatology practice, Shirley, on 12 September 2012 who proposed to 'use Aug month end as a sample for the meeting'.
Dinah James 100Charltons concedes that no order should be made in relation to Dinah James.
Orders 101The parties should deliver to my associate agreed orders reflecting these reasons within 10 days. The defendants should pay 75% of the plaintiff's costs of the hearing on 10 July 2013.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 August 2013
Charltons CJC Pty Ltd
Fitzgerald
(2002) 58 NSWLR 464
(1997) 188 CLR 449
(2001) 207 CLR 165
(2003) 212 CLR 484