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Haven Insurance Limited v Lombard [2020] NZHC 1248 (5 June 2020)

Last Updated: 6 October 2020

JUDGMENT OF PETERS J

HAVEN INSURANCE LTD v HEINRICH LOMBARD [2020] NZHC 1248 [5 June 2020]

This judgment was delivered by Justice Peters on 5 June 2020 at 4.50 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date: ...................................

Re-delivered at 4.50 pm on 8 June 2020 as per minute of Peters J of the same date

Solicitors: Russell Legal, Auckland
Sharp Tudhope, Tauranga

Counsel: S M Lowery, Auckland

B D Gustafson, Auckland

Copy for: Fifth and Sixth Defendants
Ninth and Tenth Defendants

Table of Contents

Introduction [1]

Causes of action [9]

Evidence [21]

Background

Haven [23]

Mr Brown/ASJ [31]

Events post-termination [35]

New policies/cancellations [39]

Breach of contract — Mr Brown/ASJ [42]

Relevant evidence [44]
Discussion [53]
Where that leaves Mr Brown [59]
Relevant provisions of the agreement [66]
Breach [68]

Breach of confidence — Mr Brown

Elements [69]

Use [76]

Discussion [79]

Conclusion [93]

Mr Brown’s evidence [96]

Breach of fiduciary duty [102]

Damages [103]
Part A — loss of upfront commissions [104]
Account of profits [111]
Part B — consequences of loss of trail commission [117]
Part C — salaried advisers [122]
Part D — internal costs [131]

Other remedies [138]

Counterclaim [140]

Mr Miller/JMC [146]
Breach of contract [150]
Remedies [158]

Mr Carr/B&M [163]
Breach of contract/breach of confidence [170]

Result [173]

Introduction

• [1] On 29 March 2017, Gordon J ordered as follows:¹

(a) That no person shall publish any report of details relating to the [plaintiff’s] clients and/or business practices without the prior leave of the Court;

(b) That no person other than the parties and their legal counsel shall be permitted access to documents or the Court file in these proceedings without the express prior leave of a Judge and only on such terms and conditions as that Judge sees fit.

• [2] These orders stand, pending further order of the Court.

• [3] The plaintiff (“Haven”) is an insurance broker, primarily of life and medical insurance policies.

• [4] With the exception of the tenth defendant (“B&M”), each corporate defendant to this proceeding was Haven’s appointed “adviser” or representative in a particular geographical territory. Advice on insurance products, and other services Haven offers, must be given by a registered financial adviser. Hence the connection between the first and second defendant, third and fourth and so on.

• [5] From August 2016 onwards, each defendant resigned his or its appointment or, in the case of B&M/Mr Carr, Haven terminated the relationship. Haven contends that, thereafter, each defendant solicited Haven’s clients and used Haven’s confidential information to sell those clients new policies and, in doing so, breached contractual or other obligations owed to Haven, causing Haven loss.

• [6] Haven’s proceeding against the first defendant, Mr Heinrich Lombard, is stayed, he having been adjudicated bankrupt.² Haven has discontinued its proceeding against the second defendant, Mr Lombard’s associated company, Status Financial Ltd (in liquidation) (“SFL”), and against the seventh, eighth and eleventh defendants.

¹ Haven Insurance v Lombard [2017] NZHC 596 at [30](a) and (b).

2. Haven Insurance Ltd v Lombard HC Auckland CIV-2017-404-487, 13 February 2018 (Minute of Sargisson AJ).

• [7] Thus the remaining defendants — and to whom I refer hereafter as “the defendants” — are the third, fourth, fifth, sixth, ninth and tenth defendants, being Mr Stephen Brown and the company with which he is associated, All Small Jobs Ltd (“ASJ”); Mr Jack Miller and his associated company, J Miller Consulting Ltd (“JMC”); and Mr Bruce Carr and his associated company, B&M. Mr Carr is Mr Brown’s father-in-law.

• [8] Mr Brown and ASJ appeared and were represented at the hearing. There was no appearance for the other defendants. That said, each had filed a statement of defence and, in the case of Mr Miller and JMC, a counterclaim. I have treated Haven’s claims against Mr Miller and JMC, and Mr Carr and B&M as matters of formal proof. Haven’s claim against these defendants is dealt with at the end of the judgment.

Causes of action

• [9] Haven sues on the following causes of action.

• [10] First, it alleges each defendant was bound by contractual provisions prohibiting the defendant from using confidential information and solicitation of Haven’ clients post-termination.

• [11] Secondly, and alternatively, Haven alleges each defendant owed and breached a duty not to misuse Haven’s confidential information to Haven’s detriment.

• [12] Thirdly, and alternatively, Haven contends each defendant owed and breached fiduciary obligations of loyalty, to avoid making a secret or unauthorised profit, and to ensure no misuse of confidential information.

• [13] As to remedies, first Haven seeks permanent injunctions requiring the defendants to return all documents comprising or including Haven’s confidential information and restraining the defendants from using such information. Secondly, it seeks damages including for lost opportunity.

• [14] For the second and third causes of action, as an alternative to an award of damages, Haven seeks an account of profits received on the sale of the new policies.

There is a particular difficulty with this latter remedy in the case of Mr Brown because in the first instance the profits were derived by Kiwi Assurance Market Ltd (“KAM”), a new company he and his wife incorporated and which, for reasons unknown to me, is not a party to the proceeding. The same difficulty arises with Mr Carr.

• [15] Haven also seeks to recover costs incurred in mitigation, in connection with what are referred to as the “salaried advisers” and for time spent by other Haven personnel.

• [16] Lastly, for the second and third causes of action, Haven seeks an award of exemplary damages.

• [17] Mr Brown and ASJ deny owing the obligations alleged, alternatively breach, alternatively loss, and have pleaded three affirmative defences. The first concerns the reasonableness or otherwise of the contractual clause prohibiting solicitation of Haven clients; the second is an alleged failure by Haven to mitigate; and the third concerns s 27 Property Law Act 2007 and the manner in which a contract of guarantee must be proved.

• [18] In addition, Mr Brown counterclaims for losses he contends he suffered between March and June 2017, at which time Haven had obtained an injunction restraining the defendants from soliciting its clients.

• [19] Mr Miller and JMC have pleaded the first two of the same affirmative defences and JMC has counterclaimed for commission it contends Haven has withheld improperly. There being no appearance for JMC, I dismiss this counterclaim.

• [20] The only pleading I have for Mr Carr and B&M is in response to Haven’s amended statement of claim. By the time of trial Haven had filed its fifth amended statement of claim, so Mr Carr’s pleading has been long overtaken. In any event, I have proceeded on the basis Mr Carr and B&M deny all allegations against them.

Evidence

• [21] With the exception of Mr Brown, I am satisfied each witness gave evidence to the best of their recollection, and the experts — for the plaintiff, Ms Naomi Ballantyne, an expert in the life insurance industry, and Mr Grant Graham, an expert accountant; and Mr John Olsen, also an expert in insurance, and Mr David Petterson, an expert accountant, for the defendants — were all impressive, well qualified and their evidence has been of considerable assistance.

• [22] I have treated all of Mr Brown’s evidence with caution. Mr Brown lied to Haven and to clients shortly before his departure and he also omitted important information from affidavits he swore throughout the proceedings. I have placed little weight on Mr Brown’s evidence as a result.³

Background

Haven

• [23] Haven was incorporated in 2008. Its founder and sole director is Mr Craig Baldwin (references below to “Mr Baldwin” are to Craig Baldwin). Haven derives its income from commissions earned on broking the life and other insurance products to which I have referred. To achieve this end, Haven employees “cold call” members of the public to identify “leads” who might wish to purchase life or other insurance and be qualified, by reason of health, age, financial position and so on, to do so. On occasion, Haven might purchase a “telemarketing list” of potential purchasers but, on the whole, it sources leads through its own efforts.

• [24] Having identified a lead, Haven refers the lead’s contact details to its adviser in the relevant location who progresses matters from there. If the lead wishes to pursue the matter, subsequent steps include the provision of a written recommendation as to the policy best suited; the lead’s completion of an application for cover; the insurer’s

3. By memorandum of 28 May 2020, Haven applied to adduce additional evidence which it contended (further) established Mr Brown had solicited its clients post-termination. I declined this application as I was satisfied Haven had established its breach of confidence claim on the evidence adduced at trial and I did not require further evidence.

offer of insurance; and, ideally, acceptance by the client, and the payment and continued payment of the premium due.

• [25] Identifying a lead is difficult and expensive. Mr Baldwin’s estimate was that it takes up to four hours of telephone calls; that 20 to 40 per cent of leads acquire a policy; and the entire process takes between 30 and 60 days to come to fruition.

• [26] As a general rule, Haven’s advisers are independent contractors and earn on commission only. For administrative convenience, Haven’s practice was to appoint an incorporated company as its adviser in a given location, pursuant to its standard form Introducer Agreement as it was in 2012, and thereafter its Adviser Agreement.⁴ However, the individual defendants, all registered financial advisers at the relevant time, were those who gave advice to clients.

• [27] An insurer pays two commissions to Haven. “Upfront” commission, the most lucrative, is paid on inception of the policy or an increase in cover. This commission may be as much as 200 per cent of the client’s annual premium. The percentage paid reflects the broker’s “persistency” rating, that is the percentage of the policies the broker has placed with the insurer that remain in place.

• [28] If the client cancels the policy or reduces the amount of cover within a period, usually two years, the insurer is entitled to “claw back” some or all of the upfront commission. Haven pays the adviser a proportion of the upfront commission, subject to retention of a sum on account of possible claw back. The substantial upfront commission may tempt a broker to “churn” clients, that is to have the client acquire a new policy shortly after the claw back period has expired so the broker earns another substantial upfront commission. The client will then usually cancel the old policy.

• [29] “Trail” commission, usually about 10 per cent of the annual premium, is paid from the start of year two. The broker ceases to earn trail commission if the insured cancels the policy or notifies the insurer of a change of adviser, as happened in this case.

4. The existence or otherwise of such an agreement is an issue in this case as regards Mr Brown and ASJ.

• [30] Typically, clients will only contact their adviser if something in their personal circumstances changes to make that necessary. Ms Ballantyne’s evidence was that it would be unusual for a broker to have direct contact, as opposed to say a generic email, with an individual client more frequently than every year.

Mr Brown/ASJ

• [31] ASJ was incorporated, by Haven as it turns out, in May 2012. Mr and Mrs Brown were its directors and shareholders, but Mr Brown was the registered financial adviser and he had the face-to-face contact with clients. Mr Brown was in Queenstown until he relocated to Tauranga in 2015.

• [32] Mr Brown terminated his and ASJ’s relationship with Haven on 25 August 2016. As of that date, Haven was receiving trail commission on 211 clients that Mr Brown and ASJ had advised.

• [33] I am satisfied ASJ ceased to trade on termination. As Haven’s losses were suffered after termination, ASJ’s presence adds little to Haven’s case in terms of remedies.

• [34] Post-termination, Mr Brown continued as a financial adviser and insurance broker, in both Tauranga and Queenstown. As I have said, the commissions earned on policies he brokered were paid to KAM, the company which Mr and Mrs Brown incorporated shortly before termination. Each was a director and shareholder.

Events post-termination

• [35] From September 2016, Haven experienced an increase in policy cancellations, these being notified by the insurers. On further analysis, Haven determined the cancellations were by clients the defendants had advised. After enquiries of and communications from such clients, in late February 2017 Haven concluded the defendants were approaching clients they had previously advised, selling them a new policy and then cancelling the Haven-brokered policy, thereby causing Haven an immediate loss of trail commission.
• [36] From February 2017 onwards, Haven recruited seven salaried advisers to shore up the defendants’ former clients. Haven seeks to recover a portion of the costs of these advisers, and an amount to compensate it for time Mr Baldwin and Ms Lindsey Reagan, a senior Haven Manager, spent responding to events.

• [37] Haven commenced this proceeding in late-March 2017. At the same time it obtained an interim injunction restraining the first to eighth defendants from contacting or soliciting past or present Haven clients and from using Haven’s confidential information.⁵

• [38] On 16 June 2017, the Court set aside the injunction as regards Mr Brown and ASJ on the ground Haven had failed to disclose that they disputed executing the written contract on which Haven had relied.⁶

New policies/cancellations

• [39] Post-termination Mr Brown and/or KAM brokered at least 40 new policies for existing Haven clients or leads, thus deriving substantial upfront commissions.⁷ Of the clients who acquired these policies, 37 cancelled their existing Haven-brokered policy.

• [40] Of the 40 policies, 35 were sold to clients Mr Brown had previously advised; three were sold to leads Haven provided to Mr Brown shortly before termination; and two were sold to clients previously advised by SF, another former adviser (“SF clients”). Haven had asked Mr Brown to review these SF clients shortly before termination.

• [41] I turn now to the various causes of action.

⁵ Haven Insurance v Lombard, above n 1.

⁶ Haven Insurance v Lombard [2017] NZHC 1336.

7. This information was provided in a schedule, produced at trial as Exhibit 7. For reasons discussed at trial, I excluded Mr James Hay from consideration.

Breach of contract — Mr Brown/ASJ

• [42] An immediate issue on Haven’s first cause of action is whether it can establish any contractual relationship with Mr Brown and/or ASJ. This is because Haven is unable to produce a copy of any agreement executed by Mr Brown and/or ASJ. Mr Brown and ASJ contend there was no contractual relationship.

• [43] For reasons set out below, I am satisfied Haven contracted with ASJ as its adviser on the terms of Haven’s standard form Introducer Agreement (“agreement”). I do not consider there was any contractual relationship between Haven and Mr Brown. On the evidence before me, ASJ was in breach of contract for a month or two before termination at most. Accordingly, although this issue took up much time at trial, success on this cause of action does not sound in any remedy of consequence to Haven. However, for the sake of completeness, I shall record the evidence that was given and the reasons for my conclusions.

Relevant evidence

• [44] In February 2012, Mr Brown responded to a Haven advertisement seeking advisers. Mr Brown and Mr Geoff Baldwin, Mr Craig Baldwin’s brother, met in Queenstown in March 2012. Geoff Baldwin gave Mr Brown a “flyer” (“flyer”) which set out the commission rates Haven paid its advisers, and a pro forma copy of the agreement. The parties’ accounts differ as to what transpired thereafter.

• [45] Geoff Baldwin’s evidence was he and Mr Brown subsequently discussed aspects of the agreement, particularly the definition of intellectual property; that Mr Brown agreed to sign the agreement; and then he, Geoff Baldwin, arranged to courier execution copies of the agreement and other documents to Mr Brown, sending the following email on 28 March 2012:

Hi Stephen,

I have couriered down the following for you to complete and send back: 1/ Adviser agreement -

(* Intellectual property - this is only with regards to our processes and material etc, not insurance companies actual products that we promote.

2/ [Professional Advisers Association Inc] agreement - please complete 3/ Adviser [contact] form - please complete

Flick me a call if you have any questions and also to discuss the best date for you to fly up here for training.

Cheers GB

• [46] Geoff Baldwin’s evidence was he would not have sent this email but for Mr Brown having said he agreed to Haven’s terms, he referred to the definition of intellectual property because Mr Brown had raised it with him, and he was adamant the courier was sent.

• [47] Two or so weeks after this, Geoff Baldwin arranged for Mr Brown to be trained as an adviser and for Mr Brown to travel to Auckland for this purpose. Again, Geoff Baldwin’s evidence was he would not have organised training for Mr Brown unless Mr Brown had agreed to Haven’s terms.

• [48] Geoff Baldwin emailed Mr Brown regarding the travel arrangements on 10 April 2012. Mr Brown replied, saying he would “get the forms posted [off] today or tomorrow as discussed”. Although Haven submitted “the forms” must have included the executed agreement, I am not persuaded this necessarily follows. Certainly there is no record of any receipt from Mr Brown.

• [49] In May 2012 Haven incorporated ASJ for Mr Brown and asked him to open a bank account for ASJ for receipt of commissions.

• [50] Haven also submitted later actions of Mr Brown are consistent with his having executed the agreement, or at least having agreed to its terms. For instance, in 2013 Mr Brown was content Mr Carr should sign what by then was called the “Adviser Agreement” but was otherwise largely unchanged. Moreover, in February 2015, Mr Brown twice emailed Mr Drew requesting a copy of “the signed contract with Haven as I only have a copy which is not signed”. Haven submitted this constitutes an acknowledgment by Mr Brown that he had signed the agreement.
• [51] Mr Brown’s evidence was quite different. He was adamant neither he nor ASJ executed the agreement or agreed to its terms. Mr Brown’s evidence was he and his wife considered the agreement very “one sided” in several respects, including the claw back provisions and the two year duration of the non-solicitation clause. Mr Brown’s evidence was that Geoff Baldwin said Haven would make any changes Mr Brown wished as Haven were “very keen for me to work with them”. Mr Brown says, as far as he was concerned, the parties’ subsequent dealings were on the basis of the information in the flyer. Mr Brown also denied receiving the documents said to have been couriered.

• [52] Geoff Baldwin denied this latter conversation. Aside from anything else, and for obvious reasons, Mr Baldwin said Haven would never have taken on anyone who was objecting to its non-solicitation clause.

Discussion

• [53] My reasons for finding Haven contracted with ASJ on the terms of the agreement, but not with Mr Brown, are these.

• [54] First, executed copy of the agreement or not, I am satisfied ASJ, through Mr Brown, assented to the terms of the agreement. I also accept Geoff Baldwin’s evidence his subsequent actions — the content of his email of 28 March 2012, organising the travel/training as did, having ASJ incorporated — can only be explained by Mr Brown having advised assent to the terms of the agreement. Likewise, Mr Brown would not have arranged for Mr Carr to execute the Adviser Agreement if he, Mr Brown, considered it unacceptable.

• [55] As to why Haven must be taken to have contracted with ASJ, rather than Mr Brown, first, it was Haven’s usual practice to appoint a company, not an individual, as adviser.

• [56] Secondly, the terms of the agreement provide Haven will pay commission “to the adviser”. Haven paid commissions to ASJ and, as I have said, having attended to ASJ’s incorporation, asked Mr Brown to open a bank account for ASJ for that very reason.
• [57] Thirdly, Haven paid commissions to advisers on invoices it, Haven, prepared. Likewise, it charged claw back to advisers on invoices it prepared. Those relevant to this case were to and from ASJ as the adviser. Mr Brown personally did not feature.

• [58] As to why I am satisfied Haven and ASJ contracted on the terms of the agreement, and not on the basis of the “flyer”, the latter does not deal with claw back. That is only provided for in the agreement. I also consider it wholly improbable Haven would have proceeded with Mr Brown had the terms of the agreement not been agreed.

Where that leaves Mr Brown

• [59] If ASJ was the adviser, Haven submitted Mr Brown was a party to the agreement as “guarantor”, as a result of which two consequences followed.

• [60] The first was Mr Brown would be liable as guarantor for any breach by ASJ of its obligations, as a result of cl 1.6 which provides:

1.6 Where the Introducer is a company, the Guarantor signing this agreement as Guarantor guarantees the performance of all of the obligations of the Introducer under this agreement and indemnifies Haven against any and all losses arising from any breach of the Introducer of this agreement. These obligations are continuing obligations and shall survive the termination of this agreement.

• [61] However, as counsel for Mr Brown and ASJ, Mr Gustafson, submitted s 27 Property Law Act 2007 requires a contract of guarantee to be in writing and signed by the guarantor. I am unable to treat Mr Brown as guarantor on the evidence before me.

• [62] Secondly, Haven contended Mr Brown personally would be bound by the terms of the agreement, as a result of cl 1.5 which provides:

1.5 By signing this agreement the parties acknowledge that they agree and are bound by the Terms, and that this agreement includes the Terms and all of the schedules attached.

• [63] Haven contends this clause is sufficient in its own right to bind Mr Brown personally to comply with the terms of the agreement and render him personally liable for any breach of its terms.
• [64] I do not accept this submission. Clause 1.5 starts “By signing this agreement” and I am not sufficiently persuaded that Mr Brown did sign the agreement. Nor do I accept a person signing as guarantor is a “party” for the purposes of cl 1.5, so as to be bound by all the terms of the agreement. In my view, something much clearer than cl 1.5 would be required if this were intended.

• [65] To conclude, I am satisfied Haven and ASJ, as adviser, contracted on the terms of the agreement. Mr Brown was not a party to the agreement.

Relevant provisions of the agreement

• [66] As I understand it, Haven contends ASJ breached the following provisions of the agreement:⁸

11. INTRODUCER’S OBLIGATIONS

• 11.1 The Introducer shall:

...

11.1.12 receive and hold in confidence, any and all confidential information disclosed to the Introducer by Haven or any originator or any of the Products in whatever form;

...

15. TERMINATION

...

• 15.2 Immediately on termination of this agreement, the Introducer will:

• 15.2.1 cease providing the Services and Financial Advice to Clients;

• 15.2.2 return to Haven, all material and equipment of any kind whatsoever in any form whatsoever in relation to Haven and any of the Products;

...

8. Without wishing to be critical of Haven’s legal advisers, and counsel who appeared for Haven at trial were relatively new to the case, Haven’s (fifth amended) statement of claim left much to be desired. The pleading was discursive and lacking in specificity. Of particular concern is the failure to identify the precise contractual provisions said to have been breached, and how.
   16. NO SOLICITATION

• 16.1 Notwithstanding anything to the contrary in this agreement, the Introducer acknowledges and agrees that, all Clients are clients of Haven ... and not the Introducer unless otherwise expressly agreed and recorded in writing. The Introducer shall not be entitled to or solicit any Client or use Haven’s ... client lists or database for the Introducers personal gain to the exclusion of Haven ...

• 16.2 The Introducer shall not during the Term and for a period of two (2) years after termination of this agreement:

...

16.2.2 solicit away from Haven ... or from the business of any other Introducer of Haven any person, firm or company who is a Client or who was at any time during the 3 years immediately preceding termination a Client nor divert or seek to divert any customers from Haven ... or any other Introducer of Haven.

• [67] As can be seen, cl 16.2.2 prohibits solicitation of any client, inter alia, within the three years immediately preceding termination. Of its own volition, Haven disclaimed any reliance on that aspect of cl 16.2.2.

Breach

• [68] For what it is worth, some of Mr Brown’s actions in, say, the two months prior to termination, referred to in the next section, put ASJ in breach of its obligations under cls 11.1.12, 16.1 and 16.2.2. The damage sustained during this period would have been de minimis and I do not propose to consider it. Likewise it is unnecessary to consider whether the duration and breadth of the non-solicitation clause was reasonable.

Breach of confidence — Mr Brown

Elements

• [69] To succeed on an action for breach of confidence, a plaintiff must prove:⁹

⁹ Skids Programme Management Ltd v McNeill [2012] NZCA 314, [2013] 1 NZLR 1 at [76], citing

Coco v A N Clark (Engineers) Ltd [1969] RPC 41 (Ch) at 47 per Megarry J.

(a) it supplied information to the defendant that was confidential, that is had the necessary quality of confidence. This is determined by considering the nature of the information the plaintiff seeks to protect. Haven has pleaded the relevant information includes its database of clients; the terms of their arrangements (by which I assume Haven means their insurance policies); and information Haven received from its clients; and

(b) the information must have been supplied to the defendant in circumstances importing an obligation of confidence; and

(c) the defendant must have made an unauthorised use of the information to the plaintiff’s detriment.

• [70] There is no real dispute about the first two elements of this cause of action. In the first instance, Haven supplied an adviser with a lead’s name and contact details. By the time the lead had acquired a policy, Haven and the adviser knew the person’s personal circumstances, their insurer, the sum insured and the annual premium. I am satisfied this information was confidential and valuable to Haven, and the product of its efforts. I accept some of the information would have come to the adviser in the first instance, on first meeting the lead. However, that information was obtained to advance Haven’s business and the adviser received it as Haven’s representative. For these reasons, I am satisfied such information is confidential to Haven, and that it was supplied to or obtained by Mr Brown in circumstances importing an obligation of confidence.

• [71] Mr Brown himself largely acknowledged the confidential nature of the information, accepting in cross-examination that the value of a brokerage business is its client base; the identity and personal circumstances of a client is commercially sensitive; and the prospect of a client list going to a competitor would be concerning.

• [72] In evidence Mr Brown did not accept leads were confidential information, contending they constitute no more than names and telephone numbers taken from the telephone book or internet. This is incorrect. The lead is a person who has been

telephoned and qualified as someone who may, and who is likely to be eligible to, purchase life or other insurance. Indeed, when he terminated his relationship with Haven, one of Mr Brown’s complaints was Haven had failed to provide him with the promised number of leads when he relocated to Tauranga. This complaint is inconsistent with his evidence a lead is no more than a name and telephone number.

• [73] There are also contemporaneous acknowledgements by Mr Brown of the confidential nature of the information. When writing to Haven to terminate the relationship he asked how Haven wished him to proceed “with the current pipeline”, a reference to those clients and leads with whom he had been working. Also, in May 2016, Mr Brown reported to Mr Baldwin and others at Haven regarding his dealings with a departing adviser. This report included an account of his collection of files and cellphone from the adviser and his advice to the person concerned that “Haven is ruthless in protecting [their] clients and leads”.

• [74] Accordingly, I am satisfied the first two elements of this cause of action are made out.

• [75] The issue is whether Haven has proved Mr Brown made an unauthorised use of the information to Haven’s detriment.

Use

• [76] Haven invited me to infer misuse from circumstantial evidence, including evidence pertaining to Mr Brown’s dealings with particular clients who purchased a new policy.

• [77] In response, Mr Gustafson submitted this was insufficient to prove misuse and that Haven was required to call each client at trial, to give evidence and be cross-examined. I do not accept this submission. In Norbrook Laboratories Ltd v Bomac Laboratories Ltd, Lord Bingham said if a plaintiff:¹⁰

10. Norbrook Laboratories Ltd v Bomac Laboratories Ltd [2006] UKPC 25 at 31, citing Brown v Rolls Royce Ltd [1960] 1 WLR 210 (HL).

31. ... adduces evidence from which, in the absence of any adequate explanation or answer, an inference of breach may properly be drawn, an evidential or provisional burden falls on the defendant ...

• [78] This is such a case. Moreover, and as counsel for Haven, Mr Lowery, submitted, how Haven proves its case is a matter for Haven. If it falls short, so be it.

Discussion

• [79] Mr Brown submitted the applications for each of the 40 new policies between

9 September 2016 and 31 July 2018, so within a little less than two years of termination. He submitted the first 16 within three months of termination, and 29 within the first year of termination, including three during the period of the injunction.

• [80] Clients could not have contacted Mr Brown on his previous cellphone and email address as Haven had disconnected these immediately on termination.

• [81] On Haven’s analysis, at least 58 per cent of KAM’s revenue in the first year post-termination derived from commission from sales to former Haven clients.

• [82] The vast majority of the cancelled policies were less than four years old. Although not able to state the average duration of a life insurance policy, Mr Baldwin’s evidence was the bulk of Haven’s clients continue to hold their original policies. Ms Ballantyne’s evidence was the average duration is seven years. I gained the clear impression Ms Ballantyne thought it likely at least some of the 40 new policies were churn.

• [83] The specific evidence to which Haven referred me regarding Mr Brown’s dealings with some of the clients or leads who acquired the new policies was as follows.

• [84] First, Mr Brown was unknown to the two SF clients Haven asked him to contact. Mr Brown submitted their applications for new policies on 9 and 15 September 2016 respectively, approximately six weeks after Haven had given him their contact details.
• [85] Secondly, Haven supplied Mr Brown with the names and contact details of the three leads referred to in [40] in early August 2016. Mr Brown met each shortly thereafter and then entered a note in Haven’s client management system to the effect none of the three was a suitable candidate and not worth pursuing. Despite this, after his departure, Mr Brown promptly submitted applications for policies for all three, two in September 2016 and one in early October 2016.

• [86] Mr Brown contended he contacted one of the three leads through a telemarketing list he purchased. Ms A’s name is on the list but the contemporaneous documents show Mr Brown received that list by email 11 days after he submitted Ms A’s application. Cross-examined on this, Mr Brown initially said he thought he had received a hard copy of the list before submitting Ms A’s application, although he later expressed doubt about this. I am satisfied Mr Brown only came into contact with Ms A because Haven had given him her contact details which, as I have said, was confidential information in that context.

• [87] Thirdly, Mr Brown presented a recommendation to a Mr and Mrs B on or around 22 July 2016, being clients he had previously advised. On 3 August 2016, Mr Brown advised Mr and Mrs B he had already lodged their application. This was untrue. Mr Brown submitted the Bs’ application for the recommended policy on 12 September 2016, two and a half weeks post-termination. Mr and Mrs B then cancelled their existing, Haven-brokered, policy.

• [88] A similar situation occurred with a Ms DB. Mr Brown presented a recommendation to Ms DB on or around 21 July 2016. As with the Bs, Mr Brown advised Ms DB on 4 August 2016 that he had already lodged her application. In fact, Mr Brown lodged Ms DB’s application for a new policy on 15 September 2016, three weeks after leaving Haven. Ms DB then cancelled her existing policy.

• [89] Haven submitted the only possible explanation for Mr Brown’s brokering of new policies for these clients or leads is that he misused confidential information derived from or through Haven.
• [90] Mr Brown denied any misuse of Haven’s confidential information. Mr Brown provided a schedule purporting to explain how he had come into contact with so many of his formerly advised clients, eg clients had contacted him, or were the result of his marketing to local businesses, or were personal friends.

• [91] I do not accept Mr Brown’s explanation. For reasons given, clients had no means of contacting Mr Brown, and it would be an extraordinary coincidence if the principal yield of Mr Brown’s marketing was clients who just happened to hold Haven-brokered policies on which he himself had advised. More importantly, however, whilst these explanations might be relevant to solicitation, what matters under this cause of action is whether there has been a misuse of confidential information. I am satisfied that had to have occurred for Mr Brown to sell the new policies.

• [92] I record also that Mr Brown contended several of the new policies he or KAM brokered were not for Haven clients, but rather were for businesses who were insuring the lives of “key people”, and thus the policyholder was a different entity. I accept several of the new policies were held by businesses in respect of their key people but that was not a new development. In most of the cases to which Mr Brown referred, if not all, the prior policy had also been held by the business.

Conclusion

• [93] The only inference available is that Mr Brown contacted the clients or leads who acquired the new policies, taking advantage of confidential information to do so and to sell the client a new policy. Mr Brown did not come to these clients or leads as a stranger. He came as someone informed of their existing insurance arrangements or knowing them as a lead who might wish to purchase insurance. I also accept Mr Brown’s misuse of this information was to Haven’s detriment, largely because of the cancellations.

• [94] I record there are two matters to which I have not had regard. First, Haven also contends there is sufficient evidence to conclude Mr Brown synchronised or copied over his Haven Outlook file with a personal email account on or about 11 August 2016, so two weeks prior to termination. Mr Baldwin gave evidence this could be deduced

from an “Outlook test message” of that date. As Mr Gustafson submitted, Mr Baldwin is not an expert in this field and I decline to accept his evidence on the point.

• [95] Secondly, each party referred me to hearsay evidence favourable to their position. For instance, Ms Reagan put in evidence notes made by her and other Haven staff of telephone calls to clients Mr Brown had advised, and which Haven submitted evidenced Mr Brown had contacted those clients post-termination. For his part, Mr Gustafson referred me to letters from other clients to the effect their new policy came about as a result of a chance encounter with Mr Brown or a telephone call from them to him. I have put this evidence to one side as I am not persuaded any of it is admissible.¹¹

Mr Brown’s evidence

• [96] At the outset of this judgment, I said I was satisfied Mr Brown had lied to Haven and to clients. That was a reference to the Bs and Ms DB and his entries regarding the three Haven leads in the Haven client management system. I also said I was satisfied he had been untruthful in affidavit evidence. The following examples suffice.

• [97] On 29 March 2017, when granting the injunction Haven sought, Gordon J ordered the then defendants, including Mr Brown, to provide a sworn affidavit identifying the Haven clients with whom they had met post-termination. In his affidavit of 20 April 2017 in response, Mr Brown stated he had met five Haven clients. In fact, as of that date Mr Brown had sold policies to an additional 17 clients. Mr Brown’s evidence that he had forgotten the additional 12 is implausible.

• [98] On 16 February 2018, Mr Brown filed an affidavit in support of his counterclaim, providing more information in relation to Haven clients or leads referred to in his 20 April 2017 affidavit. By this time, Haven had filed a list of clients it contended had cancelled their policies at Mr Brown’s instigation. Two points arise as to Mr Brown’s affidavit. First, Mr Brown referred to a Mr K, saying Mr K had contacted him after seeing Mr Brown’s advertisement in the local paper but that

¹¹ Evidence Act 2006, ss 18 and 19.

Mr Brown had not advised a change of policy and that Haven had suffered no loss. This was incorrect. Third party discovery given as late as during the trial showed Mr Brown submitted Mr and Mrs K’s application for a new policy on 28 May 2017. The second and more general point that arises is that by this time Mr Brown had disclosed meetings with seven or eight of the 40 clients whereas in fact he had sold 34 of the 40 policies in issue.

• [99] Mr Brown filed a further affidavit in support of his counterclaim on 8 March 2018. Mr Brown referred to a further two clients on the Haven list referred to in the previous paragraph, Mr N and Mr R, saying he did not know why those clients had cancelled their Haven-brokered policies and said that they did not do so before 29 March 2017. The latter statement was correct but the first must have been false. Mr Brown transferred both clients to different policies in October and November 2017.

• [100] On 29 June 2018, Mr Brown filed an affidavit opposing Haven’s request that he give further discovery. Mr Brown said that, to the best of his knowledge, he/KAM/ASJ had only received commissions for policies on four individuals who had been Haven clients at the time of termination of the relationship. This statement was also false. By 29 June 2018, KAM or Mr Brown had brokered 39 of the 40 new policies and he, or KAM rather, must have received the commissions on the vast majority, if not all, of those policies.

• [101] The true position only came to light after Haven obtained third party discovery from the insurers in October 2018. It was only at that point Mr Brown acknowledged he or KAM had brokered many, but not all, of the new policies.

Breach of fiduciary duty

• [102] The conclusion I have reached on the second cause of action makes it unnecessary to consider Haven’s third cause of action.

Damages

• [103] Haven seeks an award of the following damages against Mr Brown:¹²

(a) Part A — $269,620. This is a claim for lost profit, being the upfront commissions Haven contends it would have earnt had it brokered the

40 new policies, net of commissions Haven would have paid a commissioned adviser. Alternatively, if I am not persuaded to make such an order, Haven sought an order Mr Brown give an account of profits derived from the commissions on the new policies.

(b) Part B — $89,910. This is Mr Graham’s assessment of the diminution in the value of Haven’s business as a result of the loss of trail commissions on the 37 cancellations.

(c) Part C — $161,891 being the contribution Mr Graham has assessed as due from Mr Brown towards the cost of the salaried advisers Haven engaged.

(d) Part D — $42,707 as a contribution to the costs incurred for time Mr Baldwin and Ms Reagan spent dealing with the aftermath of the departure of all the advisers.

Part A — loss of upfront commissions

• [104] The Part A claim assumes Haven would have brokered each of the 40 new policies. However, Mr Lowery accepted that, even on the best case scenario, Haven might have expected some attrition. Accordingly, it is necessary to assess Haven’s chance of selling the new policies before making any award under this heading. Mr Lowery submitted Haven’s chance was substantial.¹³ For his part, Mr Gustafson submitted there was little, if any, prospect of Haven selling any of the policies.

• [105] The relevant evidence is as follows.

¹² I have put the claim against ASJ to one side.

¹³ McGill v Sports and Entertainment Media Group [2016] EWCA Civ 1063, [2017] 1 WLR 989.

• [106] First, what can be deduced from the clients’ acquisition of the new policies is that those clients wished to continue to hold life insurance. Moreover, Haven was the incumbent. These matters count in Haven’s favour. However, I do not accept the submission for Haven that these clients were “ripe for the picking” and therefore Haven could have sold the new policies just as well as Mr Brown. I consider it possible that, at least on some of the sales, Mr Brown was acting in his own interests and not the clients’.

• [107] Secondly, although the evidence was Haven encourages its commissioned advisers to meet clients every two or three years and this provides an opportunity to sell a new policy, whether life or for different cover, in fact commissioned advisers are reluctant to undertake such meetings because they usually do not earn any revenue from them. For instance, over a 12-month period, five of Haven’s commissioned advisers conducted 890 meetings with new leads and only 80 with existing clients. This further diminishes Haven’s prospects of having sold the new policies.

• [108] Nor did Haven adduce evidence of its experience of review meetings, by which I mean how often such a meeting can be expected to result in new revenue, rather than a retention of the status quo. Had this evidence been adduced, some predictions might have been possible.

• [109] Overall, I accept Mr Gustafson’s submission that Haven’s principal focus is on finding new clients. That is the most lucrative course. Its commissioned adviser model is such that there is little, if any, incentive to revisit the existing client base to investigate whether there are further opportunities.

• [110] All of this leads me to conclude Haven was unlikely to have positioned itself to sell many of the new policies. It might have sold some but I would be speculating if I were to attempt to put a percentage on just how many. Accordingly, I am unable to make any award for loss of profit.

Account of profits

• [111] The next issue is whether to order Mr Brown to give an account of the profits KAM earned from commissions it received on the new policies. I would have ordered

KAM to account had it been joined as a party to the proceedings, as it was the beneficiary of Mr Brown’s breach of duty, at least in the first instance.

• [112] I have not been able to identify any New Zealand authority in which the Court has ordered that a wrongdoer, such as Mr Brown, give an account of profits earned by a third party not before the Court.

• [113] Given that, I asked for counsel’s assistance on this point. Mr Lowery referred me to two cases which provide some support for Haven’s position, being CMS Dolphin Ltd v Simonet and Cook v Deeks.¹⁴ In these cases the Court ordered an errant fiduciary to account for profits derived from his breach but by a corporate entity. In each, the individual defendants were company directors who had diverted to a new company an opportunity belonging to the old, in clear breach of their fiduciary duties. In each, however, the new company was a defendant to the proceedings, although “hopelessly insolvent” in the CMS case.¹⁵ In substance, the effect of the orders the Court made was to render the new company and the defaulting fiduciaries jointly and severally liable to account for the profits the new company had received as a result of their breach. Mr Gustafson accepted CMS might constitute authority for the order Haven seeks but on the whole doubted I had jurisdiction to make the order sought.

• [114] I note also Blanchard J, writing for himself, McGrath and Gault JJ in Premium Real Estate Ltd v Stevens, referred to CMS.¹⁶ His Honour contrasted the case before him with a situation such as in CMS, where the fiduciary takes his or her profit “through another vehicle” and is accountable for that profit. Further on in that passage, his Honour recognised the possibility of an account of profits being ordered against an indirect recipient such as Mr Brown.

• [115] There is also considerable force in Mr Lowery’s submission that it would be unconscionable to leave the profits derived from Mr Brown’s breach of confidence in the hands of KAM and/or Mr Brown.

¹⁴ CMS Dolphin Ltd v Simonet [2001] EWHC Ch 415; and Cook v Deeks [1916] UKPC 10; [1916] 1 AC 554, PC.

¹⁵ CMS Dolphin Ltd v Simonet, above n 14, at [98].

¹⁶ Premium Real Estate Ltd v Stevens [2009] NZSC 15, [2009] 2 NZLR 384 at [79].

• [116] Despite these compelling arguments, I decline to make the order sought. I am influenced by the lack of direct authority but also because no analysis has been carried out of the profits KAM derived in fact. There is evidence of the receipts but not of the profits. Accordingly, even if in principle it were possible to make the order sought I am not persuaded there would be any point in doing so, given that lack of analysis.

Part B — consequences of loss of trail commission

• [117] This claim is for the loss of the annual trail commission on the 37 cancelled policies. There is no dispute about the methodology, that is trail commission with an appropriate multiple to reflect the number of years the income might be expected to continue.

• [118] Mr Graham’s initial calculation of $88,000 assumed trail commission of

$22,000 per annum, by a multiple of four. The amount of $22,000 was incorrect, not through any fault of Mr Graham’s. The annual trail income lost was $12,838.61.

• [119] Ms Ballantyne, Mr Petterson and Mr Graham agreed that in the usual course of events the multiple adopted would reflect due diligence on the policies themselves, for instance on matters such the age of the policy and the age of the policyholder. Ms Ballantyne’s evidence was that books generally sell at a multiple of three to five of the value of their annual trail commission but she has seen a range of two to five.

• [120] Mr Gustafson submitted that, in the absence of any due diligence, I should adopt a multiple of one, ie that I should award $12,838.61.

• [121] The costs of due diligence on such a modest claim would soon outweigh benefit and is unnecessary. I propose to adopt a multiple of 3.5, being the midpoint of Ms Ballantyne’s observed range. This also seems to me to be reasonable given the seven year average duration of a policy; that Haven does not churn clients; that it has a good persistency rating; and the short duration of many of the cancelled policies. I award Haven $44,935.14 for this head of damage.

Part C — salaried advisers

• [122] Haven seeks to recover a contribution to the costs it incurred in employing seven salaried advisers between March 2017 and July 2018. Part of the salaried advisers’ role — on Haven’s evidence, their “primary focus” — was to meet clients previously advised by one or other of the defendants, and shore up the client base. Haven’s estimate was that at least 50 per cent of the salaried advisers’ time was spent defending Haven’s client base. When not shoring up the client base, salaried advisers were given new leads to pursue and were able to write new business.

• [123] Haven has calculated its overall loss as a result of employing the salaried advisers at approximately $300,000, which Mr Graham apportioned between the defendants by reference to the percentage of loss each is said to have occasioned Haven under Parts A and B, as claimed, rather than as I have allowed. The sum sought from Mr Brown and ASJ is $161,891.

• [124] As to how Haven’s loss has been calculated, the salaried advisers generated

$639,432 in commissions for Haven. The costs Haven incurred in deriving this income was $541,286 comprising salaries, Kiwisaver contributions, and $91,380 commission paid to the salaried advisers on new policies they wrote.

• [125] On the face of it, Haven’s receipts from the salaried advisers exceed outgoings by $98,147. Haven’s complaint is that it would have incurred costs of $242,820 had it generated the same revenue through commissioned advisers, rather than costs of

$541,286. Hence the approximately $300,000.

• [126] Mr Graham proposed an alternative calculation of loss, being to apportion 50 per cent of the amount of salaried advisers’ salaries, this 50 per cent being $267,000 in round terms.

• [127] Mr Gustafson’s principal submission on this part of the claim was that Haven had not discovered the documents necessary to prove the claim. First, he submitted there was no evidence Haven had employed the salaried advisers in response to the defendants’ attacking the client base. He submitted Haven might simply have made a

decision to alter its business model and employ salaried advisers and, finding the results disappointing, was seeking to recover some of the shortfall.

• [128] I do not accept this submission. I accept Mr Baldwin’s evidence the salaried advisers were employed to mitigate to the defendants’ actions.

• [129] Next, Mr Gustafson submitted Haven had not discovered documents evidencing the salaried advisers’ division of time; which defendants’ clients they met; and how much new business the salaried advisers generated from those clients. Without this information, Mr Gustafson submitted it was impossible for Mr Petterson to assess the validity of the claim.

• [130] Counsel disagreed on whether Mr Brown had ever sought this discovery. Whatever the position may be, however, it is incumbent on a plaintiff to produce the documents required to prove its claim.¹⁷ Ultimately, I would have been willing to accept Mr Baldwin’s assessment that 50 per cent of the salaried advisers’ time was spent defending the client base; I would have adopted Mr Graham’s alternative assessment of costs (that is 50 per cent of the amount paid in salaries); but at the very least it would be necessary to know, and I do not know, what commissions were generated from clients the salaried advisers met in their efforts to conserve those clients for Haven. The defendants would be entitled to the benefit of a credit for such commissions. Absent that information, again I would be speculating if I were to make any award in Haven’s favour.

Part D — internal costs

• [131] Haven seeks to recover a contribution for the cost of time Mr Baldwin and Ms Reagan estimated they spent responding to the attack on Haven’s client base.

• [132] Mr Baldwin estimated he spent, at a minimum, two and a half hours per week, every week for two years and Ms Reagan 10 to 15 hours per week, every week, for 18 months.

17. Pegasus Group Ltd v QBE Insurance (International) Ltd HC Auckland CIV-2006-404-6941, 13 May 2009.

• [133] These estimates have culminated in a gross cost of $40,001 for Mr Baldwin at an hourly rate of $153.85 and for Ms Reagan $38,735 at an hourly rate of $49.66. Mr Graham has allocated to $42,707 to Mr Brown and ASJ, in the same manner as he apportioned the claim in respect of the salaried advisers.

• [134] Again, Mr Gustafson was critical of the absence of Haven’s failure to discover any internal records bearing out these estimates. Moreover, Mr Baldwin’s assessment would require me to accept that he did not take any holidays in the two-year period and the situation was not under control well within two years.

• [135] I decline to make any award in respect of Ms Reagan’s time. I am satisfied Ms Reagan worked additional hours in the aftermath of the defendants’ departure. I am not satisfied this caused Haven a loss. As I understood Ms Reagan’s evidence, much of the additional time she spent was in the evenings and on weekends outside of her usual working hours. There is no evidence Haven paid her for these additional hours or that it was otherwise deprived of time Ms Reagan would have spent on general business.

• [136] Turning to Mr Baldwin’s claim, I am satisfied time he spent responding to the defendants’ attack on Haven’s client base was time he might otherwise have spent on advancing Haven’s business generally. As I have indicated, I am unable to accept Mr Baldwin’s estimate of his total hours at face value. This might be met by making some discount for the number of hours claimed, say, 25 per cent.¹⁸ That would reduce the total claimed for Mr Baldwin’s time to $30,000.

• [137] I would have preferred to allocate this time by the number of clients in each adviser’s book but there is no clear statement as to those numbers. Given that, I shall allocate the cost on a per capita basis on the basis there were essentially six advisers, namely $5,000 each.

Other remedies

• [138] I propose to grant the injunctions Haven seeks.

¹⁸ Bridge UK.Com Ltd v Abbey Pynford Plc [2007] EWHC 728 at [124].

• [139] I also propose to make an award of exemplary damages. Such is plainly warranted to mark Mr Brown’s blatant breach of his obligations. The issue is the amount of the award. In Skids Programme Management Ltd v McNeill, the Court of Appeal made an award of $20,000 against the respondent for what it considered blatant copying of a confidential manual.¹⁹ Mr Brown’s breach was equally blatant. The two cases are on a par and I likewise shall make an award of $20,000.

Counterclaim

• [140] Mr Brown contends the effect of the orders Gordon J made on 29 March 2017 precluded him from trading at all whilst the injunction was in force, that is until 16 June 2017.

• [141] Mr Brown calculates the loss he incurred as $75,790, being lost income.

• [142] I decline to make any award in Mr Brown’s favour. First, the orders Gordon J made were that Mr Brown, inter alia, should cease to contact “all present or former clients of Haven” and “cease directly or indirectly canvassing, soliciting or attempting to solicit, serve or act” for any former or present Haven client.

• [143] Mr Brown’s evidence was the nature of the orders prevented him from contacting any person on the basis they might, unknown to him, be a past or present Haven client. I would not have construed the orders so broadly but, regardless, if Mr Brown truly held that concern, the obvious course for him or his solicitors was to seek clarification or a variation, by consent in the first instance, alternatively by application to the Court. There is no evidence of any such attempt.

• [144] Nor do I accept Mr Brown did cease trading during the period of the injunction. He lodged three applications for new policies whilst the injunction was in force. There was a deposit to KAM’s account on 17 May 2017 of $1,618.18, which may have been in respect of one of the three applications of course. Then, on 30 June 2017, AIA deposited a commission to KAM’s account of $4,732.04 and another, on 3 July 2017, of $10,959.16. Other payments followed in July 2017. The timing of these payments,

¹⁹ Skids Programme Management Ltd v McNeill, above n 9, at [124].

and Mr Baldwin’s evidence that the process of a sale may take up to 60 days, suggests to me Mr Brown traded through the period he was prohibited from doing so.

• [145] I dismiss Mr Brown’s counterclaim accordingly.

Mr Miller/JMC

• [146] Haven appointed JMC as an adviser on or about 18 April 2012. Mr Miller guaranteed the performance by JMC of its obligations. At all material times, Mr Miller was the sole director and shareholder of JMC. The Introducer Agreement between Haven, JMC, and Mr Miller as guarantor, has been properly executed, so no issue arises on this score. As a result, Mr Miller must indemnify Haven for the losses, if any, referred to in cl 1.6 of the agreement (see [60] above).

• [147] JMC and Mr Miller terminated their relationship with Haven on or about 5 August 2016.

• [148] Thereafter Mr Miller brokered 25 new policies for existing Haven clients or leads, with these new policies issued between 20 September 2016 and 5 October 2018.²⁰ The upfront commissions on these policies were paid to JMC. Haven lost annual trail commission of $4,537.24 as a result of the acquisition of these new policies.

• [149] Ten of the new policies were for clients formerly advised by Mr Miller; one was for a lead Haven had recently provided to Mr Miller; two were for leads Haven had provided to Mr Coetzer or Yourway Ltd, the seventh and eighth defendants; and the remainder were for clients advised by, or Haven leads provided to, Mr Lombard or SFL, the first and second defendants. Haven’s case is that Mr Coetzer and Mr Lombard provided Mr Miller with information enabling contact with their clients or leads.

²⁰ These policies are those listed in the schedule at CB302.0337.

Breach of contract

• [150] I am satisfied JMC breached each of cls 11.1.12, 16.1 and 16.2.2. In reaching this conclusion I have taken into account the following.

• [151] First, whilst contracted to Haven, JMC/Mr Miller used a Haven cellphone and email address, both terminated on cancellation. Accordingly, clients Mr Miller had previously advised could not have contacted him by those means.

• [152] Secondly, the clients or leads deriving from Mr Lombard or Mr Coetzer had no prior dealings with Mr Miller. Either Mr Miller contacted them or Mr Coetzer and Mr Lombard did so on his behalf.

• [153] Thirdly, Mr Miller, or JMC’s, rate of conversion of leads to clients diminished substantially in the months prior to termination. In the four full quarters prior to termination, Mr Miller’s percentage rate of conversion was 90, 52, 43 and then 18. I accept Haven’s submission this reduction is likely to evidence Mr Miller conserving clients for future sales.

• [154] Most importantly, however, I do not consider it possible the 25 new policies were the result of chance meetings. They must have been the product of solicitation and misuse of Haven’s confidential information.

• [155] The matters to which I have just referred are also sufficient to establish JMC and Mr Miller breached their duty of confidence to Haven, quite independently of the breach of contract.

• [156] To the extent I am required to consider it, I reject the affirmative defence pleaded to the effect the two-year duration and unlimited geographical scope of the non-solicitation clause is unreasonable. The gist of Mr Gustafson’s submission for Mr Brown on this issue was that a maximum of one year was sufficient and that the clause should be confined to the adviser’s clients. Mr Gustafson’s submission was based on Mr Olsen’s evidence. Whilst this may be so for an adviser selling general insurance, I prefer Ms Ballantyne’s evidence that such duration would not be appropriate or “standard” for an adviser selling life insurance. First, two years is

required to cover the claw back period. Secondly, there is the reluctance of clients to meet their broker.

• [157] As to whether the clause should be confined to clients previously advised by the departing adviser, the actions of Mr Miller, Mr Lombard and Mr Coetzer illustrate why that would not provide adequate protection.

Remedies

• [158] First, as before, I am unable to assess Haven’s prospects of securing the upfront commissions paid on the 25 new policies JMC/Mr Miller sold post-termination.

• [159] Secondly, I make an order JMC account for profits earned on the new policies. I do not propose to make an order against Mr Miller personally. As I say, I have not been referred to any case establishing jurisdiction to do so. Haven will, however, have to “prove” profit and, if it elects to pursue this remedy, it will be required to abandon its claim for the loss of trail commission. Despite Mr Lowery’s submission, I am satisfied Haven cannot claim both profits and trail commission. That would be to double count.

• [160] Subject to that, the same multiple of 3.5 applies for valuing the trail book if this claim is to be pursued.

• [161] Fourthly, I award $5,000 against JMC on account of the cost incurred for Mr Baldwin’s time and grant the same injunctions. Mr Miller will be liable to indemnify Haven in respect of the loss of the trail book and the $5,000.

• [162] Fifthly, I consider Mr Miller’s conduct on a par with Mr Brown’s and I make the same order for exemplary damages, in the same amount.

Mr Carr/B&M

• [163] Mr Brown introduced Mr Carr to Haven in early 2013.

• [164] Mr Brown sent Mr Carr the Adviser Agreement on 12 February 2013, asking Mr Carr to execute the document and email it back. Later that day, Mr Carr emailed

the executed document or at least the front page of it. The front page of the agreement is in evidence. Mr Carr has executed as adviser, not as guarantor.

• [165] The effect of cls 1.1 and 1.2 of the agreement, which appear on the front page, are that Haven appoints the adviser to provide services as defined and that the services will be so provided on the terms set out in the schedules to the agreement. The effect of cl 1.5 is that the parties agree to, and are bound by, those terms.

• [166] It was a matter for Mr Carr whether he emailed back the entire document or only the front page. The important point is he had received the entire document, containing all relevant terms. Hence, I am satisfied he was bound by all the terms of the contract.

• [167] Although Haven appears to have paid at least some commissions to B&M, there is no evidence of any contractual relationship between Haven and B&M, whether as adviser or guarantor. Accordingly, I proceed on the basis Mr Carr is personally liable for any breach of the Adviser Agreement.

• [168] Haven terminated the contract on 27 March 2017.

• [169] Thereafter Mr Carr wrote new policies for 18 clients, all of whom he had formerly advised. Mr Carr commenced submitting applications for these new policies on 6 June 2017, with the new policies issued in a 15-month period between 20 June 2017 and 1 September 2018.²¹ Haven derived annual trail commission of $3,497 on those of the 18 who cancelled. It appears from Mr Graham’s evidence the upfront commissions on these new policies were paid to Carisbrook Financial Services Ltd (“Carisbrook”), which is also not a party to the proceedings.

Breach of contract/breach of confidence

• [170] I am satisfied Mr Carr breached each of cls 11.1.12, 16.1 and 16.2.2 of the Adviser Agreement and also his duty of confidence to Haven.²² The new policies

²¹ These policies are those listed in the schedule at CB302.0340

22. There is no material difference between the relevant clauses of the Introducer Agreement and the Adviser Agreement.

Mr Carr wrote were for clients he had previously advised, and were written in a relatively short period of time. Again, it is not possible those clients contacted Mr Carr because, as with Mr Brown and Mr Miller, Haven disconnected his cellphone and email address on termination. The only possible explanation is that Mr Carr contacted those clients and, in doing so, and in selling the new policies, solicited those clients and misused Haven’s confidential information.

• [171] Again, I decline to make any award for loss of profit and, in the absence of Carisbrook, decline to make an order for an account of profits.

• [172] Aside from granting the injunctions, I shall make the same orders against Mr Carr in respect of the trail commission, contribution for the cost of Mr Baldwin’s time and exemplary damages.

Result

• [173] I enter judgment for Haven against:

(a) ASJ, JMC and Mr Carr on the first cause of action;

(b) Mr Brown, JMC, Mr Miller and Mr Carr on the second cause of action.

• [174] I dismiss all other causes of action and counterclaims.

• [175] I make the following orders:

(a) I grant a permanent injunction requiring each defendant to refrain from using in any way, or transferring or disseminating Haven’s confidential information;

(b) I order the defendants to return to Haven all documents which comprise or include Haven’s confidential information;

(c) Mr Brown is to pay Haven the sums of $44,935.14; $5,000; and

$20,000;

(d) JMC is to account to Haven for all profits derived on the policies listed on CB302.0337; alternatively JMC and Mr Miller are jointly and severally liable to pay Haven the sum of $15,880.34;

(e) JMC and Mr Miller are jointly and severally liable to pay Haven

$5,000;

(f) Mr Miller is to pay Haven the sum of $20,000;

(g) Mr Carr is to pay Haven the sums of $12,239.50; $5,000; and $20,000;

(h) Haven is entitled to interest under s 87 Judicature Act 1908, such interest to be calculated at the rate prevailing from time to time, from the date Haven commenced proceedings to the date of judgment.

• [176] I reserve leave to Haven, ASJ and Mr Brown to apply.

• [177] Costs are reserved pending submissions from the same parties.

Peters J