Federal Court of Australia

Fortrend Securities Pty Ltd v Wollermann [2023] FCA 70

ORDERS

THE COURT ORDERS THAT:

LWAM

1.    LWAM Pty Ltd (LWAM) be joined as the Fourth Respondent to the proceeding and the title of the proceeding be amended accordingly.

Delivery of property

2.    By 4pm on 13 February 2023, pursuant to Rule 14.01 of the Federal Court Rules 2011 (Cth) (Rules), the Third Respondent (Shaw) and LWAM are to deliver up any FSA Property by making it available for the Applicant to inspect and take copies thereof.

3.    In this order, “FSA Property” has the same meaning as that given in paragraph 2 of the Applicant's interlocutory application dated 24 January 2023, and includes any devices or cloud storage which contained, but no longer contains, any FSA Property.

Interlocutory injunctions

4.    Each of the Respondents be restrained until further order, whether by itself, its officers, employees, agents or howsoever otherwise from using the FSA Property in any way, including but not limited to:

(a)    making contact with any person who was a client of the Applicant or Fortrend Securities Inc (FSI) on or before 16 December 2022; and

(b)    providing trading services in relation to United States securities (Trading Services) to any person who was a client of the Applicant or FSI on or before 16 December 2022.

5.    Until 16 June 2023, or further order, each of First Respondent (Wollermann) and Second Respondent (Lyle) be restrained from canvassing, soliciting, interfering with or enticing, or endeavouring to canvass, solicit, interfere with or entice, from the Applicant or FSI to offer Trading Services to any person who was a client of the Applicant or FSI on or prior to 16 December 2022.

Discovery

6.    Within seven days from the date of these orders, each of the Respondents are to make discovery and allow inspection of the following categories of documents for the period 1 October 2022 to 9 February 2023:

(a)    any FSA Property in their possession or imaged in accordance with order 2 above and the orders of the Honourable Justice Anderson dated 30 January 2023;

(b)    any correspondence (whether by email, text, letter, or otherwise) between any of:

(i)    Lyle and Wollermann; and/or

(ii)    LWAM; and/or

(iii)    any employee of Shaw, and

(iv)    any of the FSA Clients (as defined in the Concise Statement);

(c)    records of any phone calls between any of:

(i)    Lyle and Wollermann; and/or

(ii)    LWAM; and/or

(iii)    any employee of Shaw; and

(iv)    any of the FSA Clients;

(d)    any emails to or from any email addresses ending in "@lylewollermannassetmanagement.com" or "@lyleandwollermannam.com".

(e)    all emails to or from the email address "cwollermann@gmail.com" or "Stephen.Lyle@gmail.com" and any of the following:

(i)    any email address ending in "@fortrend.com.au";

(ii)    Lyle;

(iii)    Wollermann;

(iv)    Shaw or its employees, agents or representatives, and

(f)    new account statements or "welcome letters" prepared by Shaw for FSA Clients.

7.    Within seven days from the date of these orders, the Respondents are to each file an affidavit confirming their compliance with paragraphs 2 and 6 of these orders and paragraph 1 of the orders of the Honourable Justice Anderson made on 30 January 2023.

Further directions

8.    The matter be referred to mediation to be conducted by a mediator that is appointed by the parties or, in default of agreement, a Registrar of the Court, which is to be completed within 21 business days from the date of these orders.

9.    Within two business days of the completion of the mediation, the mediator is to report to the Court on whether the matter has resolved.

10.    On the next available date after the mediator has reported to the Court, the matter be listed for case management.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

ANDERSON J:

1    Fortrend Securities Pty Ltd (Fortrend), by interlocutory application dated 24 January 2023 seeks relief, in a number of ways, from the first respondent, Christopher James Wollermann (Wollermann), the second respondent, Stephen Lyle (Lyle) and their current employer, the third respondent, Shaw and Partners Limited (Shaw).

2    On 25 January 2023, Justice O’Bryan received undertakings from the respondents to preserve certain Fortrend property. This property included:

(a)    property defined in Fortrend’s interlocutory application as “FSA Property”, which is essentially the proprietary and confidential information which is accessible to Fortrend employees (Confidential Information); and

(b)    USB drives, personal mobile phones, personal computers and other device or cloud storage platforms that has the Confidential Information stored on it (the Devices).

3    Justice O’Bryan also made procedural orders for the filing of evidence and submissions to enable this interlocutory application to be heard before me on Wednesday, 1 February 2023.

4    On 30 January 2023, I made orders by consent which required Wollermann and Lyle to make the Devices available to independent experts that specialise in digital and forensic analysis, Forensic IT Pty Ltd (Forensic IT). Forensic IT then conducted a forensic analysis of the Devices, which included: creating forensic images of the data stored on the Devices (so as to preserve the evidence) and also to capture the metadata that exists on the Devices. Mr Scott Andrew Reid, deposes to this process as well as his findings in his affidavit, dated 23 January 2023 (Reid Affidavit)

5    Fortrend now seeks interlocutory injunctions in the form identified below.

8    An interlocutory injunction that each of the Respondents be restrained, whether by itself, its officers, employees, agents or howsoever otherwise from using the FSA Property in any way, including but not limited to:

(a)    Making contact with any person who was a client of the Applicant or FSA on or before 16 December 2023; and

(b)    providing services to any person who was a client of the Applicant or FSI on or before 16 December 2023.

9    An interlocutory injunction that until 16 June 2023, or further order, each of Lyle and Wollermann be restrained from:

(a)    canvassing, soliciting, interfering with or enticing, or endeavouring to canvass, solicit, interfere with or entice, from the Applicant or FSI:

(i)    any director, manager, officer, employee, servant or contractor of or to the Applicant or FSI, whether or not such person would commit a breach of any contract by reason of ceasing to serve or act for the Applicant or FSI; and

(ii)    the custom of any person who was a client of the Applicant or FSI on or prior to 16 December 2023, and

(b)    being a principal, or engaged to act as an adviser or consultant in, or be an employee, agent or officer of, or an adviser or consultant to, any corporation, partnership, joint venture, undertaking, trust or enterprise which carries on a business in competition with, or of a similar kind to, the Applicant.

6    At the hearing on 1 February 2023, senior counsel for Fortrend, Mr Tim North KC, informed me that Fortrend no longer pressed for the injunctive relief in the form of order 9(a)(i) of the interlocutory application, which is the reason for the strike out.

7    Fortrend on this interlocutory application relies on:

(1)    The Reid Affidavit.

(2)    The affidavit of Mr Joseph Burke Forster, Managing Director of Fortrend, dated 23 January 2023 (Forster Affidavit).

8    I marked the Reid Affidavit and the Forster Affidavit collectively as Exhibit A.

9    Fortrend also tendered a services agreement which was executed on 20 October 2022 (Services Agreement) between Shaw and LWAM Pty Ltd (which Mr North KC explained stands for “Lyle Wollermann Asset Management” (LWAM), who were a prospective fourth respondent, and are now joined to this proceeding) which I marked as Exhibit B.

10    The respondents collectively rely upon the following affidavits to oppose the interlocutory injunctions sought:

(1)    Affidavit of Mr Christopher James Wollermann dated, 30 January 2023 (Wollermann Affidavit).

(2)    Affidavit of Mr Stephen Matthew Lyle, dated 30 January 2023 (Lyle Affidavit).

(3)    Affidavit of Mr Malcolm Cameron, State Manager, Shaw, dated 30 January 2023.

(4)    Affidavit of Mr Christopher James Wollermann, dated 1 February 2023.

11    I marked the respondents’ affidavits collectively as Exhibit C.

background

12    The affidavit evidence filed by the parties deposes to the following relevant background facts.

13    Fortrend is a specialist broker which enables Australian investors to invest in and trade US securities with US domiciled accounts. Fortrend has been providing such services in Australia for over 30 years. Fortrend has maintained relationships with its clients, and stores their Confidential Information on its IT system.

14    Wollermann and Lyle were employed as advisors at Fortrend. As advisors, Wollermann and Lyle had access to the Confidential Information and were introduced to, and interacted with, all of Fortrend’s existing clients (FSA Clients). Wollermann and Lyle gave notice of their resignations from Fortrend on 16 November 2022. Wollermann and Lyle then joined Shaw after their notice period ended on 16 December 2022. Shaw is a financial services company that also provides stockbroking services that compete with Fortrend.

15    After resigning, a series of correspondence ensued between Mr Forster and Wollermann and Lyle from late November 2022. Mr Forster requested that both Wollermann and Lyle prepare documents to facilitate a client handover to Mr Forster, however Wollermann and Lyle did not respond to this request. On 12 December 2022, Mr Forster instructed his solicitors, Corrs Chambers Westgarth (Corrs) to send a letter to both Wollermann and Lyle, requesting they return their mobile phones, laptops and delete all emails and other Confidential Information they had in their possession. Wollermann and Lyle responded to this request, in writing, on 16 and 14 December 2022 respectively. In their response, Wollermann and Lyle stated that they did not have any Confidential Information in their possession as it had been previously deleted. A summary of the key correspondence can be found below.

16    On 16 December 2022, Lyle wrote to Fortrend’s solicitors, Corrs, stating in part:

I also confirm that I have deleted all Fortrend material in my possession from any other computer or cloud storage. Other than the items referred to above (the mobile phone, building pass, and key), I've returned all Fortrend property to Fortrend (and have not retained any of it).

17    On 16 December 2022, Wollermann wrote to Fortrend stating in part:

I have not deleted any Fortrend client information at all. You may not be aware (but Joe is) that all client work and information is on a shared drive referred to as the F: drive. All Fortrend's information is there.

I did reset my phone before returning it. This was to remove my personal applications and data. However, for you and Joe to claim that large amounts of Fortrend data was on my phone or was lost is just untrue.

18    At some point after their notice period ended with Fortrend, Wollermann and Lyle joined Shaw as Senior Portfolio Managers.

19    On 22 December 2022, Seyfarth Shaw, solicitors for Wollermann and Lyle, wrote to Fortrend stating in part:

We understand that Messrs Lyle and Wollermann have written to you about [the Confidentiality Obligations], and confirmed that they have abided by all of their obligations in respect of confidential information, and will continue to do so.

20    On 23 December 2022, Fortrend began to receive “Automated Customer Account Transfer Service” (ACATS) requests. ACATS are received by Fortrend when a FSA Client seeks to move to a new broker.

21    Fortrend alleges that some 43 clients have moved from Fortrend to Shaw in the period between 16 December 2022 and 16 January 2023, being over the Christmas period, when many people are on holidays. Mr Forster, in the Forster Affidavit at [109], gave evidence of the 43 clients have submitted ACATS to move their accounts to Shaw.

22    On 10 January 2023, Fortrend’s solicitors, Corrs, received a letter from Mr Stephen Arnison, General Counsel - Company Secretary of Shaw, whereby Shaw denied that it had any of the Confidential Information in its possession:

For the record, Shaw and its employees including the Melbourne State Manager and Office Manager are not in possession of any confidential information of Fortrend's and have not breached Australian Privacy Laws. Any action, including for interim relief, against Shaw will be opposed and we will rely on this letter on the question of costs.

The matters you have raised solely relate to the Former Fortrend Employees. There is no reason to send us Fortrend Securities Inc's legal letter to us other than to smear the Former Fortrend Employees. These are confidential matters relating to their employment and any correspondence should be addressed directly to them.

Fortrend’s claim

23    Fortrend alleges that the evidence it has filed in this interlocutory application establishes that Wollermann and Lyle:

(a)    downloaded large amounts of the Confidential Information onto unauthorised USB devices prior to them giving their notices of resignation, including client files and confidential employee files for other staff of Fortrend;

(b)    provided some, if not all, of that information to Shaw; and

(c)    told FSA Clients they were leaving Fortrend to join Shaw and solicited their custom.

24    Fortrend further alleges that Shaw, through Wollermann and Lyle and their Office Manager Ms Lisa Taranto:

(a)    used the Confidential Information to make unsolicited contact with FSA Clients about leaving Fortrend and joining Shaw; and

(b)    provided those FSA Clients with “Welcome Letters” which requested those clients to falsely attest it was they who had contacted Shaw.

25    Fortrend alleges that as a result of this conduct, Fortrend has lost those 43 FSA Clients to Shaw, which is stated to be worth an aggregate value of $28 million AUD, and has had its fees decreased to almost a quarter of their pre-October 2022 level.

26    Wollermann and Lyle were employed pursuant to letters of employment dated 14 September 2019 and 8 May 2012 respectively. The terms and conditions of the letters of employment provided, relevantly, for:

(a)    the confidentiality of Fortrend’s “Confidential Information” which was proprietary to Fortrend (see: cll 10.1 to 10.10);

(b)    non-solicitation obligations (cl 11.2); and

(c)    non-compete obligations (cl 11.3).

27    Fortrend stores its Confidential Information in several places, namely:

(a)    on the devices it provides its employees, in particular their mobile phones, desktop computers, and laptops;

(b)    on its office servers, which are divided into the “F-Drive”, for client material, and “G-Drive” for personnel files;

(c)    in “StoneX”, which is Fortrend’s US-based clearing firm; and

(d)    in “Tracker” software, which is a program that stores communications between Fortrend, through its advisors, and FSA Clients.

28    Wollermann and Lyle were provided with a phone and desktop each (Lyle also had a laptop), and had access to Fortrend’s servers.

29    On 10 October 2022, Wollermann and Lyle incorporated LWAM. This was not disclosed to Mr Forster.

30    On 20 October 2022, LWAM and Shaw executed a Services Agreement which expressed the terms upon which LWAM would provide financial services to clients and Shaw would provide infrastructure and brokerage services to LWAM and its clients. Shaw would pay a commission based upon a percentage of the brokerage which LWAM transacted for its clients. The Services Agreement provided a generous and substantial signing bonus and asset based bonus to incentivise Wollermann and Lyle to introduce clients onto the Shaw brokerage platform. The bonus was payable in two instalments, the first within 30 days of the commencement of the Services Agreement and the second within 30 days of the first anniversary of the commencement date.

31    The Services Agreement also provided for an asset-based bonus which was payable if Wollermann and Lyle introduced clients to Shaw with a total asset base of [REDACTED]. This asset-based bonus was for an amount of [REDACTED]. Both the signing bonus and the asset-based bonus were to be repaid to Shaw in the event that Lyle, Wollermann or Shaw terminated the Services Agreement prior to its sixth year anniversary.

Reid’s evidence

32    Fortrend alleges that the Reid Affidavit provides evidence that from mid-October 2022, Wollermann and Lyle at different times connected a number of USB drives to their desktops. Those devices are referred to as the:

(a)    SanDisk Cruzer;

(b)    USB 2;

(c)    Lexar Firefly;

(d)    WD Passport; and

(e)    as well as three other USB devices with the serial numbers: “04009522050121083042”, “20120926571200000”, and “4C530001430603113515”, respectively,

(collectively, the USBs).

33    Fortrend alleges that none of the USBs are in its possession, nor were they known about by Mr Forster prior to Mr Reid’s involvement. The Reid Affidavit explains that one or more of the USBs were connected to Wollermann and Lyle’s desktop computers on at least eight occasions between late October 2022 and the date of Lyle and Wollermann’s resignation. On each occasion the USBs were connected (often multiple USBs at once), there were often dozens of interactions that followed which is indicative of the Confidential Information being saved onto the USBs.

34    The Reid Affidavit deposes to Mr Reid’s forensic analysis, to date, of the Devices that he was provided with, including:

(a)    Apple iPhone 11 Pro model A2215 with serial number C39D25MCN6Y6 (Wollermann Phone);

(b)    HP Pavilion desktop computer model 570-p059a with serial number CNV74510SG (Wollermann Desktop). ]Apple iPhone 11 Pro model A2215 with serial number C39D2187N6Y6 (Lyle Phone, together with the Wollermann Phone, the Phones);

(c)    Lenovo ThinkCentre desktop computer model M73 with serial number PB00MX0G (Lyle Desktop, together with the Wollermann Desktop, the Desktops); and

(d)    Dell lnspiron 3563 laptop with service tag 20D7X23 (Lyle Laptop).

35    Mr Reid’s evidence reveals the following:

(a)    It is likely that the Phones were wiped and reset to their original settings and activated for a new user (a process which would delete all previous user data, including emails, text messages, call history and the address book). Based on data extracted from the phones this is likely to have occurred on or shortly before:

(i)    18 November 2022 for the Lyle Phone; and

(ii)    1 December 2022 for the Wollermann Phone.

(b)    In relation to the Lyle Laptop, it is likely that on or about 16 November 2022, the Windows operating system was reset to factory defaults, a process which would delete user activity, internet history, event logs, user documents and locally stored emails. Mr Reid to date has not identified any records relevant to the scope of his engagement and there is a paucity of user records or activity, both of which are consistent with limited usage of the Lyle Laptop subsequent to the reset process.

(c)    In relation to the Desktops, between 20 September 2022 and 18 November 2022, interactions occurred on the Desktops that are consistent with documents being downloaded or saved from the Desktops and/or the FSA network share drives (“F-Drive” and “G-Drive”) to USB thumb drives or portable hard drives. This conclusion is supported by Mr Reid’s findings that:

(i)    there are records of zip archive files being saved or created on a USB device, and whose titles appear to relate to FSA client accounts;

(ii)    there is a characteristic and repeated pattern of USB device connection and disconnection activity bracketing interactions with folders on the FSA F-Drive network share, and folders which appear to be located on USB devices;

(iii)    there are recorded interactions with folders on USB devices with titles which appear to correspond to equivalent folders on the FSA F-Drive network share, and which Mr Reid understands are named for FSA client accounts;

(iv)    there are recorded Windows event logs indicating the viewing or editing of Excel documents at times proximate to records of USB device connection and disconnection;

(v)    the number of recovered USB-related events recorded over October and November 2022 in connection with the Wollermann Desktop, account for 92% of all USB-related events for that year, while the corresponding events on the Lyle Desktop, account for 80.85% of all USB-related events for that year; and

(vi)    the number of recovered folder interactions recorded over October and November 2022 in connection with the Wollermann Desktop, account for 89.8% of such events for that year. This metric is less pronounced for the Lyle Desktop, with these months accounting for around 33% of activity for that year.

(d)    In relation to the Wollermann Desktop, there are internet history records which suggest that between May and November 2022, there was:

(i)    access to folders within the FSA G-Drive network share, which Mr Forster has said Mr Wollermann was not authorised to access;

(ii)    access to the “Box” cloud storage service for Fortrend Securities Inc (a company related to Fortrend), which Mr Forster has said that Mr Wollermann was not authorised to access. Box is a cloud-based file sharing and content management service that allows users to access, store, and share files and folders online.

(e)    In relation to the Wollermann Desktop there are internet history records which show that in November 2022 there were enquiries made around the merging or consolidation of contact information from the Exchange application on an iPhone with an Apple iCloud account.

36    The Reid Affidavit deposes to search activity which Lyle undertook on the Lyle Phone on 22 November 2022 between 5:58 pm and 6:05 pm. The search history indicates that Mr Lyle accessed Microsoft Outlook through the Safari internet browser rather than through the dedicated Outlook email application, which was not installed on the Lyle Phone. The Reid Affidavit explains that emails or other data input through Outlook online in Safari would not be saved as files on the device itself, but in the Microsoft cloud for the specific user.

37    Mr Reid deposed to undertaking a forensic analysis of the hard drive contained in the Lyle Laptop using forensic analysis programs “Magnet Axiom” and “USB Detective”. That analysis revealed that the Windows 10 home operating system present on the hard drive from the Lyle Laptop was recorded as being installed on 17 November 2022 (the day after Lyle gave his notice of resignation). Mr Reid deposed that he was not able to identify any significant user activity in terms of USB connectivity, file or folder access, or internet history on the Lyle Laptop. Mr Reid expressed this opinion based on the recorded Windows installation date, along with the absence of records showing significant user activity, and the content of log files relating to the Windows installation process. Mr Reid’s evidence was that it is likely that the Lyle Laptop was reset to its factory settings on 16 November 2022, with the re-installation and setup completed on 17 November 2022. This had the effect of deleting all previous user data.

38    Mr Reid then undertook an analysis of the Desktops and the interactions the Desktops had with the USBs and other devices. Mr Reid gave evidence that on 18 November 2022 files and folders were accessed and copied from either the Wollermann Desktop or the Fortrend F-Drive network and shared to the Lexar Firefly and WED Passport devices.

39    Mr Reid also undertook analysis on the interactions of the Wollermann Desktop and Lyle Desktop on various dates between 20 September 2022 and 18 November 2022 and concluded that there is evidence that the Fortrend server was accessed and documents were accessed and saved onto the Lexar Firefly. Mr Reid also deposes to a similar process occurring, wherein documents were saved onto the SanDisk Cruzer.

40    Mr Reid, in his expert evidence deposed to internet searches being conducted on the Wollermann Desktop on 10 November 2022, wherein certain URL links were accessed which were consistent with someone saving the contact list from the Outlook application on an iPhone to a separate Apple iCloud account, and on that same day, Wollermann conducted internet searches on how to back up his iPhone contacts to his personal Gmail account.

41    Fortrend alleges that the evidence of Mr Reid and Mr Forster, in respect of the USBs, supports the conclusions that:

(a)    at least 50 individual client folders were accessed and downloaded onto the USBs, often saved with the name “NEW ACCOUNTS DOCUMENTS”;\

(b)    personal employment folders of employees other than Wollermann and Lyle, including the entire G-Drive, were accessed and downloaded onto the USBs;

(c)    client summary files of all FSA Clients from StoneX were downloaded onto the USBs; and

(d)    files were saved onto the USBs which are no longer in Fortrend’s possession, and which have suspicious names such as “Template”, “Primary Offerings 11.14.22.xlsx” and “Proposed CDs”.

42    Fortrend alleges that the evidence discloses that the Confidential Information, in particular, client contact information and account details, was appropriated by Wollermann and Lyle, provided to Shaw, and used by Shaw to solicit FSA Clients.

43    Fortrend alleges that the evidence discloses that Wollermann and Lyle made undisclosed and unauthorised copies of the Confidential Information on personal USBs, denied having retained that material, but then Shaw prepared Welcome Letters and ACATS which could only have been prepared if Shaw had the Confidential Information.

Respondents’ defence

Wollermann and Lyle’s evidence

44    The affidavits filed by Wollermann, Lyle and Cameron in opposition to the interlocutory injunctions deny any unlawful conduct took place on the respondents’ behalf.

45    The Wollermann Affidavit, after providing a summary of his employment history and the commencement of his employment with Fortrend, denies that “almost all of [Fortrend’s] clients were brought into the business” by Mr Forster. Wollermann deposed that both he and Lyle expanded the assets under management by Fortrend from around $45 million to $200 million as at December 2022. Wollermann estimates that both he and Lyle introduced around 60-70% of Fortrend’s current relationships to the business, contributing approximately 80% of Fortrend’s revenue.

46    Wollermann denies that the names and contact information of clients is Confidential Information. Wollermann alleges that the FSA Clients’ information is within the public domain, and this is particularly the case for corporate entities, whose information can be obtained via an ASIC search.

47    Wollermann deposes that many of the Fortrend’s clients have been serviced by him and Lyle for many years, and they can recall individual telephone numbers, contact details, addresses and the financial circumstances of these clients.

48    For the purpose of preparing his affidavit, Wollermann demonstrated that he was able to compile a list of contact information for almost all of the clients identified at [80] of the Forster Affidavit within 20 minutes via searches on Google.

49    Wollermann denies improperly downloading and taking any documents from Fortrend’s computer systems. Wollermann deposed to not having any such documents in his possession, custody or control, and to have not had any such documents in his possession since the cessation of his employment with Fortrend on 16 December 2022. Wollermann’s evidence was that the only information he had in his possession following the cessation of his employment were the contact details for particular clients whose details he knew from memory, and much of which is otherwise available in the public domain.

50    Wollermann alleges that Fortrend’s IT system is deficient and prevented the firm from operating efficiently. As a result of this deficiency, Wollermann deposed that USB storage devices were required to download information on the Fortrend IT system to take home and to enable employees to operate remotely.

51    Wollermann’s evidence was that almost every Fortrend employee regularly used external storage devices such as USBs to enable them to perform their work remotely and in the office. Wollermann explained that the use of external storage devices increased significantly during the pandemic and Wollermann was not able to work from home without the routine use of external storage devices. This was Wollermann’s reason for regularly taking home the USBs and other storage devices, which contained Fortrend’s Confidential Information. Wollermann claims that, after ceasing his employment with Fortrend on 16 December 2022, he did not possess any of the Devices which contained Confidential Information.

52    Wollermann deposed that both he and Lyle met with representatives of Shaw on various occasions in October and November 2022. During these meetings, Shaw never asked Wollermann or Lyle to bring across Confidential Information to Shaw, or to poach any clients of Fortrend, nor did Wollermann or Lyle offer to do so.

53    Wollermann deposed that both he and Lyle arranged for the incorporation of LWAM, which occurred on 10 October 2022. The reason for the establishment of LWAM was to facilitate Wollermann and Lyle’s engagement with Shaw. That is, the structure that Lyle and Wollermann discussed with Shaw, and was ultimately agreed, was that they would provide services to Shaw via a services agreement between Shaw and a corporate entity that Lyle and Wollermann controlled. That corporate entity was LWAM.

54    Wollermann deposed to not taking any steps to facilitate the transfers of any client accounts to Shaw during his employment with Fortrend. After his employment ended, Wollermann immediately began to contact clients and informed them that he was to commence a role at Shaw on 19 December 2022. Wollermann, in his affidavit, stated that most of those clients expressed a desire to move their accounts to Shaw and where those clients requested to move to Shaw, both he and Lyle facilitated that transfer.

55    Wollermann stated that he initiated the transfer of a client to Shaw without the use of any Confidential Information of Fortrend. Wollermann identified that, in doing so, there was only a small amount of information that was required, and all of the required information was either provided by the client or was publicly available through an ASIC company search.

56    Wollermann denies that he or Lyle used any Confidential Information to facilitate the transfer of clients to Shaw.

57    Wollermann deposed to certain contact which Mr Forster had with FSA Clients, however it is unnecessary for present purposes to go into the detail of those communications.

58    Lyle, in his affidavit, deposed to much of the same background facts that were the subject of the Wollermann Affidavit. It would serve no purpose to repeat those matters again. However, I mention the following salient matters:

(a)    Lyle rejected that the names and contact details of most of Fortrend’s clients were “confidential information” belonging to Fortrend. Lyle deposed that, over the many years, his regular dealings with the FSA Clients gave him a working knowledge and familiarity of their names and contact details, especially those clients with the larger asset portfolios. Lyle identified that he knew the names and investment entities of the clients and, with that basic information alone, Lyle’s evidence was that a simple Google search would reveal the names of those clients. Lyle stated that many of the clients also invest through corporate entities, and the information about those entities is available via an ASIC register.

(b)    Lyle also deposed in his affidavit to his dealings with Mr Forster after giving notice of his resignation on 18 November 2022.

Cameron’s evidence

59    Mr Cameron is the Victorian State Manager of Shaw. In his affidavit dated 31 January 2023, Mr Cameron outlined how many advisors that have commenced working at Shaw also, similarly, had post-employment and continuing obligations to their former employers or firms not to use or disclose their Confidential Information. Mr Cameron deposed to Shaw’s expectation that all of its advisors fully comply with all obligations that apply to them.

60    Mr Cameron acknowledged that while Shaw benefits from advisors bringing their clients into Shaw’s business, very little information is required to transfer a client from another firm to Shaw. Mr Cameron deposed that all information necessary is either available on the public record (particularly for corporate entities, which can be obtained via an ASIC search) or can be provided directly from a transferring client.

61    Mr Cameron deposed that, in his experience, the contact details of clients such as phone, email addresses and addresses are usually within the direct knowledge of advisors, or are very quickly and easily obtained by advisors as a result of the working knowledge and familiarity they have developed with clients over many years.

62    Mr Cameron first met with Wollermann and Lyle on 4 October 2022. Further meetings were had in early October and a services agreement between Shaw and LWAM was signed on or about 20 October 2022.

63    Mr Cameron deposed that, to the best of his knowledge and belief, Shaw did not ask for, and had not received, any Confidential Information belonging to Fortrend.

64    Mr Cameron deposed to Lyle and Wollermann contacting Fortrend Clients after commencing as advisors with Shaw on 19 December 2022. Lyle and Wollermann oversaw the process of transferring FSA Clients to Shaw.

65    It is apparent from the above summary of the evidence filed by Fortrend on the one hand; and Wollermann, Lyle and Shaw on the other, that there is a substantial factual controversy on the matters deposed to by the parties which cannot be ultimately resolved on the hearing of this interlocutory application and must await determination at trial where the deponents’ evidence may be tested and findings made by the Court accordingly.

the Hearing

66    During the hearing on 1 February 2023, Senior Counsel for the respondents, Mr Richard Dalton KC made a key admission. Mr Dalton KC drew the Court’s attention to [79] of the Wollermann Affidavit, which provided evidence that Wollermann had viewed, but did not download a report on the StoneX system which contained a number of key client details. These client details included the customer’s “rank” based on their asset value against each of the other FSA Clients. These rankings also appeared on the ACATS. I proposed to Mr Dalton KC that such an action is tantamount to accessing the Confidential Information of Fortrend. Mr Dalton KC agreed that such an action is indeed a misuse of Confidential Information. My discussion with Mr Dalton KC was as follows:

HIS HONOUR: So he has accessed the confidential information. He has used that confidential information to produce a list which had the abbreviated client names together with the asset value ranking, not the asset values themselves. The handwritten numbers on some of the ACATS documentation is referable to the ranking in this list. He no longer has the list in his possession, custody or control “as I destroyed it in or about 26 December 2022”:

Lyle and I oversaw the completion of the ACATS documents in respect of the 25 clients that transferred to Shaw. Together with Shaw’s administrative staff, we used the handwritten numbers to prioritise the processing of the ACATS.

…

HIS HONOUR: Isn’t that an admission of use of confidential information of the applicant?

MR DALTON: It is.

HIS HONOUR: It is, isn’t it?.

MR DALTON: Yes, your Honour, it is.

relevant principles

67    The principles relevant to the grant of an interlocutory injunction are well-known and were not in dispute between the parties. The first issue is whether the applicant has made out a prima facie case, in the sense of having shown “a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial”: Australian Broadcasting Corporation v O’Neill [2006] HCA 46; (2006) 227 CLR at 82 (O’Neill) [65]. What is a “sufficient likelihood” depends upon the nature of the rights asserted and the practical consequences likely to flow from the orders sought: Beecham Group Limited v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618, 622, approved in O’Neill at 82 [65].

68    The second issue is whether the inconvenience or injury which the applicant would be likely to suffer were an injunction refused outweighs the injury which the defendant would suffer were an injunction granted.

Prima facie case – Confidential Information

69    I am satisfied that Fortrend has made out a prima facie case that Wollermann and Lyle breached the confidentiality obligations imposed by cl 10.2 of the letters of employment to keep confidential all of Fortrend’s Confidential Information which was broadly defined and included customer lists and other information concerning Fortrend and its customers. I am also satisfied that Fortrend has established a prima facie case that Wollermann and Lyle breached cl 10.3 of the letters of employment by using Fortrend’s Confidential Information for the benefit of Shaw and LWAM. I am of this opinion for the reasons that follow.

70    On 10 October 2022, whilst still employees of Fortrend, Wollermann and Lyle entered into the Services Agreement with Shaw through LWAM, the entity which they had recently incorporated. The Services Agreement provided a substantial sign-on bonus, half of which was to be payable within 30 days of commencing with Shaw, and the balance payable on the first anniversary of the commencement date. The Services Agreement also provided for a substantial asset based bonus payment of [REDACTED] if Wollermann and Lyle, through LWAM, could introduce clients to Shaw’s brokerage platform.

71    The terms of the Services Agreement were structured to provide a substantial monetary reward to Wollermann and Lyle for introducing clients to Shaw. The evidence is clear that the only clients which Wollermann and Lyle had access to were Fortrend’s clients. There is no evidence that Wollermann and Lyle would be bringing any clients other than Fortrend clients to Shaw. The Services Agreement was executed on 20 October 2022, which was well prior to Wollermann and Lyle providing their notice of resignation to Fortrend on 16 November 2022. The entry into the Services Agreement prior to termination of their employment with Fortrend provides important context to Wollermann and Lyle’s conduct in accessing Fortrend’s IT systems and downloading information and data onto the USBs which falls within the meaning of Confidential Information in cl 10.10 of the letters of employment.

72    The evidence and expert opinion of Mr Reid provides persuasive evidence that Wollermann and Lyle, whilst still employed by Fortrend between September and November 2022, downloaded substantial amounts of Confidential Information from their desktop computers to unauthorised USB devices. This Confidential Information included client files and confidential employee files for other staff of Fortrend. Wollermann and Lyle have not provided any satisfactory explanation as to why, whilst still employed by Fortrend during the period of September to November 2022, they undertook numerous downloads of large amounts of Confidential Information.

73    Wollermann’s explanation was that during the months of October and November 2022, he was working in a “hybrid way” that is, partly in the office and partly from home, and he therefore downloaded information which he required to work from his desktop computer to the USBs.

74    Lyle, in his affidavit, gave a similar explanation.

75    This does not however explain the substantial increase in downloads from the Desktops and Fortrend’s IT system which spiked in October and November 2022. Mr Reid’s evidence was that USB download events in connection with Wollermann’s desktop in October and November 2022 accounted for 92% of all USB related events in that year, while the events on Lyle’s Desktop accounted for 80.85% of all USB related events for that year. The substantial increase in this USB related activity in October and November 2022 is not explained by Wollermann or Lyle in their evidence.

76    Mr Reid, in his affidavit, detailed how Wollermann and Lyle’s mobile phones were reset to the manufacturer’s default settings and which had the effect of deleting all previous search histories. This occurred on or about 18 November 2022 for the Lyle Phone and 1 December 2022 for the Wollermann Phone.

77    Wollermann and Lyle, in their affidavit evidence, have not satisfactorily explained their conduct and have failed to provide an answer to the irregularities identified by Mr Reid in his interrogation and analysis of the Desktops, the Lyle Laptop and the Fortrend IT system generally. Mr Reid’s evidence, in my opinion, provides a sound foundation upon which to find that Fortrend has made out a strong prima facie case that Wollermann and Lyle had breached the confidentiality obligations imposed by cl 10.2 and 10.3 of the their letters of employment.

78    Wollermann admits, at [75] of his affidavit, that in about November 2022 (whilst still an employee of Fortrend), he compiled a list of the most significant clients that Lyle and he serviced and rated them by asset value. Wollermann deposed that he had a very clear picture of where the clients ranked (by asset value) as he was familiar with their accounts. But in compiling the list, Wollermann undertook a check in which he searched and viewed a report on the StoneX system, which is Confidential Information of Fortrend. The list on the StoneX system contained the abbreviated names of Fortrend’s clients, together with the asset value ranking but not the asset values themselves. Wollermann admits that the handwritten numbers on some of the ACATS is referrable to the ranking in the list he had prepared after viewing a report on the StoneX system. Wollermann no longer has the list in his possession, custody or control as he destroyed it on about 26 December 2022. Wollermann admits that he and Lyle oversaw the completion of the ACATS in respect of the clients that transferred to Shaw, together with Shaw’s administrative staff. Wollermann deposed to using the handwritten client rankings to prioritise the processing of the ACATS.

79    Lyle, in his affidavit at [97], agrees that there were some handwritten numbers on the ACATS. Lyle agrees that these numbers were attached to the ACATS to rank the priority of the client in terms of the size of their portfolio. At the time this occurred (November 2022), Lyle recalls that Wollermann prepared a list of clients, and that list contained the name of the client, their contact details and it was in ranked order. Lyle deposes to the names, contact details and rankings as being familiar to him given his work at Fortrend. Lyle agrees that he and Wollermann oversaw the filling out of the ACATS together with the assistance of Shaw’s administrative staff.

80    The admissions of Wollermann and Lyle that they had, in November 2022, taken Confidential Information relating to FSA Clients and used that information to rank the clients in terms of the size of their portfolio to assist in prioritising the transfer of those clients from Fortrend to Shaw is strong prima facie evidence of breach of the confidentiality obligations in the letters of employment.

81    Wollermann in his affidavit at [48] acknowledges that he and Lyle would be responsible for the client relationships that they brought to Shaw.

82    I am also satisfied on the evidence that Fortrend has established a prima facie case against Shaw that it has aided and abetted, counselled and procured and was knowingly concerned in or a party to Wollermann and Lyle’s breaches of cll 10.2 and 10.3 of their letters of employment. I am of this opinion because Mr Cameron, the State Manager for Shaw, makes clear in his affidavit that many of the client advisors who commence working with Shaw have post-employment obligations to their former employer or firm. Mr Cameron acknowledges that client advisors have continuing obligations to those former employers or firms not to use or disclose Confidential Information belonging to the former employer or firm. I am satisfied on the evidence that Shaw knew, or reasonably ought to have known, in the discussions which it had with Wollermann and Lyle commencing on 4 October 2022, that they would have been or were likely to have been subject to confidentiality obligations under the terms of their employment with Fortrend and that those confidentiality obligations would continue after they had ceased working for Fortrend.

83    The speed at which the ACATS were completed to effect the transfer of Fortrend’s clients to Shaw provides a basis to infer that Wollermann and Lyle, with the assistance of Shaw’s administrative staff, commenced the process of preparing the ACATS transfer documentation prior to Wollermann’s and Lyle’s termination on 16 December 2022. For example, the ACATS for [REDACTED] were signed on Saturday, 17 December 2022; the ACATS for [REDACTED] were signed on Sunday, 18 December 2022 and the ACATS for [REDACTED] were signed on 21 December 2022. In addition, the accounts statements submitted with each ACATS was the statement for the month of October 2022 rather than the most recently available Fortrend statement which would have been for November 2022. Each of the ACATS submitted had a Fortrend accounts statement which was one month out of date and had dates prior to Wollermann and Lyle’s termination on 16 December 2022. I am satisfied on the evidence that administrative staff at Shaw provided administrative assistance to facilitate the transfer of Fortrend’s clients to Shaw prior to Wollermann and Lyle’s termination on 16 December 2022.

Prima facie case - Non-Solicitation and Non-Compete Obligations

84    The non-solicitation and non-compete obligations in Wollermann and Lyle’s letters of employment are in identical terms save for cl 11.3(b) in Lyle’s letter of employment which has the following additional words which seek to clarify the contractual term, and do not appear in Wollermann’s letter of employment:

To be clear, Fortrend is a specialist in “overseas” markets. If you go to work in “domestic” markets, we will not be concerned. It has been our experience that by working at Fortrend you will develop specialist skills in overseas markets. You may not work for an Australian company dealing in overseas markets for six months.

85    The terms of the restraints in the letters of employment are as follows.

11.2    Non Solicitation

You will not, for a period of 6 months following the termination of your employment, without the prior written consent of Fortrend, either on your own account or for any other person canvass, solicit, interfere with or entice or endeavour to canvass, solicit, interfere with or entice from Fortrend:

…

(b)    the custom of any person who:

(i)     has been or was during your employment with Fortrend a client of Fortrend; or

(ii)     is or was at the time of the termination of your employment a client of Fortrend.

11.3    Restraint

You will not, without the prior written consent of Fortrend, for a period of 6 months from the date of the termination of your employment, be as principal interested or engaged or act as an adviser or consultant in, or be an employee, agent or officer of, or an adviser or consultant to:

(a)    any corporation, partnership, joint venture, undertaking, trust or enterprise business (Business) which carries on a business of a similar kind to that of Fortrend; or

(b)    Any Business which competes with the business of Fortrend. [With the Lyle letter of employment having the additional words]: To be clear, Fortrend is a specialist in "overseas" markets. If you go to work in "domestic" markets, we will not be concerned. It has been our experience that by working at Fortrend you will develop specialist skills in overseas markets. You may not work for an Australian company dealing in overseas markets for six months.

86    I am satisfied on the evidence that Wollermann and Lyle have breached the non-solicitation obligation in cl 11.2 and the non-compete obligation in cl 11.3 of their letters of employment. The evidence to which I have referred establishes that Wollermann and Lyle have taken Confidential Information of Fortrend in October and November 2022, prior to termination of their employment with Fortrend, and actively contacted Fortrend’s clients from at least 17 December 2022 to promote their transfer to Shaw’s brokering platform. It is clear from the terms of the Services Agreement that Wollermann and Lyle had a substantial financial incentive to transfer Fortrend’s clients to Shaw.

87    The respondents, by their affidavit material, do not contest that the non-solicitation and non-compete obligations were breached, but rather, submit that the contractual restraints are unenforceable.

88    The onus is on Fortrend to displace the presumption that the covenants in cll 11.2 and 11.3, which are self-evidently restraints of trade, are unenforceable. That requires Fortrend to demonstrate that the restraints are reasonable. Proving reasonableness of the restraints requires:

(a)    first, the identification of the legitimate interest of the employer; and

(g)    second, to consider whether the restraint does no more than is reasonably necessary to protect that legitimate interest.

89    In Liberty Financial Pty Ltd v Jugovic [2021] FCA 607, Beach J held:

(a)    that in addition to protecting confidential information and trade secrets via a post–employment restraint, “an employer has a legitimate interest in protecting its customer/client connections which may include knowledge of, and influence over, the employer’s customers/clients”: at [200];

(b)    the restraints in that case were therefore justified to protect the employer’s “confidential information and customer/client connections”: at [201];

(c)    relevantly, there the employee had been “employed for many years in a highly specialised role which called upon him to have an intimate knowledge of sensitive confidential information” and would be entering a role that is “similar to the role” post the resignation, performing similar services: at [202];

(d)    the previous employer’s information would be “commercially valuable” and cause damage to their business if used even subconsciously or inadvertently, there was a strong case the previous employer had a legitimate business interest in protecting against disclosure or use of that information by a competitor at: [202]-[204]; and

(e)    the employee had the opportunity to develop relationships with clients and acquire a knowledge of their identities and funding preferences and risk appetite: at [205].

90    Fortrend has a legitimate interest in protecting its customer/client relationship which it has developed over the years. I am of the opinion that Fortrend has established a prima facie case that the restraints in cll 11.2 and 11.3 do no more than is reasonably necessary to protect Fortrend’s legitimate commercial interest, and are therefore valid and enforceable restraints of trade. I have reached this conclusion for the following reasons:

(a)    Wollermann and Lyle had access to significant amounts of Fortrend’s Confidential Information.

(b)    Wollermann and Lyle were the face of Fortrend to all the FSA Clients. They were responsible for the day-to-day interactions with FSA Clients and were in this way the embodiment of Fortrend’s goodwill.

(c)    Wollermann and Lyle were the two main advisors at Fortrend, meaning Fortrend required protection from the exact kind of coordinated scheme to appropriate its Confidential Information as I have found Fortrend has established here on a prima facie basis.

(d)    Wollermann and Lyle expressly acknowledged, by cl 11.4 of the letters of employment, that the non-compete and non-solicitation obligations were reasonable.

(e)    Mr Forster expressly discussed the non-solicitation and non-compete obligations with Wollermann and Lyle prior to the signing of the letters of employment.

(f)    The non-solicitation and non-compete obligations are necessarily geographically limited by reason of the specific nature of Fortrend’s business and clients, and that the number of competitors with Fortrend is small is due to its unique business model and regulatory environment. This is also made express in the Lyle’s letter of employment by the sentences at the end of cl 11.3(b).

(g)    The obligations are constrained in scope, by a six-month limitation on Wollermann or Lyle directly contacting FSA Clients for the non-solicitation obligation, and a six-month bar on acting for Fortrend’s few competitors that deal directly in US-based securities.

(h)    There is no limitation on Wollermann or Lyle promoting themselves, or otherwise advertising that they have left Fortrend. There is only a limitation on contact with, and solicitation of, FSA Clients.

(i)    The non-solicitation and non-compete obligations were entered into between competent business people, for a highly lucrative employment agreement with fees earned on a commission basis.

91    I am satisfied on the evidence that the restraints in cll 11.2 and 11.3 are, on a prima facie basis, the minimum required to protect Fortrend’s legitimate interest in preserving its customer relationships which it introduced to Wollermann and Lyle, its commercial know-how and its Confidential Information about those customers which Fortrend provided to Wollermann and Lyle.

Balance of convenience

92    Fortrend has established a prima facie case that the respondents have breached the confidentiality obligations imposed by cll 10.2 and 10.3 of the letters of employment. Fortrend has also established a prima facie case that Wollermann and Lyle have breached the non-solicitation and non-compete obligations in cll 11.2 and 11.3 of their letters of employment which I have found, on a prima facie basis, to be commercially reasonable restraints and enforceable. Further, as Mr Forster has deposed to in the Forster Affidavit at [109], Fortrend has, so far, had 43 clients submit ACATS to move their accounts from Fortrend to Shaw and if an injunction is not granted, Fortrend may experience further losses of its clients. Fortrend, on the evidence, faces the substantial threat that it may lose a substantial number of its clients who will transfer to Shaw’s brokerage platform. In these circumstances, the inconvenience or injury which Fortrend would be likely to suffer were the injunctions refused, in my opinion, outweighs the injury which the respondents would suffer were the injunctions granted. The injunctions are necessary, in my opinion, to preserve the status quo so as to prevent the wholesale transfer to Shaw of Fortrend’s client base.

disposition

93    I will grant the injunctive relief sought by Fortrend, substantially in the form of paragraphs 8 and 9 of its interlocutory application, dated 24 January 2023.

94    I will also make orders for the further conduct of the proceeding.

Associate:

Dated:    9 February 2023