Monarch Advisory Group Pty Ltd v Puxty (No 4)

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FEDERAL COURT OF AUSTRALIA

Monarch Advisory Group Pty Ltd v Puxty (No 4) [2025] FCA 534

File number: NSD 951 of 2020
Judgment of: MARKOVIC J
Date of judgment: 23 May 2025
Catchwords:

INDUSTRIAL LAW – employment agreements – whether consent given to breach post-employment restraint – whether post-employment restraint reasonable, valid and enforceable – where no consent established – where post-employment restraint enforceable

DAMAGES – damages for loss of profits – damages for lost opportunity – basis for calculation of damages – where breach of restraint of trade – where company lost business as a consequence – whether loss of business caused loss of opportunity to sell business at a higher price   
Legislation: Restraints of Trade Act 1976 (NSW) s 4
Cases cited:

Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64

Ennis Paint Australia Holding Pty Ltd & Anor v Jimmy Poh Wing Lei & Ors [2015] NSWSC 1933

Extraman (NT) Pty Ltd v Blenkinship (2008) 23 NTLR 77

Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267

Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46

Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 Birla Nifty Pty Ltd v International Mining Industry Underwriters Ltd (2014) 47 WAR 522

OAMPS Insurance Brokers Ltd v Peter Hanna [2010] NSWSC 781

Orica Investments Pty Ltd v McCartney [2010] NSWSC 488

Stacks Taree v Marshall [No 2] [2010] NSWSC 77

Woolworths Ltd v Olson [2004] NSWCA 372
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs: 211
Date of hearing: 11-13 March 2024
Counsel for the Applicant: Mr D Mahendra
Solicitor for the Applicant: Madison Marcus Law Firm
Counsel for the Respondents: Mr V Bedrossian SC and Ms S Erian
Solicitor for the Respondents: Edge Legal Group

ORDERS

NSD 951 of 2020
BETWEEN:

MONARCH ADVISORY GROUP PTY LTD

Applicant
AND:

BRETT JAMES PUXTY

First Respondent

FRANCIS COGGAN

Second Respondent

ODYSSEY ADVISORY SERVICES PTY LTD

Third Respondent
AND BETWEEN:

BRETT JAMES PUXTY (and another named in the Schedule)

First Cross-Claimant
AND:

MONARCH ADVISORY GROUP PTY LTD

Cross-Respondent

ORDER MADE BY:

MARKOVIC J

DATE OF ORDER:

23 MAY 2025

THE COURT ORDERS THAT:

1.Subject to Order 2 below, by 6 June 2025 the parties are to provide draft short minutes of order giving effect to these reasons including in relation to the date from which interest should run and on the question of costs.

2.In the event that the parties cannot agree on the form of orders:

(a)by 6 June 2025 they are to provide to my Associate their competing orders and submissions, not exceeding three pages in length, addressing the areas and extent of the disagreement between them; and

(b)the proceeding will be listed for case management hearing to allow all outstanding matters in dispute to be determined and for final orders to be made.

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

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Details
Case
[2025] FCA 534
Decision Date

CaseChat Overview and Summary

In the matter of Monarch Advisory Group Pty Ltd v Puxty, the Federal Court was tasked with determining whether post-employment restraints in the employment agreements between Monarch Advisory Group Pty Ltd and its former employees, Messrs Puxty and Coggan, were valid and enforceable. Specifically, the court had to decide whether the restraints were reasonable and if they were breached by the former employees. The central issue revolved around the enforceability of these restraints and the damages, if any, that Monarch was entitled to claim due to their alleged breach.

The court found that the post-employment restraints were valid and enforceable. The analysis focused on the reasonableness of the restraints, considering factors such as the duration, geographical scope, and the nature of the business activities restricted. The court concluded that the restraints were necessary to protect the legitimate business interests of Monarch, including its client relationships and intellectual property. Additionally, the court determined that there was no evidence of consent by the former employees to breach these restraints. The court assessed the damages Monarch claimed for lost profits and lost opportunity to sell its business at a higher price, concluding that these damages were a direct consequence of the alleged breach of the restraints. The court awarded Monarch $194,448 in damages, after making adjustments for uncertainties in the calculations and potential attrition of clients. The total judgment in favor of Monarch was $270,593.60, less $30,000 for the repaid loan, with interest to be calculated as per the Federal Court of Australia Act 1976. The court reserved the decision on costs pending further submissions from the parties.

Orders

Orders of the court

1. Subject to Order 2 below, by 6 June 2025 the parties are to provide draft short minutes of order giving effect to these reasons including in relation to the date from which interest should run and on the question of costs.

2. In the event that the parties cannot agree on the form of orders:

(a) by 6 June 2025 they are to provide to my Associate their competing orders and submissions, not exceeding three pages in length, addressing the areas and extent of the disagreement between them; and

(b) the proceeding will be listed for case management hearing to allow all outstanding matters in dispute to be determined and for final orders to be made.

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

Background

Background to the litigation

I return to the detail of the remaining pleaded claim as against Messrs Puxty and Coggan below. Before doing so it is convenient to set out the evidence relied on by the parties and the relevant facts, noting that it is no longer necessary to resolve some of the factual issues that might have arisen. To that end I have only included the evidence insofar as it is relevant to the remaining pleaded and defended claim based on an alleged breach of cl 19 of the employment agreements and the components of the Amended CC that remain in issue and otherwise to the extent it provides background and context.THE FACTSWitnesses Monarch relied on evidence given by the following witnesses:(1)Ms Coulter, the sole director and secretary of Monarch. Ms Coulter obtained a Diploma of Financial Services – Financial Advice in 2003, which enabled her to provide financial advice, and an Advanced Diploma Financial Services from RMIT University in 2005. She has held the following positions:(a)from about 2001 she worked for AdvantEdge, a subsidiary of MLC Limited, in its call centre providing “no advice” information for investments and superannuation to members of AdvantEdge;(b)from 2002 to 2003 she was a mortgage broker at MLC;(c)from 2003 to 2004 she was an education specialist for corporate super at MLC. While undertaking these roles for MLC, Ms Coulter focused largely on superannuation. As an education specialist for MLC superannuation, she travelled around Australia educating members of the MLC Super Fund about the mechanics of investing in super and the investment options available to them. Ms Coulter was not able to provide financial advice to members at the time, but she provided them with financial literacy to assist them in making informed decisions about consolidating their super and member investment choice including if appropriate by providing assistance so that members could tailor the investment approach for their super rather than remaining with the default option. Ms Coulter educated staff from a number of large corporations including Telstra, PwC, Sony, Thales and Australian Defence Industries;(d)in 2005 she worked as a financial planner at Westpac Banking Corporation providing advice to businesses on strategies and structures such as business insurance, including buy/sell and keyperson insurance, superannuation for individual business owners and group superannuation options for staff, along with other investments outside of superannuation. Ms Coulter advised small to medium enterprises where the businesses employed at least 10 staff and had a minimum turnover of $1,000,000;(e)in 2006 she moved to AMP where she held the role of business development manager. In that role Ms Coulter assisted AMP aligned advisors (advisors licenced by AMP) with structures and strategies for superannuation, investments and insurance;(f)in 2007 she moved to Perpetual Private Wealth as business development manager in private wealth and investments where she assisted advisors to structure their client investments through separately managed accounts (SMAs). Ms Coulter worked closely with the investment managers to understand their investment philosophy and the individual stocks they chose for the SMAs so as to assist the advisors to understand how to incorporate the SMAs in their client’s overall investment portfolio;(g)in 2008 she moved to Macquarie Bank where she held the role of business development manager in insurance. In that role Ms Coulter assisted advisors to understand how to structure complex insurance strategies for their high-net-worth clients, being those requiring in excess of the standard sums insured, for example, $15 million total and permanent disability insurance coverage, $10 million trauma insurance coverage and $60,000 per month income protection. Ms Coulter met with advisors and helped them to understand how to calculate the amounts insured to best present to the underwriter, which for those clients were significantly higher than the industry standard at the time; and(h)in 2010 she moved to OnePath where she held the role of business development manager in insurance until 2012 when she established Monarch. In that role Ms Coulter spent most of her time with advisors working on the OnePath product. However, there was a comprehensive training program that Ms Coulter and the technical advice manager presented to advisors around business insurance which included presenting strategies to advisors and assisting them to implement the strategies, including in depth underwriting case studies. While Ms Coulter was at OnePath, there was a focus on business insurance. After she left OnePath, Ms Coulter maintained her relationship with the technical managers and would often run strategies by them. Ms Coulter was cross-examined;(2)Alex Lee, managing partner of Newlane Risk Pty Ltd, a financial planning and advisory business. Mr Lee has over 16 years’ experience as a financial advisor and has owned and operated his own advisory business since about 2017. Mr Lee gave evidence in relation to the calculation of the purchase price for the purchase by Newlane of Monarch’s client book. Mr Lee was not cross-examined; and(3)Michael Potter, a chartered accountant and a partner of EY. Mr Potter is an accredited business valuation specialist and forensic accountant with over 38 years’ experience. Mr Potter prepared a report in relation to the loss of profit suffered by Monarch during the “Restraint Period as a result of the claimed employment contract breaches” and the question of “whether the claimed employment contract breaches resulted in a reduced [purchase price for the purchase by Newlane of Monarch’s client book] and if so, the quantum of that reduction”. Mr Potter was cross-examined.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The respondents having cast doubt on some of the integers in Mr Potter’s calculation do not assist the Court by providing an alternative quantification. Their expert Mr Minett does not do so, nor does he provide a percentage by which the calculation of claim 2 might be reduced in light of the uncertainties. Monarch proffered that a reduction of 20% should be applied for “friends and family” who would in any event have left Monarch following Messrs Puxty’s and Coggan’s departure. In addition, having regard to the undermining of some of the assumptions given to Mr Potter and the fact that the assessment does not factor in the possibility of attrition in the Clients under Restraint by their departure from Monarch in the ordinary course of business I would reduce Mr Potter’s calculation by a further 20%. Thus, the damages for claim 2 are assessed as $194,448. CONCLUSION Monarch is entitled to judgment in the sum of $270,593.60 being the amount of its damages for claim 1 and claim 2 less $30,000 (being that component of the Amended CC which Monarch did not oppose) and interest on that amount pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth). Given the way in which Monarch ultimately conducted its case, in particular its late abandonment of most of its pleaded claims, and its approach to the Amended CC, and the extent of its success, I will reserve on the question of costs. The parties should provide my Associate with draft orders giving effect to these reasons and, if agreement can be reached, on the question of costs within 14 days of their publication. If they cannot agree, including in relation to the date from which interest should run and the question of costs, they should provide their competing orders by that date together with submissions, not exceeding three pages, addressing the areas of disagreement. The proceeding will thereafter be listed for case management hearing to resolve any differences and make final orders. I will make orders accordingly.

Ratio Decidendi

Legal Principle Established

Until the final day of the hearing, in its Amended OA Monarch also sought damages and an account of profits occasioned by an alleged breach of fiduciary duty by Messrs Puxty and Coggan and damages pursuant to s 1317H of the Corporations Act 2001 (Cth), s 236 of the Australian Consumer Law (ACL) being Sch 2 to the Competition and Consumer Act 2010 (Cth) and for passing off. Similarly, in its amended statement of claim filed on 4 February 2022 (ASoC) Monarch pleaded a broader case alleging, in addition to breaches by Messrs Puxty and Coggan of various clauses of their respective employment agreements with Monarch, breach by Messrs Puxty and Coggan of their fiduciary duties owed to Monarch, breach by Messrs Puxty and Coggan of s 182 and s 183 of the Corporations Act and Odyssey’s involvement in such breaches and breach by Messrs Puxty and Coggan and Odyssey (together respondents) of s 18 of the ACL and that the respondents engaged in passing off. On 27 February 2023 Mr Puxty and Odyssey (together cross-claimants) filed an amended notice of cross-claim and amended statement of cross-claim (Amended CC) seeking damages for alleged breach of contract and repayment of a loan of $30,000 which the cross-claimants allege was advanced by Mr Puxty to Monarch. In Monarch’s opening submissions it informed the Court that, without admission of liability, it would consent to an order requiring it to pay Mr Puxty the $30,000 it received from him but says that payment of this amount should await the determination of the relief it seeks in the ASoC (such that the amount could be offset against any monetary judgment made in Monarch’s favour as opposed to it constituting a stand-alone order against it). In oral closing submissions on the final day of hearing, counsel for Monarch informed the Court that Monarch only alleges and relies on breach by each of Messrs Puxty and Coggan of cl 19 of their respective employment agreements, which are post employment restraint clauses, and claims damages for those alleged breaches. Monarch otherwise abandoned all other relief sought and claims made in its Amended OA and ASoC, including in relation to alleged breaches of other clauses of Messrs Puxty’s and Coggan’s respective employment agreements. I return to the detail of the remaining pleaded claim as against Messrs Puxty and Coggan below. Before doing so it is convenient to set out the evidence relied on by the parties and the relevant facts, noting that it is no longer necessary to resolve some of the factual issues that might have arisen. To that end I have only included the evidence insofar as it is relevant to the remaining pleaded and defended claim based on an alleged breach of cl 19 of the employment agreements and the components of the Amended CC that remain in issue and otherwise to the extent it provides background and context.THE FACTSWitnesses Monarch relied on evidence given by the following witnesses:(1)Ms Coulter, the sole director and secretary of Monarch. Ms Coulter obtained a Diploma of Financial Services – Financial Advice in 2003, which enabled her to provide financial advice, and an Advanced Diploma Financial Services from RMIT University in 2005. She has held the following positions:(a)from about 2001 she worked for AdvantEdge, a subsidiary of MLC Limited, in its call centre providing “no advice” information for investments and superannuation to members of AdvantEdge;(b)from 2002 to 2003 she was a mortgage broker at MLC;(c)from 2003 to 2004 she was an education specialist for corporate super at MLC. While undertaking these roles for MLC, Ms Coulter focused largely on superannuation. As an education specialist for MLC superannuation, she travelled around Australia educating members of the MLC Super Fund about the mechanics of investing in super and the investment options available to them. Ms Coulter was not able to provide financial advice to members at the time, but she provided them with financial literacy to assist them in making informed decisions about consolidating their super and member investment choice including if appropriate by providing assistance so that members could tailor the investment approach for their super rather than remaining with the default option. Ms Coulter educated staff from a number of large corporations including Telstra, PwC, Sony, Thales and Australian Defence Industries;(d)in 2005 she worked as a financial planner at Westpac Banking Corporation providing advice to businesses on strategies and structures such as business insurance, including buy/sell and keyperson insurance, superannuation for individual business owners and group superannuation options for staff, along with other investments outside of superannuation. Ms Coulter advised small to medium enterprises where the businesses employed at least 10 staff and had a minimum turnover of $1,000,000;(e)in 2006 she moved to AMP where she held the role of business development manager. In that role Ms Coulter assisted AMP aligned advisors (advisors licenced by AMP) with structures and strategies for superannuation, investments and insurance;(f)in 2007 she moved to Perpetual Private Wealth as business development manager in private wealth and investments where she assisted advisors to structure their client investments through separately managed accounts (SMAs). Ms Coulter worked closely with the investment managers to understand their investment philosophy and the individual stocks they chose for the SMAs so as to assist the advisors to understand how to incorporate the SMAs in their client’s overall investment portfolio;(g)in 2008 she moved to Macquarie Bank where she held the role of business development manager in insurance. In that role Ms Coulter assisted advisors to understand how to structure complex insurance strategies for their high-net-worth clients, being those requiring in excess of the standard sums insured, for example, $15 million total and permanent disability insurance coverage, $10 million trauma insurance coverage and $60,000 per month income protection. Ms Coulter met with advisors and helped them to understand how to calculate the amounts insured to best present to the underwriter, which for those clients were significantly higher than the industry standard at the time; and(h)in 2010 she moved to OnePath where she held the role of business development manager in insurance until 2012 when she established Monarch. In that role Ms Coulter spent most of her time with advisors working on the OnePath product. However, there was a comprehensive training program that Ms Coulter and the technical advice manager presented to advisors around business insurance which included presenting strategies to advisors and assisting them to implement the strategies, including in depth underwriting case studies. While Ms Coulter was at OnePath, there was a focus on business insurance. After she left OnePath, Ms Coulter maintained her relationship with the technical managers and would often run strategies by them. Ms Coulter was cross-examined;(2)Alex Lee, managing partner of Newlane Risk Pty Ltd, a financial planning and advisory business. Mr Lee has over 16 years’ experience as a financial advisor and has owned and operated his own advisory business since about 2017. Mr Lee gave evidence in relation to the calculation of the purchase price for the purchase by Newlane of Monarch’s client book. Mr Lee was not cross-examined; and(3)Michael Potter, a chartered accountant and a partner of EY. Mr Potter is an accredited business valuation specialist and forensic accountant with over 38 years’ experience. Mr Potter prepared a report in relation to the loss of profit suffered by Monarch during the “Restraint Period as a result of the claimed employment contract breaches” and the question of “whether the claimed employment contract breaches resulted in a reduced [purchase price for the purchase by Newlane of Monarch’s client book] and if so, the quantum of that reduction”. Mr Potter was cross-examined.