The NSW Supreme Court has restrained Ord Minnett (Ords) from using confidential information of Wilson HTM Investment Group (Wilson) which it obtained from Wilson advisors in breach of their employment contracts for the purpose of making offers to those advisors.
Implications for employers
This case confirms that damages and injunctive relief are available remedies for an employer in circumstances where a competitor lures or poaches employees using wrongfully obtained confidential information belonging to the employer of those employees.
On 27 July 2012, Wilson commenced proceedings against five of its former senior investment and financial advisors who had commenced employment with Ords. Two of these advisors (Mr Pagliaro and Mr A Bligh) were former Branch Managers and members of Wilson’s Executive Leadership Team.
Earlier, Mr Pagliaro (while still employed by Wilson) had been contacted by Ords’ Chief Executive Officer (Mr Gunning). There were a number of subsequent meetings and communications between the parties. As part of these discussions, Mr Pagliaro was alleged to have told Ords that he (and others) would seek to persuade other advisors to join Ords and that the advisors would bring with them customers they had advised while with Wilson (referred to as the Undertaking).
- Ords conceded during the trial that Mr Gunning met with the five advisors (and other advisors) and:
- arranged for a third party recruitment advisor (Mr Thomas) to interview them and obtain from them their commission statement sheets recording the revenues they had written for Ords;
- authorised Mr Thomas to negotiate and/or offer other advisors sign-on bonuses if they left Wilson and joined Ords; and
- authorised offers to be made in writing by Ords to the other advisors and obtained advisor revenue figures from Mr Pagliaro.
Ords also conceded that Mr Thomas:
- interviewed each of the five advisors and other advisors;
- obtained information about their revenues by requiring each advisor to show him their commission statement sheets or provide him with revenue information from those sheets;
- communicated those revenues to Mr Gunning;
- negotiated with the advisors as to the bonuses they would be paid if they ceased employment with Wilson;
- agreed sign-on bonuses to be paid to each of the five advisors on entry into contracts of employment with Ords;
- offered sign-on bonuses to the other advisors; and
- used the advisor revenue figures for the purpose of negotiating and agreeing to the bonuses and sign-on bonuses.
Wilson claimed that Ords had:
induced the advisors to:
- breach their contracts of employment by (amongst other things) causing them to provide Wilson’s confidential information (namely the revenue information, including that contained in the commission statement sheets) to Mr Thomas and Ords;
- to take part in a plan to persuade other Wilson employees to join Ords; and
- to give the Undertaking;
- intended to solicit Wilson’s customers who were the subject of the Undertaking; and
- engaged in conduct which is unconscionable under the Competition and Consumer Act 2010 (Cth).
Wilson also claimed that each of Mr Pagliaro and Mr A Bligh had breached duties under the Corporations Act 2001 (Cth) and had breached their duties of loyalty and fidelity to Wilson.
Ords disputed (amongst other things) that the revenue information was confidential.
The proceedings against each of the five advisors were settled prior to the trial commencing.
Accordingly, the matters in issue at trial were only those arising between Wilson and Ords.
Her Honour Bergin CJ held that:
the revenue information was confidential. This was so:
- even though there was no express reference to such information being confidential in the advisors’ employment contracts. “Revenue” was captured by the broad wording of the confidentiality provisions in the advisors’ contracts, in particular the expression “any information relating to [Wilson’s]…business affairs”;
- despite Ords’ claim that the information was not confidential because there was a practice within the industry that employees disclose such information to prospective employers, Wilson and the industry generally treated revenue information of their employees as confidential;
- despite the fact that Wilson disclosed revenue figures to the ASX and in its annual reports. This information was of a general nature and did not enable particular individuals to be identified and targeted as high earners. In contrast, the information the subject of the litigation was comprised of lists of specific amounts of revenue earned by individuals within Wilson’s employment; and
- despite Ords’ argument that the confidentiality clause prohibiting disclosure of revenue information to prospective employers was an unreasonable restraint of trade and void. Wilson had a legitimate commercial interest in seeking to protect its business from an exodus of its workforce by reason of competitors luring its employees through the use of its confidential information. The case was not about the commercial morality of competitors luring employees away from their employment. Instead, the issue was whether Ords had wrongfully obtained Wilson’s confidential information to “set the lure”;
- Ords had induced breaches of contract by Mr Pagliaro and Mr A Bligh. While it was clear from the evidence that Mr Pagliaro and other advisors wanted to leave Wilson, a distinction was made between an individual employee deciding to leave employment and employees plotting with a competitor for a group of them to transfer to that competitor. The latter would be in breach of contract. The inducement for the breach here was Ords’ offer to take the group as a team and make a competitive bid for the employees as a team by structuring salaries and/or sign-on bonuses at a more attractive level than employees’ current remuneration;
- in the absence of evidence from Ords (from which Her Honour inferred such evidence would not have assisted in it in defending its claim), Ords had pursued the advisors as a result of receiving confidential information from Mr Pagliaro and Mr A Bligh in breach their employment contracts with Wilson. Ords knew (and intended) such conduct would be in breach of the advisors’ contracts; and
- Ords had induced Mr Pagliaro and Mr A Bligh to breach their implied obligations of good faith and their fidiciary duties to Wilson.
Findings were not made in respect of the alleged breaches of the Corporations Act 2001 (Cth) and the Competition and Consumer Act 2010 (Cth), pending further submissions.
The Court restrained Ords from using, publishing or otherwise dealing with any advisor revenue and other information recorded in the commission statement sheets.
Damages were also awarded in the amount of $174,416. The Court held the appropriate timeframe for the calculation of damages was one month, based on the relevant notice period for the advisors. Damages were assessed on the average of the five advisors’ monthly revenue, adjusted by 60% to take account of remuneration and other relevant costs.