Resilium Pty Ltd v Nest Insurance Consult Pty Ltd

1. [1]

   This is a claim (brought by way of cross-claim) for damages for an alleged breach of a term in a written contract that each party must keep confidential and must not use the other party’s Confidential Information except as necessary to perform the agreement or as required by law.

2. [2]

   The claim fails because:

   1. (1)

      the claimant has not established that the information concerned was its Confidential Information within the terms of the contract;

   2. (2)

      in any event, the respondent was entitled to use it as it did, because this was required by law;

   3. (3)

      the claimant, and not the respondent, was the cause of any loss suffered by the claimant; and

   4. (4)

      the claimant has not established that by the respondent’s conduct it suffered any loss or the quantum of it.

Nest Insurance Consult Pty Ltd

1. [3]

   The cross-claimant is Nest Insurance Consult Pty Ltd (Nest), a company associated with Mr Kien Nhat Nguyen (Nguyen) who incorporated it, and who, at all material times, was its sole director.

Resilium Insurance Broking Pty Ltd

1. [4]

   The first cross-defendant is Resilium Insurance Broking Pty Ltd (RIB). It has, at all material times, held an Australian Financial Services Licence authorising it to deal in and advise on general insurance products (that is insurance broking).

Resilium Pty Ltd

1. [5]

   The second cross-defendant, Resilium Pty Ltd (Resilium), is the holding company of RIB and a general insurance broker, which at all material times held an Australian Financial Services Licence authorising it to deal in and advise on general insurance products. For reasons which will be explained later, Resilium no longer has any direct part to play in this controversy.

2. [6]

   Although this dispute is purely contractual, it arises in the context of a statutory regime and should be viewed in that light.

3. [7]

   Chapter 7 of the Corporations Act 2001 (Cth) (the Act) concerns financial services and markets. Sections referred to below are, unless otherwise stated, sections of the Act and are within Chapter 7.

4. [8]

   Section 760A states, relevantly, that the main object of the Chapter is to promote fairness, honesty, and professionalism by those who provide financial services.

5. [9]

   The Chapter makes provision for the grant by ASIC of an Australian Financial Services Licence (AFSL) to fit and proper persons to provide the financial services covered by the licence. [1]

6. [10]

   Section 912A requires an AFSL holder to do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly. Under s 915C, ASIC may suspend or cancel an AFSL, relevantly, if the AFSL holder has not complied with their obligations under s 912A.

7. [11]

   Division 5 of the Chapter contains provisions under which a AFSL holder may give a person (Authorised Representative or AR) a written notice authorising that person to provide a specified financial service or financial services on behalf of the AFSL holder.

8. [12]

   Division 6 of the Chapter contains provisions which make the AFSL holder responsible as between them and the client for the conduct of the Authorised Representative, whether or not the representative’s conduct is within authority. Section 917E extends the responsibility of the AFSL holder so as to make them liable to the client in respect of any loss or damage suffered by the client as a result of the representative’s conduct.

9. [13]

   Section 1311, which is in Chapter 9, makes it an offence for a person to do an act or thing that the person is forbidden to do by or under a provision of the Act.

10. [14]

    Subsequent to the events which gave rise to these proceedings, s 912EA was introduced into the Act. [2] It provides that an AFSL holder must take reasonable steps to notify a person (the affected client) of a reportable situation, which includes where an Authorised Representative has breached a core obligation and the breach is significant. A core obligation includes doing all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly. The section did not, and does not, apply here, but is reflective, in my view, of RIB’s general obligation to those for whom it acts as broker under its AFSL.

Portfolio transfer to Nest

1. [15]

   From 2008 to 2012, Nguyen worked for GIO as a service consultant and then member of its general commercial sales team. In mid-2012, he started in the role of business insurance specialist, brokering commercial insurance products for clients with more complex risks than those covered by the general commercial sales team. He was assigned a portfolio of commercial insurance policies. He was given a list of names and contact details of policyholders, details of their policies and premiums and other information concerning their businesses.

2. [16]

   Resilium and RIB were, until 2017, part of an AR network which was part of the Suncorp Group, the ultimate holding company of which was AAI Limited which traded as GIO. Vero is another GIO brand name.

3. [17]

   In 2017, Suncorp’s AR network was restructured to the intent that insurance broking portfolios run by Authorised Representatives would thenceforth be owned by them (as opposed to GIO). The effect was that Authorised Representatives would, in that capacity, carry on a business in their own right.

4. [18]

   The restructuring made in-house insurance advisers at GIO redundant. Advisers, including Nguyen, were offered the opportunity to join the Resilium network as Authorised Representatives.

5. [19]

   To this end, on 20 July 2016, Resilium and Nest entered into a written Referral and allocation agreement under which Resilium, in consideration of Nest paying an Allocation Price ($510,431 calculated on the value of the transferred portfolio - payable in monthly instalments of $8,290), would refer clients and identified policies recorded on a Register maintained by Resilium, to Nest for renewal. Resilium would then allocate to Nest, within the Register, all such policies where the client had elected to renew with Nest.

6. [20]

   Resilium duly provided Nest with a list of client insureds together with information concerning them and their policies.

7. [21]

   Thereafter, on 28 July 2016, Resilium and Nest entered into a written Authorised Representative Deed of Agreement (AR Agreement) under which Resilium authorised Nest, for the purposes of Ch 7, to provide financial services on its behalf. The AR Agreement incorporated Master Terms (updated on 30 August 2017) (the Master Terms). It was terminable by either party giving notice to the other and, relevantly, by Resilium immediately if Resilium was of the reasonable opinion that Nest had engaged in conduct considered to be an act of dishonesty or serious misconduct or failed to perform its duties efficiently, honestly and fairly. Nguyen guaranteed Nest’s performance of the AR agreement. The AR Agreement made provision for nomination of a specified officer to be the principal point of contact for dealings between Resilium and Nest. Nguyen was nominated. The AR Agreement and the Master Terms included a provision that during its term, subject to various exceptions, the clients would be Nest’s and Resilium would not contact them. It contained provisions about Confidential Information which make it clear that it had Resilium’s information, rather than Nest’s, in mind. It included provisions requiring Nest to deliver up to Resilium its Confidential Information and give Resilium all client lists and client files on termination.

8. [22]

   On that date, Nest also entered into an Authorised Representative Agreement (Corporate) on similar terms with RIB.

The RIB Corporate Authorised Representative Agreement

1. [23]

   On 1 June 2019, Resilium ceased to be a member of the Suncorp Group and became the largest privately owned insurance broking business in Australia. Suncorp ceased offering corporate policy renewals from Resilium. Renewals would henceforth be offered via Vero.

2. [24]

   From that time, practically, RIB took the place of Resilium with respect to the Authorised Representative relationship with Nest. RIB uses the Resilium banner.

3. [25]

   Following this, on 30 June 2020, RIB, as Licensee, and Nest, as Authorised Representative, entered into a further written Authorised Representative Agreement (Corporate) (the RIB-Nest Agreement). This was to implement the business model under which Nest would have ownership of, and the goodwill in, its own business.

4. [26]

   Unless otherwise stated, or the context indicates differently, references below to clauses are references to clauses in the RIB-Nest Agreement.

5. [27]

   The RIB-Nest Agreement records that RIB is a general insurance broker with an AFSL under which it is authorised to provide general and personal financial product advice in relation to general insurance products and to deal in such products. It records that Nest had submitted an application to RIB to be given an Authorisation to provide financial services on behalf of RIB.

6. [28]

   Under clause 1, RIB authorised Nest, pursuant to s 916A, to provide financial services on its behalf and Nest accepted the appointment.

7. [29]

   The RIB-Nest Agreement provides for an 80/20 split, in favour of Nest, in Broking Commission and Fee Income earned from the portfolio. It also provides for Nest to pay an annual Licence Fee for access to RIB’s broker management system and ongoing training and support by RIB.

8. [30]

   The following are the pertinent clauses of the RIB-Nest Agreement:

9. [31]

   Schedule 1 to the RIB-Nest Agreement contains the following provisions:

RIB discovers Nest’s dishonesty

1. [32]

   On 18 November 2020, in a meeting with Vero, RIB became aware that in acting as its Authorised Representative, Nest had engaged in conduct which RIB considered to be acts of dishonesty or serious misconduct.

2. [33]

   Nest knowingly gave insurers (including Vero) false information when applying for commercial (mostly motor vehicle) insurance policies. First, it gave wrong or false post codes where motor vehicles were garaged. Second, it gave false information about the age of the youngest driver. Nest admits this.

3. [34]

   Although neither Nest nor Nguyen admit that their purpose was to achieve lower premiums for clients by ameliorating the perceived risk, no other rational explanation for what they did was proffered at the hearing. I am satisfied that this was their purpose. There is evidence that Nguyen admitted that this was the motive. Nguyen swore four affidavits in the proceedings but said nothing about this. I infer that his evidence would not have assisted him. [3]

4. [35]

   Throughout the trial, it was said on Nest’s behalf that some 40 policies were involved. The truth is that at least 74 policies were infected by this dishonesty. I will refer to these policies as the infected policies. The 40 number was apparently the policies audited by Vero.

5. [36]

   The seriousness of the implications of this behaviour by an Authorised Representative for an AFSL holder, the client and the insurer is obvious.

6. [37]

   Under the Act, RIB was responsible for Nest’s behaviour and liable to the clients for any loss or damage suffered thereby. Their policies were imperilled and the insurers potentially defrauded.

7. [38]

   Nest does not dispute that RIB was entitled to immediately terminate the RIB-Nest Agreement and Nest’s AR status.

8. [39]

   To this point, Nest had, on the face of things, been successful. It had 754 clients with 1,095 policies. The big question is how much of its success was attributable to its dishonest broking practices.

RIB terminates the Agreement and Nest’s Authorised Representative Status

1. [40]

   On 19 November 2020, after a meeting with Vero, Mr Drue Castanelli (Castanelli), RIB’s Director of Operations and Compliance, and Mr Benjamin Hastie, RIB’s Managing Director, had a telephone conversation with Nguyen.

2. [41]

   Castanelli then sent the following email to Mr Adrian Kitchin (Kitchin), an Executive Director of RIB:

3. [42]

   Kitchin thereafter sent the following email to Nguyen:

4. [43]

   The following day, 20 November 2020, Kitchin sent the following email to Nguyen:

5. [44]

   Later that day, Hastie sent the following email to Nguyen:

Post Termination Events

1. [45]

   On 22 November 2020, Nguyen sent the following email to Kitchin:

2. [46]

   Kitchin replied:

3. [47]

   There followed an exchange of correspondence between the parties’ solicitors which it is not necessary to recount.

4. [48]

   RIB wrote to Nest’s clients that Nest was no longer authorised to act under its AFSL and would no longer be managing their general insurance policies. This would henceforth be done by Milestone GI Pty Ltd trading as Australian Consolidated Insurance Services or ACIS (Milestone).

5. [49]

   It will be observed that RIB’s original intention was to sell the portfolio to Milestone for 50% of a year’s net income earned from it. However, RIB ultimately simply gave Milestone the portfolio information on its computer system which Milestone used as its Authorised Representative.

6. [50]

   Professional Services Corporation Network (PSC) is an insurance broking network. On 27 November 2020, Nguyen wrote to Messrs Tony Walker and Ewan Thompson of that organisation:

7. [51]

   Nguyen met with them on 27 November 2020, after sending the email. According to Nguyen, PSC was interested in having him “onboard” and Walker told him that he should set up a new entity for the onboarding process, given the dispute with Resilium. Based on this discussion, he says he set up a new entity, Postcode Insurance Pty Ltd (Postcode).

8. [52]

   Subsequently, on 8 December 2020, Nguyen met with PSC, however, at the start of the meeting, Walker said words to the effect of “we can no longer assist with your appointment. My MD has received a call from Adrian Kitchin and now strongly advises against your appointment”.

9. [53]

   On 24 December 2020, Nguyen and Postcode became Authorised Representatives of another insurance broker called Edgar’s Insurance Brokers.

10. [54]

    Nest no longer operates as an insurance broker.

11. [55]

    It is not in dispute that information disclosing the identity and policy details of the insured clients (the client information) was given by RIB to Milestone and used by Milestone, amongst others, to carry out a process of remediating the infected policies.

12. [56]

    Despite the transfer of the client information to Milestone, Postcode, due no doubt to the efforts of Nguyen and his connection with the clients, was thereafter able to “retrieve” a large part of the portfolio. His degree of success is demonstrated by the fact that for the 12 months ending on 19 November 2020, the revenue of the whole portfolio was $1,037,157, whereas the income earned by Postcode from customers who were customers of Nest, from 20 November 2020 to 4 October 2023, was $1,583,534, derived from 510 clients. This amounts to a retrieval rate of some 70%.

13. [57]

    At the time of the hearing, Nest owed Resilium approximately $80,000 of the Allocation Price under the Referral and allocation agreement, and RIB owed Nest some $90,000 of unpaid broking commission and fee income pertaining to the period prior to termination.

14. [58]

    These proceedings started life as a claim by Resilium, as plaintiff, in the Local Court of New South Wales for the unpaid balance of the Allocation Price. The proceedings were transferred to this Court because of Nest’s cross-claim against both Resilium and RIB for damages for alleged breach of contract by RIB in disclosing the client information to Milestone and for equitable compensation against both Resilium and RIB for breach of an equitable duty of confidence. The equitable claims were correctly abandoned at the hearing. They were manifestly unmaintainable, not least of all because Nest comes to Court with unclean hands. Nest also abandoned claims of unconscionable and misleading and deceptive conduct. Nest cross-claimed against RIB for its unpaid commission and fee income. Resilium’s claim and Nest’s cross-claim were settled during the course of the hearing and can be put to one side.

15. [59]

    The result is that Nest’s cross-claim against Resilium falls to be dismissed. All that needs to be determined is Nest’s cross-claim in contract against RIB.

16. [60]

    The hearing was originally set down for 5 days. However, none of Nest’s witnesses (lay or expert) were cross-examined. RIB did not call any lay evidence and its expert witness was not cross-examined.

17. [61]

    The Court had the benefit of written opening submissions from both sides, extensive oral closing argument, and closing written submissions from RIB.

18. [62]

    The hearing concluded in two days.

Nest

1. [63]

   Nest puts that:

   1. (1)

      its “client list” (as distinct from every piece of information held by RIB on its broker management software about the clients and their insurance) was Confidential Information under cl 16.2; [4]

   2. (2)

      in breach of cl 13.1, RIB failed to keep confidential and used the client list by giving it to Milestone;

   3. (3)

      prior to disclosure to and use by Milestone of the client list, the portfolio had a market (sale) value;

   4. (4)

      the disclosure and use of the client list denuded it of confidentiality causing Nest loss; and

   5. (5)

      its loss is the market value of the portfolio of insurance policies brokered by Nest as at the date of the breach. It quantifies its loss by taking the annual revenue derived from the portfolio (as at 19 November 2020) and applying to it a multiplier said to reflect what purchasers have paid for comparable portfolios.

2. [64]

   Nest conceded, correctly, that provision by RIB to Milestone of the client information about the infected policies was not in breach of cl 13.1. The basis for the concession was that RIB was “required by law” to take steps of the kind that it did with respect to the infected policies. RIB had a statutory obligation to the insureds to act efficiently, honestly and fairly. It was responsible to the clients for Nest’s misconduct and exposed to them for any loss or damage suffered by them because of it. Nest’s authorisation had been terminated for good cause. In those circumstances, RIB had no choice but to act to protect those insureds, and it did so. How it went about this was, in my view, a matter for it.

3. [65]

   Nest’s concession was correct for an additional reason. Where the definition of Confidential Information in cl 16.2 refers to performing the agreement and arranging or issuing policies of insurance, this must be construed as a reference to lawful behaviour. [5] A construction that excludes from the definition of Confidential Information, information pertinent to a party’s illegal behaviour in the course of “performing” the agreement or issuing policies of insurance is supported by the general principle that there is no confidence in an iniquity. This principle may legitimately be employed in construing an express contractual obligation of confidentiality. [6]

RIB

1. [66]

   RIB denies that the client information given to Milestone was, on the proper construction of cl 13.1 read with cl 16.2, Nest’s Confidential Information. It argues that it was its own Confidential Information. It seeks to deploy in aid of this construction, the terms of the AR Agreement which protect its Confidential Information.

2. [67]

   RIB argues that it was in any event entitled to act as it did because it was, within cl 13.1, required by law to do so.

3. [68]

   It denies that it caused any loss to Nest. It says that any loss suffered by Nest was caused by Nest itself.

4. [69]

   It argues that Nest has failed to prove that it suffered any loss, or the quantum of it, because Nest’s approach of using a multiplier derived from so called comparable transactions to the historical annual revenue of Nest is out of accord with its pleaded case and erroneous. As well, it argues that Nest led no evidence of intending to sell the portfolio. This, says RIB, has the consequence that Nest cannot recover the portfolio sale value (if any).

Liability

1. [70]

   The RIB-Nest Agreement is a commercial contract which is to be given a business-like interpretation. Interpreting it requires attention to the language used by the parties, the commercial circumstances which it addresses, and the objects which it is intended to secure. The meaning of the words chosen is determined objectively by reference to its text, context, and purpose, the question being what a reasonable businessperson would have understood them to mean. Preference is given to a construction supplying a congruent operation to the various components of the whole, so as to avoid commercial inconvenience. Where language is open to more than one construction, the Court will prefer a construction which avoids consequences which are capricious, unreasonable, inconvenient or unjust. [7]

2. [71]

   I do not consider that the terms of the AR Agreement can properly be deployed in construing the RIB-Nest Agreement because the context of that agreement was the Suncorp AR network as it stood before the restructuring. The restructuring involved a different business model, under which the AR’s owned their own businesses and were not in-house consultants.

3. [72]

   In my opinion, the client information (including any client list – which no doubt could be generated from the information held on RIB’s computer system) disclosed by RIB to Milestone is not, on the proper construction of cl 13.1 and cl 16.2, Confidential Information in the hands of RIB qua Nest.

4. [73]

   Starting with the definition in cl 16.2, it covers all information, data practices and techniques relating to a party, or a related body corporate, customers, competitor or other property of which the other party becomes aware in negotiating or performing the agreement or in arranging or issuing insurance policies. This formulation is directed to protecting information which relates to one party from being disclosed by the other party who learns of it. It is not intended to capture information which relates to the receiving party and especially not information which is, and always was, that party’s own information.

5. [74]

   This is reflected in the words in cl 13.1, under which a party must not use the other party’s Confidential Information.

6. [75]

   Under cl 16.2, Client Data is the information held by RIB on its broker management software relating to Nest’s business. It is not in issue that the client information passed to Milestone is Client Data. Manifestly, Client Data, which is a narrower category than Confidential Information, is not intended to be covered by the definition of Confidential Information. So much is evident from cl 8.2, under which Nest (as Authorised Representative) gets access to Client Data only if it (and not RIB) terminates the RIB-Nest Agreement. The obverse of this is that, if RIB terminates, Nest has no entitlement to this information, which is inimical to any suggestion that it is Nest’s Confidential Information.

7. [76]

   It is to be observed that the RIB-Nest Agreement contains a provision (cl 15.2) that a party must not assign any of its rights or obligations under it, without the prior written consent of the other party. The effect of this, is that Nest could not (without RIB’s written consent – which I am prepared to infer would not have been given) have passed the benefit of the RIB-Nest Agreement to any purchaser of the Client Portfolio. The parties did not grapple with the question as to how in those circumstances the purchaser could have obtained the Client Data.

8. [77]

   Perhaps most important, however, is that under cl 6.4, upon termination of the RIB-Nest Agreement or the Authorisation, Nest is required, if requested by RIB, to provide all reasonable assistance to RIB in the orderly transfer of the authorisation, functions and operations provided in accordance with the RIB-Nest Agreement to another service provider or to RIB itself. Obviously, this includes provision of client information. Such a transfer would be necessary to perform the RIB-Nest Agreement. This clause does not operate congruently with cl 13.1 as Nest would have it construed. Its construction would defeat, rather than achieve, the object the provision is intended to secure.

9. [78]

   The client information is RIB’s. The clients may have obtained their insurance through Nest, but Nest was acting as RIB’s Authorised Representative and as RIB’s agent. RIB, not Nest, is the broker on the policies.

10. [79]

    Finally, if, as Nest conceded, RIB was required by law to take steps of the kind it did in relation to the infected policies, it seems to me that it was equally required by law for RIB to take steps to ensure that all the clients in the portfolio were protected. This is what RIB did, by appointing Milestone and giving it the information necessary to do so. It hardly lies in the mouth of Nest or Nguyen to say that RIB was obliged by law to deal with the infected policies (of which it knew) and leave the rest to be dealt with by Nest or Nguyen whether by sale or otherwise. This would not have been a safe course to have taken.

11. [80]

    I find that, by disclosing the client information (including any client list) to Milestone, RIB did not breach cl 13.1.

12. [81]

    If, contrary to what I have found, RIB breached cl 13.1, then whether Nest was thereby caused loss and damage depends on there being sufficient connection between the breach and the damage suffered for the latter to be regarded as because of the former. This is essentially a question of fact, to be determined by reference to common sense and experience and one into which policy considerations and value judgments necessarily enter. [8]

13. [82]

    In my opinion, approached in this manner, any loss caused to Nest by impairment of the sale value of the Client Portfolio is properly to be viewed as having been caused by Nest’s own dishonest conduct, not RIB’s steps taken to assuage its effect.

14. [83]

    It follows that Nest’s claim fails.

15. [84]

    I will nevertheless deal with quantum, in case I am wrong. I do so on the hypothesis that RIB, by conveying client information to Milestone, breached cl 13.1.

Quantum

1. [85]

   In its Amended Commercial List Cross-Claim Statement (Cross-Claim), Nest particularised its loss and damage as:

2. [86]

   In its Amended Commercial List Cross-Claim Response, RIB pleaded, relevantly, that after Nest ceased being its AR, it could not lawfully have provided financial services and advice to the clients.

3. [87]

   Nest filed an Amended Commercial List Reply to RIB’s Amended Commercial List Cross-Claim Response, in which it changed positions somewhat on damages. It articulated its claim as one for “damages for the loss of its Client Portfolio and equal to the market value of the Client Portfolio as at 19 November 2020”.

4. [88]

   In its Cross-Claim, “Client Portfolio” is defined as including “the information about the clients of Nest at any given time, including client lists for which the business had brokered insurance policies and, client data and client information in respect of the same”.

5. [89]

   RIB (with some justification) complained that Nest had changed position. It made the point that Nest’s real complaint is about lost confidentiality of information concerning the relevant insureds. I take this to include Nest’s client list.

6. [90]

   Notwithstanding that a reply is not the appropriate vehicle for the formulation of a damages claim, I propose to deal with Nest’s claim as finally articulated by Senior Counsel for Nest in closing oral submissions, namely, the loss of the market (that is, sale) value of its entire portfolio because the client list was given to Milestone. I take this to mean the loss by Nest of its ability to sell the portfolio because it had become worthless as a result of Milestone having the client list. I leave out of account any inhibition there may have been upon Nest dealing with the portfolio without being an Authorised Representative.

7. [91]

   Nest’s final formulation focuses squarely on what is said to have flowed from the client list being published to Milestone, with the attendant loss of confidentiality of its contents.

8. [92]

   Nest relied on the evidence of a forensic accountant, Mr John McGuiness (McGuiness), who provided a number of reports. RIB relied on the evidence of a forensic accountant, Ms Jennings-Jones (Jennings-Jones), who provided one report. The experts provided a joint report.

9. [93]

   The questions directed to McGuiness, for his opinion were:

   1. (1)

      What is the market value of the insurance policies brokered by Nest as of 19 November 2020? [9]

   2. (2)

      What is the market value of the Client Portfolio less those policies which were “recovered” by Postcode?

   3. (3)

      What is the market value of the Client Portfolio,

10. [94]

    The approach taken by McGuiness was to take the annual broking and commission revenue earned by Nest to 19 November 2020 on the defined parts of the portfolio and apply to it a multiplier derived principally by reference to known examples of the sale or transfer of client portfolios for consideration (and presumably at arms’ length). This assumes that the other transactions are relevantly comparable to a sale of Nest’s portfolio.

11. [95]

    In their joint report, the experts agreed on estimates of market value derived in this fashion. They agreed on a range, the midpoint of which as to the numbered questions above is:

    1. (1)

       $2.33 million;

    2. (2)

       $660,000;

    3. (3)

       (a) $2.2 million; and

12. [96]

    The Court requested that the parties provide certain further figures. According to McGuiness, the market value of policies recovered is $1,690,000. Jennings-Jones holds the view that although policies were recovered, subsequent differences in the premiums and other factors had the result that their market value was reduced to $1,485,000.

13. [97]

    They agreed that the market value (that is, the revenue multiplied) of the infected policies is $105,000. However, it was not suggested that a portfolio consisting solely of infected policies actually has a market value.

14. [98]

    Jennings-Jones was asked to provide an opinion on the value to Nest of the Client Portfolio on the assumptions that the RIB-Nest Agreement and Nest’s authorisation were terminated, and that Nest remained unlicenced to provide financial services and product advice as an Authorised Representative, so that it could not lawfully provide those services. Unsurprisingly, she opined that on those assumptions, the value of the Client Portfolio to Nest is nil.

15. [99]

    Nest’s approach to quantification of its claimed loss is unsound and cannot be adopted, even though the experts agreed on a market value based on it. Simply valuing an assumed income stream by applying a multiplier says nothing of this case.

16. [100]

    First, it incorrectly equates loss of confidentiality with the total loss to Nest of the sale value of the Client Portfolio. If Nest was unable to sell the portfolio, it is not because of loss of confidentiality but because of Nest’s discovered misconduct and the termination of its agency and AR status. Subsequent facts show, however, far from the loss of confidentiality eliminating all (or even most) of the value of the Client Portfolio, through Postcode, Nguyen used it to significant commercial benefit, even if this was to the detriment of Nest. It is not necessary to consider whether Nest has some claim against Postcode or Nguyen, or both (for example, for breach of fiduciary obligations). On the experts’ methodology, the sale value of the portfolio after 19 November 2020 would be revealed by applying a multiplier to Postcode’s revenue, entailing the assumption that Postcode could have sold for the resulting amount. That assumption has not been made out. What it does expose, however, is the fallacy in the proposition that RIB’s transmission of the client information to Milestone made the portfolio worthless. Whether it could have been sold is another matter entirely. This reveals the unsoundness of the experts’ approach in equating a multiplied revenue with a market sale price.

17. [101]

    Second, in selecting a multiplier, the experts did not take into consideration the obvious impact the discovered misconduct of Nest would almost inevitably have had on the assessment by a buyer of what they would be prepared to pay for this Client Portfolio. An honest seller would no doubt have had to disclose the facts. Anyway, market value is determined by reference to a transaction between willing but not anxious parties. [10] Excluding from the calculation revenue attributable to the infected policies does not take account of the problem. I do not consider it to have been incumbent on Nest to have demonstrated that it would have sold, but it was incumbent on it to demonstrate that it could have sold and then at what price and on what terms. Such terms may have included a non-compete clause by Nest and Nguyen about which there is no evidence. The Court has no data on which it can make a rational assessment either of, what annual revenue figure for the Client Portfolio should be adopted as legitimate, proper and maintainable as at 19 November 2019, or what multiplier is to be applied in circumstances where a significant part of the portfolio is infected policies and it was managed and procured by someone who did what Nest did, and whose AR status was terminated because of it. It is to be remembered that PSC baulked at the opportunity to buy.

18. [102]

    In Troulis v Vamvoukakis [1998] NSWCA 237 at 28 Gleeson CJ (as His Honour then was) (with whom Mason P and Stein JA agreed) said:

19. [103]

    As in that case, in this one, justice does not dictate that a figure be plucked out of the air.

20. [104]

    Nest’s cross-claims against Resilium and RIB, and all other claims and cross-claims in the proceedings, are dismissed.

21. [105]

    The parties are, within seven days, to bring in Short Minutes reflecting this outcome.

22. [106]

    I provisionally order that Nest is to pay Resilium and RIB’s costs of the proceedings. This order will solidify unless, within seven days of delivery of this judgment, any party notifies, in writing, the opposing parties and my Associate that some other order is sought, specifies what it is and provides brief reasons why. If such notice is given, the order will not take effect and I will make directions for the resolution of costs.

23. [107]

    The exhibits are to be returned.