Upon learning that 5 senior advisors (Advisors) had defected to rival Ord Minnett, Wilson HTM Investment Group Limited (Wilson) took legal action against both the Advisors and Ord Minnett.
Whilst Wilson’s claim against the Advisors settled, it pursued its claim against Ord Minnett. Against Ord Minnett, Wilson argued that it induced the Advisors to breach their employment contracts by requiring them to disclose confidential information and harm Wilson while still employed.
The Advisors arranged a number of meetings with Ord Minnett representatives, including a backyard BBQ. The Advisors also provided Ord Minnett with remuneration and advisor revenue figures, commission statement sheets and contact details for up to 23 Wilson employees.
The Advisors’ employment contracts provided that remuneration was a confidential matter, obligated employees to not intentionally do anything to harm Wilson, and required the protection of Wilson’s confidential information.
The Supreme Court held that Ord Minnett induced the Advisors to breach their contract of employment and awarded damages of $174,416.
The Court rejected Ord Minnett’s argument that remuneration information was not confidential because it was common practice within the industry to disclose such information to prospective employers. Instead, the Court held that remuneration was confidential information within the meaning of the Advisors’ employment contracts, as it was ‘information relating to’ Wilson’s ‘business affairs’.
Importantly, the revenue generated by the advisors was also considered confidential information, even though this was not stated contractually, as remuneration was in part based on such revenue.
Further, the Court held that the remuneration, revenue and commission information retained its confidentiality despite Wilson’s disclosure of company-wide revenue figures in its Annual Report and to the ASX. Wilson’s disclosure of company-wide figures did not enable individuals to be identified and targeted as high income earners by prospective employers.
The Court found that Wilson had a legitimate interest in protecting its business from an ‘exodus of its workforce by reason of competitors stealing a march on it by use of its confidential information’, and accordingly restrained Ord Minnett from using Wilson’s confidential information.
The Court calculated damages on the Advisors’ contractual 1 month notice period given that they had been seeking alternative employment for some time.
This decision is significant as it reminds stockbroking, investment and financial planning firms to avoid seeking detailed remuneration, revenue or commission information from prospective employees and authorised representatives.
Importantly, this decision provides that competitors should assume that such information is confidential and that employees are contractually restrained from disclosing it.
However, firms must remember that seeking such information in broad terms (i.e. bands of revenue) is unlikely to constitute inducement to provide confidential information.
Therefore, whilst there is nothing wrong with luring employees away from competitors, confidential information must not be used to do so. Indeed, although Ord Minnett was restrained from using Wilson’s confidential information, it was free to approach other Wilson employees.
For advice and assistance, please contact:
Lisa-Marie McKechnie | Partner
T:+61 2 8289 5857
M:+61 418 544 716
  NSWSC 1086.