Solicitors:
Hitch Advisory (Plaintiff)
Tom Howard Legal (First Defendant)
Lander & Rogers (Second Defendant)
File Number(s): 2021/103525
[2]
Judgment
The plaintiff, Curve Securities Pty Ltd, and the second defendant, Ord Minnett Limited, are competitors in the market of trading fixed rate financial investments. The first defendant, Mr Alexander Young, was, until August 2020, the Associate Director Interest Rate Markets at Curve. Since September 2020, Mr Young has been employed by Ord Minnett as a Fixed Interest Advisor. Mr Young's role at Ord Minnett is substantially the same as was his role at Curve.
Curve alleges that, in the course of his employment with Ord Minnett, Mr Young has:
1. approached, solicited and accepted Curve's clients;
2. disclosed and used confidential information obtained in the course of his employment with Curve; and
3. commenced his new employment in direct competition with Curve.
Curve alleges that Mr Young has taken these steps in contravention of restraints and non-disclosure clauses in his employment contract and in breach of his contractual, equitable and fiduciary duties to it.
Curve also alleges that Ord Minnett is, on various bases, accessorily liable to Curve for Mr Young's conduct.
There has been discovery before evidence in the course of which Ord Minnett has produced some 5,000 documents relating to 118 former clients of Curve that the parties referred to as the "Relevant Clients". As I understand it, it is common ground that the Relevant Clients are now clients of Ord Minnett and that Mr Young approached those clients, identified them to Ord Minnett, introduced them to Ord Minnett or won or procured them as clients for Ord Minnett. The question is whether Mr Young did so in breach of his contractual and other duties to Curve.
By Notice of Motion filed on 2 June 2022, Curve seeks to amend its Summons and Commercial List Statement. By Notice of Motion filed on 16 June 2022, Ord Minnett seeks an order that Curve's List Statement be struck out.
Argument proceeded before me on the basis of a refined form of proposed Amended List Statement that was annexed to the submissions of Mr Fernon SC, who appeared for Curve.
Mr Young has brought no similar application but, through his counsel, made submissions in support of Ord Minnett's position.
During argument on 22 July 2022, it became clear to me that there are some significant deficiencies in Curve's proposed Amended List Statement and that I should refuse to grant Curve leave to amend in accordance with that document.
Although in his written submissions Mr Gandar, who appeared for Ord Minnett, submitted that I should be cautious about giving Curve a further opportunity to refine its pleading, I indicated, in the course of argument, that I would do so. In those circumstances, Mr Fernon said he did not require me to give reasons for refusing leave to amend in accordance with the proposed Amended List Statement. However, as Mr Gandar submitted, the giving of short reasons as to some of the difficulties I see with the current pleading may assist the parties in moving beyond an argument as to pleadings and proceed to deal with the substance of the case. The purpose of these reasons is to record the misgivings I have as to the proposed Amended List Statement. These reasons are not intended to be a tutorial as to how Curve's case should be pleaded.
In substance, Curve claims that in breach of what are described in the proposed Amended List Statement as a "Non-Solicitation Clause", a "Non-Acceptance Clause" and a "Non-Contact Clause" (together called the "Restraints"), Mr Young has approached the Relevant Clients and caused those clients to engage the services of Ord Minnett rather than Curve. Curve also alleges that Mr Young has acted in breach of what are described as an "Express Fidelity and Good Faith Clause", a "Maintain Confidentiality Clause" and a "Non-Disclosure of Confidential Information Clause" in his contract of employment.
Paragraphs C4 to C15 of the proposed Amended List Statement plead the terms of Mr Young's employment with Curve, including the above provisions.
Paragraphs C16 to C20 deal with "Access to Curve's Confidential Information".
Paragraph C16 alleges that:
"During the course of his employment with Curve, and in order to carry out the Employment Responsibilities, Mr Young had access to, became familiar with, memorised and retained Confidential Information."
"Particulars" are then given of the "Confidential Information" which Mr Young "had access to". Those particulars are described in general terms and include "contact names" and "contact phone numbers" of Curve's clients.
The allegation appears to be that Mr Young "became familiar with", "memorised" and "retained" the "Confidential Information" to which he "had access to".
This allegation appears to relate to an allegation, made later in the proposed Amended List Statement, at par C45(b), that Mr Young used differently defined "Confidential Information" by "retaining and using" specified mobile numbers and email addresses of Curve's clients.
There is a familiar, although sometimes factually elusive, distinction between a former employee's permissible use of general "know-how" and his or her own knowledge and memory of client details and their interest in obtaining the relevant goods or services on the one hand, and impermissible use or creation of client lists, of transmission of client details or conscious commitment to memory for future employment purposes of such details on the other. [1]
Although in par C16 it is alleged that Mr Young "memorised" and in pars C16 and C45(b) that he "retained" Curve's clients' contact names and numbers, it is not alleged that he made a list of those names.
However, before me, Mr Fernon submitted that, bearing in mind the number of the Relevant Clients, Mr Young "must have copied" the details.
This serious allegation is absent from the proposed Amended List Statement. If it is Curve's case, for example, that it is to be inferred in all the circumstances that Mr Young did actually copy Curve's client details, or make a list of them, then that allegation should be made in terms, and the facts, matters and circumstances relied upon to give rise to that inference be spelled out.
Paragraphs C44A to C61 deal with "Mr Young's Breaches". Mr Gandar placed particular emphasis on par C45 which deals with Mr Young's "Offending Conduct".
I set out the terms of par C45 in an attachment to these reasons. Attachment - par 45 (131465, pdf)
I see a number of difficulties with this paragraph.
First, in the chapeau to par C45, Curve alleges that Mr Young has "used, disclosed and not maintained Confidential Information" in breach of three separately identified provisions of his employment contract. Mr Fernon agreed that the obligations in those clauses did not all apply to the three time periods implicitly referred to in the chapeau, namely the period from 17 June 2020 when Mr Young was employed by Curve, the period when he was on "gardening leave", and the period when he thereafter became an employee of Ord Minnett.
Paragraph C45(a) makes allegations that Mr Young approached, contacted, accepted and solicited Curve's clients, and that "he was only able to do so by using" the "Confidential Information of Curve" described in pars C45(a)(i) to (v).
That description of "Confidential Information" is expressed in different terms to the "Confidential Information" referred to in par C16.
There is thus a lack of particularity as to the Confidential Information referred to.
Both Mr Gandar and Mr Zielinski, who appeared for Mr Young, drew attention to the authorities which emphasise that it is necessary in a case like this that the confidential information said to have been misused be identified with particularity and specificity.
The "Particulars" at the end of C45(a) evidently relate to the allegations in pars C45(a)(i) to (iii). They are identified by material in a document which I marked as "Confidential Exhibit A". These relate to the Relevant Clients. However, no particulars are given of the matters in pars C45(a)(iv) or (v). Mr Fernon accepted that those matters should be particularised.
What should also have been made clear is whether the "Confidential Information" identified in par C45(a) is all of the confidential information that Curve relies upon in relation to its claims against Mr Young and Ord Minnett.
The pleading also does not identify how it is said that Mr Young misused the "Confidential Information" asserted. This issue further relates to the matters I have set out above concerning pars C16 and C45(b).
A further difficulty with par C45(b) is that, in addition to not specifying how it is that Mr Young "retained" the mobile numbers and email addresses referred to, the clients of Curve whose mobile numbers and email addresses Mr Young is said to have retained and used are not specified. Are they all, or some, and if so which, of the Relevant Clients?
The pleading also does not particularise which of Curve's clients are referred to in pars C45(c) and (d).
Paragraph C45 concludes with further "Particulars" "A" to "I". These particulars are not tied in any useful way to the allegations made in the body of par C45.
Paragraph C49 deals with the loss Curve alleges it has suffered and includes, as a particular:
"Curve estimates from its review of the material disclosed by Ord Minnett, that there [are] in excess of 1,300 transactions which constitute a breach of the matters pleaded in paragraphs [44A, 45 and 48]."
These "transactions" are not identified in the pleading. Mr Fernon submitted that Ord Minnett "must know" what the transactions are. Evidently, these are transactions involving one or more of the 118 Relevant Clients. That does not appear to me to clearly emerge from the proposed Amended List Statement.
As I have set out above, the List Statement identifies three provisions in Mr Young's employment contract as the "Restraints".
Paragraph C55 of the proposed Amended List Statement, under the heading "The Restraints", simply reads:
"Further, or in the alternative, the Offending Conduct [2] constitutes a breach of the Restraints, or each of them."
This rolled up pleading appears intended to allege that by engaging in the multiplicity of conduct specified in par C45, all of which relates to the alleged misuse of "Confidential Information", Mr Young has somehow been in breach of the three clauses which are, together, described as the "Restraints". It is hard to see how that would follow. In any event, Mr Young and Ord Minnett are entitled to know, precisely, how Curve alleges that the conduct complained of in par C45 constitutes a breach of the Restraints. It does not appear to me to be sufficient to bury what may well be a multifactorial series of allegations in a single sentence such as in par C55.
A number of other allegations concerning Mr Young, incorporating by reference the expression "Offending Conduct", have the same difficulties that I have set out in relation to par C45; namely, pars C55, C57 and C60.
Paragraphs C62 to C82 deal with "Ord Minnett's Breaches".
Paragraphs C64 to C67 deal with "Inducing Breach of Contract". In substance, the allegation is that Ord Minnett, knowing of the terms of Mr Young's employment with Curve, "permitted" him to use Curve's "Confidential Information", to approach Curve's clients and to engage in the "Offending Conduct," and "knew and intended" that Mr Young would act inconsistently with the terms of his employment agreement.
As Mr Gandar pointed out, there is a real question as to whether it is sufficient for Curve simply to plead that Ord Minnett "permitted" Mr Young to act in this way; and as to whether it is necessary that Curve also allege that Ord Minnett took some active step, such as inducing or procuring Mr Young to behave this way, to make out this cause of action. [3]
Finally, pars C68 to C74 deal with an allegation of "Receiving Confidential Information & Accessorial Liability" and conclude with the allegation that:
"Ord Minnett acted dishonestly in assisting and permitting Mr Young in respect of each breach of the Fiduciary Duties as pleaded above."
This appeared to be an attempt to make a claim under the second limb of Barnes v Addy [4] (knowing assistance by a third party in a dishonest or fraudulent design).
A question arises as to whether it is necessary for Curve to allege that the "trustee or fiduciary", in this case, Mr Young himself, had a "dishonest or fraudulent design". There is no direct allegation to this effect, although at par C72 it is alleged:
"Accordingly, Ord Minnett knew that Mr Young intended to breach and did breach the Employment Agreement and the Fiduciary Duties as pleaded above."
Mr Fernon submitted that this paragraph, in effect, constitutes an allegation of dishonesty on Mr Young's part. However, it appears to me that this paragraph is directed to Ord Minnett's knowledge, rather than Mr Young's conduct.
There is also a real question as to whether it is sufficient for Curve to allege no more than that Ord Minnett acted dishonestly "in assisting and permitting" Mr Young to act in breach of his "Fiduciary Duties" and whether it is necessary for Curve to also allege, if it considers that it can make this allegation, that Ord Minnett induced Mr Young to act in this way. [5]
[3]
Conclusion
I decline to give Curve leave to amend its Commercial List Statement in the manner proposed.
However, I will give Curve a further, final, opportunity to do so.
I direct that the plaintiff circulate the form of any further proposed Amended Commercial List Statement by 5pm on 12 August 2022.
I stand the plaintiff's Notice of Motion of 2 June 2022 and the second defendant's Notice of Motion of 16 June 2022 over to 26 August 2022 before the Commercial List Judge.
[4]
Endnotes
Mr Gandar drew attention to a useful summary of those principles by Ball J in SWM Financial Services Pty Ltd v Lloyd [2011] NSWSC 1108 at [88]-[89].
That is, the conduct articulated in par C45.
See, for example, Pittmore Pty Ltd v Chan; Chan v Tan (2020) 104 NSWLR 62; [2020] NSWCA 344 at [194] (Leeming JA, Bell P and Brereton JA agreeing).
(1874) LR 9 Ch App 244.
Cf Pittmore Pty Ltd v Chan; Chan v Tan at [186]-[194] (Leeming JA, Bell P and Brereton JA agreeing).
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Decision last updated: 28 July 2022