Tipto Pty Ltd v Yuen

The pleaded case

1. The plaintiffs filed a statement of claim on 11 September 2014, to support the relief claimed in their summons. The defendants filed a defence on 20 October 2014.
2. It is necessary in this case to pay particular attention to the manner in which the plaintiffs have pleaded their case, because not all of the allegations of wrongdoing made against the defendants are the subject of relief sought by the plaintiffs, and the plaintiffs have abandoned a number of claims that they pleaded in their statement of claim.
3. The plaintiffs pleaded in their statement of claim that Mr Yuen committed a substantial number of breaches over the period between 7 September 2009 and the final day of his employment, on 28 March 2014. They also alleged breaches that were committed after the end of Mr Yuen's employment. The plaintiffs organised these breaches under two broad headings, being breach of duty of fidelity and good faith, and breach of restraint. It will be convenient to adopt this approach to organising the alleged breaches, for the purpose of analysing the statement of claim.

Breach of duty of fidelity and good faith

1. The plaintiffs divided the breaches of duty of fidelity and good faith into two parts, which are described in paragraphs 65 and 68 of their statement of claim. First, in paragraph 65, they pleaded that Mr Yuen's conduct, referred to in identified preceding paragraphs, was in breach of his obligations under: (a) the implied duty of fidelity and good faith in his 4 January 2007 written employment agreement with Tipto and his 4 January 2007 written employment agreement with PCFM. (b) the implied duty of fidelity and good faith in the 1 July 2011 replacement written agreement with Tipto. (c) The express terms of the 1 July 2011 employment agreement with Tipto that (i) during working hours Mr Yuen would devote the whole of his time, attention and abilities to carrying out his duties; (ii) in performing his duties, Mr Yuen must use his best endeavours to promote and extend SWU's business interests and reputation, and not do anything to its detriment; (iii) Mr Yuen must at all times act in the best interests of SWU; and (iv) Mr Yuen must abide by SWU's Confidentiality and Independence Statement; (d) the express obligations of confidence contained in the 29 July 2013 written Employee Confidentiality Agreement and Independence Statement with SWU and PCFM.

Provision of financial advice

1. The plaintiffs alleged that Mr Yuen engaged in 17 separate breaches between 7 September 2009 and 6 October 2011 by offering to provide, or providing, financial advice to a Mr Yip, during business hours, and using his employer's computer and email system (pars 27 to 39, 43 to 45 and 61 of the statement of claim). The plaintiffs alleged in par 27 that Mr Yip was a friend of Mr Yuen.
2. Although the plaintiffs alleged that this conduct constituted breaches of duty by Mr Yuen, the plaintiffs did not allege that these breaches caused any of them to suffer any particular loss. The plaintiffs pleaded in par 83, that "if this Court does not grant the plaintiffs the injunctive relief sought, the plaintiffs will suffer loss and damage as a result of [Mr Yuen's] breaches pleaded above of [the 4 January 2007, the 1 July 2011 and the 29 July 2013 agreements], which cannot be conveniently quantified and for which the plaintiffs will not be adequately compensated by an award of damages. The plaintiffs reserve the right to claim damages in the event that [the defendants'] conduct causes identifiable loss and damage to the plaintiffs". The fact remains that the plaintiffs did not allege that the breaches caused them to suffer any loss, and it is inherently unlikely that they did so.
3. The plaintiffs did not seek any injunctive relief in relation to these breaches. As Mr Yuen's employment is now terminated, he will not have the opportunity to commit breaches of this nature in the future.
4. Indeed, in par 7 of their statement of claim, the only damages which the plaintiffs claimed is an amount of $2200 in respect of a different breach, which I will come to below, concerning the alleged preparation by Mr Yuen of a fraudulent invoice that the plaintiffs claim Mr Yuen sent to Mr Yip.
5. The question whether or not Mr Yuen committed these breaches, and if so, what the consequence was, is not included in the parties' agreed statement of issues. Yet the alleged breaches are mentioned in the plaintiffs' outline of closing submissions (pars 72 to 82). These submissions do not, however, appear to go directly to any relief claimed by the plaintiffs. Rather, the plaintiffs submit that the evidence given by Mr Yuen on this subject was untruthful in a number of respects; so the submissions appear to go only to his credibility.
6. In submissions, counsel for the plaintiffs conceded that the plaintiffs did not seek any relief in relation to these alleged breaches by Mr Yuen. He said that the plaintiffs pleaded these breaches in their statement of claim because, if they could be established, even though no relief was sought in respect of them, the Court could act upon the fact that the breaches had occurred to form a conclusion that Mr Yuen had a propensity for breaching his contractual obligations, which would support the Court's ordering the injunctions sought by the plaintiffs, in respect of the future conduct of the defendants. That is a problematic submission. It does not follow from the fact that, over a number of years, Mr Yuen may have committed petty breaches of his obligations to his employer, by providing financial planning advice on the side to one of his best friends, that this conduct would demonstrate a propensity on his part to divulge or misuse his employer's confidential information, or to breach contractual restraints of trade, after the end of his employment.
7. As it happens, even though the plaintiffs had no good reason at all to subject the defendants to the need to defend these allegations of breach, issues emerged out of the cross-examination of Mr Yuen concerning the commission of these breaches that have caused the plaintiffs to submit that the evidence that Mr Yuen gave in his defence should not be believed, and the Court should not treat him as being a reliable witness. I will return to this issue below. In essence, in various ways, the plaintiffs have attempted to prove, in a circumstantial way, that Mr Yuen breached his obligations to the plaintiffs after the end of his employment. The plaintiffs argue that the Court should not believe the positive evidence given by Mr Yuen, under affirmation, to negate the circumstances upon which the plaintiffs urge the Court to draw inferences of breaches by Mr Yuen. In this way, the plaintiffs seek to rely upon allegedly untruthful evidence given by Mr Yuen, in defence of claims against him that the plaintiffs should not have pursued, in order to persuade the Court not to accept denials by Mr Yuen in respect of circumstantial matters that the plaintiffs ask the Court to infer, but which the plaintiffs have not positively proved.

Provision of confidential information

1. The plaintiffs then alleged that, in connection with the provision of financial advice by Mr Yuen to Mr Yip on six occasions, Mr Yuen sought and received financial product information in his capacity as an employee; the information received was 'Confidential Information", as defined in clause 1 of the Employee Confidentiality Agreement and Independence Statement; and he supplied that information to Mr Yip (pars 40 to 43, 46 to 48, 49 to 51, 52 and 54 to 56, 58 to 60, 62 and 63).
2. As was the case for the allegations concerning the giving of financial advice, the plaintiffs have not alleged that the provision of the confidential information by Mr Yuen to Mr Yip caused them to suffer any damage. Again, the plaintiffs have not sought any injunctive relief in relation to these breaches. As Mr Yuen is no longer employed by any of the plaintiffs, he will not, in the future, have the opportunity to repeat this conduct by obtaining financial product information, in the capacity of an employee of any of the plaintiffs.
3. This issue is also not included in the parties' agreed statement of issues. It is mentioned in par 121 of the plaintiffs' outline of closing submissions, in the context of alleged breaches of his obligation of confidence, after the termination of his employment. The plaintiffs merely submit: "Mr Yuen has also previously made unauthorised disclosures of SWU's confidential information to his friend Mr Yip".
4. These alleged breaches are in the same position as the alleged breaches consisting of Mr Yuen's provision of financial advice to Mr Yip.

Preparation of fraudulent invoice

1. The plaintiffs pleaded a claim of fraud against Mr Yuen, as part of their breach of duty of fidelity and good faith claim. The allegations in their statement of claim are as follows: 53. On or about 20 July 2012, [Mr Yuen] made an electronic copy of Invoice No. 120006, which was for $220 and addressed to a client of SWU, Ms Yvette Su, fraudulently modified the copy to be addressed to Mr Yip in the amount of $2200 for 'investment in shares review services provided by [SWU]' and signed it… 57. SWU has never received any payment from Mr Yip in respect of the fraudulently modified advice referred to in paragraph 53 above.
2. As I have already noted, the plaintiffs claimed damages in the sum of $2200, in par 7 of the relief claimed in their statement of claim.
3. This subject is dealt with in par 12 of the parties' agreed statement of issues in the following terms: 12. Did Mr Yuen: (a) on about 20 July 2012 make an electronic copy of the invoice No 120006 and fraudulently modify the copy as alleged in paragraph 53 of the Statement of Claim, or otherwise fraudulently create an invoice on the SWU stationery, and sign it; and (b) on 23 July 2012, forward such document to Mr Yip; If so, is Mr Yuen liable to pay SWU the sum of $2200 plus interest or, alternatively, some other amount?
4. The defendants included comments in the agreed statement of issues to the effect that the plaintiffs' pleaded case does not raise the issue comprehended within the words "or otherwise fraudulently create an invoice on SWU stationery" and "or, alternatively, some other amount?".
5. The false invoice issue is dealt with in pars 84 to 90 of the plaintiffs' outline of closing submissions. Most of these submissions support a claim by the plaintiffs that the evidence given by Mr Yuen on the issue was not credible.
6. However, at this stage, the question is: how is it put by the plaintiffs that this conduct by Mr Yuen, if it occurred in the manner alleged, caused SWU to suffer a loss of $2200? Mr Yuen gave evidence that the circumstances in which he prepared the invoice were not in any way false or fraudulent. He said that he prepared a document that took the form of an invoice, but he gave it to his friend Mr Yip to take effect as a quotation for the future provision of financial advice services. Mr Yip did not accept the quotation. If the invoice was genuine, then Mr Yip would have been liable to pay the invoice to SWU, and not Mr Yuen. If, as the plaintiffs allege, the invoice was false, and did not relate to the provision of any services to Mr Yip, then no one was obliged to pay the amount of the invoice to SWU. SWU did not suffer any loss. The plaintiffs did not plead that any of them acted in some way on the faith of a belief that the invoice was genuine, and that, in consequence of that action, they suffered a loss.
7. I cannot see how, logically, the claim, as pleaded by the plaintiffs, could have caused any of them to suffer loss arising out of the preparation by Mr Yuen of the alleged false invoice.
8. When asked by the Court in final submissions to explain the logical basis of SWU's claim that it was entitled to $2200 in damages for this breach, counsel for the plaintiffs acknowledged that he could not do so, and that in fact the claim was only included in the statement of claim because SWU had not received the $2200 in payment of the tax invoice, and it was assumed that Mr Yuen had received that money. Counsel acknowledged that SWU did not, at the time it filed its statement of claim, and did not at the time of the hearing have, any evidence, or basis for alleging, that Mr Yuen had received the $2200.
9. When the issue was exposed by the Court in this way, the plaintiffs responded by seeking leave to delete par 7 of the claim for relief in their statement of claim. That leave was not opposed by the defendants, and it was granted.
10. When the Court asked whether the consequence of the amendment was that the fraud claim had ceased to be relevant to the proceedings, counsel responded by saying that the plaintiffs maintained the claim, even though they no longer sought any relief in respect of it. The plaintiffs wished to establish that Mr Yuen fraudulently prepared the tax invoice in support of their argument, to which I have referred above, that the Court could act upon findings of past misdeeds by Mr Yuen, to justify the Court in issuing broad injunctions, as sought by the plaintiffs, notwithstanding that the plaintiffs have been able to prove only few or trivial breaches, after the end of Mr Yuen's employment.
11. I will return to this issue below, when I deal with an application made by the plaintiffs, in the course of their submissions in reply, for leave to amend the statement of claim.

Breach of licence agreement by SWU

1. The final aspect of the breach of duty of fidelity and good faith claim pleaded by the plaintiffs (pars 66 to 68), concerns a consequence of the giving by Mr Yuen of the unauthorised financial advice referred to above. The plaintiffs alleged that the advice was given on an email containing wording that suggested it was sent on behalf of SWU, as a licence holder and authorised representative of Premium Wealth Management Ltd. They said that the provision of the unauthorised financial advice, on behalf of SWU, was a breach of the licensing agreement between SWU and Premium Wealth Management Ltd. The plaintiffs alleged, in par 4, that SWU is a corporate authorised representative of Premium Wealth Management Ltd, the holder of Australian Financial Services Licence number 237498. They alleged that, by causing SWU to breach its licensing agreement with Premium Wealth Management Ltd, Mr Yuen breached the 1 July 2011 employment agreement, whereby he agreed to use his best endeavours to promote, develop and extend SWU's business interests and reputation, and not do anything to its detriment, and his obligation at all times to act in the best interests of SWU.
2. The first thing to note about this allegation is that it concerns breaches of the 1 July 2011 agreement. Most of the conduct relied upon by the plaintiffs occurred before Mr Yuen entered into that agreement. Only six instances of conduct by Mr Yuen occurred during the course of the agreement (pars 51, 56, 60, 61, 62 and 63).
3. The plaintiffs have not alleged that this defaulting conduct by Mr Yuen had any consequences for SWU. That is not surprising, as all of the conduct was discovered by the plaintiffs after the termination of Mr Yuen's employment. There is no allegation that Premium Wealth Management Ltd has ever learned of the conduct; and indeed, it is unlikely that the plaintiffs would inform it of what Mr Yuen had done. Premium Wealth Management Ltd has not apparently taken, or threatened to take, any steps against SWU as a consequence of the breaches.
4. The plaintiffs did not seek any injunctive relief or damages in relation to this conduct in the relief claimed in their statement of claim.
5. The subject is not mentioned in the parties' agreed statement of issues. The subject is not mentioned in the plaintiffs' outline of closing submissions.

Fate of breach of duty of fidelity and good faith claims

1. As it is now clear that the plaintiffs do not seek any relief at all concerning the allegations of breach by the defendants of Mr Yuen's duty of fidelity and good faith that I have analysed above, I will in due course make an order dismissing those claims.
2. I do not propose to engage in the idle process of determining whether the conduct of Mr Yuen pleaded by the plaintiffs constituted the breaches of duty that they have alleged. I do not accept the plaintiffs' argument that I could take those breaches into account, if proved, to justify the issuing of injunctions against the defendants, to prohibit them from engaging in breaches of entirely different terms of Mr Yuen's agreements with one or more of the plaintiffs.
3. I add that Mr Yuen and Mr Yip were cross-examined extensively in relation to these breaches. I am satisfied that, in any event, Mr Yuen's conduct was entirely trivial. Mr Yip was, and is, a very close friend of Mr Yuen. The two have known each other, and been friends, from their earliest school days. They lived together as flatmates for 10 or so years. It may be technically valid that, in general terms, Mr Yuen should not have engaged in the email communications that he did with Mr Yip in his employer's time, or used standard form emails that described him as communicating on behalf of one of the plaintiffs. There should, however, be some element of balance in the way in which employers respond to employees engaging in limited amounts of unofficial communications with friends or relations during work time. It must be remembered that the plaintiffs have alleged that Mr Yuen engaged in this conduct on about 23 occasions, over a two-year period. I would infer that the plaintiffs discovered this conduct by thoroughly investigating Mr Yuen's email records on his work computer. That justifies an inference that the only questionable conduct committed by Mr Yuen was the conduct pleaded.
4. I would not have acted upon these alleged breaches, in the manner submitted by the plaintiffs, even if I had found all of them to be substantiated.
5. It will therefore not be necessary for the Court to deal with the matters raised by the defendants specifically in response to these allegations of breach in their defence.
6. I will, in due course, invite the defendants to make submissions concerning the costs order that the Court should make in relation to these allegations of breach.
7. As I have observed above, the plaintiffs should not have made the allegations in their statement of claim concerning these breaches, as they have not sought any relief directly in relation to the breaches. As it has happened, the plaintiffs only want to rely upon proof that the breaches occurred for reasons connected to the credibility of Mr Yuen, and his propensity for breaching his contractual obligations to the plaintiffs. The plaintiffs have succeeded in leading evidence concerning the alleged breaches, and have cross-examined Mr Yuen concerning their commission. Had the plaintiffs not alleged the breaches in their statement of claim, and so made them issues in the proceedings, they would have had to rely upon any evidence they wished to adduce concerning the commission of the breaches as matters going to credit or tendency. It is by no means clear that, in that case, the plaintiffs would have been able to establish any exception to the credibility rule in s 102 of the Evidence Act 1995 (NSW), or that the plaintiffs could have satisfied the tendency rule in s 97 of that Act. There is a strong appearance that the plaintiffs have gained an advantage to which they were not entitled by the manner in which they alleged the breaches now being considered.

Breach of restraints

1. The second part of the plaintiffs' case against the defendants is based upon allegations that Mr Yuen breached various restraints in his employment contract, and that he did so through his company, the second defendant, CoWealth Partners.

Restraint against competition

1. The first claim made by the plaintiffs is that, from April 2014 onwards Mr Yuen has, through CoWealth Partners, provided financial planning and wealth management services to clients, with a particular focus on clients with a Chinese background, and that CoWealth Partners competes with the business of SWU, in breach of an aspect of clause 30.1 of the 1 July 2011 employment agreement, which prohibits Mr Yuen from carrying on, or being engaged or interested in, any business which competes with SWU or PCFM, except post-termination in the capacity as an employee.
2. As appears from the parties' agreed statement of issues, the defendants accept that this claim is properly raised by the pleadings (par 8). There are, however, differences between the parties concerning whether the statement of claim raises two subsidiary issues that are significant to this aspect of the plaintiffs' claim. Those issues have been included by the plaintiffs as pars 10 and 11 of the agreed statement of issues. The defendants' position is that the issues as stated are not an accurate statement of what occurred, and in any event, on the pleaded case, are not relevant issues for determination. The issues are: 10. What effect (if any) did the formal change of payment arrangements for Mr Yuen's salary in July 2013 from indirectly through the first plaintiff ('Tipto") to directly from SWU have on Mr Yuen's restraint obligations? 11. What effect (if any) did the execution of the Employee Confidentiality Agreement and Independence Statement (2013 Confidentiality Agreement) by Mr Yuen on 29 July 2013 in which his employer is expressed to be 'SWU and PCFM' have on Mr Yuen's restraint obligations?
3. The plaintiffs alleged, in par 10 of their statement of claim, that Mr Yuen entered into a written employment agreement with Tipto, as a part-time 'para-planner' for SWU, on or about 4 January 2007. In par 11 they alleged that, on or about the same date, Mr Yuen also entered into a written employment agreement with PCFM as a part-time 'business development associate' for PCFM. The plaintiffs alleged in pars 12 and 13 that, until about 30 June 2011, Mr Yuen devoted about two thirds of his time working in the business of SWU and one third of his time working in the business of PCFM. SWU paid Tipto a service fee for the provision of Mr Yuen's services, and Tipto paid Mr Yuen two thirds of his remuneration. The other one third of Mr Yuen's remuneration was paid by PCFM.
4. The plaintiffs alleged that, on or about 1 July 2011, Mr Yuen "varied his employment agreement with Tipto by executing a replacement written agreement for his employment as a part-time financial planner for NSW". Paragraph 11 of the statement of claim is an allegation that, on or about 29 July 2013, Mr Yuen entered into a written Employee Confidentiality Agreement and Independence Statement with SWU and PCFM. The terms of this agreement pleaded in par 20 are restricted to restraints on Mr Yuen in relation to the confidential information of SWU and PCFM.
5. The plaintiffs alleged in par 21 that, from 1 July 2013, SWU paid two thirds of Mr Yuen's remuneration directly to him, and the other one third was paid by PCFM.
6. The plaintiffs alleged in par 23 that, at all material times from at least 4 January 2007 until 28 March 2014, the financial planning work performed by Mr Yuen, in the course of his employment, was for the benefit of SWU. They also alleged in par 24 that, over that period, SWU directed and controlled the performance of the financial planning work performed by Mr Yuen.
7. Finally, the plaintiffs alleged in par 26 that, "at all material times from at least 4 January 2007 until 28 March 2014, SWU was the employer of [Mr Yuen]".
8. It is, therefore, true that the plaintiffs pleaded that SWU was the employer of Mr Yuen between 4 January 2007 and 28 March 2014. The basis upon which that alleged employment relationship existed is, however, entirely unclear from the pleading, because the plaintiffs alleged specifically that Mr Yuen entered into a number of consecutive employment agreements with Tipto.
9. In final submissions, counsel for the plaintiffs accepted that the plaintiffs had not positively pleaded in their statement of claim that the change in payment arrangements which apparently occurred in July 2013, had the effect of making SWU the employer of Mr Yuen. Counsel submitted that the contemporary attitude of the Court to the strictness with which plaintiffs' claims should be pleaded was more liberal than in former times, and that it was open to the plaintiffs to run the case that SWU became an employer of Mr Yuen in July 2013, because that was a case that was available on the affidavit evidence served by the plaintiffs, and the plaintiffs had sought to introduce the issue in the parties' agreed statement of issues.
10. I propose to say nothing in general terms, in response to the submission by the plaintiffs concerning the liberality of the attitude that the Court now takes to the way in which plaintiffs should plead their claims. I will limit my observations to the present case. In the present case, the plaintiffs seek to enforce contractual restraints of trade against the defendants. As will be seen, the employment contract contained a general prohibition against competition, for a period of two years with the "company", and only Tipto was described in the agreement as the company. A crucial issue in the proceedings has always been whether, on the proper construction of the employment agreement, the word "company" included SWU. That barrier to the plaintiffs' success in obtaining an injunction to restrain the defendants competing with SWU might be removed, if the plaintiffs could establish that the employment agreement between Tipto and Mr Yuen was by some means novated in favour of SWU, so that SWU became Mr Yuen's employer. If that happened, the argument would be available to SWU that the word "company" should be taken, in consequence, to mean SWU, rather than the former employer, Tipto.
11. In my view, this is a sufficiently important issue that the rules of pleading required the plaintiffs to allege specifically that the consequence of SWU commencing to pay Mr Yuen directly, rather than Tipto, was that SWU replaced Tipto as Mr Yuen's employer.
12. The mere change in the arrangements within the plaintiffs, concerning how Mr Yuen was paid two thirds of his remuneration, would not self-evidently effect a change in employer, or even if it did, lead to the incorporation of all of the terms of the employment agreement with Tipto, as terms of the new contract of employment with SWU. In the absence of the novation being pleaded, the defendants would not have a proper opportunity to address the issue of Mr Yuen's consent to the new arrangement, or lead evidence concerning his knowledge of the change in the source of part of his remuneration, or its significance.
13. The present is not a case where the plaintiffs can properly say that all parties contested the dispute on the basis of issues that were not strictly raised by the pleadings. The defendants did not stand by when they received the draft of the parties' agreed statement of issues from the plaintiffs, and allow the plaintiffs to proceed upon the mistaken belief that the issue in par 10 was a live issue in the proceedings. The defendants explicitly included in the draft statement an assertion that the issue was not properly raised in the case. Had the plaintiffs wished to dispute that contention, it was necessary for them to do so at the commencement of the hearing, and in fact necessary for them to seek leave to amend their statement of claim appropriately. That leave may or may not have been granted by the Court, but at least the defendants would have had the benefit of the Court's consideration of whether the amendment could be allowed, in a manner that would be fair to the defendants. It is possible that the plaintiffs would have had to pay the price of an adjournment, as a consequence of leave being granted to them to amend their statement of claim. The course that the plaintiffs now wish to take, of having the issue determined without having faced the consequences of an application to amend their statement of claim at an appropriate time, is not available to them.
14. In relation to issue 11, the plaintiffs pleaded in par 19 of their statement of claim that, on or about 29 July 2013, Mr Yuen entered into a written Employee Confidentiality Agreement and Independence Statement with SWU and PCFM. They did not allege that that document had any effect on the identity of the employer of Mr Yuen, and in particular did not allege that any statement in the document that Mr Yuen's employer was "SWU and PCFM" had the contractual effect of changing the identity of Mr Yuen's employer.
15. In these circumstances, the plaintiffs have not pleaded that the document had any contractual effect in changing the identity of Mr Yuen's employer. Accordingly, it is my opinion that the issue in par 11 of the parties' agreed statement of issues is not available to the plaintiffs on the pleadings.

Provision of confidential information

1. The plaintiffs alleged a breach by Mr Yuen of his confidentiality obligation in around May 2014 (pars 73 to 74). The breaches concern information published on the website of CoWealth Partners. The breaches alleged were in respect of Mr Yuen's obligation to abide by SWU's Confidentiality and Independence Statement contained in clause 28 of the 1 July 2011 agreement, and of the obligations in clause 5(b) and clause 11 of the Employee Confidentiality Agreement and Independence Statement with SWU and PCFM.
2. Three statements on the website are given as particulars to par 73 of the statement of claim, being: (a) 'SWU Financial Planning manages around $200 million in client's wealth". (b) 'A large part of his [Mr Yuen's] experience comes from looking after nearly half of the clients within SWU Financial Planning'. (c) 'Premium Wealth Management manages approximately $2 billion in client's wealth'.
3. Paragraph 13 of the parties' agreed statement of issues raised the question of whether any of these matters constituted 'Confidential Information', as defined in clause 1 of the 2013 Confidentiality Agreement. However, the only one of the allegations that survived to the time of final submissions was that in (b), concerning the claim that a large part of Mr Yuen's experience comes from looking after nearly half of the clients within SWU Financial Planning.
4. The other two allegations fell by the wayside, because it emerged that the information that the plaintiffs claimed to be confidential was in the public domain, as it had been published by the plaintiffs, or Mr Wu. The defendants pleaded the facts that justified the conclusion that the information given in sub-pars (a) and (c) of the particulars was not confidential in their defence. Yet, again, the plaintiffs maintained untenable allegations against the defendants, until they were forced to abandon them at the trial.

Contact, induce, encourage or solicit clients

1. The plaintiffs alleged in pars 74 to 77 of the statement of claim that Mr Yuen breached the obligation in his employment agreement, that he would not "contact, induce, encourage or solicit any of the clients that use the services of SWU or PCFM to cease doing so or in any way disparage SWU or PCFM or the services they provide". In around July 2014, Mr Yuen began managing a superannuation fund for Mr Giang Ngo, who was a client of SWU, who Mr Yuen had met while he was working for SWU.
2. Finally, the plaintiffs alleged in par 78 of the statement of claim that, between 28 March 2014 and 26 June 2014, Mr Yuen breached the same term of his employment agreement that the plaintiffs rely upon in relation to their claim concerning Mr Ngo, because Mr Yuen "contacted various clients of SWU and PCFM using the social media service known as 'LinkedIn' and requested that those clients 'connect' with him on his LinkedIn account.
3. A significant aspect of this claim is that the term upon which the plaintiffs rely is pleaded in par 17(g)(ii) of the statement of claim as having the effect that Mr Yuen must not, for a period of two years after his employment ends, "contact, induce, encourage or solicit any of the clients that use the services of SWU or PCFM to cease doing so". The claim pleaded by the plaintiffs in par 78 goes no further than a complaint that Mr Yuen "contacted" the clients. There is no allegation that, as part of the contact, Mr Yuen suggested that any of the clients should cease using the services of SWU or PCFM, or that Mr Yuen in any way disparaged SWU or PCFM, or the services they provided. The validity of this claim will depend at the outset on whether, on the proper construction of the relevant employment agreement, it prevented Mr Yuen from contacting the clients of SWU or PCFM per se, irrespective of whether Mr Yuen took any step to persuade the clients not to continue to deal with SWU or PCFM.

Plaintiffs' application to amend

1. During their submissions in reply at the end of the hearing, the plaintiffs applied to the Court for leave to amend their statement of claim.
2. The application may have been prompted by questions put to their counsel by the Court, concerning the entitlement of the plaintiffs to pursue part of their substantive case, that did not appear to be specifically pleaded.
3. The plaintiffs' draft amended statement of claim became MFI 9. As I have observed above, the plaintiffs were given leave, with the consent of the defendants, to delete par 7 of their claim for relief, by which they had sought $2200 in damages in respect of the allegation that Mr Yuen had fraudulently prepared a tax invoice. The plaintiffs were also, with the consent of the defendants, given leave to amend the particulars to par 73, to delete the two allegations of publication of confidential information that I have discussed above, as having fallen by the wayside.
4. The defendants objected to the plaintiffs being given leave to amend par 53 of the statement of claim, or to insert pars 77A to 77G. I will set out those paragraphs below (with only par 53 being marked up in the conventional way to show the amendment, as the other paragraphs are all new): 53. On or around 20 July 2012, [Mr Yuen] fraudulently made an electronic copy of SWU's invoice template and numbered it No 120006, which was for $220 and addressed to a client of SWU, Ms Yvette Su, fraudulently modified the copy to be addressed to Mr Yip in the amount of $2200 for 'investment in shares review services provided by [SWU]' and signed it. 77A. On or about 14 October 2013, [Mr Yuen] met with Dr Toon Kin Chaim, and his wife, Dr Wai Lam Emily Yan, in [Mr Yuen's] capacity as a SWU financial planner and prepared a detailed financial profile for them. 77B. On or about 24 January 2014, [Mr Yuen] met again with Dr Chaim and Dr Yan and arranged for them to formally appoint SWU as a third-party authority authorised to access Dr Chaim's First State Super account and Dr Yan's MLC Super account. 77C. On or about 5 February 2014, [Mr Yuen] again met with Dr Chaim and Dr Yam again and had them sign a Financial Services Guide setting out the terms on which SWU would provide financial planning advice to them. 77D. In the premises set out in paragraphs 77A - 77C above, by 5 February 2014, Dr Chaim and Dr Yan had commenced using the services of SWU and were 'clients' of SWU within the meaning of clause 30.1 of the employment agreement referred to in paragraph 16 above. 77E. At a time unknown to the plaintiffs, between 28 March 2014 and 12 August 2014, there was contact between Dr Chaim and Dr Yan on the one part and [Mr Yuen] and [CoWealth] on the other. 77F. As a result of the contact referred to in paragraph 77E above, Dr Chaim and Dr Yan ceased using the services of SWU. 77G. The conduct referred to in paragraph 77E above was in breach of the express term of [Mr Yuen's] employment agreement referred to in paragraph 17(g)(ii) above.
5. I will consider the application to amend par 53 first. The reason for the amendment apparently is that the defendants pointed out to the plaintiffs that the genuine invoice that SWU sent to Ms Su was dated after the allegedly fraudulent invoice that was sent to Mr Yip. The plaintiffs' original allegation was accordingly misconceived. The plaintiffs ascertained, in the cross-examination of Mr Yuen, that he had prepared the invoice referred to in par 53 simply by using SWU's template invoice. Notwithstanding that the application to amend was made after the plaintiffs had abandoned their claim for any relief in respect of the alleged conduct referred to in par 53, the plaintiffs wished to maintain the allegation, albeit corrected as to one matter of fact, for the reasons that I have discussed above, to support their submission that their cross­-examination of Mr Yuen on this false issue had damaged his credibility.
6. I will not grant to the plaintiffs the leave that they seek, in relation to the amendment of par 53. It is, in my view, vexatious for the plaintiffs to make an allegation of fraud against Mr Yuen, in circumstances where they seek no relief against him in respect of that conduct, and they only make the allegation to provide a foundation for a submission contrary to Mr Yuen's credit, and another submission that he has a tendency to breach his contractual obligations.
7. It is necessary for me to explain the background to the plaintiffs' application to add pars 77A to 77G to their statement of claim.
8. As I have explained above, the plaintiffs have only pleaded that the defendants provided financial planning advice to one client of SWU, being Mr Ngo, in the period between 28 March 2014 and 12 August 2014. Apparently, some interlocutory skirmishing occurred between the parties concerning the provision of each side's list of clients to the other. The plaintiffs objected to the list of their clients being provided to Mr Yuen, because it would refresh his memory as to the names and contact details of the clients, and Mr Yuen might misuse that information. The plaintiffs required the defendants to provide a list of their clients to them. The defendants complied but, as I understand it, only on the condition that the list remained confidential to the plaintiffs' counsel, and, on the Friday before the hearing, the solicitor for the plaintiffs was permitted to look at the list. The officers of the plaintiffs were not permitted to do so. That, in practical terms, limited the utility of the list to the plaintiffs, because the legal representatives of the plaintiffs were unlikely to be able to recognise the names of any clients of the plaintiffs on the defendants' list. Only the officers of the plaintiffs could readily do that. There was further skirmishing during the hearing on this issue. In dealing with the skirmishing, I was influenced by the consideration that I should treat both sides in the same way, in relation to whether the respective lists of clients should be inspected by the parties. This issue was resolved by requiring the defendants to ensure that their list contained information concerning their clients that should facilitate a comparison between the two client lists. I then left it to the legal representatives for the plaintiffs to compare the two lists, in the expectation that that process would be reasonably reliable to enable the plaintiffs to identify clients whose names were also on the defendants' client list. I regard this process as being something of a farce, but it was the product of each side's insistence that their own client list should not be it inspected by the other side.
9. The names of Dr Chaim and Dr Yan apparently appeared on both lists of clients. In broad terms, the evidence bears out the allegations in pars 77A to 77E. I do not imply by this statement that I have made positive findings of fact precisely in the terms alleged in those paragraphs. The allegation in par 77F that Dr Chaim and Dr Yan ceased using the services of SWU as a result of the contact referred to in par 77E is more problematic, as Dr Chaim and Dr Yan were not called as witnesses. Apart from the fact that the defendants have put these persons on a client list, the evidence does not disclose what, if any, services have been provided by the defendants to those persons.
10. The evidence does not permit any thorough investigation of why it was that the plaintiffs did not discover that Dr Chaim and Dr Yan were on the defendants' client list until halfway through the hearing. It is reasonable to suppose, however, that the steps that the plaintiffs ultimately took at the hearing, to ascertain the names of the defendants' clients, could have been taken earlier had the plaintiffs been more proactive in investigating the extent of the services provided by the defendants to the plaintiffs' clients, before Mr Yuen gave his undertaking to the Court.
11. The plaintiffs did not apply for leave to amend their statement of claim to introduce this new claim concerning Dr Chaim and Dr Yan, immediately after they discovered that those persons were on the defendants' client list. The defendants submit that the plaintiffs should not be permitted to amend their statement of claim at this stage, as that would unfairly deprive the defendants of the opportunity to go into evidence to respond to the allegations now sought to be made.
12. In particular, the defendants rely upon the following exchanges that took place, after the plaintiffs discovered that Dr Chaim and Dr Yan were on the defendants' client list. It is appropriate to put these exchanges in context. The plaintiffs discovered that the defendants had provided services to Mr Ngo, because that fact had been disclosed by Mr Yuen in an affidavit. This was an apparent attempt by Mr Yuen to be candid in relation to such of his actions as might be argued to have been breaches of the restraints in his employment agreement. The plaintiffs' counsel wished to cross-examine Mr Yuen, using the names of Dr Chaim and Dr Yan, in order to put to Mr Yuen that, in fact, he had not been candid to the plaintiffs, or the Court, because he had not disclosed the names of these clients. For that purpose, counsel did not want to disclose the identity of Dr Chaim and Dr Yan, before he commenced his cross-examination of Mr Yuen. I have extracted relevant parts of the transcript, and corrected a number of formatting errors (starting at T 95.20): GRATION: Your Honour, the plaintiffs have being trying since August last year. The plaintiffs served a notice to produce requiring the production of Mr Yuen's clients, it was fought tooth and nail. Eventually the defendants provided a confidential list. Up until last week, after repeated requests, they point-blank refused to allow that information to be provided, initially to my instructing solicitor. HIS HONOUR: …If they had provided you a list, had you asked before a statement of claim was filed, you would have been obliged to allege in the statement of claim, with the benefit of that information, who the clients were. GRATION: It was not until this morning when the list of full names and dates of birth were provided, that was the first time in which the plaintiffs became aware that some of Mr Yuen's evidence is false. And it will be put quite fairly and squarely to Mr Yuen that it was a deliberate lie, that he knew it was false. HIS HONOUR: Okay, you can do that anyway. But the point of it is-- GRATION: He should not be told the name of that person ahead of his cross examination. HIS HONOUR: Absolutely but it's your case. If you will bind the plaintiffs not to rely upon this evidence you're talking about as evidence of clients formerly of the plaintiffs, now of the defendants, then that may be one thing. If you just want to rely upon it for credit. But if you want to rely upon it for credit and then also rely upon it in your case to prove that there were clients for both sides, then you've got to disclose it… GRATION: Yes, as a basis of the information provided this morning, Mr Yuen has said in para 6 of his affidavit, affirmed on 12 August 2014: "So far as I am aware only one of these clients has ever been a client of SWU, namely Mr Giang Ngo." That is simply untrue. HIS HONOUR: I'm not entering upon that. It may be right or it may be wrong but there are two things and I don't think you're responding to me. The first is, if it is part of your case that identified persons, who you may have only been able to identify today, have at relevant times been clients of the defendants when they shouldn't have been, you have to state the names to the Court, to Mr Fernon and to the defendants, because that's your case. You may be forgiven for providing late particulars by reason of the circumstances which prevented you getting the information earlier. But the first point is, if it's part of your case you have to state what it is… The second point is, Mr Yuen has sworn whatever he has sworn, you have the evidence from his own source. If one is inconsistent with the other you can cross-examine him on it. GRATION: Let me avoid further waste of time, your Honour. I will read out that name in Court. It will be alleged that Dr Toon Kin Chiam and Dr Wai Lam Emily Yan are clients whom Mr Yuen knew were clients of SWU and it will be alleged that he has knowingly lied in para 6 of his affidavit. HIS HONOUR: All right… HIS HONOUR: All right. Well, I think, Mr Fernon, that gives you the information you asked for? FERNON: Yes, thank you, your Honour, we'll cogitate upon that.
13. The effect of this exchange may be somewhat ambiguous. Counsel for the plaintiffs made positive assertions that he intended to use the evidence to discredit Mr Yuen. He did so in the context that I distinguished between the use by the plaintiffs of the clients' names for the purpose of challenging Mr Yuen's credit on the one hand, and relying upon the defendants' dealing with those clients for the purposes of the substantive relief claimed by the plaintiffs on the other. In my judgment, counsel's response conveyed to the defendants that the information would only be relied upon on the issue of credit. It may perhaps be said, contrary to that observation, that I conveyed to counsel that it would be necessary to identify the clients if the plaintiffs wanted to rely upon them to support their substantive case, and that is what counsel did following his statement that he wanted to avoid further waste of time. However, the better view is that counsel's response did not signify that the plaintiffs would rely upon the new information for the purposes of their substantive case, but rather simply that he wished to get on with the case without further ado.
14. It will also be relevant to the consideration of this issue to assess the cross-examination of Mr Yuen that took place on this subject. Because of the length of the cross-examination, I have edited the following extract. It commenced at T 239.40: Q. Now, I must move on, if I may, to the next topic. Do you know Dr Toon Kin Chiam and his wife Dr Wai Lam Emily Yan? A. Yes. Q. You'd met with them on 14 October 2013, hadn't you? A. I cannot recall the day. Q. Well, do you agree that you met with them in late 2013 while you were working at S Wu Financial Planning? A. Yes … Q. You'd agree then that you met with Dr Chiam and Dr Yan on 14 October 2013 and prepared a personal financial profile, didn't you? A. Yes … Q. You'd agree that in the course of that meeting with them on 14 October 2013 you became familiar with their financial circumstances, didn't you? A. Yes. … Q. At 24 January 2014 was roughly six weeks after, you say, that you had already told Mr Simon Wu that you would be resigning from his business? A. Yes. … Q. On that occasion you filled out the form on the second page I've shown you, "Appointment of third party authority in respect of a first state super account?" A. Yes. … Q... Dr Chiam and Dr Yan came back again for another meeting on 5 February 2014, didn't they? A. I cannot recall the day, sorry. Q. Let me show you this document and if you could hand back the previous one. … Q. Thank you. Looking at the document you've just been handed, this is a financial services guide. It's correct, is it not, that Dr Chiam and Dr Yan came back to see you again on 5 February 2014, didn't they? A. I cannot recall. That's the date that is just the signed document of the financial services guide. … Q. Have a look at that document. At that same meeting, I suggest to you, if you look at the final page, you have, in your capacity as a Justice of the Peace, certified a true and complete copy of the original, dated 5 February 2014, haven't you? A. Yes. Q. So do you accept that you had a meeting with Dr Chiam and Dr Yan on 5 February 2014? A. Yes. Q… You would agree, would you not, that having signed the formal appointment of S Wu Financial Planning, as a third party authority, telling Dr Chiam and Dr Yan what the fees would be and giving them a financial services guide, that they were now clients of S Wu? A. No. Q. What's the basis for you saying that? A. Because that's, as I said before, that's a third party. We find out information and it's up to the client what service they require and then we have to perform the statement of advice to engage them. So if they have signed the statement of advice then that becomes a client. Q. You're now telling his Honour that notwithstanding acknowledging receipt of the financial services guide, notwithstanding having completed documents appointment S Wu Financial Planning, you are seriously telling his Honour that you did not consider those people to be clients of S Wu Financial Planning? A. All those are the pre steps that we have to get a client to prepare a statement of advice. Financial services guides are provided to every client that comes into the office regardless whether they become a client because that discloses what service are available and where would the client seek compensation and all that. It's all - it's a prerequisite to any client walking in to a door and then it's either emailed to them, the first copy, and then get them signed. That doesn't mean that they are a client. Even if you get their financial information it's not a client. They can go to ten planners and get the same - get different services guides as well and give their affairs to them to look into and whether or not they select which one, is whether or not they get engaged is when they sign upon the statement of advice prepared by the-- … Q. I'd like to show you your affidavit sworn on 12 August 2014 and I'll turn to annexure A to that affidavit. A. Yes. Q. You'd agree that Dr Chiam and Dr Yan's names appear on the list of your clients at annexure A, doesn't it? A. Yes. Q. I'll ask you please to turn to paragraph 6 of the affidavit. For your Honour's benefit this is page 103 of the court book. When you said in paragraph 6 of this affidavit, "So far as I'm aware only one of these clients has ever been a client of S Wu, namely, Mr Giang Ngo," that was a deliberate lie, wasn't it? A. No. Q. It was a deliberate lie because you knew that Dr Chiam and Dr Yan had met with you only a few months earlier, hadn't they? A. It wasn't a lie. Q. You knew that they had signed themselves up with S Wu as the nominated financial adviser for that superannuation account, didn't you? A. No. Q. You didn't know that? A. They haven't signed up. Q. You're persisting with your evidence to his Honour that the form purporting to appoint you as the financial planner doesn't mean what it says? A. There is no form to appoint. That is the third party form if you refer to that. Q. You're persisting with your evidence that the statement on that form sent to a third party appointing you as far as the third party is concerned as the financial planner, did not make them a client. Is that the basis for what you've said? A. Yes. Q. I suggest to you, again, it was a deliberate lie that you put in this affidavit for the purpose of avoiding disclosure to the plaintiffs that that is what you had done? A. No. You can look back to their file notes and all that. Never in one point they said they would engage as client. Q. When you went with them on 5 February I suggest that you decided that you wanted to have their business for your own business that you decided to set up and you decided after that meeting on 5 February that you would not enter them into the client database system of S Wu so that they would never be recorded as clients of S Wu? A. No. Other staff knew about these clients. … Q. It's the case, isn't it, you never entered Dr Chiam or Dr Yan's name on S Wu's database, did you? A. It was on the record. There's files, there's records because they were never signed up as clients. Q. You've said two different things there. You're saying there were files that were records. … Q. I suggest to you that by January 2014 you decided that this were high wealth individuals that you wanted to manage in your new business when you left? A. No. Q. I suggest to you that you dishonestly decided to divert S Wu's clients to yourself? A. No. Q. I suggest to you that this was a gross breach of your duty of good faith to your employer? A. No. … Q. I suggest to you the reason you withheld your consent was that you were so anxious to avoid the plaintiffs ever seeing your list because you were terrified that they would recognise that Dr Chiam and Dr Yan were on your list of clients despite having been signed up with S Wu? A. No. Q. I suggest that anxiety was because you knew that you had deliberately and dishonestly not entered their names into the client name database? A. No.
15. In this cross-examination, it was put to Mr Yuen, as foreshadowed by counsel the previous day, that he had deliberately omitted to refer to the two additional clients in his affidavit. The cross-examination went further to suggest that Mr Yuen dishonestly failed to record the two new clients in the plaintiffs' database. That suggestion must also go to credit, as there is no allegation in pars 77A to 77G that Mr Yuen breached his employment agreement by failing to enter the clients' names on the database. Questions were not put to Mr Yuen in cross-examination concerning the nature and circumstances of the contact between Mr Yuen and Dr Chiam and Dr Yan, and in particular who initiated the contact. There were no questions about whether the defendants have actually provided financial planning services to those clients. There were no questions as to whether Mr Yuen said anything to the clients directed towards inducing them not to seek financial planning services from SWU. Nothing was asked that explored the possibility of a causal connection between the clients' contact with the defendants and their not seeking financial planning advice from SWU.
16. It is arguable that counsel for the plaintiff went somewhat further in his cross-examination of Mr Yuen on his credit in respect of this new material, but, in my opinion, the cross-examination went to credit; and counsel for the defendants would not have gleaned from the questions that the plaintiffs intended to rely upon the evidence to support a substantive breach of the employment agreement.
17. An issue that emerged out of this cross-examination was that Mr Yuen took the position that Dr Chiam and Dr Yan were not technically clients of SWU at the time Mr Yuen's employment ended. Mr Yuen gave his reasons for that belief, albeit that he was required to do so on the run in cross-examination. The late application by the plaintiffs for leave to amend their statement of claim has had the effect that Mr Yuen has been deprived of the opportunity to investigate the issue of when people technically became clients of SWU, and the possibility of being able to adduce positive evidence on that subject.
18. In all of these circumstances, in my view, it would not be fair to the defendants to give leave to the plaintiffs to amend the statement of claim to add pars 77A to 77G at the stage of their submissions in reply. I dismiss the application.

The material facts

1. On 3 January 2007, Mr Yuen signed a confidentiality and independence statement in favour of SWU, Tipto and PCFM, who were collectively described as the "company."
2. On 4 January 2007, Mr Yuen signed an employment agreement with PCFM. The agreement took the form of a letter addressed to Mr Yuen, and contained provision for his signature. The copy of the document that is in evidence has not been signed by Mr Yuen. However, the defendants pleaded in their defence that Mr Yuen entered into the agreement. The agreement specified the duties that were required to be undertaken by Mr Yuen on a full-time basis. The employment was to continue until terminated by either party, on at least two weeks' notice. Mr Yuen's gross salary was to be $10,000 per annum. Clause 10 prohibited Mr Yuen from disclosing confidential information. It stated that a separate confidentiality and independence agreement would be signed as part of the employment conditions. Clause 12 prohibited Mr Yuen from competing with PCFM during his employment, and within one year after termination, without the prior written consent of the company.
3. Mr Yuen entered into a similar agreement with SWU on 4 January 2007. Mr Yuen's salary was to be $25,000 per annum. The agreement contained prohibitions on the disclosure of confidential information, and the same non-competition clause as in the other agreement.
4. The two agreements described PCFM and SWU respectively as the "company".
5. On 15 April 2008, Mr Simon Wu, on behalf of Premium Wealth Management Ltd, signed an authorisation certificate, that certified that Mr Yuen had been appointed as an authorised representative of Premium Wealth Management Ltd, under s 916A of the Corporations Act 2001 (Cth) for the purpose of providing certain identified services.
6. Mr Yuen was issued business cards which described him as an authorised representative of Premium Wealth Management and SWU Financial Planning, and also as Research Manager for PCFM.
7. Mr Yuen signed a new employment agreement on 1 July 2011. Mr Simon Wu said that this took place because, in July 2011, "SWU updated its standard form of employment agreement to incorporate various legislative changes".
8. The other party to the employment agreement was Tipto, as trustee for the SWU Management Trust. The agreement defined Tipto in that capacity as "Company").
9. Clause 2 provided that Mr Yuen "will be employed by the Company on a part-time permanent basis in the position of Financial Planner. Your duties and roles are stated out (sic) in the separate document titled "Position Description and Duties". That separate document described Mr Yuen's duties as Financial Planner - "SWU Financial Planning" and "Research Manager - Premium China Funds Management". The document listed specific duties under the heading: "General office duties relating to financial planning and funds management activities. These duties include the following (this list is not exhaustive)". The list was: * General Office Administration and Assistance * Preparation of Client Review Reports * Managing Workflow of Client Review Reports * Complete Review Meetings for financial planning clients * Recruitment of new financial planning business * Taking and following up client queries regarding administrative issues * Contacting clients during marketing campaigns, seminars etc * Assisting marketing activities for the funds management group * Database management for CRM for the funds management group * Assisting in organising roadshows, attendees and liaise with dealer groups * Manage research system and organisation for the Funds management business * Keep the funds management team up to date with issues arising from Asia including provision of analysis.
10. Clause 7.1 provided that Mr Yuen's duties were to be as stated in the separate document "and shall include any other duties as advised by the Company from time to time". Clause 7.3 required Mr Yuen at all times "to carry out all lawful directions given to you by the Company". Clause 7.5 required him to "use your best endeavours to promote, develop and extend the Company's business interests and reputation, and not do anything to its detriment".
11. Clause 9 provided for Mr Yuen's remuneration. His salary was to be $39,000 per annum. Clause 9.2 entitled Mr Yuen to be paid a bonus "equal to 1% of the gross turnover of the SWU Financial Planning business… which is made available to split between all contributing members of the SWU Financial Planning business at the principals (sic) discretion".
12. Clause 27.1 required Mr Yuen to act at all times in the best interests of the Company.
13. Clause 30 provided for the following restraint of trade: 30.1 In consideration of your remuneration and to protect the Company's goodwill, you will not while employed by the Company or for a period of 2 years within NSW after your employment with the Company ends, do the following: a. induce, encourage or solicit any of the Company's or its related entities employees to resign; b. contact, induce, encourage or solicit any of the dealer groups or advisers that used the managed funds distributed by the Company and its related entities to cease doing so or in any way disparage the Company or its associated entities or the managed funds or other financial products they distribute; c. contact, induce, encourage or solicit any of the clients that use the services of the Company and its related entities to cease doing so or in any way disparage the Company or its associated entities or the services they provide; d. carry on or be engaged or interested in any business which competes with the Company (except post termination in the capacity as an employee).
14. In clause 30.1(b) and (c) the words "related" and "associated" appear to be used interchangeably.
15. On 29 July 2013, SWU and PCFM (collectively described as "Employer") entered into a document called Employee Confidentiality Agreement and Independence Statement with Mr Yuen (described as "Recipient").
16. Mr Simon Wu explained the reason for this agreement by saying that, in July 2013, SWU acquired powerful software on which it intended to store confidential information about SWU's clients. Mr Wu intended to provide each of SWU's senior staff with a pass code to access the database. He requested all of SWU's staff to sign an agreement in the form signed by Mr Yuen.
17. Recital A recited: "The Recipient is employed by the Employer pursuant to a separate employment contract". There was no separate employment contract between Mr Yuen, on the one hand, and SWU and PCFM on the other.
18. Clause 1 contains a definition of "Confidential Information". "Confidential Information" means, subject to clause 3, all, 1. Information, data and records stored via the software "Work Sorted" or any similar data storage system; 2. Client information, data and records, including but not limited to identity, contact details and financial information. 3. Marketing and distribution - information, trade secrets, prospects, referrers, distributors, contacts, budgets, marketing plans; 4. Information received from Value Partners Hong Kong and its related parties and associated entities; 5. Business - information, data, records and documents including without being limited to financial statements, management accounts, taxation returns, BAS statements, employment records, budgets, supplier information, diaries, schedules, financial models, planning information, client portfolio information, financial products used, financial products researched, concepts, programming information, accounting records, statistics, formulations, know-how, trade secrets, ideas, concepts and other operational information, processes, products developments, sales information, financial accounts, documents, papers, information relating to sub-contracts, board minutes, management records, client lists and minutes of meetings, and any business information which is confidential, commercially sensitive or secretly furnished in any form or media whatsoever, whether before or after execution of this Agreement, and either directly or indirectly; (a) which is or has been disclosed by the Provider or any of its representatives in relation to the Specified Purpose; or (b) of which the Recipient becomes aware as a direct result of the Recipients Employment.
19. Clause 5(b) prohibited Mr Yuen from using, disclosing, publishing, selling or trading, reproducing or permitting reproduction, of or otherwise permitting the disclosure or publication of, the Confidential Information, or the fact that he had received Confidential Information, or any opinion regarding the Confidential Information to any person.
20. The effect of clause 7 was that the obligations of confidentiality contained in the agreement survived and continued for 10 years from the date of the agreement.

Meaning of relevant terms of employment agreement

1. The parties' agreed statement of issues raises questions of construction concerning both clause 30.1(b), which concerns the dealer groups or advisers that use the managed funds distributed by PCFM, and clause 30.1(c), which concerns clients that use the services of SWU.
2. Both provisions are relevant to the plaintiffs' claim that Mr Yuen breached the employment agreement by the contacts that he made on LinkedIn, because, as I understand it, some of the contacts were advisers of PCFM and others were clients of SWU. The claim concerning the provision of services to Mr Ngo only arises under clause 30.1(c), as Mr Ngo was a client of SWU.
3. There are two questions of construction that arise, and they are the same for the two provisions. It will be convenient to set them out again: b. contact, induce, encourage or solicit any of the dealer groups or advisers that used the managed funds distributed by the Company and its related entities to cease doing so or in any way disparage the Company or its associated entities or the managed funds or other financial products they distribute; c. contact, induce, encourage or solicit any of the clients that use the services of the Company and its related entities to cease doing so or in any way disparage the Company or its associated entities or the services they provide;

Are SWU and PCFU related or associated entities?

1. The first question is whether the expressions "related entities" and "associated entities" refer to PCFM in the case of clause 30.1(b) and SWU in the case of clause 30.1(c).
2. There is no definition of "related entities" or "associated entities" in the employment agreement. The expressions must therefore be given their natural and ordinary meanings, as they would be understood by parties in the position of Tipto and Mr Yuen. The expressions have relatively straightforward meanings as a matter of ordinary parlance, although because of the indefiniteness of the terms "related" and "associated", there may often be scope for doubt about the entities that were intended to be included. However, any uncertainty in the use of the terms "related" and "associated" may be cured by the objective facts known to the parties in particular cases. In the present case, it was clear to Mr Yuen that PCFM and SWU were related to or associated with Tipto, because those two companies conducted the enterprise, as corporate vehicles for Mr Simon Wu, for which Tipto provided services.
3. The defendants contested this issue, but in my opinion, given that Tipto was defined to be the Company, it is clear that PCFM and SWU were objectively intended to be comprehended within the expression "its related entities", or "associated entities"..
4. First, Mr Yuen accepted in cross-examination that he knew that his employer, Tipto, was a service company that provided his services to both of PCFM and SWU. In a practical sense, Mr Yuen worked for PCFM and SWU, even if not technically employed by them. It must have been clear to Mr Yuen, at the time he signed the employment agreement, that, in a practical way, the two companies were related to or associated with Tipto. The use in both subclauses of the expression "the Company and its related entities", where it first appears, makes it clear that PCFM and SWU were intended to be related entities, because it was only those companies who dealt with "dealer groups or advisers that use the managed funds distributed by the Company and its related entities", or who had "clients that use the services of the Company and its related entities".

Was mere contact with clients or advisers prohibited?

1. The more difficult question concerns the proper construction of the wording "contact, induce, encourage or solicit any of the…to cease doing so…"
2. In the case of the LinkedIn issue, the plaintiffs have an arguable case that Mr Yuen had been in contact with a number of dealers and clients, albeit electronically by means of the service provided by LinkedIn. Mr Yuen and a number of dealers and clients were connected on the web-based service LinkedIn. The evidence did not establish whether that result came about by steps initiated by Mr Yuen, or steps initiated by the dealers and clients. The evidence did not show how the LinkedIn service works. The plaintiffs have no evidence that any dealers or clients that were in contact with Mr Yuen were in any way encouraged to cease acting as dealers or being clients of PCFM and SWU respectively. There was nothing more than the fact that Mr Yuen and the dealers and clients were connected by the manner in which the LinkedIn service operates.
3. Also, in relation to the case concerning Mr Ngo, the plaintiffs have been able to adduce evidence that CoWealth Partners provided financial planning services to him, but Mr Ngo remains a client of SWU, and SWU does not have evidence that Mr Yuen has encouraged Mr Ngo to cease being a client of SWU.
4. Consequently, the plaintiffs have had to resort to the argument that the two subclauses must be read in the following way: that is, Mr Yuen will not contact, or be contacted by, any of the dealer groups or advisers or clients, and will not induce, encourage or solicit any of the dealer groups or advisers or clients to cease doing so. That is, the subclauses impose a blanket prohibition on contact with dealer groups, advisers or clients (even if not initiated by Mr Yuen), but they only otherwise prohibit inducement, encouragement or solicitation of dealer groups, advisers or clients to cease dealing with PCFM and SWU.
5. The defendants' case is that this manner of interpreting the subclauses is incorrect, because it would prohibit mere contact. Contact per se would not harm the plaintiffs. There is no commercial reason to construe the subclauses as having the effect of prohibiting mere contact. The chapeau to clause 30.1 states that the clause is intended to protect "the Company's goodwill". If the subclauses are to be given a commercially sensible construction, they should have the effect that conduct by Mr Yuen is only prohibited if the conduct would be likely to injure the Company's goodwill.
6. The defendants submit that the subclauses should be construed as if the words "to cease doing so" qualify "contact" as much as they do "induce, encourage or solicit". The defendants recognise that the expression "contact…to cease doing so" is not felicitous, as a matter of language. They nonetheless submit that it is an intelligible course to construe the subclauses in this way, and that approach will give the subclauses a commercially sensible meaning.
7. They also submit that the subclauses, or at least those parts of the subclauses that employ the word "contact", would be void by reason of being unreasonable restraints of trade, if they purported to prohibit absolutely all contact between Mr Yuen and dealer groups, advisers or clients, including where the contact was not initiated by Mr Yuen, and where the contact occurred in circumstances that could not damage the Company's goodwill. The defendants submit that the subclauses should be given a construction that avoids their invalidity.
8. The construction of the subclauses proposed by the defendants is to be preferred. Structurally, the expression "to cease doing so" qualifies "contact", as much as it does "induce, encourage or solicit". The fact that the expression "contact to cease doing so" is an inelegant use of language does not, in my view, overcome the conclusion that should be drawn from the structure of the language in the subclauses. It would be of no commercial benefit to the plaintiffs to prevent ex-employees merely contacting dealer groups, advisers or clients; a fortiori if the contact was initiated solely by those other persons. The restraint could not be reasonably necessary to protect the legitimate interests of the PCFM or SWU, if it prohibited mere contact. The subclauses should not be construed in a way that would make them void, or partly void, if there is a better interpretation under which they will be valid. The subclauses therefore have the effect of prohibiting Mr Yuen from contacting dealer groups or advisers or clients to cease being dealer groups or advisers of PCFM or clients of SWU.

Does "Company" include SWU and PCFM?

1. The next question of construction that arises is whether, on its proper construction, the reference to "Company" in clause 30.1(d) of the employment agreement includes a reference to SWU and PCFM.
2. The plaintiffs submit that this question should be answered affirmatively. They acknowledge that the employment agreement defines Tipto as the Company. However, the only business in which Tipto engaged was the provision of employees to the operating companies, SWU and PCFM. Tipto did not compete in any market, as it did not provide services to anyone other than SWU and PCFM. Mr Yuen conceded in cross-examination that he was aware, at the time he entered into the employment agreement, of the structure of the arrangement between Tipto and the other two companies. Clause 30.1(d) could have absolutely no effect if it were to be construed literally.
3. The construction for which the plaintiffs contend is supported by the consideration that the expression "the Company" is also used three times in the chapeau to clause 30.1. The first time the expression is used is in the following statement of the reason for the restraint being in the contract of employment: "and to protect the Company's goodwill". There is no realistic sense in which Tipto had goodwill to protect.
4. The defendants' response was that clause 30.1(d) is clear and unambiguous, and that the word "Company" was expressly defined as referring to Tipto. Even though, at the date of the employment contract, the only commercial activity of Tipto was the provision of services to PCFM and SWU, it could in the future have engaged in different commercial activities, and built up its own goodwill. (The defendants relied upon the provisions of the trust deed that enabled Tipto, as trustee, to engage in a wide range of businesses. The plaintiffs responded by submitting that there was no evidence that Mr Yuen was aware of the terms of the trust deed, so that they could not fall within the surrounding circumstances known to the parties. That may be correct, but it would have remained possible for Tipto to engage in other businesses, as a matter of general principle).
5. The defendants also relied upon the fact that subclause (a) referred to "the Company's or its related entities employees". Subclauses (b) and (c) referred to "the Company and its related entities" and to "the Company and its associated entities". Therefore, it is not just a matter of considering the meaning of "Company", where it appears in subclause (d), in isolation. In the other three restraints, express provision is made for the protection of Tipto and its related entities, or associated entities. If, as I have found, "related entities" and "associated entities" include PCFM and SWU, then, the defendants contend that it is proper to draw a distinction between the first three restraints, which expressly comprehend PCFM and SWU, and the restraint in subclause (d), which does not. The restraint in subclause (d) is far more onerous to the ex-employee, than are the other three restraints, and it is also much more difficult to demonstrate as being reasonable for the protection of the legitimate interests of the employer, than are the other three restraints. The Court should, therefore not be too quick to ignore the differences in wording between the first three subclauses on the one hand, and subclause (d) on the other.
6. The difficulty that arises in determining the proper construction of clause 30.1(d) requires consideration of the legal principles that are relevant to the construction of contracts of employment in this context.
7. The same principles which govern the construction of commercial contracts apply to employment contracts: Carr v Blade Repairs Australia Pty Ltd (No 2) [2010] FCA 688 at [44]; Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889; (2000) 177 ALR 193 at 204-5 (per Lindgren J), and 217 (per Mansfield J).
8. The plaintiffs relied upon the following passage in the judgment of French CJ and Hayne, Crennan and Kiefel JJ in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, 656 [35] (citations omitted): [35] … this court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd (in rec), unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience".
9. I accept this statement of principle as to the proper approach to the construction of commercial contracts: see also Mainteck Services Pty Ltd v Stein Heurtey [2014] NSWCA 184 at [71].
10. In the case of freely negotiated commercial contracts between parties who have some real bargaining power, it is not artificial to say that, when the parties reach agreement as to the wording of the contract, they will have in mind such matters as the surrounding circumstances that are known to them, the purpose or object of the contract, and the market in which they are operating. Ordinarily, it would be impossible for the parties to ignore those matters, which will form part of a natural and integral process whereby the parties choose the wording of their agreement.
11. A feature of the employment agreement in this case is that, if clause 30.1(d) is considered in isolation, there is a relatively strong argument that, notwithstanding the inappropriateness of the use of the term, the word "Company" must have been intended to refer to SWU and PCFM, because they were the only companies with whom Mr Yuen could compete after the termination of his employment. But clause 30.1(d) cannot be considered in isolation, because clauses 30.1(d) must be read in the light of sub-clauses (a), (b) and (c), which form its immediate context. It will be natural for the eye of the reader to look at the sub-clauses in their natural order, and that process will lead to the reader seeing that the first three sub-clauses apply to the Company and its related or associated entities. As the reference to the related or associated entities would naturally cause the reader, if employed in the circumstances of Mr Yuen's employment, to understand that SWU and PCFM were intended to be comprehended by those terms, the natural understanding that would flow from the use of the term "Company" in clause 30.1(d), on its own, is that it only included Tipto.
12. The evidence does not establish how the employment agreement was entered into. It is more probable than not that the employment agreement was prepared on behalf of Tipto and presented to Tipto's employee, Mr Yuen, for signature. It is also more probable than not that the agreement was not a product of free negotiations between parties of relatively equal bargaining power. In the absence of evidence that established that the parties engaged in negotiations about the wording of the employment agreement, including in particular clause 30.1, I would infer that Mr Yuen more probably than not signed the draft employment agreement, as requested by Tipto, without having any personal involvement in the wording of clause 30.1, or probably even a consideration of the subtle differences in meaning that could arise from different combinations of words that were used. I would infer that Mr Yuen read the draft employment agreement before he signed it, and more probably than not understood the words at face value.
13. The following observation by Kirby P (Sheller JA agreeing) in State Lotteries Office v Burgin (unreported, NSW Court of Appeal, 19 May 1993; BC9301896) p 7 may be apposite in this context: Where a contract is constituted by a printed form which is tendered by a party which has complete control over its terms, it is relevant to take such control into account in construing a term that may appear ambiguous or uncertain. This is not, as such the contra proferentem rule, which developed first as a principle for the construction of deeds against a grantor and in favour of a grantee. See Neill v The Duke of Devonshire [1882] 8 App Cas 135. That rule was later accepted for the construction of ambiguities in policies of insurance. See C E Heath Underwriting and Insurance (Aust) Pty Ltd v Edwards Dunlop and Co Ltd (1993) 67 ALJR 395 (HC), 397. Cf Houghton v Trafalgar Insurance Co Ltd [1954] 1 QB 247 (CA). See K Lewison, The Interpretation of Contracts, Sweet and Maxwell, London, 1989, 134ff; J Parris, Making Commercial Contracts, BSP Professional Books, Oxford, 1988, 202f. It is rather a recognition of the difference which exists between a case where parties haggle about the terms of their agreement before fixing them (on the one hand) and where one party is presented with an agreement ready made which must be accepted, like it or not. In the latter case, at least where the contract is one in the form of a public lottery where it may be inferred that the vendor is well advised and the odds are deliberately stacked against the purchaser, it is not unreasonable to construe an ambiguity (if there be one) against the party which had complete control over the terms which it propounded.
14. I do not think that adopting this approach involves, in any way, a departure from the principles stated in the Electricity Generation Corporation case. It applies that principle but in a nuanced way, that has regard to the manner in which the employment agreement was entered into, the likely influence of the surrounding circumstances on the parties' understanding of the objective meaning of the terms of the agreement, and the significance of the positive effect of the express words of the agreement on the likelihood that the parties would look beyond the express words to the surrounding circumstances.
15. In the present case, Tipto had the opportunity to determine the wording of the employment agreement that it would require its employees to sign, and it did so. It chose the wording of each of the sub-paragraphs of clause 30.1. It chose that clause 30.1(d) only referred to Tipto. It chose only to refer to its related or associated entities in the other sub-clauses. It is probable that, if an employee in the position of Mr Yuen considered the wording of clause 30.1(d), in the requisite objective sense, read the word the "Company" in clause 30.1(d), they would see that it was a reference to Tipto alone, and they would stop there. If they had in mind the references to "related entities" and "associated entities" in the preceding sub-clauses, their understanding that only Tipto was covered by sub-clause (d) would be confirmed. I do not think that it is at all likely that an employee, looking at the wording of clause 30.1 objectively, would have ignored these indications and understood that the reference to "Company" in sub-clause (d) did not refer to Tipto alone, but referred also to the other companies, because of the wording of the chapeau. More simply, it is more probable that the employee would understand the wording of the clause in accordance with its literal meaning, and would not understand that "Company" in clause 30.1(d) had an artificial meaning that was different to the meaning of the same word in sub-clauses (a), (b) and (c).
16. In my opinion, in addition, it would be a legitimate process of construction of clause 30.1 to read it contra proferentem. Tipto is the proferens, whatever meaning is given to that term. The draft employment agreement was prepared by Tipto, and clause 30.1 was included for the benefit of Tipto.
17. The proper approach is to construe the clause in accordance with the ordinary construction principles, and only if ambiguity is then found, is the contra proferentum rule to be applied: Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 at 510. It is the plaintiffs' position that clause 30.1 is ambiguous, and that clearly must be the case. The ambiguity arises from the wording of the chapeau, the reference to the "related entities" and "associated entities" in three of the sub-clauses, and the reference to the "Company" alone in sub-clause (d).
18. It has been held that, where an employment contract is based on a standard form contract, and provided by the employer for the employee to sign, the agreement will normally be interpreted contra proferentum, against the party who formulated the document, at least where the resolution of ambiguities cannot adequately be achieved by applying the ordinary rules of construction: Carr v Blade Repairs Australia Pty Ltd (No 2) [2010] FCA 688 at [45]; Wesoky v Village Cinemas International Pty Ltd [2001] FCA 32 at [47]; Maye v Colonial Mutual Life Assurance Society Ltd (1924) 35 CLR 14 at 26-7.
19. The rule is only to be used where the document or clause is otherwise ambiguous. In deciding if a document or clause is ambiguous, no stretched or artificial notion of ambiguity should be used: CE Heath Underwriting & Insurance (Aust) Pty Ltd v Edwards Dunlop & Co Ltd (1993) 176 CLR 535 at 548; North v Marina [2003] NSWSC 64 at [76].
20. Reading clause 30.1 contra proferentem in the present case involves no more than giving the words of sub-clause (d) their natural meaning.
21. I therefore find that the plaintiffs fail in their claim that Mr Yuen has contravened clause 30.1(d) of the employment agreement, by competing with SWU after the termination of the agreement.
22. It follows that the plaintiffs have failed to prove that Mr Yuen's conduct, as alleged in their statement of claim, breached any aspect of clause 30.1 of the employment agreement.

Validity of restraints of trade does not arise

1. It is therefore not necessary for the Court to decide the issue of whether the restraints of trade in clause 30.1 are valid, or how s 4(1) of the Restraints of Trade Act 1976 (NSW) would apply to the circumstances of the present case, if it were found that the restraints were invalid according to general equitable principles.
2. It is appropriate, however, that I make the following observations concerning this aspect of the plaintiffs' case.
3. First, there was a great deal of evidence concerning the standing of Mr Simon Wu in the financial planning market, and his involvement in the day-to-day operations of the plaintiffs. It is fair to say that the evidence shows that Mr Simon Wu is a doyen of that part of the financial planning market that offers financial planning services to Chinese Australians. He has written a number of books on the subject, and has for many years conducted radio programs in Chinese languages within Australia. The plaintiffs, and particularly SWU, go to great pains to ensure that Mr Wu's personal connection to clients is maintained. The wording of advices that are provided to clients suggests that Mr Wu has personally been involved in the preparation of the advice, and as I understand the evidence, that is, at least generally, true. When he can, Mr Wu makes it his business to drop in to greet clients, when they are being interviewed by employees, such as Mr Yuen. The evidence justifies a finding that Mr Wu maintains a very strong personal customer connection and relationship with all of the plaintiffs' clients.
4. That conclusion does not necessarily obviate the fact that employees in the position of Mr Yuen will naturally, to some extent, develop personal relationships with the plaintiffs' clients. Those relationships will afford to employees, after the termination of their employment, some opportunity to try to win away the plaintiffs' clients.
5. However, a significant feature of the evidence in this case is that Mr Wu personally professed in cross-examination not to be concerned with the likelihood that Mr Yuen would succeed in any substantial way to entice the plaintiffs' clients away to his own business. Mr Wu is the best judge of that, and, with no disrespect to Mr Yuen, I would agree with him. I in no way disparage Mr Yuen, but it should be recognised that he is still a junior financial planner, and it is inherently unlikely that he would achieve significant success in a head-to-head battle with Mr Wu for the loyalty of the plaintiffs' clients.
6. If sub-clauses 30.1(b) and (c), properly construed, had prohibited Mr Yuen from having any contact with dealers and agents of PCFM and clients of SWU, I do not think that the restraints could be justified as being reasonably necessary to protect the legitimate commercial interests of the plaintiffs. That is particularly so, if, as the plaintiffs claim, the provisions prohibited Mr Yuen from being in contact even when the contact was initiated by the dealers, agents and clients. Mere contact in that situation could not harm the plaintiffs, and the restraints would have to be unreasonable because Mr Yuen could not control whether or not the contact occurred. Even in cases where Mr Yuen initiated the contact, if he did not also induce, encourage or solicit the dealers, agents and clients to cease dealing with the plaintiffs, the contact could not do any harm to the plaintiffs.
7. The question whether sub-clauses 30.1(b) and (c) validly prohibited Mr Yuen from contacting dealers, advisers and clients to induce, encourage or solicit them to cease their connection with the plaintiffs does arise not at all on the pleadings.
8. The restraints in clause 30 of the employment agreement are expressed to be for a period of 2 years. If the word "Company" in clause 30.1(d) referred to PCFM and SWU as well as Tipto, I do not think a two year period for the restraint would be justified. The main reason is the substantial disparity between the standing and customer connection that Mr Wu maintained, and that which employees in the position of Mr Yuen could have attained. The plaintiffs justified the 2 year period on the basis that it is standard practice for SWU to confer with and review the position of a substantial proportion of its clients annually. The plaintiffs argued that it would probably take 2 review periods for SWU to cement the relationship between the clients and Mr Yuen's replacement employee. The evidence on this issue was very limited. I am sceptical about the validity of the argument, as it was not established that the plaintiffs could not act proactively to introduce the new financial planner to the clients before any annual review took place.
9. There is also real doubt about whether the plaintiffs can justify the general prohibition against competition in clause 30.1(d). The general prohibition is subject to a somewhat strange exception that permitted the ex-employee to compete with the plaintiffs, but only as an employee of a business that competed with the plaintiffs, and not on the ex-employee's own account. The plaintiffs explained the rationale for the exception by saying that the ex-employee was less likely to be tempted to solicit the plaintiffs' clients if the ex-employee was securely employed by a competitor of the plaintiffs, than if the ex-employee was struggling to establish a new business from scratch. The suggestion was that, if the ex-employee did not have the benefit of an ongoing salary, but was dependent upon earning income from the new business, the temptation to try to solicit the plaintiffs' clients was likely to be overwhelming. I am sceptical about the validity of the logic of that argument. An existing competitor of the plaintiffs, who employed the ex-employee, may very well be tempted to use its resources to take advantage of the exception to try to solicit the plaintiffs' clients. It should be accepted, however, that the existence of the exception would make clause 30.1(d) less onerous on the ex-employee, because he or she could at least earn an income in an employed capacity from competing with the plaintiffs.
10. If I had found that clause 30.1(d) prohibited Mr Yuen from competing with PCFM and SWU, but that the period of 2 years was excessive, it would then have been necessary for me to consider the application of s 4(1) of the Restraints of Trade Act. Mr Yuen's employment terminated on 28 March 2014, and on 12 August 2014, Mr Yuen gave an extremely wide undertaking to the Court, which has now prevented him for a period of almost 1 full year from having anything to do with any clients of the plaintiffs. Had it been necessary for me to decide whether a restraint in the terms of clause 30.1(d) was justified for a period of less than 2 years, I would not have found that it was justified for any longer period than 1 year. Accordingly, I would not, in any event, have made an order against the defendants to prohibit them from competing against the plaintiff in the future, as for practical reasons the plaintiffs have already enjoyed a greater level of protection against competition than the application of the Restraints of Trade Act would have given them.
11. I add, although it is not necessary for me to explain my reasons in depth, that I reject the concerted attack that the plaintiffs made on Mr Yuen's honesty and credibility. I formed the view, when observing Mr Yuen under cross-examination, that he is generally an honest witness, and did his best to respond to questions candidly.

Claim for breach of confidentiality agreement

1. As I have noted above, only one allegation of breach of the confidentiality agreement has survived. That is the publication by Mr Yuen on the CoWealth Partners website of the statement: "A large part of his [Mr Yuen's] experience comes from looking after nearly half of the clients within SWU Financial Planning".
2. This is a very general statement, which does not convey anything of particular significance concerning the nature, identity or contact details of SWU's clients, or the services provided by SWU to its clients. It is difficult to see that publication of this information could in any way be injurious to SWU. That is so, not simply because of the blandness of the statement, but the information that Mr Yuen's experience came "from looking after" clients said very little about what Mr Yuen actually did for the clients.
3. The information that SWU claims was confidential did not fall within clauses 1 to 4 of the definition of Confidential Information. The statement made by the defendants was obviously based upon Mr Yuen's memory of the total number of SWU's clients, and the number of those clients that Mr Yuen 'looked after'. It did not come from the data storage system (clause 1). It was not client information (clause 2). It was not within any of the categories of information listed under the rubric "marketing and distribution" (clause 3). It was not information received from the identified entities in Hong Kong (clause 4).
4. The question is whether clause 5 of the definition applies. The source of the information was not any of the specific categories of documents, and other records, listed in clause 5 (which are clearly proper subjects for confidentiality restrictions). It depends upon whether the source of the information falls within the more general parts of clause 5. That is, does the information that the defendants disclosed come within the following description (which I have produced by inserting the definition contained in clause 1): Business…and any business information which is confidential, commercially sensitive or secretly furnished in any form or media whatsoever, whether before or after execution of this Agreement, and either directly or indirectly: (a) which is or has been disclosed by [the Employer and its Affiliates] to [Mr Yuen] or any of its representatives in relation to the [employment of Mr Yuen]; or (b) of which [Mr Yuen] becomes aware as a direct result of [Mr Yuen's] employment.
5. In essence, this more general part of the definition of Confidential Information in clause 5 falls back on general equitable principles of confidence. I do not accept that the information in question was, in any meaningful way, commercially sensitive or secretly furnished.
6. Was it confidential information according to ordinary principles? On what basis may it be said that the plaintiffs would have had any reason for concern about Mr Yuen disclosing that he had looked after nearly half of the clients of SWU, in circumstances where Mr Yuen did not elaborate on what 'looking after' meant, and he did not state the number of SWU's clients?
7. I respectfully adopt the statement made in Meagher, Gummow and Lehane Equity Doctrines & Remedies (5 ed) at [42-100] as to what is the preferable formulation of the principle governing when Equity will protect from use or misuse information said to be confidential (citations omitted): … It is safer simply to apply the statement of principle in the joint reasons of Finn, Sundberg and Jacobson JJ in Optus Networks Pty Ltd v Telstra Corporation Ltd that there are four elements: (a) the information in question must be identified with specificity; (b) it must have the necessary quality of confidence; (c) it must have been received in circumstances importing an obligation of confidence; and (d) there must be an actual or threatened misuse of the information.
8. The information that the plaintiffs seek to protect in the present case appears to satisfy element (a) but that is primarily because the information is so simple and trivial that it is easy to identify. I do not accept that the information satisfies element (b), because it does not in any real way have the necessary quality of confidence. It is not the case that every single item of information learned by employees in the course of their employment that is not generally known to outsiders will have the necessary quality of confidence. I also do not accept that element (c) is satisfied as, if the plaintiffs had considered this issue in a balanced way, it should not have concerned them whether or not Mr Yuen told the world that he looked after nearly half of SWU's clients.
9. The plaintiffs relied upon an argument that an employer will be entitled to enforce a contractual obligation that an employee not disclose or misuse information defined by the contract to be confidential information, even where Equity would not intervene. However, for the reasons I have set out above, in my view, the relevant term of the employment agreement does not in this case take the plaintiffs any further than the relevant principles of Equity.
10. Finally, I am also not satisfied that element (d) is satisfied. There has been a use of the information, but I am not satisfied that there has been a misuse. When a former employee, in the course of attempting to make a new living, sets about establishing the employee's own business, he or she does not have to treat the former employment as if it were a black hole from which no information can escape. If the issue is considered reasonably, there will be a great deal of general information that the former employee may need to disclose concerning the general nature of his or her former duties, which could not rationally involve any breach of the duty of confidence to the former employer.
11. I make the following orders: 1. The plaintiffs' application to amend par 53 and to add pars 77A to 77G of their statement of claim is dismissed. 2. The plaintiffs' claims are dismissed. 3. The plaintiffs are ordered to pay the defendants' costs. 4. The defendants are directed to deliver to the associate to Robb J within 14 days any submissions they wish to make concerning the basis upon which the costs payable by the plaintiffs should be assessed in respect of any aspects of the plaintiffs' claims. 5. The plaintiffs are directed to deliver any submissions in response to any submissions made by the defendants to the associate to Robb J within 14 days of receipt. 6. Exhibits and any documents produced on subpoena may be returned forthwith in accordance with the rules of the Court.

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: 10 August 2015