SOLICITORS: Cowley Hearne - Pltf. MBA Lawyers - Dft.
CATCHWORDS: EMPLOYMENT - competition in business with former employer - employment contract - implied terms - fiduciary duty - good faith and fidelity - acts preparatory to establishing business - lists and records as employer's property - whether fiduciary duties breached - whether misuse of trade secrets or confidential information - whether interception of maturing business opportunity.
IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION
BRYSON J.
FRIDAY 7 APRIL 2000
2094/99 WELDON & CO. SERVICES PTY LTD v. CHRISTINE HARBINSON
JUDGMENT
HIS HONOUR:
Factual Background. The plaintiff company claims remedies relating to events in which the defendant left the plaintiff’s employment and established her own accountancy practice. The principal of the plaintiff is Mr Brian C. Weldon, who has practised as an accountant since January 1962. He became a registered Tax Agent in September 1975 and in May 1977 established the Public Accountancy practice now conducted as the plaintiff. Since February 1986 the practice has been conducted at 2nd Floor, 12 Falcon Street, Crows Nest. The defendant was employed by the plaintiff as a trainee accountant in 1987 for some months and then returned to the United Kingdom. In 1989 she emigrated to Australia, sponsored by Mr Weldon. The defendant was employed as an accountant by the plaintiff from June 1989 until she gave notice of her intention to resign on 31 March 1999; her employment ended when the notice expired on 14 April 1999.
The defendant received training from Mr Weldon and also attended professional seminars and pursued studies of her own. In June 1992 she was approved by the Tax Agents Board as a nominee of the plaintiff, and she became a registered Tax Agent on 18 December 1997. After a course of study and examination the defendant received a public practising certificate from the Society of Certified Practising Accountants on 7 March 1999.
Until 1990 an accountant called Mr White was also a principal of the plaintiff. When Mr White left the practice the defendant was the only person other than Mr Weldon who performed accountancy services. The defendant’s main work for the plaintiff was preparing company accounts, annual tax returns and corporate and individual tax records, mainly for small businesses. For some clients the plaintiff had a retainer to provide accountancy support at a monthly or other regular fee. Her degree of responsibility increased with the passage of time and the progress of her experience, studies…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Weldon & Co Services Pty Ltd v Harbinson [2000] NSWSC 272
Case
[2000] NSWSC 272
Decision Date
CaseChat Overview and Summary
Weldon & Co Services Pty Ltd v Harbinson was a case brought before the court where the plaintiff, a company, sought remedies against the defendant who had previously been employed by the plaintiff as an accountant. The dispute centred on the defendant's departure from the plaintiff's employment and her subsequent establishment of her own accountancy practice in competition with the plaintiff. The defendant had been employed by the plaintiff from June 1989 until her employment ended in April 1999. During her employment, she had gained significant experience and responsibilities, including acting as the primary contact for several clients. The plaintiff alleged that the defendant breached fiduciary duties, misused confidential information, and intercepted maturing business opportunities by soliciting clients while still employed and by removing client records and establishing her own practice shortly after her resignation.
The primary legal issues the court had to address were whether the defendant breached any fiduciary duties owed to the plaintiff, whether she misused trade secrets or confidential information, and whether she improperly intercepted business opportunities. The court also had to consider whether the defendant's actions constituted misleading and deceptive conduct under the Fair Trading Act 1987. The plaintiff argued that the defendant's actions, including soliciting clients while still employed, removing client records, and establishing a competing practice, amounted to breaches of fiduciary duty and misuse of confidential information.
The court found that the plaintiff's claims succeeded only to the extent that the plaintiff should be awarded $500 in damages. The court held that the plaintiff had not provided sufficient evidence to support the claim that the defendant breached fiduciary duties or misused confidential information. The court also found that the plaintiff could not establish that the defendant had solicited clients while still employed or removed client records in a manner that constituted a breach of fiduciary duty. However, the court acknowledged that the plaintiff was entitled to some compensation for the defendant's actions, leading to the award of $500. The court did not find merit in the plaintiff's claim for misleading and deceptive conduct under the Fair Trading Act 1987, as the defendant had no obligation to inform the plaintiff of her intention to set up a competing practice.
In conclusion, the court awarded the plaintiff $500 in damages but found that the plaintiff's claims for breach of fiduciary duty, misuse of confidential information, and misleading and deceptive conduct failed. The court reserved the consideration of costs.
Orders
Orders of the court
Full text does not contain this section.
Background
Background to the litigation
Factual Background. The plaintiff company claims remedies relating to events in which the defendant left the plaintiff’s employment and established her own accountancy practice. The principal of the plaintiff is Mr Brian C. Weldon, who has practised as an accountant since January 1962. He became a registered Tax Agent in September 1975 and in May 1977 established the Public Accountancy practice now conducted as the plaintiff. Since February 1986 the practice has been conducted at 2nd Floor, 12 Falcon Street, Crows Nest. The defendant was employed by the plaintiff as a trainee accountant in 1987 for some months and then returned to the United Kingdom. In 1989 she emigrated to Australia, sponsored by Mr Weldon. The defendant was employed as an accountant by the plaintiff from June 1989 until she gave notice of her intention to resign on 31 March 1999; her employment ended when the notice expired on 14 April 1999. The defendant received training from Mr Weldon and also attended professional seminars and pursued studies of her own. In June 1992 she was approved by the Tax Agents Board as a nominee of the plaintiff, and she became a registered Tax Agent on 18 December 1997. After a course of study and examination the defendant received a public practising certificate from the Society of Certified Practising Accountants on 7 March 1999. Until 1990 an accountant called Mr White was also a principal of the plaintiff. When Mr White left the practice the defendant was the only person other than Mr Weldon who performed accountancy services. The defendant’s main work for the plaintiff was preparing company accounts, annual tax returns and corporate and individual tax records, mainly for small businesses. For some clients the plaintiff had a retainer to provide accountancy support at a monthly or other regular fee. Her degree of responsibility increased with the passage of time and the progress of her experience, studies and examinations, and tax agent registrations. Mr Weldon offered the defendant a position as a principal analogous to a partner, and she declined. The defendant was a senior employee with a high degree of responsibility, including responsibility for the plaintiff’s interests in its relations with clients. For some years she dealt separately and directly with a number of the plaintiff’s clients with little or no intervention by Mr Weldon, so that she was the client’s direct point of contact. Mr Weldon dealt almost exclusively with other clients. By 1999 the defendant’s remuneration by salary and superannuation contribution was $78,000, which was a substantial salary having regard to the nature of the work being done and of the practice. She was also given a bonus each year. There was no comprehensive agreement in writing establishing the terms of the employment. Some details relating to remuneration were in writing. There was no express agreement relating to use by the defendant of confidential or other information gained in the employment, or relating to the defendant’s conduct after her employment ended. There was no agreement restraining competition should she leave her employment.
Evidence
Evidence Before The Court
Defendant’s Failure to Call Evidence. The plaintiff’s counsel submitted that the defendant had failed to call evidence which was potentially available to her on a number of matters; and that inferences adverse to her case should be drawn for that reason. One topic to which this submission was related was the question whether the defendant solicited work from clients of the plaintiff while still employed. Counsel pointed out that several clients whose evidence the defendant called did not deal with this subject. In the absence of any positive evidence that the defendant did solicit those clients, it is understandable that relatively little attention was given to the subject in evidence. It was also submitted that the plaintiff could have called corroborating evidence of clients with respect to the allegations that she had removed papers of Patterson & Partners and JGP from the plaintiff’s office. Similarly in the absence of any substantial evidence that she had done so it is understandable that relatively little attention was given to this matter and that the defendant relied on her own evidence on the subject. It was suggested that Mr Barden could well have dealt with a number of topics with which his evidence did not deal. There were also contentions that various other persons might have been called by the plaintiff including, for example, the sales assistant from whom she bought computer software whom she said gave her advice on its use. This submission was on the verge of the fanciful. A number of persons who were referred to in this submission gave evidence on other subjects, and were available to be cross examined by the plaintiff if it were thought that they could give evidence of any substantial matter. Further, clients and former clients of the plaintiff were available for the plaintiff to call their evidence with respect to matters on which the plaintiff bears the onus of proof. Principles in Jones v. Dunkel (1959) 101 CLR 298 do nothing to overcome the onus of proof which the plaintiff bears. Many different formulations have been given for the circumstances in which it should be regarded as natural for one party to produce a witness; these formulations were collected by Glass JA in Payne v. Parker [1976] 1 NSWLR 191 at 200-203; see his para 7. In Jones v. Dunkel the absent witness was himself a defendant. In my view it should not be taken simply from the fact that an organisation which formerly retained the plaintiff as its accountant now retains the defendant that its principals stand in any especially close relationship to the defendant; that may be so but there is a need to demonstrate that it is so when adverse inferences are sought to be established. The plaintiff’s counsel contended that the plaintiff is entitled to remedies for misleading and deceptive conduct under s 42 of the (NSW) Fair Trading Act 1987. It was contended that the defendant’s conduct in soliciting business, establishing her office, servicing undisclosed clients and removal of records from the plaintiff’s office constituted breaches of s 42. This submission lacks a factual basis. The defendant had no obligation to tell the plaintiff in advance of her intention to set up a competing practice. A contractual term to that effect would be anti-competitive a restraint of trade, not a severe restraint, but not a term which should be implied in a contract of employment.
Decision
Reasons for decision
BRYSON J
Conclusion. For these reasons the plaintiff’s claims succeed to the limited extent that the plaintiff should be awarded judgment for $500. In all other respects the plaintiff’s claim fails. I have not yet considered costs. Orders:(1) Give judgment for the plaintiff for $500. Costs reserved.