This case concerns breach of confidentiality and fiduciary duty in a commercial setting.
The Plaintiff in this case was Wilson HTM Investment Group (Wilson HTM), which provides financial advice and other services to customers (the Services)
The defendants were:
- Joseph Pagliaro – a senior investment/financial advisor employed by the Plaintiffs
- Wren Bligh (W Bligh)
- Angus Bligh (A Bligh)
- James Hunter and Hamish Blanche (the Advisors)
- Ord Minnett Limited (the Defendant) of which Tim Gunning was the CEO – one of Wilson HTM’s competitors for the provision of the Services
The Advisors had been discussing amongst themselves and with the plaintiffs the prospect that they might restructure their employment in a manner that was more lucrative and/or tax effective for them.
Pagliaro was not in agreement with the way in which Wilson HTM’s business was being operated.
Ord Minnett contacted Wilson HTM’s employees on multiple occasions with the view of persuading them to join their company.
At the same time, the Advisors were pursuing employment opportunities with corporations other than Ord Minnett, on the basis that a group of employees in addition to the Advisors might move to those other corporations.
The Advisors commenced employment with Ord Minnett in mid-August 2012.
Wilson HTM claim that Ord Minnett induced the Advisors to breach their contracts of employment with Wilson HTM by causing them (in breach of the obligations of loyalty to Wilson HTM) to provide to Ord Minnett, confidential information belonging to Wilson HTM and causing them to take part in a plan to persuade other employees of Wilson HTM to terminate their contracts of employment and take up positions with Ord Minnett.
Wilson HTM is consequently seeking an interim injunction as relief, in order to prevent Ord Minnett employing its previous employees which were involved in this plan.
There are a number of issues in this case:
- Whether there has been a breach of confidentiality by Pagliaro and the Advisors
- Whether there has been a breach of fiduciary duties by Pagliaro and A Bligh
- Whether ss 182 and 183 of the Corporations Act 2001 (Cth) have been breached
- Whether Ord Minnett’s conduct was unconscionable under s 21 of Schedule 2 to the Competition and Consumer Act 2010 and s 12CB of the ASIC Act 2001
Referred to Cl 9.1 (‘Confidential Information’) of Wilson HTM’s Employment Contract:
“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”).”
The breadth of the language in this clause, particularly the phrase ‘information relating to’ the Plaintiff’s ‘business affairs’, supports the finding that the parties intended that the revenue that is generate by the Advisors for the plaintiffs was to be included in the definition of ‘confidential information’.
Rejected the Defendant’s argument that the reporting obligations of Wilson HTM (being a public company) nullified the argument that information pertaining to its revenue could be held to be confidential under Cl 9.1. Rather, the Court held that the revenue figures reported in the Annual Reports do not enable particular individuals to be identified and targeted as high earners.
Wilson HTM had a legitimate commercial interest to protect their business from an exodus of its workforce by reason of competitors stealing employees by use of its confidential information. Hence Cl 9.1. was also held not to be an unreasonable restraint.
TEST: The plaintiff 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. 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 an effect.
It is alleged that Pagliario and A Bligh breached Cl 3.3 (Promotion of Company’s Interests), 9.3 (Confidentiality) and 9.4. (Use of Confidential Information).
Ord Minnett pursued Wilson HTM’s employees as a result of the receipt of information from Pagliaro and A Bligh. The court concluded that Ord Minnett was aware that the provisoin of the revenue of all the Advisors and other advisors was a provision of information that was confidential to the Plaintiff and in breach of Pagliaro’s employment contract. It was also clear that the Defendant intended that such conduct (on the part of Pagliaro and A Bligh) to occur. It was through the provision of this information that Ord Minnett was able to identify and target individuals that it sought to employ.
Ord Minnett knew that its conduct in inducing Pagliaro and A Bligh to arrange meeting with the Advisors and other advisors for the purpose of enabling it to create offers of employment to those employees, was conduct that was in breach of Pagliaro and A Bligh’s contracts of employment with Wilson HTM. It was clear that the conduct would harm Wilson HTM, and that it Ord Minnett intended that its conduct would result in a breach of contract by Pagliaro and A Bligh.
Breach of duties
From what has been established above, it was clear that Pagliaro and A Bligh were in breach of their implied obligations of good faith and their fiduciary duties to the Plaintiff not to obtain for themselves a benefit by a breach of their duty of fidelity and loyalty.
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).
Sections 182 and 183 are civil penalty provisions, contraventions of which carry very serious consequences under s 1317H.
Damages are discussed below.
Australian Consumer Law and ASIC Acts
‘Services’ as defined under s 2 of the Australian Consumer Law includes “a contract for or in relation to the performance of work (including work of a professional nature)”. Consequently, s 21 read in accordance with s 2 enables a claim that Ord Minnett’s conduct in acquiring services from the Advisors (i.e. in entering into contracts for the performance of work) was unconscionable because Ord Minnett used Wilson HTM’s confidential information in acquiring those services.
It is unlikely that the claim under s 12CB of the ASIC Act would succeed, as it requires the conduct to be in connection with the acquisition or supply of financial from or to a person. Ord Minnett was not acquiring financial services from the Advisors.
The NSW Supreme Court awarded Wilson HTM Investment Group Ltd $174 416 in damages to be paid by Ord Minnett. This amount took into account the issues mentioned above.
While the Court held that it was inappropriate to restrain Ord Minnett from employing the aforementioned individuals, it issued an injunction restraining the Defendant from utilising the Plaintiff’s confidential information.
Competitors should assume that detailed remuneration, revenue or commission information from prospective employees is confidential and that employees are contractually restrained from disclosing such information.
While it is not against the law to attract employees from competitors, this must be done without utilising confidential information belonging to the employee’s current employer.