Grave robbery: funeral provider laid to rest by the High Court

A rogue employee can do a lot of damage. Trusted with company secrets, an employee may pinch those secrets and take them to a competitor (in return, no doubt, for a handsome raise).

An employee, as a fiduciary to their employer, may be required to account for such nefarious conduct. However, a non-fiduciary who knowingly participates in the breach, may also be required to account.

This was the subject of judicial comment in the High Court case Lifeplan.¹

The case

Lifeplan Australia (Lifeplan) sells funeral investment funds to its customers. Lifeplan manages the fund (for a fee), and upon a customer’s death, pays that customer’s contribution to a funeral director. 

Lifeplan was lucrative, boasting inflows of $68 million in 2010. However, in July 2010, Lifeplan employees Mr Woff and Mr Corby approached competitor Foresters Victoria (Foresters) to pitch a business plan.

Mr Woff and Mr Corby, through their access to Lifeplan’s confidential information, sought to transfer the majority of Lifeplan’s business to Foresters over a five year period.

Foresters hired Mr Woff and Mr Corby, with a view to enacting their five year business plan.

The plan “set out a detailed strategy to attack the commercial base of [Lifeplan] in order to win as many clients from [Lifeplan]…”.²

The plan was immediately effective; Foresters increased its inflow from $1.6 million (in 2010) to $24 million (in 2012). In what the Court called “a compelling correlation”,³ Lifeplan’s business suffered, losing $23 million worth of inflow over just 2 years.

“Foresters’ gain was…Lifeplan’s loss.”⁴ The Court found that, as a result of Mr Woff and Mr Corby’s breach of fiduciary duty, Foresters had obtained the entire benefit of Lifeplan’s business, obliterating Lifeplan’s viability in the process.⁵

Although Foresters owed no fiduciary duty to Lifeplan, the Court found that it knowingly participated in Mr Woff and Mr Corby’s breach, and ought to be made to account for its entire capital value.⁶ As a result, Foresters was ordered to pay to Lifeplan $14,838,063.00 (plus costs).

Lavan comment

Foresters profited from “the dishonest and fraudulent breaches of fiduciary duty by Mr Woff and Mr Corby in which [it] knowingly participated.”⁷

As tempting (and lucrative) as the original pitch was, Foresters ought to have recognised that it was unconscionable to usurp Lifeplan’s business, in the manner conceived by Mr Woff and Mr Corby.

Sufficient protocols must be established to mitigate the risk of an employee misusing confidential information. Further, a business must educate itself on what information it can, or cannot, rely on, when hiring from a competitor. Confidential information is very valuable.  Businesses should value it and guard against its misappropriation.  Employees must be educated in their obligations of confidence.

If you require assistance in this regard, please contact Iain Freeman or Andrew Sutton on andrew.sutton@lavan.com.au.