Trademax Australia Limited v Xiang Huang

The plaintiff, Trademax Australia Limited (TAL), brought these proceedings against the defendant, Xiang Huang (who also is commonly known by the English name “Roy”), seeking interlocutory and final injunctive relief to restrain the defendant in accordance with provisions contained in the Employment Agreement dated 22 December 2021 between TAL and the defendant.

On 13 November 2024, I heard TAL’s application for urgent interlocutory injunctions against the defendant until the determination of the final relief. I granted those interlocutory injunctions against the defendant. Set out below are my reasons for doing so.

TAL operates trading platforms for its customers to engage in over-the-counter contract-for-difference (CFD) trading of underlying financial products, including shares, commodities, index, crypto-currencies and foreign currencies.

TAL’s head office is located in Sydney, New South Wales. TAL also has branch offices in other locations across Australia and overseas. TAL has 224 employees in New South Wales, 32 employees in the Australian Capital Territory (ACT) and 325 employees globally.

TAL holds a licence to provide financial services for its customers in multiple jurisdictions, including Australia.

In summary, TAL makes a market for its customers by acting as principal in entering into CFD contracts with its customers. TAL is the counterparty to all of its customers’ trades, managing the risk on its own book. Using this model, TAL makes a profit primarily from its customers’ losses.

TAL and its related companies worldwide seek new customers to use its trading platform by engaging in marketing campaigns, including by sponsoring globally renowned sports stars, sports teams and sports events. For example, TAL has been a sponsor of the English Premier League team Chelsea since 2023, the Australian Open tennis from 2021 until 2023, the Italian football goalkeeper Gianluigi Buffon (who serves as TAL’s brand ambassador) since 2021 and the football AFF Suzuki Cup in 2020. This has involved TAL spending about US$7 million on marketing in 2023 and US$5 million in marketing in 2024 to date.

In TAL’s business, client inquiries come via TAL’s website, live chat, app store, marketing partnership page and various marketing events which are captured as a sales lead by the TAL sales office. Those sales leads are then given to the TAL Office Sales Manager who distributes them amongst team leaders and Accounts Managers. The Account Managers then approach potential customers assigned to them to give them information about TAL’s trading platform and products, answer any queries or concerns, guide them through the on-boarding process of opening a trading account and facilitate that account opening.

Once a client opens a trading account it must deposit funds into that account to initiate any trades. After the client commences trading on TAL’s platform, the Account Managers continue to provide support to them. Revenue generated on each account then forms part of the Account Manager’s commission and key performance indicators.

TAL has a number of competitors who trade in CFDs with clients located throughout the world, including in Australia.

One of those competitors is First Prudential Markets Pty Ltd (FP Markets). FP Markets is based in Australia.

As mentioned, on 22 December 2021, the defendant and TAL entered into the Employment Agreement pursuant to which the defendant was employed in the full time position of Account Manager based in Canberra, ACT. The base salary payable to the defendant under the Employment Agreement was $55,000.

Amongst the obligations required to be performed by the defendant as an employee of TAL were the following:

Importantly, the Employment Agreement also contains a number of restraints on the defendant’s conduct which operated during his employment and after its termination. Those restraints are in the following form:

In the Employment Agreement, the defendant acknowledged that each of the restraints in cl 14.1 are reasonable and necessary to protect TAL’s legitimate interests (cl 14.3) and there is also provision for the periods for each of the restraints in cl 14.1(b) and (c) to be read down from 12 months to 9 months, from 9 months to 6 months, and from 6 months to 3 months, and for the restraint in cl 14.1(a) to be read down from 12 months to 6 months and from 6 months to 3 months (cl 14.5). It is notable that the restraint in cl 14.1(a) is not the subject of any time limit. None of the restraints are expressed to have a geographical limit. The restraints are also expressed to operate to protect the interests of TAL and any Group Company.

Importantly, cl 17.6 of the Employment Agreement states that it is governed by the law applying to New South Wales.

At various dates between 6 December 2022 and 3 September 2024, the defendant acknowledged his awareness of particular policies of TAL.

On 3 April 2023, TAL offered the defendant the position of AM Manager for the Canberra office with effect from 1 April 2023, which included a significant increase in the defendant’s base salary to $120,000 per annum along with the AM Manager’s bonus structure, but with all other terms and conditions of his employment remaining unchanged (Variation Agreement).

On 13 April 2023, the defendant agreed to the Variation Agreement.

In effect, as a result of the Variation Agreement, the defendant was responsible for overseeing the whole of TAL’s operations in its Canberra office, with one of his key responsibilities being to receive leads from the TAL sales office and redistribute those leads to team leaders and Account Managers. The defendant received commission from TAL for undertaking this work. In his evidence, the defendant accepted that he was responsible for overseeing TAL’s business operation in Canberra.

During 2023, the defendant received commissions very significantly more than his salary to a level which indicates that he was a senior executive of TAL.

On 6 October 2024, Season Huang (who manages the Melbourne, Canberra, and Adelaide offices of TAL) received an oral anonymous complaint about the defendant and informed Tom Yao (the Chief Sales Officer of TAL) of it.

On 12 October 2024, at the direction of Mr Yao, Maggie Xie of TAL initiated an anonymous survey of all employees at TAL concerning non-compliance with TAL’s employment handbook, which resulted in further complaints about the defendant, including that he was organising employees of TAL to work for FP Markets.

On about 18 October 2024, TAL commenced an investigation of the complaints in relation to the defendant which was overseen by Tongyang Wang (the Chief Compliance Officer of TAL).

In essence, the complaints were that the defendant was working for FP Markets secretly, had attempted to induce TAL’s employees to work for FP Markets and unfairly distributed leads between the Canberra office Account Managers.

During the course of the investigation, documents were found on TAL computers issued to the defendant which showed that he had a business card identifying him as a Vice President of FP Markets (which indicated that he went by the name of Roy as well as a further alias of Frank, with an Australian based telephone number; had an FP Markets email address using the name of Frank and a WeChat handle of Roy); leads provided to the defendant by TAL were being distributed by him to FP Markets; he was earning commission from FP Markets and was corresponding with staff of FP Markets in Australia between 15 June 2022 and 25 May 2023 about potential clients.

One of the documents uncovered in the investigation was an email string comprising the following:

On 21 October 2024, an employee of TAL was interviewed as part of the investigation. In the course of that interview, the employee stated that the defendant was performing work for FP Markets and giving income for that work to that employee of TAL.

On 22 October 2024, the defendant participated in an interview with Fiona Lu, Season Huang and Tongyang Wang of TAL. The transcript of that interview records the defendant saying that he started working for FP Markets between 2021 and 2022, had been involved in working for clients with FP Markets, was working with others at TAL in performing work for FP Markets and had received commission from FP Markets for that work. The defendant claimed to have stopped working for FP Markets a long time ago, although he admitted that he had been working with FP Markets for some time (“this has been happening for several years”) and he was still doing work for FP Markets in 2024 (“This year there will definitely be some ongoing enquiries because clients will have follow-up issues”).

On 22 October 2024, TAL terminated the defendant’s employment with TAL.

On 23 October 2024, TAL’s solicitors sent a letter by email to the defendant requesting information from him.

On 25 October 2024, TAL’s solicitors sent a letter by email to the defendant requesting his confirmation that he would not engage with FP Markets in business or activities that are the same or similar to the business of TAL. The letter sought a response by 4pm on 28 October 2024, failing which they stated that they held instructions to commence urgent court proceedings against the defendant.

On 28 October 2024, the solicitors for the defendant sent a letter by email to TAL’s solicitors stating they were reviewing the correspondence and seeking instructions, and would provide a response by no later than 6 November 2024. In the letter, the defendant’s solicitors also requested that TAL provide them with evidence of the defendant’s breach of his obligations under the Employment Agreement.

On 1 November 2024, TAL’s solicitors sent a letter by email to the defendant’s solicitors requesting that the defendant provide undertakings in the nature of those contained in cl 14.1 of the Employment Agreement by no later than 5pm on 4 November 2024, failing which TAL may commence proceedings seeking injunctive relief against the defendant.

On 5 November 2024, the defendant’s solicitors sent an email to TAL’s solicitors stating that they were seeking instructions and would respond by no later than 6 November 2024.

On 6 November 2024, the defendant’s solicitors sent a letter by email to TAL’s solicitors denying any wrongdoing by the defendant and refusing to give the requested undertakings.

On 8 November 2024, TAL’s solicitors sent a letter by email to the defendant’s solicitors giving him an opportunity to provide the undertakings which had been sought by 9am on 11 November 2024. No response to that letter was provided on behalf of the defendant.

On 11 November 2024, TAL commenced these proceedings.

In his evidence, the defendant says that he has not worked since 22 October 2024, he plans to continue to spend time with his family in China, he does not have any plan to work in the immediate future and he is not looking for a job at the moment.

The defendant says that he does not have any contractual or business relationship with FP Markets, has not received any benefit from FP Markets and did not provide any of the Confidential Information (as defined in Schedule 1 to the Employment Agreement) to FP Markets.

The defendant also says that between 2021 to 2023, he worked as an agent for First Prudential Markets Ltd (FP EU), a company registered in the Republic of Cyprus, and that during this period he introduced people in China who wished to engage in CFD trading to trade with FP EU.

The task of a court determining whether to exercise the power to grant an interlocutory injunction is to do so in a manner which achieves justice between the parties pending the final hearing of the proceedings.

This was expressed in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2009] HCA 63, Gleeson CJ at [12] stating:

The principal inquiries to be made in deciding whether to grant an interlocutory injunction have been expressed in slightly different terms but to the same effect.

In Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148; [1968] HCA 58, Mason ACJ at [11] said:

In Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; [2006] HCA 46, Gleeson CJ and Crennan J at [19], after repeating these inquiries, described them as:

In O’Neill, Gummow and Hayne JJ (with whose reasoning Gleeson CJ and Crennan J agreed) at [65] expressed the first inquiry in this manner (footnotes omitted):

The inquiry involving the balance of convenience is determined by whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; [1968] HCA 1, Kitto, Taylor, Menzies and Owen JJ at 622–623. The plaintiff bears the onus of establishing that the balance of convenience lies in favour of granting the interlocutory injunction: O’Neill, Gummow and Hayne JJ at [71].

While the factors to be taken into account in determining where the balance of convenience lies will vary with the circumstances of each case, common ones include the strength of the plaintiff’s case, the hardship to the parties and third parties, delay, the utility of the proposed orders and the sufficiency of the plaintiff’s undertaking as to damages.

The strength of the party’s case for final relief is an important consideration in determining where the balance of convenience lies, there being a connection between the inquiry about the serious question to be tried and the balance of convenience. In Warner-Lambert Company LLC v Apotex Pty Ltd (2014) 106 IPR 218; [2014] FCAFC 59, Allsop CJ, Jagot and Nicholas JJ at [70] said:

The stronger the case for final relief and therefore the likelihood of success, the less is needed for the balance of convenience in favour of the grant of the interlocutory injunction: BMW Australia Ltd v Brewster (2019) 269 CLR 574; [2019] HCA 45, Edelman J at [216].

The strength of the plaintiff’s case for final relief is significant where the outcome of the interlocutory application will effectively determine the claim for final relief: Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535–536.

Particular considerations arise in cases where an employer seeks to restrain an employee.

The relevant principles relating to the enforcement of a restraint of trade were conveniently expressed in Isaac v Dargan Financial Pty Ltd ATF Dargan Financial Discretionary Trust (ABN 68 702 047 521) (trading under the name of Home Loan Experts) (2018) 98 NSWLR 343; [2018] NSWCA 163 by Gleeson JA (Bathurst CJ and Beazley P agreeing) at [59]–[68]:

On the issue of whether the common law or the Restraints of Trade Act 1976 (NSW) applies in any particular restraint which is sought to be enforced, in KA & C Smith Pty Ltd v Ward (1998) 45 NSWLR 702, Austin J at 719 said (citations omitted):

Where one of the grounds to justify the restraint is to protect the employer’s confidential information, the considerations stated in The Littlewoods Organisations Ltd v Harris [1978] 1 All ER 1026, by Lord Denning MR at 1033 are relevant:

In addition, the personal connections of an employee which have been developed during their employment by the employer can also be an interest which justifies the protection by a restraint. This concept was explained in Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9; [2006] NSWSC 717 by Brereton J at [25] (citations omitted):

On the question of whether damages would be an adequate remedy in a case of this sort, where the employer is seeking to enforce a negative stipulation by way of prohibitory injunction, there is authority that the inadequacy of damages may not be a critical element other than in an exceptional case, which was dealt with in Tullett Prebon (Australia) Pty Ltd v Simon Purcell [2008] NSWSC 852; (2008) 175 IR 414 at [97]:

Additionally, in Tullett Prebon Brereton J at [102] said:

I must also consider the hardship that the interlocutory injunction sought may occasion on the defendant in weighing up my discretion. In Otis Elevator Co Pty Ltd v Nolan [2007] NSWSC 593, Brereton J at [30] said:

Even where a restraint is valid, equity retains a discretion as to whether and if so how far to enforce it, including on an interlocutory basis, although exceptional or compelling reasons will be required to persuade the court to decline injunctive relief in relation to a restraint, having regard to the circumstances at the date of the hearing: Tullett Prebon, Brereton J at [88].

In summary, TAL made the following submissions:

In summary, the defendant made the following submissions:

It is abundantly clear that TAL has a seriously arguable case with strong prospects of success that the defendant has breached multiple terms of the Employment Agreement. The defendant has not denied any of those breaches.

In the transcript of the interview with the defendant on 22 October 2024, the defendant made statements that tend to demonstrate that during the course of his employment with TAL he has been engaged or involved in the business of FP Markets without the approval of TAL (breach of cl 3.2).

The email exchange of 12 October 2022 and 3 November 2022 tends to demonstrate that the defendant was sharing Confidential Information with FP Markets (breach of cl 10.1), was engaged in a business or activity that is the same or similar to the business of TAL and used and exploited Confidential Information to gain an advantage for himself and FP Markets to the detriment of TAL (breach of cl 14.1(a)) and was soliciting an existing client of TAL with a view to obtaining custom from them (breach of cl 14.1(b)), and was inducing existing employees of TAL to leave their employment to join the business of FP Markets that is the same or similar to the business of TAL (breach of cl 14.1(c)). Despite the defendant’s claim that he only worked with FP EU, the email exchange makes it clear that he was working with FP Markets in Australia.

Having been terminated for what appears to be egregious misconduct during the course of his employment, the defendant was then asked by TAL to give an inter-partes undertaking that he would comply with the restraints contained in cl 14.1 of the Employment Agreement. He refused to do so on three occasions. I consider that the nature of the defendant’s conduct during the course of his employment and his refusal to provide an inter-partes undertaking of his intention to comply with his Employment Agreement give rise to a real risk that he will not comply with the restraints, which are directed at protecting TAL’s interests in its Confidential Information, clients and employees. In my view, the fact that TAL has not identified any breach of the Employment Agreement which has occurred in the three weeks since it was terminated does not reduce the risk of anticipatory breach of the restraints by the defendant.

The Employment Agreement is governed by the law of New South Wales. At the final hearing, applying KA & C Smith, the enforceability of the restraints contained in cl 14.1 will be determined on the basis of the application of the Restraints of Trade Act. I consider that it is seriously arguable that the restraints in their current form may be subject to narrowing in their breadth both in time, the territory covered by them, as well as the entities which are the subject of the protections. Such matters going to the ultimate judgment of the reasonableness of the restraints cannot be determined on an interlocutory basis, but rather will be the subject of full argument on a final basis. I also give weight to the fact that in cl 14.3 of the Employment Agreement the defendant has given an acknowledgment that the restraints in cl 14.1 are reasonable.

The defendant asserts that damages would be an adequate remedy for any prospective breach of the restraints. I disagree. Applying the principles set out in Tullett Prebon, in circumstances such as the present where TAL seeks to enforce negative contractual stipulations, damages will only be an adequate remedy in an exceptional case. There is no basis asserted by the defendant for regarding this as an exceptional case. Further, I consider it is important to apply the approach in equity of holding the defendant to his agreement rather that allowing him to escape it for the price of damages.

The defendant says that he does not intend to work, will be spending his time in China with his family and is not looking for a job. This factor operates on both sides of the balance of convenience: on the one hand, it demonstrates that there will be no hardship to the defendant from the imposition of the interlocutory injunctions which are sought, and on the other hand it indicates that there is little risk of the defendant breaching the restraints in the Employment Agreement. Given the nature of the defendant’s seriously arguable breaches of the Employment Agreement, I tend in favour of finding that there would be no hardship to the defendant upon the interlocutory injunctions being made.

On current indications, any final trial of these proceedings could be held in March 2025. As a result, the prejudice to the defendant of the interlocutory injunctions remaining in place is considerably reduced as that is just over four months away.

Finally, TAL has provided the usual undertaking as to damages, which is also further protective of the defendant if the interlocutory injunctions are made.

In my view, on an interlocutory basis, TAL is entitled to enforce the provisions of the bargain it made with the defendant as set out in the Employment Agreement which are protective of TAL’s interests in its Confidential Information, customer connections and employees.

At the conclusion of the hearing on 13 November 2024, I made the following orders.

In these orders: