Federal Court extends restraint on Shaw and Partners brokers after Fortrend Securities alleges client poaching

The Federal Court has extended restraints against two Shaw and Partners brokers after their former employer alleged they had taken clients when they walked out in December.

Shaw and Partners senior portfolio managers Stephen Lyle and Christopher Wollermann.

The Federal Court has extended restraints against two Shaw and Partners brokers after their former employer alleged they had poached their best clients when they walked out in December.

But claims between the two sides are to be litigated further in a July hearing, after Justice Stewart Anderson ruled on a preliminary basis it was clear a non-compete had been breached, but did not rule on whether it was enforceable.

Fortrend Securities boss Joe Forster launched the action against James Wollerman and Stephen Lyle, who worked at his Melbourne-based brokerage for more than a decade before leaving in November.

Mr Forster claimed as the two men prepared to leave Fortrend Securities, they accessed confidential documents relating to the firm’s high net wealth clients in a bid to poach them.

Justice Anderson said expert evidence showed Mr Wollerman and Mr Lyle had accessed confidential Fortrend documents in the weeks leading up to their leaving.

But Mr Wollerman and Mr Lyle allege they didn’t use confidential documents but instead relied on public information to contact clients they dealt with at Fortrend Securities.

Fortrend Securities alleges at least 43 of its clients moved over to Shaw and Partners in the wake of Mr Lyle and Mr Wollerman’s departure in December.

“Wollermann estimates that both he and Lyle introduced around 60-70 per cent of Fortrend’s current relationships to the business, contributing approximately 80 per cent of Fortrend’s revenue,” Justice Anderson noted.

Mr Forster claimed Fortrend had lost at least $28m in aggregate value after the two men left, with the firm’s fees slumping to almost a quarter of their pre-October 2022 levels.

“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,” Justice Anderson said.

“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.”

Justice Anderson said he was “satisfied on the evidence” that Mr Wollerman and Mr Lyle had breached their non-solicitation and non-compete obligations.

“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,” he said.

“Fortrend has a legitimate interest in protecting its customer/client relationship which it has

developed over the years.”

Justice Anderson found the two men “do not contest” that they had breached their non-compete and non-solicitation obligations, but “submit that the contractual restraints are unenforceable”.

He ordered they refrain from contacting any Fortrend clients who were with the firm from before December 16.

Mr Forster told The Australian the firm was “focused on servicing our clients”.

However, Justice Anderson said that Mr Wollerman and Mr Lyle had submitted they were the “face of Fortrend” to the company’s clients.

Mr Lyle alleged in his evidence Mr Forster was an absent boss at Fortrend Securities, spending several years working on a blockchain business, before moving to the United States until early 2017.

“He spent a considerable amount of time in 2015 writing a movie screenplay (which he unsuccessfully pitched to Hollywood studios),” he alleged.

“On the rare days that Forster did attend, he would spend most of the time lying on the couch in his office.”

Shaw and Partners co-chief executive Earl Evans said the firm was committed to growing its international securities business and servicing clients “including former Fortrend Clients who have chosen to join us”.

“The judgment today is one step in a legal process, which looked at whether Fortrend’s claims are arguable only. As the judgment says, Fortrend’s claims are contested and cannot be resolved at this stage,” he said.

“We will continue to work through the process and are relaxed that the outcome will be in our favour.”