Fortrend Securities Pty Ltd v Wollermann (No 2)

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FEDERAL COURT OF AUSTRALIA

Fortrend Securities Pty Ltd v Wollermann (No 2) [2025] FCA 96

File number(s): VID 38 of 2023
Judgment of: O’CALLAGHAN J
Date of judgment: 21 February 2025
Catchwords: CORPORATIONS – alleged breaches of equitable duty of confidence, fiduciary duties and statutory obligations by former employee – where clients moved from applicants to the respondents’ new employer – whether respondents breached the employment contract or used confidential information to solicit former clients – whether new employer liable as an accessory or for inducing breach of contract – proceeding dismissed  
Legislation:

Corporations Act 2001 (Cth) ss 180(1), 181(1), 182(1) and 183(1)

Evidence Act 1995 (Cth) ss 48(4)(b), 87(1)(a) and cl 5 of pt 2 of the Dictionary
Cases cited:

Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172

IF Asia Pacific Pty Ltd v Galbally [2003] VSC 192; (2003) 59 IPR 43

Liberty Financial Pty Ltd v Scott (No 4) (2005) 11 VR 629

Manildra Laboratories Pty Ltd v Campbell [2009] NSWSC 987

Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289

Pioneer Concrete Services Ltd v Galli [1985] VR 675

Reinforced Plastics Applications (Swansea) Ltd v Swansea Plastics & Engineering Co Ltd [1979] FSR 182

Wright v Gasweld Pty Ltd (1991) 39 IR 256
Division: General Division
Registry: Victoria
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs: 109
Date of last submission: 21 November 2024
Date of hearing: 6–10, 16, 17 May 2024, 12–14 June 2024, 28, 29 August 2024 and 11–13 September 2024.
Counsel for the Applicant:  M D Wyles KC with J R Anthony-Shaw
Solicitor for the Applicant:  Cornwalls
Counsel for the Respondent:  P D Crutchfield KC with L Merrick SC and T Burn-Francis
Solicitor for the Respondent:  Seyfarth Shaw

 

ORDERS

VID 38 of 2023
BETWEEN:

FORTREND SECURITIES PTY LTD ACN 055 702 693

Applicant
AND:

CHRISTOPHER JAMES WOLLERMANN

Respondent

ORDER MADE BY:

O’CALLAGHAN J

DATE OF ORDER:

21 FEBRUARY 2025

THE COURT ORDERS THAT:

1.The proceeding be dismissed.

2.If the parties are unable to resolve the question of costs, then:

(a)the respondents file and serve a written submission about the issue, not exceeding 5 pages, within ten days; and

(b)the applicants file and serve a written submission about the issue, not exceeding 5 pages, within ten days of receipt of the respondents’ submission.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 (Cth).


REASONS FOR JUDGMENT

O’CALLAGHAN J

INTRODUCTION

  1. This proceeding was set down for trial on counsels’ estimate of five days.  It ended up taking 15 days.  Because of other court commitments of my own, and issues about the availability of counsel, it was necessary to hear the case in dribs and drabs between early May and mid-September last year.  On the second last day of the hearing, I insisted that the applicants do more to clarify the precise nature of the confidential information that they alleged the first and second respondents had unlawfully…

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Details
Case
[2025] FCA 96
Decision Date

CaseChat Overview and Summary

Fortrend Securities Pty Ltd brought an action against Messrs Wollermann, Lyle and LWAM, and Shaw, seeking damages for alleged breaches of equitable duty of confidence, fiduciary duties and statutory obligations. The dispute arose from the alleged misuse of confidential information and solicitation of clients from Fortrend by Messrs Lyle and Wollermann, who subsequently moved from Fortrend to Shaw, a new employer. The Federal Court was required to determine whether the respondents breached their employment contract or used confidential information to solicit former clients, and whether Shaw was liable as an accessory or for inducing a breach of contract. The court examined the evidence and submissions to ascertain whether Messrs Lyle and Wollermann had indeed used confidential information in breach of their duties and/or contract, and whether Shaw benefitted from such use. The court found that the applicants had failed to prove that Messrs Lyle and Wollermann had breached their duties or contract by using confidential information to solicit former clients, and dismissed the proceeding. The court also found that Shaw was not liable as an accessory or for inducing a breach of contract. The proceeding was dismissed, and the parties were directed to attempt to resolve the issue of costs.

Orders

Orders of the court

1. The proceeding be dismissed.

2. If the parties are unable to resolve the question of costs, then:

(a) the respondents file and serve a written submission about the issue, not exceeding 5 pages, within ten days; and

(b) the applicants file and serve a written submission about the issue, not exceeding 5 pages, within ten days of receipt of the respondents’ submission.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 (Cth).

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Mr Lyle, Mr Wollermann, Mr Cameron and Mr Stone were cross-examined.THE EVIDENCE RELEVANT TO THE ALLEGATION OF MISUSE OF CONFIDENTIAL INFORMATIONThe evidence of Mr Lyle Mr Lyle’s main affidavit was dated 22 December 2023. In it he deposed (at [80]) that during his notice period with FSA, out of courtesy he told several of his clients that he had resigned from FSA, but he did not tell any client about the fact that he and Mr Wollermann had established LWAM. He also said that they decided not to tell any clients about the fact that they were joining Shaw. As he put it: “I simply wanted my clients, with whom I had personal and professional relationships, to know out of courtesy that I had resigned from FSA, with my last day being 16 December 2022”. He said that, in response, some clients told him that they wanted to transfer their accounts to wherever he was going and asked to be contacted after he had left FSA. He further deposed at [82]–[83]:I did not take any steps to facilitate the transfer of any client accounts to Shaw during my employment with FSA. However, immediately after my employment ended, I began to reach out to clients and inform them that I was to start in the office at Shaw on 19 December 2022. Most of those clients expressed their desire to move their accounts to Shaw.For those clients who indicated to us a preference to move their accounts to Shaw, either Wollermann or I had further contact with the client to facilitate that transfer. We met or had telephone calls with the client to get the relevant details required to open an account and assist in completing the required paperwork to effect the transfer. I describe the required transfer paperwork at paragraphs [88] to [91] below, and the interactions I had with each client at paragraphs [95] to [200] below. Mr Lyle gave the following evidence about the transfer process (at [84]–[87]):In order to transfer a client from FSA to Shaw, there are three key steps. First, we establish a domestic Shaw account for the client. Secondly, we establish an account with Pershing LLC (Shaw’s clearing firm). Finally, we use the Automated Customer Account Transfer Service (ACATS) to transfer the client’s assets from the StoneX account (being FSA’s clearing firm) to the new Pershing LLC account (Shaw’s clearing firm). At that point, the transfer is complete.ACATS is an electronic transfer system developed by the National Securities Clearing Corporation. As US clearing firms are typically members of NSCC, the transfer of customer accounts from one clearing firm to another can take place via ACATS.The ACATS transfer process is extremely simple. Once the receiving account has been established, all that is required is for the receiving broker/clearing firm to submit a completed ACATS form to the delivering broker/clearing firm to initiate the transfer of the account assets.Once a completed ACATS transfer form is submitted to the delivering clearing firm, the assets are transferred from the “delivering account” to the “receiving firm” automatically.In my experience, the transfer itself would take between 2-7 business days. …

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

The applicants contended that Shaw obtained the benefit of Fortrend’s confidential information and sue Messrs Wollermann and Lyle for breach of their contractual obligations, their obligations under ss 180(1), 181(1), 182(1) and 183(1) of the Corporations Act 2001 (Cth) (Corporations Act) and their fiduciary duties as employees of Fortrend. Although the alleged breaches of ss 180(1) and 181(1) were originally pleaded, they were not maintained in the applicants’ written closing submissions. In the event, the applicants have claimed loss and damage arising from the use of Fortrend’s confidential information by Shaw, Mr Lyle, Mr Wollermann and LWAM to benefit themselves. As counsel for the applicants accepted, the first key question that arises in respect of every pleaded and pressed cause of action in this proceeding is: “did Mr Lyle and Mr Wollermann use confidential information of Fortrend in breach of their duties and/or breach of contract?”. If the answer to that question is “no”, then the proceeding is to be dismissed. By paragraph 11 of their Further Amended Statement of Claim (FASOC), the applicants pleaded:In the course of its dealings with FSA Clients, FSA and FSI obtained or generated, and then used and stored, the following confidential information concerning FSA Clients:(a) their identities;(b)the fact that they were individuals who were involved or interested in trading in US securities;(c) the fact that they were FSA Clients;(d) their contact details, including their:(i) phone numbers;(ii) home addresses; and (iii) email addresses;(e) their personal information, including their:(i) dates of birth; and (ii)identification information, including copies of identification documents such as passports, driver licenses and Medicare cards;(f)their social media contacts, including LinkedIn;(g)the makeup of their stock trading portfolios, including risk profiles and appetite;(h)their trading histories;(i)which securities they had historically invested in;(j)their employment and financial status;(k)structuring of their corporate, superannuation and trust entities,(together and individually, including as set out in [11A] the Confidential Client Information). PARTICULARSThe Confidential Client Information is confidential to the FSA Clients as it was provided to FSA by them in confidence, and is subject to FSA Policies (as defined below) requiring it to be kept confidential.Further particulars, and or further specific information confidential to FSA, may be provided after discovery and evidence. I note that the “confidential information concerning FSA Clients” as set out in paragraph 11 of the FASOC does not include clients’ StoneX account numbers. Further, as I have said, Mr Wollermann and Mr Lyle admitted that they used the names of the clients and their telephone numbers and/or email addresses to prepare the ranking list (ranked in order of funds under management) and that they also looked at, but did not download, the StoneX information to come up with the rankings. See transcript at page 1119.