Supreme Court New South Wales

• Medium Neutral Citation: Wilson HTM Investment Group Limited & Ors v Pagliaro & Ors [2012] NSWSC 1068
• Hearing dates: 27, 28, 29 and 31 August 2012
• Decision date: 10 September 2012
• Jurisdiction: Equity Division
• Before: Bergin CJ in Eq

Decision

Plaintiffs entitled to damages and an injunction restraining the use of confidential information

• Catchwords: [CONFIDENTIAL INFORMATION] - whether revenue figures of plaintiffs' employees is confidential information - distinction between approximate revenue figures of one employee and specific revenue figures of a large group of employees.; [CONTRACT] - whether defendant aware of terms in contracts of employment requiring plaintiffs' employees to use best endeavours to promote and enhance plaintiffs' interests and not to do anything that may be harmful to plaintiffs - whether defendant aware of term requiring plaintiffs' employees not to disclose revenue figures to a competitor - whether defendant induced plaintiffs' employees to breach their employment contracts.
• Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth); Competition and Consumer Act 2010 (Cth); Corporations Act 2001 (Cth); Restraints of Trade Act 1976
• Cases Cited: Cactus Imaging Pty Ltd v Peters [2006] NSWSC 717: (2006) 71 NSWLR 9; Cleary v Kocatekin & Seven Network (Operations) Limited [2012] NSWSC 692; Faccenda Chicken Limited v Fowler & Others [1986] 1 All ER 617; Jones v Dunkel (1959) 101 CLR 298; McCann v Switzerland Insurance Australia Limited [2000] HCA 65;(2000) 203 CLR 579; McNamara v Flavel [1988] 13 ACLR 619; OBG Ltd v Allan; Douglas v Hello! Ltd; Mainstream Properties Ltd v Young [2007] UKHL 21 [2008] 1 AC 1; News Limited & Ors v Australian Rugby Football League & Ors (1996) 139 ALR 193; One.Tel Limited (In Liquidation) v John David Rich and Ors [2005] NSWSC 226; (2005) 53 ACSR 623; Re Phillip Adamson and Others v New South Wales Rugby League Limited and Others (1991) 31 FCR 242; Stowe v Benstead and Another [1909] 2 KB 415
• Texts Cited: William C Bunton, Legal Thesaurus, Macmillan Publishing Co Inc., New York, 1979
• Category: Principal judgment
• Parties: Wilson HTM Investment Group Limited (1st Plaintiff); Wilson HTM Services Pty Ltd (2nd Plaintiff); Wilson HTM Limited (3rd Plaintiff); Joseph James Pagliaro (1st Defendant); Wren Bligh (2nd Defendant); Angus Bligh (3rd Defendant); Hamish Blanche (4th Defendant); James Hunter (5th Defendant); Ord Minnett Limited (6th Defendant)
• Representation: RM Smith SC/MA Friedgut (Plaintiffs); GK Rich (1st, 2nd, 4th and 5th Defendants); CRC Newlinds SC/MR Elliott (6th Defendant); Solicitors: Harmers Workplace Lawyers (Plaintiffs); Baker & McKenzie (1st, 2nd, 4th and 5th Defendants); Clifford Gouldson (3rd Defendant); Horton Rhodes (6th Defendant)
• File Number(s): 2012/234921
• Publication restriction: Nil

Judgment

1 Poaching occurs in many walks of life from farming to sporting pursuits to the world of commerce: Stowe v Benstead and Another [1909] 2 KB 415; (Re Phillip Adamson and Others v New South Wales Rugby League Limited and Others (1991) FCR 242; Cactus Imaging Pty Ltd v Peters [2006] NSWSC 717: (2006) 71 NSWLR 9. It is a pejorative term that conveys the taking of something by "illegal" or "unfair methods" (William C Bunton, Legal Thesaurus, Macmillan Publishing Co Inc., New York, 1979). It must be remembered that in the commercial world many businesses prosper by reason, in part, of their capacity to lure the best and brightest away from their competitors to employment with them. This process has become commercially acceptable with the establishment and growth of employment consultancies, search firms and 'head hunters' targeting employees who have proven track records in their particular fields. However this litigation involves allegations of poaching, with claims that illegal or unfair methods (the wrongful use of the plaintiffs' confidential information) have been deployed in luring the plaintiffs' employees away.

The Parties

2 The first plaintiff, Wilson HTM Investment Group Limited, is a publicly listed holding company of a number of companies including Wilson HTM Services Pty Limited and Wilson HTM Limited, the second and third plaintiffs. Those companies carry on the business known as Wilson HTM Investment Group, that provides financial advice and other services including stockbroking and financial planning to customers (the Services). The plaintiffs have a number of offices, including offices in Sydney, Melbourne and Brisbane.

3 As at the beginning of 2012 each of the 1st to 5th defendants, respectively Joseph James Pagliaro, Wren Bligh (Mr W Bligh) and his brother Angus Bligh (Mr A Bligh), James Hunter and Hamish Blanche (the Advisors), was a senior investment or financial advisor employed by the plaintiffs. Mr Pagliaro and Mr A Bligh were Branch Managers (the former in the Sydney office, the latter in the Brisbane office) and were also members of a group within the business known as the Executive Leadership Team (ELT).

4 The sixth defendant, Ord Minnett Limited (the defendant) is a competitor of the plaintiffs for the provision of the Services. Mr Tim Gunning is the Chief Executive Officer of the defendant. In August 2012 the Advisors commenced employment with the defendant.

The Proceedings

5 The plaintiffs commenced the proceedings on 27 July 2012 by ex parte application to the Duty Judge, at which time injunctions were issued against the Advisors. The matter was listed for an urgent final hearing that occurred on 27, 28 and 29 August 2012 with further submissions in relation to interim injunctive relief on 31 August 2012. At the commencement of the trial, the Court was informed that the matter had been settled as between the plaintiffs and the Advisors and final orders in respect of that settlement have been made. The trial proceeded on issues as between the plaintiffs and the defendant, albeit that the conduct of the Advisors was the subject of evidence and was pivotal to the plaintiffs' claims against the defendant. Mr RM Smith SC, leading Mr MA Friedgut, of counsel, appeared for the plaintiffs. Mr CRC Newlinds SC, leading Mr MR Elliott, of counsel, appeared for the defendant.

6 The plaintiffs read the affidavits of their Managing Director, Andrew Richard Brian Coppin, sworn on 10 August 2012; the Head of their Private Wealth Management, Brad Gale, affirmed on 9 August 2012; and three Senior Investment Advisors in the Brisbane office, Andrew O'Dell Fleming, sworn on 10 August 2012; Gregory John Burton, sworn on 10 August 2012; and Paul Cameron Bryant sworn on 10 August 2012. Mr Coppin and Mr Gale were cross-examined.

7 The defendant did not call any evidence other than to tender a draft Supplementary Affidavit of Mr Gale dated 24 August 2012 (Ex 1), Annual Reports and some Announcements to the market by the plaintiffs (Ex 2-5). This failure to call any evidence from the officers of the defendant, in particular Mr Gunning and/or Mr Morris or the defendant's agent, Mr Chris Thomas of Thomas Hardy Employment Consultants, is relied upon by the plaintiffs to submit that an adverse inference should be drawn against the defendant in respect of the plaintiffs' allegations against it: Jones v Dunkel (1959) 101 CLR 298. I will return to this submission later.

The Plaintiffs' Claims

8 The plaintiffs claim that the defendant induced the Advisors to breach their contracts of employment with the plaintiffs by, inter alia, causing them (in breach of the obligations of loyalty to the plaintiffs) to provide to the defendant confidential information of the plaintiffs and causing them to take part in a plan to persuade other employees of the plaintiffs to terminate their contracts of employment and take up positions with the defendant. The plaintiffs seek to restrain the defendant from employing a number of their other financial advisors.

9 The plaintiffs claim that from March 2012 the Advisors communicated with each other about: ceasing employment with the plaintiffs; establishing a corporate vehicle for the provision of financial services with the plaintiffs' customers to the exclusion of the plaintiffs; seeking to cause a number of other advisors to join the defendant; and seeking financial compensation for procuring the other advisors to join the defendant (paragraph 5 of the Second Amended Points of Claim (PC)). It is alleged that (PC 6):

Not later than 3 May 2012 Pagliaro communicated with Gunning about the prospect of Pagliaro and each of the Wilson advisors, and other advisors employed by the Plaintiffs, joining Ords as Senior Client Advisors ("the Ords proposal").

10 It is further alleged that in May, June and July 2012 Mr Pagliaro, for himself and on behalf of the other four Advisors, had communications by telephone, text messages and at meetings with Mr Gunning and Mr Thomas relating to the Ords proposal (PC 7). It is also alleged that in June 2012 Mr A Bligh and Mr W Bligh also communicated with Mr Gunning on their own behalf and on behalf of the other Advisors in relation to the Ords proposal (PC 8-9).

11 It is alleged that Mr Pagliaro informed Mr Gunning that: the Advisors were prepared to cease employment with the plaintiffs and join the defendant; other employees of the plaintiffs might be persuaded to join the defendant; he and Messrs A and W Bligh would seek to persuade the other advisors to join the defendant; he had arranged for other advisors to attend a barbeque at his home in Sydney at which Mr Gunning could meet them and discuss the Ords proposal; and Mr A Bligh would arrange for senior advisors to meet Mr Gunning at the Brisbane office to discuss the Ords proposal (PC 10(a)-(cbb)). It is also alleged that Mr Pagliaro informed Mr Gunning (PC 10):

(c) of the revenues which persons proposing to join Ords had earnt for the Plaintiffs in the period from 1 July 2011 to May 2012, by causing customers to acquire financial services from the Plaintiffs ("the advisor revenue");

(d) that if the Wilson advisors were to join Ords, they would require payment of sign on bonuses and other financial incentives by Ords;

(e) of the amount of the sign on bonuses, which each of the Wilson advisors sought;

(f) that if the Wilson advisors joined Ords, they would bring to Ords the custom of customers they advised when employed by the Plaintiffs ("the undertaking").

Matters not in Issue

12 The defendant conceded during the trial (tr 115-116) that Mr Gunning: met with the Advisors and the other advisors at a barbeque at Mr Pagliaro's home; met with advisors at the defendant's Brisbane office and made a presentation to them; arranged for Mr Thomas to interview advisors and obtain from each of them their commission statement sheets recording the revenues they had written; authorised Mr Thomas to negotiate and/or offer other advisors sign on bonuses if they left the plaintiffs and joined the defendant; authorised offers in writing to be made by the defendant to the other advisors; and, on 29 June 2012, obtained the advisor revenue figures from Mr Pagliaro (PC 12A).

13 The defendant also conceded during the trial (tr 116) that on or after 27 June 2012, Mr Thomas, at Mr Gunning's request: interviewed each of the Advisors and the other advisors; obtained from each of the Advisors and the other advisors revenues by requiring each of the other advisors to show Mr Thomas their commission statement sheets or to provide him with revenue information from those sheets; communicated the revenues to Mr Gunning; negotiated with the Advisors and the other advisors as to the bonuses each would be paid if they ceased employment with the plaintiffs and commenced employment with the defendant; agreed the sign-on bonuses to be paid to each of the Advisors on entry into contracts of employment with the defendant; offered sign-on bonuses (the amount of which was to be negotiated) to the other advisors; and used the advisor revenue figures for the purposes of negotiating and agreeing to the bonuses and sign-on bonuses (PC 12B). It is not in issue that within the financial services industry in which the parties compete, sign-on bonuses are calculated as a multiple of the advisors' revenue (tr 118) (PC 13(d)).

14 The defendant also conceded during the trial (tr 116) that Mr Gunning knew or believed that each of the Advisors and the other advisors were the plaintiffs' employees and that they were employed under contracts of employment (PC 13(a)-(b)).

The Confidential Information Issue

15 The plaintiffs allege that the Advisors' and the other advisors' revenue and the content of their commission statement sheets is information of a kind that each of the plaintiffs, the defendant and participants in the financial services industry regard as confidential and do not disclose (PC 13(c)). This matter is in issue.

16 The plaintiffs allege that (PC 13):

e) disclosure of the advisor revenues, the commission statement sheets and the giving of the undertaking by Pagliaro and other advisors to Mr. Thomas was:

(A) a breach of the obligations which Pagliaro and the other advisors owed the Plaintiffs under his contract of employment;

(B) conduct by Pagliaro and the other advisors which involved an improper use of their position and of confidential information as employees of one of the Plaintiffs to:

(i) advantage the Wilson advisors and the other advisors and Ords, and;

(ii) to cause detriment to the Plaintiffs.

f) Ords' willingness to discuss paying the Wilson advisors, and other advisors' sign on bonuses and other financial incentives, caused Pagliaro to disclose the advisor revenues and the other advisors to disclose their revenues and their commission statement sheets to Ords and to give the undertaking so as to justify and persuade Ords to pay the sign on bonuses and other incentives requested.

g) Intended that if agreement was reached on the Ords' proposal, that Ords would solicit the Plaintiffs' customers whose identity would be disclosed to Ords by performance of the undertaking and by the other advisors contacting clients when working for Ords.

Other Claims

17 The plaintiffs also claim that the defendant induced Mr Pagliaro and Mr A Bligh to breach ss 182 and 183 of the Corporations Act 2001 (Cth) and to breach their fiduciary duties of loyalty and fidelity to the plaintiffs. The plaintiffs also claim that the defendant's conduct was "unconscionable" within the meaning of that term in s 21 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)) and s 12CB of the Australian Securities and Investments Commission Act 2001(Cth) (the ASIC Act).

Background

18 In early to mid 2012 the Advisors had been discussing amongst themselves and with the plaintiffs the prospect that they might restructure their employment in a manner that would be more lucrative and/or tax effective for them. One of the options that they discussed was a franchise arrangement. It is clear that Mr Pagliaro was not in agreement with the way in which Mr Coppin was operating the plaintiffs' business and he was concerned about the financial viability of the business.

19 On 23 April 2012 Mr Gunning contacted Mr Pagliaro and arranged a lunch for 3 May 2012. Before that lunch Mr Morris and Mr Gunning gave consideration to Mr A Bligh's position in Queensland, describing him as a "key player".

20 The Advisors were also pursuing employment opportunities with corporations other than the defendant and this pursuit was on the possible basis that a group of employees in addition to the Advisors might move to those other corporations.

21 On 13 May 2012 Mr Coppin wrote to Messrs Pagliaro and W Bligh suggesting that they meet to discuss proposed team development and structures. In that communication Mr Coppin wrote:

We have to get to a mutual understanding and stop the rumours. I have had four people ask me in the last week when you guys are going, whose (sic) doing the MBO, whose (sic) doing the takeover - we have to end it now as it is truly the most unsettling and morale destroying thing for a firm in our position.

22 There was a second lunch attended by Messrs Pagliaro, W Bligh, A Bligh and Mr Gunning on 20 May 2012 at a restaurant in Sydney. Prior to this luncheon Mr Pagliaro sent an email to Mr Gunning advising that "the guys will be expecting some info on numbers".

23 On 22 May 2012 Mr Coppin wrote to Mr Pagliaro, Messrs A and W Bligh and Mr Greg Burton advising that he had attended successful meetings in Brisbane and had "identified that most people are happy to stay at the firm and just want to know that everything is going to be ok". Mr Coppin wrote:

One outstanding issue that is hard to resolve without you is the matter of the constant rumours of you leaving and the risks that that would pose to the firm's revenue.

...

I need to know if you are prepared to do it and lead by example so that we can put these insidious and destructive rumours to bed once and for all and give the Advisers the security they need to forge on.

24 On 22 May 2012 Mr M Tritton of UBS wrote to his colleagues within that company reporting on his meeting that morning with Mr A Bligh. That communication was as follows:

Info as follows:

- WIG Brisbane has 25 CA's.

- As many as 10 with revenue of $8-$10m looking to move.

- They are all likely to go together.

- There are about 8 CA's in Syd (very close to Bris CA's) who are looking to do the same.

- Both groups will likely decide in concert so we need to cover them all.

- The senior guys own stock and they are optimistic about a deal being down (sic) with Pinnacle to unlock value.

- timing of Pinnacle deal is expected in July.

- a decision is "weeks" away. Their annual result is out mid-July and this is when they get their volume bonuses.

- this is very clearly a competitive situation. One former WIG CA is at MSSB and is actively trying to get them across.

- MS terms for a $1.5m writer $1m up-front and an additional $500k based on targets.

- the senior guys are the [key] influencers and they have lost plenty on the WIG shares so the financials will be very important.

- those that own stock feel they want something for it in addition to a sign on? This is not realistic in my view other than getting some value realised via Pinnacle.

What is important to them:

- the financial terms.

- the systems & processes

- culture

- potentially a combined incentive for them all to come together.

25 Mr Tritton wrote to Mr A Bligh later that day informing him that it was "not often there is an opportunity to grab a bunch of high quality advisers and marry it with a high quality brand and business". Mr Tritton suggested to Mr Bligh that he was confident that he could "make a great fit for your team" and match other offers that might be made to the team.

26 The plaintiffs submitted that it is reasonable to infer that the content of the communications between Mr A Bligh and Mr Tritton is an exemplar of the communications that would have occurred between the Advisors and the defendant. However the defendant also relies upon this communication to submit that it is obvious that there was no need to induce anyone into leaving the plaintiffs' employment because as at the date of these communications the plan was already afoot for a group of advisors to leave together or to act in "concert".

27 On 7 June 2012 Mr Angus Bligh wrote to Mr Coppin and Mr Gale in an email entitled "Peace pipe" that included the following:

I know you are getting sick of wren joe and I but we really do have the firms interest at heart.

We are frustrated and upset about things - but we aren't deliberately trying to do the wrong thing and upset everyone. The bottom line is that the firm is on the operating table and we need to revive it. (before it's too late).

...

One thing to keep in mind is that we are prepared to say things to you guys that others in the firm aren't and while that might be uncomfortable sometimes - it's actually a good thing. Others prefer to do their talking in corridors which doesn't help anyone.

28 On 13 June 2012 Mr Pagliaro wrote to Mr Coppin and others including members of the ELT in the following terms:

Taking the strain off our Balance Sheet by actioning the serious cost out measures discussed yesterday and the enhanced versions will go a long way to killing off those internal and external rumour mongers........recent ex employees who are spreading these rumours will then have nothing to talk about.....if anyone needs my input or assistance on achieving this, please give me a bell.

29 On 15 June 2012 Mr Gunning wrote to his colleagues and Mr Morris on the subject of "Adviser Visit Tuesday night" in the following terms:

Angus Bligh and two of his colleagues based in Brisbane would like to visit our offices and hear about our offering on Tuesday 19th June at 7pm. I am sending George up to specifically deal with the platform side but they also want to hear more broadly about our offering including research, corporate, Pershing as well as getting a feel for the offices culture ect (sic). It is imperative that we keep there (sic) visit confidential. We are getting down to the business end of a potential deal so put your sales shoes on this one is important!

30 On 20 June 2012 Mr Lawlor of the defendant reported to Mr Gunning and Mr Morris as follows:

Last night went exceptionally well. Angus Bligh came over with Richard Cooper (Richard became an adviser when I was at Wilsons' in the late 90's). The two spent just under 2 hours with George and myself after an initial meet and greet with Karl.

My impression was that by the end of the meeting they were effectively sold on Ords - in particular the platform offering, the on-boarding process and the research offering. It would appear that they are already comfortable with the cultural fit and now it will be down to timing (this would appear more likely to be driven by the state of play at Wilsons').

31 The reference to "on boarding" is probably to the defendant's policy contained in the document entitled "Advisor & Client On Boarding Process" that includes the following:

Pre-Arrival at Ords

We are sufficiently commercial to accommodate and respect any post-termination restraints you may have. Our focus is to transition your business as quickly and as smoothly as possible whilst maintaining your professional integrity.

It's critical the preparation for your arrival begins as soon as possible.

...

Arrival - Day 1 at Ords

If the pre arrival process is complete there should be no surprises on day 1.

Pre populated New Account documentation will be ready for your clients to sign, along with template letters and other various forms of communications such as emails.

32 Gregory Burton, who is a senior investment advisor in the plaintiffs' Brisbane office, gave unchallenged affidavit evidence that he attended the meeting with Mr Gunning and other employees of the defendant in Brisbane. At that meeting Mr Gunning gave a presentation of the defendant's business and research capabilities and offered the Advisors and the other advisors a tour of the defendant's office and its facilities. At that meeting Mr Gunning said:

We will make individual offers to any advisors who are interested in joining us. We'll have a third party look after the offers.

33 After that meeting Mr Burton was contacted by Mr Thomas who introduced himself and said:

I've been engaged by Ords as their agent to speak to you about a formal financial package that Ords can offer if you join Ords. I will need to see your revenue and commission statements so that an offer can be made by Ords to you. Please can you come to a meeting with me and bring your commission sheet? I need the commissions sheet so that an offer can be prepared for you.

34 Mr Burton attended a meeting with Mr Thomas in Brisbane. He advised him that he did not wish to give him his commission statement sheets but that he was happy to give Mr Thomas "some numbers". Another advisor who attended the meeting with Mr Burton subsequently supplied a copy of his commission statement sheets to Mr Thomas and received an offer in writing from the defendant.

35 Andrew Fleming, a senior investment advisor in the plaintiffs' Brisbane office, had a conversation with Mr W Bligh in early June 2012 in Sydney. Mr W Bligh advised Mr Fleming that he was concerned over the financial viability of the plaintiffs' business and was no longer motivated. He also advised that he was looking to leave the firm and that he and Mr Pagliaro were speaking to a number of other firms. Subsequently Mr Fleming spoke with Mr A Bligh in Brisbane. Mr A Bligh advised Mr Fleming that a meeting had been held with the defendant who had an "interesting offer" with "sign on bonuses and a decent commission grid". Mr A Bligh claimed that the offer was looking "reasonably competitive" and that the defendant was interested "in taking more advisors than just" Mr Pagliaro, Mr W Bligh and himself.

36 Mr Fleming attended the meeting with Mr Gunning in Brisbane in mid June 2012. His evidence was that Mr Gunning said:

The Ords board has given approval for offers to be made to a number of advisors. If this progresses further we will engage a third party to do the negotiating for us.

37 Mr Fleming also met with Mr Thomas who asked him for his revenues and what business he had written in the year to date. Although Mr Fleming did not provide Mr Thomas with his commission statement sheet he did give him details of the nature of the investment portfolios that he had managed and the revenues that he had earned in the year to that date. He said to Mr Thomas:

I will be disappointed if I find that I am being used as a pawn in a larger game. If I accept any arrangement with Ords, that will require my whole team to come with me. I do not want Jo, Wren or Angus to receive a bonus in the event of my team joining Ords. I do not particularly want to move, and I don't need to move but I'm only attending because if the firm goes broke, I will need somewhere to go.

38 Paul Bryant, another senior investment advisor in the plaintiffs' Brisbane office, gave affidavit evidence of a meeting with Mr A Bligh in both May and June 2012 during which Mr Bligh advised him that he had been speaking to the defendant and also to Morgan Stanley. Mr Bligh informed Mr Bryant:

Ord Minnett is interested in taking a number of advisors. It prefers to pay sign ons for key advisors. It's not interested in buying Wilson HTM as a whole. Sign ons in the level of one times revenue for advisors writing over $1M are being offered. For advisors writing less than $1M the multiplier is scaled down. At the bottom end of the scale, they are offering a bit less than one times the advisor's revenue.

39 These meetings were arranged by the defendant and, in preparing for them, Mr Gunning noted that his team should "put your sale shoes on" as they were "getting down to the business end of a potential deal". The plaintiffs relied upon this communication to suggest that discussions had been on foot for some time. The plaintiffs also submitted that it can be inferred that Mr Gunning was sufficiently encouraged by his meetings both in Sydney and Brisbane to retain Mr Thomas as a "go-between". It was also submitted that it can be inferred that Mr Gunning engaged this recruiting consultant as a means of distancing the defendant from direct contact with the plaintiffs' employees. In this regard the plaintiffs relied upon Mr Gunning's communication with Mr Thomas and others reminding them of the need to keep the Brisbane visit confidential and in directing contact to be by personal email.

40 By the end of June 2012 Mr Gale and Mr Coppin received information that Mr A Bligh had been "active in coordinating for a number of advisors to walk to Ords".

41 On about 25 June 2012 Mr Pagliaro wrote out a list of advisors (together with their revenue earned in the previous twelve months and a multiplier) on the back of an envelope. It included an entry, "six def", translated by the plaintiffs to mean six "definite", being the Advisors and one other advisor. On 25 June 2012 Mrs Pagliaro scanned the envelope and emailed it to Mr Pagliaro checking with him that that he did not need the "commission share calculation sheets".

42 Mr Pagliaro met with Mr Thomas at 9.00 am on 29 June 2012. On the same day Mr Thomas provided Mr Gunning with a document entitled "NSW Advisors.docx". That document listed the Advisors (excluding Mr Angus Bligh) and six other advisors together with their telephone numbers and "approx revenue". The communications with Mr Gunning included the statement that Mr Pagliaro and Mr Blanche "come as a team - revenue combined" and that the figures given fluctuated wildly and could be up to $800,000. The plaintiffs submitted that it can be inferred that the NSW Advisors' details were provided to Mr Thomas by Mr Pagliaro. I agree. However the drawing of such an inference is now unnecessary because of the concession made during the trial that the advisor revenue figures were obtained by the defendant from Mr Pagliaro on 29 June 2012.

43 The defendant's documents (in the hands of its agent) also include two schedules identifying the Advisors and the other advisors, their contact details, their revenue and multipliers. For instance in the case of Messrs Pagliaro, W Bligh, Blanche and Hunter it was noted, "Done" together with a multiplier and revenue figure. In the case of Mr A Bligh it was noted, "Done" together with a multiplier and revenue figure and "+ corp will give up some of sign on for [named individual]". The defendant's documents also include a spreadsheet listing the Advisors and 13 other advisors, including Messrs Burton and Fleming, referred to as the "Team", their location (Queensland or New South Wales) and their 2011 and 2012 revenue.

44 In early July 2012 there were further meetings between the defendant, the Advisors and the other advisors. Mr Thomas' diary records that on 3 July 2012 meetings were planned with Messrs Blanche, Hunter and two other advisors. It also records that further meetings with the plaintiffs' employees were held on 4 July 2012 in Sydney and 5 July 2012 in Brisbane.

45 In early July 2012 Brad Gale had a number of discussions with Mr Pagliaro and Mr W Bligh. On 4 July 2012 Mr Gale advised Mr Coppin that, in his view, Mr Pagliaro intended to leave the plaintiffs' employment and that Mr A Bligh had been engaging with advisors about a "walk out".

46 On 10 July 2012 Mr Pagliaro met with Mr Coppin and said:

Coppo. There are rumours that I've heard that people are leaving. I just want to let you know that it's definitely not me. I think something is happening, but I can't tell you who or what. You need to know that I'm not leaving and we're here working focussing (sic) on revenue.

47 On 11 July 2012 the plaintiffs purported to give three months notice of termination to Mr Pagliaro and Mr W Bligh and requested Mr Hunter and Mr Blanche to sign a new contract that provided for 3 months notice. Messrs Hunter and Blanche subsequently resigned, as did Mr W Bligh.

48 On 17 July 2012 the plaintiffs notified ASX Limited as follows:

Wilson HTM Investment Group Ltd - Personnel Changes

Wilson HTM Investment Group Ltd (the Company) advises that eleven client facing personnel are currently serving notice periods prior to their termination or resignation from the Company's securities business (Wilson HTM).

Wilson HTM has in excess of 130 client facing personnel in its offices in Brisbane, Sydney, Melbourne and regional Queensland. They are committed to delivering exceptional service, wealth creation strategies, and corporate advice to clients.

Wilson HTM continues to recruit in key areas of its wealth management and advice businesses in support of its longer term strategy to be Australia's leading wealth manager and advisor to emerging companies.

It is premature to assume that there will be a material financial impact from the change in staffing referred to in the first paragraph. Shareholders and clients are assured that all client relationships are being managed for continuity of quality investment and wealth management advice.

49 After 11 July 2012 the defendant continued contacting the plaintiffs' employees with a view to seeking to persuade them to join the defendant. As late as 10 August 2012 the defendant was still seeking to persuade the plaintiffs' other advisors to join the defendant with one of the documents recording that the advisors were "running scared while the litigation is going on".

50 As stated earlier, the Advisors commenced employment with the defendant in mid August 2012. On the plaintiffs through their counsel giving the usual undertaking as to damages, the defendant has undertaken to the Court not to make offers of employment to the other advisors pending judgment being delivered.

Contracts of Employment

51 The relevant clauses of the Advisors' and the other advisors contracts of employment are as follows (there has been no differentiation between the plaintiffs and the contractual relationship will be referred to in the same way):

3.2 Prohibition of Other Employment

An employee will not during the course of their employment with the Company without the prior consent of the Company:

(a) undertake any other business or profession;

(b) be or become an employee or agent of any other person; or

(c) assist or have any interest in any other business or profession

3.3 Promotion of Company's Interests

An employee will at all times:

(a) use their best endeavours to promote and enhance the interests, welfare, business, profitability, growth and reputation of the Company; and

(b) not intentionally do anything which is or may be harmful to it.

...

4. REMUNERATION

4.1 Base Salary

An employee will be paid a Base salary per annum, or in the case of casual employees, an hourly rate, exclusive of superannuation, in an amount determined by the Company and agreed with the Employee.

The Base salary, or casual hourly rate, is all inclusive and is set to compensate an employee for all hours worked, including those outside core hours or office hours and reasonable additional hours.

The Base salary will be payable in equal monthly instalments on the 15th of each month or in such other instalments, for such other periods and at such other times as the Company may determine.

The Base salary is reviewable by the Company at least once every 12 months in accordance with the Company's Performance Review Policy and Salary Review Policy which policies may be amended from time to time in the Company's absolute discretion.

4.2 Performance Bonuses and Commission Payments

Employees are entitled to earn performance bonuses and/or commission payments in accordance with the Company's Remuneration Plan that is current at the time the entitlement accrues and as is applicable to the Employee's position in the company.

The Company's Remuneration Plan is subject to change by the Company in its absolute discretion from time to time.

4.3 Confidentiality

Remuneration is a confidential matter between each individual Employee and the management of the Company. Employees shall not reveal or discuss their remuneration with any other persons whether employed by the Company or otherwise without the approval of the Business Unit Head.

...

9 CONFIDENTIAL INFORMATION

9.1 Confidential Information

The following information is confidential information-

Any information relating to the Strategic business plans, business affairs, accounts work, marketing plans, sales plans, prospects, research management, financing, trade secrets, operations, products, inventions, designs, processes and data bases, data surveys, customer lists, the names, addresses and telephone numbers of customers, records reports, software or other documents, material or other information whether in writing or otherwise concerning the Company or its related bodes corporate or any of their shareholders, customers or suppliers to which the Employee gains access, whether before, during or after the period of their employment ("the Confidential Information").

9.2 Acknowledgment

Employees acknowledge that all of the Confidential Information is and will be the sole and exclusive property of the Company.

9.3 Confidentiality

Employees will keep confidential all Confidential Information and will not disclose any Confidential Information to any person, except:

(a) as required by law;

(b) with the prior written consent of the Company; or

(c) with the agreement of the Company, to the Company's agents, employees or advisers in the proper performance of an Employee's responsibilities and duties under this Agreement.

9.4 Use of Confidential Information

Employees will not use any Confidential Information to cause detriment to the Company or for the benefit of any person or entity other than the Company. An Employee will immediately notify the Company of any use or disclosure by the Employee of Confidential Information not authorised under the terms of this Agreement.

9.5 Confidential Information in the Public Domain

The obligation of confidentiality will cease in relation to any information which lawfully comes into the public domain.

Determination of the Confidential Information Issue

52 The first aspect of this issue is the question of construction of clause 9.1 of the employment contracts.

53 The defendant submitted that clause 9.1 of the employment contracts, whilst cast at some points in extraordinarily wide terms, also goes to some trouble to identify specific information considered to be confidential. There is no express reference to "revenue" in clause 9.1 and the same observation is made in respect of clause 4.3. It was submitted that as a matter of construction, the fact that the parties did not mention "revenue" in the definition of confidential information in clause 9.1 is the best indicator that they did not intend that such information be caught by the extremely broad provisions found elsewhere in clause 9.1.

54 The plaintiffs submitted that in construing the terms of the employment contracts, regard should be had to the commercial circumstances and objects of these contracts, including the commercially competitive financial services industry and the imperative of protecting a business, in particular cocooning a high earning and efficient workforce from poaching by competitors. It was submitted that there should be a "businesslike" construction of clause 9.1 of the contracts: McCann v Switzerland Insurance Australia Limited [2000] HCA 65; (2000) 203 CLR 579 per Gleeson CJ at [22].

55 The plaintiffs submitted that "revenue" is clearly caught by the description within clause 9.1, in particular, "information relating to", amongst other things, the plaintiffs' "business affairs". The plaintiffs also emphasised that clause 9.1 includes the provision relating to "other information whether in writing or otherwise concerning the Company". It was submitted that far from excluding revenue, the use of such terminology evidences a clear intention to include revenue as "confidential information". The plaintiffs also relied upon clause 4.3 pursuant to which the employer and employee agreed that "Remuneration" was a confidential matter between the employer and the employee. The employees agreed not to reveal or discuss their remuneration with any other persons whether employed by the plaintiffs or otherwise without the approval of the plaintiffs.

56 I am of the view that the breadth of the language of clause 9.1, in particular the expression "information relating to" the plaintiffs' "business affairs", supports the finding that the parties intended that the revenue that is generated by the Advisors for the plaintiffs was to be included in the definition of "confidential information". Although clause 4.3 refers to the confidentiality of "remuneration" rather than "revenue", there is no issue that the Advisors' remuneration is based, in part, on the revenue they generate for the plaintiffs. That clause gives further support to the conclusion that the parties agreed to treat revenue as the confidential information of the plaintiffs.

57 As a matter of construction, revenue is part of the plaintiffs "confidential information" as defined in clause 9.1 of the employment contracts.

58 There is a further issue in relation to this aspect of the matter that was relied upon, not only for whether revenue was confidential information within the definition in the employment contracts, but also in respect of whether the defendant was aware that the Advisors would be in breach of their employment contracts by the provision of the revenue information to the defendant. The defendant contended that the information was not confidential because there is a practice within the industry that employees disclose such information to prospective employers. It was also submitted by the defendant that the first plaintiff publishes "revenue" figures in the Annual Reports.

59 The Annual Reports for the first plaintiff are in evidence and disclose "Revenue from operations" as follows:

Services revenue	2011 $'000
Brokerage	37,526
Corporate finance advisory revenue	8,559
Performance fee income	944
Fund management fees and commissions	25,894
Corporate finance equity capital markets revenue	10,162
Interest income on structured products	46,422
Management and advisor fees	2,243
Amortisation of loan establishment fees	1,504
	133,254

60 There are also in evidence Announcements to the ASX by the first plaintiff in which it reported revenues from ordinary activities. For instance, for the half-year ended 30 June 2011 the revenue figure provided was "down 15.2% to $139,765,000" and for the half-year ended 31 December 2011 the revenue figure provided was "down 44% to $41,695,000".

61 The defendant submitted that the publication of these revenue figures is a clear indication that the plaintiffs do not regard (and as a public company cannot regard) the revenue figures as confidential information. There is no doubt that the particular figures that must be disclosed in the Annual Reports and in the Announcements to the ASX are not confidential. However during the course of operations of a business there are a number of matters relating to the structure of that business or, to use the language of the employment contracts, "the affairs" of that business that the corporation would wish to keep confidential. The revenue figures reported in the Annual Reports do not enable particular individuals to be identified and targeted as the high earners. Obviously if a company publishes the fact that certain individuals are high and efficient earners bringing in $X per month, it will attract offers of employment from other firms to its own detriment. The revenue figures, the subject of this litigation, are not general revenue figures but lists of specific amounts of revenue earned by named individuals within the plaintiffs' employment. I am not satisfied that the fact that the first plaintiff is a public company with reporting obligations means that the revenue information the subject of this litigation is not confidential information.

62 Mr Coppin's affidavit evidence was that "neither advisors nor firms" within the industry disclose to third parties "the revenues which advisors earn from the clients they advise" (par 59). Mr Gale's affidavit evidence was that advisors' "revenue figures are confidential information" and are "not disclosed to other advisors" (par 34). However their evidence elicited in cross-examination referred to individual prospective employees' conduct that had not been mentioned in their affidavits. It is appropriate to set some of that evidence out in detail.

63 Mr Coppin has had more than twenty-three years experience in the stockbroking industry in Australia. He has worked for very large stockbroking firms as an investment advisor and in senior management roles. He is familiar with the practices of stockbrokers, investment advisors and the wealth management business (including stockbroking and financial planning) in Australia. His affidavit evidence was that a sign-on fee is a sum that a stockbroking firm will pay an advisor to acquire the revenues associated with the clients for whom the advisor works. Sign-on fees are normally calculated as a multiplier of an advisor's revenue over the previous twelve months.

64 Mr Coppin's evidence was that advisor revenue figures are kept confidential within the plaintiffs' business and advisors are not given access to the revenues of other advisors. Mr Coppin conceded that advisors might somehow be able to obtain that information however they are not authorised to do so. The Standards of Conduct for the plaintiffs' employees include a requirement that the plaintiffs' confidential information "must not be divulged to any other person" without the plaintiffs' written approval. Those Standards also provide that "no employee will use confidential information for personal advantage".

65 Mr Coppin gave the following evidence in cross-examination (tr 65-66):

Q: Now, in relation to the management of the business throughout 2012 you have gone out of your way to positively seek to employ stockbrokers from other firms into Wilson's. Correct?

A: Correct.

Q: And during the course of interviewing such people you have obtained from them revenue information, have you not?

A: From time to time, yes.

Q: And in relation to [named individual] you know that during his interview he gave you information about the revenues he was writing at his current employment?

A: He gave me indications of what his revenue bands would be, yes.

Q: Now, you can't recall whether you asked him or whether he just volunteered the information, can you?

A: I don't recall, no.

Q: But the information he gave you was sufficient for you to determine whether or not it was a good idea to employ him?

A: Well, yes, because I had worked - he had worked for me before.

Q: Yes, but also because you needed to know for the purpose of making that decision what revenues he was currently producing as a stockbroker - yes?

A: Yes.

Q: And the reason you needed to know that information was because the revenues produced by a stockbroker in the immediate preceding period are likely to be a reasonable guide as to what they will produce in the short term future?

A: It is certainly an indication.

Q: Because it is expected that the clients they deal with on a regular basis will probably follow them to the new employer, isn't it?

A: It is one of the factors.

...

Q: And in so far as the information that [named individual] gave you, you don't consider that you were doing anything wrong or that he was doing anything wrong when he provided you with that revenue information, do you?

A: No, because it was part of a broader discussion.

Q: Part of a broader discussion about whether he would work for you?

A: Correct.

66 Mr Coppin's attention was drawn to paragraphs 65 to 71 of a draft affidavit that had been prepared for him dated 27 August 2012 (Ex A) in which reference was made to the commercial significance to the plaintiffs of the remuneration of each financial advisor and the fact that they are kept confidential within the plaintiffs' business. That draft affidavit included the following:

68 The information is confidential because the revenue figures of individual financial advisors show how each individual is performing as part of the Private Wealth Management business unit, and is directly linked to their remuneration.

69 The employment contracts of each advisor and each of the First to Fifth defendants state that the salary and commissions of individual advisors is confidential, disclosure of which will constitute misconduct. If financial advisors knew what other financial advisors were earning, this knowledge would be extremely divisive, as it could raise issues of preferential treatment, and lead to complaints that some advisors who are not performing should be performance managed.

70 If the financial advisor revenue figures were not kept confidential, they could be disclosed to a third party or a competitor. If a competitor obtained sufficient revenue figures from a sufficient number of employees in for example the Private Wealth Management business unit, a competitor could calculate the total revenue of the business unit. That information is valuable in the hands of a competitor. The competitor would know the profitability of the business unit, and whether particular financial advisors working for the Plaintiffs should be approached in order to poach them. This information would give competitor information regarding the scale of commissions payable by the Plaintiffs to their financial advisors. A competitor would then be in a position to frame offers of employment to financial advisors, providing for some more generous rates of commission than the Plaintiffs provided.

71 Additionally, because the First Plaintiff is a public company, if advisor revenue figures were not kept confidential, the continuous disclosure requirements of the ASX would then apply to this information. This is because the aggregate of the financial advisors' revenue would demonstrate the profitability of the PMW business unit, which in the present market, is the main contributor to the Plaintiff's profitability. The profitability of the Private Wealth Management business unit would be material to a shareholder when deciding whether or not to acquire shares.

67 Mr Coppin was cross-examined in relation to those paragraphs as follows (tr 67-68):

Q: Are you saying this, that really it boils down to what is in paragraph 70, that if a new employer gets revenue figures from a sufficient number of Wilson employees it will give that competitor a better opportunity to persuade the employees of Wilson's to come and work with them?

A: Yes, I think there is a difference between having a general discussion with someone about the individual revenue and having access to a raft of information about a whole firm's revenue and all of its advisors including commission statements and other more intimate details. There is quite a big difference.

Q: The commercial advantage that would give the competitor though is really it gives it a better ability to say to some or all of the employees, "come and work with us"; that is right, isn't it?

A: Depending upon the level of detail but it very well could, yes.

Q: You see, for example you say in paragraph 70: "the competitor would know the profitability of the business unit and whether particular financial advisors working for the plaintiff should be approached in order to poach them" so there you see a competitive advantage to the competitor in deciding whether to poach employees, is that what you are saying?

A: If they have all of the revenue and commission details of the employees it would certainly be strategically advantageous, yes.

Q: And it would give them information regarding the scale of commission payable by the plaintiff to their financial advisors, you say?

A: If they are in possession of the commission statements, yes.

Q: But they would know that anyway, wouldn't they, because the level of commissions is pretty much across the board, is it not?

A: I don't think firms openly publish their commission schedules that they pay advisors but across the industry professionals that have been in it for a long time, we all have some relative understanding about who gets paid what within what's fees but it is not specific or readily available to my knowledge.

Q: And what it really boils down to, what you are saying is this, isn't it, you are saying that if the competitor knows revenue figures either of individuals or of a group that is of assistance in that competitor enticing that employee to come and work for them?

A: I believe that it would be advantageous.

Q: And the revenue figure gives you a good indication of the actual commission that they will be receiving, does it not, because generally you will have an understanding of the level of commission?

A: I mean, again, if the revenue figure is an entire revenue figure then yes, because in our industry you need to distinguish between revenue which could be comprising of brokerage plus other fees plus corporate transaction fees so the total revenue number combined with a commission would allow you to intimately understand what each person in the firm was actually getting paid.

68 Mr Gale's affidavit evidence was that advisors do not have access to the revenues derived by other advisors. However, as Branch Managers, Mr Pagliaro and Mr A Bligh did have such access. Mr Gale's attention was drawn to his draft Supplementary Affidavit of 24 August 2012. That document (Ex 1) included the following (at 15):

When I have interviewed new employees, both in my current role and at previous employers, I have not requested that candidates provide me with any evidence of the revenue that they earn, nor to provide details of clients or commissions. Instead, I might ask a general question such as "In broad terms, what level of revenue have you generated in the last year?" and I would expect an approximate round number in response. The purpose of that question is to understand their seniority and experience, where they might fit within the organisation and the current team and an appropriate base salary to offer them. I would not expect them to divulge precise figures or provide evidence taken from their employer's records of those figures.

69 Mr Gale was cross-examined as follows (tr 28-36 and 48):

Q: The fact is you do when interviewing prospective new employees ask them a general question such as in broad terms, "what level of revenue have you generated in the last year?", correct?

A: Yes.

Q: And they answer that question, don't they?

A: They generally give me a guideline of the range.

Q: So of course you know that they would know the actual amount of revenue they generated in the last year, don't you?

A: Assuming they have come from - assuming they have come from a broking firm as opposed to outside industry.

Q: Well, of course, I mean, this discussion wouldn't happen if they were not coming from a broking firm.

A: My discussion is I have far more interest in the level of revenue that they expect to write in the coming year.

Q: But of course no-one can tell you what will happen in the future, correct?

A: Correct.

Q: But a good way to judge what might happen in the future is to look at what has happened in the past?

A: It is a guide, yes.

Q: So you ask them in broad terms, "what revenue have you produced in the last year?", yes?

A: Yes.

Q: And they answer that question, don't they?

A: Yes.

...

Q: Can I ask you this: The notion of "in broad terms", do you have yourself an expectation as to what a proper answer to that question might entail, for example, does that mean they don't have to give you the precise dollars and cents figure?

A: No, I wouldn't expect the precise dollars and cents.

Q: But you would expect them to round it to the nearest, what, hundred thousand?

A: I would say in the range of under 500,000, over 500,000, over 1 million.

Q: So if someone said, "well, I made revenue last year of over one million" wouldn't you ask some more questions about that?

A: Yes, I would.

Q: You would say, "well, how much over a million?", wouldn't you?

A: I would say, "is over a million, you know, 2 million or is that between one and one and a half million?".

Q: And they tell you?

A: Yes.

Q: And from that you can judge the level of business that you would expect that they might be able to bring over to your firm if they take a job with you?

A: Yes.

Q: And do you do that expecting that their contract at their current employer if they are a stockbroker would have a provision in it preventing them from providing you with revenue figures?

A: Yes.

Q: And do you say that the way you deal with that situation is to simply ask them to tell you in broad terms?

A: I haven't thought about that.

...

Q: And you draw a distinction between specific numbers and numbers within a range, do you?

A: Yes.

...

Q: And I was asking you to explain what that distinction is by reference to commercial matters?

A: Okay. With regard to commercial matters the reason I am looking at it in those broad categories is that I am trying to get an understanding of the revenue that they would generate when they come to work with me or if they come to work with me and that impacts the way I would structure the office with regard to support needs and other matters.

...

Q: You expect them to do the best they can to estimate what their revenues were within the last 12 months, correct?

A: I expect them to give me a guide.

Q: But are you disagreeing with what I have put to you?

A: Yes.

Q: So you don't expect them to do the best they can to tell you the revenues they have generated in the last 12 months.

A: I would expect them to do the best they can to give me a guide.

...

Q: Dealing with the position industry wide, you wouldn't say that advisor revenue figures are treated across the board as a matter of practice as confidential, would you?

A: I think firms treat that information as confidential. I think some of the advisors within the industry choose to make their position public.

70 It appears that at least Mr Gale expects that individual employees will provide their own approximate revenue figures to prospective employers, notwithstanding that the revenue figures are treated as confidential information within the plaintiffs' business. The fact that an individual employee might breach their employment contract by providing more specific detail of their remuneration or the revenue information without the consent of their employer does not mean that the information is not confidential information. The plaintiffs submitted that the defendant did not call any evidence of industry practice in relation to what individual employees might do and that the highest the evidence from Mr Gale could be put was that it was his practice (rather than industry practice) to obtain general, rather than specific, information from prospective employees.

71 The plaintiffs submitted that the defendant sought to keep its communications with Mr Pagliaro secret from the plaintiffs. That submission was based in part on the fact that Mr Pagliaro was asked to use only personal emails. It was also based in part on the ruse used by Mr Pagliaro in his pretence in advising the plaintiffs that he had heard rumours of people leaving the plaintiffs' employment but that he was staying with the plaintiffs. It was submitted the defendant's requirement for secrecy in the process of communicating with Mr Pagliaro supports the conclusion that it well knew that the revenue information was confidential.

72 There is really no issue that the content of the commission statement sheets is the source of the revenue figures used by the defendant in formulating offers of employment and sign-on bonuses for the Advisors. The defendant had precise revenue figures for each of eighteen individuals who were employed by the plaintiffs. The plaintiffs submitted that the revenue figures that Mr Pagliaro provided to the defendant were not given to the defendant in the context of individual employees providing the material in broad terms at a meeting with a prospective employer. Rather it was submitted that the giving of the revenue figures to the defendant was the first step in obtaining the identity of the plaintiffs' employees to enable the defendant to target and to achieve a "team" transfer of the plaintiffs' employees to it.

73 The defendant contended that if the employment contracts prevent employees from disclosing the revenue information to prospective employees, the provision should be regarded as an unreasonable restraint and that it would, therefore, be void: Restraints of Trade Act 1976. It was submitted that a restraint of this kind would be unreasonable not only having regard to the interests of the contracting parties but by reference to the interests of the public. The defendant submitted that if on the proper construction of the contract, the provision of the revenue information is a breach, such provision could only lessen the opportunity of the employees to obtain better employment. It was contended that this is quintessentially anti-competitive and does not protect what the cases describe as the legitimate commercial interests of a party. It was submitted that the provision is therefore invalid and unenforceable.

74 The plaintiffs submitted that a legitimate commercial interest to be protected is the maintenance of a stable workforce. In this regard, reliance was placed on what Brereton J said in Cactus Imaging Pty Ltd v Peters [2006] NSWSC 717; (2006) 71 NSWLR 9 at 26-27 [55] as follows:

But apart from protection against misuse of confidential information, does an employer have a protectable interest in staff connection - that is, in maintaining a stable trained workforce? The cases denying that there is any such legitimate interest emphasised that an employer does not own the workforce, as if employees were akin to stock-in-trade. That is self-evident, but nor does an employer own the customers, who are also not akin to stock-in-trade; yet a connection with customers is unquestionably amenable to protection by covenant. The employees, along with the suppliers and the customers make up the three relations upon which the profitability of a business depends. The customers are not property, but their connection with the business adds value to the business and is recognised as deserving of protection in the proprietor's legitimate interest. Similarly, employees are not property, but, all else being equal, a business with a stable trained workforce will be more attractive to a purchaser and command a higher price than one with a workforce which is unstable, disruptive or poorly trained, just as a loyal and satisfied clientele makes a business more attractive and valuable. In my opinion, staff connection constitutes part of the intangible benefits, which may give a business value over and above the value of the assets employed in it, and thus comprises part of its goodwill. It is amenable to protection by a covenant in a manner similar to customer connection, even in the absence of protectable confidence.

75 I do not regard the inclusion of revenue in the definition of confidential information in the employment contracts as an unreasonable restraint. I am satisfied that the plaintiffs have a legitimate commercial interest to protect their business from an exodus of its workforce by reason of competitors stealing a march on it by use of its confidential information. This case is not about the commercial morality of competitors luring employees away from their employment. The issue is whether the defendant wrongfully obtained the plaintiffs' confidential information to set the lure. If a competitor is aware of the relative revenues of each of the plaintiffs' employees, it will have the capacity to structure targeted offers over and above the revenues and/or commissions being paid by the plaintiffs. Depending upon the commercial climate (and a number of unknown personal factors) this may be irresistible to some or all of those employees who are so targeted. It also provides the competitor with the commercial edge because the plaintiffs, unaware of these offers, would be unable to compete to retain those employees.

76 I am satisfied that the plaintiffs have a system in place to keep the revenue information in respect of employees confidential. It is possible that a prospective employer might be able to obtain an individual employee's revenue information. Indeed if they interview numerous employees who are willing to publish remuneration information in breach of their employment contracts, the prospective employer might gather quite a deal of revenue information in relation to a particular business. However the evidence establishes that the plaintiffs, and the industry generally, treat revenue information of their employees as confidential. I am satisfied that the revenue information is confidential information.

Inducement of breach of contract

77 The plaintiffs must establish that the defendant intended to induce a breach of contract and that the defendant knew that the conduct it was inducing would be a breach of contract. The defendant's state of knowledge of the contract is a necessary consideration in determining whether the defendant had the requisite intent: Cleary v Kocatekin & Seven Network (Operations) Ltd [2012] NSWSC 692. It is not enough to show that the defendant procured an act that, as a matter of construction of the contract, is a breach. It must be shown that the defendant realised that it would have such effect: OBG Ltd v Allan; Douglas v Hello! Ltd; Mainstream Properties Ltd v Young [2007] UKHL 21; [2008] 1 AC 1 at [39].

78 There are two aspects to the claim of inducement of breach of contract by Messrs Pagliaro and A Bligh. The first is the alleged breach of clause 3.3 of their employment contracts. It is alleged that Messrs Pagliaro and A Bligh breached clause 3.3 by assisting the defendant to target the plaintiffs' workforce knowing that it would be harmful to the plaintiffs for there to be a large "walk out" of its advisors. The second is the alleged breaches of clause 9.3 and 9.4 of their employment contracts. It is alleged that Messrs Pagliaro and A Bligh breached clauses 9.3 and 9.4 by providing the revenue figures to the defendant to enable them to identify and target the plaintiffs' advisors for the purpose of offering employment to those advisors as a "team" and causing a "walk out" of a large part of the workforce from the plaintiffs.

79 The defendant was aware that the Advisors with whom they were dealing, in particular Mr Pagliaro and Mr A Bligh, were employed with the plaintiffs pursuant to employment contracts. I am satisfied that the defendant would have been aware that the Advisors were subject to a contractual obligation to be loyal to and not harm the plaintiffs while in their employment. I am also satisfied that the defendant would have been aware that the plaintiffs would have protected their confidential information by a contractual prohibition on publication of such information by the Advisors and the other advisors to third parties, in particular to competitors.

80 It follows from the concession that the defendant obtained the revenue figures (the revenue information) from Mr Pagliaro and the surrounding circumstances (including the arrangement of meetings and the communications referred to above) that the revenue information was provided to the defendant for the purpose of enabling the defendant to make offers of employment and offers of sign-on bonuses to the Advisors and other advisors. The evidence establishes that the defendant approached and made offers to (or was preparing itself to make offers to) 23 of the plaintiffs' advisors.

81 The defendant had been in merger negotiations with the plaintiffs and, more probably than not, was aware that the plaintiffs' financial position was the subject of some rumour. I am satisfied that the defendant would have been well aware that to entice 23 top tier employees of the plaintiffs away from the plaintiffs' employment would harm the plaintiffs' business, at least in the short term.

82 There is an issue as to whether the defendant procured Mr Pagliaro to identify the Advisors and other advisors in the plaintiffs' employment who might be willing to leave the plaintiffs' employment or whether Mr Pagliaro invited the defendant to accept such information. There is also an issue as to whether the defendant procured Mr Pagliaro to provide it with the revenue information or whether Mr Pagliaro invited the defendant to accept such information. The plaintiffs submitted that, if Mr Pagliaro invited the defendant to accept the information, it would have known at the time of the communication of the information that Mr Pagliaro was in breach of his contract of employment with the plaintiffs. That is so because it would have been obvious to the defendant that Mr Pagliaro was pursuing a plan to have the Advisors and the other advisors in the plaintiffs' Sydney and Brisbane offices leave the plaintiffs' employment at the same time, with the consequential obvious detriment or damage to the plaintiffs' business by the loss of that earning capacity.

83 The defendant contended that there was no inducement of the plaintiffs' employees to breach their contracts. It was submitted that they already wanted to leave the plaintiffs' employment (as can be seen from Mr A Bligh's communications with Mr Tritton) and it was the Advisors who approached the defendant. It was submitted that they did not need any inducement to breach their contracts because they were willing to do so irrespective of the defendant's conduct. The defendant submitted that the result of its conduct was that the Advisors resigned their employment. It was submitted that they were entitled to resign and therefore there was no breach of contract and accordingly no inducement of a breach of contract.

84 I am satisfied that in the circumstances of this case it does not matter who made the first contact. It is clear that Mr Pagliaro and the other Advisors already wanted to leave the plaintiffs' employment. However there is a difference between having a desire to leave employment and taking the step of leaving that employment. There is also the distinction to be drawn between an individual employee deciding to leave employment and employees plotting with a competitor to take a group of employees out of the workforce of their employer for the purpose of transferring that workforce to the competitor. Such a step, if taken, would be in breach of contract in that it would not promote the interests of the employer and, indeed, would harm the employer. The inducement for the breach is the defendant's offer to take the group as a team and/or to make a competitive bid for the employees as a team by structuring salaries and/or sign-on bonuses at a more attractive level than the employees' present remuneration. That is what was done.

85 The defendant chose not to go into evidence (other than to tender the documents referred to earlier). The defendant submitted that an adverse inference should not be drawn against it because there is nothing in the plaintiffs' case against it that requires any explanation. In circumstances where there has been a secret plan pursued with the assistance of the plaintiffs' employees, it is very difficult for the plaintiffs to prove by direct evidence the detail of the defendant's conduct. However the plaintiffs have garnered the evidence of Messrs Bryant, Fleming and Burton and tendered the documents evidencing the communications between the Advisors and the defendant. It is obvious that the defendant's meetings with the Advisors and other advisors were as a result of the conversations with Mr Pagliaro and Mr A Bligh. Mr Pagliaro was a pivotal part of the defendant's plan to transfer a large part of the plaintiffs' workforce to itself. He co-ordinated the plan with Mr A Bligh and Mr Gunning. He set up meetings and invited Mr Gunning into his home to meet with the members of the plaintiffs' workforce. It is also obvious that the defendant was in receipt of information to enable it to structure its approach to the Advisors and other advisors.

86 The irresistible conclusion is that it was the defendant who pursued the plaintiffs' employees as a result of the receipt of the information from Mr Pagliaro and Mr A Bligh. I am satisfied that it is appropriate to infer that any evidence the defendant might have given would not have assisted it in defending the claim that it had induced Messrs Pagliaro and A Bligh to breach their employment contracts with the plaintiffs.

87 I am satisfied that the defendant knew that its conduct in inducing Mr Pagliaro and Mr A Bligh to arrange meetings with the Advisors and the other advisors for the purpose of enabling the defendant to formulate and make offers of employment to those Advisors and other advisors, was conduct that would in fact be a breach of Mr Pagliaro's and Mr A Bligh's contracts of employment with the plaintiffs. This was obviously conduct that would harm the plaintiff and I have no doubt that the defendant intended that its conduct would result in a breach of contract by Mr Pagliaro and Mr A Bligh.

88 I am satisfied that Mr Pagliaro provided the details of the earnings and revenue of each of the Advisors and other advisors to the defendant. I am also satisfied that the defendant was well aware that the provision of the revenue of all the Advisors and other advisors was a provision of information that was confidential to the plaintiffs and in breach of Mr Pagliaro's employment contract. I am satisfied that the defendant intended that such conduct occur. The defendant was able to identify and target those individuals that it sought to bring across to its employment as a result of the provision of this information.

89 I am satisfied that the plaintiffs have established that the defendant induced breaches of contract by Mr Pagliaro and Mr A Bligh.

Damages

90 The plaintiffs submitted that but for the defendant's inducement, the probabilities are that the Advisors would not have left the plaintiffs' employment on 11 July 2012. Rather, it was submitted they would have stayed on for at least the completion of the Pinnacle transaction (the sale of an asset in which the Advisors had an interest as shareholders). It must be remembered that it was the plaintiffs who gave two of the Advisors notices of termination. Although those notices were for a period of three months, I am satisfied that the relevant period is only one month and the plaintiffs were not entitled to bind the Advisors to any greater timeframe.

91 It was submitted that the probabilities are that the Advisors would have remained employed with the plaintiffs after July 2012. However it was submitted that it is "a matter for the Court to assess just how long they would have stayed" in the plaintiffs' employment "but for the defendant's conduct". It was also submitted that on any view "a safe assessment would be two months after 11 July 2012".

92 It may be that the Advisors would have been interested to receive any distribution that would have come to them from the Pinnacle transaction. There is no evidence of the status of that transaction. However it is common ground that it had not been completed as at July 2012. The Advisors were looking at alternatives to their employment with the plaintiffs and, had another employer offered them employment either individually or as a group or team transfer, I am satisfied that in the particular environment that existed in early July 2012, they would have given one month's notice to the plaintiffs. In those circumstances and doing the best I can on the paucity of the evidence before me, I am satisfied that the appropriate timeframe for the calculation of damages is one month.

93 The plaintiffs claim that the damages should be assessed by a calculation on the average monthly revenues of each of the five Advisors. Those revenues total $436,042. The plaintiffs submitted that this is the measure of damages that, but for the defendant's conduct the plaintiffs would have received had the Advisors stayed in employment with the plaintiffs. On reflection, the plaintiffs conceded that the amount needs adjustment to take into account remuneration and other relevant costs about which there was a paucity of evidence. However there was evidence that the "standard percentage that is paid across the industry" in relation to remuneration is 35% to 60% of revenue (tr 40). The confidential commission statement sheets also provide some evidence. There is also the probability that at the time the Advisors were actively pursuing alternative employment, their average monthly revenues would have been adversely affected. Just how much that affect may be is not possible to calculate with any precision.

94 On the basis that these Advisors would be at the upper end of the range, an appropriate percentage reduction is 50%. There should also be a further reduction for the abovementioned matters of other costs and the adverse effect on earnings. I am of the view that a further reduction of 10% should be made. Accordingly the amount of $436,042 is reduced to $174,416.

95 Accordingly the plaintiffs are entitled to damages as against the defendant in the amount of $174,416.

Restraint

96 The injunction that the plaintiffs seek restraining the defendant from employing certain named individuals would obviously affect those individuals. They are not joined in these proceedings and have not had the opportunity of cross-examining any of the plaintiffs' witnesses and/or calling evidence or making submissions. I am satisfied that it would be inappropriate to restrain the defendant from employing the named individuals: News Limited & Ors v Australian Rugby Football League & Ors (1996) 139 ALR 193 at 300-301. However I am satisfied that the defendant should be restrained from utilising the plaintiffs' confidential information. Accordingly an injunction will issue restraining the defendant from using, publishing or otherwise dealing with any of the advisor revenue and other information recorded in any of the plaintiffs' financial advisor commission statement sheets that were provided to Mr Thomas and/or Mr Gunning.

Breach of Duties

97 There is no real issue in these proceedings that the Advisors' employment contracts have implied into them an obligation to serve the plaintiffs with "good faith": Faccenda Chicken Limited v Fowler & Others [1986] 1 All ER 617 at 625. Having regard to the findings made above in particular in relation to the inducement of breaches of clause 3.3, I am satisfied that the plaintiffs have established that Messrs Pagliaro and A Bligh were in breach of the implied obligations of good faith and their fiduciary duties to the plaintiffs not to obtain for themselves a benefit by a breach of their duty of fidelity and loyalty. I am satisfied that they were induced by the defendant to breach those obligations and duties. Equitable compensation is sought in the same amount as the damages sought for the inducement of breach of contract. Accordingly the plaintiffs are entitled on this approach to equitable compensation in the amount of $174,416.

Other Claims

98 When the proceedings were commenced on 27 July 2012, the Summons contained the relief sought without the inclusion of any contentions setting out the causes of action. It was not until the plaintiffs filed their Points of Claim on 2 August 2012 that the ambit of the claims against all of the defendants was identified. In that first 'pleading' there was a claim that the Advisors were in breach of their obligations imposed on them by s 182 and s 183 of the Corporations Act 2001. However there was no claim against the defendant that it had contravened these sections of the Corporations Act by being involved in the breaches by the Advisors. There was no contention pleaded against the defendant in relation to alleged unconscionable conduct under the Australian Consumer Law or the ASIC Act.

99 The plaintiffs filed Amended Points of Claim on 14 August 2012 in which for the first time an allegation was made against the defendant that it had caused the Advisors to breach their obligations imposed by s 182 and s 183 of the Corporations Act. It was not until the last day of the trial that the plaintiffs filed in Court Second Amended Points of Claim in which, for the first time, allegations of unconscionable conduct under the Australian Consumer Law and the ASIC Act were made against the defendant.

100 The defendant has accommodated the urgent amendments to the 'pleadings', however the main issues that were the subject of final submissions were the construction of the employment contracts, the question of the confidentiality of the revenue information, the claims of inducement of breaches of contract and the injunctive relief. The plaintiffs dealt with the additional claims in their submissions, however the defendant did not make detailed submissions in relation to them. The plaintiffs have succeeded in the claims referred to above and I do not regard it as prudent to deal with these additional claims in the absence of detailed submissions. However I will refer to the nature of the claims and the way forward should the plaintiffs wish to press them.

Corporations Act

101 The plaintiffs claim that Mr Pagliaro and Mr A Bligh contravened s 182 and s 183 of the Corporations Act 2001 and that the defendant was involved in those contraventions. Section 182 prohibits an employee of a corporation from improperly using their position to gain an advantage for themselves or to cause detriment to the corporation by which they are employed. Section 183 prohibits an employee of a corporation from improperly using information obtained by reason of that employment to gain an advantage for themselves or to cause detriment to the corporation. Each of those sections provides that a person, including a company, who is "involved" in a contravention itself contravenes the section: s 182(2); s 183(2). Section 79 provides that a person is "involved" if the person has aided, abetted, counselled or procured, or induced, or been knowingly concerned or a party to the contravention: s 79(a)-(c).

102 Sections 182 and 183 are civil penalty provisions: s 1317. An essential aspect to the plaintiffs' case against the defendant is that there should be a finding that Mr Pagliaro and Mr A Bligh contravened those sections of the Act so that a finding can be made that the defendant was involved in those contraventions. If the Court is satisfied that there is a contravention of those sections, it "must" make a declaration of contravention: s 1317. However it is not necessary for a Court to make a declaration of contravention under s 1317E in proceedings for an order for compensation brought by a corporation under s 1317H or s 1317HA: One.Tel Limited (In Liquidation) v John David Rich and Ors [2005] NSWSC 226; (2005) 53 ACSR 623 at [70].

103 The plaintiffs contend that both Mr Pagliaro and Mr A Bligh used their positions as Senior Advisors to arrange meetings with the defendant and promote attendance at those meetings for the purpose of gaining advantage for themselves (in the form of sign-on bonuses) and causing detriment to the plaintiffs.

104 Although the plaintiffs claimed that both Mr Pagliaro and Mr A Bligh were in breach of s 183 of the Corporations Act, final submissions were made only in relation to Mr Pagliaro. In final submissions, attention was drawn to the divergent judicial views as to whether the section is applicable only to the use of confidential information: McNamara v Flavel [1988] 13 ACLR 619. In any event I have already concluded that the information that was utilised by Mr Pagliaro was confidential information.

105 The plaintiffs seek compensation under s 1317H for damage resulting from the defendant's contraventions of ss 182 and 183, by reason of its involvement in the alleged contraventions by Mr Pagliaro and Mr A Bligh. Findings of contravention of civil penalty provisions of the Corporations Act can have very serious consequences, irrespective of whether a declaration is made under s 1317E of the Act. If findings of contraventions are made against Messrs Pagliaro and A Bligh, and if findings of contraventions are made against the defendant on the basis it was "involved" in the contraventions by Messrs Pagliaro and A Bligh, the appropriate measure of compensation would be $174,416.

106 However if the plaintiffs wish to press for these findings I would invite further submissions from the plaintiffs as to whether Messrs Pagliaro and A Bligh should be provided with the opportunity to be heard. I would also need to hear submissions from the defendant and arrangements will have to be made to re-list the matter for that purpose.

Australian Consumer Law and the ASIC Act

107 The plaintiffs claim that the defendant's conduct was "unconscionable" within the meaning of that term in s 21 of the Australian Consumer Law and s 12CB of the ASIC Act.

108 Section 21 of the Australian Consumer Law provides relevantly:

21 Unconscionable conduct in connection with goods or services

(1) A person must not, in trade or commerce, in connection with:

(a) the supply or possible supply of goods or services to a person (other than a listed public company); or

(b) the acquisition or possible acquisition of goods or services from a person (other than a listed public company);

engage in conduct that is, in all the circumstances, unconscionable.

...

(3) For the purpose of determining whether a person has contravened subsection (1):

(a) the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and

(b) the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.

(4) It is the intention of the Parliament that:

(a) this section is not limited by the unwritten law relating to unconscionable conduct; and

(b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and

(c) in considering whether conduct to which a contract relates is unconscionable, a court's consideration of the contract may include consideration of:

(i) the terms of the contract; and

(ii) the manner in which and the extent to which the contract is carried out;

and is not limited to consideration of the circumstances relating to formation of the contract.

109 Section 12CB of the ASIC Act relevantly provides:

Unconscionable conduct in connection with financial services

(1) A person must not, in trade or commerce, in connection with:

(a) the supply or possible supply of financial services to a person (other than a listed public company ); or

(b) the acquisition or possible acquisition of financial services from a person (other than a listed public company);

engage in conduct that is, in all the circumstances, unconscionable.

110 The plaintiffs submitted that the defendant systematically set out to obtain the plaintiffs' business without paying any consideration for it. It was contended that the defendant sought to acquire the services of the Advisors by the use of, and on the basis of, confidential information provided by those Advisors to the defendant in breach of their contractual, equitable and statutory obligations and duties.

111 It was submitted that the unconscionability of the defendant's conduct is particularly stark in light of the fact that during the first part of 2012 the defendant had discussions with the plaintiffs in relation to the question of a possible merger of the two businesses. It was submitted that the conduct of the defendant was conduct in trade or commerce in connection with the supply by the Advisors to the defendant of services and the acquisition by the defendant from those Advisors of those services and that it was unconscionable within the meaning of both s 21 of the Australian Consumer Law and s 12CB of the ASIC Act.

112 The plaintiffs' contention that the defendant's conduct was unconscionable under s 21 of the Australian Consumer Law is possibly more tenable than the equivalent claim under s 12CB of the ASIC Act. "Services" as defined in the Australian Consumer Law includes "a contract for or in relation to the performance of work (including work of a professional nature)": s 2. Accordingly the breadth of s 21 read with s 2 accommodates a claim that the defendant's conduct in acquiring services from the Advisors (that is, in entering into contracts for the performance of work) was unconscionable because the defendant used the plaintiffs' confidential information in acquiring those services.

113 The claim under s 12CB of the ASIC Act is more problematic. The conduct must be in connection with the acquisition (or supply) of financial services from (or to) a person. The defendant was not acquiring financial services from the Advisors. It was seeking to acquire professional services from the Advisors. It does not seem to me that this provision has application to the alleged conduct. However this has not been debated.

114 Should the plaintiffs wish to proceed with these claims I would require further submissions and arrangements will have to be made to re-list the matter for that purpose.

Orders

115 The plaintiffs have established that the defendant induced Mr Pagliaro and Mr A Bligh to breach their employment contracts with the plaintiffs and to breach their implied contractual duties and fiduciary duties of loyalty to the plaintiffs. The plaintiffs are entitled to damages in the amount of $174,416.

116 The plaintiffs have also established that the revenue information and the information in the commission statement sheets is confidential information. The defendant is restrained from using, publishing or otherwise dealing with any of the revenue information and information recorded in any of the plaintiffs' financial advisors' commission statement sheets that were provided to Mr Thomas and/or Mr Gunning.

117 The plaintiffs' application for an injunction to restrain the defendant from employing the individuals named in the Second Amended Points of Claim is dismissed. The defendant is released from the undertaking it gave to the Court on 31 August 2012.

118 The parties are to prepare Short Minutes of Order reflecting these findings and an agreed costs order. If agreement on a costs order cannot be reached I will hear argument when the matter is listed for the purpose of making final orders in the Short Minutes of Order prepared by the parties. I grant liberty to restore on short notice.

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Decision last updated: 10 September 2012