Guardian Insurance Brokers P/L v Olbrich - [2010] SADC 114

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
GUARDIAN INSURANCE BROKERS P/L v OLBRICH & ANOR
[2010] SADC 114
Judgment of His Honour Judge Herriman
2 September 2010
EMPLOYMENT LAW - THE CONTRACT OF SERVICE AND RIGHTS, DUTIES AND LIABILITIES AS BETWEEN EMPLOYER AND EMPLOYEE - MISCELLANEOUS MATTERS - TRADE SECRETS, ETC, AND FIDUCIARY POSITION OF EMPLOYEE
Insurance broker engaged by plaintiff nominally as an independent contractor – whether a contract of service or contract for services. Agreement as to confidentiality – implied duty of confidentiality at common law and whether fiduciary duty. Broker accesses confidential information during employment, later resigns and competes with plaintiff, attracting former plaintiff clients – whether breaches occurred during employment – whether materials accessed comprise trade secrets – whether used after resignation or simple resort to know-how. Breaches of contractual common law and fiduciary duties found. Consideration of damages.
Corporations Act 2001 (Cth) s 182(1), s 913B; Acts Interpretation Act 1915 (SA) s 4(1), referred to.
Halliday & Nicholas v Corsiatto [2001] NSWCA 188; Southern Real Estate v Dellow (2003) 87 SASR 1; Humphries v Proprietors 'Surfers Palms North' Group Titles Plan 1955 (1993-94) 179 CLR 597; Landmark Underwriting Agency Pty Ltd v Kilborn [2006] NSWSC 1108; Concut Pty Ltd v Worrell (2000) 176 ALR 693; Robb v Green [1895] 2 QB 315; Deta Nominees v Viscount Plastic Products [1979] VR 167; Duke Group Ltd v Pilmer (1999) 73 SASR 64; Hill v Rose [1990] VR 129; Roger Bullivant Ltd v Ellis [1987] FSR 172; Riteway Express P/L v Clayton (1987) 10 NSWLR 238; Faccenda Chicken Ltd v Fowler [1985] 1 All ER 724; [1986] 3 WLR 288; NP Generations v Feneley (2001) 80 SASR 151; Titan Group Pty Ltd v Steriline Manufacturing PL (1990) 19 IPR 353; Hivac Ltd v Parkroyal Scientific Instruments Ltd [1946] Ch 169; Digital Pulse Pty Ltd v Christopher Harris [2002] NSWSC 33; State Vacuum Stores of Canada Ltd v Phillips (1954) 3 DLR 621; US Surgical Corp v Hosp Products Int P/L [1982] 2 NSWLR 766; O'Halloran v R T Thomas & Family P/L (1998) 45 NSWLR 262; Mordecai v Mordecai (1988) 12 NSWLR 58; Trego v Hunt [1896] AC 7; Lloyds Ships P/L v Davros P/L (1987) 17 FCR 505; Coordinated Industries PL v Elliott (1998) 43 NSWLR 282, applied.
Abacus Australia Ltd v Bradstock GIS P/L unreported, VSC 4779 of 1998; WA Fork Truck Distributors Pty Ltd v Jones & Ors [2003] WASC 102, considered.

EMPLOYMENT LAW - EMPLOYMENT RELATIONSHIP - ASCERTAINING EXISTENCE AND NATURE OF RELATIONSHIP - PARTICULAR RELATIONSHIPS - INDEPENDENT CONTRACTOR
Cross claim for benefits as an employee – discussion of relevant indicia. Finding of employment relationship - assessment of loss.
Long Service Leave Act 1987 (SA); Superannuation Guarantee (Administration) Act 1992 (Cth) s 12(3), referred to.
Stevens v Brodribb Sawmilling Co Pty Ltd (1985) 160 CLR 16; Hollis v Vabu Pty Ltd (2001) 207 CLR 21; Abdalla v Viewdaze (2003) 121 IR 215, applied.
AMP Society v Chaplin (1978) 18 ALR 385, distinguished.
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Industries (Australia) Ltd (1986) 160 CLR 226; Bryne v Australian Airlines Ltd (1995) 185 CLR 410, considered.

GUARDIAN INSURANCE BROKERS P/L v OLBRICH & ANOR
[2010] SADC 114
Introduction

The plaintiff (‘Guardian’) was incorporated in about July 1995 for the purposes of conducting the business of general insurance broking. Its sole director since 1998 has been Evan Jackson (‘Jackson’) and he and his wife have continuously held its two issued shares. Jackson had previously conducted the same business under the trading name of Evan Jackson Insurance Brokers through an entity incorporated in August 1992 and known as Evan Jackson Insurance Brokers Pty Ltd (‘EJIB’), but upon incorporation of the plaintiff the business of Evan Jackson Insurance Brokers Pty Ltd was transferred to the plaintiff.
In 1994 the defendant Gary Olbrich (‘Olbrich’) commenced working with EJIB and he continued to work on the same terms with Guardian after the broking business was transferred to it.
There is a dispute as to his initial engagement terms and whether his work status continuing through to February 2004 constituted a contract of service or a contract for services. There is no doubt that EJIB and Guardian, for their respective parts, and Olbrich, for his own, intended that it be the latter and purported to treat it that way throughout that time, but whether that reflected the reality falls to be determined because Olbrich now says he was at all times employed by each entity. It is otherwise common ground that as of February 2004 he became an employee of Guardian and continued in that capacity until he resigned on 19 October 2006.
Whatever of his status at particular times, it is not in dispute that his principal work involved the marketing and selling of general insurance policies on behalf of EJIB and Guardian, albeit that he carried out other tasks for Guardian as well. I will discuss these later.
There is, further, a dispute as to other arrangements said to have been concluded between Olbrich and EJIB when he first joined it. He had till then been the co-owner of a general insurance broking business operating at Gawler and known as ‘The Insurance Shop’ (‘TIS’) and had wished to bring with him to EJIB (by agreement with his former partner) a group of clients from that business. It is not in contest that Jackson did not particularly want that business as he preferred that Olbrich devote his time to Guardian’s clients. In the event, Olbrich did bring with him to EJIB part of his client book.
The dispute arises from Olbrich’s claim that in consequence of that, Jackson personally agreed to pay him $40,000 for that book of business and in furtherance of that arrangement paid him two amounts of $8,000 and a figure between $11,000 and $15,000 (the precise sum he could not recall), their agreement being that the balance would then be paid to him at some undefined time in the future or otherwise if Olbrich left the business.
For his part, Jackson denied that he had ever agreed to pay any amount to Olbrich for those clients but said that soon after he joined the business, Olbrich needed $8,000 to assist in a house purchase so EJIB paid him that sum in recognition of the clients he had brought there.
Further, said Olbrich, at a later stage in their relationship Jackson promised to confer upon him, equity of 15% in the Guardian business and, indeed, said he had done that, but in fact he never did. Originally in the proceedings, Olbrich had sought a declaration supporting his claim to ownership of that portion but ultimately he abandoned that claim. In consequence, the issue never fell to be finally determined. Jackson denied it but conceded he had spoken to Olbrich of his plans to one day confer equity upon him and had otherwise made some provision for it in his will.
There is then no doubt that in 2004 Olbrich became a Guardian employee and from that time events occurred which led to a loss of his status and position in Guardian and which ultimately led, as I have found it, to his departure from the business.
Equally, there is no doubt that at various times in the year or so before he left Guardian, Olbrich used his virtually unlimited access to Guardian’s computer database to access lists of Guardian’s clients and those for whom he was responsible – he said for innocent purposes. Guardian contended otherwise.
The defendant OBI Services Pty Ltd (‘OBI’) was incorporated on 16 October 2006, with Olbrich as its sole director and shareholder.
Immediately following his resignation from Guardian on 19 October 2006, Olbrich, through OBI, began conducting the business of a general insurance broker in competition with Guardian. It is common ground that in the course of doing that Olbrich approached many of Guardian’s clients and over a period of time was able to procure from them Letters of Appointment appointing OBI as their general insurance broker in lieu of Guardian.
Guardian instituted these proceedings against Olbrich and OBI on 2 November 2006 and sought urgent declaratory and injunctive relief, in particular orders restraining them from soliciting the business of its clients and from using its confidential information or intellectual property. For a brief period there was in place a consent order based upon particular undertakings given by the defendants with respect to certain Guardian clients but, ultimately, the plaintiff opted not to pursue that form of relief. It has instead sought damages against Olbrich, and through him OBI, based upon alleged breaches of his engagement terms and of legal and equitable duties arising out of his employment, including duties of confidentiality, honesty and as a fiduciary. These breaches are said to have arisen through the alleged actions of Olbrich during his employment, in accessing Guardian’s confidential information and in using it, then or later, to compete with Guardian.
For their part, the defendants have denied Olbrich owed any relevant express contractual duties arising out of his employment, have acknowledged the existence of an implied contractual duty of good faith and of a coterminous fiduciary duty of confidentiality, and have said those duties persisted only during employment and were never breached.
Post-employment, they say, Olbrich was entitled to compete with the plaintiff and, in soliciting its clients, he and OBI did not have or make use of any of Guardian’s confidential information. Instead, Olbrich carried with him and used his ‘know-how’ in order to solicit and obtain those clients. Accordingly, he did not breach any duties owed to Guardian.
By a cross claim, Olbrich then asserts that at all relevant times between 1994 and 2004, and of course thereafter, he was an employee of Guardian and thereby has entitlements to the payment of annual leave, leave loading, long service leave and superannuation calculated to the time of his resignation, which have not been met.
He also claims to be entitled to payment from Jackson for the balance of purchase moneys said to be due by Jackson to him consequent upon the acquisition by Jackson of the goodwill of his (Olbrich’s) previous broking business. Prima facie, EJIB was the beneficial transferee of that goodwill, but Olbrich seeks to hold Jackson liable on the footing that he personally represented to Olbrich that he was the party acquiring it.
The trial was a lengthy one, occupying 19 sitting days, and there were 100 exhibits, some of them comprising volumes of documents.
Observations about General Insurance Broking Businesses
The proprietor of a general insurance broking business is required to be licensed as an Australian Financial Services Licensee pursuant to s 913B of the Corporations Act and is subject to the conditions and restrictions contained in that licence. A licensee must nominate one or more persons to be the officers of the licensee or to perform duties on its behalf. In the case of the plaintiff, the person so nominated under its licence was Evan Jackson.
Further, the licensee must ensure that all persons who provide financial product advice on its behalf have properly completed the levels of training required by ASIC. Such persons are commonly referred to as ‘authorised representatives’.
A licensee must further comply with all the prudential requirements set out in its licence.
The ordinary business of a general insurance broker involves consultation with and the provision of advice to consumers, whether individual or corporate, on their general insurance needs, liaison with insurance underwriters who service those needs, negotiating with underwriters and settling with the customer upon the terms of appropriate policies and (in most cases) collecting the premiums from the customer and, after deducting fees and commissions, passing them on to the underwriter. On occasions, premium funding arrangements may be concluded directly with underwriters and, when that occurs, instalment payments will be made directly to that party, which will, in turn, remit commissions to the broker.
In order to satisfy the underwriter that it is authorised by the client to conclude such arrangements, the broker will customarily obtain from the client a confirmatory letter, commonly known as a ‘Letter of Appointment’, and pass it on to the underwriter.
Thereafter, in the absence of any new Letter of Appointment and for so long as that policy (or group of policies) continues and is renewed, the broker will be treated by the underwriter as the client’s agent.
It will thus commonly occur that if a claim is made under the policy, the broker will assist the insured in settling it with the underwriter.
Whilst commission payments represent the principal source of income of a general insurance broker, it will on occasions charge additional service or administration fees.
As commissions are generally calculated on an agreed proportion of the premium charged, it stands to reason that the larger the premium the greater the reward for the broker. It follows, too, that a consumer requiring many different types of policies or the coverage of larger risks will be a more valuable client to the broker, because of the additional services required to be provided and/or the aggregated value of commissions recovered.
These considerations were reflected in evidence given during the trial about the respective values of small or domestic consumers as opposed to larger corporate accounts.
I have spoken about the relationship established between the broker and the consumer over the issue of a particular policy and potential claims under it but, of course, the matter does not usually end there. Policies are mostly issued for periods of 12 months and, assuming the risk coverage is required after that time, the client will seek to renew the policy for a further 12 months, either on the same or adjusted terms, as the case may be.
Ordinary broking practice involves the broker notifying the client well in advance of the impending expiry date and recommending particular renewal arrangements for it. Assuming then that the client wishes to continue with the coverage, the broker will liaise with the same or possibly another underwriter and arrange for renewal, or otherwise a fresh policy with that other underwriter, covering that risk.
In those circumstances, similar commission arrangements will likely apply.
Where a particular client has a number of different policies, it will generally be seen as convenient for all of them to have the same commencement and expiry dates. For some clients, the renewal date may conveniently reflect the end of the financial year but for others it might be a particular date during the year.
It is not uncommon for particular brokers to have preferred relationships with particular underwriters and some underwriters encourage such loyalty by paying incentive or loyalty rewards to them.
It is trite to say it but, apart from those clients known to a particular broker from present or past dealings, it will generally not know, without specific enquiry, the names, contact details and insurance requirements of other potential consumers. Obviously, it can attract custom by advertising or by direct approach but, as the evidence in this case showed, it can also seek to increase its custom by acquiring another brokerage or accessing customer lists containing that sort of information; indeed, there are agencies that trade in such lists.
In the course of establishing its own business, a broker will acquire or develop its own client list and, typically, such a list will contain the name of the client, the names of other entities closely associated with that client who may have insurance needs, the address of the client, telephone and email contact details, the names of particular contact persons, the nature of the policies held by that client or its associates, the annual premium for each such policy and the commissions and fees attaching to it.
Such information is of considerable value to the broker, not merely as its business record, but because it enables it to maintain a continuing and profitable relationship with that client by reminding the client of expiry dates, assisting it with any claims and advising it of any relevant industry developments. It stands to reason that the larger the total commission and fee income, the more valuable the continuing relationship will be.
During the course of the trial I heard evidence from Mr Robert Kelly, the Executive Chairman of the Steadfast Group (‘Kelly’). The Steadfast Group is a public company providing services to a large number of general insurance brokers in Australia. Those services include advice on business relationships, marketing, compliance, premiums, policy wordings, underwriter liaison, brokerage transfer and associated matters. Both the plaintiff and the second defendant are members of that group.
His particular role in Steadfast has been in advising members on the sales of broking businesses and he was able to speak with considerable and unchallenged knowledge and experience of the terms upon which such transfers commonly occur.
He spoke in particular about the value of a broker’s client list. It is the principal asset of a broking business and it can be traded. Most often, indeed, the sale price of a brokerage or a client group is fixed as a multiplier of the total of annual commission and other fees received in respect of the clients on its client list or that client group. Throughout Australia, that multiplier has progressed over the years from 1.5 to 2.5 and more recently has settled in the range of 2 to 2.3. It is a price-fixing formula, he noted, that is very similar to that established for the sale of a real estate rent roll.
The factors that impact upon the size of the multiplier agreed upon in a trade include the number of policies (the fewer the better), the number of retail (as opposed to lesser valued domestic) policies and the length of the established client relationship.
Almost invariably, he said, there is a rise and fall, or clawback, provision in any sale agreement which enables the purchaser to be credited with the value of those clients who elect not to transfer their business following a sale.
He spoke, as well, about the high level of sensitivity attending any sale negotiation, about how both parties commonly sign a confidentiality agreement to assist disclosure during negotiations, and about his own role in bringing parties together in a negotiation without disclosing specific client detail to the interested purchaser.
He was pressed on the multiplier likely to have been applicable to the sale in late 2006 of a book of say 200, mainly commercial, clients and an income stream of about $170,000. He said that the multiplier range valuing that book would be between 1.7 and 2.
His evidence on those matters was not, in the end, seriously contested.
I have dwelt at length on those matters because the plaintiff’s claim was based upon the assertion that Olbrich, and through him the second defendant, had effectively taken from the plaintiff and misused a client list of about that type and size valued at about $170,000 and that its damages should be calculated having regard to the tradable value of that list.
Kelly’s evidence was significant, as well, because Jackson spoke of the level of confidentiality attaching to a broker’s client list. He said that had it come to his attention that, during his time at Guardian, Olbrich had accessed or prepared such a list, he would have immediately sought an explanation from him, because such a list was not otherwise readily available to or accessible by staff and he could envisage no reason why, in the ordinary course of business, Olbrich would need to search and garner such information. Had he known of Olbrich’s activities, he would have dismissed him.
Observations as to Witnesses
Plaintiff Witnesses
- Evan Jackson

I found Jackson’s evidence to be generally reliable, but there were instances where I thought he was stubborn, where he sought to exaggerate his position or where he otherwise displayed an imperfect recollection of events. He was aggrieved, and on occasions emotional, about what he viewed as Olbrich’s disloyalty. Having regard to the nature and length of their relationship, he appeared to have been insensitive to Olbrich’s reasonable career aspirations and that may go some way towards explaining the conduct I have found Olbrich engaged in, but that is another matter.
Overall though, I was satisfied he tried to be truthful and that I can rely upon what he said.
Olbrich was critical of his evidence in several respects and I will deal with them:
·Jackson had confidently claimed that Olbrich was not employed for the purpose of replacing the sales person Greg Smith on the road because Smith was not there at that time and that the cash book would show that. He was later obliged to retreat from that position when that book showed otherwise. He was clearly mistaken but it was a non-issue and I am satisfied he had not deliberately sought to mislead, nor could there have been any real purpose in doing so.
·He said that Olbrich was seeking to join his firm because Olbrich’s previous business, TIS, was then being sold to Elders, but on the defence account and the evidence of its co-proprietor Greg Matz (‘Matz’), that was not so.
I did not consider that to be a very damaging point. It concerned events that had happened 15 years ago and which were of no particular interest to Jackson. The reality is that, on Matz’ evidence, he was not moving his own work base from life to general broking, Olbrich, as the sole general operative, had left the business and it was indeed later sold to Elders. I think it probable that something was said to Jackson, either then or later, about the possibility of Elders acquiring the business.
·Jackson’s evidence as to the Business Rules document was criticised. He related a conversation where Olbrich assured him that he had signed the document, yet it was pointed out that he had not made any reference to that conversation in his affidavits Exhibits D9 or D12.
As to that matter, I elsewhere comment on the absence of particularity in the affidavits of both parties, and upon the circumstances and the purposes of each of the affidavits. In the relevant affidavit (D12), Jackson stated that he had information that Olbrich signed a copy of the Business Rules but had not yet been able to access it. In the circumstances of seeking urgent injunctive relief where Jackson was likely searching for the best evidence and may have had a reasonable expectation that he would find it, I do not find it surprising that he might not have turned his mind to or otherwise felt it necessary to refer to the asserted conversation with Olbrich. Conversely, had Jackson been intending to deliberately fabricate a circumstance tending to demonstrate that Olbrich had signed the document, it appears to me he might have advanced a much more persuasive conversation than that which he reported.
·Jackson’s evidence as to what was said in the 19 October conversation conflicted with the terms of his solicitors’ letter of 24 October 2006 (Exhibit P2, Tab 132) and the affidavit D9. I have commented elsewhere on that topic. It called his credit into question but not in a very significant way, as I find it, and no more than did the corresponding conflict between Olbrich’s affidavit (Exhibit P83) and his evidence.
·Jackson’s evidence was that, contrary to Olbrich’s assertions, when Olbrich joined EJIB he did not have the capacity then to have paid out Olbrich’s asserted bank debt of about $15,000. Jackson’s accountant Tay, on the other hand, said that Jackson could have done that.
I have commented on this topic elsewhere and am not persuaded it is a particularly telling point. Jackson may have had cash flow sufficient to make such a payment, but that does not necessarily reflect his true asset position at that time, a matter upon which Tay, on his presentation before me, would have found it hard to proffer meaningful comment. He had retired from accounting, he appeared to me to have a limited recollection of events and was being asked to speak about the financial position of a former client some 15 years earlier. I was not particularly assisted by that challenge.
- Other Plaintiff Witnesses
Generally, I found the lay witnesses called by the plaintiff to be truthful and reliable and, indeed, their evidence was not the subject of criticism by the defence.
To the extent that the evidence of Guardian’s account manager, Kathleen Karagiannis (‘Karagiannis’) on the topic of the SIM card conflicted with that of Olbrich, I preferred her evidence, which was given in a straightforward manner and was unshaken in cross-examination.
The evidence of an external consultant to Guardian, Michael Harrison (‘Harrison’), was largely undisputed and he had a measure of independence, having later ceased his consultancy with the plaintiff.
As to the witness Kylie Herbert (‘Herbert’), a Guardian client, I regarded it as of some importance because she was independent and it was only after she spoke of having received correspondence from Olbrich that the defence produced the pro forma letter P86. I enlarge on this topic elsewhere. I viewed that development with the gravest misgivings.
As to the various expert witnesses called by the plaintiff, their evidence was again largely uncontentious. Whilst its internal Information Technology (‘IT’) consultant, Peter Mitchell (‘Mitchell’), was still aligned with Guardian, he displayed an appropriate level of objectivity, albeit that to the extent that any of his evidence conflicted with that of IT experts Mark Gare (‘Gare’) and Philip Kernick (‘Kernick’), I preferred the latter two witnesses.
Mr Alan Tay (‘Tay’) was a retired accountant who had previously attended to Guardian’s books and who, separately, had advised Olbrich about whether he should seek to be engaged in the business as an employee or an independent contractor.
His account of those dealings was not seriously disputed. The defendants pointed to his evidence that Jackson at relevant times had the capacity to pay amounts of up to $15,000 to Olbrich, but his basis for asserting that was not apparent. He had seen the cash book (Exhibit P8) and some group certificates, but they were the only records he had seen. Notwithstanding his comparatively recent retirement, his recollection of other matters touching upon the business was limited indeed and he even seemed quite unsure when it was he had ceased to act as Guardian’s accountant. Whether he was speaking of a capacity to pay $15,000 to Olbrich in terms of cash flow or nett asset position was never elucidated.
I discuss the evidence of the computer experts elsewhere, but the remaining expert witness whose evidence was uncontested was that of Kelly and I have spoken of him already.
Defence Witnesses
- Olbrich
Overall, I had a distinctly negative view about the credibility or reliability of Olbrich’s evidence.
His general presentation was over-confident on matters where he felt safe and he did not appear to me to be unduly concerned over several instances where he was challenged on self-contradictory statements. At times he appeared to find the process mildly amusing. As I discuss below, when challenged about some matters of importance he retreated to the position of saying he could not remember, and I had serious reservations about his conduct in connection with discovery of documents. He was confident enough about his knowledge of computers to suggest that certain of the expert IT evidence on the topic of transferring electronic material to another medium was wrong.
Where his account conflicted with that of other witnesses, I generally preferred that of others.
I mention the following particular aspects of his evidence:
·His claimed inability to recall generating the SQL search Exhibit P46 in March 2006, which I find absurd and unconvincing given its size, its level of complexity, the wealth of detail it contained and its importance in the context of this case. That asserted memory loss became even more unconvincing in the face of expert evidence that the results of that search could not, practically speaking, have been viewed on the screen except by the deliberate act of saving them to a desktop location, yet by 13 October 2006 there was no record of that having occurred. Such a record, they said, could have been erased.
It was inconceivable to me that Olbrich would go to the trouble of creating such a complex enquiry and not seek to view it, let alone retain it. The inference which I have drawn, in all the circumstances, is that he did indeed view the results of that enquiry by saving them to a particular location on his desktop and on all the evidence it must follow that at some later stage he consciously deleted the ‘document’.
I am not persuaded that a series of complex actions of that kind and containing such comprehensive and valuable information about Guardian’s clients would not be remembered by him, and I am satisfied he deliberately sought to mislead over this.
Further, he proffered a reason for instituting an enquiry of that kind which was fatuous. I have cited it elsewhere.
Other evidence made it plain that the nature of the material sought by that enquiry, and indeed the combination of the various fields in it, could really indicate only one purpose, namely, one of gathering a list of Guardian clients along with all the ancillary information that would be valuable if one were to compete for those clients.
·Olbrich’s conduct in generating other client lists (Exhibits P24 and P25 – the latter in 2005), which he acknowledged but for which he again gave an explanation that was unconvincing. I have dealt with this elsewhere. I prefer Jackson’s evidence that in the ordinary performance of his duties with Guardian, he can have had no need for the preparation of such lists.
·His deletion, on the night before his departure from Guardian, of the client lists containing details of 116 clients and his explanation for it.
·There was confusing evidence about Olbrich’s paper diaries. His solicitors advised in correspondence that he had never kept paper diaries whilst at Guardian. Subsequently, in evidence, Harrison spoke about seeing him using a diary.
When later confronted with his solicitors’ letter, Olbrich said it was incorrect, that he had used paper diaries up to about 2005 and that he believed he had left them in a box at Guardian’s office. He was unable to produce them.
Subsequently, it emerged that after leaving Guardian in October 2006 he had used his wife’s paper diary for the purpose of recording some appointments. It had never been discovered but was called for and produced. No satisfactory explanation was advanced for its late production and, all in all, I had reservations as to Olbrich’s evidence on the whole topic, particularly in the face of the explicit denial of his solicitors.
·He sought to explain the absence in Guardian’s electronic diary during and after October 2006 (that is to say, surrounding the time of his resignation) of many forward entries relating to policy renewal appointments for the clients he serviced, on the basis that forward entries were always made at a relatively late time and that most of them were in any event made by staff members and not by him.
As to the first proposition, there was evidence that Guardian’s procedure for scheduling renewal appointments in fact operated several weeks in advance of the renewal date and that entries were variously made by Olbrich and by staff. Further, there was evidence that Olbrich had continued to see renewal clients right up until 19 October and that many outstanding renewals remained to be completed, with ancillary appointments, after that time. There was no good explanation for the limited number of entries in that period and on the basis of what I have otherwise found, I consider it likely that Olbrich made appointments with those persons independently of Guardian’s system and removed staff entries in his electronic diary (which he was at liberty to do).
·At one point (T/S 1305) when confronted over the possession of a particular document, he sought to make a fatuous distinction between documents held personally by him and those held by his solicitors.
·On the topics of the alleged debt owed to him by Guardian over the acquisition of his Insurance Shop clients and the amount of his ANZ Bank debt, his evidence was internally conflicting and unpersuasive. He had at first asserted in an affidavit (P83) that there was a purchase price agreed for that book of clients of $40,000, of which $8,000 was immediately paid by Jackson to assist him with a house purchase. Then his cross claim in those terms was amended to assert that a further payment of $15,000 had been made on that debt and that that payment satisfied a debt he and his wife had to the ANZ Bank. Then in examination-in-chief he said the bank debt and Jackson’s payment was between $5,000 and $20,000. Later in cross-examination, he said the debt was ‘in the area of $11000 odd’ (T/S 1278) and then that it was in the $11,000 to $15,000 range. I have commented elsewhere upon the absence of any evidence on the topic from the ANZ Bank or Mrs Olbrich and on the unexplained management fee payment of $15,000 shown in the books of the TIS partnership. All in all, his evidence on this topic was unconvincing and unsatisfactory and, save for the $8,000 payment which Jackson agreed (but which he said was paid in recognition of the business transfer), there was no independent evidence of any other payment.
·There was abundant evidence that, as of 2006, he had a significant level of skill in dealing with computers generally and with Guardian’s computer system. In consequence, he had effectively had during most of his time there full systems administrator access rights to the Guardian system.
When the plaintiff employed another to manage that system in 2005, he temporarily lost that full access and so it was in August 2005 that he complained to Lou Borrello and Chris Evans about being unable to run reports in an effective way (Exhibit P48). In the event, he was provided with the relevant password and thereby regained full access to the system.
Whilst his complaint did not itself ask for the password, it yielded it, and I have reservations as to his reasons for making it when, on all the evidence, he could have accessed the information he was seeking without the need for the password. It appears to me he was anxious even then to regain full access to the system.
·I discuss the matter elsewhere, but I found his evidence about the timing of his disenchantment with Guardian and his decision to leave to be unconvincing. I am satisfied on all the evidence that he was unhappy there from at least March 2006, and probably from much earlier than that, and that his conduct from that time was directed towards securing such material as he considered would assist him were he to leave and compete with his employer. It may be that he did not make the final decision about doing that until close to 19 October, but I am satisfied that he was in the meantime taking steps to secure that information.
·I have elsewhere discussed the evidence relating to the day of his resignation but whatever may be said about the evidence of either of them, it is apparent and he concedes that he lied to Jackson about his intentions.
·His evidence about the Guardian Business Rules document (Exhibit P1, Tab 21) was unpersuasive. His primary position was that he did not recall the document at all but, in the face of the email correspondence and the demonstrated fact that he had witnessed an employee, Easton, execute her own copy, he conceded that he probably had received a copy. He disclaimed any participation in its creation, but again I prefer Jackson’s evidence that the document was discussed within the management committee of which Olbrich was then a member. I find it highly unlikely that a document of that importance would not have been discussed by that body and it is inconceivable to me that he would have no recollection of its formulation or of receiving or seeing a copy, let alone being asked to sign one.
·There was then the very late discovery, indeed during the course of trial, of a copy of the pro forma letter that Olbrich had sent to a number of Guardian clients on 28 October 2006 (Exhibit P86). It was produced only after the plaintiff’s witness Herbert spoke of receiving such correspondence. Even then, the original (electronic) distribution list, indicating to whom it had been sent, was not. It had been deleted, said Olbrich, and what was instead tendered to the court was, he said, a hard copy of that list (Exhibit P87). Why the distribution list was deleted but the letter retained was not adequately explained and, more significantly, how it can have been considered that neither document was one directly relevant to the plaintiff’s claim is beyond my understanding. It appeared to me that it was produced only because of the challenge about it to Olbrich and the evidence of Herbert. Either way, its late production discredited him.
·Further to that last matter, I regard it as a matter of some significance that the list P87 is written up in a form that discloses what I would regard as an intimate knowledge as of 28 October – that is, nine days after resignation – of the full names of 73 insured parties to whom P86 was sent, their addresses and their first and last names, all in a format quite similar to the way such information was recorded in Guardian’s database. That level of detail purportedly compiled within such a short time of his departure is inconsistent, as I find it, with his claim to have simply acted on know-how.
·His claimed lack of memory extended to the reasons for generating what appears to me to have been the critical document of March 2006 (P46), the explanation he proffered for the 116 files being present on his computer the night before his departure, his possession of client lists, his involvement with the Guardian Business Rules and his uncertainty over the amount of the ANZ debt. These were all matters of significance and I was simply not prepared to accept his claim not to recall them or the detail of them.
·He gave curious evidence about selling properties in order to invest in TIS business when it became apparent on his own evidence that he was then in straitened financial circumstances and on the evidence of Matz that he did not advance any capital towards that business.
·I have reservations about his claim that he did not discuss with Westcourt prior to 19 October confidential information relating to Guardian’s clients. I am satisfied he had by then already secured confidential information from Guardian and, even on his own account, a confidentiality agreement was signed with Westcourt in order to protect the interests of both of them.
He asserted that Westcourt asked him nothing about the type of business that he was doing at Guardian. I find that to be extremely unlikely. Further, he said he made no notes of any of his discussions with Westcourt and certainly none were produced. That seemed to me to be even more surprising. No witness was called from Westcourt on these matters.
·He said in evidence that there was nothing time‑critical about the moment of his resignation and that he would have been prepared to serve four weeks’ notice, but evidence of the timing of his incorporation of OBI and his dealings with Westcourt showed quite to the contrary. It was plain that he had everything in place to commence the business of OBI on the day following his resignation and it is evident from the email traffic that he was dealing with Westcourt on the basis that that would certainly happen.
·He said in evidence that the particular client Adelaide Pool & Spa did not have anything requiring urgent attention when he spoke to its proprietor on 19 October 2006, yet the reality was that its renewals were due on the following day.
·He gave evidence about a conversation with Hollands of Westcourt before his resignation which is quite inconsistent with an email touching upon the contents of that conversation (Exhibit P1, Tab 78).
·His evidence about the SIM card and his dealings with Karagiannis was unconvincing and conflicted with the contents of the emails Exhibits P56 and P57. It is evident that the SIM card was offered to him and was able to be used in his mobile phone, but I find that he chose not to accept and use it because he preferred to retain client information held on his own SIM card. I found his claim that his own SIM card did not contain any client contact details to be highly improbable.
·He claimed (at T/S 1531-1534) that he could not have printed Guardian information accessed through his laptop to a remote printer and that he could not save documents to his home computer system or to any external medium connected either to his laptop or, indeed, to his desktop computer, when the expert evidence, which I prefer, was quite to the contrary. I am satisfied he knew otherwise.
·His evidence about the $8,000 sum being used by him as a deposit on a house was challenged, but in reality he seemed to regard a ‘deposit’ as an equity contribution on the purchase of his house. I did not think much turned on that.
·I found his evidence as to a lack of awareness of the true proprietor of Jackson’s business, at the time he joined it, to be unbelievable. Whilst he may not have known of the precise structure behind the business, on his own confession he knew Jackson had a company and a trading name. He plainly had enough business experience and acumen to be put on enquiry about who Jackson was speaking for, particularly as it was to become his employer.
His assertion that he believed he was dealing with Jackson in his personal capacity appears to me to have been advanced solely to circumvent the need to pursue EJIB.
·His evidence that he was able to attract 216 of Guardian’s clients to OBI (after allowing for those he was not able to persuade) was explained on the basis that these were all clients he was able to attract because of his know-how – that is to say, he knew of their names or their whereabouts and constructed that client base solely using that information and his own enquiries through public sources.
Even allowing that he had serviced some of those clients for a long time, in the context of my observations as to the value of those clients and the timing of their Letters of Appointment, I do not accept his claim to have sourced all of them at particular times, and many so soon after his resignation, solely by exploiting his know-how.
·The plaintiff sought to make something of the apparently conflicting evidence between Olbrich and Matz over Olbrich’s claim that Matz returned to work in the general insurance area and that that threatened his income. I did not think that attack went very far because the taxation material upon which it was based ended at a point some 10 months prior to Olbrich’s departure.
·His claim as to the value of the TIS client book was not borne out by other evidence he gave, nor independent evidence going to its profitability.
·I have elsewhere spoken about his claim to have been owed money by Jackson personally in circumstances where in the interim separate loans and repayments were arranged with Jackson and where the asserted liability was not raised until after 19 October.
·His assertion, later not pursued, that he was entitled to 15% of Guardian as at 19 October, did him little credit in the face of the evidence.
- Greg Matz

The defendants also called Olbrich’s former business associate, Matz, to speak about the circumstances of their dealings in 1994/95. Matz had quite a limited recollection of those events and believed that Olbrich had worked in his business for between eight months and a year, when the evidence disclosed that it was a period close to three years.
I thought he did his best to recall the nature of his dealings with Olbrich, albeit that in the context of his limited recall, I had reservations about the level of detail in his claimed recollection of discussions he had with Olbrich about Jackson paying out the aged business loan. He was quite unable to proffer any explanation for the payment by the business of a management fee of $15,000 in the 1994 year, nor as to who the recipient was, and that struck me as quite surprising. Pertinently, at one point he said he was not thinking of selling the general insurance business when Olbrich left but he did sell it to Elders some 18 months later.
The Expert IT Evidence
Four IT experts were called, but not all for the same purposes.
The plaintiff called Mitchell because he had been a consultant to the firm since 2004. He had had dealings with Olbrich prior to 19 October 2006, had closed out Olbrich’s access to the Guardian server on that day and had enabled Guardian personnel to subsequently access his profile.
Simon Miller (‘Miller’) was called by the plaintiff. He was a chartered accountant and had IT expertise as well. His evidence focussed principally upon steps he had taken to recover data from the Guardian system, particularly relating to Olbrich’s dealings.
He and Mitchell also spoke of various activities observed in Olbrich’s computer profile and their evidence was largely uncontentious.
Where, however, it conflicted with that of either of the experts Gare or Kernick, I preferred the evidence of the latter two, as each of them appeared to have a higher level of knowledge and skill in the IT area.
For the most part, the evidence of each of Gare and Kernick was not contentious, but to the extent that there was any conflict, it was on matters of lesser relevance and I generally preferred the evidence of Gare. He presented as truly independent, whereas Kernick was rather less detached and, indeed, on a few occasions was minded to adopt an argumentative approach.
In noting ‘Book 2.xls’ (Exhibit P21) was created on 31 October 2006, he proffered that that was ‘after Mr Olbrich had left’ (T/S 1190). At another point he was prompted to note that Olbrich’s laptop had been used by other staff and, at T/S 1202, he commented in response to a question in cross-examination:
We have got clear evidence in the past that documents have been changed, modified, moved on the laptop after Mr Olbrich has left …
These gratuitous, seemingly partisan, remarks displayed to me a lack of complete objectivity, albeit that for the most part he sought to speak as an independent expert.
The Expert Accounting Evidence
Each of the parties called an expert accounting witness to speak of the means by which the court might proceed to assess the value of the client business taken by the defendants from Guardian after Olbrich’s resignation, were that task to become necessary.
The number and the commission and fee values of those clients were not in issue and the evidence turned on how that business might best be valued.
I had no difficulty, based on their evidence and in particular the evidence of Kelly, in concluding that a book of clients has a commercial value, not merely in terms of the immediate commission and fee income that might be earned from it, but on the footing that it can reasonably be expected that a good proportion of that book will continue to provide an income stream to a broker as policies come up for renewal.
The plaintiff’s expert, Phillip Dewing (‘Dewing’), suggested two approaches to the quantification of that loss. The first involved a calculation of the nett present value of a book of clients lost to Olbrich and valued in the first year at approximately $176,000. He then adjusted that figure for what might be termed ‘natural attrition’ and set against it the costs saved as a result of the absence of Olbrich’s wages and the administrative costs of servicing that client income. He suggested that the resulting figures showed the loss of a nett positive income in 2006 of some $54,000 and that (with what he suggested was a demonstrated increase in earning capacity) that loss would have aggregated over the following years. He selected a five-year period as an appropriate span. He then discounted those future losses for present payment and estimated that the nett present value of the expected loss of nett income was $337,000.
Otherwise, he contended it was possible to calculate that loss by having regard to the market value of the lost clients and upon the footing that that group of clients could have been sold to a third party, as happens in the industry. He suggested that current market values of client lists ranged between 1.7 to twice annual earnings and that if that calculation were applied in the present instance, the losses would range between $279,000 and $328,000. In suggesting those market value multipliers, he claimed some, but quite limited, experience of that market.
The defence called Brian Morris (‘Morris’), chartered accountant. He was critical not so much of Dewing’s methodology but of particular assumptions Dewing had made with respect to the maintenance and retention of clients, growth in fee income and expense savings, and suggested they were not justified on the information before him. Based upon his adjusted figures, he concluded that the loss of the Guardian clients to the defendants had not actually resulted in any nett loss of profit to Guardian.
Both experts were cross-examined closely on these issues but I am obliged to say that, in the end, I have not found it necessary to resolve their differences. I say that because, having heard all the evidence, I found myself satisfied that the market value approach to loss was the more realistic and reliable one. Dewing ultimately concluded that and the evidence of Kelly strongly supported the position that the market value approach is the one most commonly adopted when client books are traded. For his own part, Morris did not claim expert knowledge of how that approach was applied in the industry, but accepted that it was a legitimate approach to the calculation of loss.
Further, I note that the market value approach was the one preferred in the case of Halliday & Nicholas v Corsiatto[1], involving an insurance brokerage, and Southern Real Estate v Dellow[2], a case involving a rent roll.
[1] [2001] NSWCA 188
[2] (2003) 87 SASR 1
As to the appropriate multiplier, I was particularly assisted by the evidence of Kelly, who said that the multiplier would likely increase the fewer policies there were, the greater the number of retail policies and the longer the existing commercial relationship. As of the time he gave evidence, the market multiplier was, he said, in the range of 2.3 to 2.6 but as of 2006 he thought the range was between 1.7 and 2, depending again on the make-up of the book.
He went on to say that most market sales contained a rise and fall-type provision enabling the purchaser to claw back some part of the purchase price as and when transfer clients were in fact lost. That consideration is not a relevant one here, as I find it, because we are here dealing with a set book of clients that actually did transfer to the defendants. The separate question of whether some of those clients might have transferred in any event, is a matter I will deal with when I discuss damages.
Detailed History
Jackson has, for the greater part of his life, worked in the insurance industry. In the early 1990s he was working for Zurich Insurance (‘Zurich’) as a divisional manager and it was there that he first met Olbrich. Olbrich had been in the industry for a relatively short period and had been transferred to Adelaide from the firm’s Darwin office. He then worked under the direct supervision of Jackson and they were together for about a year.
- The Insurance Shop
In May 1991 Olbrich left Zurich and entered into a partnership with Matz. At that time Matz was carrying on business in Gawler as a life insurance agent under the name of GJ and JA Matz and Associates. In the course of that business he had from time to time also arranged general insurance for a small number of clients. Whilst his place of business was at Gawler, his clients extended through to Adelaide and its metropolitan area.
Olbrich was keen to establish himself as a general insurance broker and was confident that some of the contacts he had garnered through his work at Zurich would follow him into the new business.
In consequence, a partnership was formed involving Matz and his wife and Olbrich and his wife, and a general insurance broking business, separate from life broking, was established to operate from Matz’ Gawler premises under the name of The Insurance Shop. It began in about 1991 and was principally conducted by Olbrich on behalf of the partnership; Matz continued to work in life insurance and neither of their wives actively participated.
It carried on until August or September 1992, at which time the parties incorporated ‘The Insurance Shop Brokers Pty Ltd’ and transferred the business to that entity. It continued to trade under that proprietorship until about May 1994, when Olbrich left to commence his engagement with EJIB. Matz continued it for some 18 months afterwards but then sold it to Elders.
On Olbrich’s account, during the short time he was working at Gawler, he was able to enlarge the existing book of general insurance clients by a significant measure from an annual premium income of about $250,000 to one just short of $1 million.
It was common ground that there is a rough proportional relationship between the total of all premiums levied upon a book of clients and the commission and other fees income likely to be derived from that book. That proportion is in the vicinity of perhaps a little less than 20%.
There were no financial or taxation returns available for the TIS partnership or company for the 1992 or 1994 years, but the combination of the income and expense accounts for the partnership and company during the 1993 year disclosed a total income of $126,000 and a nett loss of $1,400. The gross commission income did not thus appear to be proportionate to Olbrich’s estimate of gross premium and, indeed, in his affidavit P83 Olbrich had asserted that the gross annual premium when he left there was about $250,000.
- Olbrich Leaves The Insurance Shop
The circumstances of Olbrich’s departure from The Insurance Shop Brokers Pty Ltd and his engagement by EJIB were contentious.
Olbrich explained that his departure from that business was a consequence of several factors. In the first place, he said Matz was finding that life insurance business was declining and was wanting to more actively participate in the general insurance side and to be paid for it. Matz, for his part, did not agree with that.
Further, said Olbrich, he had suffered a number of financial reverses and could not see that he could readily restore his financial position were he to remain there. He and his wife had previously operated a snack bar for a short time, had lost heavily in it and in consequence were indebted to the ANZ Bank for a substantial amount. His evidence as to the exact amount was unsatisfactory, as I discuss elsewhere, but it ranged between $11,000 and $20,000. They had carried that debt for some time and he saw no prospect of readily paying it out. I should say here that the TIS income figures available to the court tended to support that assessment.
Further, as a result of his financial difficulties, he had sold the family home and was living in rented accommodation.
- Evan Jackson Insurance Services/Guardian Insurance Brokers
I turn then to Jackson. He had left Zurich in August 1991 and established his own broking business, at first in his own name trading as Evan Jackson Insurance Services, but in 1992 incorporated as EJIB. It grew quickly and he was looking for experienced staff.
He had been in occasional contact with Olbrich since their ways had parted at Zurich and it is common ground that over a series of discussions in 1994 there was talk of Olbrich leaving TIS and coming to work at Jackson’s business, and indeed that occurred in about May 1994.
- Olbrich’s Engagement by Evan Jackson Insurance Services and later Guardian Insurance Brokers
The content of their discussions is important in these respects:
(1)- With whom did Olbrich contract?
Olbrich says that at no time in his negotiations with Jackson leading to his engagement by the business was he aware that it was conducted by EJIB, that he believed he was dealing with Jackson personally. He admitted he knew of the business name Evan Jackson Insurance Brokers (it was on the shopfront) and even that Jackson had a company, but otherwise said he believed he was being engaged by Jackson. His cross claim for the asserted debt was thus brought against Jackson personally. Olbrich did not identify any conversation he had had with Jackson about that topic but neither, for that matter, did Jackson. Jackson’s position was that it was manifest at all times that he was conducting his business through EJIB.
On this topic, for reasons I discuss elsewhere, I had no confidence in Olbrich’s account. Whilst it may be he was unaware of the precise identity of the proprietor of the business, he knew of the business name and the existence of a company and it must have been plain to him that Jackson was conducting the negotiations on behalf of that entity. Indeed, the identity of that party would have become immediately known to him once he commenced work there, because he was paid with the company’s cheque. I am not prepared to accept that there were not other materials in the office which he likely dealt with prior to his engagement and which made plain to him the existence of EJIB.
Further, it seems to me that ordinary principles of agency would support a clear inference that Jackson’s conduct of the engagement negotiations was undertaken on behalf of EJIB, a business entity the ownership of which Olbrich, with his business experience, might have easily ascertained. The fact he may not have known of its exact name or status is not to the point.
Finally, it must be that Olbrich knew his partnership was on the face of things contracting to provide services to EJIB. There could have been no reason for Jackson to personally acquire a book of clients and, indeed, the $8,000 which was paid to Olbrich was paid by EJIB.
Plainly, Olbrich cannot bring his asserted claim for the sale of his business book against Guardian, as it was not then in existence, and in the context of my general observations as to his credit, I view his assertion that Jackson personally agreed to purchase his book with considerable misgivings.
(2)- Did EJIB agree to purchase Olbrich’s clients and, if so, for how much?
It was common ground that Olbrich wanted to bring some of his Insurance Shop clients with him and anticipated, as proved to be the case, that he could reach an agreement with Matz over the proportion that would be transferred. It was not in dispute, either, that Jackson was little interested in any part of that book; his wish was that Olbrich would service EJIB clients and he was confident that there was sufficient work for Olbrich to be fully occupied in doing that. Even so, he did not ultimately object to Olbrich bringing some clients with him.
Olbrich then negotiated with Matz on the footing that rather than being paid out for his interest in TIS, he would instead take a group of clients with him, leaving the balance for the company to exploit.
Inherent in that negotiation was a recognition that The Insurance Shop Brokers Pty Ltd then had debts variously estimated at between $15,000 and $60,000. As the plan was for the company to retain that debt and relieve Olbrich of any liability for it, it was agreed that Olbrich would take a lesser proportion of its book of clients. In the event, said Matz, he retained 60% of the company’s book and Olbrich took 40% with him. In the absence of the company returns, I am unable to determine the overall value of that book or of Matz’ concession.
Olbrich said, however, that the value of the commission income attaching to his 40% of that book was $40,000 per annum and that he agreed with Matz that the relevant multiplier at the time was 1, hence that $40,000 was the value of the business he brought with him to EJIB and the amount Jackson personally agreed to pay him.
Other evidence cast doubt on that. His assertion, in P83, that the total premium income was then $250,000 implied, on all the evidence, a commission income of $50,000 per annum and 40% of that figure calculates at $20,000.
Further, even if the figure of $40,000 were to be accepted as 40% of TIS’ annual commissions, then its gross annual income of $100,000 implies a total premium income, not of $1 million, as Olbrich elsewhere asserted, but something less than $500,000.
Matz’ evidence was of no assistance on this matter, he had a very limited memory of events altogether, but he did say that TIS had traded at a loss in the 1993 year. Notably, too, he said, and contrary to Olbrich’s claims, that neither party had contributed any capital to that business.
I have already discussed how Olbrich’s pleading and evidence as to the amount Jackson remained indebted to him fluctuated between $32,000, $17,000, $15,000 and $11,000, and how there was no good evidence as to the true amount of his ANZ debt. He further went on to say that there was no agreement as to the time at which the balance would be paid. At a later point he said he had told Jackson that he would not require it to be paid unless he was to leave the business.
For his part, Jackson said that he had not sought to negotiate any figure with Olbrich for the purchase of his business as, whilst the book was of some significance, it covered different areas from EJIB’s business and he did not particularly want it. He told Olbrich as much and in evidence Olbrich did not appear to dispute that. Jackson was, however, conscious of Olbrich’s wish to bring his clients, of his general financial position and of his desire to purchase a home and it was in those circumstances that he said to Olbrich that EJIB would pay the required deposit of $8,000 and that that payment would be the consideration for the client book Olbrich would bring with him. He said Olbrich agreed with that and a cheque for $8,000 was thereupon drawn on EJIB’s account and given to Olbrich. No other sum or arrangement was ever agreed upon.
To rebut the challenge that the amendment of his cross claim to plead a further payment by Jackson was a recent invention, defence counsel asked Matz about a conversation he had with Olbrich at the relevant time. Matz recalled that Olbrich had told him that Jackson would be paying out his loan but he was unable to recall any sum being specified.
A separate but potentially related question arose during the course of Olbrich’s evidence. The partnership return of TIS for part of the 1993 year disclosed as an expense item a ‘management fee’ of $15,000. There was no corresponding expense during the balance of that year when the company took over the business. Olbrich was unable to explain the $15,000 sum, but did say that, to the best of his knowledge, nobody was then paid any management fee by the partnership. Matz could not recall one being paid either and was unable to explain the entry, albeit that he said that it might have been part of an $18,000 income figure for management fees shown in the company return. Even so, there was no explanation for that entry either.
Apart from the agreed and documented $8,000 payment by EJIB (not Jackson), no documentation was adduced by Olbrich tending to support the payment by Jackson to him or to the ANZ Bank of $15,000 or any lesser sum, nor was any witness from that institution called by Olbrich. I am thus left to wonder at the coincidence that that same $15,000 figure found its way into the partnership accounts as an item of expense. Given Matz’ limited recall of or interest in events that occurred in 1993, it is possible his recollection of discussions about payment of Olbrich’s bank debt could be confused with the fact that that payment was made directly by the TIS partnership to satisfy Olbrich’s ANZ debt. It otherwise seemed remarkable that he could not explain a $15,000 management fee yet could remember a conversation with Olbrich about the asserted debt arrangement with Jackson, in circumstances where Olbrich himself did not appear to have recalled it until the time of trial.
Three further matters touch upon this topic:
(a)By an email of 3 February 2006 addressed to Jackson and to the Guardian consultant Harrison, Olbrich spoke about turning 40, reaching a milestone in his life and looking at his ‘current position and … obligations / responsibilities and future’ (Exhibit P95). He then went on to propose that he be appointed office manager of the business and invited formalisation of an ‘informal agreement’ with Jackson that he be given 15% of the company. That email made no mention of the balance of the asserted debt owed by Jackson and it appears to me to have been a curious omission. In all the circumstances, I would have expected that, in his apparent desire to regularise or formally establish his position in the company and his relationship with Jackson, he would have touched upon it.
(b)At the very least, I would have expected that Olbrich would raise the issue at the time of his resignation when, on his account, it was certainly payable, yet he did not.
(c)It is common ground that during the course of Olbrich’s engagement with Guardian, Jackson loaned him several substantial sums of money, which he repaid. On one particular occasion in 2004, Guardian itself loaned him $3,000 and that loan was recorded in a form document (Exhibit P3, Tab 176).
There is no evidence that Jackson needed those moneys at any particular time but Olbrich did. It seems to me quite extraordinary and highly unlikely that such arrangements would be completed between the parties in circumstances where, at least on Olbrich’s account, Jackson remained continually indebted to him in an amount of about $17,000 or thereabouts.
Having particular regard to my observations on credit, I should say I prefer the evidence of Jackson on this matter and I am satisfied and find that there was no agreement concluded of the kind Olbrich asserted. Jackson was, as I find it and as Olbrich even allowed, largely disinterested in TIS clients and all that was agreed was that he would, in recognition of that transfer of business, pay Olbrich an amount of $8,000, which happened to be the margin Olbrich was seeking to complete the purchase of a house.
There is not a shred of corroborating evidence as to any other payment having been made by Jackson to or for Olbrich on that account, nor any documentation of any kind supporting the existence of some other agreement or arrangement. The books of EJIB were produced at trial and they supported no more than the $8,000 payment. No evidence was called from Olbrich’s wife nor from ANZ Bank as to any of these matters and no good explanation was advanced for that.
(3)- In what capacity was Olbrich engaged?
I turn then to the question of Olbrich’s status at the time he was engaged by EJIB. Whatever was the nature of that relationship, it was common ground that it continued with Guardian after the business of EJIB was transferred to Guardian.
I will deal first with the factual background to this and will then touch upon the legal issues.
Jackson asserted, and Olbrich did not seriously dispute, that when Olbrich’s transfer to EJIB was being negotiated, they talked about whether it was preferable for him to work as an independent contractor or as an employee. Jackson says that he suggested to Olbrich that he take advice about it and that Olbrich went away to do that. Subsequently, Olbrich said he wished to carry out his work on the footing that a partnership between him and his wife would independently contract to provide services to EJIB.
Tay remembered a meeting he had with Olbrich at about that time and in the course of which Olbrich sought his advice on the question of whether he should undertake employment or operate as a contractor.
Olbrich did not recall that but did not deny it, nor that he and EJIB then agreed that he would not become an employee but that his family partnership would provide services to EJIB. Nor was it contested at trial that that arrangement continued after Guardian took over the EJIB business and through until February 2004, when the parties mutually agreed to change Olbrich’s status to that of employee.
Of course, the fact that the parties chose to characterise their arrangements in those ways is not conclusive in a legal sense, but I mention it now because it is plain and I find that at the outset both parties sought to establish the relationship of principal and independent contractor and that Olbrich did so after taking professional advice.
As an adjunct to that question, it is further not disputed that the parties negotiated an annual contract sum for those services at a fixed amount plus a percentage of commissions earned.
Within that framework I find it became a matter of practice between them that Olbrich could absent himself or take annual leave or its equivalent as and when it suited him and sick leave as he needed it, albeit that he would notify EJIB or Guardian when he proposed to do that. Such a notification would have been in the interests of both parties. Olbrich purported to characterise these arrangements as an agreed and paid annual leave allocation but I am not so persuaded. His annual income was a fixed amount and he took leave as and when his work tasks permitted. These matters have some resonance when I come to discuss the cross claim for leave loading.

I have elsewhere found against Olbrich’s claim that he was owed any further moneys by Guardian or Jackson for the purchase of his Insurance Shop clients.
I turn then to his claim for employee entitlements.
As to the first defendant’s entitlement to annual leave on termination, the quantum was agreed at $5,256.92. The plaintiff faintly sought to argue that he was not entitled to leave loading of 17.5% on that figure because there was no assurance that as his employer it would have continued to pay that sum, but I am not persuaded by that and I therefore find that he is entitled to a total of $6,176.88, payable as at 19 October 2006. He is also entitled to simple interest on that unpaid sum and again I fix an amount of $1,870 in lieu of interest.
As to the first defendant’s entitlement to leave loading, the defence contention is that it arose by implication from custom and practice. It referred to Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia)Ltd[30] and Byrne v Australian Airlines Ltd[31]. Here, said the defendants, the evidence was that the plaintiff had been in the habit over that time of paying all of its employees annual leave loading as a matter of practice and, by implication, the first defendant ought to have been paid that loading too.
[30] (1986) 160 CLR 226 at 236
[31] (1995) 185 CLR 410 at 423
I accept the evidence of past practice but am not here persuaded it justifies the conclusion that Olbrich, as an employee, would have been paid any sum beyond that which was agreed between the parties as an annual and purportedly a contract fee. I find that because I prefer and accept Jackson’s evidence that at the time Olbrich was engaged by EJIB, the terms agreed upon were a fixed annual payment of $32,500 (which was paid in weekly amounts of $625) plus 25% of commissions earned by him above that amount. I am satisfied that that payment was agreed upon before the parties settled upon what would be Olbrich’s status and that it reflected the full annual amount that was to be paid to Olbrich, whether he chose to become an employee or an independent contractor, and that had he opted for employment, that same amount would have included all his employee entitlements, including annual leave loading.
Put another way, it was the figure the parties agreed upon as Olbrich’s complete annual reward for his work at Guardian, whether his status was to be styled as independent contractor or employee. Jackson did not propose one figure if Olbrich were to become an employee and another figure if he were to become an independent contractor.
As an employee, annual leave loading based on that income would have been worth at least $425 per annum and, having taken professional advice about his proposed status, Olbrich can be presumed to have been well aware of that.
There was then no evidence that that situation changed once Guardian became the party paying Olbrich and I am satisfied that by opting to be styled as an independent contractor through his partnership, Olbrich was well aware that he would not be paid leave loading and that he waived that entitlement. It does not seem to me that my finding that he was in reality an employee in some manner negates the effect of those negotiations or that waiver.
I do note that from 2004 he began to receive leave loading but I am satisfied his engagement terms were renegotiated then, anyway, and I thus draw no inference from the fact of that change.
For all these reasons, I dismiss that part of Olbrich’s claim as to annual leave loading.
Otherwise, having regard to my finding as to employment, I am satisfied that Olbrich is entitled to recover from Guardian superannuation and long service leave entitlements and it is otherwise agreed between the parties that he has an entitlement to annual leave on termination. I will deal with those figures in a moment.
I turn then to his cross claim for long service leave entitlements. Although I have found that Olbrich was at first employed by EJIB and only came to be employed by Guardian in September 1995, I am satisfied that both of those entities were related corporations, given the meaning of the Long Service Leave Act 1987 (SA). I am satisfied and find on the basis of the evidence of Morris that Olbrich was thus entitled, as of his resignation, to an amount of $23,024 by way of long service leave and I fix an amount of $6,970 in lieu of interest on that sum. I am not persuaded that, in purporting to characterise himself as an independent contractor, Olbrich waived or could waive what was a statutory entitlement to long service leave.
Separately, there was Olbrich’s claim for superannuation contributions which he said ought to have been paid to him as an employee from May 1994 until February 2004, when he became an employee and in fact commenced to benefit from those contributions.
I am satisfied that pursuant to s 12(3) of the Superannuation Guarantee (Administration) Act 1992 (Cth), Olbrich was a person who ‘work(ed) under a contract that (was) wholly or principally for the labour of the person … (and was thus) an employee of the other party to the contract’.
By legislation, the rates by which those contributions were to be paid varied between 1994 and 2004, but in that respect I accept the evidence of Morris and his calculations in Appendix 12 of his report D34, which demonstrate the total amount that ought to have been paid to Olbrich over the period in question had contributions been properly deducted by EJIB and Guardian. They were not, however, for the obvious reason that the parties purported to treat the arrangement as an independent contract.
Olbrich’s claim for these moneys faces a number of hurdles, however:
(1)Had they been made as required, they would have been taxed in the fund at 15% in each year. I then accept Morris’ evidence that the total superannuation payment is not to be made to Olbrich in any event, but to the Australian Tax Office, which will then deduct that 15%.
(2)I am not satisfied that the Act enables Olbrich to recover against Guardian superannuation contributions that ought to have been paid by EJIB.
(3)The vexed question then arises as to whether Olbrich’s superannuation fund ought to be compensated for the loss of use of those moneys or whether the proper approach is to simply calculate today’s value of those contributions in a fund, had they been invested and subjected to market fluctuation in the meantime. As Morris pointed out (D34), the former approach would reflect the benefit to the employer from non-payment, but it would likely be ‘inconsistent with the performance of monies invested in superannuation’. He preferred the latter approach and went on to the performance of three separate industry funds over the relevant period, had they been the recipients of Olbrich’s proper superannuation. He noted that after tax, contributions of $34,885 to each of them separately would have led to a nett present superannuation value ranging between $48,000 and $51,000. If the tax liability of 15% was then added to those figures, the payment to the Australian Taxation Office required to restore Olbrich’s superannuation position would range between $57,000 and $60,000.
Those figures were, of course, based upon valuations as at November 2009 and they also took account of the period prior to September 1995, when Olbrich was employed by EJIB. I propose to make adjustments for both of those factors, but they will be relatively minor ones and, in any event, I am mindful of the marginal difference in the $57,000 to $60,000 range. Doing the best I can and allowing for effluxion of time, I find that the amount now required to be paid in order to restore Olbrich’s superannuation to the financial status it ought presently occupy, is $60,000, and I will direct Guardian to pay that amount to the Australian Taxation Office on his behalf.
In summary then, on the cross claim I dismiss the claims over Jackson’s alleged indebtedness to Olbrich with respect to the acquisition of the TIS book of clients and, as well, the claim for annual leave loading up to 2004.
Otherwise, I am satisfied that Olbrich is entitled to be paid for long service leave in the amounts I have calculated and for the agreed amount of his annual leave entitlement, both of those figures attracting interest, and that otherwise there be paid to the Australian Taxation Office a figure representing the present value of his lost superannuation benefit.
Even so, there must then be deducted from his entitlements the sum of $22,537, being Morris’ calculation of the benefit which, on the adjusted figures, Olbrich received by virtue of his claimed contractor status.
So on the cross claim I award as follows:
Annual leave  $6,176.88
In lieu of interest  $1,870.00
Long service leave  $23,024.00
In lieu of interest  $6,970.00
Superannuation entitlements
(including tax)  $60,000.00
__________
$98,040.88
From that total must be deducted the credit I have previously mentioned of         $22,537.00, thus yielding a nett figure of $75,503.88, and I direct that of that nett sum, the superannuation entitlement figure of $60,000 be paid to the Australian Taxation Office on Olbrich’s behalf.
Conclusion
There will thus be judgment on the claim in favour of the plaintiff in the sum of $281,455 inclusive of interest and judgment on the cross claim in favour of the first defendant in the sum of $75,503.88 inclusive of interest, and I will hear from the parties as to appropriate orders and costs.