Curve Securities Pty Ltd v Young (No 2)

1. [1]

   The background to this matter is set out in my judgment of 28 July 2022. [1] I shall use the same abbreviations here.

2. [2]

   To repeat, Curve and Ord Minnett are competitors in the market of trading fixed rate financial investments. Mr Young was, until August 2020, the Associate Director Interest Rate Markets at Curve. Since September 2020, Mr Young has been employed by Ord Minnett as a Fixed Interest Advisor. Mr Young’s role at Ord Minnett is substantially the same as was his role at Curve.

3. [3]

   Curve alleges that, in the course of his employment with Ord Minnett, Mr Young has:

4. [4]

   Curve alleges that Mr Young has taken these steps in accordance with what Curve alleges to be an “Arrangement” [2] entered into with Ord Minnett while he was still in employment with Curve, in contravention of restraints and non-disclosure clauses in his employment contract and in breach of his contractual, equitable and fiduciary duties to Curve.

5. [5]

   Curve also alleges that Ord Minnett is, on various bases, accessorily liable to Curve for Mr Young’s conduct.

6. [6]

   There has been discovery prior to evidence in the course of which Ord Minnett has produced some 5,000 documents relating to 118 former clients of Curve, referred to by the parties as the “Relevant Clients”. It is common ground that the Relevant Clients are now clients of Ord Minnett and that Mr Young approached those clients, identified them to Ord Minnett, introduced them to Ord Minnett, or won or procured them as clients for Ord Minnett.

7. [7]

   By Notice of Motion filed on 2 June 2022, Curve seeks to amend its Summons and Commercial List Statement. By Notice of Motion filed on 16 June 2022, Ord Minnett seeks an order that Curve’s then current List Statement be struck out.

8. [8]

   For the reasons I gave in my judgment of 28 July 2022, I refused to grant Curve leave to amend its Commercial List Statement in accordance with the then proposed draft.

9. [9]

   On 28 July 2022, in the course of declining to give Curve the leave it then sought, I said that I would give Curve “a further, final opportunity to do so”. [3] I directed that Curve circulate the form of any further proposed Amended Commercial List Statement by 12 August 2022.

10. [10]

    Since then, Curve has circulated four further proposed forms of the Amended Commercial List Statement, each form evidently responding to criticisms made on behalf of Ord Minnett and Mr Young to the earlier iterations.

11. [11]

    On 14 October 2022, I heard argument about the fourth such iteration (“the Proposed List Statement”).

12. [12]

    Ord Minnett and Mr Young oppose Curve having leave to file the Proposed List Statement in two respects.

Mr Young’s alleged breach of s 183 of the Corporations Act 2001 (Cth) arising from or incidental to the Arrangement – pars C40(f) and 50(2)

1. [13]

   Section 183 of the Corporations Act provides:

2. [14]

   The elements of a cause of action under s 183 are, relevantly to this case, that Mr Young:

3. [15]

   Paragraph C40 of the Proposed List Statement reads:

4. [16]

   The “Arrangement” referred to is defined in par C35 of the Proposed List Statement as follows:

5. [17]

   This allegation is particularised as being an arrangement to be inferred from certain circumstances earlier pleaded, certain conduct of Mr Young and Ord Minnett earlier pleaded, and the fact that the Relevant Clients became clients of Ord Minnett after Mr Young commenced employment with Ord Minnett.

6. [18]

   Subparagraphs C40(b), (c) and (d) refer, respectively, to subpars C29(a), (b) and (c) of the Proposed List Statement, which are in the following terms:

7. [19]

   Subparagraph C40(f) refers to “Curve’s Business Information” which is defined in par C23 of the Proposed List Statement as follows:

8. [20]

   Thus, it is alleged in subpar C40(f) that Mr Young, since 17 August 2020, and “in performance of the Arrangement” used “Curve’s Business Information” to do the things specified in par C40(a) to (e).

9. [21]

   Mr Docker submitted that Ord Minnett (and Mr Young) are unable to understand from this proposed pleading what information Mr Young is alleged to have used, on what occasion such information is alleged to have been used, and how he is alleged to have done so.

10. [22]

    As to what information Mr Young is alleged to have used when engaging in the conduct alleged at subpars C40(a) to (e) of the Proposed List Statement, in the particulars to par C40 at [A] Curve repeats the elements of the defined term “Curve’s Business Information” which I have set out above. The allegation is, thus, that Mr Young used all of that information when engaging in the activities alleged at subpars C40(a) to (e); although it is clear that only one or more elements of “Curve’s Business Information” would be relevant to the particular actions alleged in each subparagraph.

11. [23]

    In my opinion, that allegation is sufficiently specific. Contrary to Mr Docker’s submissions, I do not see it as having the same generality as prompted the criticisms made by Jagot J of the lack of specificity of “Particular (m)” in her Honour’s decision in Jack Brabham Engines Limited v Beare. [5]

12. [24]

    As to how Mr Young is alleged to have used Curve’s Business Information to engage in the conduct alleged at subpars C40(a) to (e), that allegation is particularised at [B] to par C40 as follows:

13. [25]

    Thus, what is alleged is that Mr Young engaged in the conduct alleged at subpars C40(a) to (e):

14. [26]

    That final element appears to be vital. The allegation is not only that Mr Young knew the identity of Curve’s clients and how to contact them, but that he knew how to pitch an offer to those clients that would lure them away from Curve.

15. [27]

    There is no allegation in the Proposed List Statement that Mr Young made a list or “retained” phone numbers and email addresses of clients or “memorised” any such details. [6]

16. [28]

    But the conduct in the final element takes matters beyond only contacting clients without having “memorised” or “retained” their details and, when read with proposed par C42 of the Proposed List Statement (to which I will return below), moves the proposed pleading to beyond the demurrable arena.

17. [29]

    As to when Mr Young is alleged to have used Curve’s Business Information, the references in subpars C40(a) to (d) to the conduct alleged in pars C28 and C29 show that the use of Curve’s Business Information is alleged to have taken place between 17 August 2020 and 17 August 2021; and, looking at the particulars to C28 at least in the instances referred to in the “Confidential Particulars” provided by Curve to Ord Minnett and Mr Young on 25 August 2022. Those particulars are evidently derived from the documents that Ord Minnett has disclosed to Curve. As the particulars to par C28 further state, Curve has, understandably, no direct knowledge of that contact and relies on inferences arising from the Confidential Particulars and from the fact that Curve clients moved over to Ord Minnett after Mr Young commenced working at Ord Minnett.

18. [30]

    In my opinion, these allegations, so understood, are sufficiently clear to enable Ord Minnett and Mr Young to know what Curve is alleging against them.

19. [31]

    Paragraph C42 of the Proposed List Statement provides:

20. [32]

    Mr Docker submitted that this allegation was insufficient as it does not, in terms, identify the impropriety of the conduct alleged. The word “improper” does not appear at par C42 but understood in the manner I have set out, it is clear that Curve is alleging that Mr Young behaved improperly for the purpose of s 183 of the Corporations Act.

21. [33]

    For these reasons, I will allow subpar C40(f) and par C42 as part of the Proposed List Statement.

Allegations concerning Ord Minnett’s involvement in Mr Young’s breach of his fiduciary duty – pars C52 and C53

1. [34]

   Paragraph C52 of the Proposed List Statement provides:

2. [35]

   There are three elements in the allegations contained in par C52.

3. [36]

   The first is that Mr Young engaged in a dishonest and fraudulent design in breach of his fiduciary duties by engaging in the conduct referred to at subpars C21(h) to (j) and par C35 of the Proposed List Statement.

4. [37]

   Subparagraphs C21(h) to (j) allege that prior to termination of his employment with Curve on 27 August 2020, Mr Young:

5. [38]

   As I have stated above, par C35 sets out the allegation of the Arrangement.

6. [39]

   The second element is that Mr Young engaged in that conduct with the intention stated, namely to use his position as an employee of Curve to obtain a benefit for himself and/or for Ord Minnett.

7. [40]

   The third element is that, thereafter, Mr Young “carried out that intention” by engaging in the conduct alleged at subpars C52(a) to (d).

8. [41]

   Mr Docker pointed out that the events alleged at subpar C52(d) occurred in the calendar year following Mr Young’s cessation of employment with Curve.

9. [42]

   Thus, in the written submissions, Mr Docker and Mr Gandar stated that the conduct there alleged “entirely post-dates Mr Young’s employment with Curve Securities and so occurs at a time when the Fiduciary Duties are not alleged to have been owed and therefore could not have been breached”.

10. [43]

    I think this misunderstands what is alleged at subpar C52(d) which is that after Mr Young engaged in the conduct alleged, with the intention alleged, he “thereafter” carried out that intention by, amongst other things, engaging in the conduct alleged in the paragraphs of the Proposed List Statement set out at subpar C52(d).

11. [44]

    Mr Docker and Mr Gandar submitted that it was necessary for Curve to plead, as against an alleged participant such as Ord Minnett:

12. [45]

    The submission continued that:

13. [46]

    I do not think this is a fair criticism of the proposed pleading.

14. [47]

    In my opinion, par C52:

15. [48]

    Paragraph C53 of the Proposed List Statement provides:

16. [49]

    This alleges that Ord Minnett knew of Mr Young’s dishonest and fraudulent design because, first, it knew matters alleged in (a), that is the terms of Mr Young’s employment agreements (actual knowledge is alleged) and that Mr Young owed Curve duties pursuant to ss 182 and 183 of the Corporations Act as well as a fiduciary duty (constructive knowledge is alleged).

17. [50]

    More particularly, it is alleged that, since 31 July 2020, being the date by which Curve alleges that the Arrangement was made, Ord Minnett knew that Mr Young intended to engage in the conduct referred to in the named paragraphs, being the conduct I have set out above.

18. [51]

    I do not see that it is to the point that such conduct is alleged to have taken place between the Termination Date (17 August 2020) and 17 August 2021 (thus post-dating Mr Young’s employment by Curve). What is alleged is that Ord Minnett knew, from 31 July 2020, that Mr Young intended to engage in that conduct.

19. [52]

    The Proposed List Statement goes on to allege, in the chausseur to par C53, that Ord Minnett thereby did know, or a reasonably honest person in its position would have known, that by entering into the Arrangement, Mr Young was acting in breach of his duties.

20. [53]

    It is true, as Mr Docker submitted, that there is no allegation, in terms, that Ord Minnett “assisted” Mr Young with knowledge of these matters. But the allegation is that, in all the circumstances, Ord Minnett entered into the Arrangement by which, according to what is alleged in the Proposed List Statement, Ord Minnett assisted Mr Young by agreeing to employ him and accepting business from clients that Mr Young could bring to it.

21. [54]

    Whether or not Curve is able to make out these allegations is, of course, a different matter.

22. [55]

    However, I am not persuaded that they are dumurrable and propose to give Curve leave to amend its List Statement to include these allegations.

Costs

1. [56]

   Curve must pay the costs thrown away by their amendment to the Commercial List Statement, including all of the costs of resisting the multiple attempts made to get the List Statement into its now final form.

2. [57]

   Mr Docker submitted that I should make an order for immediate payment on account of those costs in accordance with the principles referred to by Parker J in Chen v Golden Land Enterprises Pty Ltd. [8] In that case, Parker J opined that it is often desirable to make such an order “to avoid the distraction and potential duplication associated with a separate assessment of interlocutory costs”. [9]

3. [58]

   Mr Docker submitted that an amount of $100,000 should be paid on account referred to an assessment made by his instructing solicitor, Ms Emma Lutwyche, in an affidavit affirmed on 13 October 2022. Ms Lutwyche said that based on her review of invoices of work in progress, the total costs incurred by Ord Minnett since March 2022 in dealing with the various steps taken by Curve to amend its Commercial List Statement were a little under $100,000. However, Ms Lutwyche deals with these matters at a high level, and I was not taken to material that enables me to form a confident opinion about what figure would be appropriate to be ordered to be paid on account.

4. [59]

   I accept that Ord Minnett and Mr Young must have incurred considerable legal costs in dealing with the lengthy and complicated process that has been undertaken by Curve to get its Commercial List Statement into final form.

5. [60]

   Mr Docker and Mr Gandar summarised those steps in a procedural chronology annexed to their submissions, an edited version of which is attached to these reasons.

6. [61]

   However, I am not satisfied that an evidentiary basis has been made out for me to make an order for payment of $100,000 on account of Ord Minnett’s costs.

7. [62]

   What I am inclined to do is order that the plaintiff pay the defendant’s costs of resisting the plaintiff’s Notice of Motion of 2 June 2022, which costs are to include the activities in the procedural chronology from and including 5 April 2022; and to order that the defendants have leave to have those costs assessed forthwith and that such costs will be payable forthwith upon assessment.

8. [63]

   However, I will give the parties an opportunity to make submissions as to whether I should make such an order.

9. [64]

   The parties should confer and bring in Short Minutes of Order to give effect to these reasons, and to provide a timetable for the further progress of the matter, including a further date for directions.

10. [65]

    If there is to be a debate about the costs order I should make, the parties should confer and agree on a timetable to make short written submissions. I will deal with that question on the papers.