Litigation Update: When can direct claims for loss be brought by shareholders, and when can a plaintiff claim travel beyond the pleaded claim?: Garner v Central Innovation Pty Limited [2022] FCAFC 64

• Published date: 16 May 2022
• Law Firm: Holman Webb
• Author: Mr Nick Maley

Background

The Full Court of the Federal Court recently handed down its decision in Garner v Central Innovation Pty Limited [2022] FCAFC 64, a case about misuse of confidential information. In its decision, the Court made numerous important observations concerning how claims should be advanced, and how litigation should be pursued.

This article will focus on what the Court stated in respect of:

• Whether a Plaintiff ought to be confined expressly to the matters it has pleaded, or whether it can advance claims outside of the pleadings where notice is provided to the Defendant; and
• The circumstances under which a claim for loss can be brought by shareholders of a company, and/or whether the company should bring it.

The decision in Garner v Central Innovation Pty Limited [2022] FCAFC 64 also provides informative comment on how an Appeal Court should assess findings of fact and credit of witnesses, applying the decision of Fox v Percy (2003) 214 CLR 118.

The decision also discusses how principles of causation and loss ought to be brought. Whilst these two points are not addressed in this article, readers are welcome to contact Holman Webb's Workplace Relations Group for further information.

Facts

Garner (The Appellant) was a former employee of the company Intercad. Intercad was a wholly owned subsidiary of parent company Central Innovation. Intercad was the Australian and New Zealand distributor of AutoCAD software.

Central Innovation and Intercad alleged that after Garner was made redundant, he had used confidential information obtained from Intercad to attempt to market to customers of those entities, and to provide AutoCAD software through another company called NCCS.

Both Intercad and Central Innovation brought claims against Garner in the Federal Court, alleging loss brought about by Garner's improper use of the confidential information gained throughout the course of his employment.

There was no real dispute...