The Federal Court has ordered a former AEI Insurance Group account manager to pay $500,000 in damages after more than 40 clients moved to a rival brokerage he joined following his resignation.

The judgment in favour of the heavy vehicle specialist finds Craig Martin breached his contract’s post-employment restraint clause by soliciting clients. The court also says he probably destroyed two mobile phones to hinder access to information, with one run over by a lawn mower.

Mr Martin, who had worked for many years in the trucking and repair industries, was employed by AEI from July 2011 and given responsibility for growing the business in Queensland. 

“By reason of the skills he had acquired before he worked at AEI, and those which he acquired at AEI, he was adept at assisting clients when their vehicles were involved in accidents, in arranging repairs and in assisting with claims,” Justice Tom Thawley said.

“From the perspective of many of AEI’s clients, Mr Martin was in practical terms the face of AEI’s business in the Queensland market.” 

Mr Martin resigned on August 29 2022 and, after initially declining to say where he was going, revealed on August 31 he was joining MA Brokers. His resignation took effect on September 2.

His contract included rules on confidential information and a 12-month post-employment restraint on soliciting, canvassing, dealing with or approaching clients with a view to obtaining their business.

AEI diverted its emergency accident assistance phone number away from Mr Martin’s company-supplied mobile. But Mr Martin sent a text message on September 1 to some contacts providing his new number.

The brokerage learnt of the text and on September 8 wrote requesting that Mr Martin acknowledge and comply with the restraint clause, return all AEI property and delete client contact details.

“AEI wishes to maintain a professional and respectful relationship with you without the need for recourse to litigation. However, steps will be taken if we consider it is necessary to protect AEI’s business interests,” it wrote.

By November 3, AEI had received notifications that 21 clients had signed letters of appointment nominating a new broker. AEI started proceedings, and the court granted an interlocutory injunction restraining Mr Martin from soliciting clients.

A further 24 clients were lost to MA Brokers after the injunction was granted.

Justice Thawley says, to put that into perspective, in the year to August 28 2022, the total income from the 45 clients that moved to MA Brokers was $752,978.

Mr Martin disputed that the Oppo AX5 mobile phone he used at AEI belonged to the business. It was returned on March 28 last year but had been reset and damaged by water immersion, and no useful information could be extracted apart from 25 AEI client contacts on a SIM card. 

Justice Thawley said an Oppo A94 using Mr Martin’s new number “met with the unhappy fate of being run over by a lawn mower” on December 4 2022, five days after the court made an order for discovery.

A Samsung Galaxy A53 had the call logs reset on February 4 2023 and all MMS and SMS messages were deleted before April 19.

“The court concludes, on the balance of probabilities, that these steps were undertaken with a view to frustrating AEI in its attempts to obtain information from the mobile telephones.” Justice Thawley said. “These conclusions are serious ones which reflect adversely on Mr Martin.”

Information considered by the court included contact details on the SIM card, the September 1 text message, email chains, an affidavit from Mr Martin and evidence from an AEI director.

Mr Martin had suggested the evidence left open that the clients moved for a reason other than a contract breach, and noted his “professional networks and long-standing friends from the transport industry and his friendly demeanour and unique skills”.

He also said it could not be excluded that clients left AEI to follow other former staff members.

But Justice Thawley said: “The evidence did not go near establishing this as plausible. In particular, it was established that 45 clients moved to MA Brokers.”

The decision considers the clients in three groupings.

“In relation to the first 16 and second 15 clients, I conclude that Mr Martin solicited the clients, either by taking the relevant steps himself or by procuring MA Brokers to take the steps by providing names and other relevant details,” Justice Thawley said.

For the third 14, he finds it likely Mr Martin solicited “a substantial proportion of them” either directly or by obtaining assistance from MA Brokers.

At AEI, Mr Martin was paid a base salary, superannuation, a vehicle allowance and commission of 30% for new business and 5% for policy renewals.

The decision says Mr Martin had a financial interest in the clients moving, given the likely similar terms of his employment with MA Brokers.  

The $500,000 in damages reflects adjustments for a portion that were not solicited, a retention rate calculation and “the impossibility of knowing which clients might have left in any event or, necessarily, the dates of their policy renewals”.

Mr Martin has also been ordered to pay AEI’s costs. 

The decision is available here.