LCM Litigation Fund Pty Ltd v Coope

[2016] NSWSC 1221

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	LCM Litigation Fund Pty Ltd v Coope [2016] NSWSC 1221
Hearing dates:	15 – 16 and 28 June 2016
Date of orders:	01 September 2016
Decision date:	01 September 2016
Jurisdiction:	Equity
Before:	Robb J
Decision:	(1) Order that the plaintiff’s Amended Summons and Amended Statement of Charge be dismissed. (2) Order that the plaintiff pay the defendant’s costs of the proceedings. (3) Order that the exhibits and any documents produced on subpoena or notice to produce may be returned forthwith in accordance with the Rules.
Catchwords:	CONTEMPT OF COURT – construction of undertaking – defendant gave an undertaking to court of non-solicitation of clients – plaintiff alleges that the defendant breached his undertaking by communicating with the plaintiff’s clients – whether the word “client” in the undertaking was intended to have its ordinary meaning or the meaning as defined in the employment agreement – consideration of undertaking as a whole – held the term was intended to have its ordinary meaning – held Mr Duncan was not a client of the plaintiff but Mr Farnsworth was – whether the defendant’s communication with Mr Farnsworth involved solicitation – held email communications with Mr Farnsworth constituted a solicitation – whether the defendant had direct dealings with Mr Farnsworth – held the defendant did not have direct dealings with Mr Farnsworth whilst working for the plaintiff – held plaintiff failed to establish beyond reasonable doubt that the undertaking was breached – held plaintiff’s amended summons and amended statement of charge be dismissed
Legislation Cited:	Corporations Act 2001 (Cth)
Cases Cited:	Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd [2003] VSC 201 Australasian Meat Industry Employees Union and Others v Mudginberri Station Pty Ltd [1986] HCA 46; (1986) 161 CLR 98 Barrett v Ecco Personnel Pty Ltd [1998] NSWCA 30 Construction, Forestry, Mining and Energy Union v Grocon Constructors (Vic) Pty Ltd [2014] VSCA 261 Kirkpatrick v Kotis [2004] NSWSC 1265; (2004) 62 NSWLR 567 Lee v New South Wales Crime Commission [2012] NSWCA 262; (2012) 224 A Crim R 94 NE Perry Pty Ltd v Judge [2002] SASC 312; (2002) 84 SASR 86 National Australia Bank Ltd v Juric [2001] VSC 375 Pang v Byland Holdings Pty Ltd [2011] NSWCA 69 Witham v Holloway [1995] HCA 3; (1995) 183 CLR 525 Wysenko v Wysenko [2012] NSWSC 732 1st Available v Melocco [2016] NSWSC 30
Category:	Principal judgment
Parties:	LCM Litigation Fund Pty Ltd (plaintiff) Patrick Mark Coope (defendant)
Representation:	Counsel: AJ Sullivan QC/T O’Brien (plaintiff) Y Shariff/V Bulut (defendant)   Solicitors: Piper Alderman (plaintiff) Esplin (defendant)
File Number(s):	2015/359582
Publication restriction:	None

Judgment

Introduction

1. By amended summons filed on 15 April 2016, the plaintiff, LCM Litigation Fund Pty Ltd (LCM), seeks a declaration that the defendant, Mr Patrick Mark Coope, is guilty of contempt of court in respect of an undertaking given by Mr Coope to the court on 24 June 2015, together with consequential relief.

2. The parties are agreed that the court should only determine at this stage, the issue of whether Mr Coope has committed the contempt of court that is alleged against him. If the court makes a finding of contempt, then the court will be asked to consider the appropriate sanction following a separate hearing.

3. The basis of LCM’s claim that Mr Coope has committed contempt of court is set out in LCM’s amended statement of charge, which is annexed to the amended summons.

Amended statement of charge

4. The amended statement of charge relies, in par 1, upon consent orders made by Hammerschlag J on 24 April 2015, in which his Honour recorded the following undertakings given to the court by Mr Coope:

UNDERTAKINGS GIVEN TO THE COURT BY THE DEFENDANT (WITHOUT ADMISSIONS) IN FAVOUR OF THE PLAINTIFF (IN RESPECT OF PRAYERS 12, 13 and 16 IN OF THE FURTHER AMENDED SUMMONS)

…

9. Without any admissions, including as to the binding effect of any of the obligations under the employment contract between the plaintiff and the defendant dated 11 February 2014, the defendant undertakes forthwith and for 12 months following termination of his employment on 31 March 2015 not to solicit, canvas, approach or accept any approach to perform any work for or perform any work for (or attempt to do any of the foregoing) any client with whom the defendant has had direct dealings, or for whom the defendant performed work, within the two years prior to the date of termination of the defendant’s employment.

10. Without any admissions, including as to the binding effect of any of the obligations under the employment contract between the plaintiff and the defendant dated 11 February 2014, the defendant undertakes not to use or disclose the Confidential Information and Intellectual Property (as those terms are defined in the Employment Contract) other than use in his capacity as a director or shareholder of the plaintiff, or as a director of a unit holder in the LCM Trust or as a director of the trustee of the LCM Trust, or for the purposes of these proceedings.

5. LCM’s allegation is that, by his conduct alleged in the amended statement of charge, Mr Coope has breached the undertaking in par 9.

6. It is significant to the issues in dispute in these proceedings that the undertaking in par 9 uses the word “client” without a capital C. That position, may be compared with that which is applicable to the undertaking in par 10 which includes the capitalised expressions “Confidential Information”, “Intellectual Property” and “Employment Contract”; in each case as if it was intended to refer to concepts that had been specifically defined in some agreement.

7. The amended statement of charge sets out in par 2, the effect of the definition of “Client” in cl 32 of Mr Cooper’s employment contract. It does so because it is part of LCM’s case that the word “client” in the undertaking in par 9 has, in the context in which it is used, the same meaning as the word “Client” in the employment agreement.

8. It will become significant later, but it should be noted that the definition of “Client” in the employment agreement depends upon the term “Person”. “Person” is separately defined in the employment agreement. The amended statement of charge does not specifically allege the definition of “Person”.

9. The amended statement of charge notes in par 3 that, on 22 June 2015, Stevenson J made orders by consent, by which he noted that the undertakings given by Mr Coope to the court in pars 9 and 10 of the 24 April 2015 orders would continue to apply.

10. Paragraph 4 of the amended statement of charge alleges that, on or about 3 August 2015, while employed by Vannin Capital (the trading name of Coope Litigation Management Pty Ltd), Mr Coope sent an email dated 3 August 2015 from an email account of Vannin Capital to Mr Lawrence Fitzgerald of Grant Thornton and Mr Adam Farnsworth of Farnsworth Shepard, both “Clients” of LCM.

11. The court was informed by senior counsel for LCM, when he opened LCM’s case, that his client does not pursue its claim against Mr Coope in relation to the email sent to Mr Fitzgerald. The reason given was that, if Mr Fitzgerald is a client of any entity, he is a client of an affiliate of LCM, and not LCM.

12. It must be noted that the allegation in par 4 is that Mr Farnsworth is a “Client” of LCM, which is, in the context, an allegation that Mr Farnsworth falls within the definition of “Client” as set out in par 3, and defined in cl 34 of the employment contract.

13. Paragraph 5 sets out the text of the 3 August 2015 email, and it is convenient to set out that email here:

I am delighted to let you know that I have today joined global litigation funder, Vannin Capital 18 years with LCM of which I was the founder, I was responsible for funding 185 completed cases with an industry leading 95% success rate. Having been one of the pioneers of the industry in Australia, I have watched with excitement as litigation funding has continued to be embraced around the globe. When the management team at Vannin asked me to lead the launch of their Australasian operation I leapt at the opportunity to join one of the world’s pre-eminent litigation funders.

Vannin Capital has billions under management and has funded clients and cases in England, Australia, US, Dubai, Germany, Ireland, Italy, Sweden and more. In fact, for the last two years, it was a substantial capital provider to LCM. Through this joint venture, Vannin acquired an in-depth understanding of the opportunities in the Australasian market but recognised that to fully capitalise upon those opportunities would require resources beyond those of LCM alone.

With a renowned assessment process, Vannin Capital has the resources to identify and diligence (sic) claims quicker than anyone else in this market and the expertise to create bespoke funding structures that reflect the unique elements of the case.

Vannin Capital has established itself as the industry “thought leader” and its team regularly present at conferences around the globe. They recently released the first in a series of reports specifically targeted at educating C-Suite executives on the financial benefits of litigation funding for both clients and law firms. Here is a link to the report and I would urge you to read it – Funding in Focus.

Vannin Capital intends to invest an initial A$50m in Australian and Asian cases over the next 18 months with further capital available as needed. We are focused on commercial and insolvency litigation and international arbitration and would welcome any and all enquiries for funding.

In Vannin Capital, I have joined an institution that matches my own personal ambition. I look forward to catching up with you soon but in the meantime, my updated contact details are below.

Kind Regards

Patrick Coope

Direct: + 61 (0) 437 359 251

E-mail: [email protected]

Web: vannin.com

14. The amended statement of charge alleges in par 6 that, on 28 August 2015, LCM’s solicitors wrote to the solicitors for Mr Coope to request that Mr Coope desist from the conduct alleged in par 5, and in par 7, that Mr Coope’s solicitors denied, on 1 September 2015, that Mr Coope had breached any of his undertakings to the court.

15. LCM claims in par 8 that Mr Coope sent a further email from the email account of Vannin Capital on 8 September 2015, to both Mr Fitzgerald and Mr Farnsworth. It will be convenient to set out the terms of this email:

I wrote to you last month letting you know that Vannin Capital had launched in Australia and Asia and that I will be leading its expansion in the region.

Vannin is an established, fully-capitalised and experienced litigation Funder with a global portfolio of cases. Our team includes solicitors recruited from some of the pre-eminent global law firms including Freshfields, Latham & Watkins and Allen & Overy.

It is my pleasure to introduce you to some of the Vannin legal team. Not only will they be able to help you with any litigation funding needs in Europe, the Americas or the Middle East, but they are each on hand to help our team here in Australia and Asia whenever needed.

[The email then sets out seven Vannin Capital contacts and their experience]

Supplementing this extensive legal skillset, Vannin Capital also includes people highly-qualified in risk analysis, financial structuring, IT and finance, all of whom bring their skills to bear in ensuring that Vannin is able to offer the fastest response time to all funding applications, bespoke structuring for every funded case and an efficient, non-intrusive case support process that clients find supportive and professional.

Access to Vannin’s diverse and talented team means that we have the resources available for litigation funding of any size and the requisite skills to quickly and effectively assess the most complicated of cases.

Kind Regards

Patrick

Patrick Coope   Sydney Office

Direct: + 61 (0) 437 359 251      AMP Tower, Level XXXIV, Bridge Street,

Email: [email protected]             Sydney NSW 2000

Web: vannin.com

Vannin Capital is the trading name of Coope Litigation Management Pty Ltd, ACN 607 233 821   

16. LCM’s amendment to its statement of charge introduced a claim that Mr Coope sent an email in materially the same terms as the 3 August 2015 email, the terms of which are set out above, to Mr Anthony Duncan of Accretion Investment Management Pty Ltd (Accretion) on 3 August 2015: see par 13.

17. The amended statement of charge then alleges the following :

10.   The individuals referred to in paragraph 4 and 9 are a “Client” of LCM as that term is defined at clause 32 of the Defendant’s Employment Contract, specifically:

10.1   Adam Farnsworth of Farnsworth Shepard is liquidator of Moore Australasia Pty Ltd (In liquidation) and currently receives litigation funding from LCM;

10.2   [Allegation concerning Mr Fitzgerald omitted]

10.3   Anthony Duncan is a director of Accretion. Accretion is a manager of later stage private equity investments that provides remedial management of underperforming private equity portfolios. Accretion is the named plaintiff in two proceedings currently before the Supreme Court of Victoria (Coinmach and BBRNA litigation) and in past proceedings before the Supreme Court of NSW (Alliance litigation), all of which LCM was responsible for providing litigation management services in respect of the conduct of these matters.

11.   [Allegation concerning Mr Fitzgerald omitted]

12.   Mr Farnsworth is also a client with whom the Defendant has had direct dealings in regards to the Moore Australasia litigation and for whom the Defendant has performed work in respect of the Huon litigation, within the two years prior to the date of termination of the Defendant’s employment, being the period of 31 March 2013 to 31 March 2015.

13.   Mr Duncan is also a client with whom the Defendant has had direct dealings in regards to the Alliance litigation which was settled in January 2015 and for whom the Defendant has performed work in respect of the currently funded Coinmach and BBRN litigation, within the two years prior to the date of termination of the Defendant’s employment, being the period of 31 March 2013 to 31 March 2015.

18. Paragraph 10 contains an allegation that Mr Farnsworth and Mr Duncan are each a “Client” of LCM within the meaning of that term in cl 32 of Mr Coope’s employment contract. In relation to each of those gentlemen, pars 12 and 13 make allegations that they were also “a client” with a small C.

Further order made by Hammerschlag J

19. It appears that LCM has set out the undertakings made to the court by Mr Coope in pars 9 and 10 of the 24 April 2015 orders (see par 4 above) in anticipation of an argument put by Mr Coope that the word “client”, where used in par 9, should not have the same meaning as “Client” as defined in the employment agreement, because of the absence of the use of a capital C, whereas the undertaking in par 10 does use capitalised terms. The use of capitalised terms in one of the undertakings, Mr Coope says, shows an intention to use defined terms, but the use of the word “client” in the undertaking in par 9 means that the undertaking only applies to clients, in the ordinary meaning of the word.

20. The proper resolution of this dispute requires that consideration also be given to another undertaking to the court noted by Hammerschlag J, being that in par 8, which is in the following terms:

8. Without any admissions, including as to the binding effect of any of the obligations under the employment contract between the plaintiff and the defendant dated 11 February 2014, the defendant undertakes forthwith and for 12 months following termination of his employment on 31 March 2015 not to approach, solicit, canvass or encourage (or attempt to do any of the foregoing) any current employees of the plaintiff (including any employees still on probations) to leave the employment or agency of the plaintiff, or from engaging or otherwise employing such persons within Australia.

21. It will be noticed that the undertaking in par 8, which broadly concerns the solicitation of employees to leave the employment of LCM, also does not use capitalised terms. As will be seen, the exercise of considering whether the meaning of “client” in the undertaking in par 9 should be influenced by the use of capitalised terms in the undertaking in par 10 may benefit from the consideration that the terms in the undertaking in par 8 are also not capitalised.

Employment contract

22. It will be necessary to consider the material terms of the employment contract between LCM and Mr Coope. LCM submitted that the terms of the employment contract, as well as the further amended summons and the commercial list statement in the proceedings in which the undertakings were given to the court, form part of the surrounding circumstances that are material to the proper construction of the wording of the undertakings.

23. The employment contract between LCM and Mr Coope takes the form of a letter addressed by LCM to Mr Coope, dated 11 February 2014.

24. The effect of cl 1.1 and Item 2 of Schedule A is that Mr Coope’s employment commenced on 1 December 2013. Clause 3.1 and Item 1 of Schedule A have the effect that Mr Coope was appointed as joint managing director of LCM. Under Schedule B, Mr Coope’s job description was “Joint Managing Director responsible for the day to day management of the Company”.

25. Clause 17 imposes the following restraints on Mr Coope:

17.   Restraints

17.1   You shall not, except with the written consent of the Company, either directly or indirectly, on your own account or on behalf of any other Person, engage in any of the activities noted in sub-clause 17.2 (Activity), for the periods noted in sub-clause 17.3 (Period), anywhere within the areas in sub-clause 17.4 (Area):

17.2   Activity:

(a)   approach, solicit, canvas, induce or encourage (or attempt to do any of the foregoing) any Restricted Person to leave the employment or agency of the Company or of an Affiliate, or otherwise engage or employ a Restricted Person;

(b)   solicit, canvas, approach or accept any approach, or perform any work for (or attempt to do any of the foregoing), any Client with whom you (or a Person reporting to you) have had direct dealings, or for whom you (or Person reporting to you) performed work in connection with your employment during the 2 years immediately prior to the Termination Date;

(c)   interfere with or disrupt or attempt to disrupt the relationship (whether contractual or otherwise) between the Company (or an Affiliate) and any Client, Restricted Person or supplier of the Company or of an Affiliate, with whom you (or Person reporting to you) had dealings or performed work in connection with your employment during the 2 years immediately prior to the Termination Date; or

(d)   be engaged in any capacity, including as a director, partner, owner, principal, agent, contract or, consultant, representative, shareholder, financier, trustee or employee, by any Client or in any Competing Business or Entity.

26. Clause 17.3 lists consecutively five different periods, being the period of employment, and then 12, nine, six and three months from the Termination Date.

27. Clause 17.4 lists seven areas, starting with Australia, three States, and then three cities.

28. Clauses 17.5 and 17.6 assert that the restraints are reasonable and provide that the restraints are separate and severable, if some are found to be unreasonable and invalid.

29. The restraint that is directly relevant in the present case is created by cl 17.2(b).

30. It is not in issue that this restraint only relates to the affairs of LCM, which is the Company; unlike other restraints that relate also to Affiliates of LCM.

31. “Client” is defined in cl 32 in the following terms:

Client means any Person that:

(e)   has received products or services from the Company in the twelve (12) months preceding the termination of your employment, and has not indicated to the Company that it no longer wishes to receive such products or services (other than where influenced by your actions); or

(f)   has entered into discussions with you, the Company in the 12 months prior to the termination of your employment, in relation to the potential of receiving products or services from the Company, and who has not informed the Company that they no longer wish to continue such negotiations or discussions (other than where influenced by your actions);

32. “Person” is defined in cl 32 as: “includ[ing] any individual, corporation, organisation or other type of entity (and includes a representative of any individual, corporation, organisation or other entity)”.

33. Clause 32 also contains a definition of “Restricted Person”, which is a term relevant to the application of cl 17.2(a) of the employment agreement. The definition is:

Restricted Person includes any person who was an employee, contractor, director, consultant, partner or agent of the Company or of an Affiliate, in the twelve month period preceding the termination of your employment with the Company (however occurring).

34. “Intellectual Property” and “Confidential Information” are also defined in cl 32 in extensive but relatively conventional terms.

LCM’s Further Amended Commercial List Summons

35. LCM submitted that one of the surrounding circumstances that should be taken into account in construing the undertaking given by Mr Coope in par 9 is the manner in which it framed its claim in the proceedings in which the undertaking was given.

36. LCM filed a further amended summons on 1 April 2015. In pars 12 and 13 of the claim for final relief, LMC sought injunctions against Mr Coope substantially in the terms of the undertakings given in pars 8 and 9 of the orders made by Hammerschlag J. An injunction restraining the use by Mr Coope of Confidential Information and Intellectual Property in the terms of the undertaking in par 10 was not specifically sought. However, in par 15, LCM sought, in the alternative, “injunctive relief in the form of one or more of the Restraints (as defined in the Commercial List Statement)”.

37. Paragraph 33 of the Commercial List Statement defined “Restraints” as being all of the prohibitions and restrictions contained in cl 17 of the employment agreement. Paragraph 32 in substance pleaded all of the covenants in cl 17.2 of the employment contract in the same terms as those provisions are set out in the agreement.

38. LCM also sought interlocutory orders in its Further Amended Summons. By par 5, LCM sought an interlocutory order preventing Mr Coope from using or disclosing LCM’s “confidential information (sic) and Intellectual Property” as defined in the employment agreement. Paragraph 8 sought an interlocutory injunction in substantially the same terms as the undertaking in par 8. No interlocutory order was sought in terms of the undertaking in par 9.

39. It is difficult to see how LCM’s Further Amended Summons or Commercial List Statement could form a sound basis for the construction of the undertaking in par 8. Those documents do not make a consistent claim for relief in terms of cl 17.2(b) of the employment agreement, in a manner that might cast light on the meaning of the word “client” in the undertaking. No interlocutory relief was sought in relation to that provision. The final relief sought was expressed substantially in the same terms as the undertaking, and not the provision in the employment agreement. However, by amendment, LCM in a catchall way sought a final injunction in terms of each of the restraints in cl 17 of the employment agreement. In that way, the documents filed by LCM could provide support for both possible meanings of the word “client” in par 9 of the undertaking of the orders made by Hammerschlag J.

Legal principles

40. The parties agreed that there was no issue between them as to the legal principles that must be applied by the court to decide the issues in this case. It will therefore not be necessary to examine the authorities that establish the relevant principles in great detail.

41. The parties accept that the authorities establish that the elements that are required to prove a contempt of court by reason of the breach of an order of the court are:

1. The order must be made by the court.

2. The terms of the order must be clear, unambiguous and capable of compliance.

3. The order must be served on the alleged contemnor, or service must be dispensed with pursuant to the Rules of Court.

4. The alleged contemnor must have knowledge of the terms of the order.

5. The alleged contemnor must have breached the terms of the order.

6. See National Australia Bank Ltd v Juric [2001] VSC 375 at [37] and [38]; Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd [2003] VSC 201 at [31] and [32]; and Wysenko v Wysenko [2012] NSWSC 732 at [17] and [18].

42. The only issues that arise in the present case are whether requirements (2) and (5) have been satisfied.

43. The parties agreed that the principles that apply to the determination of whether a party has committed contempt of court by breaching an order of the court apply equally to an alleged breach of an undertaking to the court: see for example 1st Available v Melocco [2016] NSWSC 30 at [16].

44. The parties also agreed that LCM’s action is for a civil contempt, and that LCM has the burden of persuading the court beyond reasonable doubt that all of the elements required to be established to prove the contempt have been established: see for example Witham v Holloway [1995] HCA 3; (1995) 183 CLR 525 at [19].

45. It is only necessary to prove knowledge of the undertaking and subsequent conduct by the party giving the undertaking which is prohibited by that undertaking. Conduct that is “casual, accidental or unintentional” may still amount to contempt, although the sanction will ordinarily differ from cases where the breach of the undertaking is wilful: see for example Australasian Meat Industry Employees Union and Others v Mudginberri Station Pty Ltd [1986] HCA 46; (1986) 161 CLR 98 at 106, 107, 109 and 113 and Construction, Forestry, Mining and Energy Union v Grocon Constructors (Vic) Pty Ltd [2014] VSCA 261 at [141].

46. Undertakings given to the court by consent must be construed in light of the factual matrix known to the parties, including the nature of the proceedings in which the undertaking was given: see Lee v New South Wales Crime Commission [2012] NSWCA 262; (2012) 224 A Crim R 94 at [14] to [15], per Bathurst CJ, with whom Macfarlan and Barrett JJA agreed.

47. Mr Coope did not challenge the submission made by LCM in its further written submissions in pars 10 to 16, concerning the significance of possible ambiguity in the formulation of the order or undertaking. For the purpose of determining the present dispute, it will be sufficient to set out the following extract from the judgment of Campbell J (as his Honour than was) in Kirkpatrick v Kotis [2004] NSWSC 1265; (2004) 62 NSWLR 567, which was cited with approval by the Court of Appeal in Pang v Byland Holdings Pty Ltd [2011] NSWCA 69 at [54] to [56]:

[54] The type of ambiguity in an order which could result in a person not being punished for contempt was considered by Sir W Page Wood VC in Spokes v Banbury Board of Health (1865) 1 Eq 42 at 48–9, when he said:

“…an order must be obeyed, and… those who wish to get rid of that order must do so by the proper course, an appeal. So long as it exists, the order must be obeyed, and obeyed to the letter; and anyone who does not obey it to the letter is guilty of committing a wilful breach of it, unless there be some misapprehension which all mankind are subject to, and which may mislead him upon the plain reading of the order.” (emphasis added)

[55] In my view, the court approaches the question of whether the order is ambiguous with the caution appropriate to a type of litigation which could result in the defendant being punished — if an order is really not clear, it is unjust for someone to be punished for not obeying it. As well, though, the court approaches the question of whether the order is ambiguous on the basis that the recipient is expected to try to understand it and obey it. If a person taking that approach to the order could be in real doubt about what it meant, in a respect which is relevant to the particular charge of contempt which is brought, the charge will fail. This means that there will sometimes be orders which a grammatical analysis would show to contain a syntactic ambiguity, but which are none the less enforceable if it is the type of ambiguity that has no real risk of misleading. There will sometimes be orders which contain a term which has multiple meanings, but where that semantic ambiguity has no real risk of misleading. If there were to be an order addressed to a promoter of musical groups not in any way to be involved in the advertising or promotion of a band under some particular name, the order would be enforceable notwithstanding that a “band” can sometimes be a rubber band, or a headband.

[56] In deciding whether an order is certain enough to be enforceable by contempt proceedings, the task of construction of an order can go far enough to enable ambiguities which have no real risk of misleading someone who is trying to understand and obey the orders to be discarded. I agree with thefollowing remarks of Lindgren J in Microsoft Corporation v Marks (No 1)(1996) 69 FCR 117 at 143:

“The proposition that a contempt will not be found where the terms of an order or undertaking are unclear, ambiguous or apt to mislead (except, perhaps, if the prosecutor proved that the contemnor understood them in accordance with what the court holds to be their true meaning) must be distinguished from certain other propositions. It does not signify that there is no breach wherever there is difficulty in the construction of the terms of an order or injunction which it falls to a court to resolve. Nor does it signify that contempt will not be found wherever an alleged contemnor did not understand the terms of an order or injunction according to their true meaning, much less wherever an alleged contemnor was unaware that his or her conduct constituted a breach of the order or undertaking (cf Watkins v AJ Wright (Electrical) Ltd [1996] 3 All ER 31).”

[57] In the case of consent orders, where surrounding circumstances can be used as an aid to construction, those surrounding circumstances can have the effect that an order which is ambiguous, considered in isolation, is found to be not ambiguous when read in light of the surrounding circumstances. As the surrounding circumstances that are taken into account are facts known to all parties to the consent order, they are the very thing that a person trying to understand and obey the order would take into account. Hence it is appropriate that any question of whether the order is ambiguous should be answered only after such facts have been taken into account.

48. The issue of the possible ambiguity in the terms of the undertaking in par 9 may arise in this case in two ways. First, Mr Coope’s defence is that he acted on the basis that the word “client” in the undertaking was intended to have its ordinary meaning, and not the meaning of the term “Client” as defined in the employment agreement. The undertaking will only apply to Mr Duncan if the word “client” has the latter meaning. In that case, the question will arise as to whether the use of the word “client” in the undertaking has any significance concerning whether Mr Coope committed a contempt of court.

49. Secondly, the undertaking is subject to the condition that Mr Coope had direct dealings with the client within the two years prior to the date of termination of his employment. The undertaking is silent as to whether to be relevant, the direct dealings must be in Mr Coope’s capacity as an employee of LCM. Mr Coope’s case is that that qualification is implied into the undertaking. If it is not, then Mr Coope may have breached the undertaking by reason of having direct dealings with Mr Farnsworth in a capacity other than as an employee of LCM. In that case, the question will arise as to whether the wording of the undertaking was ambiguous in some relevant sense.

Meaning of undertaking in par 9

50. Mr Coope submitted that, when the meaning of the undertaking that he gave to the court in par 9 as noted by Hammerschlag J is properly understood, he did not breach the undertaking in sending any emails to Mr Farnsworth or Mr Duncan.

51. It will be convenient to deal with the proper construction of the undertaking in the order of the submissions made by Mr Coope as to relevant aspects of the meaning of the undertaking.

52. The first and second submissions made by Mr Coope were that the undertaking was given by Mr Coope to LCM, and not to any subsidiary or other related entity of LCM, so that the undertaking only applies to clients of LCM. LCM did not put the validity of those submissions in issue, and as I have noted above, it was for that reason that LCM did not press its case concerning the emails sent by Mr Coope to Mr Fitzgerald.

53. The third submission made by Mr Coope is contentious. It is the submission based upon the use of the word “client” in the undertaking, so that the undertaking will only be breached if Mr Coope, to speak simply, solicited a client of LCM, where the word is given its ordinary meaning, rather than the extended meaning in the definition of “Client” in accordance with cl 32 of the employment agreement.

54. This submission is relevant to the outcome of LCM’s claim that Mr Coope has committed contempt of court in the following way. While on the facts it may have been arguable that the email that Mr Coope sent to Mr Duncan was in fact sent to Mr Duncan’s employer, who was a client of LCM within the ordinary meaning of that word, it is clear that the amended statement of charge alleges that Mr Duncan himself was a “Client” of LCM (see par 17 above). While LCM also alleges in par 13 of its Amended Statement of Charge that Mr Duncan was also a “client”, LCM concedes that Mr Duncan was not its client, in the ordinary meaning of that term. To succeed against Mr Coope in relation to his email sent to Mr Duncan, LCM accepts that it must establish that the word “client” in the undertaking has the same meaning as “Client” as defined in the employment agreement. Even then, in order to succeed, LCM accepts that it must also establish that Mr Duncan falls within the meaning of “Client” by reason of the fact that the term as defined refers to any “Person”, and “Person” is given its own extended definition which, LCM argues, can be inserted in the definition of “Client” with the effect that Mr Duncan is a “Client”. This last step in LMC’s submission is not without some difficulty, but it only need be considered if LCM’s primary submission that “client” has the same meaning as “Client”, as defined in the employment agreement, is successful.

55. The essential question is whether, by reason of the undertaking in par 9 having been given in the context of the seeking of relief by LCM in proceedings commenced by the Commercial List Summons, on the facts alleged in the Commercial List Statement, in order to enforce an aspect of the employment agreement, the word “client” should be given the extended meaning as defined in the employment agreement, or whether it should be given its ordinary meaning.

56. It is necessary to construe the meaning of the individual undertakings given to the court by Mr Coope in the context of the orders made and undertakings noted by Hammerschlag J on 24 April 2015 as a whole. It must be noted that, speaking simply, the undertaking in par 8 concerned solicitation of employees, and par 9 concerned the solicitation of clients, while par 10 prevented misuse of Confidential Information and Intellectual Property.

57. The appropriate approach is to consider the undertakings in the order in which they were given, and this leads to the enquiry starting with the undertaking in par 8 (set out above at par 20). The significant aspect of the drafting of this undertaking is that it prevents the solicitation of “any current employees of the plaintiff”.

58. The subject matter of the undertaking in par 8 is clearly the covenant contained in cl 17.2(a) of the employment agreement. By parity of reasoning with the argument that the use of the word “client” in the undertaking in par 9 was intended to attract the defined term “Client” in cl 17.2(b), it would be expected that the undertaking in par 8 was intended to encompass the conduct prohibited by the covenant in cl 17.2(a).

59. Yet upon a comparison between the undertaking in par 8 and the covenant in cl 17.2(a), it becomes immediately apparent that the former is much narrower than the latter. That is true in three respects. One is that cl 17.2(a) extends to an Affiliate of LMC, but the undertaking does not prohibit Mr Coope from soliciting employees of Affiliates. The second is that the undertaking applies only to employees of LMC, while cl 17.2(a) applies to any Restricted Person. As set out in par 33 above, Restricted Person includes not only employees, but also contractors, directors, consultants, partners and agents. The third is that the undertaking in par 8 only applies to “current employees” of LMC, while the covenant in cl 17.2(a) applies to all persons who fall within the definition of Restricted Person in the 12 month period preceding the termination of Mr Coope’s employment.

60. It is therefore clear that the drafter of the undertaking in par 8, consistent with the claim for interlocutory relief in par 8, and for final relief in par 12 of the Further Amended Summons, expressed the undertaking in a conservative way that was not as extensive as the restraint in cl 17.2(a) of the employment agreement.

61. That is significant to the validity of LCM’s argument that the drafter of the undertaking in par 9 acted inadvertently in using the word “client” rather than the word “Client”, as used in cl 17.2(b), and defined in the employment agreement. Such inadvertence is rendered unlikely by the plainly conscious decision to draft the undertaking in par 8 in a conservative manner.

62. Further, there are aspects of the way in which the undertaking in par 9 was itself drafted that tell against the conclusion that the word “client” was used inadvertently.

63. First, the undertaking simply uses the word “client”. It is agreed that the client must be a client of LCM. The word “client” is used in the expression “any client with whom the defendant has had direct dealings, or for whom the defendant performed work, within the two years prior to the date of termination of the defendant’s employment”. There may be a question as to whether the client must be a client at the time the undertaking is given, or whether it is sufficient that the client is a client at the time when the dealings occur, or the work is performed, within the two year period. The reference to the two year period does not necessarily exclude that the parties intended that the client must be a client at the time the undertaking was given. The undertaking may have been intended to apply to current clients with whom dealings had occurred, or work being done, within the two year period.

64. It is not necessary for the court to resolve this issue. As I understand it, the evidence is that if Mr Farnsworth and Mr Duncan fall within the meaning of “client”, they would be current clients at the date the undertaking was given. The parties did not address this issue. It is only relevant insofar as it may cast light on the general question of whether the word “client” was intended to have the same meaning as the defined term “Client” in the employment agreement.

65. The circumstance that the undertaking in par 8 referred to “current employees” might provide some support for the conclusion that “client” in the undertaking in par 9 was intended to refer to current clients.

66. However, the relevant point is that the term “Client” is defined in cl 32 of the employment agreement in terms of any Person who has dealt with LCM in the defined way in the 12 months preceding the termination of Mr Coope’s employment. If it was the case that the drafter of the undertaking in par 9 intended the undertaking to apply only to current clients, then that would provide a positive reason for using the word “clients” rather than the defined term “Client”, as the latter would have led to a different result, being that the undertaking would apply to any Person who had satisfied the definition of “Client” within 12 months prior to the termination of employment.

50. Thus, there is at least arguably a good reason why the drafter of the undertaking in par 9 would not use the word “Client”, and that reason is consistent with the conservative approach to the drafting of the undertaking in par 8. That is, in both cases, the undertakings were intended only to apply to current employees or clients.

51. I also accept Mr Coope’s argument that some support for the conclusion that “client” in the undertaking in par 9 was intended to have its ordinary meaning, arises out of the use in the undertaking in par 10 of the capitalised expressions “Confidential Information” and “Intellectual Property” in connection with the expression “(as those terms are defined in the Employment Contract)”. That demonstrates that the drafter clearly had in mind the possibility of using terms defined in the employment agreement, and that clarity of drafting would make it prudent to expressly state that the terms used were to have the meaning as defined in that agreement.

52. In the present case, where the issue is whether Mr Coope has breached the undertaking in par 9 in a manner that involves a contempt of the court, I could not be satisfied in the circumstances that, upon its proper construction, the undertaking in par 9 should be understood as if the word “Client” as defined in the employment contract had been used instead of the word “client” in its ordinary meaning. In my view, the better construction is that the drafter intended to use the ordinary word “client”, consistently with the various ways in which the undertakings appear to have been drafted conservatively having regard to the terms of the contractual restraints to which they related.

53. LCM in effect argues that the court should construe the undertaking on the basis that it must have been intended to have effect in precisely the same way as the contractual restraint to which it related. I do not accept that argument. It does not allow for the possibility that the legal representatives of LMC, acting in a competent and careful manner, may have drafted the undertaking in a conservative way to maximise the prospects of the court granting it interlocutory relief in the same terms as the undertaking, if Mr Coope had declined to give it. Further, the argument leaves out of account the possibility that the wording of the undertaking was the result of negotiations and compromise between the parties.

54. In the circumstances, the only safe and proper course is for the court to construe the undertaking in par 9 in a way that gives the word “client” its ordinary meaning.

55. It will follow, as LCM has conceded, that its claim that Mr Coope’s communication with Mr Duncan involved a breach of the undertaking must be rejected.

56. The fourth submission made by Mr Coope concerning the proper construction of the undertaking is that the undertaking only relates to those clients with whom “the defendant has had direct dealings, or for whom the defendant performed work”. That submission merely reflects the wording of the undertaking in par 9, and must be correct. I do not understand LCM to have made a submission to the contrary.

57. However, the proper construction of this aspect of the undertaking raises an important question concerning LCM’s claim that Mr Coope’s communications with Mr Farnsworth constituted a breach of the undertaking and a contempt of Court. The issue is, assuming that a particular person is a client of LCM for the purposes of the undertaking (whether that means a client at the time of the undertaking, or within the previous 12 months), must the direct dealings with, or the work performed by the defendant for, the client be done by the defendant on behalf of LCM? That is an important question in this case in relation to Mr Farnsworth, because it is arguable that Mr Coope had many dealings with Mr Farnsworth in the two year period, but that those dealings were not on behalf of LCM.

58. I take Mr Coope’s position on this issue to be that the dealings and the work must be performed on behalf of LCM, as Mr Coope has made the positive submission on the facts that all of the relevant dealings and work involved a company other than LCM.

59. In my view, the proper way to construe the undertaking in par 9 is that it only applies to direct dealings that are had, or to work performed, by Mr Coope on behalf of LCM. It does not apply to persons who satisfy the definition of “client”, but where dealings have been had or work done on behalf of someone other than LCM.

60. It is proper, in my view, for the court to take into account the fact that ultimately, the interest of LCM protected by cl 17.2(b) of the employment agreement, and also by the undertaking in par 9, is LCM’s entitlement to maintain its connection with its clients, and not to suffer the risk of loss of that connection because Mr Coope, as a former employee, has developed a personal connection with LMC’s clients through the opportunity that arose from his employment by LCM, and his being given the task of dealing with particular clients on behalf of LCM. The undertaking should not be construed in a way that restrains Mr Coope, for the benefit of LCM, in cases where the personal connection with the clients developed by Mr Coope was developed in his capacity as the employee of some other person, and where it is that other person who has the interest that is entitled to protection.

61. The implication that the dealings with, and work done, referred to in the undertaking in par 9 must be restricted to dealings with and work done, on behalf of LCM, is supported by the manner in which cl 17.2 of the employment agreement deals with the position of LCM and “Affiliates”. The restraints in cl 17.2(a) (solicitation of Restricted Persons) and cl 17.2(c) (dealings with suppliers) relate to “the Company or of an Affiliate”. “Affiliate” is defined to mean a related body corporate within the meaning of s 50 of the Corporations Act 2001 (Cth). The restraint in cl 17.2(b), by means of the definition of “Client”, concerns only clients of LCM. That restriction is carried over into the wording of the undertaking in par 9. As the undertaking does not apply to clients of Affiliates, dealings with, or work done for, clients during the period on behalf of Affiliates should not be taken to fall within the prohibition in the undertaking. More strongly, dealings, with or work done for, clients for persons outside the definition of Affiliates should not fall within the prohibition.

62. The fifth submission made by Mr Coope is the uncontroversial proposition that the direct dealings must occur, or the work be performed, “within the two years prior” to 31 March 2015.

63. The final submissions made by Mr Coope are, however, more controversial.

64. Mr Coope’s sixth submission is that, where an individual has a number of different capacities, the undertaking applies only where that person is acting in the capacity in which the person was a client of LCM. Mr Coope gave the example of a person who is appointed to a company as a liquidator, and then enters into a liquidation funding agreement with LCM in that capacity. The submission is that the person is only a client of LCM in that capacity as liquidator only, and not in the person’s personal capacity.

65. As I understand it, Mr Coope’s seventh submission is related to his sixth, and is an elaboration upon that submission. Mr Coope submits that, if the person is a client at the relevant time because the client has a funding agreement in place with LCM, and the client receives funding in a particular capacity in which the person entered into the funding agreement, the person is a client for the purposes of the undertaking only in that capacity.

66. The validity of these submissions depends upon the simple proposition that the word “client” in the undertaking in par 9 should be construed in a way that does not apply to the person of the client, but only applies to the capacity in which the person has had dealings with LCM that satisfied the definition of “client”.

67. In practical terms, this submission is directed to the fact that Mr Farnsworth entered into a funding agreement with LCM in his capacity as liquidator of a particular company, for the purpose of pursuing litigation that Mr Farnsworth was entitled to pursue under the Corporations Act in his capacity as liquidator. Mr Coope’s argument is that, for the purposes of the undertaking, Mr Farnsworth was only a client of LCM in his capacity as liquidator of that company. Accordingly, any communication by Mr Coope with Mr Farnsworth that should be characterised as a solicitation within the meaning of the undertaking will not be a breach of the undertaking, unless the communication was with Mr Farnsworth in his capacity as the liquidator of that company.

68. I do not accept Mr Coope’s submissions, which seek to limit the meaning of the word “client” to the relationship between a particular person, and LCM in a particular capacity.

69. The ordinary meaning of the word “client” is that it applies without qualification to a particular person who has dealings with LCM that fall within the definition of the word. In ordinary parlance, a person who has dealings of that type with a particular supplier is a client of that supplier. The identification of the person of the client may depend upon whether the individual, who has the dealings with the supplier, is dealing on his or her own behalf, or as agent for another, in which case the other may be the client. However, in either case, the person who at law has the dealings is simply a client.

70. Mr Coope has succeeded in his argument that the word “client” in the undertaking in par 9 has the ordinary meaning, and not the defined meaning of “Client” in accordance with the employment contract, and consistency requires that the court gives that term the same meaning for the purposes of Mr Coope’s sixth and seventh submissions.

71. In a real and practical way, a liquidator in Mr Farnsworth’s position, who enters into a funding agreement with a litigation funder, such as LCM, is a personal client of the funder. The client relation that is created by the dealings will be between the funder and the liquidator. It is in the nature of the work of liquidators that from time to time, they will find themselves in need of litigation funding. The nature of LCM’s business is that it will aspire to provide Mr Farnsworth funding in relation to future litigation, should the opportunity arise. It is relatively unlikely that the opportunity would arise for a funder in LCM’s position to provide additional litigation funding to Mr Farnsworth in his capacity solely as liquidator of the particular company the subject of the litigation funding agreement that caused Mr Farnsworth to fall within the definition of a client of LCM.

72. The eighth, and final, submission made by Mr Coope concerning the proper construction of the undertaking in par 9, is that the words “solicit, canvass, approach or accept any approach to perform any work for or perform any work for… any client” assume that there is actual work that exists that Mr Coope was soliciting from the client. Furthermore, Mr Coope submits that the words “perform any work”, which appear twice in the text of the undertaking, have the effect that the restraint on soliciting is in respect of the actual performance of work within the 12 months. Thus, according to Mr Coope, the undertaking is only engaged if Mr Coope solicits a client in respect of work that will actually exist within the 12 months, for the purpose of doing that work within that period.

73. In support of this submission, Mr Coope relies on the reason why the law will in some cases enforce non-solicitation restraints after the termination of employment; being, as submitted by Mr Coope, the protection of the employer’s connection with clients “in respect of existing work for a period of 12 months”, in the present case.

74. This case is concerned with the proper construction of an undertaking given to the court, and not the proper construction of the restraint in an employment agreement. There may be some scope for having regard to the purpose for which the law will in some cases enforce restraints in employment agreements in construing an undertaking to the court, but care must be taken. The undertaking given to the court in the present case is the result of a compromise of LCM’s claim. The words of the undertaking should be given their ordinary meaning, unless a difficulty in construction requires some consideration of the purpose and effect of the underlying restraint.

75. In my view, the operative parts of the undertaking should be analysed as if the words read:

(a)   undertakes

(b)   forthwith and for 12 months following termination

(c)    not to solicit, canvass, approach to perform any work for

(d)    or [not to] accept any approach to perform any work for

(f)   (or attempt to do any of the foregoing)

(g)   any client

93. What is prohibited by the undertaking is the act of soliciting, canvassing or approaching any client; or alternatively, accepting any approach from any client; or attempting either activity. That must not happen within the 12 month period after termination of the employment contract. The expression “to perform any work for”, where used on both occasions, is the object of the solicitation, canvassing or approach. The undertaking does not require that the work be performed within the 12 month period, or even that there be work available to be performed within that period.

94. The reliance by Mr Coope on the supposed underlying purpose of non-solicitation restraints does not, in my view, assist Mr Coope. The basis upon which the court should decide the reasonableness of the duration of a non-solicitation restraint in an employment or similar contract has been put in a number of ways. In NE Perry Pty Ltd v Judge [2002] SASC 312; (2002) 84 SASR 86 at [28] to [30], Doyle CJ considered whether the period that should be considered to be reasonable is the period necessary for the replacement employee to have a reasonable opportunity to demonstrate his or her effectiveness to customers; or whether it is the period reasonably necessary to enable the employer to break the connection between the ex-employee and customers. His Honour preferred the latter approach, but it is not necessary for present purposes to decide the issue. In either case, the period that is reasonable is related to the likelihood that the employer’s customers will do business with the ex-employee because of the subsistence of the personal connection between the ex-employee and the customers. This consideration reinforces the conclusion that the act that the undertaking in par 9 prohibits is the act of solicitation, canvassing or approaching, or the acceptance, or attempt to accept an approach from a client of LCM. It is not intended merely to prevent Mr Coope from actually carrying out work for a client in the 12 month period. An act of solicitation etc that secured work for Mr Coope after the end of the 12 month period would be prohibited if made within the period. A solicitation etc made within the period would not be permitted merely because it turned out that no work was ultimately available.

Was Mr Farnsworth a client within the meaning of the undertaking?

95. Mr Coope accepted that the basis for Mr Farnsworth to be a client of LCM was the fact that, on 29 May 2014, he entered into a litigation funding agreement with LCM in his capacity as liquidator of Moore Australasia Pty Ltd (in liq). The company in liquidation was also a party to the agreement.

96. The litigation funding agreement was still in effect at the date of the termination of Mr Coope’s employment on 31 March 2015.

97. The litigation funding agreement was made a confidential exhibit in the proceedings, but the limited information that it is necessary to disclose for the purpose of these reasons for judgment should not be of concern to LCM, or to Mr Farnsworth, or the company in liquidation.

98. It is sufficient to note that LCM is described as the “Funder” and Mr Farnsworth in his capacity as liquidator, along with the company in liquidation, are together described as the “Litigant”. The agreement proceeds on the basis that the “Litigant” will be funded under the agreement to pursue the “Action”. The “Action” is defined primarily by reference to the “Principal Cause of Action”, which is defined in Schedule A as:

(a)   Unfair preference claim against the Deputy Commissioner of Taxation;

(b)   Unfair preference claim against South Pacific Print Group Pty Ltd and

(c)   Unfair preference claim, uncommercial transaction claim, unreasonable director-related transaction claim, insolvent transaction claim or voidable transaction claim against Fraser & Jenkinson Pty Ltd.

99. Each of the claims listed in the definition of Principal Cause of Action is a voidable transaction within the meaning of s 588FE of the Corporations Act, and the court may grant the relief pursuant to s 588FF of the same Act at the suit of the liquidator.

100. The consequence is that, not only was Mr Farnsworth personally a party to the litigation funding agreement, but the litigation to be funded was to seek relief that only Mr Farnsworth in his capacity as liquidator could pursue.

101. As I have rejected the argument made by Mr Coope that the word “client” in the undertaking in par 9 only made Mr Farnsworth a client limited to his capacity as the liquidator of Moore Australasia Pty Ltd, I find that, at the date Mr Coope gave the undertaking to the court, Mr Farnsworth was a client of LCM.

Did Mr Coope’s communications involve solicitation etc?

102. In Barrett v Ecco Personnel Pty Ltd [1998] NSWCA 30, Stein JA, with whom Sheller JA and Fitzgerald AJA agreed, said in relation to the meaning of the word “solicit”:

The task of the court is to interpret the words in the contract of employment in their context. In a liquor case in New Zealand (Sweeney v Astle [1923] NZLR 1198) Stout CJ noted that 'solicit' was a common English word, and in its simplified form meant 'to ask'. Its other meanings included 'to call for' 'to make request', 'to petition', 'to entreat', 'to persuade'.

103. The terms of the email that Mr Coope sent to Mr Farnsworth on 3 August 2015 are set out above (at par 13), as well as the terms of the 8 September 2015 email (at par 15).

104. In my view, it is clear that each of those emails involves a solicitation, canvassing, or approach to perform work for Mr Farnsworth.

105. I do not accept Mr Coope’s argument that the emails are no more than an attempt by Mr Coope to inform and update the recipients of his emails as to his new contact details and where he was, and to introduce the Vannin Capital name or brand to people in Australia (T 44.1). The emails did not simply convey that Vannin Capital was “in business simpliciter” (T 45.45), or that it was “open for business” (T 46.20), or that all Mr Coope was doing was “building the brand” (T 48.25).

106. In relation to the earlier email, Mr Coope said in the penultimate paragraph:

Vannin Capital intends to invest an initial A$50M in Australian and Asian cases over the next 18 months with further capital available as needed. We are focused on commercial and insolvency litigation and international arbitration and would welcome any and all enquiries for funding.

107. I cannot see how that statement can be interpreted as having any meaning other than a request or entreaty for Mr Farnsworth to make an application to Vannin Capital for the provision of litigation funding.

108. Mr Coope’s statement in the final paragraph: “I look forward to catching up with you soon but in the meantime, my updated contact details are below” reinforces the effect of the penultimate paragraph that the email, viewed objectively, is an immediate solicitation to Mr Farnsworth for him to make an application for litigation funding from Vannin Capital.

109. A number of other aspects of the email support the conclusion that it constituted a solicitation of Mr Farnsworth by Mr Coope. First, there is a statement in the second paragraph that Vannin Capital had asked Mr Coope “to lead the launch of their Australasian operation”. As that paragraph made clear that Vannin Capital’s business was litigation funding, the natural meaning of the words was that Mr Coope’s objective was to obtain litigation funding business for Vannin Capital, and the natural way for the recipient of the email in Mr Farnsworth’s position to understand those words would be that he had been chosen because he may be the source of litigation funding business, given his profession as a liquidator.

107. Secondly, the statement in the third paragraph that it was beyond the resources of LCM to fully capitalise upon available funding opportunities in the Australasian market, in association with the information given concerning Vannin Capital’s expertise and resources, would suggest to a recipient in Mr Farnsworth’s position that Mr Coope, on behalf of Vannin Capital, was seeking litigation funding business, particularly in the light of the contents of the last two paragraphs of the email, which I have considered above.

108. Mr Coope’s later email must be assessed in light of the earlier email sent to Mr Farnsworth, as is noted in the first paragraph of the email.

109. The statement in the first paragraph that Vannin Capital had “launched in Australia”, and that Mr Coope would be “leading its expansion in the region”, would naturally be interpreted by a recipient in the position of Mr Farnsworth as meaning that Mr Coope wished to convey that Vannin Capital had “launched”, which can only mean for a company in the business of providing litigation funding that it wished to receive applications for litigation funding. The proposition that Mr Coope would be leading the expansion of the business could only mean that he was seeking additional litigation funding business.

110. The email then says in the third paragraph: “… Not only will they be able to help you with any litigation funding needs… but they are each on hand to help our team here in Australia… wherever needed”. Given that Mr Farnsworth’s business as a liquidator would from time to time give rise to a requirement that he seek litigation funding, Mr Farnsworth could hardly interpret this statement as being other than an invitation to apply to Vannin Capital for litigation funding if it was “needed”.

111. The balance of the later email, insofar as it described the superior capabilities of Vannin Capital, would objectively have reinforced the understanding of the recipient in the position of Mr Farnsworth that he was being invited to apply to Vannin Capital for the granting of litigation funding, if he had a need for it.

112. As I have held above that it is immaterial to the issue of whether the undertaking in par 9 was breached, to consider whether Mr Farnsworth had an immediate need for additional litigation funding at the date he received the emails, and as to whether the funding would be needed before the 12 month period expired, I find that the emails themselves constituted a solicitation of Mr Farnsworth that would be in breach of the undertaking, if all other requirements for breach of the undertaking were present.

Did Mr Coope have direct dealings with Mr Farnsworth?

116. For LCM to establish that the two emails that Mr Coope sent to Mr Farnsworth involved a breach of the undertaking in par 9, it will be necessary for LCM to prove beyond reasonable doubt that Mr Coope had had direct dealings with Mr Farnsworth, or performed work for Mr Farnsworth, within the two years prior to 31 March 2015.

117. As I have noted above (in par 17), LCM alleged in par 12 of its amended statement of charge that Mr Farnsworth was a client with whom Mr Coope has had direct dealings in regard to the Moore Australasia Litigation, and for whom Mr Coope has performed work in respect of the Huon litigation within the relevant two years.

118. As I understand LCM’s evidence, the reference in par 12 of the amended statement of charge to Mr Coope performing work in respect of the Huon litigation for Mr Farnsworth was an error. As appears from the affidavit of Mr Moloney, the managing director of LCM, the Huon litigation was litigation in respect of which LCM entered into a litigation funding agreement with the company associated with Mr Fitzgerald. The claim concerning Mr Fitzgerald is no longer being pursued, for the reasons set out above.

119. The question therefore is whether within the two year period, Mr Coope had direct dealings with Mr Farnsworth in relation to the Moore Australasia litigation.

120. It will be appropriate now to consider the evidence that is relied upon by LCM to persuade the court to give an affirmative answer to this question.

121. It is necessary to start by noting that Mr Coope gave evidence that a subsidiary of LCM, Small Claims Funding Pty Ltd, was the trustee of the Small Claims Fund (SCF). All of the units on issue in the SCF were owned equally by companies associated with Mr Coope and Mr Moloney. Those companies were responsible for providing all of the capital required for the SCF to operate and provide litigation funding. The trustee was entitled to a fee of $10,000 for each litigation funding project profitably completed by the SCF. This fee was the only financial interest of LCM, through its subsidiary, in the SCF. Mr Coope said that the SCF was established for himself and Mr Moloney to undertake small litigation funding projects, preferably those in which Mr Moloney could be the solicitor on the record so as to reduce the required amount of funding. At the time, LCM did not have the financial resources to undertake small litigation funding projects.

122. LCM did not contradict this evidence, and Mr Coope was not asked questions about it in cross-examination.

123. Somerset Ryckmans were the solicitors for Mr Farnsworth. The solicitor directly involved in the matter was Mr Martin Rosenblatt.

124. On 20 August 2013, Mr Rosenblatt sent an email to Mr Coope at his SCF email address. Mr Farnsworth was one of the persons to whom the email was copied. The email attached a letter addressed to “LCM Litigation Fund” but it was actually sent: “Via email: [email protected]”. It was therefore, received by Mr Coope at his SCF email address. The letter stated that Somerset Ryckmans acted for Mr Farnsworth, the liquidator of Moore Australasia Pty Ltd, and attached “an LCM Proposal Form in connection with an anticipated claim against Fraser & Jenkinson Pty Ltd”. The letter expressly contemplated that LCM would evaluate whether it was interested in providing litigation funding to Mr Farnsworth.

125. The proposal used a pro forma document in the name of “LMC Litigation Fund, and was headed: “Proposal Form to LCM Litigation Fund Pty Ltd”. That heading was followed by various details concerning the proposal that were completed in handwriting. The form was signed by Mr Farnsworth. The form contained the following printed statement at the end of the document:

Please return the signed form to:

Patrick Coope

LCM Litigation Fund Pty Ltd

PO Box 95

Glenside SA 5065

126. There was no evidence of the circumstances that caused Mr Rosenblatt to send the email and the letter accompanying the application to Mr Coope. There is no evidence that Mr Coope directly solicited the application. Mr Rosenblatt used an application form that must have been circulated by LCM. Although the letter and the application were addressed to LCM, they were sent to Mr Coope at his SCF email address. (Later evidence will show that Mr Coope also had an LCM email address, which I infer was intended to be used for LCM’s business).

127. On 20 August 2013, Mr Rosenblatt also sent two emails to Mr Cooper at his SCF email address, by which he forwarded emails providing additional information sent to Mr Rosenblatt by Mr Ben Carson, who I understand was a member of Mr Farnsworth’s firm.

128. On 26 September 2013, Mr Rosenblatt sent an email to Mr Coope at his SCF email address, in which Mr Rosenblatt referred to his email dated 20 August 2013 and said: “Can you please advise if SCF is interested in funding”.

129. While the letter and Proposal Form attached to Mr Rosenblatt’s 20 August 2008 email expressly conveyed that the application for litigation funding was made to LCM, the evidence is unclear as to whether or not Mr Coope invited Mr Rosenblatt to send him the application in his capacity as an employee of LCM, rather than SCF. The 26 September 2013 email provides evidence to support that Mr Rosenblatt in fact understood that the application had been made to SCF. That is consistent with the fact that Mr Rosenblatt sent the original email to Mr Coope’s SCF email address.

130. Mr Coope, using his SCF email address, sent an email to Mr Rosenblatt on 9 October 2013 seeking some missing information. At the foot of the email (under what appears to be a logo) the words “Small Claims Fund Pty Ltd” appear, together with that company’s ACN, and also a telephone number and Mr Coope’s SCF email address. The evidence shows this email was written by Mr Coope on behalf of SCF.

131. Mr Coope sent another email to Mr Rosenblatt on 9 October 2013, in which he requested information concerning the financial position of the proposed defendants. This email was copied to Mr Carson and Mr Farnsworth. However, it was also sent using the SCF email, and had the logo and the statement: “Small Claims Fund Pty Ltd” at the foot of the email.

132. Mr Rosenblatt sent an email to Mr Coope at his SCF email address on 28 January 2014. The email was copied to Mr Farnsworth and Mr Carson. It referred to difficulties Mr Rosenblatt had had in reaching Mr Coope by telephone, and his failure to respond to earlier emails. It contained the statement: “Can you please advise if SCF is interested in funding”.

133. This is further evidence that Mr Rosenblatt understood that the application for funding had been made to SCF.

134. Curiously, also on 28 January 2014, Mr Farnsworth sent a reply to Mr Rosenblatt and to Mr Coope at his SCF email address, which simply said: “hello”.

135. Mr Rosenblatt sent another email to Mr Coope on 28 January 2014, containing exactly the same message as the earlier email to Mr Coope on that day, save that it said: “Can you please advise if you have any interest interested (sic) in funding”. This email was sent to Mr Coope at his LCM email address. While the earlier email had specifically asked whether SCF was interested in funding, the second email did not refer to SCF, apparently because Mr Rosenblatt had decided to send the second email to Mr Coope at his LCM email address.

136. There is no evidence that Mr Coope invited Mr Rosenblatt to send the second email to him at his LCM email address.

137. On 12 February 2014, Mr Coope sent an email to Mr Rosenblatt, with copies to Mr Farnsworth and Mr Carson, from Mr Coope’s SCF email address. He said that he had been overseas for work, and that he had not received replies to two emails that he had sent the previous year for information. This email again ended with what appears to be a logo and the words: “Small Claims Fund Pty Ltd”.

138. This email was sent as a reply to Mr Rosenblatt’s 12 February 2014 email addressed to Mr Coope at his SCF email address.

139. Mr Coope did not reply to the email that was also sent to him on 12 February 2014 at his LCM email address.

140. On 20 February 2014, Mr Rosenblatt forwarded to Mr Coope, at his SCF email address, an email that he had earlier received from Mr Carson containing additional information. Mr Rosenblatt said: “I believe these attachments that (sic) should satisfy your outstanding request”.

141. Mr Coope replied to Mr Rosenblatt’s 20 February 2014 email from his SCF email address on 19 March 2014. He said: “thanks Marty – will come back to you shortly”.

142. On 19 March 2014 at 8:57 AM, Mr Coope sent from his SCF email address an email to Mr Moloney, on the subject of Moore Australasia. He said: “I am going to send you some further papers on this matter to consider. I reviewed a while ago. My note is that the claims looked good but that the legal team was weak.” The attachment is found in 61 pages of the court book.

143. Almost immediately following that email, Mr Coope sent a second email to Mr Moloney on the same date at 8:58 AM, to which he attached documents that are found in a further 75 pages of the court book.

144. Mr Coope gave evidence that, on 19 March 2014, he transferred responsibility for the Moore Australasia litigation funding proposal to Mr Moloney. He also said that he could not recall having any further direct dealings with anyone concerning Mr Farnsworth’s application for litigation funding after that date.

145. The two substantial emails dated 19 March 2014 provide substantial support for Mr Coope’s claim that he transferred responsibility for the application to Mr Moloney.

146. On 16 April 2014, Mr Farnsworth sent an email to Mr Rosenblatt, with a copy to Mr Moloney (and not to Mr Coope). The email listed the litigation for which Mr Farnsworth was seeking funding.

147. Later that same day, Mr Moloney, describing himself as joint managing director, sent an email to Mr Coope at his LCM email address, in which he asked: “Patrick how do I price this project 20% 25%?”

148. On 17 April 2014, Mr Coope, describing himself as joint managing director, replied to Mr Moloney’s email from Mr Coope’s LCM email address. He said:

I think 20 to 25% is about right – may be in the middle? I would make sure the Third Interest in Asset is 12.5% and the Costs Limit is say $150,000 so that if it is necessary to replace the solicitors (and pay the replacement firm) then we are on our usual 35% deal.

149. On 24 April 2014, Mr Coope sent a further email to Mr Moloney from his LCM email address, in which he gave some advice as to what LCM should do if the solicitors were going to act on a speculative basis.

150. The litigation funding agreement was entered into on 29 May 2014. Mr Coope signed the agreement on behalf of LCM as one of its directors. Item No 1 of Schedule A to the agreement identified Mr Coope as the “Representative” for LCM. Clause 34 of the agreement appointed LCM’s Representative “to represent and bind [LCM] with respect to all matters pertaining to this Agreement”. Clause 17.2 gave LCM a right for its Representative, or a nominee of the Representative, to be present at any discussion concerning the possible settlement of the litigation. Clause 39.2.1 required notices to be given in writing to LCM’s Representative. Clause 47 gave the Representative a role in dispute resolution.

151. There is no evidence that Mr Coope took any step whatsoever, or was engaged in any way in a practical sense, on behalf of LCM as its Representative.

152. In its submissions, LCM relied upon the matters stated in Mr Moloney’s 7 December 2015 affidavit at [21] to [25] to demonstrate that Mr Farnsworth “was a client of LCM”. From the context in which this submission was made, I take it that LCM relies upon those circumstances as evidence of direct dealings that Mr Coope had with Mr Farnsworth within two years before the date of termination of his employment. In par 47 of its outline of submissions, LCM summarised the evidence on which it relied as follows:

1. Prior to 29 May 2015, Mr Coope received funding requests from Mr Farnsworth.

2. On 29 May 2014, Mr Farnsworth entered into a litigation funding agreement with LCM, which was relevantly signed by Mr Coope.

3. Mr Cooper was listed as the “Representative” of LCM in the litigation funding agreement (with the role set out above in this judgment).

153. Relevantly, to the issue of whether Mr Coope had direct dealings with Mr Farnsworth during the two year period, Mr Coope’s response was as follows:

1. Mr Coope did not have any direct dealings with and did not perform work for Mr Farnsworth; rather his direct dealings were with Mr Rosenblatt.

2. Mr Coope’s dealings with Mr Rosenblatt were in his role with SCF, and not his employment by LCM.

154. An appropriate place to start in resolving this aspect of the dispute is to note that the evidence supports Mr Coope’s assertion that on about 19 March 2015, he transferred responsibility for Mr Farnsworth’s application to Mr Moloney. As I have observed above, Mr Coope’s actions on that date in sending a substantial amount of information to Mr Moloney is consistent with his claim. Moreover, before that date Mr Coope consistently dealt with Mr Rosenblatt through his SCF email address; but after that date he did not communicate with Mr Rosenblatt at all, and his involvement was in assisting Mr Moloney through Mr Coope’s LCM email address.

155. In my view, Mr Coope’s act in signing the litigation funding agreement on behalf of LCM was not a direct dealing with Mr Farnsworth for the purposes of the undertaking in par 9. There is no evidence of the circumstances in which the litigation funding agreement was executed by the parties; and in particular that it was executed by Mr Coope, Mr Moloney and Mr Farnsworth when each was personally present with the others. Even then, the execution of the document by Mr Coope was an executive action on behalf of LCM, and was an internal matter. It was therefore not a dealing by Mr Coope personally with Mr Farnsworth.

156. It is clear that, if in his capacity as Representative of LCM under the litigation funding agreement, Mr Coope had been called upon to take steps that involved any direct dealing on behalf of LCM with Mr Farnsworth, then that direct dealing would have been sufficient to satisfy the terms of the undertaking. However, as I have said, there is no evidence that Mr Coope was called upon to do anything at all in his capacity as Representative of LCM. Apart from the absence of such evidence, I would infer from the fact that nothing was put to Mr Coope in cross-examination that he had engaged in direct dealings with Mr Farnsworth in his capacity as Representative, that no such dealings in fact occurred. Had they occurred, it would have provided obvious evidence for LCM to rely upon in these proceedings, and to put to Mr Coope.

157. The steps taken by Mr Coope in sending the emails that he sent to Mr Moloney on 19 March 2014, 17 April 2014, and 24 April 2014, did not involve Mr Coope in having direct dealings with Mr Farnsworth, or in performing work for Mr Farnsworth. All of these steps were clearly part of the internal administrative arrangements of LCM, albeit that they concerned the proposed litigation funding agreement with Mr Farnsworth.

158. The only real question therefore, is whether any part of the email correspondence between Mr Coope and Mr Rosenblatt before 19 March 2015 (including Mr Farnsworth’s curious “hello” to Mr Coope on 28 January 2014) involved Mr Coope in direct dealings with Mr Farnsworth.

159. In my view, the evidence requires a conclusion that Mr Coope only dealt with Mr Rosenblatt and Mr Farnsworth in Mr Coope’s capacity as an officer of SCF. That conclusion is justified on a strong balance of probabilities. As the real question is whether LCM has proved beyond reasonable doubt that Mr Coope had direct dealings with Mr Farnsworth in the relevant period, the conclusion must be reached that LCM has not carried its burden of proof.

160. While it is true, as I have noted above, that the original letter written by Mr Rosenblatt, and the accompanying proposal, were addressed expressly to LCM, there is no evidence that Mr Coope personally invited that application to be made to LCM, and the fact that it was sent to his SCF email address justifies the inference that, whatever invitation Mr Coope may have made to Mr Rosenblatt, whether direct or indirect, Mr Coope only invited an application to be directed to SCF. That may be a debatable conclusion, but it cannot be excluded in the context of the obligation on LCM to prove beyond reasonable doubt that Mr Coope had direct dealings in the relevant period with Mr Farnsworth.

161. The subsequent communications strongly reinforce the conclusion that any direct dealings that occurred involving Mr Coope were carried out in his capacity as a representative of SCF. Mr Coope invariably communicated with Mr Rosenblatt through Mr Coope’s SCF email address. Mr Rosenblatt asked twice whether SCF was prepared to accept Mr Farnsworth’s application for litigation funding; while Mr Coope did not reply to the one request made by Mr Rosenblatt addressed to Mr Coope’s LCM email address, he did specifically chose to respond to the request made to his SCF email address on the same day.

162. If I am correct in the construction that I have given to the undertaking in par 9 that the direct dealings referred to are direct dealings by Mr Coope on behalf of LCM, and not some other party, then the conclusion that must be reached is that Mr Coope did not breach the undertaking, as claimed by LCM, in relation to dealings with Mr Farnsworth.

154. Even if it be thought that the construction that I have given to the undertaking in par 9 is debatable, in my view, it would be more than reasonable for a person in Mr Coope’s position to assume, even if wrongly, that the undertaking only applied to direct dealings carried out on behalf of LCM.

155. I cannot leave this issue without dealing with a further basis on which LCM claimed that the evidence established that Mr Coope had had direct dealings with Mr Farnsworth in the relevant period.

156. On 13 August 2015, Mr Coope sent an email to his solicitor, Mr Stephen Rush, in which he asked a number of questions for the purpose of obtaining Mr Rush’s legal advice. Mr Coope’s email, with Mr Rush’s 14 August 2015 responses inserted following each question, became exhibit C. In question 3, Mr Coope asked a question concerning the meaning of the reference to direct dealings with clients. He added the observation: “This is probably only theoretical because I can’t think of any client that I didn’t deal with (because Moloney never did anything)”.

157. LCM relied upon this statement as an admission by Mr Coope that he had direct dealings with Mr Farnsworth during the relevant period.

158. Mr Coope was cross-examined on this issue at T 70.4 to 71.32. Mr Coope’s response to the statement in the email was: “I obviously didn’t think of the Moore Australasia matter”.

159. The statement by Mr Coope in the 13 August 2015 email is an insubstantial foundation for an admission of a fact necessary to support an allegation required to be proved beyond reasonable doubt. Mr Coope said, at a time when he would not have been trying to be exhaustive: “I can’t think of any client that I didn’t deal with”. That is not an absolute statement that Mr Coope dealt directly with all clients of LCM.

160. In my view, this supposed admission is displaced by the evidence of Mr Coope’s actual dealings with Mr Rosenblatt and Mr Farnsworth, which I have considered above.

161. In these circumstances, it is not necessary for me to decide the question as to whether Mr Coope’s direct dealings with Mr Rosenblatt were not direct dealings with Mr Rosenblatt’s client, Mr Farnsworth.

162. Were it necessary for me to do so, I would hold that, for the purposes of the undertaking in par 9, a direct dealing by Mr Coope with the solicitor for a client of LCM, if carried out as part of LCM’s business, and in circumstances where the client may be presumed to be substantially aware of the dealings between Mr Coope and the solicitor, and where the solicitor was the legal representative of the client for the purpose of negotiating a contract between the client and LCM, without any discretionary authority concerning the making of the contract, any direct dealings by Mr Coope with the solicitor would be direct dealings with the client. (In making this observation, I do not mean to suggest any limit to the circumstances in which dealing with a client’s solicitor would constitute direct dealing with the client for the purposes of the undertaking in par 9).

163. LCM made a sustained attack on the credibility of Mr Coope’s evidence. The reasoning process that I have adopted in reaching the conclusions I have in this judgment have not required me to decide on Mr Coope’s credit. At the stage of considering whether LCM’s claim that Mr Coope has committed contempt of court, I have found it appropriate to decide the issues on the basis of the objective evidence. I have not had to rely on Mr Coope’s testimonial evidence on any issue that was challenged by LCM. In these circumstances, I will not deal with the extensive submissions made by LCM as to why aspects of Mr Coope’s evidence should not be accepted.

Conclusion and orders

173. As LCM conceded that its claim that Mr Coope’s conduct in relation to Mr Duncan must fail if the word “Client” in the undertaking in par 9 was not intended to have the same meaning as “client” as defined in the employment agreement; my finding that the word “client” was intended to be used with its ordinary meaning has the consequence that this aspect of LCM’s claim must fail.

174. Although Mr Farnsworth was a client of LCM in the relevant sense, and although the two email communications constituted solicitations that would have contravened the undertaking, my finding that Mr Coope did not engage in direct dealings with Mr Farnsworth in the relevant two year period on behalf of LCM has the result that this aspect of LCM’s case must also fail.

175. I will accordingly make the following orders:

1. Order that the plaintiff’s Amended Summons and Amended Statement of Charge be dismissed.

2. Order that the plaintiff pay the defendant’s costs of the proceedings.

3. Order that the exhibits and any documents produced on subpoena or notice to produce may be returned forthwith in accordance with the Rules.

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Amendments

06 December 2016 - Representation details updated; noted that Counsel AJ Sullivan QC/T O'Brien appeared for (plaintiff)

Decision last updated: 06 December 2016