Morgan Stanley Wealth Management Australia Pty Ltd v Detata [No 3]

Morgan Stanley Wealth Management Australia Pty Ltd sought to recover sums of money paid to Mr Detata, a former stockbroker, under an employment contract and a settlement deed. The dispute arose from Mr Detata's trading activities which were considered by Morgan Stanley to be in breach of its internal policies. Mr Detata argued that the instructions to cease trading in a particular manner were unlawful, and that the settlement deed was voidable due to economic duress or unconscionable conduct. The case centred on whether Mr Detata had breached the employment contract by not following lawful and reasonable directions, and whether the settlement deed contained a penalty clause. The Federal Circuit Court was required to determine whether Mr Detata had breached the terms of the employment contract by not following the policies outlined in the Compliance Manual, and whether the settlement deed was enforceable.

The court held that Mr Detata's breach of the Compliance Manual's policies constituted a breach of his contractual obligation to follow lawful and reasonable directions. The court found that the regulatory environment, particularly the role of ASIC and the ASX, underscored the importance of adhering to these policies. Mr Detata's evidence that he understood his obligation to comply with these policies was noted but did not change the outcome. The court rejected Mr Detata's claims of economic duress and unconscionable conduct, finding that there was no special disadvantage or unconscionable advantage taken. The court also found that the repayment requirement in the settlement deed was not a penalty, as it was a legitimate means of recouping sums paid to Mr Detata under the employment contract.

The court ordered that Mr Detata repay to Morgan Stanley the sums paid to him under the settlement deed, and that the settlement deed was enforceable. The court further ordered that the repayment of incentives under the employment contract was not a penalty, and that Mr Detata was liable for these amounts. The decision underscores the importance of compliance with internal policies in the financial services industry and the enforceability of settlement agreements in such contexts.