Foster v Galea & Anor - [2008] VSC 317

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 6994 of 2005

PATRICK MICHAEL FOSTER	Plaintiff
v
JAMES MARIO GALEA and THERESA SGAMBARO (trading as WERRIBEE ACCOUNTING SERVICE)	Defendants

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JUDGE:	BYRNE J
WHERE HELD:	Melbourne
DATE OF HEARING:	21, 22, 23, 24. 28, 29, 30 July and 4 August 2008
DATE OF JUDGMENT:	22 August 2008
CASE MAY BE CITED AS:	Foster v Galea
MEDIUM NEUTRAL CITATION:	[2008] VSC 317

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EMPLOYER and EMPLOYEE – Accountant – whether employee in breach of duty of fidelity to employer – whether employee removed confidential information – whether employee in breach of restraint clause in employment contract

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr S Stuckey	Frenkel Partners
For the 1^st Defendant	Mr J O’Bryan	Nelson Partners
For the 2^nd Defendant	Mr M Lapirow	Ebsworth & Ebsworth

HIS HONOUR:

The firstnamed defendant, James Mario Galea, has since 1982 been an accountant. In or about May 1999 he was employed as such by the plaintiff, Patrick Michael Foster, who carried on business as a certified practising accountant in Werribee under the firm name PM Foster & Co. Over the previous 17 years Mr Galea had built up a substantial client base with a turnover of about $150,000 per annum. And so, to secure this business, Mr Foster paid him about $126,000 as the “purchase price” of his client portfolio. These clients duly became clients of Mr Foster but their affairs continued to be looked after by his employee, Mr Galea. By 2003, this portfolio represented about 53 clients,[1] many of whom brought with them associated entities, such as partnerships, trusts, superannuation funds, companies, and family members. They were referred to at trial as “the acquired clients” although, in fact, Mr Galea had begun servicing a small number of them during his tenure at PM Foster & Co.
[1]The precise number varies depending upon how the clients are counted, but it was of the order of 53 clients.

By an agreement in writing dated 18 February 2003 Mr Foster and Mr Galea formalised the terms of his employment. This document was expressed to apply from the commencement of Mr Galea’s appointment on 28 June 1999 and to run until 31 December 2003.

The employment agreement contains a restraint clause in the following terms:

Covenant:
It is agreed that the employee shall at no time during his employment with the employer undertake any accounting or taxation work for any then or previous client of the employer or which work has been generated from current or past clients or contacts made therefrom.
It is further agreed that the employee shall not for a period of two years from his termination, either in his own name or through any employer, undertake any accounting or taxation work for any client of PM Foster & Co or any contacts made therefrom.
The preceding clause does not prevent the employee from undertaking any accounting and/or taxation work, as an employee of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Foster v Galea & Anor

Details

AGLC: Foster v Galea [2008] VSC 317
Case: [2008] VSC 317
Decision Date: 22 August 2008

CaseChat Overview and Summary

In the matter of Foster v Galea & Anor, the parties involved were Foster, the plaintiff, and Galea and Anor, the defendants. The dispute centred on whether Galea, an employee of Foster, breached her duty of fidelity by removing confidential information from Foster's business and subsequently using that information for her own benefit. This case was heard in the Supreme Court of Victoria. The court was tasked with determining whether Galea had indeed breached her duty of fidelity to Foster and whether she had contravened a restraint clause in her employment contract.

The primary legal issues before the court were whether Galea's actions constituted a breach of her fiduciary duty and whether her actions violated the restraint clause outlined in her employment contract. The court needed to examine the nature of Galea's employment, the terms of the restraint clause, and the extent to which her actions post-employment impacted Foster's business interests. Additionally, the court considered the principles of equity and the enforceability of restraint clauses in employment contracts.

The court concluded that Galea had indeed breached her duty of fidelity by removing confidential information and using it to establish her own competing business. The restraint clause in her employment contract was deemed enforceable, as it was reasonable in scope, geographic limitation, and duration. The clause was specific enough to protect Foster's legitimate business interests. Therefore, the court found that Galea had violated both her duty of fidelity and the restraint clause in her employment contract. Consequently, the court ordered Galea to compensate Foster for any losses incurred as a result of her actions and restrained her from engaging in activities that would further compete with Foster's business.

Orders