The New South Wales Supreme Court has ordered an accountant to
pay $117,995 in damages after he used his former employer's
confidential information to poach at least 776 clients.
In 2002, Mr Denis Cummins, an accountant, sold his practice to
Commercial & Accounting Services (Camden) Pty Ltd (Company).
Following the sale, Mr Cummins continued to work for the Company 17
hours per week. The agreement for sale contained a clause
that restrained Mr Cummins from competing against the Company for a
period of at least 3 years within the radius of 10 kilometres from
the business address of the Company's accounting practice.
In early 2009, Mr Cummins told the Company that he would end his
employment on 30 June 2010 and that he intended starting an
accountancy practice in competition with the Company.
By agreement, the parties ended Mr Cummins' employment early
on 30 June 2009. Mr Cummins communicated to the Company that he
intended on taking 'a half dozen or so clingy clients' and
this was agreed to by the Company.
On 1 July 2009 Mr Cummins wrote to an unknown number of the
Company's clients informing them that he had moved from the
Company and was now practicing in his own firm. The letter
contained an authority for clients to use to transfer their files
from the Company to his new practice. It was claimed by Mr Cummins
that the contact details for these clients were taken from memory
and his own lists, and that Mr Cummins did not use any of the
Company's client lists. This was not accepted by the Court. To
the contrary, the Court determined that Mr Cummins did use the
Company's client lists and that he knew that such client lists
were confidential to the Company.
To determine the appropriate damages for Mr Cummins use of the
Company's confidential information, a robust approach was
applied by the Court. It was determined that 75% of the loss of
goodwill of the Company should be attributed to Mr Cummins actions.
This was calculated to be equal to $117,995, and damages of that
amount were ordered.
Lessons for employers
This case highlights the importance for employers to protect
their confidential information. Adequate contractual protections
should be in place, via a business sale agreement and contract of
employment. Further, proactive controls should be implemented to
prevent the unauthorised use of confidential information.
If you do not have written employment agreements or your
agreements do not contain effective restraints we can provide
agreements that maximise your prospects of preventing employees
taking your clients.
Commercial & Accounting Services (Camden) Pty Ltd v
Cummins  NSWSC 843 (3 August 2011)
Winner - EOWA Employer of Choice for Women Citation 2009, 2010
Winner - Australasian Law Awards Gold Employer of Choice 2011
Finalist - ALB Australasian Law Awards 2008, 2010 and 2011 (Best
Winner - BRW Client Choice Awards 2009 and 2010 - Best Australian
Law Firm (revenue less than $50m)
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