Supreme Court New South Wales Medium Neutral Citation: Curve Securities Pty Ltd v Young (No 2) [2022] NSWSC 1436 Hearing dates: 14 October 2022 Date of orders: 21 October 2022 Decision date: 21 October 2022 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: Plaintiff granted leave to amend its Commercial List Statement Catchwords: PRACTICE AND PROCEDURE – pleadings – whether plaintiff should have leave to amend its Commercial List Statement – whether List Statement should be struck out Legislation Cited: Corporations Act 2001 (Cth) Cases Cited: Chen v Golden Land Enterprises Pty Ltd [2022] NSWSC 19 Commissioner for Corporate Affairs v Green [1978] VR 505 Curve Securities Pty Ltd v Young [2022] NSWSC 1016 Forkserve Pty Ltd v Jack [2000] NSWSC 1064 In the matter of Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789 Jack Brabham Engines Limited v Beare [2010] FCA 872 Category: Procedural rulings Parties: Curve Securities Pty Ltd (Plaintiff) Alexander Young (First Defendant) Ord Minnett Limited (Second Defendant) Representation: Counsel: A Fernon SC (Plaintiff) S Docker with A Gandar (Second Defendant) Solicitors: Hitch Advisory (Plaintiff) Tom Howard Legal (First Defendant) Lander & Rogers (Second Defendant) File Number(s): 2021/103525 Judgment 1. The background to this matter is set out in my judgment of 28 July 2022. [1] I shall use the same abbreviations here. 2. To repeat, Curve and Ord Minnett are competitors in the market of trading fixed rate financial investments. Mr Young was, until August 2020, the Associate Director Interest Rate Markets at Curve. Since September 2020, Mr Young has been employed by Ord Minnett as a Fixed Interest Advisor. Mr Young's role at Ord Minnett is substantially the same as was his role at Curve. 3. Curve alleges that, in the course of his employment with Ord Minnett, Mr Young has: 1. approached, solicited, and accepted Curve's clients; 2. disclosed and used confidential information (described as "Curve's Business Information") obtained in the course of his employment with Curve; and 3. commenced his new employment in direct competition with Curve. 1. Curve alleges that Mr Young has taken these steps in accordance with what Curve alleges to be an "Arrangement" [2] entered into with Ord Minnett while he was still in employment with Curve, in contravention of restraints and non-disclosure clauses in his employment contract and in breach of his contractual, equitable and fiduciary duties to Curve. 2. Curve also alleges that Ord Minnett is, on various bases, accessorily liable to Curve for Mr Young's conduct. 3. There has been discovery prior to evidence in the course of which Ord Minnett has produced some 5,000 documents relating to 118 former clients of Curve, referred to by the parties as the "Relevant Clients". It is common ground that the Relevant Clients are now clients of Ord Minnett and that Mr Young approached those clients, identified them to Ord Minnett, introduced them to Ord Minnett, or won or procured them as clients for Ord Minnett. 4. By Notice of Motion filed on 2 June 2022, Curve seeks to amend its Summons and Commercial List Statement. By Notice of Motion filed on 16 June 2022, Ord Minnett seeks an order that Curve's then current List Statement be struck out. 5. For the reasons I gave in my judgment of 28 July 2022, I refused to grant Curve leave to amend its Commercial List Statement in accordance with the then proposed draft. 6. On 28 July 2022, in the course of declining to give Curve the leave it then sought, I said that I would give Curve "a further, final opportunity to do so". [3] I directed that Curve circulate the form of any further proposed Amended Commercial List Statement by 12 August 2022. 7. Since then, Curve has circulated four further proposed forms of the Amended Commercial List Statement, each form evidently responding to criticisms made on behalf of Ord Minnett and Mr Young to the earlier iterations. 8. On 14 October 2022, I heard argument about the fourth such iteration ("the Proposed List Statement"). 9. Ord Minnett and Mr Young oppose Curve having leave to file the Proposed List Statement in two respects. Mr Young's alleged breach of s 183 of the Corporations Act 2001 (Cth) arising from or incidental to the Arrangement – pars C40(f) and 50(2) 1. Section 183 of the Corporations Act provides: "183 Use of information – civil obligations Use of information – directors, other officers and employees (1) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to: (a) gain an advantage for themselves or someone else; or (b) cause detriment to the corporation. Note 1: This duty continues after the person stops being an officer or employee of the corporation. Note 2: This subsection is a civil penalty provision (see section 1317E). (2) A person who is involved in a contravention of subsection (1) contravenes this subsection. Note 1: Section 79 defines involved. Note 2: This subsection is a civil penalty provision (see section 1317E)." (Emphasis in original.) 1. The elements of a cause of action under s 183 are, relevantly to this case, that Mr Young: 1. was at the relevant time an employee of the corporation; 2. acquired the relevant information; 3. acquired that information by virtue of his position as an employee of the corporation; 4. made improper use of that information; and 5. made such improper use of the information in order to gain, directly or indirectly, an advantage for himself or Ord Minnet or, alternatively, to cause detriment to Curve. [4] 1. Paragraph C40 of the Proposed List Statement reads: "In the period since the Termination Date [17 August 2020], Mr Young has, in performance of the Arrangement and in the course of his employment with Ord Minnett: (a) contacted and/or approached Previous Curve Clients in the manner referred to in paragraph 28; (b) solicited of sought to solicit Curve's clients and/or their custom to Ord Minnett as pleaded in paragraph 29(a); (c) persuaded or sought to persuade Curve's clients to cease or reduce the amount of business those clients would normally do with Curve as pleaded in paragraph 29(b); (d) offered or sought to offer services on behalf of Ord Minnett in competition with Curve as pleaded in paragraph 29(c); (e) provided and/or been concerned in Ord Minnett providing services similar to and/or in competition with the fixed interest business carried on by Curve; and (f) used Curve's Business Information in the course of doing those things referred to in paragraphs 40(a) to (e) above." 1. The "Arrangement" referred to is defined in par C35 of the Proposed List Statement as follows: "On a date best known to them but otherwise by at least 31 July 2020, Mr Young and Ord Minnett reached an understanding/came to an arrangement that: (a) Ord Minnett would employ Mr Young in a role equivalent to and with the same employment responsibilities as Mr Young had at Curve; (b) Mr Young would solicit, approach and/or seek to divert clients from Curve to Ord Minnett; (c) Mr Young would use Curve's Business Information in the course of his employment with Ord Minnett; (d) Ord Minnett would accept business from and provide services to those clients of Curve which Mr Young solicited and/or diverted from Curve to Ord Minnett; and (e) Mr Young would provide services to clients of Ord Minnett being services of a kind ordinarily forming part of Curve Securities Business; (Arrangement)." (Emphasis in original.) 1. This allegation is particularised as being an arrangement to be inferred from certain circumstances earlier pleaded, certain conduct of Mr Young and Ord Minnett earlier pleaded, and the fact that the Relevant Clients became clients of Ord Minnett after Mr Young commenced employment with Ord Minnett. 2. Subparagraphs C40(b), (c) and (d) refer, respectively, to subpars C29(a), (b) and (c) of the Proposed List Statement, which are in the following terms: "Between the Termination Date [17 August 2020] and 17 August 2021 Mr Young: (a) solicited or sought to solicit Previous Curve Clients and/or their custom to Ord Minnett; (b) persuaded or sought to persuade Previous Curve Clients to cease or reduce the amount of business those clients would normally do with Curve; (c) offered or sought to offer services to Previous Curve Clients on behalf of Ord Minnett in competition with Curve." 1. Subparagraph C40(f) refers to "Curve's Business Information" which is defined in par C23 of the Proposed List Statement as follows: "In the course of his employment with Curve, Mr Young received and had access to information about Curve's business activities and Curve's clients including: (a) the identity of Curve's Deposit Taking Clients; (b) the identity of Curve's Deposit Making Clients; (c) the fact that Curve's Deposit Taking Clients and/or Curve's Deposit Making Clients were in need of services or were in the business of providing services relating to the Fixed Interest Business services; (d) the names, identities and/or contact details of persons employed by Curve's Deposit Taking Clients and/or Curve's Deposit Making Clients involved in and/or responsible for: (i) in the case of the Deposit Making Clients, handling, approving and/or authorising the placing of investments; and (ii) in the case of the Deposit Taking Clients, handling, negotiating and/or accepting the investments; (e) the margin and/or brokerage rates charged by Curve on the placing and/or accepting of deposits by its Deposit Making Clients and/or Deposit Taking Clients, (Curve's Business Information)." (Emphasis in original.) 1. Thus, it is alleged in subpar C40(f) that Mr Young, since 17 August 2020, and "in performance of the Arrangement" used "Curve's Business Information" to do the things specified in par C40(a) to (e). 2. Mr Docker submitted that Ord Minnett (and Mr Young) are unable to understand from this proposed pleading what information Mr Young is alleged to have used, on what occasion such information is alleged to have been used, and how he is alleged to have done so. 3. As to what information Mr Young is alleged to have used when engaging in the conduct alleged at subpars C40(a) to (e) of the Proposed List Statement, in the particulars to par C40 at [A] Curve repeats the elements of the defined term "Curve's Business Information" which I have set out above. The allegation is, thus, that Mr Young used all of that information when engaging in the activities alleged at subpars C40(a) to (e); although it is clear that only one or more elements of "Curve's Business Information" would be relevant to the particular actions alleged in each subparagraph. 4. In my opinion, that allegation is sufficiently specific. Contrary to Mr Docker's submissions, I do not see it as having the same generality as prompted the criticisms made by Jagot J of the lack of specificity of "Particular (m)" in her Honour's decision in Jack Brabham Engines Limited v Beare. [5] 5. As to how Mr Young is alleged to have used Curve's Business Information to engage in the conduct alleged at subpars C40(a) to (e), that allegation is particularised at [B] to par C40 as follows: "Mr Young used Curve's Business Information as referred above, by knowing who to approach at Curve's Deposit Making Clients and Deposit Taking Clients, the means by which to contact those individuals and what offers could be made in respect of margin and/or brokerage rates in order to undercut Curve's offering." 1. Thus, what is alleged is that Mr Young engaged in the conduct alleged at subpars C40(a) to (e): 1. knowing which of Curve's clients to approach; 2. having the means by which to contact them; and 3. critically, knowing what offer would undercut Curve's margins and brokerage rates. 1. That final element appears to be vital. The allegation is not only that Mr Young knew the identity of Curve's clients and how to contact them, but that he knew how to pitch an offer to those clients that would lure them away from Curve. 2. There is no allegation in the Proposed List Statement that Mr Young made a list or "retained" phone numbers and email addresses of clients or "memorised" any such details. [6] 3. But the conduct in the final element takes matters beyond only contacting clients without having "memorised" or "retained" their details and, when read with proposed par C42 of the Proposed List Statement (to which I will return below), moves the proposed pleading to beyond the demurrable arena. 4. As to when Mr Young is alleged to have used Curve's Business Information, the references in subpars C40(a) to (d) to the conduct alleged in pars C28 and C29 show that the use of Curve's Business Information is alleged to have taken place between 17 August 2020 and 17 August 2021; and, looking at the particulars to C28 at least in the instances referred to in the "Confidential Particulars" provided by Curve to Ord Minnett and Mr Young on 25 August 2022. Those particulars are evidently derived from the documents that Ord Minnett has disclosed to Curve. As the particulars to par C28 further state, Curve has, understandably, no direct knowledge of that contact and relies on inferences arising from the Confidential Particulars and from the fact that Curve clients moved over to Ord Minnett after Mr Young commenced working at Ord Minnett. 5. In my opinion, these allegations, so understood, are sufficiently clear to enable Ord Minnett and Mr Young to know what Curve is alleging against them. 6. Paragraph C42 of the Proposed List Statement provides: "By engaging in the conduct referred to in paragraph 40(f) above, Mr Young breached the Section 183 Duty in that he used Curve's Business Information for his own benefit and otherwise to the detriment of Curve." 1. Mr Docker submitted that this allegation was insufficient as it does not, in terms, identify the impropriety of the conduct alleged. The word "improper" does not appear at par C42 but understood in the manner I have set out, it is clear that Curve is alleging that Mr Young behaved improperly for the purpose of s 183 of the Corporations Act. 2. For these reasons, I will allow subpar C40(f) and par C42 as part of the Proposed List Statement. Allegations concerning Ord Minnett's involvement in Mr Young's breach of his fiduciary duty – pars C52 and C53 1. Paragraph C52 of the Proposed List Statement provides: "By engaging in the conduct referred to in paragraphs 21(h)-(j) and 35 above, Mr Young engaged in dishonest and fraudulent breach of his Fiduciary Duties in that Mr Young intended to use his position as an employee of Curve to obtain a benefit for himself and/or Ord Minnett, and thereafter carried out that intention by: (a) using his position at Curve to contact 50 of Curve's clients in the manner referred to in paragraph 21(i); (b) making the Young Representations to Ord Minnett for the purpose of encouraging and/or inducing Ord Minnett to employ him; (c) making the 5 August Representations to Ord Minnett by which he admitted his intention to breach his obligations to Curve and to bring Curve's clients over to Ord Minnett; and (d) thereafter engaging in the conduct referred to in paragraphs 28, 29 and 30 by using Curve's Business Information in fulfilment of the Arrangement." 1. There are three elements in the allegations contained in par C52. 2. The first is that Mr Young engaged in a dishonest and fraudulent design in breach of his fiduciary duties by engaging in the conduct referred to at subpars C21(h) to (j) and par C35 of the Proposed List Statement. 3. Subparagraphs C21(h) to (j) allege that prior to termination of his employment with Curve on 27 August 2020, Mr Young: "(h) on or about 2 August 2020, invited [Mr Stewart Calderwood, the Director of Fixed Interest at Ord Minnett] to engage in conduct which Mr Young considered would assist to keep hidden from Curve Mr Young and Ord Minnett's 'plans'; Particulars Email from Mr Young to [Mr Calderwood] dated 2 August 2022 (i) on dates best known to him but otherwise on or about 3 August 2020, made contact with approximately 50 of Curve's clients in anticipation of him commencing employment with Ord Minnett; Particulars The Plaintiff does not know the identities of the 50 clients contacted by Mr Young but relies on the admission by Mr Young in his email to [Mr Calderwood] of 5 August 2020. (j) on 5 August 2020, made express written representations to [Mr] Calderwood to the effect that he: (i) had resigned his employment with Curve on 3 August 2020; (ii) was on gardening leave; (iii) had made contact with and had dealings with approximately 50 of Curve's clients; and (iv) could not wait to bring clients onboard to Ord Minnett; (5 August Representations)" (Emphasis in original.) 1. As I have stated above, par C35 sets out the allegation of the Arrangement. 2. The second element is that Mr Young engaged in that conduct with the intention stated, namely to use his position as an employee of Curve to obtain a benefit for himself and/or for Ord Minnett. 3. The third element is that, thereafter, Mr Young "carried out that intention" by engaging in the conduct alleged at subpars C52(a) to (d). 4. Mr Docker pointed out that the events alleged at subpar C52(d) occurred in the calendar year following Mr Young's cessation of employment with Curve. 5. Thus, in the written submissions, Mr Docker and Mr Gandar stated that the conduct there alleged "entirely post-dates Mr Young's employment with Curve Securities and so occurs at a time when the Fiduciary Duties are not alleged to have been owed and therefore could not have been breached". 6. I think this misunderstands what is alleged at subpar C52(d) which is that after Mr Young engaged in the conduct alleged, with the intention alleged, he "thereafter" carried out that intention by, amongst other things, engaging in the conduct alleged in the paragraphs of the Proposed List Statement set out at subpar C52(d). 7. Mr Docker and Mr Gandar submitted that it was necessary for Curve to plead, as against an alleged participant such as Ord Minnett: 1. a dishonest and fraudulent design; 2. breach of fiduciary duty in execution of the design; 3. that the fiduciary breach transgressed ordinary standards of honest behaviour; 4. [Ord Minnett's] assistance in the execution of the design to engage in the conduct that is in breach; and 5. [Ord Minnett's] knowledge of the circumstances indicating the dishonesty of the conduct which constitutes the breach. 1. The submission continued that: "The pleading in [52] rolls up the elements described in [the preceding paragraph] into one allegation and fails to distinguish between the alleged dishonest and fraudulent design, the alleged conduct said to constitute breaches of fiduciary duty in the execution of the dishonest and fraudulent design, and the circumstances in which those breaches transgress ordinary standards of honest behaviour." 1. I do not think this is a fair criticism of the proposed pleading. 2. In my opinion, par C52: 1. does identify the specific conduct; 2. alleges that engagement in that conduct was a dishonest and fraudulent design and a breach of Mr Young's fiduciary duties; and 3. does state why this transgresses the ordinary standard of honest behaviour, namely by using his position as an employee of Curve to obtain a benefit for himself and/or Ord Minnett. 1. Paragraph C53 of the Proposed List Statement provides: "Ord Minnett had knowledge of Mr Young's dishonest and fraudulent design in that: (a) since 22 June [2020 [7] ], Ord Minnett had the knowledge referred to in paragraph 36(a) and ought reasonably to have been aware of the matters in paragraph 36(b); and (b) since 31 July [2020], Ord Minnett knew that Mr Young intended to engage in the conduct referred to in paragraphs 28, 29 and 30 above; and thereby Ord Minnett knew or a reasonably honest person in Ord Minnett's position would have known that by entering into the Arrangement, Mr Young was acting in breach of his Fiduciary Duties." 1. This alleges that Ord Minnett knew of Mr Young's dishonest and fraudulent design because, first, it knew matters alleged in (a), that is the terms of Mr Young's employment agreements (actual knowledge is alleged) and that Mr Young owed Curve duties pursuant to ss 182 and 183 of the Corporations Act as well as a fiduciary duty (constructive knowledge is alleged). 2. More particularly, it is alleged that, since 31 July 2020, being the date by which Curve alleges that the Arrangement was made, Ord Minnett knew that Mr Young intended to engage in the conduct referred to in the named paragraphs, being the conduct I have set out above. 3. I do not see that it is to the point that such conduct is alleged to have taken place between the Termination Date (17 August 2020) and 17 August 2021 (thus post-dating Mr Young's employment by Curve). What is alleged is that Ord Minnett knew, from 31 July 2020, that Mr Young intended to engage in that conduct. 4. The Proposed List Statement goes on to allege, in the chausseur to par C53, that Ord Minnett thereby did know, or a reasonably honest person in its position would have known, that by entering into the Arrangement, Mr Young was acting in breach of his duties. 5. It is true, as Mr Docker submitted, that there is no allegation, in terms, that Ord Minnett "assisted" Mr Young with knowledge of these matters. But the allegation is that, in all the circumstances, Ord Minnett entered into the Arrangement by which, according to what is alleged in the Proposed List Statement, Ord Minnett assisted Mr Young by agreeing to employ him and accepting business from clients that Mr Young could bring to it. 6. Whether or not Curve is able to make out these allegations is, of course, a different matter. 7. However, I am not persuaded that they are dumurrable and propose to give Curve leave to amend its List Statement to include these allegations. Costs 1. Curve must pay the costs thrown away by their amendment to the Commercial List Statement, including all of the costs of resisting the multiple attempts made to get the List Statement into its now final form. 2. Mr Docker submitted that I should make an order for immediate payment on account of those costs in accordance with the principles referred to by Parker J in Chen v Golden Land Enterprises Pty Ltd. [8] In that case, Parker J opined that it is often desirable to make such an order "to avoid the distraction and potential duplication associated with a separate assessment of interlocutory costs". [9] 3. Mr Docker submitted that an amount of $100,000 should be paid on account referred to an assessment made by his instructing solicitor, Ms Emma Lutwyche, in an affidavit affirmed on 13 October 2022. Ms Lutwyche said that based on her review of invoices of work in progress, the total costs incurred by Ord Minnett since March 2022 in dealing with the various steps taken by Curve to amend its Commercial List Statement were a little under $100,000. However, Ms Lutwyche deals with these matters at a high level, and I was not taken to material that enables me to form a confident opinion about what figure would be appropriate to be ordered to be paid on account. 4. I accept that Ord Minnett and Mr Young must have incurred considerable legal costs in dealing with the lengthy and complicated process that has been undertaken by Curve to get its Commercial List Statement into final form. 5. Mr Docker and Mr Gandar summarised those steps in a procedural chronology annexed to their submissions, an edited version of which is attached to these reasons. 6. However, I am not satisfied that an evidentiary basis has been made out for me to make an order for payment of $100,000 on account of Ord Minnett's costs. 7. What I am inclined to do is order that the plaintiff pay the defendant's costs of resisting the plaintiff's Notice of Motion of 2 June 2022, which costs are to include the activities in the procedural chronology from and including 5 April 2022; and to order that the defendants have leave to have those costs assessed forthwith and that such costs will be payable forthwith upon assessment. 8. However, I will give the parties an opportunity to make submissions as to whether I should make such an order. 9. The parties should confer and bring in Short Minutes of Order to give effect to these reasons, and to provide a timetable for the further progress of the matter, including a further date for directions. 10. If there is to be a debate about the costs order I should make, the parties should confer and agree on a timetable to make short written submissions. I will deal with that question on the papers. ********** Attachment – Procedural Chronology Endnotes 1. Curve Securities Pty Ltd v Young [2022] NSWSC 1016. 2. To which I return below. 3. At [51]. 4. In the matter of Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789 at [443] (Black J); citing Commissioner for Corporate Affairs v Green [1978] VR 505 at 510 (McInerney J); and Forkserve Pty Ltd v Jack [2000] NSWSC 1064 at [114]-[118] (Santow J). 5. [2010] FCA 872. Her Honour's criticism is found at [206] and particular (m) is recited at [176]. 6. Cf [18]-[21] of my 28 July 2022 judgment. 7. Correcting an agreed typographical error. 8. [2022] NSWSC 19. 9. At [32]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 October 2022