AIIB Pty Limited v Beard

AIIB Pty Limited is a company which carries on the business of insurance brokerage. From November 2005 to February 2008, Hamtuan Pty Limited was its authorised representative. Mr Peter Beard, the sole shareholder and director of Hamtuan, was the individual through whom Hamtuan provided insurance broking services in its capacity as AIIB’s authorised representative. In February 2008, Hamtuan and Mr Beard terminated their business relationship with AIIB. On 7 March 2008, Hamtuan was appointed as an authorised representative of another insurance broking company, Chegwyn Corporate Services Pty Limited (ACN 128 875 767) (“Chegwyn”).

This dispute arises out of the use allegedly made by Mr Beard/Hamtuan in February 2008 of client contact details and information as to clients’ insurance needs (said to amount to confidential information of AIIB) first in soliciting clients formerly serviced by Hamtuan (as AIIB’s authorised representative) to appoint Hamtuan as their broker and subsequently when renewing insurance contracts on behalf of former AIIB clients when Hamtuan was the authorised representative of Chegwyn. Issues

Broadly summarised, the following issues arise: (i) whether Mr Beard/Hamtuan were contractually bound not to use information in relation to (or solicit) clients serviced by them at AIIB; (ii) whether there was an equitable obligation of confidence on the part of Mr Beard/Hamtuan in relation to the alleged confidential information; (iii) whether, if Mr Beard/Hamtuan did owe an obligation of confidence (contractual or equitable) in relation to some or all of the information, there was an unauthorised use thereof; (iv) whether Mr Beard/Hamtuan acted as Chegwyn’s agents in soliciting (and later acting for) AIIB clients or Chegwyn has improperly made use of AIIB’s allegedly confidential information; and (v) the appropriate relief (if any) to be awarded in favour of AIIB (and any relief to be granted in favour of Chegwyn on its cross-claim against Mr Beard/Hamtuan). Summary

For the reasons set out below, I summarise my findings as follows.

AIIB and Mr Beard entered into a binding employment agreement on the terms of an Offer of Employment signed by Mr Beard on 11 October 2005, pursuant to which Mr Beard became bound by the confidentiality obligations and non-solicitation clauses contained in that document. That employment agreement came to an end by mutual consent in late November 2005. (Although the confidentiality/non-solicitation provisions, in their terms, became operative when that employment agreement was terminated, no liability has arisen under that agreement.)

When Mr Beard/Hamtuan commenced with AIIB in November 2005, they did so not on the basis of the employment agreement but on the basis of an arrangement under which Hamtuan was appointed AIIB’s authorised representative. Neither Mr Beard nor Hamtuan signed the “Authorised Representative Agreement” provided to Mr Beard/Hamtuan on 28 November 2005. The evidence does not establish that either of them expressly notified AIIB of acceptance of its terms. Nevertheless, I consider that Hamtuan (acting through Mr Beard) by its conduct sufficiently manifested acceptance of the Authorised Representative Agreement by accepting appointment of Hamtuan as AIIB’s authorised representative, acting as AIIB’s authorised representative and accepting increases in remuneration proffered on the basis that there was such an agreement in existence. In coming to that conclusion I place weight on the fact that, when it came to bringing their relationship to an end, Hamtuan issued a formal notice of termination of the so-called Authorised Representative Agreement.

Had there been no binding contract between AIIB and Hamtuan in the terms of the Authorised Representative Agreement, I would have been satisfied that Hamtuan was bound by an equitable obligation of confidence not to disclose or use, without the consent of AIIB, confidential client contact details or information as to the insurance needs or requirements of clients serviced at AIIB.

Mr Beard was not a party to the Authorised Representative Agreement and so was not bound by its terms. While the Authorised Representative Agreement contemplated that Mr Beard would (in his own right) enter into a form of guarantee contract which itself contained confidentiality provisions, there is no evidence that such a contract came into existence (nor is such a contract pleaded).

I find that any confidential client details and information as to the insurance needs or requirements of clients serviced at AIIB information was information received by Mr Beard in circumstances sufficient to import an equitable obligation of confidence on his part.

I consider that Mr Beard and Hamtuan’s respective obligations of confidence extend to client information contained in or procured from AIIB files, prospect sheets or the like in respect of confidential client contact details or information as to the insurance needs or requirements of clients who were procured by Mr Beard’s own initiatives or efforts while he was in a business relationship with AIIB (such as Northpoint Constructions and Essential Air) as well as clients who had been referred to Mr Beard by others at AIIB (such as Paraquad or Streetbuild).

I do not consider that either Mr Beard or Hamtuan owes any obligation of confidence (equitable or otherwise) to AIIB in respect of client contact details or insurance needs information gained by Mr Beard while he was with his former employer, Driessen Insurance Brokers (“Driessen”). That information does not fall within the definition of confidential information in the Authorised Representative Agreement nor can it be information which was received by Mr Beard in circumstances where he owed any duty to AIIB to keep it confidential, since information of that kind was necessarily gained before Mr Beard was in a business relationship with AIIB. (That said, to the extent that a client’s insurance needs would (or may) change from year to year, information gained while Mr Beard acted for former Driessen clients while at AIIB (such as the former Driessen clients’ then current insurance needs as at February 2008) could, in my view, fall within the obligations of confidence owed to AIIB (even though information as to the previous insurance needs of those clients gained while Mr Beard was at Driessen would not have done). There is, however, no evidence from which I could identify any such information.)

I consider that the removal from AIIB of client contact or insurance needs information in the form of prospect sheets, copies of insurance policies or renewal information, and the use of that information in February 2008 to solicit clients formerly at AIIB, was a clear breach, on the part of Hamtuan, of the confidentiality and non-solicitation covenants in the Authorised Representative Agreement and, on the part of Mr Beard, of his equitable obligation of confidence.

Other than in the course of soliciting AIIB clients (by letters sent on or about 29 February 2008) to appoint Hamtuan as their broker following termination of the AIIB relationship, I am not satisfied that any actual use was made by Mr Beard or Hamtuan of confidential information taken from AIIB. The subsequent policy renewals (for example, the Paraquad renewals) seem to have occurred after Mr Beard was required (in the context of these court proceedings) to hand back the relevant confidential information. I accept Mr Beard’s evidence that he had to work, in effect, from “scratch” in relation to those policy renewals.

The conduct of Mr Beard (on behalf of Hamtuan) in soliciting AIIB clients in February 2008 (before Mr Beard or Hamtuan was appointed as Chegwyn’s authorised representative) is not conduct for which Chegwyn is liable under any doctrine of agency, nor is it conduct which Chegwyn subsequently “adopted” so as to give rise to any direct claim by AIIB against Chegwyn as Mr Beard/Hamtuan’s principal. I do not find that there has been any improper misuse by Chegwyn of information which was confidential to AIIB. I therefore dismiss AIIB’s claim against Chegwyn.

The principal relief sought against both Mr Beard and Hamtuan is put in the alternative, namely an order for an enquiry as to damages or an account of profits.

The appropriate relief in respect of the breach by Hamtuan of contractual non-solicitation and confidentiality obligations owed to AIIB (under the Authorised Representative Agreement) is an order for damages calculated so as to put AIIB in the position it would have been in had there been compliance with the contractual obligations in question. Those damages may extend beyond the loss of profits from commissions which would be likely to have been earned from clients who left AIIB as a result of Hamtuan’s conduct to any loss sustained to the value of the business of AIIB by reason of Hamtuan’s conduct. However, damages for loss of value to the business would have to be subject to an appropriate discount for the possibility that the clients in question may have chosen to leave AIIB even without the breach by Hamtuan. I think it appropriate to order an enquiry as to the amount for which Hamtuan is liable to AIIB. (I do not consider it appropriate to order an account of profits in respect of Hamtuan’s breach of contract.)

The appropriate relief in respect of the breach by Mr Beard of his equitable obligation of confidence, is for AIIB to have the right to elect between an order for equitable compensation and an account of the profits made by Mr Beard as a result of his breach. Again, I think it appropriate to order an enquiry as to the amount for which Mr Beard is liable to AIIB, once it makes its election.

I do not consider it appropriate to grant a final injunction as sought by AIIB against Mr Beard/Hamtuan.

I find for Chegwyn on its cross-claim against Mr Beard/Hamtuan. Conduct of the proceedings

To explain the course these proceedings took (and to set the context for some of the submissions made in relation to the relief sought) I set out briefly below the history of the conduct of these proceedings. AIIB’s claim

These proceedings were initially commenced by Summons filed on 12 March 2008. AIIB sought orders restraining each of the defendants for a six month period from 29 February 2008 from: (a) soliciting insurance business from or providing insurance services to any person who was a client serviced by Mr Beard and/or Hamtuan during the two years prior to 29 February 2008; (b) soliciting, canvassing, approaching or accepting any approach from any person or entity who is or was at any time during the six months prior to 29 February 2008 a client of AIIB with a view to establishing a relationship with or obtaining the custom of that person or entity in the business of the defendants.

Interlocutory relief was sought to restrain the use, pending further order, of any information contained in documents described in Annexure “A” to the Summons or soliciting, for the purpose of entering into any contract, or entering into any contract, with any of the persons or entities referred to in Annexure “A” to the Summons.

The documents described in Annexure “A” were, broadly speaking, insurance or insurance renewal documents or policies, “prospects sheets” detailing “new prospects”, and telephone or contact details. The persons or entities named in Annexure “A” included, relevantly, the Paraplegic and Quadriplegic Association of NSW (“Paraquad”), Gemaveld Pty Limited (“Gemaveld”) and its subsidiaries (identified as Citadel, Action), and Northpoint Constructions Pty Limited.

When the matter came before the court on 17 March 2008, undertakings were proffered (without admission) by the defendants. Those undertakings were subsequently extended by consent (again without admission) on 26 March 2008, until further order. Those undertakings remain in force. They were given upon AIIB, by its counsel, giving the usual undertaking as to damages.

Relevantly, the undertakings are that the defendants shall not, by themselves their servants or agents use, any information contained in the documents described in the relevant Annexures or “solicit for the purpose of entering into any contract or enter into any contract with” any of the persons referred to in those Annexures.

AIIB ultimately proceeded on a Further Amended Statement of Claim filed pursuant to leave granted by me on 11 February 2009 (that amendment application having been brought by AIIB during the course of closing submissions and at the conclusion of a two day hearing by which time all the evidence then proposed to be adduced in the proceedings had been heard) in the circumstances set out in my reasons for judgment published on 11 February 2009. The hearing was adjourned to July 2009.

While the hearing was unfortunately disrupted by the adjournment (and the resolution of the proceedings delayed), I have been assisted, when preparing these reasons, by the extensive notes taken by me throughout the course of the hearing (see generally Hadid v Redpath (2001) 35 MVR 152 at 159 [34] per Heydon JA; Expectation Pty Limited v PRD Realty Pty Limited (2004) 140 FCR 17 at 33 [73]; Monie v Commonwealth of Australia (2005) 63 NSWLR 729 at 742 [43] per Hunt AJA; NAIS v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 228 CLR 470 at 504 [109]-[111] per Kirby J, at 525 [169] per Callinan and Heydon JJ).

The further amendment was limited to an amendment to the name of the third defendant from “Chegwyn Corporate Services Pty Limited ACN 090 107 092” to “Chegwyn Corporate Services Pty Limited ACN 128 865 767”. This amendment had the effect of removing the company bearing ACN 090 107 092 (formerly known as Chegwyn Corporate Services Pty Limited, but now known as Nikalview Pty Limited) and joining the company bearing ACN 128 865 767 (formerly known as Nikalview Pty Limited, but now known as Chegwyn Corporate Services Pty Limited). The two companies had, in effect, swapped names in March 2008. AIIB’s legal representatives first became aware of the swap (and of the fact that the wrong company within the Chegwyn group of companies had been joined to the proceedings) upon receipt of closing written submissions of Mr McLure (counsel for the respective third defendants).

While documents lodged with ASIC on 12 March 2008 record the passage of the relevant special resolutions for the changes of name as occurring on 7 March 2008 (somewhat curiously, since the date appearing next to Mr Chegwyn’s signature on the notices is 6 March 2008), the name changes (contrary to the submissions made on behalf of Chegwyn) did not take effect, as a matter of law, until 13 March 2008 (s 157(3) Corporations Act 2001) when ASIC altered the details of the companies’ respective registrations. Therefore, as at the date of commencement of the proceedings, the company bearing ACN 090 107 092 was named Chegwyn Corporate Services Pty Limited (though its name would change the following day).

AIIB’s claim against Mr Beard/Hamtuan is principally a claim for breach of contract (by reference to the confidentiality/non-solicitation provisions in both the October 2005 employment agreement and the alleged November 2005 Authorised Representative Agreement). In the alternative, a claim is brought for breach of an equitable obligation of confidence.

AIIB’s claim against Chegwyn is pleaded on the basis that the relevant conduct of Mr Beard/Hamtuan (in soliciting, canvassing, approaching and accepting approaches from AIIB clients) was engaged in as “agents and authorised representatives” of Chegwyn. By reason of the alleged agency/authorised representative relationship, that conduct is said to be “deemed to be the action of” Chegwyn (paragraphs 21 and 22 Further Amended Statement of Claim). Further, it is alleged that Chegwyn, by its alleged agents, has “improperly made use of” AIIB’s proprietary and/or confidential information (paragraph 23 of the Further Amended Statement of Claim).

AIIB seeks an order that there be an enquiry as to damages suffered by AIIB as a result of the conduct of each of the defendants (including Chegwyn) (paragraph 6 of the prayers for relief in the Further Amended Statement of Claim) and, in the alternative, an account of the profits which AIIB would otherwise have received but for the conduct of the defendants or each of them (paragraph 7 of the prayers for relief). As to the injunctive relief sought, AIIB no longer presses the claim for the six month restraint sought in paragraph 1 of its Further Amended Statement of Claim (corresponding to paragraph 1 of the Summons) as this is no longer of any utility, the relevant period now long since expired. Nevertheless, AIIB still presses for an order in the form of a perpetual injunction against Mr Beard and Hamtuan to restrain them from using the confidential information referred to in paragraphs 13(a)-(e) of the Further Amended Statement of Claim (see paragraph 3A of the prayers for relief). Defences

By their defence, Mr Beard/Hamtuan deny that Mr Beard ever commenced in the employment of AIIB; deny that the terms of an October 2005 “Contract of Employment” (as defined in AIIB’s pleadings) ever governed the terms of the relationship between Mr Beard and AIIB; admit that Hamtuan was an authorised representative of AIIB from about November 2005 until 29 February 2008; and deny that Hamtuan ever entered into a written Authorised Representative Agreement (as defined in AIIB’s pleadings) or that its terms ever governed the relationship between Hamtuan and AIIB.

In particular, Mr Beard and Hamtuan deny the terms alleged by reference to clauses 14 and 19 of the Authorised Representative Agreement (relating to AIIB’s ownership of confidential information, as defined in clause 1, and imposing a two year non-solicitation clause, respectively).

Mr Beard and Hamtuan admit that, following termination of the business relationship with AIIB, they retained certain documents but say that those documents were their property and that they were entitled at law to retain those documents. (In due course, the documents so retained were, according to Mr Beard, produced to the solicitors for AIIB in answer to a notice to produce issued in these proceedings. Mr Beard denies that he currently holds any of the documents in question or any copies thereof.)

The (originally named) third defendant filed its defence on 27 August 2008, denying liability and positively asserting that the entity “Chegwyn Corporate Services Pty Limited ACN 128 875 767” became licensed as an AFSL licensee on 7 March 2008 (though not stating that at that time the entity with that particular ACN was then registered with ASIC as Nikalview Pty Limited) and asserting that Hamtuan became an authorised representative of that entity on 7 March 2008.

The present third defendant filed an Amended Defence on 24 June 2009 denying liability, but admitting that on 7 March 2008 it became licensed as an AFS licensee and that Hamtuan became its authorised representative and agent on that day. The Amended Defence also asserts an entitlement to have any equitable pecuniary remedy for which Chegwyn is liable reduced by the expenses incurred in establishing and operating Hamtuan’s agency. Cross-claim by Chegwyn

After leave was given by me for the amendment of the pleadings to rectify the misjoinder of the company bearing ACN 090 107 902, the (now correctly named) third defendant, Chegwyn, filed a cross-claim against Mr Beard and Hamtuan seeking a declaration that they are liable to indemnify Chegwyn with respect to any equitable pecuniary remedy Chegwyn may be held liable to pay AIIB, any order for costs made against Chegwyn and any legal costs incurred by Chegwyn in relation to these proceedings.

That cross-claim is based on an alleged express term of the agency agreement between Chegwyn and Mr Beard/Hamtuan to the effect that the latter were not authorised to provide insurance services to former clients of AIIB where that had not been agreed between them and AIIB (and would indemnify Chegwyn for any liability or costs incurred in so doing). Chegwyn pleads that as at June 2009 it has made demand (which remains unsatisfied) on the indemnity for its legal costs in defending the proceedings to that date. Chegwyn also seeks unspecified damages.

At various times during the proceedings, and in particular during the hearing before me on 4-6 February 2009 and again on 11 February 2009, Mr Beard/Hamtuan had the benefit of legal representation but this was not the case when the hearing resumed on 16 July 2009. Mr Beard (who by that time was representing himself and, as I understand it, Hamtuan) indicated that a defence to the cross-claim would be filed. No such defence has been filed. It seems to me that Mr Beard has had ample opportunity to obtain advice and put forward any defence he or Hamtuan may have had to the cross-claim. In his oral evidence Mr Beard conceded, in effect, that he had no authority from Chegwyn to use any confidential information, or solicit any clients, if he was not entitled viz-a-viz AIIB so to do. Facts

As noted above, each of AIIB and Chegwyn carries on business as an insurance broker and each held, at the relevant times, an AFSL.

As at 2005, Mr Lofts was the majority shareholder (holding about 75% of the shares) and a director, of AIIB. His fellow director, Mr John Brindle, held the remaining 25% of the shares of AIIB.

At some time in early 2005, Mr Brindle decided that he wished to retire from AIIB in about 2006. Mr Brindle gave evidence that, as part of the retirement process, he wanted to sell his shareholding in AIIB and to retire as a director. Mr Lofts did not wish to acquire Mr Brindle’s parcel of shares. Mr Brindle gave evidence that he had negotiations with various parties in relation to the sale of his shares. He said that he first offered his parcel of shares to another insurance broker, Mr Stephen McGrath, but that Mr McGrath was not able to acquire the whole parcel. In about April 2005 he had discussions with Mr Beard (T 54), who was then employed as an insurance broker by Driessen, as to the possibility that Mr Beard would take up a position with AIIB and would acquire part (but not all – T 68) of Mr Brindle’s shareholding in AIIB.

Mr Brindle says, in general terms, that he offered Mr Beard a position with the company and with the opportunity of purchasing a portion of his shareholding in that company at an agreed value and that Mr Beard accepted that offer (T 55). Mr Brindle nominated a price of $216,000 for 900 of his shares (about 9% of the company’s capital). He says that Mr Beard requested a complete list of finances for two years to make a judgment (T 55) (although Mr Beard’s evidence suggests that he simply accepted the figure put to him by Mr Brindle).

Mr Brindle says he calculated the value of his shareholding as a percentage of the value of the total shares, valuing the business at 1.5 times earnings (that being the way he said shares are valued in “insurance practices” - T 56/57). Mr Brindle says that Mr Beard had agreed (presumably only in principle since there was not a formal agreement till May 2006) to purchase 900 of his shares in October 2005, before he gave Mr Beard the client list, which has assumed some significance in these proceedings, identifying particular clients (T 55).

Mr Lofts agrees that he was privy to some of the initial discussions between Mr Brindle and Mr Beard. Mr Beard says it was represented to him that, on acquisition of the shares, he would be made a director of AIIB. According to Mr Lofts, the discussion about a directorship was in the context of someone taking up the whole of Mr Brindle’s 25% shareholding. Mr Lofts said that prior to November 2005 he had had a conversation with Mr Beard in relation to the proposed sale of Mr Brindle’s 25% shareholding in which he says that he had indicated that the person who purchased a 25% holding would be made a director of the company (T 27). Mr Lofts apparently did not wish to enlarge the board by appointing more than one director in place of Mr Brindle. The fact that Mr Beard was ultimately not made a director of the company was a source of some contention on Mr Beard’s part (as evidenced by the complaints contained in his notice of termination). · Offer of Employment – October 2005

On 11 October 2005, Mr Beard signed a document titled Offer of Employment (“Offer of Employment”), accepting the offer by AIIB of a position as an account manager of AIIB commencing on 28 November 2005 on a salary of $85,000. It is not disputed that under this offer, Mr Beard’s overall monetary package was in the vicinity of $100,000 per annum (slightly less than Mr Beard’s salary package had been at Driessen).

Shortly afterwards, Hamtuan was incorporated by Mr Beard on 14 October 2005 (as disclosed in the ASIC search a copy of which is Annexure D to Mr Lofts’ affidavit).

Mr Beard commenced work with AIIB on 28 November 2005. At least on the face of the pleadings, there is a dispute as to whether, when he did so, he remained bound by the terms of the Offer of Employment he had signed. Mr Beard says that the “offer” contained in the Offer of Employment was superseded by a verbal agreement between AIIB and Hamtuan pursuant to which the latter was to be appointed as an authorised representative of AIIB. Mr Lofts, for his part, seems broadly to have accepted in the witness box that the only “agreement” in place when Mr Beard started with AIIB was that Hamtuan would be an authorised representative and would receive the agreed monthly commission (T 29). · Authorised Representative Agreement – November 2005

On about 28 November 2005, Mr Lofts provided Mr Beard with a document titled “Authorised Representative Agreement” and dated 28 November 2005 (“Authorised Representative Agreement”), in which the Licensee was expressed to be “AIIB Pty Limited” and the Authorised Representative was expressed to be “Hamtuan P/L”. The basis on which this document was provided by AIIB is disputed. Mr Beard suggested that this document was in some way foisted upon him (and Hamtuan); he says he was told to “rip up” the Offer of Employment and that a corporate authorised representative had to be appointed. Mr Lofts says, to the contrary, that it was Mr Beard who requested that his corporate entity be the authorised representative and Mr Lofts denies that he told Mr Beard his company would have to be an authorised representative (T 28).

There was no reason put forward as to why Mr Lofts would have insisted upon the contractual arrangements being structured with Hamtuan and Mr Beard (rather than simply with Mr Beard himself) as an authorised representative rather than an employee, in circumstances where he had already provided to Mr Beard, and Mr Beard had already signed, an employment agreement. The reason for the change cannot logically be linked to the purchase by Hamtuan of Mr Brindle’s shares, since this had been the basis on which Mr Brindle was “offering” Mr Beard a position with AIIB in the first place. There is no suggestion that an authorised representative arrangement (as opposed to an employment relationship) was necessary if what was contemplated was the sale of a client portfolio (as opposed to a sale of shares), although Mr Beard seemed to think the portability of a client base was facilitated by his appointment as an authorised representative. Nor was it suggested that there was a particular need on the part of AIIB for Mr Beard or his company formally to be appointed as an authorised representative, as such, rather than Mr Beard simply operating as an employed insurance broker (as Mr Beard says he had been at Driessen).

Any difference between the two roles (as described by the two men) seems at most to turn on the kind of financial services advice which can be given under an AFSL but neither Mr Beard nor Mr Lofts placed any emphasis on this. After (rather uninstructively) saying (at T 132) “An insurance broker is an insurance broker. An authorised representative is an authorised representative. They fulfil many of the same jobs – risk analysis – both do”, Mr Beard later contradicted this (T 140) by saying that an authorised representative had totally different responsibilities and characteristics. Mr Beard described the difference by reference to the level of perceived autonomy an authorised representative would have had and whether his computer system would be under another’s control. He said that an authorised representative has more duties and responsibilities and basically sets his or its own business plan and agenda, operating as an individual company under the umbrella of a licensed broker. Mr Lofts seems to have accepted that Mr Beard/Hamtuan’s role was or would have been the same whether Mr Beard was employed under the employment agreement or whether Hamtuan was appointed AIIB’s authorised representative operating under AIIB’s licence as an employee or as an authorised representative (T 10).

There are two factors which seem to me to point to Mr Lofts’ version of events being correct (ie that the change in the working arrangements from that of an employment relationship to the appointment of a corporate authorised representative was made at Mr Beard’s request or at least with his knowledge prior to the commencement of the working relationship). First, it seems there was no requirement that Mr Brindle (whose position Mr Beard was in part assuming) operated through a corporate entity. Secondly, Hamtuan was incorporated after the employment agreement was signed by Mr Beard, some two weeks before Mr Beard says the Authorised Representative Agreement was thrust upon him. There must have been some discussion leading up to the production of that first corporate authorised representative agreement for Mr Lofts to have known the name of the company to be appointed. It is unlikely that such a document was magically brought into existence without Mr Beard’s prior knowledge and foisted upon him on the first day of what had hitherto been proposed as an employment relationship.

Mr Beard says that he told Mr Lofts he would give the Authorised Representative Agreement to his accountant to give to his lawyer, and that he did so. Neither he nor Hamtuan signed the Authorised Representative Agreement. To the extent that Mr Lofts’ affidavit deposed to Mr Beard having said he was “happy” with the agreement, Mr Lofts conceded in the witness box that Mr Beard had never indicated one way or the other whether the terms were acceptable to him. Rather, he said that what Mr Beard had said to him was that he was happy with the arrangement whereby he was appointed an authorised representative (T 31).

I will come back in due course to the reason why Mr Beard says he (and Hamtuan) did not sign the Authorised Representative Agreement. Suffice it to note that there seems no suggestion that Mr Beard was in any way unhappy with its terms (assuming he had paid any or any more than scant regard to its terms, a matter which is itself in issue). I find it difficult to accept that Mr Beard (who seems at various stages throughout this matter, including at the time he signed the October 2005 agreement, to have been prepared to rely upon his own counsel in making decisions) would not at least cursorily have read the document before passing it on to his advisers. · Registration of Hamtuan as AIIB authorised representative

Hamtuan was registered with ASIC as the authorised representative of AIIB on 28 November 2005, the date on which it and Mr Beard commenced their business relationship with AIIB. At that stage, no agreement for the sale to Mr Beard of any portion of Mr Brindle’s shares had been completed, although it was in principle agreed that Hamtuan would acquire 900 of Mr Brindle’s shares for a price of $216,000. Mr Brindle says that at this stage Mr McGrath, through his company Blue Ocean Two Pty Limited, had agreed to purchase an equivalent of 60% of his shareholding and what Mr Beard had agreed to purchase was an equivalent of 36% of his total shareholding. · Client list

In about November 2005, Mr Brindle handed to Mr Beard a handwritten list of clients, a copy of which is Annexure “A” to Mr Brindle’s affidavit sworn 1 April 2008. The list contains two columns, the left hand headed “SMcG” and the right hand “PB”. What this list represents is a matter in dispute between the parties.

Mr Brindle says that this document listed the various clients whom he then managed (and that the numbers adjacent to each client referred to the earnings or revenue to AIIB from each client). Mr Brindle says that he attempted to distribute the clients he managed fairly between Mr McGrath and Mr Beard. (Mr Brindle did not allocate any clients to Mr Anthony Bourke (a broker in AIIB’s Newcastle office) who bought the balance of his shares and was also a party to the ultimate Share Sale Agreement.) Mr Brindle denies that he had any proprietary right or interest in a “client portfolio” and denies that any purchase by Mr Beard of his client portfolio was discussed.

Mr Beard, on the other hand, asserts that the list reflects the portion of Mr Brindle’s “client portfolio” that he “purchased”. Mr Beard said that at least three or four draft client lists were provided to him. He denied that a client list was only given to him after he walked through AIIB’s door: “No, because we were in discussions and I wanted to know his client portfolio. I didn’t want to spend a lot of money on something that I didn’t know what was – what was there, so I had run through with him – with him – the potential clients prior to my joining, prior to my leaving my previous employer”. (That in itself seems inconsistent with Mr Beard’s understanding that he was purchasing a “client portfolio” rather than being given an opportunity to earn remuneration based on commissions from a client portfolio he was being given to manage. Had the position been the former, Mr Beard’s willingness to leave his former employment prior to finalising the acquisition of the client portfolio seems to me to be, at best, remarkably trusting. More likely, this is indicative of an understanding that Mr Beard was purchasing company shares, not clients.)

Mr Brindle, who says he continued working for AIIB until late February 2006 to ensure the smooth handover of client management, accepts that he visited each of the clients he managed with either Mr McGrath or Mr Beard as the case may be (and some clients on two or three occasions) but denies that this was more than a handover in an administrative sense. I think nothing can be drawn from the fact that Mr Brindle took Mr Beard to introduce him to the clients on the list. It is what might have been expected on either version of events. · Share Sale Agreement – May 2006

Mr Lofts recalled that in about February/March (I assume, 2006) Mr Beard had asked for information as to declared dividends over the years and financial trading information. Mr Lofts said, “I gave an undertaking in relation to the dividends which would be paid which the company later honoured even though profits were smaller because of that transaction with John [Brindle]” (T 12). Nevertheless, he says what he gave to Mr Beard prior to the latter becoming a shareholder were projections as to the payment of dividends (T 14; T 15) not historical financial information (T 12; T 14).

It was not until May 2006 that the sale of Mr Brindle’s shares was completed. (Mr Brindle’s evidence is that he was advised by his accountant to postpone signing the Share Sale Agreement until some time after he left AIIB for tax reasons. Mr Beard seemed to suggest the reason for the delay was a financing issue. Nothing seems to turn on this, other than that the lapse of time between the commencement of Mr Beard/Hamtuan at AIIB and the documentation of arrangements in relation to the share sale, including the preparation of a proposed shareholders agreement, makes it difficult for me to accept that the reason Mr Beard did not sign the Authorised Representative Agreement, at least initially, was due to any difficulty in securing Mr Lofts’ agreement to the later documentation.)

For completeness (though I have placed no weight on this) I note that Mr McGrath gave evidence (by affidavit sworn 12 April 2008) confirming his understanding that what was purchased by Blue Ocean Two Pty Limited was the equivalent of 60% of Mr Brindle’s shares (or 15% of the total shareholding in AIIB) and not a client portfolio.

Under the Share Sale Agreement dated 29 May 2006, Mr Brindle (as vendor) sold to Hamtuan 900 shares in AIIB at a purchase price of $216,000 (1,500 being sold to Blue Ocean Two Pty Limited for $360,000 and the remaining 101 being sold to Mr Bourke for $24,000) out of a total share capital in AIIB of 10,003 shares (the remaining 7,502 shares being held by Mr Trevor Lofts).

The means by which the $216,000 purchase price was derived is also a subject of dispute between the parties. Mr Beard gave contradictory and confused evidence in this regard; in particular as to whether or not Mr Brindle had said the share price was to be calculated by reference to the gross revenue of AIIB (T 84 cf T 86) and as to what he understood that to mean.

Mr Beard seemed to suggest that the purchase price was in some way linked to a previous representation by Mr Brindle that the client revenue represented 25% of the revenue of the company (T 84) but on no view of the matter was Mr Beard acquiring 25% of the company shares. Mr Beard said: “Mr Brindle said he would hand over a list of a group of clients and those clients represented a certain value to the firm” (T 82) and at T 85 he said, “It related to the whole revenue of AIIB but specifically the purchase of the shares related to his client lists and revenue. So it was based on his client list and client revenues”. Then at T 86, he reverted to saying the purchase price was based solely on his client list and not revenue.

The significance of this is as to the question whether Mr Beard/Hamtuan was entitled, as he seems to have believed, to “take” his client portfolio with him when he left AIIB. If that had been the case then surely it would have been considered necessary at some stage to obtain Mr Lofts’ confirmation of the position, since this was inconsistent with the position reflected in both the Employment Agreement and the Authorised Representative Agreement.

At or about the same time as the Share Sale Agreement was signed, it seems that AIIB and Hamtuan entered into a loan (Mr Lofts says for $217,000) for the purposes of facilitating Hamtuan’s acquisition of the 900 AIIB shares. Mr Lofts says that the arrangement was that, should Hamtuan fail to repay the loan, the shares Hamtuan had purchased would be returned for the sum of $1. A copy of that loan agreement is not in evidence. As I understand Mr Lofts’ oral evidence, Hamtuan ultimately defaulted on that loan.

After the purchase of his shares, Mr Lofts says that Mr Beard asked about the financial position of AIIB “on many occasions” and was given that information “because he was a shareholder” (T 12) but Mr Lofts says that before that time all that Mr Beard was provided with (on a weekly basis as part of management meetings) was current financial information of the company. I was not taken to any documents which shed light on what financial information Mr Beard was given either in November 2005 or later at the time of the share sale. · Directorship

Mr McGrath was appointed a director on 28 June 2005, the date on which Mr Brindle ceased holding office as director. His company had acquired the larger portion of Mr Brindle’s shares. After Mr Beard’s commencement with AIIB, he apparently pressed Mr Lofts to appoint him also as a director. His evidence was that he had been promised a directorship in connection with the purchase of the AIIB shares. It is not clear when Mr Lofts told him that he would not “enlarge” the board. In essence, Mr Beard’s evidence seems to be that, having by then already left Driessen, he had little choice but to continue with the arrangement to join AIIB even though the directorship of AIIB had not been given to him (para 13). Mr McGrath gave evidence that there were conversations in which Mr Lofts suggested that the remaining position of director could be rotated on a two year basis, and that he (Mr McGrath) was prepared to agree to that rotation; but this did not eventuate. The issue of a directorship was one which appears to have rankled with Mr Beard, as did, later, the fact that Mr Lofts had refused to sign the Shareholders Agreement provided to him by Mr Beard. From Mr Beard’s later termination letter, it appears he took particular issue with the fact that members of Mr Lofts’ family had been appointed directors. · Shareholders’ Agreement

At some stage after the purchase by Mr Beard of shares in the company (Mr Lofts says this was in early 2007 - T 29), Mr Beard provided to Mr Lofts a draft Shareholders’ Agreement, which Mr Beard requested he enter into in order to govern the position between the company’s shareholders. (There is no suggestion that this was provided to Mr Lofts in 2005 at the time the Authorised Representative Agreement was prepared, although Mr Beard claims that the reason he did not sign the latter was because Mr Lofts would not sign the former). Mr Lofts said the Shareholders’ Agreement was not in acceptable form (based, according to him, on something like a yacht club agreement) and he said it would need to be redone. Although another draft was prepared, that was also not acceptable to Mr Lofts. · Increases in remuneration

There seems no dispute that during the period 2005-2007 Hamtuan was paid commission in accordance with the Authorised Representative Agreement (initially in the amount set out in the one-page schedule appearing at the end of Annexure C). On 25 September 2007, Mr Lofts, in his capacity as director of AIIB, wrote to Hamtuan (in a letter addressed to the attention of Mr Beard) notifying an amendment to Hamtuan’s remuneration both as at 1 October 2006 (curiously, on its face, a retrospective notification) and 1 October 2007 (Annexure E to Mr Lofts’ affidavit): … to advise that with effect from October 2007 Schedule A of your Authorised Representative Agreement dated 28 November 2005 has been amended to reflect the following increase in remuneration… In all other respects the Authorised Representative Agreement remains unaltered.

This letter is clearly predicated on an assumption that there is a written document comprising the Authorised Representative Agreement and that it is more than a one-page document (since it refers to a Schedule A and the one-page document has no schedule thereto). Neither Mr Beard nor Hamtuan responded to this letter to assert that there was in place no Authorised Representative Agreement. · Departure from AIIB

According to Mr Lofts, the relationship between AIIB and Mr Beard deteriorated gradually. He says Mr Beard had raised concerns as to his non-inclusion in company activities. (Mr Beard’s ultimate termination letter raises a variety of other work-related issues, in tones of what might fairly be described as self-righteous indignation. I think it safe therefore to conclude that there was a breakdown in the relations between Mr Lofts and Mr Beard.)

By late 2007, Mr Beard seems to have been looking to leave AIIB. Mr Chegwyn, by affidavit sworn 23 June 2009, deposed to a conversation he had with Mr Beard at a conference in October 2007, when Mr Chegwyn mentioned to Mr Beard that he was in the process of applying for an AFSL, following which (in early December 2007) Mr Beard again met with Mr Chegwyn. Mr Beard told him that he intended to sell his shares in AIIB and to commence his own business.

On 12 December 2007, seemingly consistent with what Mr Chegwyn had told Mr Beard in October, “Nikalview Pty Limited” ACN 128 875 767 was formed, with Mr Chegwyn as its sole director and secretary.

In late December 2007, according to Mr Chegwyn, he again met with Mr Beard who said he intended to become an authorised representative of another broker and suggested that Mr Chegwyn might be that broker. (In the witness box (T 188) Mr Chegwyn put this discussion as being on 27 December 2007.)

Mr Chegwyn says that on 17 January 2008, Mr Beard told him he had decided to leave AIIB at the end of February and a conversation took place in the following words: Beard - I've decided to leave AIIB at the end of February. I have a group of clients that belong to me that I will bring over with me. Chegwyn - Okay, but I don't want to get involved in any conflict between you and AIIB over clients. It is important to make sure that your separation is clean and that there are no misunderstandings. Beard - You don't need to worry, the clients I will bring over are mine. I bought most of them when I bought into the business, the others followed me from my previous practice. I don't have any non-compete agreement with AIIB and besides, I am happy to indemnify you for everything in relation to those clients. Chegwyn - Okay fine, but I wouldn't want you to be involved with taking any clients of AIIB that you have not bought from them. Once I get my licence in place we can look at you coming on board as an authorised representative. We will need to get the paperwork signed up but in the meantime if you want to get the ball rolling, you can complete the application to become an authorised representative. Let me know how things proceed on your side and otherwise we will have to talk some more once my licence is being approved.

Mr Beard does not deny that a conversation to this effect took place. Mr Chegwyn says that Mr Beard told him in that conversation that he had purchased a book of clients with potential fees per annum of $200,000.

From early 2008, it appears Mr Beard was making preparations for his departure from AIIB. Ms Ashleigh Allston, who was employed as the front desk receptionist for AIIB at the relevant time, swore an affidavit (21 April 2008) deposing to an occasion on 31 January 2008 when she attended a weekly “prospects meeting” and Mr Beard asked her to get his referrals in “hardcopy”, after which meeting Mr Beard asked her if she could “print out all contacts from our prospect system” and, when told everything would have to be printed out individually, said “If you come across any of the engineering, metal or similar prospects, please print out a hard copy and give them to me”. Ms Allston says she printed out the prospects requests over the next month and handed Mr Beard at least 20 documents displaying contact names and details. Mr Beard accepts that he asked Ms Allston if he could get his referrals on hard copy but says she did not print out any prospects lists for him.

I accept Ms Allston’s evidence. She was unshaken in cross-examination and there seems no reason why she would have fabricated her evidence. Her recollection accords with her handwritten note of the 31 January prospects meeting.

At the very least it appears that from January 2008 (prior to the time at which Mr Beard initially deposed to having formed the intention to leave AIIB) Mr Beard was compiling or looking (with assistance from Ms Allston) to compile his own set of hard copy information on “prospects” or clients serviced by him or within his fields of insurance expertise. This can only have been for the purpose of later making use of that information in competition with AIIB, since Mr Beard had no need for hard copy materials at AIIB (where he said everything was operated on a soft copy system) and had already indicated to Mr Chegwyn that he would be bringing a client portfolio with him. · Commencement with Chegwyn

In February 2008, there was an exchange of email correspondence between Mr Chegwyn and Mr Beard in which Mr Chegwyn extended an offer to Hamtuan to be appointed as a Corporate Authorised Representative of his company for a fee of 15% of all commission and fee revenue invoiced within Chegwyn’s broking system. These emails had the footer “Chegwyn Corporate Services Pty Limited” noting that it was an authorised representative of Chegwyn Insurance Brokers Pty Limited AFSL 283020. (At this time an application was apparently still pending for registration of Chegwyn itself (then named Nikalview Pty Limited) as an AFS licensee.)

The first of these email communications was on 1 February 2008, when Mr Chegwyn sent to Mr Beard an email detailing the “broad terms” in accordance with which Mr Beard’s “firm” would become a “Corporate Authorised Representative”. Said to be attached to that email (though not attached to Mr Chegwyn’s affidavit), was an ASIC application form and a draft Corporate Authorised Representative Agreement.

An exchange of emails then took place between Mr Beard and Mr Chegwyn between 7 and 9 February. On 9 February 2008, Mr Beard sent an email to Mr Chegwyn attaching a document bearing the header: “Corporate Authorised Representative Application Form”. That document included the following: 2. Details Of Existing / Prior Authorisations Provide details of any authorisation, registration or agency held (include copies of any relevant agreements). If you have any current arrangements state whether you intend to continue with the arrangement. HAMTUAN PTY LIMITED HAS A VERBAL AUTHHORISED [sic] REPRESENTATIVE AGREEMENT WITH AIIB PTY LIMITED. PETER JAMES BEARD HAS ALSO BEEN APPOINTED AN AUTHORISED REPRESENTATIVE, WITHOUT ANY AGREEMENT. WRITTEN NOTICE WILL BE PROVIDED TERMINATING THE APPOINTMENT PRIOR TO COMMENCING WITH CHEGWYN INSURANCE BROKERS.

Pausing there, this document evidences what I see as Mr Beard’s tendency to gloss over the details of his working arrangements. While the assertion that Hamtuan had a “verbal” authorised representative agreement is consistent with the stance propounded by Mr Beard in these proceedings, the suggestion that Mr Beard had been appointed an authorised representative in his own right is not supported by any evidence.

Mr Chegwyn says that on 25 February 2008 he was advised that the issue of a licence by ASIC for Chegwyn was imminent and he contacted Mr Beard by telephone to advise him this was the case. He says he believes he told Mr Beard what the licence number was going to be so that Mr Beard could prepare his stationery but that he was not to use it until Chegwyn had obtained the licence and Hamtuan was formally appointed as a representative. (Mr Beard seems to have used this information in his 29 February 2008 letters. He also seems to have “jumped the gun” in notifying clients that the change was effective “immediately”, since his commencement date with Chegwyn seems not to have been until at least 7 March 2008.)

Mr Chegwyn was not challenged on this (somewhat self-serving account of) the conversation on 25 February 2008. Although it might be seen as somewhat odd that he considered it necessary to tell a person such as Mr Beard, with purported experience already as an authorised representative, that once he became appointed as such any correspondence must note this fact and must include the relevant AFSL number or, conversely, that he could not use the licence number until the appointment was formalised), this may simply indicate a level of attention to detail on Mr Chegwyn’s part which would support the perhaps pedantic view he appears to have taken of other matters (evident in his response to Mr Lofts’ subsequent enquiry in March 2008 referred to below). · Removal of AIIB information

Ms Allston says that in late February, namely during the weeks commencing 18 and 25 February 2008, Mr Beard asked her to print out documents relating to his clients from the computer system for him, and to put those and the prospects papers into a folder. Ms Allston also observed on one occasion that Mr Beard had printed papers showing contact details from AIIB’s main address book.

In the witness box Mr Beard appeared to concede that he had been involved in printing out or obtaining client reports, insofar as he had already admitted he took with him copies of the Paraquad policies and, in the witness box, he said it is more likely that he would have printed these out himself than that Ms Allston did so (T 117). He agreed he printed out about 100 pages of contacts but says he “would have used them and thrown them in the bin” and only “updated 20 or 30” (T 118).

Again, I accept Ms Allston’s evidence in this regard. She was firm in her recollection that she had put documents into folders for Mr Beard and this does not seem something about which she would be likely to have been mistaken. Presumably, in the course of her role as receptionist, a task such as this which may have taken her some time, as she told Mr Beard it would, would be one she would remember. · Termination of business relationship

Ms Allston says that Mr Beard told her in February 2008 that he had resigned and was taking his clients with him. Ms Allston gave evidence that on occasions around this time she observed Mr Beard leaving the office with those folders and not returning with them.

Mr McGrath gave evidence that in about February 2008 Mr Beard said to him words to the effect “I am setting up my own brokerage. I have been planning this for months”. Mr McGrath was not challenged on this conversation.

In his first affidavit, Mr Beard said that he began to have concerns about AIIB’s “longevity” towards the end of February 2008 (para 22) and decided to move his client base to another AFSL holder “to protect my income and my clients’ best interests” (para 22). The above chronology (and the apparent removal or stockpiling of information from at least January/February 2008) indicates that in fact Mr Beard’s decision to move from AIIB was being formulated at least two months earlier than he deposed to in his affidavit.

By letter dated 29 February 2008, addressed to the Proper Officer of AIIB, Mr Beard (signing as director of Hamtuan) advised that the “Authorised Representative (AR) agreement” was terminated with effect from 5pm on that day. In that letter, Mr Beard noted that “the original copies of the AR agreement remain unsigned and have been held by my accountant since 2005”. He can only thereby be referring to the original of the hard copy document which is Annexure C.

The letter recited a number of reasons for Mr Beard’s (or Hamtuan’s) lack of confidence in the directors of AIIB (most of which are not relevant for present purposes), the first of which was: failure of AIIB to repurchase the 9% shareholding held in Hamtuan, (reflecting the portfolio of clients originally purchased from John Brindle), therefore making AIIB shares illiquid and virtually worthless. Although a loan of $230,000 was taken out to secure this portfolio of clients.

Mr Beard then went on to say: Any attempt by AIIB, it’s [sic] staff or consultants, to contact clients in the portfolio held by Peter Beard / Hamtuan Pty Limited will result in immediate legal action. Although I wish to settle all outstanding matters amicably, these and other issues will no doubt enter into the public domain in the event of legal action between the parties. and Mr Beard concluded by giving notice that all correspondence must be sent care of his lawyer. It would seem that Mr Beard anticipated (and perhaps was seeking to pre-empt) a challenge to his asserted rights to a client portfolio. · Solicitation of clients/removal of client information

In evidence were four letters dated 29 February 2008 on Hamtuan letterhead and signed by Mr Beard as director of Hamtuan. Those were addressed to persons at Baker & Provan, Integrated Premises Services Limited, Street Consulting Pty Limited and DSM Food Specialities Australia Pty Limited. The letters were substantially identical. There is a fifth letter in evidence in substantially the same form but on which no date or addressee appears. Mr Lofts deposes to the fact that this letter was provided to him by Corroseal Coatings Pty Limited. Mr Chegwyn denied knowledge that Mr Beard was proposing to send out those letters (T 190).

The letters are in the following terms: Regarding: Insurance & Risk Management Services for 2008-2009 Thank you very much for giving me the opportunity to act as your insurance advisor over the past three years, following the purchase of John Brindle’s business on his retirement. I have pleasure in announcing that due to continued growth in similar accounts to yours, Hamtuan has commenced the process of applying for its own independent Insurance Broking & Risk Management license [sic]. The new company name will be AIR Insurance Brokers & Risk Managers… As such the current Authorised Representative agreement with AIIB will cease today (29th February) and be replaced immediately with a Corporate Authorised Representative Agreement with Chegwyn Corporate Services (based at North Sydney), pending issue of a full licence for AIR in the next 4-5 months by ASIC. This change to a Corporate Authorised Representative will in no way effect [sic] your current insurance cover or premium. The only minor change will be in the letterhead of documents sent from me, which will be on Chegwyn Corporate letterhead. The new contact details from Monday 3 March 2008 are… If required, Alex Chegwyn (Managing Director) will also be available to discuss any questions that you may have in relation to this matter…. I will call to make an appointment to meet with you as early as possible. Please note that I will continue to handle all existing claims, as well as finalise any outstanding issues or recent changes to cover.

Mr Beard acknowledges that on his departure from AIIB he took with him some papers and two hard copy files (relating to Gemaveld/Agriwealth and Paraquad), which documents he says he believed to be owned by him. Mr Beard denies that he removed any other physical or electronic documents upon his departure from AIIB.

Mr Arcus, a computer expert, gave evidence as to the forensic searches carried out on Mr Beard’s office computer which revealed that a considerable amount of material had been deleted from Mr Beard’s computer in a manner which Mr Arcus considered gave rise to suspicion and that Mr Beard had had electronic access to a considerable number of client files prior to his departure from AIIB. Mr Arcus recovered 3.2 gigabytes of information on 22 March 2008 but did not know whether that included photographs (T 44). He said that the “My docs” folder was noticeably barren of files and the “recycle bin” was empty (T 46).

Mr Arcus said that, in his experience, normal computer users would regard the mode of deletion adopted by Mr Beard as permanent. Hence, he suspected that Mr Beard had sought to delete files without enabling AIIB to know what had been deleted. Mr Arcus said that, ordinarily, documents removed in the normal course of work from the documents folder will be in the recycle bin (T 47).

Mr Beard agreed he had deleted all information from his “my documents” folder and from the trash bin on his computer but says he did not do so to close off any trace of his action or to email the material to an external source (T 114/115) or to frustrate AIIB’s relationship. (Rather, he said most of the files deleted were personal files (T 120) and his explanation for having had access to numerous client email files in the time before he left AIIB was, he says, because he emailed all the time and looked at client files on AIIB’s soft copy system.)

Mr Beard does not therefore appear to deny that he systematically deleted a large number of entries from his computer. Whether he did so to obstruct AIIB or to take information with him is, however, impossible to tell. Mr Beard’s explanation for this is as noted above. While I do not accept that Mr Beard’s account of his working arrangements is reliable (given the inconsistency between his account of events, such as the share purchase arrangements and the written record of those events and his attempt to post-date the making of his decision to leave AIIB), I am inclined to accept this denial of having removed more than the contact details/insurance policies from AIIB mainly because Mr Beard seemed to me to exhibit a strong sense of grievance that he should have had to hand this material back and thereby have to start from scratch when renewing policies after that time.

On 7 March 2008, there was an exchange of email correspondence between Mr Chegwyn and Mr Lofts. The precise times at which the respective emails were sent are not entirely clear. The first communication (from a virtual office service) bears the time “13:41”. Mr Chegwyn’s first email bears the time “14:13”. Mr Lofts’ response bears the time “15:31”. Mr Chegwyn’s second email bears the time “14:35”. It seems unlikely (from its terms) that Mr Chegwyn’s second email was sent before receipt by Mr Chegwyn of Mr Lofts’ email. There is no suggestion that Mr Chegwyn and Mr Lofts were in different time zones. I would infer that the emails were sent either at 2:13 pm, 2:31 pm and 2:35 pm respectively or at 3:13 pm, 3:31 pm and 3:35 pm.

The text of Mr Chegwyn’s first email, somewhat defensive in its approach, was in the following terms: I have received a message to call you which I can only assume relates to some dispute you are having with Peter Beard. [It would seem by this that Mr Chegwyn had anticipated that there might be a potential dispute in relation to Mr Beard’s departure from AIIB.] I have nothing to do with Peter’s separation with your business and if there are some issues that require sorting out – then with respect – that is between Peter & yourself to discuss with a view to finding a commercial resolution. I hope you understand my position and I confirm that I will not be entering into any conversation or further correspondence in relation to AIIB & Peter Beard. [To the extent that AIIB may have had a genuine complaint as to conduct of Mr Beard relating to clients or AIIB’s confidential information, the attitude conveyed by Mr Chegwyn’s response in my view was tantamount to shutting his eyes to any problem.]

Mr Lofts’ response was in the following terms: My only [seemingly incorrect, insofar as Mr Lofts apparently had other concerns by that stage as to removal of company records] concern is that Peter Beard and his company Hamtuan are purporting to be an authorised representative of your company but that has not been registered with ASIC. This gives me concern as ex clients who suggest that they are going to Peter are not clearly leaving our books. Please confirm that Peter and his company is an authorised representative of your company/companies and that you will complete the necessary ASIC registration. If this is not the case then please advise.

The text of Mr Chegwyn’s second email was in the following terms: Your email is noted. By way of confirmation, Peter Beard & Hamtuan P/L are in the process of formal registration as Authorised Representatives. This should be completed by Tuesday or Wednesday next week. I have reconfirmed with Peter that he has to wait for the official registration before promoting Hamtuan or himself as an Authorised Representative of my company – Chegwyn Corporate Services. This does not, however, prevent him for [sic] acting in a direct manner for this company (i.e. engaged either as an employee or contractor) until his Authorised Representative status is confirmed. Trust this clarifies the position. (My emphasis)

Mr Chegwyn explained this email as one in which he was saying, in layman’s terms, from one principal to another, that Mr Lofts was not going to tell him how he could run his business. It seemed clear from the way Mr Chegwyn responded to questions as to this during cross-examination that he was indignant at the notion that Mr Lofts should presume to tell him what to do. I read Mr Chegwyn’s email in this light and not as an admission that Mr Beard was in fact already acting as an employee or contractor in advance of the registration of the authorised representative appointment.

It is alleged (on behalf of Chegwyn) that at some time on the same day (7 March 2008), the company then registered with ASIC as ACN 090 107 092 changed its name from Chegwyn Corporate Services Pty Limited to Nikalview Pty Limited and in turn Nikalview Pty Limited (ACN 128 875 767) changed its name from Nikalview Pty Limited to Chegwyn Corporate Service Pty Limited.

In evidence, there are two copies of documents in the form of ASIC Form 205, which is the prescribed form for notifying ASIC of resolutions. The documents record the special resolutions changing the names of the companies. The date of meeting on both documents is listed as “7/3/08”. These documents were lodged with ASIC on 12 March 2008 as is apparent from the date stamp they bear and from ASIC’s public record. Curiously, the date appearing next to the signature of Mr Chegwyn on both documents is “6/3/08” (ie before the resolutions were supposedly passed). (As noted earlier, any name change would have become effective only when registered by ASIC on 13 March 2008.)

What seems, therefore, to have happened is that on 7 March 2008, an AFSL (No: 321117) came into effect in respect of the company possessing ACN 128 875 767 (then named “Nikalview Pty Limited”) and immediately after that occurred, or (if the 6 March date is correct) in anticipation of it occurring, steps were taken to change the name from Nikalview to “Chegwyn Corporate Services Pty Limited”. Mr Chegwyn explained the name change as being for “compliance reasons” (T 198).

Mr Chegwyn deposed to the fact that, on 7 March 2008, Mr Beard attended at his office and signed a “Corporate Authorised Representative Application Form”.

There is in evidence a second AFSL document, also bearing licence No: 321117. On its face, it appears to grant a licence, effective as from 18 March 2008, to the company possessing ACN 128 875 767 (by then named “Chegwyn Corporate Services Pty Limited”). However, an ASIC record dated 17/03/2009 (annexed to Mr Chegwyn’s affidavit) lists the licensee, there described as “Chegwyn Corporate Services Pty Limited” as having “commenced” as at 07/03/2008 and there seems no reason why a replacement or second licence should later have issued (unless to record that name change).

Mr Beard said (in his affidavit sworn in January 2009) that there were only six clients for whom he had acted at AIIB for whom he subsequently did work at Chegwyn (T 90). In explaining the inconsistency in client numbers (his earlier affidavit having conceded that there were 19) Mr Beard said that three clients had given him verbal instructions or instructions in writing to act and then subsequently withdrew them or it was agreed that (in view of the litigation) he would not proceed (Exact Fulfilment, Everything Rubbish and Streetbuild) (T 92) but in saying that he provided no services to them, he conceded that he had put a proposal to Streetbuild and had had a meeting with Streetbuild to discuss its needs and to put forward some policy changes (T 93-94). Mr Beard said it was more accurate to say he had earned commission only on six clients (T 93) but conceded that he was in discussion with approximately 19 clients – “You know, 17, 19, whatever the number is” (T 97). Mr Beard’s evidence was vague and contradictory in this respect.

On 15 May 2008, Mr Chegwyn sent an email to Mr Beard notifying him of his termination of the Corporate Authorised Representative Agreement with effect from 22 May 2008. On 22 May 2008, notice of revocation of Hamtuan’s and Mr Beard’s authorised representative status was lodged with ASIC.

Mr Beard now operates under a company AIR Investments trading as AIR Insurance Brokers & Risk Managers, a corporate authorised representative of Honan Group. He joined Honan in September 2008 (T 98). Issues Issue (i) Were Mr Beard/Hamtuan contractually bound by an obligation of confidence or non-solicitation covenant? · Offer of Employment

AIIB in its pleading relies both upon the contract constituted by Mr Beard’s acceptance of the October 2005 Offer of Employment and the contract said to have arisen in terms of the Authorised Representative Agreement provided to Mr Beard in November 2005.

(Irrespective of any express obligation of confidentiality under the employment agreement, it is likely that an implied obligation of confidentiality would have arisen as an incident of the initial employment relationship had this in fact commenced (see, for example, the decision in Mid-City Skin Cancer and Laser Centre Pty Limited v Zahedi-Anarak (2006) 67 NSWLR 569 per Campbell J). However, this is unnecessary to determine in view of subsequent events.)

While it is conceded that the Offer of Employment was executed, Mr Beard’s position is that he never took up a position as accounts manager at AIIB and was never remunerated pursuant to the Offer of Employment. This is accepted by Mr Lofts.

Clause 11 of the contract constituted by acceptance of the Offer of Employment (which was expressed to continue to apply after the agreement was terminated) prescribed certain information as confidential and set out various acknowledgements and obligations of the employee in respect of confidential information. AIIB’s confidential and proprietary information was defined as including “information about our client and our client’s organisational structure, strategies, plans, research, operations, procedures, transactions, databases, customer lists, finances, business affairs, marketing plans, prospects” as well as documents or other material developed or written by the employee in the course of employment.

Clause 14.1 of the Offer of Employment provided that: For the Restraint Period shown in Schedule 1, [being six months after termination of employment] you will not do the following on your account or on behalf of any other person or entity: … Solicit, canvass, approach or accept any approach from any person or entity who is, was or has at any time during the 6 months immediately preceding the termination of this Agreement been our client with a view to establishing a relationship with or obtaining the custom of that person or entity in a business which competes with us; …

The Offer of Employment contained an acknowledgement to the effect that, by signing it, Mr Beard had read, understood and accepted the terms of employment.

In the absence of any evidence suggesting that the cessation or termination of the agreed employment arrangements was to be conditional upon entry into a binding authorised representative agreement (so as to leave open an argument that the employment contract remained on foot unless and until the authorised representative agreement was signed), the consequence of what occurred in November 2005 in my view is that the employment agreement came to an end.

That would itself seem to have amounted to a “termination” of the employment agreement for the purposes of clause 14.1 of the contract comprised by the Offer of Employment (unless, as was not suggested, the parties had agreed to its rescission ab initio). Therefore, the non-solicitation clause would appear to have become operative at that point, though it would have made no business sense for AIIB to have enforced it at that stage and there is no suggestion that it did so. More relevantly, the confidentiality obligation would remain binding, though logically no information could have come within it if, as was the case, Mr Beard’s employment never proceeded as a matter of fact (so that as at the time it came to an end Mr Beard had no information falling with that clause). It does not seem to me that the employment contract can be construed as applying to information acquired after the employment relationship was terminated.

There nevertheless remains some significance in the fact that Mr Beard had entered into the employment agreement: namely, that he was thereby clearly put on notice of the kind of information regarded by AIIB as confidential – something which in my view would be capable of informing the equitable obligation of confidence for which AIIB also contends. Mr Beard accepted that he had read the Offer of Employment and saw the clauses about confidentiality (in contrast with his assertion that he passed the Authorised Representative Agreement straight to his accountant – T 137), so he can have been in no doubt what AIIB considered confidential.

As to the November 2005 document, Mr Beard/Hamtuan denies that it is binding yet Mr Beard clearly believed an agreement of some kind was on foot (since he formally terminated it in his 29 February letter of termination). · Was there a binding agreement in accordance with the terms of the document given to Mr Beard in November 2005?

The Authorised Representative Agreement (a copy of which appears as part of Annexure “C” to Mr Lofts’ affidavit) provided that AIIB, as AFS Licensee, authorised the Authorised Representative to provide financial services on its behalf . Remuneration was to be paid in accordance with clause 6.1 at a fixed monthly fee of $9,200 (including GST) less mobile phone and parking paid by AIIB. Remuneration was to be reviewed on an annual basis. Item 7 provided “the review will look at the percentage of the increase in profit in the Licensee’s business as a result of the client portfolio managed by the Authorised Representative” (my emphasis). Mr Beard concedes that the monthly fee paid by AIIB was based on the total of brokerage and commissions received by him.

AIIB relies upon clauses 14.2 and clause 1.1 of the Authorised Representative Agreement which provided that AIIB is the owner of its confidential information, being information concerning clients, supplies, employees, affairs, transactions, trade secrets, operations, processes or dealings of the Licensee which is not in the public domain and which is or may be received by the Authorised Representative in connection with this Agreement . (Pausing there, it is difficult to see how, on this definition of confidential information, it would extend to any information held by Mr Beard or Hamtuan prior to commencement of the agreement.)

Clause 19.1 provided: On termination of this Agreement (for any reason): (a) Upon payment by the Authorised Representative [Hamtuan] of any amount owed to the Licensee [AIIB] pursuant to this Agreement, the Licensee will own the right to service the Clients and the Portfolio and will be entitled to all commission and/or fees payable in respect of all insurances arranged or renewed by the Licensee after termination of this Agreement; … (e) The Authorised Representative will not directly or indirectly for the period after termination set out in Schedule A, Item 9 - Restraint Period, in any capacity whatsoever, solicit insurance business from or provide insurance services to any person who was a Client serviced by the Authorised Representative at any time during the 2 year period immediately prior to termination. If this restriction is " found by a court to be unenforceable, but would be enforceable if modified, the restriction applies with the modification required to make it valid and enforceable. The Authorised Representative acknowledges that the restriction is reasonably necessary for the protection of the Licensee and its goodwill and that the Authorised Representative will hae [sic] received adequate consideration for the restraint obligations imposed on it by this clause.

Clause 19.3 provided that “this clause 19 will survive the expiry or termination of this Agreement”.

The Authorised Representative Agreement made provision for Mr Beard to guarantee Hamtuan’s obligations thereunder.

Appearing at the end of Annexure C is a document, signed by Mr Lofts, on AIIB letterhead entitled “Authorised Representative Payment”, showing a base salary of $85,000 and other items totalling a package of $110,300.00, “say $9,200.00 per month retainer plus GST” and concluding “Needless to say this is a retainer which is to be on the basis of 50% of commission written to $130,000 and then 30% above this amount to be adjusted on a three year average subject to variation on the basis of exception [sic] circumstances”. As I understand it, the parties accept that this was not a document forming part of the Authorised Representative Agreement when it was provided to Mr Beard. (This is the only document which Mr Beard accepts records any “agreement” between him and AIIB.)

The evidence Mr Beard gave to the effect that the letter of termination was intended just to notify that revocation of his appointment should be notified to ASIC is difficult to accept. The language of the notice is that of termination of an “agreement” rather than revocation of an appointment. Even allowing for some imprecision of language or thought (a tendency to which was evident throughout Mr Beard’s oral evidence), the fact that Mr Beard thought it necessary formally to terminate an “agreement”, as such, seems to me to amount to an implied admission that there was an agreement of some kind on foot. The fact that he identified this agreement as the “unsigned” agreement from 2005 can only be a reference to the document provided to him on 28 November 2005 (not the subsequent one page remuneration schedule). Although the one page document appearing at the end of Annexure “C” of Mr Lofts’ affidavit (which on its face does not purport to amount to a stand alone “agreement”) is also an “unsigned” document, it is not one to which the notice of termination, properly construed, could in my view be taken to have referred. That one page document is not the document which Mr Beard said he had provided to his accountant (and which he was adamant in the witness box he would not sign because Mr Lofts had not signed his shareholders’ agreement) nor could it have been since it came into existence only in 2007.

Mr Beard’s failure to raise any query when AIIB notified him of amendments to the remuneration provisions of this agreement suggests that he was content to allow AIIB to operate on the basis of such an agreement. His evidence that the so-called “unsigned agreement” was not more than the one page outline of remuneration is not credible, in circumstances where Mr Beard was not unfamiliar with the formality of business agreements (having, at the very least, already signed the Offer of Employment) and where (even if, as he says, Mr Beard paid no attention to the document and sent it straight to his accountant, where it stayed for over two years) Mr Beard must have appreciated that the agreement AIIB was putting forward was more than a mere remuneration schedule. It is hardly as if Mr Beard could be said to be unaware of the kind of confidentiality obligations AIIB regarded as applicable in a business relationship with its insurance brokers since (at least in relevant respects) the confidentiality/non-solicitation obligations contained in the Authorised Representative Agreement mirrored Mr Beard’s employment contract.

It is submitted for Mr Beard/Hamtuan that implicit in the fact that Mr Lofts was aware that the Authorised Representative Agreement had been given to Mr Beard’s accountant and lawyer to check is an awareness of the non-acceptance by Mr Beard/Hamtuan of the proposed agreement pending receipt of such advice. I think it more likely that AIIB’s position would have been to assume having heard nothing further from Mr Beard and Mr Beard/Hamtuan having continued to accept benefits under the proposed terms of agreement, that his silence meant he assented to the document. However, such an assumption would not be enough for a binding contract to have arisen on the terms of the Authorised Representative Agreement. AIIB must establish that Hamtuan (and Mr Beard) had in some way manifested or communicated an acceptance of the agreement.

In this regard notice of termination dated 29 February 2008 which was issued by Mr Beard/Hamtuan seems to me to be significant. In my view it amounted to a clear admission or acknowledgement by Mr Beard/Hamtuan as to the state of the parties’ rights at that time (as contemplated in Sasson v Fahevu [1999] NSWCA 400) and that in their view there was then in force an (unsigned) Authorised Representative Agreement (which, logically, can only have been a reference to the document which had been provided to Mr Beard on 28 November 2005, to the terms of which neither Mr Beard nor Hamtuan at any time raised any objection).

Is that a sufficient basis on which to conclude that a contract had come into existence on the terms of the Authorised Representative Agreement at some point after it was handed to Mr Beard in November 2005? In Sasson , the differentiation drawn by Fahevu between two particular transactions (liability for one being “vociferously denied”, liability for the other being “unambiguously conceded”) amounted to an admission of the contractual rights and obligations in respect of which liability had been claimed.

In Pitcher v Langford (1991) 23 NSWLR 142 at 160, Handley JA considered the question whether admissions of law or of mixed facts and law were admissible: In my opinion these admissions were admissible and entitled to considerable weight. In Grey v Australian Motorists & General Insurance Co Pty Ltd [1976] 1 NSWLR 669 at 684, Mahoney JA said: “An admission may provide material from which a court may find a question of law, a question of fact, or a question being a conclusion from a mixture of fact and law.” See, also, Jones v Sutherland Shire Council [1979] 2 NSWLR 206 at 231. The authorities his Honour referred to as establishing that admissions involving conclusions of mixed fact and law are receivable, and in a proper case may be given considerable weight, included Allen v Roughley (1955) 94 CLR 98 at 142 per Kitto J.

In Film Bars Pty Limited v Pacific Film Laboratories Pty Limited (1979) 1 BPR 9251, McLelland J held that reference could legitimately be made to subsequent communications between the parties when determining whether a contract has been made. The probative value of subsequent communications was to be found, his Honour said, in the light they threw on the proper interpretation of the earlier communications alleged to constitute the contract. There, his Honour was considering what constituted the making of an informal contract and said, relevantly for present purposes: … a contract is made by the mutual communication between the parties of their respective assents to being bound by identifiable terms otherwise capable of having contractual force, the mutual communication typically taking the form of offer and acceptance. "It is not the subjective thing known as meeting of the minds, but the objective thing, manifestation of mutual assent which is essential to the, making of a contract." (Williston on Contracts, 3rd ed, vol 1 para 21.) Frequently one finds the relevant issue formulated in terms of the "intention of the parties". It is necessary to understand the sense in which the expression "intention" is thus used. In my opinion the following words of Lord Diplock in Gissing v Gissing [1971] AC 886 at 906, albeit in another context, are apt here: … the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party's words or conduct, notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party.

Here, the letter of termination does not shed light on any particular earlier communication as such but clearly indicates an acceptance by Mr Beard that there was a contract in existence and that it was on the terms of the unsigned Authorised Representative Agreement. As McLelland J said: More commonly, perhaps, such subsequent communications may be legitimately used against a party as an admission by conduct of the existence or non-existence, as the case may be, of a subsisting contract. … Admissions by a party of the existence or non-existence of a contract, or of a fact relevant to that issue, will usually vary inversely with the strength of the available direct evidence of the matters in question. · What is the available direct evidence in this case?

Mr Beard signed an offer of employment obtaining confidentiality/non-solicitation clauses. It was agreed informally that this would be “superseded” or replaced by an agreement appointing Mr Beard’s company as an authorised representative. A new written agreement was produced naming Hamtuan and AIIB as parties, with Mr Beard as guarantor. Neither Mr Lofts nor Mr Beard seemed to suggest that the replacement agreement imposed new or different obligations (although Mr Beard at one point in the witness box referred to an authorised representative having new or different responsibilities).

Hamtuan was registered with ASIC as the authorised representative of AIIB and Hamtuan/Mr Beard acted and accepted remuneration as such (including increases in remuneration expressly referable to the review provisions of the Authorised Representative Agreement).

Mr Beard’s letter of 29 February 2008 formally terminated that “unsigned” agreement, something completely unnecessary if there was no agreement in existence. This amounts to an admission or acknowledgement by Mr Beard (and, through him, Hamtuan) that there was then in existence an agreement on the terms of the Authorised Representative Agreement, supporting the conclusion that, by their conduct from late November 2005 Mr Beard/Hamtuan had objectively manifested their agreement to the appointment of Hamtuan on the terms of the Authorised Representative Agreement even though Mr Beard (seemingly in a fit of pique) had not signed it.

For these reasons, I consider that Hamtuan was bound by the confidentiality (and non-solicitation) obligations under the Authorised Representative Agreement. However, I have difficulty identifying any conduct by Mr Beard which could be said to have amounted to an acceptance by him of separate obligations as guarantor of Hamtuan’s obligations under the Authorised Representative Agreement and nothing in the termination letter evidences an acknowledgement of obligations of that kind. Therefore, I do not find that Mr Beard owed any separate contractual obligations to AIIB as guarantor even though this was contemplated under the Authorised Representative Agreement. · Estoppel

I interpose to note that, on the evidence before me, I would have been inclined to think that, by their earlier conduct (and, in particular, by accepting increases in remuneration expressly said to be referrable to the Authorised Representative Agreement without suggesting to AIIB that they were not bound thereby), Mr Beard/Hamtuan had represented to AIIB that they accepted that agreement as binding and/or had knowingly allowed AIIB to continue under the mistaken assumption that there was a binding Authorised Representative Agreement in force between the parties, so as to provide the foundation for an argument that Mr Beard/Hamtuan should be estopped now from denying that they were bound by the terms of the (unsigned) Authorised Representative Agreement.

Mr Beard was seemingly content to allow AIIB to proceed on the assumption that there was an Authorised Representative Agreement in place. He sought to justify his failure to sign it on the basis that he was not going to sign the Authorised Representative Agreement without an agreement having been reached on a proposed shareholder’s agreement (though there is no evidence that he in fact said anything to this effect to Mr Lofts). This was expressed in rather petulant fashion in the witness box: I specifically wouldn’t sign it because they wouldn’t sign my shareholder agreements. I was in negotiations with them for several months and they wouldn’t sign the shareholder agreement. I was spending a lot of money purchasing a portfolio of shares. I wanted to protect my interests. They wouldn’t sign my agreement. I didn’t sign theirs.

Whether Mr Beard perceived that by so doing this might force Mr Lofts to sign the shareholders agreement he had prepared or was engaging in some form of “tit for tat” for Mr Lofts not having done so, the issue in relation to the Shareholders Agreement was quite separate, as I see it, from Mr Beard’s apparent acceptance of or acquiescence in the terms on which Hamtuan had been appointed by AIIB as its corporate authorised representative (and on the basis of which Hamtuan had accepted a monthly retainer (increased from time to time) since 2005).

For any finding based on estoppel to be made, it would however have been necessary for AIIB to show that it had acted to its detriment in reliance upon such a representation or mistaken assumption so as to render it unconscionable for Mr Beard/Hamtuan now to resile therefrom. As it seems to me unlikely that AIIB would have allowed Hamtuan to continue to operate as its authorised representative, and continued to pay a monthly retainer under that agreement, had AIIB understood there to be no agreement in place governing its terms, it might be expected that detrimental reliance could have been made out.

However, no claim based on estoppel was pleaded in relation to the Authorised Representative Agreement (as it clearly should have been if AIIB were to seek to invoke the doctrine of estoppel – Laws Holdings Pty Limited v Short (1972) 46 ALJR 563 at 571 per Gibbs J) and I make no finding in that regard. Issue (ii) Equitable obligation of confidence

This issue does not arise in relation to Hamtuan in light of my findings above. However, given that the contract comprised by the Offer of Employment came to an end in November 2005 and that Mr Beard was not a party to (and cannot in my view be said as guarantor to have adopted) the Authorised Representative Agreement, any obligation of confidence owed by Mr Beard can only be equitable (not contractual) in nature.

The knowledge of Mr Beard that AIIB regarded client information of the kind outlined in the employment agreement as confidential to it, and of AIIB’s expectation that the confidentiality of client information would be preserved even after the termination of their working relationship, which at the very least emerges from the Offer of Employment document which Mr Beard accepts he had read, leads me to conclude that any client information of that kind which was received by Mr Beard during his working relationship with AIIB was received in circumstances sufficient to import an equitable obligation of confidence. I see no basis for suggesting that any different confidentiality regime would have applied to authorised representatives (and the document handed to Mr Beard shows otherwise). (Had I not found that Hamtuan was bound by a contractual obligation of confidence, I would have found that it too was bound by an equitable obligation of confidence.)

In Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434 at 443, Gummow J enumerated what must be satisfied for an equitable obligation of confidence to arise: The plaintiff: (i) must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question, and must be able to show that (ii) the information has the necessary quality of confidentiality (and is not, for example, common or public knowledge); (iii) the information was received by the defendant in such circumstances as to import an obligation of confidence; and (iv) there is actual or threatened misuse of that information, without the consent of the plaintiff.

The information to which it is said the duty attached comprised AIIB’s customer lists and details; AIIB’s clients’ prospects lists; and AIIB’s client files. Broadly speaking, this was described in the hearing as comprised by client contact details, “prospects” sheets and insurance needs. Mr Lofts himself confined the confidential information to the contact details and insurance needs only (but that may be because the prospect lists were seen by him as falling within one or both of the other two classes of information) (T 36.26).

The information was, in the main, identified with sufficient particularity to put Mr Beard on notice of what it was alleged he had taken from AIIB and Mr Beard, in producing that material as required at the commencement of these proceedings, conceded as much.

(Where there was insufficient specificity was in the allegation that confidential information had been downloaded from Mr Beard’s computer files. On the evidence before me, other than the so-called prospects sheets or contact details and copies of the Paraquad/Gemaveld insurance policies, I am unable to determine what other, if indeed any, information was downloaded or deleted from the computer files. Even if the systematic deletion of electronic data is suspicious, as Mr Arcus not unreasonably thought it was, it appears there is no way of identifying that information with any particularity. Therefore, I make no findings in relation thereto.)

As to the necessary quality of confidence, while there is a distinction between client contact details (which may well be public knowledge) and client insurance needs (which are unlikely to be public knowledge), the compilation of contact details in a client contact or prospects list is something which has been recognised as capable of carrying with it the necessary quality of confidentiality (as confirmed in Robb v Green [1895] 2 QB 1 and Mid-City. ) In Robb v Green it was the compilation of the client information contained in the order book which it was said made the list so valuable. Similarly, in Halliday & Nicholas Insurance Brokers Pty Limited v Corsiatto [2001] NSWCA 188 at [16]-[17] , where the submission was made that client lists were not confidential as that information was publicly available, Handley JA noted that, “In business time is worth money” and considered that the fact that in that case the broker had gone to the trouble of surreptitiously obtaining the lists, established both their importance to the broker and their confidential nature. (Interestingly, in Halliday it appears there was evidence that lists of clients of insurance brokers or sub-brokers were a tradeable commodity, sold in the industry for 12-18 months’ brokerage income. There was no such evidence in this case.) Here it is not clear exactly how surreptitious Mr Beard was in the removal of the contact detail information. However, it does seem to have been done in a relevantly covert way. He had reference to client prospect sheets and he updated his own contacts lists with information held in AIIB’s records. He enlisted the (unknowing) aid of Ms Allston to identify particular clients within his area of interest or expertise and according to her evidence (which I accept) he took the information out of the company folder by folder prior to his departure. I consider that the necessary quality of confidentiality has been established.

As to the third of the elements outlined by Gummow J in Corrs Pavey Whiting & Byrne, the circumstances in which an obligation of confidence will be imported, in Coco v AN Clark (Engineers) Limited [1969] RFC 41 Megarry J suggested that the imposition of the obligation of confidence was to be objectively determined: It seems to me that if the circumstances are such that any reasonable man standing in the shoes of the recipient of the information would have realised that upon reasonable grounds the information was being given to him in confidence, then this should suffice to impose upon him the equitable obligation of confidence.

The defendants contended that information of the kind in question was not imparted to or received by Mr Beard/Hamtuan in circumstances that would import an obligation of confidence, because the information fell into one or more of the following categories: (a) it was information obtained by Mr Beard during the course of his employment with Driessen and thus was already held by Mr Beard when he commenced his employment with AIIB (this includes information in relation to clients such as Keogh, Walker, Construction Connection, DSM and Exact Fulfilment) (“the Driessen information”); (b) it was information about clients forming part of a client portfolio “purchased” from Mr Brindle (Paraquad, Streetbuild) (“existing AIIB client information”); or (iii) it was information obtained by Mr Beard personally, through his own initiative and efforts while Hamtuan was an authorised representative of AIIB. (Northpoint Constructions and Essential Air) (“new client information”).

I consider each category of information in turn. (a) the Driessen information

To the extent that Mr Beard had obtained particular client contact details or insurance needs information prior to joining AIIB, this cannot logically be said to have been information received by him in circumstances giving rise to any duty of confidentiality to AIIB (the position viz-a-viz Driessen is another matter).

However, to the extent that a client’s insurance needs, or information in relation thereto, may change from time to time, it seems to me that just because a client had followed Mr Beard to AIIB it does not mean that confidential information thereafter imparted to Mr Beard by that client would not be received by him in circumstances where at that time he had an obligation not only to the client to respect the client’s confidentiality but also to AIIB to keep it confidential. (The difficulty here is in knowing what information, in particular, Mr Beard had used in relation to former Driessen clients and hence whether any information so used was information acquired prior to or after the AIIB relationship commencing.)

There was an issue taken by the defendants as to Mr Lofts’ assertion, in cross-examination, that the confidential information in question was confidential to “the client” (Mr Lofts saying that in the context of his denial that the information in question was confidential to Driessen – T 38.42 – 38.50). In Mid-City, the fact that information was recognised to be confidential to the client did not preclude an obligation of confidentiality arising on the part of a doctor in the medical practice to the proprietors of the medical practice (who had a clear interest in conducting the practice in such a way that confidential information disclosed by patients remained confidential). There, Campbell J referred to United States v Grossman 843 F 2d 78 (2nd Cir 1988) at 86 where a law firm was held to have the right, as against an employee of the firm, to the confidentiality of information disclosed to members of the firm by a client: … the same factors which have led to the customer lists of any business being regarded as confidential, and persons working in that business being obliged, by an implied term in their contract of employment to recognise the confidentiality of those lists, apply here.

Therefore, the fact that the information may be confidential both in the hands of the client and, once imported to the broker, in the broker’s hands does not in my view assist Mr Beard/Hamtuan.

It is further said that AIIB cannot assert a right of confidentiality in respect of information acquired by Mr Beard from a previous employer (Driessen) and which AIIB did not treat as being confidential in the hands of that previous employer. This gave rise to the “clean hands” defence raised during submissions by Counsel for Chegwyn, Mr McLure, (though not pleaded by any of the defendants).

In effect, it is said that, Mr Beard having done the same thing with those particular clients on leaving AIIB as he did when he left Driessen, then if Beard/Hamtuan has misused AIIB’s confidential information in relation to those clients so he must also have done with Driessen. On that hypothesis it is said that AIIB must have improperly profited from the use of that information in similar circumstances.

However, there is no evidence as to what was in fact the contractual or other position as between Mr Beard and Driessen. Mr Lofts said that after Mr Beard joined AIIB he had a call from Mr Driessen. What was said in that conversation did not directly emerge. Mr Lofts said he then told Mr Beard not to use any confidential information of Driessen but that he should continue to take client calls (T 34/35). I can only assume that Driessen did not ultimately raise or pursue any complaint or assert any right to any information used by Mr Beard. Hence Driessen may have waived (or not regarded itself as having) any right in respect of the confidentiality of the information. That situation is consistent with Mr Beard being under no form of non-solicitation obligation to Driessen. Mr Beard says he accepted they were Driessen’s clients not his, but says he did not have a contract with Driessen: “If I left and they wanted to move, they had every right and under the terms of the Authorised Representative Agreement with AIIB [the very agreement which he seems adamantly to have denied] I would then own these clients. They were my clients” (T 134).

I have difficulty in seeing any “unclean hands” in AIIB seeking to restrain the use of the confidential information in question. (That said, on the evidence as I understand it, the only use made of the Driessen information seems to have been the issue of letters to Driessen clients soliciting their custom.) (b) the existing AIIB client information

Mr Beard’s position at the outset was that information in relation to clients of AIIB as at the time Mr Beard joined AIIB was information to which he was entitled, having purchased Mr Brindle’s client portfolio (indeed, he seemingly threatened AIIB with litigation if it sought to obstruct his use of that information).

I do not accept that what Mr Beard had in fact purchased was a client portfolio.

A copy of the Share Sale Agreement is Annexure B to Mr Brindle’s affidavit. The subject of the respective sales recorded in that agreement is clearly the respective parcels of shares in the issued capital of AIIB. There is nothing in that document to suggest that there is to be a sale to any of the purchasers of any part of a client portfolio.

Clause 5.2 in its terms provides that the Agreement “supplants and supersedes any previous written or oral negotiations or preliminary agreements between the parties”, so that even if the earlier discussions between Mr Brindle and Mr Beard had related to the acquisition of a client portfolio the failure to include this in the agreement would arguably preclude Mr Beard’s current claim.

The definitions section of the Agreement defined “client” as “Person(s) or company(ies) to whom the Authorised Representative provides financial services on behalf of the Licensee.” (my emphasis)

Clause 9 set out “servicing rights” and, in effect, provided that during the currency of the agreement (subject to a client notifying AIIB in writing that the client no longer wished to deal with the Authorised Representative) AIIB would not market or provide financial services directly to clients serviced by the authorised representative. If a client notification of the above kind was given then, in accordance with clause 9.2, if no reversal of instruction is received after 28 days have passed “no further commission or fees relating to the client will accrue to the Authorised Representative”.

The warranties are of a kind referable to the vendor’s capacity and title to shares and the company’s corporate status (Schedule 2). Clause 8 contains a restraint of trade provision precluding Mr Brindle, inter alia, from competing with AIIB’s business and from interfering with AIIB’s business, including in its terms a prohibition on Mr Brindle seeking “to attract the custom for a Restrained Business of any person who is at completion a customer of the Company”. The restraint clauses (and other clauses referring to the servicing of clients on behalf of AIIB) are inconsistent with the agreement being one for the sale of a client portfolio.

The evidence as to the calculation of the respective purchase prices does not in my view support Mr Beard’s assertion. Mr Brindle says he calculated the figure payable by Mr Beard by reference to a multiple of the value of the business. Mr Beard seems to have accepted it without any real negotiation or discussion as to how it was comprised. He apparently thought it was a fair or reasonable price.

As to the value of the company, Mr Lofts said in his experience a multiple based on brokerage turnover was general used. He suggested the multiple was in the vicinity of 1.5 to 1.7. On that basis, the value of a 9% shareholding in a company with a turnover of $1.6 million would be about $216,000. It was submitted that this is an artificial way in which to justify the purchase price, but it seemed to me not illogical that Mr Brindle would seek to value his shares in the business on that basis (T 15/16).

Mr Croft’s evidence (albeit tendered for a different purpose) supports the view that the value of the shares as a proportion of the value of the business could reasonably have been calculated in that way. By contrast, the purchase price is by no means readily calculated as a proportion of the revenue anticipated to be derived from the clients which were being allocated to Mr Beard (whether, on Mr Brindle’s contention, to manage, or, on Mr Beard’s contention, to purchase).

Counsel appearing for Mr Beard/Hamtuan during the first hearing dates (Mr Katsinas) submitted that, from a commercial point of view, it seemed somewhat imprudent for Mr Beard to pay $216,000 in order to obtain commission roughly equivalent to what he would have been paid anyway under his terms of employment. It was submitted that it made no sense for Mr Beard to pay $216,000 for the shares if he were not thereby obtaining the client portfolio. That submission seems to be put on the basis that there was no great value in terms of the return on declared dividends. However, if so, then the evidence that Mr Beard sought undertakings from Mr Lofts as to the payment of dividends makes little sense (and the level of his apparent concern at not being made a director seems somewhat disproportionate). As Mr Lofts said, Mr Beard could have quite easily purchased the shares and not been an employee (T 17).

The problem I have with Mr Katsinas’ submission is that it ignores whatever value the shares themselves may have had by way of a share in the value of the overall business. The fact that Mr Beard seems ultimately to have had difficulty in selling those shares (seemingly the gist of the principal complaint conveyed in his letter of termination) is not to the point. Nor is the prudence or otherwise of his entry into the transaction. Had he obtained advice as to the value of the shares he was acquiring at the time of acquisition he might well have been advised of the position of minority shareholders in a company such as this and of any discount that would ordinarily be placed on those shares as a result.

The fact that this particular client list was drawn up (T 69.35) the day Mr McGrath and Mr Beard commenced with the company does not seem to me to be conclusive one way or the other – it is consistent with there being an allocation of clients for management purposes rather than being a list of clients “bought” by each of them. Indeed, given that there were no clients allocated to Mr Bourke on that list, but that he was at the same time also clearly acquiring shares, it seems to me more likely that this handwritten list was (as Mr Brindle said) a client allocation list (with the commission/revenue figures provided to demonstrate the revenue which the company (and through it Mr Beard) could expect to receive if the clients continued to be serviced at AIIB).

Mr McLure places weight on the fact that Mr Brindle accepted in the witness box that the commission/revenue figures were irrelevant if Mr Beard was only buying shares based on AIIB’s overall revenue (T 70.1), Mr McLure submitted that the only inference to be drawn from that is that the revenue figures were provided so that Mr Beard could assess the value of the “asset” being offered to him.

However, the revenue figures bear no objective relevance to the price paid for the respective shares. ($216,000 for 900 compared to $360,000 for 1,500; whereas the fees totalled $114,840 on Mr Beard’s side of the ledger and $119,279 for Mr McGrath.) Mr Beard’s allocation of clients, according to Mr Brindle’s list, accounted for 49% of his client fees and McGrath’s 51%. If the purchase price paid for the shares had been referable to the level of client fees, Mr Beard would have surely paid around the same price as Mr McGrath, not something proportionally less. Similarly, on a comparison of fees from those clients to the firm, overall the fees on the list represented 1/15th total revenue.

It was suggested to Mr Brindle in cross-examination that, as Mr Beard did not obtain a directorship, the sweetener was the “clients”, to which Mr Brindle acceded, saying “yes”, but he went on to make it clear that he did not believe he owned the clients in question (T 58). I therefore understood Mr Brindle to be suggesting that by way of a “sweetener” or to compensate for the lack of a directorship, what he had sought to do was allocate to Mr Beard clients of value in terms of the likely generation of revenue by way of commission for Mr Beard (not that he was accepting the proposition that he had “sold” any clients to Mr Beard). In that sense I do not accept that if the price for the acquisition of shares was calculated by reference to the gross revenue of AIIB, the particular commission and brokerage fees from clients as disclosed to Mr Beard would be irrelevant.

It is said that the parties conducted themselves in a manner consistent with the acquisition by Mr Beard of a “book” of clients, this being the reason for the relationship to proceed not on the basis of employment but of authorised representation – ie so that the “client book” could in due course be moved to another insurance broker if necessary. However, the Authorised Representative Agreement does not suggest this is the case. Moreover, the evidence as to why the parties moved from employment relationship to authorised representative agreement is by no means clear. Mr Beard says he was “presented” with this (almost as a “ fait accompli ”) when he arrived at work (T 137-140). For the reasons outlined earlier I doubt this evidence since that does not explain Mr Beard’s apparent decision some six weeks or so earlier to incorporate Hamtuan (that being the entity which ultimately became the nominated authorised representative).

Finally, I note that I regarded Mr Brindle as a more reliable witness than Mr Beard. Mr Brindle was matter of fact in his manner in the witness box; he had no apparent reason to present a slanted view of events (though conceding he considered Mr Beard’s conduct had been wrong in his eyes); and his explanation of events was logical and consistent which the documentation. Mr Beard’s explanation of events does not accord with the documentation. If what he thought he was purchasing from Mr Brindle was a client portfolio, it defies belief that there would be no reference at all to this in the Share Sale Agreement, no covenants in Mr Beard’s favour protecting him from competition from Mr Brindle, and no warranties (or exclusions) referable to the purchase of such a portfolio. Nor had Mr Beard sought to exclude, from the arrangements agreed with AIIB at the commencement of his business relationship, the operation of any confidentiality or non-solicitation obligations which would or might otherwise apply to the client “portfolio” he says he was acquiring.

I am not persuaded that what Mr Beard had “acquired” (whatever he may have thought he was acquiring) was a portfolio of existing AIIB clients. I consider that the existing AIIB client information was information imparted to Mr Beard in circumstances which would have imported an obligation of confidence and was information which he was not free to take with him (contractually or otherwise) when he left AIIB. (c) new client information

As to information in relation to clients acquired during Mr Beard/Hamtuan’s relationship with AIIB, the fact that Mr Beard developed or attracted clients due to his own efforts, whether with (as asserted by Mr Lofts) or without AIIB’s marketing programme assistance, does not logically mean that the information so acquired was not imparted in circumstances where he had a duty to AIIB (on whose behalf, as licensee, the said clients were being attracted to the brokerage firm) to keep it confidential. I have noted above the terms of the Authorised Representative Agreement which describe the authorised representative’s role as being on behalf of the Licensee. It would render largely meaningless any confidentiality obligation contained in the employment/authorised representative agreements if the employee/authorised representative could simply say, “well I was responsible for this new client coming to the firm, so I am later free to make whatever use I choose of its information.” The protestations made by Mr Beard as to his entitlements to take clients with him (based on his assertion that he had acquired a client portfolio) ring somewhat hollow in the context of his parallel claim to be entitled to take with him AIIB clients which never fell within the so-called “client portfolio” (such as those he acquired while at AIIB). Conclusion

Information falling within (b) and (c) above is in my view information falling within the contractual (or equitable) obligation of confidence owed by Hamtuan (or Mr Beard) respectively to AIIB, as would “new” insurance needs information imparted to Mr Beard/Hamtuan from Driessen clients after they followed him to AIIB (though not information already held by Mr Beard in respect of these clients in his earlier capacity as an employee of Driessen).

(I accept that it would have been open to Hamtuan (but for the operation of the non-solicitation covenant in the Authorised Representative Agreement), and to Mr Beard, after the cessation of their business relationship with AIIB, to make contact with clients they had formerly serviced at AIIB (provided that such contact did not involve the use of AIIB’s confidential information such as would be the case if Mr Beard had simply had that information in his memory at the time he left AIIB).) Issue (iii) Use/misuse of confidential information

Did Hamtuan/Mr Beard use any confidential information in breach of their respective contractual/equitable obligations?

Mr Beard admits to having taken some client information (though asserting it was his right to do so), some of which (after updating his contacts book) he says he simply threw away as it was of no use.

Had the relevant contact details or insurance information been something in Mr Beard’s memory (such as his memory of when the Paraquad policies fell due for renewal each year) then, apart from the breach of the non-solicitation covenant, it would have been open (leaving aside Hamtuan’s non-solicitation covenant) for Mr Beard/Hamtuan to use that information after leaving AIIB. As Campbell J said in Mid-City (at 148): An employee [and I see no reason why, in principle, an authorised representative would be in any different position] is entitled, once his employment is over, and in the absence of an express and valid contractual restriction on his doing so, to canvass former customers of his employer, to the extent that he has the names and addresses of those customers in his memory as a result of the ordinary carrying out of his duties as an employee: Ormonoid Roofing and Asphalts Limited v Bitumenoids Limited (1930) 31 SR (NSW) 347 at 354–356; 48 WN (NSW) 66 at 69 (Harvey CJ in Eq); Faccenda Chicken Limited v Fowler [1987] 1 Ch 117 at 136; Riteway Express Pty Limited v Clayton (1987) 10 NSWLR 238 at 240 (McLelland J); Weldon & Co Services Pty Limited v Harbinson [2000] NSWSC 272 at [68]–[72] (Bryson J). and at (158): Both the common law and equity take into account, in formulating the extent of obligations they impose in a situation like the present, the public interest that there is in people who have acquired skills and knowledge while working in one situation, such that those skills and that knowledge is part of the mental equipment they carry around with them, being able to use those skills and that knowledge when they take up a later situation.

However, it seems likely that the pro forma letters sent to various clients made use of the contact information contained in the client lists; they being created almost immediately upon Mr Beard’s departure and containing details which it would surely not have been necessary for Mr Beard to copy if he already had them at the top of his head. I find that the issue of those letters constituted a breach both of the confidentiality obligations (owed in contract by Hamtuan and in equity by Mr Beard) and the non-solicitation obligation of Hamtuan under the Authorised Representative Agreement.

Annexed to Mr Lofts’ affidavit sworn 11 September 2008 is a list showing the clients managed by Mr Beard on behalf of AIIB prior to 29 February 2008. There seems no dispute about this. Mr Lofts identifies those clients which he believed had appointed Mr Beard/Hamtuan, and/or Chegwyn, as their insurance brokers between 7 March 2008 and (in the case of Keogh) 30 May 2008 as: Action Construction Services (NSW) Pty Limited; Gemaveld Pty Limited and subsidiaries; Paraquad; Northpoint Commercial Projects Pty Limited or Northpoint Constructions; Street Consulting Pty Limited or Streetbuild; DSM Food Specialities Australia Pty Limited; Construction Connection Pty Limited; Citadel Property Group and Shellbridge Pty Limited; Exact Fulfilment Services Pty Limited, Essential Air Conditioning, Ms Keogh; Mr Rooney and Mr and Mrs Kekatos.

The commission and fees referable to those clients for the previous 12 month period, as listed in paragraph 11 of Mr Lofts’ affidavit, totalled approximately $95,000.

Mr Beard (in his first affidavit of 25 March 2008, paragraph 28) accepted that 19 clients had followed him to Chegwyn. In his subsequent affidavits and in the witness box, Mr Beard said that only six of those clients had in fact appointed him as their broker. Only two of those (Paraquad and Northpoint Commercial) have since appointed Honan (with whom Mr Beard is now associated) as brokers. Others (such as Citadel Property Group) had apparently indicated they would do so but then withdrew the letter of appointment and have since appointed other brokers. (Rather than sending a pro forma letter when he left Chegwyn, Mr Beard says he presented two or three clients with a standard letter of authority for them to sign in order if they wished to appoint Honan (T 101).)

In Southern Real Estate v Dellow (2003) 87 SASR 1, Debelle J, with whom Nyland and Lander JJ agreed, considered a not dissimilar issue in relation to what was held to be the misuse by a director of a rent roll of a real estate business. There, it was said that the director had prepared customer lists with the intention of using them once she had resigned and was thereby placing herself in the most advantageous position to erode the goodwill of the company. It was recognised that, after her resignation (and after the expiry of any fiduciary duties), Ms Dellow was at liberty to make a list of clients from memory and actively to solicit their custom. However, Ms Dellow had, in effect, pre-empted that course.

Here, it would seem that Mr Beard behaved in similar fashion. His statements to Mr McGrath and Ms Allston indicate that Mr Beard had been preparing to leave AIIB for some time. I can only conclude that he was seeking to equip himself with the information with which to compete with AIIB. It was put that, at most, Mr Beard’s conduct accelerated the transfer of clients to him (and Chegwyn) in advance of the time in which he could lawfully have dealt with those clients and competed with AIIB. That, however, was the situation in Dellow . The acceleration (or advantage) thereby wrongly obtained was compensable by way of an award of damages for the loss of value to the business.

As to what was done after undertakings were proffered to the court, Mr Beard accepts that after 17 March 2008, he continued to provide insurance services for Paraquad. In particular, while with Chegwyn Mr Beard was involved in the renewal of Paraquad’s Marine Transit insurance policy on 3 April 2008 (T 105). However, Mr Beard says he did so without reference to the existing policy; that he had the date of renewal in his head (since all Paraquad policies fell due on 31 March, including Paraquad special risks insurance policy and directors and officers policies) and that by then he had no copies of the policy documents (T 107); that the insurance companies would not talk to him about old insurance; and that he had to renegotiate with a new insurance company. (Any renewals between May and September 2008 would, Mr Beard says, have been put through Chegwyn as Mr Beard had no insurance broking licence.)

I am not satisfied that I should make any findings as to the asserted breach of the undertakings proffered by Mr Beard/Hamtuan to the court (by reason of the renewal of the Paraquad policies or otherwise) in that what those undertakings precluded (relevantly) was the entry into of contracts with the identified former AIIB clients (not necessarily the entry of contracts on behalf of former AIIB clients). It seemed to be conceded, in discussion with Counsel, that there was potentially some ambiguity in the operation of the undertakings in light of what in fact happened and there was no allegation pleaded of any such breach.

The only actual misuse of confidential information which has been established, in my view, is the use made of client contact details in Mr Beard/Hamtuan soliciting AIIB clients to leave AIIB and to appoint Mr Beard/Hamtuan as their broker at Chegwyn. Issue (iv) Relief · Against Mr Beard/Hamtuan

AIIB seeks, as against Mr Beard/Hamtuan, an enquiry as to damages or alternatively an account of profits.

The losses said to have been suffered as a result of the alleged breaches of the duty of confidence are: (i) loss of commission and fees from clients who have ceased to retain AIIB as a result of the conduct - $95,130.79 (Mr Lofts’ affidavit 11 September 2008 para 11); (ii) loss in the value of AIIB’s business as a result of the loss of clients and commissions, assessed by Mr Croft at between $142,696 - $166,479; and (iii) fees and commissions not accounted for by Mr Beard - $9,334 (affidavit of Mr Lofts – 11 September 2009 paras 15-25).

In addition, AIIB maintains that there is a significant risk that Mr Beard and Hamtuan will continue to use AIIB’s confidential information to solicit AIIB’s clients and hence says a perpetual injunction ought to be granted against them. It is said that on or about 8 August 2008, in anticipation of becoming an authorised representative of Honan Insurance Group Pty Limited, Mr Beard again solicited former clients of AIIB (Plaintiff’s tender Vol 2, pp 619-624) and further that, after the undertakings were given on 17 March 2008, Mr Beard had provided insurance services and entered into insurance contracts in breach of the undertaking given on 17 March 2008 (Plaintiff’s tender Vol 2, pp 530, 531, 559, 519D).

It terms of the relief sought, a distinction was not clearly drawn between the relief sought for the alleged breach of the contractual obligations under the Authorised Representative Agreement and the relief alternatively sought for breach of an equitable obligation of confidence. The conceptual difficulties that may arise in circumstances where there are potential claims both in contract and for breach of an equitable obligation of confidence, were considered by Campbell J in Mid-City (at 625-626 [270]-271]). There, his Honour, raising the question whether an account of profits was available, as a remedy in equity’s auxiliary jurisdiction, for a breach of contract, said: There are difficulties of principle concerning whether an account of profits is available as a remedy, in equity’s auxiliary jurisdiction, concerning a breach of contract: Gleeson and Watson, “Account of profits, contracts and equity” (2005) 79 Australian Law Journal 676. I have expressed the view that even if an account of profits is sometimes available in circumstances where there has been a breach of contract, something more than a mere breach of contract is needed to demonstrate the appropriateness of awarding the equitable remedy: Town & Country Property Management Services Pty Limited v Kaltoum [2002] NSWSC 166 at [83]. An argument might be open that, if the relationship between contracting parties is such that if there had been no term in the contract imposing an obligation of confidence, equity would have imposed an obligation in its exclusive jurisdiction which was no less onerous than the parties by their contract have agreed to, that is a sufficient justification for the award of an account of profits in relation to a breach of the contractual obligation of confidence. It is clear law that if an equitable obligation imposed in the exclusive jurisdiction is breached, the remedies available include whichever the plaintiff elects of equitable compensation, and an account of profits. That equity allows that choice of remedy concerning a breach of an obligation of confidence in its exclusive jurisdiction might be argued to be a reason why it would regard the common law remedy of damages for breach of a contractual obligation of confidence as inadequate in a situation where it would have imposed an obligation of confidence if the parties had not agreed on such an obligation.

On its claim for breach of the contractual obligations contained in the Authorised Representative Agreement, the remedy would be an order against Hamtuan for damages for breach of contract assessed by reference to what was necessary to put AIIB in the position in which it would have been had the breach(es) not been committed.

In those circumstances the relevant loss would have been loss of the profits AIIB would have earned on commissions likely to have been received for renewal of policies had the clients not left when they did and any loss suffered to the goodwill of the business.

In Gurr v Robinson (unreported, 10 February 1986) the Court of Appeal considered a claim for damages for breach of a restrictive covenant in a contract for the sale of a business between the parties. Kirby P noted: As was pointed out during argument, the reason why there are relatively few reported cases on the principles to be applied to the calculation of damages in cases of an alleged breach of a restrictive covenant may be found, in this State at least, in the fact that a claimant, asserting loss by reason of a breach of restrictive covenant, will normally seek relief in Equity by way of an injunction. This procedural explanation rather than any inherent or special complexity in the calculation of damages probably explains the paucity of legal authority on the point. Furthermore, a reference to authority shows that there are cases which indicate the approach that should be taken to calculate general damages in such cases. Reference might be made to the judgment of Sir Wilfred Greene, MR in Draper v Trist & Ors [1939] 3 All ER 513, where his Lordship suggested that the approach to be taken to the calculation of general damages by the court was similar to that which a jury would be entitled to take: "... to use ordinary business knowledge and common sense, and to consider that one cannot have deceptive trading of a considerable volume without inflicting, at any rate, some measure of damage on the goodwill. How long that will last, what its extent will be, is a thing which no evidence, except in the most exceptional case, could satisfactorily define, and the matter is reduced, as many of these matters are reduced, to the formation of a rough estimate in a way in which a jury could properly form one" (ibid, 524). These remarks were applied in Australia by the Full Court of the Supreme Court of South Australia in Winkie Meat Works Limited v Ballard [1960] SASR 312, 338 (Ross, J). In that case, which concerned the assessment of damages for breach of a covenant in restraint of trade, his Honour cited with approval what was said in Halsbury's Laws of England, 3rd ed, vol 11, pp 226-7: "The fact that damages are difficult to estimate and cannot be assessed with certainty and precision does not relieve the wrongdoer of the necessity for paying damages for his breach of duty, and is no ground for awarding only nominal damages."

The evidence (albeit mainly from Mr Lofts) was that there is ordinarily a high degree of stability in terms of client base in the insurance industry for clients of the kind in question. (Mr Lofts says that the insurance brokerage industry is “surprisingly more stable than [one] would imagine”; his experience being that AIIB maintains 90-95% of its client base (T 16).) Mr Beard seemed to concede this when he explained (albeit in a different context) that what had been important to him when assessing the client list provided by Mr Brindle was not only the fees attributable to clients but the quality of the clients themselves; emphasis being placed by him on the fact that these were longstanding clients. That said, various of the clients serviced by Mr Beard seem to have shown considerable loyalty to him (some moving from Driessen to AIIB and then to Chegwyn; Paraquad moving from AIIB to Chegwyn and since then to Honan Insurance Brokers with whom Mr Beard’s new company, AIR Insurance, is now associated).

It seems to me that, balancing those factors, the discount factor on any loss of value to the business calculation must be a not insubstantial one. However, that may be a matter for submission, or further evidence, on an enquiry by an associate justice. In circumstances where Mr Crofts’ report was served late, and the defendants did not address this issue in evidence or submissions, I do not consider it appropriate to make any finding on this issue at this stage.

The significance of my finding that Hamtuan owed a contractual obligation of confidence (and was bound by the non-solicitation covenant) under the Authorised Representative Agreement is that it is left to its rights in contract. The need to invoke equity’s exclusive jurisdiction in relation to breaches of confidence does not arise in Hamtuan’s case. In Meagher Gummow & Lehane , the learned authors refer to Vokes v Heather (1945) 62 RPC 135 at 142; Deta Nominees Pty Limited v Viscount Plastic Products Pty Limited [1979] VR 167 at 191 and Faccenda Chicken Limited v Fowler [1987] Ch 117 at 135-8, in exhorting the courts to resist in these circumstances the introduction of equitable concepts [para 41-020].

However, AIIB’s claim against Mr Beard is made out only on the equitable obligation of confidence, a claim lying exclusively in the equitable jurisdiction of the court.

In Halliday & Nicholas Insurance Brokers Pty Limited v Corsiatto , the court considered a not dissimilar situation. There, an employee of the appellant insurance brokers resigned to act as sub-broker for the second respondent insurance brokers. He had prepared customer lists containing confidential information in breach of his fiduciary duty to the appellant and he used those lists to canvass his former clients. Many of those former clients nominated the second respondent as their broker and the respondents then obtained details of their current insurance arrangements and substantial brokerage/commission was earned. It was not established that second insurance brokerage firm knew that the lists had been obtained by breach of fiduciary duty. The relief granted at first instance was an account of profits for six months or, in the alternative, equitable compensation.

On appeal, Handley JA referred to Warman International Limited v Dwyer (1995) 182 CLR 574 at 588-9 where the court said “What is necessary however is to determine as accurately as possible the true measure of the profit or benefit obtained by the fiduciary in breach of his duty … It is necessary to keep steadily in mind the cardinal principle of equity that the remedy must be fashioned to fit the nature of the case and the particular facts”.

Handley JA noted, that an account of profits against a fiduciary is based on the receipts of the defendant, not the loss of the plaintiff and that, as a general rule, a court will not apportion profits in the absence of an antecedent arrangement for profit-sharing but will make allowance for skill, expertise and other expenses.

In Mid-City , Campbell J said (at 626 [273]): The onus is on any plaintiff who seeks an inquiry as to profits to persuade the Court that it is appropriate to make such an order. Whenever an account of profits is ordered in relation to a breach of an equitable obligation, where that breach has resulted in the person in breach receiving money in consequence of both the breach of the obligation, and his or her own expenditure of time effort and skill, an allowance is ordinarily made for the value of that time, effort and skill: Green v Folgham (1824) 1 Sim & St 398 at 406; 57 ER 159 at 162; Boardman v Phipps [1967] 2 AC 46 at 104, 112; Warman International Limited v Dwyer (1995) 182 CLR 544 at 562.

What would be the true measure of the profits obtained by Mr Beard by reason of the breach of any equitable obligations of confidence in this case? Only a small number of clients followed Mr Beard to Chegwyn and an even smaller number seem to have renewed their insurance policies through Chegwyn. Of those, a limited number again seem to have written further insurance business through Honan, the next insurance brokerage firm with whom Mr Beard was engaged.

It seems to me that what would be appropriate in these circumstances would be (if AIIB so elects) for Mr Beard to account for the profits (if any) made by him (as opposed to profits earned by Hamtuan) by reason of the breaches.

As to any deduction by way of allowance for skill, expertise and other expenses, had Mr Beard/Hamtuan remained with AIIB then remuneration would have been paid to Hamtuan under the Authorised Representative Agreement on the basis of the commissions earned. In Halliday , Handley JA considered, that when such an account was taken, prima facie the appropriate allowance would be for the employee’s basic remuneration before he left, without any allowances or share of profits. Incidental or overhead expenses of a minor nature were to be ignored, his Honour noting that “what will be required on the inquiry … will not be mathematical exactness but only a reasonable approximation”. The only deduction warranted in my view would have been the monthly retainer payable to Mr Beard/Hamtuan for the period in which the commissions were earned.

As to the alternative claim for equitable compensation, the object of such an order is to restore persons who have suffered a loss due to breach of fiduciary obligations to the position in which they would have been had there been no breach of those obligations. It was submitted that an order for equitable compensation should only be made where an account of profits would not be an appropriate remedy. However, in Mid-City , Campbell J noted that it was clear law that the remedies available for breach of an equitable obligation imposed in equity’s exclusive jurisdiction would include whichever the plaintiff elects of equitable compensation and an account of profits. Here, where there would in my view have been a real question as to whether relief limited to an account of profits on the insurance renewals for AIIB clients solicited by Mr Beard/Hamtuan was the appropriate remedy (in circumstances where, with hindsight, the actions of Mr Beard seem to have led to the loss (on a more than temporary basis) of a number of AIIB’s clients irrespective of whether those clients ultimately followed (or wrote new business with) Mr Beard/Hamtuan), I find that AIIB has the right to elect between the remedy of an account of the profits received by Mr Beard and equitable compensation for the loss caused by his breach.

AIIB moved quickly to restrain the apprehended breach by Mr Beard/Hamtuan. Therefore, the profits in fact made by Mr Beard/Hamtuan as a result of the breach were relatively small. Hamtuan’s appointment with Chegwyn was subsequently brought to an end (as a result, largely it would seem, of the ensuing litigation); various clients were advised by Mr Beard to take their custom elsewhere so as not to be embroiled in the litigation or chose not to continue with Mr Beard. Viewed with hindsight, those clients remain lost to AIIB and the goodwill in its business must therefore have suffered as a result to some degree which would not be compensated by an order for an account of profits.

In Dellow , the loss in question was a substantial reduction in the number of clients remaining on the rent roll; loss said to have been caused by the defendant’s misconduct. An account of profits was not sought in that case and it was said in those circumstances the most appropriate method of assessing the loss was to assess the diminution in the value of the rent roll. A discount was applied in that case to reflect the fact that the value of the rent roll would have been affected in any event by the establishment of a property management business in competition with the company (the discount factor applied being one third).

In Tropeano v Riboni [2005] VSC 229, Gillard J in the Supreme Court of Victoria assessed damages for breach of a restraint clause in connection with the sale of an accountancy business. There, what was lost was part of the asset which comprised the goodwill of the firm (that part being the clients acquired in breach of the restraint of trade clause) and in addition loss of the income the firm would have derived from those clients. Gillard J applied what was described as a general practical approach – asking what would have happened had the breach not occurred. It was said that the prospects were that the clients would have remained with the firm, though there was a risk that some may have left. The value of the goodwill would have been expected to remain at about the level as when purchased, but subject to variation according to the number of clients. The court there awarded damages for loss of clients affecting the goodwill on a dollar for dollar basis based on fees received. No assessment could be made of any loss of net income from those clients.

In this case, on the claim for breach by Mr Beard of an equitable obligation of confidence I consider it appropriate that, as against Mr Beard, AIIB be given the right to elect, by way of relief for breach of the equitable obligation of confidence, between an account of the profits made by Mr Beard as a result of his breach(es) on the one hand and on the other hand an order for equitable compensation assessed at the loss of the value to AIIB’s business or the goodwill in that business (measured by reference to the clients lost by reason of Mr Beard’s conduct) discounted by an appropriate amount to reflect the likelihood that these clients would have left anyway following Mr Beard’s departure, plus loss of the net income which AIIB would have earned from the renewal of their policies had those clients not left AIIB. Care would need to be taken to ensure there was no double counting in that regard. Particularly in circumstances where Mr Croft’s report was served late, I consider that the matter should be referred to an associate justice for an enquiry as to the amount of equitable compensation, if this be the remedy for which AIIB elected.

(It goes without saying that in the enforcement of any orders I make against Mr Beard/Hamtuan, AIIB cannot obtain double recovery.)

I do not consider that a perpetual injunction should be granted in circumstances where client contact information is information which Mr Beard could have compiled from public sources in any event. I accept that Mr Beard/Hamtuan no longer retain copies of the “insurance needs” information taken in the form of existing policy information as at February 2008 (which will presumably be out of date soon, if not already, with the passage of time). To grant an injunction of the kind claimed would in my view go far beyond any reasonable restraint of trade or non-solicitation covenant. Nor am I satisfied that I should make any findings as to the submissions made during the hearing (in support of the claim for a perpetual injunction) that Mr Beard/Hamtuan have breached undertakings given to the court when these proceedings first commenced by renewing insurance contracts on Paraquad’s behalf while at AIIB or Honan.

As far as the claim for “unaccounted-for” commission is concerned, Mr Lofts gave evidence that various tax invoices had been issued prior to Mr Beard’s departure (and/or policies placed by him) in respect of which no commission has been received by AIIB (paragraphs 14-21 of Mr Lofts’ affidavit). To the extent that Mr Beard has given evidence that no such commissions were received by him and that certain of the policies were not in fact placed (and was not challenged on his responses to those invoices), it is not clear to me that AIIB has established that any amounts remain owing by Mr Beard or Hamtuan by way of unaccounted-for commission and I make no order for those amounts. · Against Chegwyn

The primary claim pleaded against Chegwyn is that it is liable as principal for the breaches of contract by its agents, Mr Beard/Hamtuan. For the reasons set out below, I do not accept that the conduct in question was conduct as agent of Chegwyn. Unless Chegwyn has some liability in tort for having induced a breach of contract or for conspiracy or unlawful interference with business interests (claims which were not pleaded against it) or is accountable for profits received by it in the knowledge that they were gained in breach of an equitable obligation of confidence, I do not see a basis on which Chegwyn is accountable for commissions it received from former AIIB clients.

Reliance was placed by Mr Wilson on Halliday & Nicholas v Corsiatto . There, Handley JA noted (at [37]) (in a passage on which Spigelman CJ and Heydon JA expressly reserved their position) that liability for misuse of confidential information extends to third parties who receive and use the information. (There, however, their Honours found that the entity in question against whom liability was sought to be found was not a third party. The sub-broker was found to have been acting as the agent of the sued insurer, who was bound by the agent’s knowledge and acts “within the scope of his agency”.) Handley JA nevertheless observed that a third party may be restrained from use even if the confidential information is acquired without notice of any impropriety and considered (again in a passage on which the other appellate judges reserved their opinion) that the power of courts of equity to award equitable compensation or an account of profits against third parties could not be narrower than its power to grant an injunction (citing Peter Pan Manufacturing Corp v Corsets Silhouette Limited [1964] 1 WLR 96, 107 and Talbot v General TV Corp Pty Limited [1980] VR 224, 243). In the event, an account was ordered of the profits made from commissions paid by insurers in respect of insurances for former clients of the appellants.

AIIB seeks to make Chegwyn liable directly (not as a third party) for the conduct in question. It contends that the conduct of Mr Beard/Hamtuan was within the authority conferred on them by Chegwyn and thus that it is to be regarded as the conduct of Chegwyn. (Mr McLure submits that this contention is based on the incorrect premise that, as a matter of fact, the conduct of Beard and Hamtuan was within the authority conferred by Chegwyn. It is said that it was common ground between Mr Beard and Mr Chegwyn that Mr Beard was not authorised to undertake work for former clients of AIIB unless Mr Beard had purchased the right to do so.) · Was there an agency relationship at relevant time?

Was Hamtuan (or Mr Beard) an agent of Chegwyn at the relevant time(s)? Here, unlike in Halliday , the solicitation letters were written before Mr Beard/Hamtuan commenced with Chegwyn. There is some evidence that Mr Chegwyn knew (or assumed) that Mr Beard would be contacting clients or former clients, since on Mr Chegwyn’s evidence he seems to have been at pains to instruct Mr Beard on the limitations to be put on use of or reference to the AFSL number in any communications by him, and Mr Chegwyn provided (presumably for that purpose) his own contact details.

I am not persuaded that when Mr Beard/Hamtuan communicated with clients on 29 February 2008 this was at the request or with the authority of Chegwyn. The terms of the letter seem to make it clear that Mr Beard was notifying a move to Chegwyn as from 3 March 2008. (Although the letter suggests the change of appointment was to happen immediately, this seems to me to be another instance of Mr Beard’s tendency to gloss over details – just as he seeks to portray to his clients in the pro forma solicitation letters that the change was a mere formality.)

Mr Wilson’s submission was that the email communications between Mr Lofts and Mr Chegwyn indicated that there was some form of agency existing prior to the formal registration of Hamtuan as Chegwyn’s corporate authorised representatives. This was put on the basis of the assertion contained in Mr Chegwyn’s email to the effect that he had “re-confirmed” with Mr Beard that he was not to act as Chegwyn’s authorised representative prior to registration (responding to Mr Lofts’ stated “only” concern at that stage) but noting that this did not prevent Mr Beard acting in a different capacity. Mr Chegwyn explained this in the witness box (with some feeling) as a response meant to tell Mr Lofts, in effect, not to presume to tell Mr Chegwyn how to run his own business.

I do not read Mr Chegwyn’s email as any admission that, prior to the registration of Hamtuan, Mr Beard had been authorised to solicit AIIB’s clients or otherwise to act on Chegwyn’s behalf in relation to its business. I accept Mr Chegwyn’s evidence that he had made it clear to Mr Beard that he was not to do anything involving the poaching of AIIB clients. (Mr Chegwyn’s response, in revoking the corporate representative agreement once it became apparent that there were real issues in this regard, is consistent with his position as expressed to Mr Beard that he wanted no part of any dispute between Mr Beard and Mr Lofts.)

Weight was also sought to be placed on the fact that Mr Beard’s emails at this time disclosed that he had an alternative email designation at Chegwyn’s offices. I think little weight can be placed on the fact that administrative arrangements were made in advance for Mr Beard to be allocated an email address.

I therefore conclude that any actions by Mr Beard/Hamtuan prior to 7 March 2008 were not undertaken as agent of Chegwyn – nor were they in fact authorised by Chegwyn. Actions taken by Mr Beard/Hamtuan after 7 March 2008 (in renewing insurance policies for at least some of the former AIIB clients, such as Paraquad) would have been as Chegwyn’s agent. However, then the question arises as to whether they were within the scope of that agency. · Scope of any agency

Reliance was placed by Mr McLure on Blackburn, Low & Co v Vigors (1887) 12 App Cas 531 at 537-538 where Lord Halsbury LC said: Some agents so far represent the principal that in all respects their acts and interests and their knowledge may well be said to be the acts, interests and knowledge of the principal. Other agents may have so limited and narrow an authority both in fact and in the common understanding of their form of employment that it would be quite inaccurate to say that such an agent’s knowledge or intentions are those of his principal; and whether his acts are the acts of his principal depends upon the specific authority he has received.

Assuming, contrary to my findings, that prior to 7 March 2008 Mr Beard/Hamtuan were agents at the relevant time, would Chegwyn have any responsibility to AIIB for their actions?

Mr Beard admits he told Mr Chegwyn told him he would be able to bring over a number of clients (T 90) and that Mr Chegwyn told him he was authorised to bring only those clients he was allowed (viz-a-viz AIIB) to bring and that he (Mr Chegwyn) did not want any dispute (T 91).

Mr Beard said (T 91) that Mr Chegwyn would have been very clear on making sure he conducted his activities within the Authorised Representative Agreement: “He would have said not that I couldn’t do work for clients of AIIB but that I would make sure that the work I was doing for clients was in accordance with the representative agreement that I was entitled to do [Authorised Representative Agreement with Chegwyn] that I only dealt with clients that I was entitled to”.

Leaving to one side any express limitations on Mr Beard/Hamtuan’s authority once appointed, the difficulty for AIIB is that the conduct in question seems to have occurred before they were so appointed. It is submitted that information held by Beard and Hamtuan before they became the agent of Chegwyn (and used contrary to Mr Chegwyn's express instruction to the contrary) cannot be imported to Chegwyn. Reliance was placed on what was said by Hoffmann LJ in El Ajou v Dollar Land Holdings Plc [1994] 2 All ER 685 to the effect that he knew of "no authority for the proposition that in the absence of any duty on the part of the principal to investigate, information which was received by an agent otherwise than as agent can be imputed to the principal simply on the ground that the agent owed to his principal a duty to disclose it". For those reasons, it was submitted that Chegwyn is not imputed with any knowledge of Beard and Hamtuan prior to 7 March 2008.

As to the issue of limitations on the authority of Mr Beard/Hamtuan, in oral submissions in response, Mr Wilson suggested that Mr Beard should be taken to have had the usual or ostensible authority to bind Chegwyn as its agent (T 225.24-25). He submitted: “[t]he fact that there was a prescription on his actual authority does not matter because Mr Beard had usual authority. He had ostensible authority to do what he did in his capacity”, which suggests that the concepts of usual/ostensible authority were being treated as one and the same and as reflecting something other than actual authority (T 227.1-3).

By this submission, Mr Wilson seemed to be suggesting that Chegwyn’s act of appointing Mr Beard (or Hamtuan) to the position it held with Chegwyn was sufficient representation to third parties such as AIIB to estop Chegwyn from denying the ostensible authority of the agent to do things within the scope of what (but for the express limitation) would be the agent’s usual authority, but which may have been outside the agent’s actual authority (which is circumscribed by the express limitation); the “authority” in such a case being ostensible authority.

The immediate difficulty with this proposition is that it was not pleaded. The issue of “ostensible authority” was raised for the first time in Mr Wilson’s oral submissions in reply and Mr McLure promptly took issue with this (T 227.28-32).

“Ostensible authority” is used to describe an estoppel arising from a frequently occurring factual circumstance ( Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Limited [1964] 2 QB 480 at 498 per Pearson LJ, at 503 per Diplock LJ). As noted earlier in these reasons, estoppel is a matter which should be specifically pleaded. In Laws, Gibbs J referred to the comments of Buckley LJ in In re Robinson’s Settlement: Gant v Hobbs [1912] 1 Ch 717 at 727, regarding the relevant equivalent to the current r 14.14 of the Uniform Civil Procedure Rules : The effect of the rule is, I think, for reasons of practice and justice and convenience to require the party to tell his opponent what he is coming to the Court to prove. If he does not do that the Court will deal with it in one of two ways. It may say that it is not open to him, that he has not raised it and will not be allowed to rely on it; or it may give him leave to amend by raising it, and protect the other party if necessary by letting the case stand over. The rule is not one that excludes from the consideration of the Court the relevant subject matter for decision simply on the ground that it is not pleaded. It leaves the party in mercy and the Court will deal with him as is just.

In Laws Holdings , Gibbs J went on to find that, given the way in which the appellant’s case had been conducted by counsel at first instance (knowing that estoppel was in issue), the appellant could not then complain that estoppel had not been pleaded. In the present case, however, Mr McLure objected almost immediately to the raising of the issue of ostensible authority and it could not, I think, fairly be said that the case had been conducted up to that point on the basis that an ostensible authority claim was in issue. In those circumstances, AIIB ought not to be allowed to rely upon the alleged ostensible authority.

The second problem is that, not having been raised until submissions in reply, it is difficult to know with any precision what the basis of the ostensible authority is said to be, how it is made out, and how it could assist AIIB. Ostensible authority is an estoppel by representation operating as between the apparent principal and the third party with whom the apparent agent interacts. The apparent agent is a stranger to this legal relationship ( Freeman & Lockyer at 503 per Diplock LJ). Ostensible authority will not, as a matter of actuality, fix Chegwyn with the knowledge, intentions or actions of Beard/Hamtuan. It may (as between Chegwyn and a third party to whom Chegwyn has represented Beard/Hamtuan’s ostensible authority) estop Chegwyn from denying that it is so fixed.

To raise such an estoppel, the third party must show that the representation had been made, that the representor had sufficient actual authority to make the representation and that the third party acted in reliance upon the representation in transacting with the apparent agent.

In the present case it is hard to know with any precision what the representation was, to whom it was made, and who acted in reliance upon it. In any case, it is hard to see that the representation was one made to AIIB or that it is one on which AIIB relied in any way sufficient to raise the estoppel.

If clients to whom Chegwyn impliedly represented that Beard/Hamtuan was its authorised representative had acted in reliance upon such a representation, that may be sufficient to raise an estoppel as between Chegwyn and those clients, but it would not be an estoppel of which AIIB could avail itself.

This uncertainty highlights the significance of the first difficulty. Ostensible authority not having been pleaded, there is no clear statement of the facts or circumstances said to give rise to the estoppel. It is not a case of which Chegwyn was on notice and it is not a case on the pleadings which Chegwyn could be expected to have met. · Section 917B Corporations Act

Mr Wilson, for AIIB, relied upon s 917B of the Corporations Act for the proposition that, even if Mr Beard's conduct was not so authorised, Chegwyn was still liable for it. Mr McLure, in response, submitted that at most s 917B of the Corporations Act could apply only to conduct of Mr Beard and Hamtuan from 7 March 2008, when Hamtuan in fact became Chegwyn’s authorised representative. Section 917B, it was submitted, could have no work to do prior to 7 March. This must be the case.

Section 917A provides that division 6 of the Act applies to conduct of a representative on which a client could reasonably be expected to rely. Section 917B deals with responsibility as between the licensee and the client. Section 917E provides that the responsibility of a financial services licensee under the division extends so as to make the licensee liable to the client in respect of any loss or damage suffered by the client as a result of the representative's conduct. Section 917F(1) provides that where a licensee is responsible for the conduct of their representative under the division, the client has the same remedies against the licensee that the client has against the representative. Section 917F(3) makes it clear that nothing in division 6 imposes any civil liability under a provision of the Act apart from the division.

As Mr McLure submits, division 6 is clearly concerned with circumstances in which a licensee may be made liable to the client to the same extent that an authorised representative would be liable to a client. It has no application to the question whether Chegwyn is liable, as licensee, to a third party (AIIB) for the conduct of its authorised representative. · Alleged improper use of confidential information

Mr Wilson submits that after 7 March 2008 Mr Chegwyn in effect adopted the pre-7 March conduct by meeting former AIIB clients and by accepting instructions from them. Mr Chegwyn’s evidence is that he met one such client in a “handshaking” exercise. If Mr Chegwyn did so at the time believing (wrongly as it transpired) Mr Beard’s assurances that he was free to deal with those clients that does not in my view amount to any adoption of wrongful conduct.

Here, I am not satisfied that Chegwyn has in fact “used” any confidential information of AIIB (innocently or otherwise). The relevant misuse of the confidential information lay in Mr Beard/Hamtuan using the confidential contact details/prospect lists to solicit AIIB clients in breach of their contractual obligations. This happened before Mr Beard/Hamtuan joined AIIB and was not authorised by Chegwyn.

As against Chegwyn, therefore, the only remedy which I consider could have potentially been applicable would have been an order that it account for the 15% of commissions retained by it out of the revenue received from the clients formerly serviced by AIIB (less a small deduction to reflect overheads or expenses which would not otherwise have been incurred in producing that income), if it had received the proceeds of a breach of an equitable obligation of confidence in circumstances in which equity would attach liability to it. No such claim was pleaded. (As the quantum of any such account of profits claim is very low, I do not consider that any further enquiry involving Chegwyn would in that event have been warranted.)

For the period from 7 March 2008 until 25 May 2008, AIIB contends that Chegwyn wrote insurance business for former clients of AIIB having total insurance premiums of $155,938 and received total commissions of $13,195.85 and total fees of $10,987.90 (plaintiff’s tender vol pp 519-20). Chegwyn contends that the commissions received by Mr Beard or his company in the period were $18,657 of which Chegwyn retained a mere $3,298.

Mr Chegwyn has assessed the value of the time spent by him establishing and dealing with Mr Beard’s agency (though conceding that it was not ordinarily his practice to charge for his work on an hourly rate) at $11,250. (45 hours at $250 per hour). However, those costs were referable to the establishment of the overall agency relationship with Mr Beard/Hamtuan which was not limited in its terms to the handling of former AIIB clients. The only overheads or expenses which I would have deducted from the commissions retained by Chegwyn (as being directly attributable to the time, skill and effort of Chegwyn in obtaining commission fees from AIIB clients) would be the “cost” of Mr Chegwyn’s 20 minute meeting (or “handshaking exercise”) with Paraquad to which Mr Chegwyn deposed in paragraph 16 of his affidavit sworn 23 June 2009. (I note that Mr Chegwyn has attributed a cost in preparation of invoices of four hours. In circumstances where this seems to me excessive, since the invoicing function could surely have been handled by someone at a lower level than managing director, I would not have allowed such a deduction).

Mr Chegwyn’s affidavit discloses net commission and fees referable to Mr Beard’s clients as $21,985.22 net of GST of which Chegwyn retains $3,297.78. The appropriate deduction would in my view have been $83.33 to compensate for 20 minutes of Mr Chegwyn’s time. The only amount for which I consider Chegwyn would potentially have been liable (assuming that its receipt of insurance renewal proceeds, with notice of the contention by AIIB that this was the result of a misuse of its confidential information, was actionable in equity) would have been $3,214.45. As it is, no order against Chegwyn is warranted.

Insofar as the cross-claim brought by Chegwyn against Mr Beard/Hamtuan is concerned, it does not seem to be disputed by Mr Beard/Hamtuan that there was an agreement by them to indemnify Chegwyn for any liability incurred in relation to the clients formerly serviced by AIIB. No defence was filed to that cross-claim. I find for Chegwyn on its cross-claim. Orders I propose to order as follows: 1. Hamtuan is liable to pay to AIIB damages for breach of the confidentiality and non-solicitation clauses in the Authorised Representative Agreement, to be assessed in accordance with 3 below, calculated as the loss of commissions which would otherwise have been likely to have been received but for Hamtuan’s breach from the clients identified in paragraph 11 of Mr Lofts’ affidavit of 12 March 2008, plus a sum which represents the loss of value to AIIB’s business by reference to the loss of those AIIB clients (less an appropriate discount for the prospect that those clients may have left in any event), subject to any deduction necessary to avoid double counting between those two heads of loss. 2. Mr Beard is liable, at AIIB’s election, either to pay equitable compensation or to account for the profits made by him by reason of breach of his equitable obligations of confidence in soliciting the AIIB clients referred to in 1 above to leave AIIB, with such deduction as is appropriate for skill and expertise, again such amount to be assessed in accordance with 3 below. 3. The matter be referred to an associate justice for enquiry as to the sum payable by Hamtuan by way of damages for breach of contract and by Mr Beard by way of equitable compensation or an account of profits, depending on AIIB’s election. 3. AIIB’s claim against Chegwyn be dismissed. 4. On Chegwyn’s cross-claim I find for Chegwyn and order Mr Beard/Hamtuan to indemnify Chegwyn for any costs of these proceedings not otherwise recoverable by Chegwyn from AIIB.

I will hear any submissions as to costs and as to the form of final orders to be made.