Federal Court rules $500k damages in breach of contract case
On September 24, 2024, the Federal Court handed down a decision in a breach of contract claim that involved an employee using confidential client information to solicit clients for a competitor. Our employee relations experts examine the case and what it means for businesses.

Case facts
AEI Insurance Group Pty Ltd (AEI) is an insurance broker with a focus on heavy vehicle insurance. Mr Craig Martin was employed by AEI from July 26, 2011, until his resignation on August 29, 2022.
Martin was employed as an account manager and had responsibility for providing 24/7 emergency assistance to AEI clients. He was issued a company mobile phone that he used for work and personal use. Martin was not a licensed broker, however he had strong relationship building skills which aided in the growth of AEI’s business.
In Martin’s signed contract of employment, he was not to solicit, canvass, deal with, approach or accept any approach from any person or organisation that was connected to AEI with the view to obtain business for another business for up to 12 months following the end of his employment.
Martin’s contract also stated that he was not permitted to use or disclose confidential information obtained in the course of his employment, which included client lists and contacts.
After resigning from his position, Martin advised that he would be moving to AEI’s competitor, MA Insurance Brokers. Martin allegedly expressed to AEI that he would like to be a broker however was not given that opportunity. Furthermore, he said he was under significant pressure and the current work structure did not allow him to set his family up financially. AEI explored options with Mr Martin to remain working there but could not come to any mutual agreement.
As a result, AEI revoked Martin’s access to its computer systems on August 31, 2022, and diverted Martin’s work email address and telephone number, as well as demand the return of his Oppo AX5 work mobile phone.
AEI explained that the number had belonged to the company for the past 11 years and would continue to be used for AEI’s 24/7 emergency assistance helpline, meaning Martin could no longer have access to it. During this conversation AEI director Michael Donaldson found out that Martin had taken former AEI clients with him to MA Insurance Brokers.
On November 1, 2022, AEI received notifications by email that a sizable number of AEI clients had withdrawn their business and engaged with MA Insurance Brokers.
It was confirmed that those clients were in contact with Martin, who had facilitated and been involved in the transition to the new brokerage. All up, 45 clients from AEI Insurance moved to MA Insurance Brokers.
After seeking to recover the Oppo AX5 phone after Martin’s resignation on March 28, 2023, the phone was delivered water damaged to AEI, and the company was unable to recover data except for all contacts on the SIM.
A forensic expert confirmed the damage was not usual or common in the use of a mobile phone and that steps had been taken to delete data from the phone. The Oppo AX5 did not charge and would not power on so it was determined that Martin tampered with evidence causing damage to the company’s property.
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- A lawyer will check compliance with legislation and flag any potential risks or issues.
- Reviews are completed within two weeks of receiving the document.
- If risks or issues are found, the lawyer will explain next steps and any costs, which are discounted for members.
- Any non-Members can access a one-time free red flag review of one document.
- Please send through copies of your internal employment documents as part of the red flag review to [email protected].
The decision
It was found that Martin had breached his employment contract, specifically the restraint of trade clause, by sending messages to AEI clients to solicit their business for his new employer, either directly or by engaging MA Insurance Brokers to do so.
The restraint of trade clause in his contract stipulated a 12-month no-contact period following the termination of his employment. Evidence also indicated that Martin's contact with AEI’s clients extended beyond the initial text message.
Enquiries conducted by Donaldson and AEI’s employees revealed that at least some clients who had moved their business to MA Insurance Brokers had been contacted by Martin or someone else from MA Insurance Brokers, informing them that Martin now worked there.
Given Martin's prominent role and extensive client interactions, including access to confidential client information, a 12-month no-contact period would have allowed AEI to rebuild client relationships.
This would have mitigated the risk of Martin re-establishing connections and potentially diverting business away from AEI.
Given the breaches to the contract and the loss of business for AEI it was concluded that Martin be ordered to pay damages of $500,000.
Key takeaways
In this case, the Federal Court took into consideration the significant financial loss suffered by AEI because of Martin’s breach of the restraint of trade provisions in his contract of employment.
It is important for businesses to receive legal advice and assistance in drafting these clauses to ensure they can be enforced if breached. If not included in a contract of employment, or if drafted incorrectly, a business may not be able to successfully pursue this type of claim.
CCIWA strongly recommends that employers contact the Employee Relations Helpline on 08 9365 7660 via [email protected] for general advice or Business Law WA for advice and assistance with restraints of trade.