IN THE SUPREME COURT OF VICTORIA	Not Restricted	
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2023 04506

BETWEEN:

2ND CHAPTER PTY LTD (ACN 631 879 439) 
(and others according to the Schedule) 	Plaintiffs	
		
and		
		
PAUL STUART SEALEY
(and others according to the attached Schedule) 	
Defendants	

 ‑‑‑

JUDGE:	Matthews J	
WHERE HELD:	Melbourne	
DATE OF HEARING:	15–19 July 2024	
date of JUDGMENT:	1 November 2024	
CASE MAY BE CITED AS:	2nd Chapter Pty Ltd & Ors v Sealey & Ors (No 2)	
MEDIUM NEUTRAL CITATION:	[2024] VSC 672	

‑‑‑

CONTRACT – Sale and purchase of business agreements – Restraint of trade – Enforceability of restraint – Legitimate interest – Whether restraints go no further than reasonably necessary to protect interests of party in whose favour they are imposed – Duration of restraint - Severance – Blue pencil principle – Wallis Nominees (Computing) Pty Ltd v Pickett (2013) 45 VR 657, applied.

CONTRACT – Employer and employee – Restraint of trade – Whether post-employment restraint was reasonable – Where restraint unreasonably wide – Severance – Just Group Ltd (ACN 096 911 410) v Peck (2016) 344 ALR 162, applied.

CONTRACT – Employer and employee – Whether employees breached employment contracts by negotiating to become employed by another employer in the future, signing an employment contract to that effect and failing to inform their employer of those matters until after their resignation – Whether breach was repudiatory – No breach established.

PRACTICE AND PROCEDURE – Trial of separate questions – Supreme Court (General Civil Procedure) Rules 2015, r 47.04.

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APPEARANCES:
	Counsel	Solicitors	
For the Plaintiffs	Mr A Broadfoot KC with 
Mr N Elias	Cornwalls NSW	
			
For the Defendants	Mr C O’Grady KC with
Mr E Gisonda	Seyfarth Shaw Australia	

Contents
A	Introduction
B	Background
B.1	Events prior to the acquisition
B.2	Relevant agreements
B.2.1	Share Purchase Agreement
B.2.2	Shareholders’ Agreement
B.2.3	Management Deed
B.2.4	Employment Agreements
B.3	Events after the acquisition
B.4	Payments
B.4.1	Payments under the Share Purchase Agreement
B.4.2	Profit sharing under the Management Deed
B.4.3	Employee wages
B.5	Termination of employment
B.6	Procedural history
C	Questions to be tried
D	Evidence and witnesses
E	Relevant law
F	Preliminary matters
F.1	Existence of a legitimate interest
F.1.1	Plaintiffs’ submissions
F.1.2	Defendants’ submissions
F.1.3	Consideration
F.2	The ‘blue pencil principle’
F.2.1	Submissions
F.2.2	Consideration
F.3	Alleged repudiation of Employment Agreements by 2nd Chapter and whether these contentions form part of the separate questions to be tried
G	Question one: the SPA restraints
G.1	Plaintiffs’ submissions
G.1.1	Scope of the restraints
G.1.2	Geographic reach
G.1.3	Duration
G.1.4	Consideration received
G.1.5	Express acknowledgement and agreement
G.1.6	Severance	
G.1.7	Public interest considerations
G.2	Defendants’ submissions
G.2.1	Scope
G.2.2	Geographic reach
G.2.3	Duration
G.2.4	Consideration received
G.2.5	Express acknowledgement or agreement
G.2.6	Confidential information
G.2.7	Severance
G.2.8	The importance of the circumstances of the particular case
G.2.9	Public interest
G.3	Consideration
G.3.1	Legitimate interest and need for restraints
G.3.2	Scope of the restraints
G.3.3	Geographic reach
G.3.4	Duration
G.3.5	Consideration received
G.3.6	Express acknowledgement or agreement
G.3.7	Confidential information
G.3.8	Severance
G.3.9	Public interest
G.3.10	Conclusion regarding question one
H	Question two: the Management Deed restraints
H.1	Plaintiffs’ submissions
H.2	Defendants’ submissions
H.2.1	Scope
H.2.2	Duration
H.2.3	Geographic reach
H.2.4	Consideration received
H.2.5	Express acknowledgement or agreement
H.2.6	Confidential information
H.2.7	Severance
H.2.8	Public interest
H.3	Consideration
I	Question three: the SHA restraints
I.1	Plaintiffs’ submissions
I.1.1	Consideration received
I.1.2	Express acknowledgement or agreement
I.1.3	Duration
I.1.4	Geographic reach
I.1.5	Severance
I.1.6	Public interest
I.2	Defendants’ submissions
I.2.1	Why the scope of the restraints is unreasonable
I.2.2	Duration
I.2.3	Consideration received
I.2.4	Confidential information
I.2.5	Express agreement or acknowledgement
I.2.6	Public interest
I.3	Consideration
J	Question four: clause 13.5 of the Sealey Employment Agreement
J.1	Plaintiffs’ Submissions
J.1.1	Reasonable as between the parties
J.1.2	Birdanco Nominees
J.1.3	Timing of new employment
J.1.4	New employment compensation
J.1.5	Severance
J.1.6	Public interest
J.2	Defendants’ Submissions
J.2.1	The first limb
J.2.2	The second limb
J.2.3	Birdanco Nominees
J.2.4	New employment compensation
J.2.5	Confidential information
J.2.6	Severance
J.2.7	Public interest
J.3	Consideration
J.3.1	The first limb of cl 13.5
J.3.2	The second limb of cl 13.5
J.3.3	Reliance on Birdanco Nominees
J.3.4	Conclusion regarding cl 13.5
K	Question five: clause 14.1 of the Sealey Employment Agreement
K.1	Plaintiffs’ Submissions
K.1.1	Duration
K.1.2	Geographical reach
K.1.3	Severance
K.2	Defendants’ Submissions
K.2.1	Expiration
K.2.2	Why the restraints are unreasonable
K.2.3	Duration
K.2.4	Geographic reach
K.2.5	Severance
K.2.6	Confidential information
K.2.7	Express acknowledgement or agreement
K.2.8	Public interest
K.3	Consideration
L	Question six: clause 13.5 of the Vickers‑Willis Employment Agreement
L.1	Submissions
L.2	Consideration
M	Question seven: clause 14.1 of the Vickers‑Willis Employment Agreement
M.1	Submissions
M.2	Consideration
N	Question eight: clause 14.1 of the Allen Employment Agreement
N.1	Plaintiffs’ Submissions
N.2	Defendants’ Submissions
N.3	Consideration
O	Question nine: Repudiation of Employment Agreements
O.1	The pleadings
O.2	The evidence
O.3	Plaintiffs’ Submissions
O.4	Defendants’ Submissions
O.5	Consideration
P	Conclusion

HER HONOUR:
A	Introduction 
1	This decision concerns a trial of separate questions in respect of the enforceability of various restrictive covenants and the alleged repudiation of employment contracts.
2	The Plaintiffs in the proceeding are: 
(a)	the first plaintiff, 2nd Chapter Pty Ltd;
(b)	the second plaintiff, Focus Escala Holdings, LLC; 
(c)	the third plaintiff, Focus Financial Partners, LLC; and
(d)	the fourth plaintiff, Escala Partners Pty Ltd.
3	The Defendants in the proceeding are: 
(a)	the first defendant, Mr Paul Stuart Sealey;
(b)	the second defendant, Mr Jonathan Charles Vickers‑Willis;
(c)	the third defendant, Terrung Investments Pty Ltd;
(d)	the fourth defendant, J C Vickers‑Willis Pty Ltd (JCVW); and
(e)	the fifth defendant, Mr William Allen.
4	Since March 2013, Escala Partners (along with its subsidiary Escala Wealth Management Pty Ltd) have been in the business of providing wealth management services, including financial advisory services.  Escala Partners owns all of the issued shares in Escala Wealth Management.  
5	In around February 2019, Escala Partners and Escala Wealth Management were acquired by Focus Escala Holdings and Focus Financial. 
6	Focus Financial is a NASDAQ‑listed company in the business of acquiring and overseeing wealth management and related businesses across the globe, including in the United States of America and Australia.  Together, Escala Partners and Escala Wealth Management represent one of six financial advisory businesses which Focus Financial has acquired in Australia.  The majority of firms which Focus Financial oversees are based in the United States and approximately 10% of Focus Financial’s revenue is derived from outside the United States.  
7	Focus Escala Holdings is a special purpose vehicle, established for the purposes of the acquisition of Escala Partners.  Focus Escala Holdings is a wholly‑owned subsidiary of Focus Financial, such that the latter ultimately owns 100% of the shares in Escala Partners through its ownership of 100% of the shares of Focus Escala Holdings.  For convenience and where it is not necessary for a distinction to be made with these two related companies (or when the parties’ submissions have not made such distinction), I will refer in these reasons to Focus.
8	As part of the acquisition of Escala Partners, 2nd Chapter was incorporated as a special purpose management company to manage the Escala Partners business on behalf of Focus Escala Holdings and to employ staff in the business.  Shareholdings in Escala Partners were sold to Focus Escala Holdings and the former shareholders whose principals were continuing in the Escala Partners business were given shareholdings in 2nd Chapter.  Post‑acquisition, 2nd Chapter received a management fee from Focus Escala Holdings representing around half of the earnings of the Escala Partners business.
9	The Plaintiffs commenced this proceeding seeking damages and injunctive relief in respect of Sealey and Vickers‑Willis.  Sealey and Vickers‑Willis are two former employees of 2nd Chapter and, through that company, they performed investment and financial advisory services for Escala Partners.  Through their related entities, they both held shares in Escala Partners which were bought by Focus Escala Holdings in the acquisition, and they are both shareholders in 2nd Chapter.  Allen is also a former employee of 2nd Chapter but did not hold shares in Escala Partners and was/is not a shareholder of 2nd Chapter.
10	Sealey, Vickers‑Willis and Allen are now employed at LGT Crestone Wealth Management Ltd (Crestone).  Crestone is an Australian company which provides wealth management services such as financial planning and advice in Australia.  It appears to be common ground that Crestone’s business is the same or substantially similar to the Escala Partners business or a material part of it and it is in competition with Escala Partners.
11	Relevantly, the Plaintiffs seek injunctive relief against Sealey and Vickers‑Willis, restraining them from:
(a)	engaging in a business or an activity in the wealth management industry;
(b)	soliciting, canvassing, approaching or accepting an approach from a person who is a client (or former client) of Escala Partners with a view to obtaining their custom in a business in the wealth management industry;
(c)	interfering with the relationship between Escala Partners and its customers, clients or employees (including by inducing any such person to terminate or modify their relationship with Escala Partners or by making negative or disparaging statements regarding Escala Partners); and
(d)	encouraging or inducing any other person to do any of the things set out in (a) to (c) above.
12	The restraints which the Plaintiffs seek to enforce arise in a number of different agreements which were entered into in connection with the acquisition of Escala Partners by Focus Financial and Focus Escala Holdings in around February 2019.  Relevant sections of those agreements are described at section B.2 of these reasons.  The Plaintiffs seek to enforce the restraints throughout Australia.
13	The Defendants say that the restraints sought to be enforced by the Plaintiffs are void as contrary to public policy.  While this will be explained in more detail later, it is necessary to note at this juncture that eight of the separate questions concern the enforceability of the restraints.  Matters such as whether the restraints have been breached by one or more of the Defendants and damages are not part of this trial.  Consequently, when describing the background and evidence, I have not included matters going solely to those issues.
14	In addition to the eight questions regarding the restraints, question nine concerns an issue of repudiation.  The Plaintiffs contend that Sealey and Vickers‑Willis repudiated their employment contracts, which they both deny.  That is also a matter to be dealt with as part of this trial of separate questions.
B	Background
B.1	Events prior to the acquisition
15	Since March 2013 Escala Partners and Escala Wealth Management have conducted the business of providing wealth management services, including financial planning and advice.  Escala Partners earns revenue principally by charging fees calculated as a percentage of the funds that it manages for its clients, who are mostly high net‑worth individuals and their associated entities.
16	There were eight founders of Escala Partners who each originally took a 12.5% shareholding in the business, none of whom are parties to this proceeding.  One of those eight founders is Mr Percival Edwin Perry.
17	Sealey and Vickers‑Willis were financial advisors with Escala Partners. Sealey commenced employment as an investment advisor at Escala Partners in around April 2013.  Vickers‑Willis commenced his employment in around January 2014 and became a partner at Escala Partners in 2018.  
18	Over the years, in addition to the eight founders, other persons obtained shares in Escala Partners, including entities associated with Sealey and Vickers‑Willis.  As concerns the interests of Sealey and Vickers‑Willis in Escala Partners:
(a)	Terrung is a company of which Sealey is the sole director and shareholder.  As at February 2019, Terrung held 60,171 shares (6.2188% of the total shares in Escala Partners), making it the eighth-largest shareholder in Escala Partners.  Terrung is trustee of the Sealey Investment Trust.
(b)	JCVW is a company of which Vickers Willis is the sole director and shareholder.  As at February 2019, JCVW held 324 shares (0.0335% of the total shareholding in Escala Partners), making it the fourteenth-largest shareholder in Escala Partners.  JCVW is the trustee of the Vickers Willis Family Trust.  JCVW purchased its shares in Escala Partners for $16,491.60 in July 2017.
19	Allen was first employed in the business in 2017 as an associate, before being promoted to an investment advisor role in 2020.  Allen did not have a direct or indirect shareholding in Escala Partners.  I understand that Sealey and Vickers‑Willis worked together in a team at Escala Partners in the form of a 50:50 partnership and that Allen (among others) worked in that team at the direction of Sealey and Vickers‑Willis while he was an associate.  The dynamics of this team changed over time.
20	In around mid‑2018, negotiations commenced for the acquisition of Escala Partners by Focus Financial.  None of the Defendants were involved in those negotiations.  At the time of the negotiations, there were 18 shareholders of Escala Partners, most of which were entities associated with fee‑earning advisors employed by Escala Partners.
21	On the Focus Financial side, Ms Molly Lynn Bennard led the negotiations under the oversight and supervision of Focus Financial’s former Co‑Founder and COO, Ms Rajini Kodialam.  Perry played a key role on the Escala Partners side of the negotiations.
22	On 16 July 2018, Bennard sent to Perry a proposal for Focus’ acquisition of Escala Partners.  Bennard sent a revised proposal to Perry on 31 July 2018.  An in‑person meeting also occurred on 31 July 2019 with personnel from Focus Financial and Escala Partners (including Kodialam, Bennard and Perry), and further documents relating to the proposed acquisition were circulated after the meeting.
23	On 8 August 2018, Bennard provided to Perry by email a summary of the restraints proposed as part of the transaction.  Those proposed restraints are, in effect, what were ultimately implemented in the acquisition by Focus.
24	On 31 October 2018, Focus Financial made a non‑binding indicative offer for the acquisition of Escala Partners.  This offer included proposed restraints along the lines of those ultimately entered into as part of the acquisition by Focus:
(a)	The Director‑Principals would enter into a standard non‑competition agreement that would prevent them from competing with the Company for two years following the termination of the Management Agreement, if the Management Agreement is terminated and, in any event, the Owners would be subject to a standard non‑competition agreement that would prevent them from competing with the Company for a minimum of five years from and after the Closing. The Management Agreement will further provide confidentiality and non‑solicitation requirements for the Director‑Principals which will prevent the Director‑Principals from soliciting other employees or clients of the Company for a period of two years after the termination of the Management Agreement, if the Management Agreement is terminated.
(b)	Certain employees of the Company would enter into standard confidentiality and non‑solicitation agreements which will prevent them from soliciting other employees or clients of the Company for a period of two years after their employment with the Company ends.
25	In around mid‑December 2018, Bennard visited the Escala Partners office in Melbourne to conduct interviews with members of the Escala Partners team as part of due diligence exercises by Focus Financial.  Other due diligence carried out by Focus included a third‑party compliance review from a regulatory risk consulting firm in January 2019.
26	As to the involvement of Sealey and Vickers‑Willis in the negotiations:
(a)	Vickers‑Willis had no involvement in the negotiations leading to the acquisition by Focus and first became aware of the negotiations when he was asked to execute the sale documents.  Perry did not dispute this.
(b)	Sealey’s evidence is that he was provided with sporadic information about the negotiations, but did not have input other than in respect of a taxation treatment matter.  This assessment is disputed by Perry.  Perry says he kept partners updated in respect of the negotiations, including Sealey, and the tax input of Sealey arose because Sealey reviewed the draft acquisition document, pulled out a certain paragraph, asked about tax treatment and investigated this further.  He did not agree that Sealey had no involvement in the negotiation of the restraints but did not state how Sealey was involved.
27	On around 20 February 2019, Focus Escala Holdings acquired all of the issued shares in Escala Partners pursuant to a written agreement entitled ‘Share Purchase Agreement’ (SPA).  The SPA and other agreements related to the acquisition of Escala Partners are outlined in section B.2 of these reasons.  In general terms, the transaction involved the shareholders of Escala Partners selling their shares to Focus Escala Holdings, while the continuing principals entered into a management deed pursuant to which 2nd Chapter was to conduct the day‑to‑day management and operation of the Escala Partners business.  The previous shareholders of Escala Partners who were continuing with the business became shareholders of 2nd Chapter, with a shareholders agreement between the shareholders, the principals, and 2nd Chapter.  Finally, the principals entered into employment agreements with 2nd Chapter.
28	As I will set out in greater detail below, following the acquisition the business continued, in effect, to operate as an independent business, although it became a wholly‑owned subsidiary of Focus Escala Holdings.  This structure is the preferred acquisition model which Focus employs when it acquires businesses.  The structure means that Focus has almost no involvement in the day‑to‑day management of the business and does not interact with clients of the business.  As Bennard explained in her evidence, this structure means that Focus places a great deal of trust in principals of the acquired business as part of this ongoing relationship, because the principals continue to maintain client relationships (and those relationships are substantially all of the value of the business).  
29	As at February 2019 (ie, prior to when the acquisition took place), shareholdings in Escala Partners were as follows:
(a)	six of the original shareholders and founders each had 118,464 shares (each being a 12.2435% proportion of all shares);
(b)	one shareholder had 94,902 shares (being a 9.8084% proportion of all shares);
(c)	Terrung had 60,171 shares (being a 6.2188% proportion of all shares);
(d)	three shareholders each had 28,060 shares (each being a 2.9001% proportion of all shares);
(e)	one shareholder had 15,904 shares (being a 1.6437% proportion of all shares); 
(f)	one shareholder had 472 shares (being a 0.0488% proportion of all shares);
(g)	JCVW had 324 shares (being a 0.0335% proportion of all shares); 
(h)	one shareholder had 275 shares (being a 0.0284% proportion of all shares);
(i)	two shareholders each had 187 shares (each being a 0.0193% proportion of all shares); and
(j)	one shareholder had 177 shares (being a 0.0183% proportion of all shares).
30	In around mid‑to‑late‑March 2019 (ie, after the SPA was executed but before the execution of other agreements in the acquisition of Escala Partners), additional communication occurred between Perry and Bennard regarding details of the acquisition including the transition plan, amendments to proposed agreements, compensation calculations, and non‑solicitation restraints forming part of those proposed agreements.
31	On 20 March 2019, Perry wrote to the (former) Escala Partners shareholders by email, to ask if  they intended to take up shares in 2nd Chapter.  Vickers‑Willis replied to that email stating that he ‘would be delighted to take up and purchase shares’, based on their prior discussions regarding an increase in his equity position to 4.5% to 5%, but that if it remained at around 3% equity, he ‘would have to seriously consider whether’ to accept the offer to take up shares in 2nd Chapter.
32	On 29 March 2019, Perry forwarded to Sealey and Vickers‑Willis by email ‘signing packs’ containing documents for execution including share transfer forms and documents requiring execution (including the SHA and Management Deed).
B.2	Relevant agreements
B.2.1	Share Purchase Agreement
33	On around 20 February 2019, a number of parties entered into the SPA (pursuant to which Focus Escala Holdings acquired all of the issued shares in Escala Partners).  Relevantly, the parties included:
(a)	Sealey and Vickers‑Willis as Principals;
(b)	Terrung and JCVW as Vendors;
(c)	Focus Escala Holdings as Purchaser; and
(d)	Focus Financial as Guarantor.
There were several other Principals and Vendors who were parties to the SPA.
34	In accordance with the terms of the SPA, Focus Escala Holdings agreed to purchase all of the shares in Escala Partners from the Vendors.  The SPA contained a number of key terms, detailed in the following paragraphs. 
35	Clause 1.1 of the SPA set out definitions applying to terms of the SPA including:
(a)	‘Associate’ means in relation to a person:
(i)	a Related Body Corporate of that Person;
(ii)	in the case of a natural person, a spouse or de facto spouse of that person;
(iii)	a company or trust of which the person has Control; and
(iv)	where the person is a Controlled Vendor, its Principal.
(b)	‘Business’ means the business carried on by the Group as at the date of this Agreement or the Completion Date (as the case requires) of providing wealth management services (including financial planning and advice);
(c)	‘Company’ means Escala Partners;
(d)	‘Completion’ means completion of the sale and purchase of the Shares contemplated by the SPA under cl 8.
(e)	‘Completion Date’ means the date on which Completion occurs, being the first Business Day of the Calendar month after the month in which each Condition (other than Conditions 2, 3 and 4 in cl 3.1 of the SPA, which must be and remain satisfied immediately prior to Completion) is satisfied or waived (or such other date as agreed between the parties);
(f)	‘Group’ means the Company and the Subsidiaries; and
(g)	‘Subsidiary’ has the meaning given to that term in the Corporations Act 2001 (Cth) (Corporations Act). 
36	The restrictive covenant was located in clause 20 of the SPA, which provided as follows:
20.1 Defined terms
In this clause 20:
engage in means to carry on, participate in, provide finance or services, or otherwise be directly or indirectly involved as a shareholder, unitholder, director, consultant, adviser, contractor, principal, agent, manager, employee, beneficiary, partner, associate, trustee or financier.
Prohibited Persons means:
(a)	each Vendor;
(b)	each Principal; and
(c)	each Associate of each Vendor and Principal (as applicable).
In this clause 20, a reference to the Business is to the Business as at the Completion Date.
20.2 Prohibited activities
Subject to clause 20.3, each Vendor and Principal (in consideration for the Purchaser entering into this agreement) undertakes to the Purchaser that its relative Prohibited Persons will not:
(a)	engage in a business or an activity that is:
(i)	the same as, or substantially similar to, the Business or any material part or parts of the Business; or
(ii)	in competition with the Business or any material part or parts of the Business; 
(b)	solicit, canvass, approach or accept an approach from a person who was at any time during the 24 month period ending on the Completion Date a customer or client of the Group or the Business with a view to obtaining their custom in a business that is the same or substantially similar to the Business or any material part of it or is in competition with the Business or any material part of it;
(c)	interfere with the relationship between the Group or the Business and its customers, clients, employees or suppliers;
(d)	induce or help to induce an Employee to leave their employment;
(e)	use a logo, symbol, trade mark or business name which may be misleading or deceptively similar to, or likely to be confused with, a logo, symbol, trade mark or business name owned or used by the Group (including the Business Names and the Trade Marks); or
(f)	encourage or induce any other person to do any of the things set out above.
20.3 Several Liability
Notwithstanding any other provision in this agreement:
(a)	each Vendor gives the undertakings in clause 20.2 in respect of itself and its Associates only;
(b)	each Principal gives the undertakings in clause in clause 20.2 in respect of itself and its Associates only; and
(c)	the liability of each Vendor or Principal under this clause 20 is several, and not joint or joint and several.
20.4 Duration of prohibition
The undertakings in clauses 20.2(a) to 20.2(d) and 20.2(f) begin on the Completion Date and end:
(a)	on the fifth anniversary of the Completion Date;
(b)	on the fourth anniversary of the Completion Date;
(c)	on the third anniversary of the Completion Date;
(d)	on the second anniversary of the Completion Date;
(e)	on the anniversary of the Completion Date.
20.5 Geographic application of prohibition
The undertakings in clause 20,2 apply only if the activity prohibited by clause 20.2 occurs within:
(a)	Australia;
(b)	New South Wales, Victoria, Western Australia, Australian Capital Territory and Queensland; 
(c)	New South Wales, Victoria and Western Australia;
(d)	New South Wales and Victoria;
(e)	Sydney and Melbourne.
20.6 Interpretation
Clauses 20.2, 20.3 and 20.5 have effect together as if they consisted of separate provisions, each being severable from the other. Each separate provision results from combining each undertaking in clause 20.2, with each period in clause 20.3, and combining each of those combinations with each area in clause 20.5. If any of those separate provisions is invalid or unenforceable for any reason, the invalidity or unenforceability does not affect the validity or enforceability of any of the other separate provisions or other combinations of the separate provisions of clauses 20.2, 20.3 and 20.5.
20.7 Exceptions
This clause 20 does not restrict a Prohibited Person from:
(a)	performing any employment and contractor agreement with the Group or the Management Company;
(b)	performing their obligations under the Management Deed;
(c)	holding 5% or less of the shares of a listed company; or
(d)	acting as an authorised representative of the Company.
20.8 Acknowledgments
Each Vendor acknowledges that:
(a)	all the prohibitions and restrictions in this clause 20 are reasonable in the circumstances and necessary to protect the goodwill of the Business;
(b)	damages are not an adequate remedy if a Prohibited Person breaches this clause 20; and
(c)	the Purchaser may apply for injunctive relief if:
(i)	a Prohibited Person breaches or threatens to breach this clause 20; or
(ii)	it believes a Prohibited Person is likely to breach this clause 20.
37	The Completion Date for the SPA was 31 March 2019, such that the fifth anniversary of the Completion Date was 31 March 2024.  
B.2.2	Shareholders’ Agreement
38	On or about 16 April 2019, a number of parties entered into a written agreement entitled ‘Shareholders Agreement’ (SHA).  The final signatures to the SHA were received on 16 April 2019.  The parties to the SHA relevantly included:
(a)	Sealey and Vickers‑Willis as Principals;
(b)	Terrung and JCVW as Shareholders; and
(c)	2nd Chapter.
39	From Bennard’s evidence, I understand that Focus Financial and Focus Escala Holdings (neither of which were parties to the SHA) did not have any input into the negotiation of the SHA.
40	In paragraphs 41 to 45, I set out the relevant terms of the SHA.
41	Definitions are included in cl 1.1 of the SHA.  The relevant definitions are:
…
(d)	Associate means in relation to a person, a company or trust of which the person has Control;
…
(h)	Business means:
(i)	the business conducted by the Company including providing the Services under the Management Deed; and
(ii)	any other activities which the Board decides will be carried on by the Company and its Subsidiaries from time to time;
…
(m)	Commencement Date means the date of execution of this Agreement;
(n)	Company means 2nd Chapter Pty Ltd (ACN 631 879 439);
…
(r)	Controlled Shareholder means, in relation to a Principal, that Shareholder whose name is listed opposite the relevant Principal’s name in Schedule 1;
(s)	Controlling Principal means in relation to a Controlled Shareholder, the Principal whose name is listed opposite that Controlled Shareholder’s name in Schedule 1;
(t)	Corporations Act means the Corporations Act 2001 (Cth);
…
(bb)	Escala means Escala Partners Pty Ltd ACN 155 884 236;
…
(dd)	Focus means Focus Financial Partners, LLC, a Delaware limited liability company;
…
(hh)	Management Deed means the management deed dated on or about the date of this Agreement between the Company, Escala, Focus and the Principals;
…
(kk)	Material Obligations mean the obligations set out in each of clause 13 (Transfer of Shares), clause 15 (Shareholder Departures), clause 16 (Drag Along Rights) 17 (Tag Along Rights), clause 20 (Restrictive Covenants) and clause 22 (Confidentiality);
(ll)	Minimum Period means in respect of a Shareholder, the date commencing on the date which that Shareholder or its Controlling Principal entered into a Services Agreement and ending 18 months after that date;
(mm)	Principal means a person, nominated by a Shareholder (including the person nominated by a Shareholder and named in Schedule 1 or in a Deed of Accession (as applicable)) who provides services to the Company pursuant to a Services Agreement;
…
(tt)	Services means the services to be provided by the Company to Escala under the Management Deed;
(uu)	Services Agreement means an agreement between the Company or any one of its Subsidiaries and a Shareholder, or a Shareholder’s Principal for the purposes of providing certain employment related services from time to time;
…
42	Sealey and Vickers‑Willis are Controlling Principals, and Terrung and JCVW are Shareholders or Controlled Shareholders in the SHA.
43	Clause 15.4 is entitled ‘Limits on Retirement and Resignation’.  It provides:
If a Shareholder or its Controlling Principal (as applicable) chooses to retire or resign under the terms of his or her Services Agreement, the Shareholder or Controlling Principal must (as applicable):
(a)	(minimum six months notice) give no less than six (6) months written notice to both the Shareholders and the Board (Departure Notice) of his or her intention to retire or resign under the terms of his or her Services Agreement;
(b)	(maximum of one Departure every six months) not retire within the same six (6) month period as any other Shareholder or Shareholder’s Controlling Principal (as applicable). In the event that more than one (1) Shareholder or its Controlling Principal provides a Departure Notice to the Shareholders and the Board in accordance with clause 15.4(a) within the same six (6) month period:
(i)	the Departing Shareholder which gives the Departure Notice which is deemed under this Agreement to have been received by the Board first and which complies with the requirements of clause 15.4(a), shall be treated as a Good Leaver; and
(ii)	each Departing Shareholder which gives one of the remaining Departure Notice(s) received in the relevant six (6) month period, or a Departure Notice that does not comply with the requirements of clause 15.4(a), shall be deemed to be a Bad Leaver unless the Board resolves otherwise.
44	Clause 20 is the key SHA term for the purposes of this proceeding as it concerns the restrictive covenant.  This lengthy clause is worth setting out in full:
20.1 Definitions
In this clause 20:
(a)	Business shall include the Business of Escala as that term is defined in the Management Deed;
(b)	engage in means to carry on, participate in, provide finance or services, or otherwise be directly or indirectly involved as a shareholder, owner, operator, controller, unitholder, director, consultant, adviser, contractor, principal, agent, manager, employee, beneficiary, partner, associate, trustee or financier.
(c)	Cessation Date means in relation to: 
(i)	a Shareholder, the date on which that Shareholder ceases to be a Shareholder; and
(ii)	a Principal, the date on which that Principal’s Controlled Shareholder ceases to be a Shareholder.
(d)	Current Restraint Term means in relation to:
(i)	each Shareholder, the period from the date that the Shareholder became a party to this Agreement, until the Cessation Date applicable to that Shareholder.
(ii)	each Principal, the period from the date that the Principal’s Controlled Shareholder became a party to this Agreement, until the Cessation Date applicable to that Principal.
(e)	Prohibited Person means (as applicable):
(i)	each Shareholder; and
(ii)	each Principal.
(f)	Solicit includes (without limitation) any mailing, e‑mail message, or other verbal or written communication that is sent directly or indirectly to one or more clients of the Company or Escala informing them:
(i)	that any Principal is no longer providing services to the Company or to or on behalf of Escala;
(ii)	that any Principal plans to no longer provide services to the Company or to or on behalf of Escala; or
(iii)	how to contact any Principal in the event that such Principal ceases to provide services to the Company or to or on behalf of Escala, other than any correspondence or communication approved by the Company in writing prior to sending to the clients.
20.2 Prohibited Activities
Each Prohibited Person undertakes severally to the Company that it will not and that its respective Associates will not:
(a)	engage in a business or an activity that is:
(i)	the same or similar to the Business or any material part or parts of the Business; or
(ii)	in competition with the Business or any material part or parts of the Business;
(b)	during the Current Restraint Term, solicit, canvass, approach or accept an approach from a person who is a client of the Company, Escala or the Business with a view to obtaining their custom in a business that is the same or substantially similar to the Business (or any material part of it) or is in competition with the Business (or any material part of it);
(c)	solicit, canvass, approach or accept an approach from a person who was at any time during the 24 months ending on the Cessation Date a client of the Company, Escala or the Business with a view to obtaining their custom in a business that is the same or substantially similar to the Business (or any material part of it) or is in competition with the Business (or any material part of it);
(d)	interfere with the relationship between the Company, Escala or the Business and its customers, clients, employees, suppliers or collaboration partners (including by inducing any such person to terminate or modify their relationship with the Company or by making any negative or disparaging statements regarding the Company or Escala);
(e)	hire or otherwise engage any employee of the Company, or initiate contact with or directly or indirectly solicit any such employee, with a view to hiring such employee, or induce or otherwise counsel, advise or encourage any such employee to leave their employment with the Company;
(f)	use a logo, symbol, trade mark or business name which may be misleading or deceptively similar to, or likely to be confused with, a logo, symbol, trade mark or business name owned or used by the Company or Escala; or
(g)	encourage or induce any other person to do any of the things set out in this clause 20.2.
20.3 Duration of prohibition
The undertakings given by each Prohibited Person in clause 20.2, begin at the commencement of the Current Restraint Term applicable to that Prohibited Person and (unless a contrary intention is expressed in clause 20.2) end:
(a)	on the second anniversary of the Cessation Date applicable to that Principal or Shareholder (as applicable);
(b)	on the first anniversary of the Cessation Date applicable to that Principal or Shareholder (as applicable).
20.4 Geographic application of prohibitions
The undertakings in Section 20.2 apply only if the activity prohibited by clause 20.2 occurs within:
(a)	Australia;
(b)	New South Wales, Victoria, Western Australia, Australian Capital Territory and Queensland;
(c)	New South Wales, Victoria and Western Australia;
(d)	New South Wales and Victoria; or
(e)	Sydney and Melbourne.
20.5 Interpretation
Clause 20.2, clause 20.3 and clause 20.4 have effect together as if they consisted of separate provisions, each being severable from the other. Each separate provision results from combining each undertaking in clause 20.2, with each period in clause 20.3, and combining each of those combinations with each area in clause 20.4. If any of those separate provisions is invalid or unenforceable for any reason, the invalidity or unenforceability does not affect the validity or enforceability of any of the other separate provisions or other combinations of the separate provisions of clause 20.2, clause 20.3 and clause 20.4.
20.6 Exceptions
Subject to a Principal complying with its obligations under the Management Deed, this clause 20 does not restrict a Prohibited Person or any of its Associates from:
(a)	holding 5% or less of the shares of a company listed on the Stock Exchange;
(b)	being an employee of, or contractor to, the Company or Escala;
(c)	continuing to participate or be concerned in, or continuing to hold or have any interest that was held by a Prohibited Person or any Associate of a Prohibited Person at the time of execution of this Agreement;
(d)	acting as an authorised representative of Escala;
(e)	where a Shareholder or Principal is employed by the Company in a role other than as a client advisor or wealth advisor immediately prior to the Cessation Date, providing services substantially similar to the services provided by that Principal or Shareholder (as applicable) to the Company prior to the Cessation Date;
(f)	accepting an approach from a client of the Company, Escala or the Business who is an Affiliate, grandparent, aunt, uncle or first cousin of the relevant Prohibited Person; or
(g)	conducting any activities that would otherwise be in breach of clause 20.2 but have been approved by the Board.
20.7 Acknowledgments
Each Prohibited Person acknowledges and agrees that:
(a)	all the prohibitions and restrictions in this clause 20 are reasonable in the circumstances and necessary to protect the goodwill of the Business, and have served as a critical inducement to the entry by each Shareholder into this Agreement;
(b)	damages are not an adequate remedy if a Prohibited Person breaches this clause 20;
(c)	the other parties to this Agreement may apply for injunctive relief if:
(i)	a Prohibited Person breaches or threatens to breach this clause 20; or
(ii)	it has reasonable cause to believe that a Prohibited Person is likely to breach this clause 20; and
(d)	the obligations and restrictions imposed upon him or her under this clause 20 are in addition to, and not in lieu of, the obligations and restrictions imposed upon him or her under the Management Deed (if any).
20.8 Legal Advice
Each Shareholder and Principal acknowledges that in relation to this Agreement and in particular this clause 20, the Shareholder has received legal advice or has had the opportunity of obtaining legal advice.
20.9 Severability
For the avoidance of any doubt, if any of the separate and independent covenants or restrictions set out in this clause 20 is or becomes invalid or unenforceable for any reason:
(a)	clause 28.6 of this Agreement applies; and
(b)	without limiting the operation of that clause, if the covenant or restriction in question would be valid or enforceable if any activity was deleted or the area or time was reduced, then the clause must be read down by deleting that activity, or reducing that period or area, to the minimum extent necessary to achieve that result.
20.10 Application to Shareholders subject to Services Agreements
In the event a Shareholder or Principal is subject to a Services Agreement, which imposes less favourable restrictions on the Shareholder or Principal than those set out under this clause 20, then the restrictions in this clause 20 prevail.
45	Clause 27.3 provides:
27.3 Clauses Surviving Termination
Despite any other provision of this Agreement, this clause 27 (Termination) and clauses 1 (Definitions), 20 (Restrictive Covenant), 21 (Public Announcements), 22 (Confidentiality), 23 (Representations and Warranties), 24.2 (Trustee Warranties), and 28 (General) survive the expiry or termination of this Agreement.
46	Clause 28.6 provides:
28.6 Severability
Any provision of this Agreement that is invalid in any jurisdiction must, in relation to that jurisdiction:
(a)	be read down to the minimum extent necessary to achieve its validity, if applicable; and
(b)	be severed from this Agreement in any other case,
without invalidating or affecting the remaining provisions of this Agreement or the validity of that provision in any other jurisdiction.
47	Former shareholders in Escala Partners did not necessarily hold shares in 2nd Chapter in proportion to the shares they had held in Escala Partners. For example, Vickers‑Willis has a larger shareholding in 2nd Chapter through his related entity than he held in Escala Partners.  
B.2.3	Management Deed
48	On 1 April 2019, various parties entered into a deed entitled ‘Management Deed’.  The parties to the Management Deed included Focus Financial, 2nd Chapter, Escala Partners, Sealey and Vickers‑Willis.
49	In brief, the Management Deed governs the terms and conditions upon which 2nd Chapter (as the ‘Management Company’) was engaged to conduct of the day‑to‑day management and operation of the Escala Partners business. 
50	Compensation arrangements for shareholders of 2nd Chapter are set out in Article 4 of the Management Deed.  These are described in section B.4.2 below.  The arrangement involves the earnings before partner compensation (EPBC) for each calendar year being divided by reference to a target and thresholds as follows:
(a)	Threshold one: $500,000 of EBPC. 
(b)	Threshold two: $4,884,157 of EBPC. 
(c)	Threshold three: $11,584,157 of EBPC. 
(d)	EBPC Target: $18,791,430 of EBPC. 
51	The ‘Management Fee’ which 2nd Chapter received from the EPBC is calculated as follows:
(a)	100% of the $4,384,157 between thresholds one and two; 
(b)	100% of the $7,207,273 between threshold three and the EBPC Target; and
(c)	50% of any amount that exceeds the EBPC Target. 
52	The amounts which are reserved for Escala Partners, and which thereby flows to Focus Escala Holdings and Focus Financial, were as follows:
(a)	100% of the $500,000 up to threshold one; 
(b)	100% of the $6,700,000 between thresholds two and three; and  
(c)	50% of any amount in excess of the EBPC Target. 
53	Article 3 of the Management Deed is entitled ‘Non‑Competition and non‑solicitation covenants’.  Article 3 relevantly provides:
Section 3.1. Defined terms. In this Article 3:
(a)	“Associate” means in relation to a Principal:
(i)	a spouse or de facto spouse of that Principal; or
(ii)	a company or trust of which the Principal has Control.
(b)	“engage in” means to carry on, participate in, provide finance or services, or otherwise be directly or indirectly involved as a shareholder, owner, operator, controller, unitholder, director, consultant, adviser, contractor, principal, agent, manager, employee, beneficiary, partner, associate, trustee or financier.
(c)	“Cessation Date” means:
(i)	in relation to the Management Company, the date on which this Deed expires or is terminated; and
(ii)	in relation to a Principal, the date on which that person’s appointment as an authorised representative of the Company is terminated (by either the Principal or the Company).
…
(e)	“Current Restraint Term” means:
(i)	in relation to the Management Company, during the term of this Deed; and 
(ii)	in relation to each Principal, the period from the date of this Deed or (if later) the date on which the Company appoints that person as an authorised representative pursuant to their AR Appointment Deed, until the Cessation Date applicable to that Principal.
(f)	“Prohibited Person” means (as applicable):
(i)	the Management Company; and
(ii)	each Principal.
(g)	“solicit” includes (without limitation) any mailing, e mail message, or other verbal or written communication that is sent directly or indirectly to one or more clients of the Company informing them:
(i)	that the Management Company or any Principal is no longer providing services to the Company;
(ii)	that the Management Company or any Principal plans to no longer provide services to the Company; or
(iii)	how to contact the Management Company or any Principal in the event that the Management Company or such Principal ceases to provide services to the Company, other than any correspondence or communication approved by Focus in writing prior to sending to the clients.
Section 3.2. Prohibited activities. Each Prohibited Person undertakes severally to Focus and the Company that it will not (and, in the case of each Principal, that its respective Associates will not):
(a)	engage in a business or an activity that is:
(i)	the same or similar to the Business or any material part or parts of the Business; or
(ii)	in competition with the Business or any material part or parts of the Business;
(b)	during the Current Restraint Term, solicit, canvass, approach or accept an approach from a person who is a client of the Company or the Business with a view to obtaining their custom in a business that is the same or substantially similar to the Business (or any material part of it) or is in competition with the Business (or any material part of it);
(c)	solicit, canvass, approach or accept an approach from a person who was at any time during the 24 months ending on the Cessation Date a client of the Company or the Business with a view to obtaining their custom in a business that is the same or substantially similar to the Business (or any material part of it) or is in competition with the Business (or any material part of it);
(d)	interfere with the relationship between the Company or the Business and its customers, clients, employees, suppliers or collaboration partners (including by inducing any such person to terminate or modify their relationship with the Company or by making any negative or disparaging statements regarding the Company or any Affiliated Company);
(e)	hire or otherwise engage any employee of the Company, or initiate contact with or directly or indirectly solicit any such employee, with a view to hiring such employee, or induce or otherwise counsel, advise or encourage any such employee to leave their employment with the Company;
(f)	in respect of a Principal only, hire or otherwise engage any employee of the Management Company, or initiate contact with or directly or indirectly solicit any such employee, with a view to hiring such employee, or induce or otherwise counsel, advise or encourage any such employee to leave their employment with the Management Company;
(g)	use a logo, symbol, trade mark or business name which may be misleading or deceptively similar to, or likely to be confused with, a logo, symbol, trade mark or business name owned or used by the Company; or
(h)	encourage or induce any other person to do any of the things set out in this Section 3.2.
…
Section 3.4. Duration of prohibition in relation to each Principal. The undertakings given by each Principal in Section 3.2 begin at the commencement of the Current Restraint Term applicable to that Principal and (unless a contrary intention is expressed in Section 3.2) end:
(a)	on the second anniversary of the Cessation Date applicable to that Principal;
(b)	on the first anniversary of the Cessation Date applicable to that Principal.
Section 3.5. Geographic application of prohibitions. The undertakings in Section 3.2 apply only if the activity prohibited by Section 3.2 occurs within:
(a)	Australia;
(b)	New South Wales, Victoria, Western Australia, Australian Capital Territory and Queensland;
(c)	New South Wales, Victoria and Western Australia;
(d)	New South Wales and Victoria;
(e)	Sydney and Melbourne.
Section 3.6. Interpretation. Section 3.2, Section 3.3 or Section 3.4 (as applicable) and Section 3.5 have effect together as if they consisted of separate provisions, each being severable from the other. Each separate provision results from combining each undertaking in Section 3.2, with each period in Section 3.3 or Section 3.4 (as applicable), and combining each of those combinations with each area in Section 3.5. If any of those separate provisions is invalid or unenforceable for any reason, the invalidity or unenforceability does not affect the validity or enforceability of any of the other separate provisions or other combinations of the separate provisions of Section 3.2, Section 3.3 or Section 3.4 (as applicable) and Section 3.5.
Section 3.7. Exceptions. This Article 3 does not restrict a Prohibited Person from:
(a)	holding 5% or less of the shares of a listed company;
(b)	being an employee of, or contractor to, the Company or the Management Company; or
(c)	acting as an authorised representative of the Company.
Section 3.8. Acknowledgments. Each Prohibited Person acknowledges and agrees that:
…
(a)	Focus and the Company have entered into this Deed at the request of the Principal;
(b)	all the prohibitions and restrictions in this Article 3 are reasonable in the circumstances and necessary to protect the goodwill of the Business, and have served as a critical inducement to the entry by Focus and the Company into this Deed;
(c)	damages are not an adequate remedy if a Prohibited Person breaches this ARTICLE 3;
(d)	the Company and Focus may apply for injunctive relief if:
(i)	a Prohibited Person breaches or threatens to breach this Article 3; or
(ii)	it has reasonable cause to believe that a Prohibited Person is likely to breach this Article 3; and
(e)	the obligations and restrictions imposed upon him or her under this Article 3 are in addition to, and not in lieu of, the obligations and restrictions imposed upon him or her under the Purchase Agreement).
54	Exhibit 2.10 to the Management Deed was a transition plan, setting out details of key members of 2nd Chapter as at 1 April 2019.  Both Sealey and Vickers‑Willis are listed as shareholders of 2nd Chapter and are included in the transition plan.
55	The entry for Vickers‑Willis in the transition plan is as follows:
Jono Vickers‑Willis is a senior advisor that is 30 years old. Jono was hired into the business four years ago as and [sic] associate advisor with financial planning skills. Jono learned the job of an advisor as he worked for a number of different senior advisors in the business. In his second year, Jono joined with Paul Sealey to advise clients. They now work in a 50/50 partnership. Both Jono and Paul have a large number of clients and both are senior advisors in the business. They work with an associate advisor that they are training to be the next advisor in the firm. If Jono was no longer part of Escala, Paul would pick up the work with the clients. Their associate advisor, Will Allen, would also step in to cover the work. A number of the clients Jono looks after were clients of Scott Carmichael years ago. Scott would also step in to handle the work load related to those people.
56	The entry for Sealey in the transition plan is as follows:
Paul Sealey was the first advisor to join Escala Partners. Paul is in his 30s and is a 50/50 partner with Jono Vickers Willis. Both Jono and Paul have a large number of clients and both are senior advisors in the business. They work with an associate advisor that they are training to be the next advisor in the firm. If Jono was no longer part of Escala, Paul would pick up the work with the clients. Their associate advisor, Will Allen, would also step in to cover the work. A number of the clients Jono looks after were clients of Scott Carmichael years ago. Scott would also step in to handle the work load related to those people.
B.2.4	Employment Agreements
57	On or about 19 March 2019, 2nd Chapter and Sealy entered into a written agreement entitled ‘Employment Agreement’ (Sealey Employment Agreement).
58	On or about 21 March 2019, 2nd Chapter and Vickers‑Willis entered into a written agreement entitled ‘Employment Agreement’ (Vickers‑Willis Employment Agreement).
59	On 27 March 2019, 2nd Chapter and Allen entered into a written agreement entitled ‘Employment Agreement’ (Allen Employment Agreement).
60	The drafting of each of the Sealey Employment Agreement, Allen Employment Agreement and Vickers‑Willis Employment Agreement (collectively, the Employment Agreements) was largely identical.  Schedule 2 to each of the Employment Agreements sets out specific information for each employee, including commencement dates, titles and remuneration.
61	By Schedule 1 of the Employment Agreements, the following definitions apply to terms used in each of the Employment Agreements:
(a)	‘Affiliate’ of a person means:
(i)	an associate of a person within the meaning of sections 10 to 17 of the Corporations Act;
(ii)	any entity in respect of which that person has control as that term is defined under the Corporations Act;
(iii)	in relation to a body corporate, any of the body’s related bodies corporate, directors or the holder of a substantial holding (as that term is defined in section 9 of the Corporations Act); and
(iv)	in relation to a natural person, any spouse or relative by blood, marriage or adoption of that person. 
(b)	‘Agreement’ is the particular employment agreement;
(c)	Client(s)’ means any ‘business, person, customer, employee, contractor, corporation or firm who has conducted or is conducting business with, or is receiving or has received services from Escala or the Company, or is currently in negotiations with Escala or the Company for these purposes.’
(d)	‘Company’ is defined to mean 2nd Chapter and any Related Bodies Corporate and Associated Entities as defined in the Corporations Act.
(e)	‘Engage in’ means ‘to carry on, participate in, provide services, or otherwise be directly or indirectly involved as a shareholder, unit holder, director, consultant, adviser, contractor, principal, agent, manager, employee, beneficiary, partner, associate, trustee or financier’.
(f)	‘Escala’ means ‘(as applicable) Escala Partners…and each of its Related Bodies Corporate as defined in the Corporations Act from time to time’.
62	Clause 2 of the Employment Agreements sets out various employee duties and requirements, including relevantly:
2.4	In the Position, you agree to:
•	devote your whole time and attention and the whole of your skills to your duties during the hours of work and such reasonable additional hours that may be necessary to perform your duties;
•	be honest in your dealings with the Company and the Board
•	use your best endeavors [sic] to promote the business interests of the Company;
•	faithfully, diligently and lawfully perform your duties;
•	comply with the Company’s policies and procedures;
•	abide by all laws applicable to your duties and position; and
•	comply with all reasonable and lawful directions of the Company.
2.5	Without prior written approval of the Company you agree not to:
•	undertake any other trade, business or profession; and
•	be involved in any activity, which creates or may create a conflict of interest with the Company, Escala or the Clients, the requirements of your position or your ability to carry out your duties. This includes without limitation, being engaged as a consultant, employee, director, partner, executive, officer, mentor, major shareholder, franchisee, trustee or executor. Should any prospective conflict of interest arise, you agree to immediately notify the Company to obtain written permission to engage in such interest or activities.
2.6	You acknowledge that you are a party to an Authorised Representative Appointment Deed dated on or around 1 April 2019 with Escala Partners Ltd (AR Deed). It is a requirement of your employment that you comply with the terms of the AR Deed and any breach of the AR Deed by you will constitute serious breach of the terms within this Agreement.
63	Clause 13 concerns termination of employment and relevantly provides:
Termination with Notice/Notice Period
13.1 	In the event that either party wishes to terminate this Agreement after completion of your probation period, you or the Company are to provide:
•	3 months written notice.
Restrictions
13.2 	During your notice period, you will continue to be employed by the Company and you must not engage or prepare to engage in any business or activity that is the same or similar to the business activities of the Company in whole or part. You must continue to act in accordance with your Agreement obligations and requirements and remain subject to the Company’s lawful and reasonable directions, including being available if needed.
You will assist with an efficient and thorough transition of all clients that you managed or that you had relationships with, to other Company employees, as directed by the CEO.
…
Non‑compete Period
13.5 	The non‑compete period, is for 6 months or if that period is unenforceable, 3 months from the date of termination of employment. During this period, in consideration of this agreement and the payments to you, referred to in clause 7, you must not (and will ensure that your Affiliates do not), directly or indirectly, on your own behalf or on behalf of any other person or entity, in any capacity, engage or prepare to engage in any business or activity that is the same or similar to the business activities of Escala or the Company in whole or part, or that is in direct competition with the business of Escala or the Company.
Without the prior written consent of the Company you also agree;
•	not to accept or conduct any activity or business which would be in direct competition with the business of Escala or the Company, with any person or entity who at any time during 12 months preceding your termination was a client of Escala or the Company; and
•	not to solicit, encourage, assist or seek to entice any individual to leave their employment with the Company.
Termination without Notice
13.6	Your employment may be summarily terminated by the Company without notice if you:
•	commit a serious or persistent breach of the terms within this Agreement including without limitation confidentiality and conflict of interest;
•	commit an act of serious misconduct or gross negligence;
•	refuse or neglect to comply with any lawful and reasonable directions concerning your employment or duties;
•	are charged with or convicted of an indictable offence; 
•	commit a wrongful or dishonest act or conduct which, in the reasonable opinion of the Company, brings the Company into disrepute;
•	seriously breach professional obligations under the Corporations Act; and
•	breach the Company’s Policies.
13.7 	If you are terminated summarily, your Agreement obligations including without limitation the Restraint Covenant and Non‑compete Period, will continue to apply.
64	Clause 14 of the Employment Agreements sets out the restraint covenant. Clause 14 is in the following terms:
14.0 Restraint Covenant
Restraint (non‑solicit) Period
14.1 	In consideration of this agreement and the payments to you referred to in clause 7 which are greater than those payable to at law [sic], you agree that you will not, and will ensure that your Affiliates do not, during the Restraint Period and in the Restraint Area, directly or indirectly, on your or their own behalf or on behalf of any other person or entity, in any capacity:
•	solicit, canvas, approach, encourage, entice, or assist any person or entity who at any time during the period of 12 months preceding the termination of your employment was a client of the Company or Escala, to cease doing business with Escala or the Company, or reduce the amount of business the client may or would conduct with Escala or the Company, or alter the terms of the client’s dealings with Escala or the Company;
•	assist another person or entity to solicit, canvas, approach, encourage, entice, or assist any person or entity who, at any time during the period of 12 months preceding the date of termination of your employment, was a client of Escala or the Company, to cease doing business with Escala or the Company, or reduce the amount of business the client may or would conduct with Escala or the Company, or alter the terms of the client’s dealings with Escala or the Company;
•	do or say anything harmful to the reputation of Escala or the Company or which may lead a person or entity to cease, curtail or alter the terms of their dealings with Escala or the Company;
•	accept any approach from any person or entity who, at any time during the period of 12 months preceding the date of termination of your employment, was a client of Escala or the Company with a view to obtain the custom of that client in a business that is the same or as similar to any part or parts of the business of Escala or the Company;
•	not interfere with the relationship between any employee, or member of Escala or the Company and any of their clients; and
•	not solicit, encourage, entice, assist (including assisting any other person or entity to do so) any individual/s to leave their employment with Escala or the Company.
14.2 	Restraint Period means each of the periods described below separately:
•	Twelve (12) months; if that is not enforceable, then
•	Nine (9) months; if that is not enforceable, then
•	Six (6) months; if that is not enforceable, then
•	Three (3) months.
14.3 	Restraint Area means each of the areas described below, separately:
•	Australia; or if that is unenforceable;
•	The state of Victoria; or if that is unenforceable;
•	the city of Melbourne in Victoria, including all surrounding suburbs.
14.4	Each of the Restraints in clause 14.1 (which result from the differing combinations of the Restraint Period and Restraint Area) is a separate, severable and independent Restraint from the other Restraints and obligations imposed (although they are cumulative in effect). You agree that it is the intention that you will be bound by each Restraint for the maximum Restraint Period and Restraint Area permitted by law.
14.5 	You agree that the restrictions imposed within this clause are reasonable as to subject matter, geographical area and duration, and are reasonably necessary in order to preserve and protect the proprietary interests of the Company.
14.6 	Nothing in this clause whether expressed or implied shall prevent you from being a holder for the purposes of investment only of marketable securities for the time being quoted on a recognised Stock Exchange in Australia or elsewhere.
14.7 	You consent to the Company advising any future employers of your restrictions under this clause.
B.3	Events after the acquisition
65	As a result of the Employment Agreements described above in section B.2.4, from around March 2019, Sealey and Vickers‑Willis were both employed by 2nd Chapter as part of the same team at Escala Partners.  At all relevant times, Sealey and Vickers‑Willis worked closely together in their employment, and the nature of their role as investment advisors and financial planners did not change following the acquisition of Escala Partners by Focus Escala Holdings.
66	Allen was also employed by 2nd Chapter in the same team as Sealey and Vickers‑Willis at Escala Partners from around March 2019, working under them and at their direction, until his appointment to the role of investment advisor.
B.4	Payments
B.4.1	Payments under the Share Purchase Agreement
67	The SPA upfront purchase price for all shares in Escala Partners was $57,950,000, less certain adjustments and deductions.  
68	The SPA also provides for: 
(a)	two annual additional purchase price payments (described by the Plaintiffs as ‘retention Earn‑Out payments’) of $7,200,000 to be made on the first and second years following the acquisition if the Earnings Before Partner Compensation (EBPC) in the first and second year was equal to or exceeded $18,032,558.  The payments were to be made to the former shareholders of Escala Partners in proportion to their respective former shareholdings in Escala Partners; and
(b)	three annual growth Earn‑Out Amounts to be paid in years three, four and five after the acquisition (up to $7,200,000 each), as long as EBITDA growth was 10% or more on an unrounded basis.  These growth Earn‑Out Amounts were to be calculated according to formulae set out in cl 5 of the SPA. 
69	According to the Plaintiffs, if the relevant earnings targets were all met, the total purchase price under the SPA would have been $93,950,000.15.
70	In the event: 
(a)	the two ‘retention Earn‑Out payments’ were made in full;  
(b)	the amount paid for the first of the ‘growth Earn‑Out Amounts’, in respect of year three following the acquisition was $6,171,428;
(c)	no money was paid for the second of the ‘growth Earn‑Out Amounts’, in respect of year four following the acquisition; and
(d)	as at the date of the Plaintiffs’ evidence being finalised in the proceeding, the third and final ‘growth Earn‑Out Amounts’, in respect of year five following the acquisition had not been determined.
71	The Plaintiffs plead that the amounts paid pursuant to the SPA included the following:
(a)	Terrung received around $4,651,504.37; and 
(b)	JCVW received around $24,988.85.
72	The Defendants disputed these payment amounts in their pleading.  The total of the amounts paid to Terrung to which the Defendants’ refer in closing submissions is $4,375,633.04.  The total of the amounts paid to JCVW to which the Defendants’ refer in closing submissions is $24,058.06.
73	I note that the amounts to which Perry referred in his most recent affidavit evidence (which is supported by trust account statements) appear to match the amounts to which the Defendants refer.  Roughly 70% of the amount paid was referable to the upfront purchase price payment and the remainder to the subsequent Earn‑Out payments.
B.4.2	Profit sharing under the Management Deed
74	As noted in paragraphs 50 to 52 above, the general profit‑sharing arrangement for the Escala Partners business post‑acquisition by Focus was as follows:  
(a)	Escala Partners would be entitled to the first $500,000 of EBPC;
(b)	2nd Chapter would be entitled to retain the next tranche of earnings from $500,000 up to $4,884,157; 
(c)	Escala Partners would be entitled to retain the next tranche of earnings from $4,884,157 up to $11,584,157;
(d)	2nd Chapter would be entitled to retain the next tranche of earnings from $11,584,157 up to the EBPC Target of $18,791,430; and
(e)	any excess above the EBPC Target was to be shared equally as between Escala Partners and 2nd Chapter.
75	Entitlements of Escala Partners would be distributed upwards to Focus Financial.  Accordingly, the above means that Focus was, in substance, entitled to $7,200,000 of the first $18,791,430 of EPBC and 50% of any earnings above that amount.  Impacting on the size of the Management Fee to which 2nd Chapter would be entitled, was the requirement that Escala Partners and 2nd Chapter each shoulder 50% of future capital expenditure costs incurred by Escala Partners.
76	The profit share which 2nd Chapter would receive followed payment of employees’ remuneration and compensation.  This meant that the amounts which shareholders in 2nd Chapter might receive from the Management Fee under the Management Deed might be significantly reduced if those remuneration costs were high.
77	Sealey’s evidence is that he received only one dividend as a shareholder of 2nd Chapter of $28,900 on 8 April 2022.  JCVW received less still, having a much smaller shareholding in 2nd Chapter.
B.4.3	Employee wages
78	Sealey, Vickers‑Willis and Allen received wages under their respective employment agreements.  For the financial year ended 30 June 2023 (FY23): 
(a)	Sealey was paid a total of $624,618.39 pursuant to the Sealey Employment Agreement. 
(b)	Vickers‑Willis was paid a total of $625,082.83 pursuant to the Vickers‑Willis Employment Agreement.
B.5	Termination of employment
79	According to Sealey, he and Vickers‑Willis began exploring opportunities at other companies in around mid‑2022.  Sealey’s evidence also refers to concerns he and other Escala Partners personnel held about the functioning of the Escala Partners business which he says led to this exploration of other opportunities.  Vickers‑Willis’ evidence is that he was increasingly dissatisfied with the remuneration model at Escala Partners and its strategic direction.  For the purposes of this judgment, however, it is not necessary to delve into these asserted concerns or make any findings in that regard.
80	The evidence of Sealey and Vickers‑Willis is that Mr Adam Ginnivan at Crestone approached them individually at around the same time, at some point before July 2022.  
81	On around 21 December 2022, Allen tendered his resignation and the Allen Employment Agreement was terminated.  Sealey’s evidence is that he did not know or expect that Allen would resign before that date, nor did he know that Allen had been dealing with Crestone.
82	Since around 27 March 2023, Allen has been employed at Crestone. 
83	On 23 May 2023, Sealey and Vickers‑Willis each entered into an employment agreement with Crestone, and executed sign‑on bonus agreements with Crestone.
84	On 20 June 2023, both Sealey and Vickers‑Willis provided to Escala Partners written notice of their resignation as ‘an employee and shareholder’ of 2nd Chapter.  They were immediately placed on gardening leave.
85	Sealey’s evidence is that the timing of his resignation from Escala Partners was driven by the busy period at the end of the financial year FY23.  He intended to resign after 30 June 2023 so as to complete work for clients for FY23 but, because his team completed the required work early, he moved forward his resignation date.  The evidence of Vickers‑Willis is to the same effect.
86	According to Sealey and Vickers‑Willis, they had a discussion with Perry after they tendered their resignations, in which Perry told them to ‘lay low’ and that they would be provided with a handover protocol within 24 hours.  They informed Perry that they were willing to have discussions to negotiate terms of their restraints.
87	According to Sealey, he was not provided with a handover protocol or other direction regarding what action to take if approached by a client while on gardening leave.  Vickers‑Willis’ evidence is the same.  Under cross‑examination, Perry confirmed that they were not provided with handover protocols and they were not involved in any transition of clients to other advisors at Escala Partners.  The decision was made not to require the assistance of Sealey or Vickers‑Willis.
88	It is now common ground that the appointment of Sealey and Vickers‑Willis as authorised representatives of Escala Partners appointment pursuant to an AR Appointment Deed was terminated on 21 June 2023.
89	Following the resignation of Sealey and Vickers‑Willis, the details of when and how the Sealey Employment Agreement and Vickers‑Willis Employment Agreement were terminated are the subject of dispute:  
(a)	The Plaintiffs say that the Sealey Employment Agreement and Vickers‑Willis Employment Agreement were terminated on 21 August 2023, alternatively 20 June 2023, or further alternatively 24 August 2023.  
(b)	The Defendants say that the Sealey Employment Agreement and Vickers‑Willis Employment Agreement were terminated on 24 August 2023 and, as a result, from that time 2nd Chapter could not seek to enforce any of the restrains of trade contained therein.  
90	To the extent necessary in respect of the separate questions, these matters will be discussed further below.
91	Both Sealey and Vickers‑Willis commenced work at Crestone on 16 October 2023.  This date was after the interlocutory decision of Waller J was handed down (described at paragraph 94 below).
92	According to the Plaintiffs, a number of Escala Partners clients have moved to Crestone since July 2023, whereas there had never been any such transfers in the previous decade.  Vickers‑Willis disputed this, recollecting a client who requested a transfer to Crestone, and Perry’s evidence at the hearing was that he could not dispute this but had been unable to find any record of it.
B.6	Procedural history
93	The Plaintiffs commenced this proceeding on 25 September 2023.
94	On 27 September 2023, the Plaintiffs filed an urgent application in the proceeding, seeking interim orders restraining Sealey and Vickers‑Willis from the same conduct as is sought in the prayers for final relief, pending the hearing and determination of the proceeding.  That urgent application was heard by Waller J on 5 October 2023.  Justice Waller refused the interlocutory application and dismissed the Plaintiffs’ summons in a ruling dated 10 October 2023.  
95	On 27 October 2023, the Plaintiffs filed an amended statement of claim.
96	On 10 November 2023, the Defendants filed their defence to the amended statement of claim (Defence).
97	On 24 November 2023, the Defendants filed a summons seeking an order, pursuant to rule 47.04 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules), that separate questions be tried before the trial of the proceeding.
98	On 28 November 2023, Lyons and Whelan JJA heard the Plaintiffs’ application for leave to appeal the ruling of Waller J.  Through their solicitors, Sealey and Vickers‑Willis gave undertakings that they would not solicit, canvass or approach any person who is a client of Escala Partners with whom either of them dealt as an advisor in the 24 months preceding the date of the undertaking with a view to obtaining their custom in the wealth management industry, or encourage or induce any person to do the same.  Having regard to the proffered undertakings, the Court of Appeal granted leave to appeal but dismissed the appeal against the ruling of Waller J.  Those undertakings remain on foot.
99	On 8 December 2023, Justice Sifris heard the Defendants’ application for a trial of separate questions and made orders pursuant to r 47.04 of the Rules and ss 47 and 49 of the Civil Procedure Act 2010 (Vic), that nine issues in the proceeding be tried first.  The nine issues are set out in section C.
100	On 18 April 2024, the Plaintiffs filed a further amended statement of claim.
101	The trial of separate questions occurred before me in the week commencing 15 July 2024.  During the trial, the Court granted the Plaintiffs leave to file a second further amended statement of claim (2FASOC).  The 2FASOC was filed on 18 July 2024.
C	Questions to be tried
102	Orders have been made for the Court to try the following nine questions/issues as separate questions, pursuant to rule 47.04 of the Rules:
(a)	Question one: Are any of the restrictive covenants set out in cl 20.2 to 20.6 of the SPA enforceable against any or all of Sealey, Vickers‑Willis, Terrung and JCVW?  If so, which restrictive covenants are enforceable and to what extent? 
(b)	Question two: Are any of the restrictive covenants set out in sections 3.2 to 3.6 of the Management Deed enforceable against either or both of Sealey and Vickers‑Willis?  If so, which restrictive covenants are enforceable and to what extent? 
(c)	Question three: Are any of the restrictive covenants set out in cl 20.2 to 20.5 of the SHA enforceable against any or all of Sealey, Vickers‑Willis, Terrung and JCVW?  If so, which restrictive covenants are enforceable and to what extent? 
(d)	Question four: Are any of the restrictive covenants set out in cl 13.5 of the Sealey Employment Agreement enforceable?  If so, which restrictive covenants are enforceable and to what extent? 
(e)	Question five: Are any of the restrictive covenants set out in cl 14.1 of the Sealey Employment Agreement enforceable?  If so, which restrictive covenants are enforceable and to what extent? 
(f)	Question six: Are any of the restrictive covenants set out in cl 13.5 of the Vickers‑Willis Employment Agreement enforceable? If so, which restrictive covenants are enforceable and to what extent? 
(g)	Question seven: Are any of the restrictive covenants set out in cl 14.1 of the Vickers‑Willis Employment Agreement enforceable?  If so, which restrictive covenants are enforceable and to what extent? 
(h)	Question eight: Are any of the restrictive covenants set out in cl 14.1 of the Allen Employment Agreement enforceable?  If so, which restrictive covenants are enforceable and to what extent? 
(i)	Question nine: Whether Sealey or Vickers‑Willis has repudiated the Sealey Employment Agreement or Vickers‑Willis Employment Agreement, respectively,  as alleged in section E.3 of the 2FASOC? 
D	Evidence and witnesses
103	The Plaintiffs have filed and rely upon the following affidavit evidence:
(a)	three affidavits of Perry sworn on 25 September 2023, 4 October 2023, and 9 February 2024; and
(b)	an affidavit of Bennard sworn on 9 February 2024.
104	The Plaintiffs also rely on a number of business records which were tendered at the hearing.
105	The Defendants have filed and rely upon the following affidavit evidence:
(a)	affidavits of Sealey affirmed on 4 October 2023 and 16 February 2024; and
(b)	affidavits of Vickers‑Willis affirmed on 4 October 2023 and 16 February 2024. 
106	Bennard, Perry, Sealey and Vickers‑Willis were cross‑examined at the hearing.
107	The Plaintiffs made submissions to the effect that I should be careful about what the Defendants say.  For example, counsel for the Plaintiffs pointed to the inconsistency in the inclusion of a start date in the employment contract with Crestone of Vickers‑Willis of 22 March 2024 and correspondence from his solicitor on 28 September 2023, in which it was said that Vickers‑Willis had intended to commence work at Crestone in October 2023.  
108	A further potential credibility point was hinted at in respect of the inclusion in Vickers‑Willis’ Crestone website profile of the claim that he had a ‘vast client base spanning across Australia’, with which claim he did not agree when cross‑examined.  This point was not pressed in closing submissions, but I feel it is important to note that, had it been pressed, I would not have made any adverse credibility finding because of it.
109	It is always the practice of the Court to exercise care and caution in the assessment of the evidence given at trial.  In respect of Vickers‑Willis’ evidence as to his start date and when that was communicated to the Plaintiffs, I found his explanation to be adequate.  I do not accept any implied suggestion that any of the Defendants have lied or attempted to mislead the Court in their evidence, or that there is a need for the Court to be more sceptical or cautious with the Defendants’ evidence than with that of the Plaintiffs.
110	I found all of the witnesses who gave evidence at trial to be impressive, honest and helpful to the Court. In particular, I make the following observations as to the testimony given:
(a)	Bennard’s evidence was clear and forthright.  Initially, Bennard appeared to be thinking about why questions were being asked or where they were going, rather than simply responding to the question put to her, and was perhaps reluctant to agree to some propositions put to her as a result.  However, once the Court confirmed to Bennard that she should only concern herself with answering the question, she took this on board in subsequent answers, and I do not consider that the quality of her evidence was negatively affected by this.  
(b)	Perry also came across well and provided clear answers to questions put to him.  When speaking of his professional and personal relationship with Sealey in particular, I observed that Perry feels deeply aggrieved by Sealey’s move to Crestone and the circumstances surrounding that move as he understands them.  Nonetheless, he came across as an honest witness.
(c)	Vickers‑Willis’ evidence was similarly of assistance and, as outlined above, I found him credible.  He made concessions where appropriate and his answers appeared to be well considered.
(d)	Sealey also came across well.  His evidence was clear, cogent, and to the point. He made concessions where appropriate, and gave appropriate context to his answers.  
E	Relevant law
111	The general principles which are relevant to whether a restrictive covenant imposes an unlawful restraint of trade are well‑established and have been succinctly summarised by the Court of Appeal in Kingdom Animalia LLC v Mecca Brands Pty Ltd:
The applicable principles are well established and were not in dispute. Stated shortly:
(a) 	where an agreement contains a covenant which restrains one party from freely engaging in trade in respect of its products or services, the party receiving the benefit of the covenant carries an onus to justify the restraint;
(b) 	to do so, the covenantee must demonstrate that the restraint is reasonable in reference to the interests of both parties and the public, in the sense that it affords not more than adequate protection of its legitimate interests; and
(c) 	the time of assessing reasonableness is the date of entry into the restraint.
112	The Court of Appeal’s summary of common law principles relevant to determining whether a restrictive covenant is lawful (and in respect of severance) in Just Group Ltd v Peck is as follows:
Principles relating to the enforceability of restraint clauses
A term in a contract, which is a restraint of trade (‘a restraint clause’), is presumed to be void as contrary to public policy.
The presumption may be rebutted if there are special circumstances that demonstrate the covenant to be:
(a)	reasonable as between the parties; and 
(b)	not unreasonable in the public interest.
The test of reasonableness varies depending on ‘the situation the parties occupy and so recognising different considerations which affect employer and employee and independent traders or business men, particularly vendor and purchaser of the goodwill of a business’. A court takes a ‘stricter view’ of restraint clauses in employment contracts; and will more readily uphold a restraint clause in favour of a purchaser of the goodwill of a business than a restraint clause in favour of an employer. In particular, a purchaser of a business is entitled to protect itself from competition by the vendor; but an employer is not entitled to protect itself from competition per se by an employee.
A restraint clause in favour of an employer will be reasonable as between the parties, if at the date of a contract:
(a)	the restraint clause is imposed to protect a legitimate interest of the employer; and
(b)	the restraint clause does no more than is reasonably necessary to protect that legitimate interest in its:
(i) duration; or
(ii) extent.
It is well established that employers do have a legitimate interest in protecting:
(a)	confidential information and trade secrets; and
(b)	the employer’s customer connections.
For the legitimate purpose of protecting the employer’ confidential information, a restraint clause does not need to be limited to a covenant against disclosing confidential information. It may restrain the employee from being involved with a competitive business that could use the confidential information.
The onus of proving the special circumstances from which the Court may infer ‘reasonableness between the parties’ is on the person seeking to enforce the covenant. However, if an employee or other covenantor alleges that the restraint clause is against the public interest, the burden of proving that proposition is on the employee/covenantor.
….
Construction of restraint clauses
In order to determine whether a restraint clause exceeds what is necessary for the protection of the legitimate interests of the employer, a court construes the restraint clause in accordance with the following principles:
(a) 	The meaning of the restraint clause may be construed by reference to the factual matrix, documentary context and surrounding circumstances to ascertain its real meaning—independently of the rules prescribing tests of reasonableness for the purpose of ascertaining its validity.
(b)	Where there is ambiguity, a restraint clause in an employment contract will be construed in favour of the employee so that, as between two reasonably available constructions, the one which imposes the lesser obligations on the employee will be preferred. Although a restraint clause may, on its literal terms, appear to be wider than is necessary to protect the legitimate interests of the employer, a proper construction of the clause in context may narrow its meaning. This construction may save it from invalidity but, as noted above, the approach is not adopted for the purpose of saving it from invalidity.  The application of this approach has restricted the effect of restraint clauses in the following situations:
(i)	Limitation on the businesses in respect of which the employee is restrained from being involved. 
….
(ii)	Limitation of the subject matter in respect of which the employee is restrained from dealing with customers.
….
(iii)	Limitation on the capacities in respect of which the employee is restrained from being involved.
…
(c)	However, generality does not constitute ambiguity. Accordingly, it is not permissible for the Court to approach the construction of a restraint clause by first determining what degree of restriction would be justified; and then reading down an unduly wide clause in order to preserve its validity. 
Severance
If a restraint clause is ‘not really a single covenant but is in effect a combination of several distinct covenant’s [sic], some of which are too wide, the invalid covenants may be severed subject to the following conditions:
(a)	The impugned covenants must be capable of simply being removed — as if crossed out with a blue pen. A court can only remove words from a restraint clause; it cannot rewrite the restraint clause.
(b)	The restraint clause contains several distinct covenants, one of which is valid. The covenant to be severed must be an independent covenant capable of being removed without affecting the remaining part. ‘The only change should be to the sphere of operations of the clause’.
(c)	Whether it is based on the principle of uncertainty, or the public policy to protect employees, or ‘that it is for the parties to make contracts, not the courts’, courts have demonstrated reluctance to engage in ‘curial disentanglement’ and sever the unenforceable parts of unreasonably wide restraint clauses if the clause is not a genuine attempt to establish reasonable protection for the legitimate interests of the employer. The following factors indicate that the restraint clauses of the latter kind are unreasonable:
(i)	If the restraint clauses include patently unjustifiable restraints such as might intimidate the employee.
(ii)	If the restraint clauses are in a standard form.
(ii)	If the variables are numerous and the combination of variables appear mechanical and indiscriminate.
However, the application of these considerations is subject to the court giving ‘appropriate attention to the intentions of the parties’ objectively assessed at the time of the contract.
113	In addition, the following general principles included in the Full Court of the Federal Court’s summary in Findex Group Limited v McKay are relevant (citations omitted):
In deciding whether there are special circumstances justifying a restraint of trade, the Court should be wary of placing weight upon improbable and extravagant contingencies as indicating the restraint to be unreasonable.
Agreements in restraint of trade, like other agreements, must be construed with reference to the object sought to be attained by them. The object is the protection of one of the parties against rivalry in trade. Such agreements cannot be properly held to apply to cases which, although covered by the words of the agreement, cannot reasonably be supposed ever to have been contemplated by the parties, and which, on a rational view of the agreement, are excluded from its operation by falling, in truth, outside and not within its real scope
…
The preferred approach is to have regard to the object and intent of the parties and read down a restraint of trade to give effect to that object and intent.
A construction which will preserve the validity of the contract is to be preferred to one which will make it void.
114	Accordingly, these principles mean that the following matters must be addressed in respect of each of the restraints relied on by the Plaintiffs:
(a)	Is there a legitimate interest which the Plaintiffs are seeking to protect and, if so, what is that interest?
(b)	Does the restraint go no further than what is reasonably necessary to protect that legitimate interest?
(c)	Is the restraint unreasonable in the public interest?
115	The Plaintiffs bear the onus in respect of the first two of these matters, whereas the Defendants bear the onus in respect of the third.
F	Preliminary matters
116	It is convenient for me to address some matters the subject of the parties’ submissions at the outset, before turning to the nine questions. 
F.1	Existence of a legitimate interest 
F.1.1	Plaintiffs’ submissions
117	The Plaintiffs’ primary contention is that they have a legitimate interest in protecting the goodwill and revenue of the Escala Partners business, both of which are substantially referable to the connection between advisors and clients.  This is said to be a close and personal connection. 
118	The Plaintiffs refer to the discussion of the Court of Appeal in Wallis Nominees (Computing) Pty Ltd v Pickett concerning customer connection, which pertains to approaches of customers to former employees in addition to solicitation of customers by former employees:
The legitimate interest alleged by DWS is its goodwill in its customers, the essence of which is its customer connections which may include knowledge of, and influence over, its customers. Personal relations or connections that employees develop with customers that were acquired during the course of their employment are “an advantage accruing to the employer and properly exercisable for his benefit … [and] would become a source of injury to the employer if the former servant were permitted to accept the custom which might voluntarily flow to him”.
The test for whether an employer has a legitimate interest in protecting its customer connection through restraint clauses has been put in various ways.
One variation is that a legitimate interest will arise:
[w]here an employee is in a position which brings him into close and personal contact with the customers of a business in such a way that he may establish personal relations with them of such a character that if he leaves his employment he may be able to take away from his former employer some of his customers and thereby substantially affect the proprietary interest of that employer in the goodwill of his business …
Another variation is where there is some element in the employee–customer relationship which causes customers to rely on the employee and to regard the employee as the business to the exclusion of the employer.
A third variation is where the personal relation between the employee and the customer be such as to enable the employee to control the customer’s business as a personal asset.  This describes “the ability of the employee to use the relation of influence, which can properly be regarded as the employer’s property, for the employee’s purposes as distinct from those of the business”.
A fourth variation is where the employee is described as having become the “human face” of the business. This is understood to mean that the employee has become the person who represents the business to the customer or has such a personal relation with the customer as to enable them to control the customer’s business, …
Two key points emerge from these formulations. First, that an employee must be in a position to gain trust and confidence so as to be relied on in a client’s affairs. Secondly, that the relationship between employee and client is such that there is a possibility that if the employee leaves the business of the employer, he or she may carry away the client’s business with them.
119	The Plaintiffs describe the restraints protecting customer connection as protecting against the risk that customers may leave by virtue of the personal nature of the relationship between the former employee and the customers.  The Plaintiffs emphasise from the above that it is the possibility of the business being adversely affected, as opposed to a certainty, likelihood or probability, that is the risk to be protected against.  
120	As was observed by Warren CJ and Davies AJA in Wallis Nominees:
The relevant question is not whether the parties intended Mr Pickett to control Grocon’s business or to become the human face of DWS for Grocon, but rather whether the nature of Mr Pickett’s employment and relationship with customers gave rise to a risk that this would happen. Moreover, the very presence of a restraint clause in the contract demonstrates that the parties contemplated such a thing might occur.
121	The Plaintiffs say that the separate agreements should be considered together and in their context.  The context was the acquisition of Escala Partners.  The Plaintiffs submit that the way that the acquisition of Escala Partners was structured meant that, going forward, the vendors (being the shareholders in Escala Partners) retained a significant economic interest in the ongoing performance of the business (through their positions as shareholders in the management company, 2nd Chapter).  In effect, the acquisition of Escala Partners involved an upfront payment for the sale of around 50% of the business and the vendors going into business with Focus Escala Holdings and Focus Financial.  According to the Plaintiffs, this context makes it more readily understandable why some of the restraints are reasonable.  The SPA, SHA and Management Deed are all effectively a suite of documents forming part of the one transaction.  The restraints contained in those documents protect the interests of the vendors, purchaser and shareholders in 2nd Chapter and protect the goodwill in the ongoing business of Escala Partners, not only for Focus Escala Holdings but also for 2nd Chapter and its shareholders.
122	The Plaintiffs submit that the restraints in each agreement are intended to protect against different risks in each agreement, and to protect different interests held by the parties to whom the restraints were given.  These different risks and protected interests are said to be significant as they result in restraints of different lengths.
123	According to the Plaintiffs, there are four themes on which the Court should focus when assessing reasonableness of the restraints as between the parties:
(a)	the nature of the customer connection (being in this case, the personal relationships that financial advisors build with clients);
(b)	(in respect of the SPA, SHA and Management Deed) the need to protect the goodwill of the business and need to protect against the risk of damage to the goodwill;
(c)	the need to protect the ongoing revenue stream to Focus Escala Holdings and Focus Financial, protected by the restraints in the Management Deed; and
(d)	the need to protect the ongoing revenue stream to shareholders in 2nd Chapter (being the former shareholders of Escala Partners, including Sealey and Vickers‑Willis), which was particularly vulnerable to events such as employee departures. 
124	The Plaintiffs say there is no doubt that Focus and Escala Partners have a legitimate interest to be protected under the SPA.  On the Focus side of the transaction, the legitimate interest is the goodwill in the business.  The Plaintiffs say the restraints are aimed at protecting a legitimate interest on Escala Partners’ side of the transaction in the close connection that its advisors, and all of them, have with their customers.  Importantly, around 70% of the Escala Partners business is derived from client referrals and so the referrals arising from the customer connection are integral to the business of Escala Partners.  Customer relationships amount to goodwill in legal terms, even though they are not goodwill according to accounting standards.
125	The restraints in cl 20.2 of the SHA are directed to the protection of 2nd Chapter’s interest in maximising the management fee to which it was entitled under the Management Deed, which was entirely dependent on the Principals and employees of 2nd Chapter providing services to Escala Partners’ clients.  The Principals had a similar interest in maximising the management fee, to increase their own dividends under the SHA and (if they were former Escala Partners shareholders) to ensure that targets under the SPA to trigger the Earn Out Payments were met.  The Plaintiffs also point to the stated objective in cl 2 of the SHA to ‘carry on, expand and maximise the value of the business.’  In contrast to the SPA, for example, these restraints have nothing to do with the purchase of goodwill by Focus.  The interest that the restraints are aimed at protecting is different.
126	It is submitted that the Defendants rely on restrictive covenant cases in respect of propositions such as the nature of the customer connection which concerned employment contract restraints, rather than contracts arising from the sale of a business where the legitimate interests are more readily protected.  
127	The Plaintiffs emphasise that the financial services business of Escala Partners post‑acquisition depended on the provision of personal services to clients of the business and the biggest risk for Focus in the acquisition was that Principals would take Escala Partners’ clients and confidential information to a competing firm.  That loss of clients is not the end of the story; this also means the loss of future referrals from those clients.  The referrals from existing clients are what has allowed the Escala Partners business to grow as rapidly as it has.
128	The Plaintiffs say that this risk was acute because Focus Financial did not have any direct relationships or interaction with Escala Partners’ clients, and so depended on 2nd Chapter and the Principals continuing in the business.  The discussion of risks in Focus’ financial documents is highlighted here in connection with the features of the highly‑competitive wealth management industry which make restraint of trade clauses ‘imperative’ when a business is acquired.  It is the Plaintiffs’ submission that the restraints were as important as the price at which the business was acquired and that, without the restraints, the purchase price offered would not have been what it was.
129	The way that the Escala Partners business worked post‑acquisition meant that Focus Financial and Focus Escala Holdings had virtually no involvement in the day‑to‑day management and operation of the business.  That left Focus Financial and Focus Escala Holdings particularly vulnerable, having paid a large amount of money to acquire a business but not having any control over the customer relationships and personal connections to clients that are fundamental to the success of that business.  
130	The Plaintiffs point to the evidence of Bennard in respect of Focus Financial’s standard requirements and processes in such acquisitions and the importance of contractual restraints for Focus Financial in this regard.  The assets of the business which made it valuable were the personal relationships with clients established by advisors, rather than the name of the business given it was so relatively new.  It is the Plaintiffs’ submission that the vast majority of the valuable assets in the business are intangible assets and the revenue that the business generates depends entirely on the relationships between advisors and clients.  References to Sealey and Vickers‑Willis in an overview of the firm is pointed to as demonstrating their value and importance to the Escala Partners business.  According to the Plaintiffs, the large amount spent in the acquisition of a business that is mostly for those intangible assets speaks for itself as to how important these restrictive covenants are from the Focus perspective.
131	This model of acquisition appears to be the preferred approach of Focus Financial and the Court was taken to descriptions of the aim of this model in their report for the 2019 calendar year.
132	The restrictive covenants were in place to ensure that the vendors under the SPA were prevented from undermining the value of the customer base and goodwill which Focus Financial purchased at significant cost, and the restrictive covenants should be construed in the context of that protective purpose.  The Plaintiffs say that the restrictive covenants are a critical requirement of Focus Financial for a business acquired in this model, to prevent principals from walking out with the valuable assets of the business.
133	The Plaintiffs refer to the following observation of Judd J in Allison v BDO (NSW – Vic) Pty Ltd:
There can be no doubt that the purchaser of goodwill is entitled to reasonable protection of the goodwill. That is a matter which will be prominent in the mind of a court in deciding whether or not a restraint is enforceable.
134	They submit that goodwill has an established and wide meaning, including:
whatever adds value to a business by reason of situation, name and reputation, connection, introduction to old customers, and agreed absence from competition …[i]t is the benefit and advantage of the good name, reputation, and connection of a business.  It is the attractive force that brings in custom. It is the one thing that distinguishes an old established business from a new business at its first start.
135	The Plaintiffs submit that goodwill is an inseverable asset which can only be protected as a whole and cannot be sold separately from the business.  
136	The Plaintiffs submit that the covenants in the SPA are directed to address the risk to the legitimate interest of Focus Financial in protecting its goodwill and the value of its investment.  The Plaintiffs say the risk is significant.  Focus Financial requires covenants substantially in this form for all its asset acquisitions and that, but for the restraints, Escala Partners would have been of little value to Focus Financial.  
137	According to the Plaintiffs, both Sealey and Vickers‑Willis were very important to the goodwill of the business, as they dealt with up to 13% of the current clients of Escala Partners and had access to detailed information about all clients.  Sealey and Vickers‑Willis were key participants in the business and sources of its goodwill, such that their agreed absence from competition is also a component of goodwill.
138	In respect of the close and personal nature of the relationships advisors hold with clients in the industry, the Plaintiffs point to examples of correspondence between Sealey and Vickers‑Willis and clients while at Escala Partners.  For example:
(a)	they point to an instance of Vickers‑Willis offering to introduce clients to an accountant based locally to the clients, characterised by the Plaintiffs as a favour which the client might repay in future with a referral of a friend to use the services of Vickers‑Willis;
(b)	the importance to clients of dealing personally with their known advisor is demonstrated in a communication from one client to Sealey, who expressed a preference to wait until Sealey was available to discuss an investment proposal, rather than to discuss it with others in the team; and  
(c)	another communication recorded by Sealey after he left Escala Partners (being a text from a former client asking ‘when are you allowed to talk to me?’) is also highlighted as showing the close personal connection in this regard.
139	On the same point, the Plaintiffs also cite the evidence of Vickers‑Willis, who described his role as involving building trust and confidence with clients and acknowledged the importance of referrals for creating business opportunities.
140	In Isaac v Dargan Financial Pty Ltd, Gleeson JA (with whom Bathurst CJ and Beazley P agreed) discussed the principles applying to determine whether there is a legitimate interest.  In the circumstances of that case, Gleeson JA stated (at 368 [127]):
That Mr Isaac did not personally deal with all of the clients of Dargan does not make the restraint unreasonable.  At the time the contract was made, it could be reasonably contemplated that Mr Isaac would have access to Dargan’s client lists and client details on the Mercury database.  As I have said, Dargan had a legitimate interest in preserving confidential client information from use or disclosure, other than in connection with its business.
141	The Plaintiffs say that the above decision has direct parallels to this case, where Sealey’s evidence is that he had access to Escala Partners’ client lists or database system.  At the time of the restraints being entered into, it could reasonably be contemplated and it was contemplated that Vickers‑Willis and Sealey would have this access and that gives rise to the risk, irrespective of whether such access was misused.  That access and risk justifies the application of the restraints to all of Escala Partners’ clients, not just those with whom Vickers‑Willis and Sealey worked. 
142	The Plaintiffs say that, approximately six months after Allen’s resignation from Escala in December 2022, coinciding almost to the day with the expiry of Allen’s non‑compete clause, Vickers‑Willis and Sealey resigned and clients started signing up to Allen at Crestone.  In this regard, the Plaintiffs rely on the affidavit evidence of Perry.  The Plaintiffs say that this leads to an inference that Allen, a relatively junior employee, went across to establish a beach head.  They say the migration of clients around a week after the expiry of Allen’s non‑compete clause shows the necessity of the non‑solicitation clause in particular, as a manifestation of the actual risk that the clauses were intended to protect against.  They say that the effect of Allen (a relatively junior employee) leaving underlines the scale of the risk in respect of more senior employees like Sealey and Vickers‑Willis.  
143	Just as there is vulnerability of Focus Financial to its partner firms (such as Escala Partners), 2nd Chapter (and its shareholders including Vickers‑Willis and Sealey) are vulnerable to the possibility of advisors leaving and taking the clients with them.  The fact that Crestone offered such significant sign‑on bonuses to Vickers‑Willis and Sealey demonstrate that this is a real risk and it all goes to the reasonableness of the restraints.  There is also an excel spreadsheet of clients of Escala Partners who have moved to Crestone in evidence, which the Plaintiffs say shows that the risk is real.  The restraints are, in the Plaintiffs’ submission, the only real safeguard that Focus Financial and 2nd Chapter have to protect their investment and ongoing business.
144	There is no evidence that the percentage of assets under management of a particular advisor reflects the number of clients the advisor has, as one client may have a disproportionate amount of assets.  Given that 70% of new clients come from referrals from existing clients, an advisor with a larger number of clients but a lower percentage of assets may be just as valuable as an advisor with just one client whose business constitutes a disproportionate percentage of the firm’s assets, because of the nature of goodwill.  The value of the advisor with a larger number of clients derives from potential new client referrals, making them a source of goodwill, being the ‘attractive force that brings in custom’.
F.1.2	Defendants’ submissions
145	The Defendants accept that Escala Partners and Focus have a legitimate interest in trying to protect the goodwill associated with their business.  That may be described as a legitimate interest of 2nd Chapter and/or Focus in protecting against a risk that advisors take clients with them on exiting the business.  However, the existence of a legitimate interest is not enough.  This is merely a gateway to the assessment of whether a restraint is enforceable.  The restraints must go no further than is reasonably necessary to protect that interest. 
146	The Defendants accept that there is a personal relationship that can be built up between a financial advisor and their clients, and say this is an obvious proposition.  However, the Plaintiffs’ focus on this issue underlines a key difficulty with the restraints at issue in this proceeding: the restraints are not confined to clients with whom an advisor has had dealings.  In this way, the Plaintiffs’ submissions about personal connections with customers miss the point.  
147	The context of the Focus business model is important.  The model amounts to buying a business and, in effect, locking the advisors into the business in perpetuity so as to maximise returns received out of the business through the use of restraints.  This is not to the point and it is not open for Focus to do this: the restraints must be reasonable.  What is more, the Focus business model gave rise to the very risk that the restraints are said to guard against. 
148	These submissions, insofar as they concern the scope of the restraints, are discussed in greater detail elsewhere in these reasons. 
F.1.3	Consideration
149	The existence of a legitimate interest was a topic covered in detail by the Plaintiffs’ submissions, however, as far as I can tell, the existence of a legitimate interest was not really in dispute.  The Defendants concede that there is a legitimate interest in the protection of the goodwill of the Escala Partners business.  Even if I have misunderstood the Defendants’ position on this point, I find that there is a legitimate interest in the protection of the customer connections, being the goodwill of the business in its customers.  The existence of a legitimate interest is obvious on the evidence and is consistent with findings by courts which have considered similar professional environments.  In this firm and this industry more generally, employees are clearly in a position to gain trust and confidence so as to be relied on in a client’s affairs and there is a clear possibility that an employee may carry away a client’s business with them on exiting the firm.  The relationship between a wealth management or financial advisor and a client is a personal one and it appears to be common ground that a significant proportion of an advisor’s work is derived from referrals.  
150	The Plaintiffs spent an inordinate amount of time in opening (and in cross‑examination) taking the Court to emails and other documents between Sealey and/or Vickers‑Willis and some of their clients which evidenced close relationships.  However, the Plaintiffs’ purpose in labouring this point was unclear, as the Defendants did not contend otherwise, and indeed described it as an ‘obvious proposition’ that such a personal relationship can arise.  It was therefore common ground that individual advisors were able to and did forge close relationships with their clients, that the clients reposed trust and confidence in them, and that at times the connection could be characterised as a personal one.
151	In terms of solicitation of clients, Perry’s evidence under cross‑examination was:
we constantly and continuously have people that our clients haven’t met, that have knowledge of those clients, that ‑ that try to approach our clients to go to other firms, it happens frequently, um, some of those people worked with us in the past, um, you know.  These, especially at the higher end, these clients are not unknown to the general public, um, and people consistently come after clients.
152	According to Perry, once a successful client relationship is established, clients are typically reluctant to transition to a new advisor, especially when they have the option of continuing with their old advisor albeit at another firm.
153	This is also clearly a situation in which a restraint could legitimately cover approaches. Indeed, Sealey’s evidence is that he has been approached by a client of Escala Partners.
154	I consider that there is a legitimate interest in restraining the former advisors, and that might extend to both solicitation and acceptance of approaches, in order to protect the goodwill of the Escala Partners business.  
155	The SPA, SHA and Management Deed restraints are designed to protect the interests of various parties in the goodwill of the Escala Partners business, which is based on the personal connections of advisors with clients of the business, in the context of the sale of the business and/or on an ongoing basis.  I accept that these agreements form part of one suite of documents arising from the acquisition of Escala Partners by Focus Escala Holdings.  Similarly, there is a legitimate interest underlying the restraints in the Employment Agreements.  However, the Employment Agreement restraints are, in my view, qualitatively different because they are not tied to the sale of a business.  The Employment Agreement restraints are directed towards the protection of 2nd Chapter’s legitimate interest in the goodwill of the business through customer connections made and maintained by advisors.
156	Bennard says that the Management Deed restraints are in place because Focus is sharing a significant amount of cash flow with the management company who are effectively responsible for managing the asset Focus owns, and the restraints are not specifically related to retaining advisors.  She also says that the Management Deed is set up to have an economic and business relationship that creates a successful business enterprise.
157	With respect to Bennard’s evidence that it is common for restraints to be put in place in respect of persons who own equity in a wealth management firm, and that the restraints at issue are consistent with the restraints of owning equity in any company in this industry, I note that this evidence was not detailed enough for me to be satisfied of its accuracy and, accordingly, I afford it little weight.
158	Bennard says that Focus viewed Sealey and Vickers‑Willis as important and as a team, as Escala Partners operates in a framework of teams, albeit I understand from Perry that there are some advisors who work individually.  Either way, it appears that clients are assigned to advisors with whom they work primarily, if not exclusively.  Sealey and Vickers‑Willis’ evidence is that they did not work with clients to whom they were not assigned.
159	An important distinction must be drawn, as a result, between the connection of individual advisors and the clients they service and the connections the business has with its clients because of its advisors as a whole.  The Plaintiffs’ articulation of the legitimate interest in the close connection that its advisors, and all of them, have with customers elides the nature of the customer connection that is protected.  It is apparent from the way the Escala Partners business was run (in the sense of siloed or relatively segregated teams of advisors who worked with particular clients assigned to them and who did not interact in any significant way with firm clients to whom they were not assigned as advisors), that the customer connections which make up the goodwill are personal as between a client and advisor and there is no collective connection held by advisors individually or as a group with all clients.  The advisors must have dealt with the clients to develop a personal connection.
160	Importantly, the legitimate interest in the protection of the goodwill of the business is tied to this personal connection between an advisor and a client.  This is important because the restraint must do no more than is reasonably necessary to protect that legitimate interest.  Whether the restraints at issue do no more than is reasonably necessary is examined further in respect of each restraint, in sections G to N below.
161	Bennard denied that the restraints involving the acquisition are intended, in effect, to lock the advisors into the partner firms; they are meant to protect the asset which Focus Escala Holdings purchased.  However, the operation of the restraints has the effect that advisors may be locked in, even if this is not the intent of the restraints.  Indeed, some of the Plaintiffs’ submissions regarding the SHA suggested this to be a purpose of the restraints.  This is a matter which may go to the reasonableness of the restraints, and will be considered later in these reasons. 
F.2	The ‘blue pencil principle’
F.2.1	Submissions
162	The Plaintiffs’ closing submissions go into some detail in respect of the ‘blue pencil principle’ concerning severance of the agreements.  While the Plaintiffs say that all of the restraints are reasonable, they say that if necessary the Court can sever parts of the restraints, including through use of a ‘blue pencil’.
163	Put simply, a court may enforce part of a restraint even though, taken as a whole, the restraint exceeds what is reasonable.  That can be done where that part which is unenforceable is clearly severable without altering the nature of the contract and without having to add to, or modify, the wording in any way other than by excision.  
164	The origin of the ‘blue pencil principle’ is explained by the High Court in SST Consulting, so‑called because severance can be effected when words can be removed by running a blue pencil through those words to cross them out.  The relevant test for restrictive covenants is:
…whether the covenantee can enforce the restraining covenant to the extent to which it would have been valid had it been narrowly drafted.  The answer is that the covenantee can do so if the parts which are too wide can be removed without altering the nature of the contract and without having to add to, or modify, the wording in any way other than by excision.
165	In Wallis Nominees, Warren CJ and Davies AJA said, after referring to SST Consulting, (at 676 [94]): 
Thus there are two clear parts to the test.  The first is that the impugned part must be capable of simply being removed — as if simply crossed out with a blue pen; a court can remove words from a restraint clause but not rewrite it.  Secondly, the part to be severed must be an independent covenant and capable of being removed without affecting the meaning of the remaining part.  The only change should be to the sphere of operations of the clause. For example in Attwood v Lamont a restraint of trade clause prevented a tailor from competing with his employer’s business in anyway, listing off the various fields of the employer’s business.  Although the parts of the clause referring to fields other than tailoring were capable of simply being removed, it was held that to do so would change the meaning — when reading the contract as a whole there was only one covenant for the protection of the employer’s ‘entire business, and not several covenants for the protection of his several businesses’ and that the employer is ‘but one business’ not carrying on several businesses.
166	The Plaintiffs submit that Court of Appeal held to similar effect in Peck that where a restraint clause is ‘“not really a single covenant but is in effect a combination of several distinct covenants”, some of which are too wide, the invalid covenants may be severed’ subject to conditions being met (as extracted earlier in these reasons).
167	The Plaintiffs acknowledge that each case will turn on its own facts, but cite three examples of the application of these principles:
(a)	In Findex, the Full Court of the Federal Court applied the principles and found that in the circumstances of that case, it was not appropriate to sever the ‘Affiliate Restraint’ to amend the relevant restraint clause to read (with the strikethrough text below showing the proposed amendment):
For the sole purpose of protecting the interest of the Company and the other Shareholders (Other Parties) in respect of the goodwill of the Company and the Business, subject to the express exclusions set out below, each of the applicable Shareholders and the Covenantors covenants with, and undertakes to, the Other Parties that they will not, nor will any Affiliate of the Non‑Findex Shareholders/Shareholders/Covenantors (as applicable), do any of the following for so long as the Shareholder remains a Shareholder, and during any of the 'Restraint Periods, within any of the Restraint Areas, directly or indirectly: …
The Court held that this part of the restraint could not properly be characterised as constituting a single, distinct covenant and could not be removed without altering the nature of the contract. 
(b)	In Rentokil Pty Ltd v Lee, the relevant provision restrained the employee, after termination of the employment, from involvement in certain types of business ‘in any capacity’.   The primary judge had found that the restraint was not enforceable because it was unreasonable in relation to the range of activities restricted by the provision. On appeal, Doyle CJ held (at 307):
…the expressions which I have identified as providing protection to the employer which is more than reasonable can be severed from the meaning given to “capacity” without altering the underlying scope or intention of the Deed.  In my opinion to do so does not involve the Court rewriting the promise which the parties have expressed.  What remains is a workable agreement, an agreement consistent with the underlying intention to protect the employer against activities of the employee which would infringe or damage the employer's protectable interest, and an agreement which is consistent with the intention indicated by the parties…
Justice Matheson considered that the whole of the definition was severable pursuant to a severance clause in the agreement.  Justice Debelle also concluded that it would have been possible to sever the definition of ‘capacity’, and that this would not amount to re‑writing the covenants expressed in the deed.
(c)	In ASPL Pty Ltd v Rajakaruna, Smith J considered whether the following restrictive covenant (which was unlimited as to time) was capable of severance:
During an employee's employment, and for the period following the termination of employment set out in clause 26.2, an employee must not, without the prior written consent of the employer, directly or indirectly, do any of the following:
a)	Solicit, canvass, or approach any person who was at any time during the 12 months preceding the termination of employment, a client of the employer, with a view to obtaining the custom of that person in a business that is the same or similar to the business conducted by the organisation;
b)	Interfere with the relationship between the employer and its clients, employees or suppliers; or
c)	Induce or attempt to induce any employee of the employer to leave their employment.
Smith J observed, with reference to the blue pencil test as articulated in SST Consulting, that:
In this matter, it appears not to be possible to sever any part of cl 21.6 to impose a time limit on the period of time which a confidentiality clause is to apply post‑termination of employment.  To do so would be to rewrite the clause.  The confidentiality clause could however be capable of severance so as to simply delete the words ‘or after termination’ so that it only applied whilst the contract of employment remained on foot.
168	The Plaintiffs also cite International Cleaning Services (Australia) Pty Ltd v Dmytrenko.  Clause 10.8.1 of the relevant contract purported to extend to a restraint on being ‘interested directly or indirectly in any activity, occupation or project which would or might have the effect of promoting or assisting directly or indirectly any competitor of the Employer in any way’.   Stanley J held that the clause was cast in wider terms than was necessary to protect the employer’s legitimate interests and, noting that the parties agreed that the unenforceable provisions could be severed, Stanley J stated:
…Rentokil is authority for the proposition that if part of an agreement is invalid or unenforceable that part may be severed from the balance of the agreement or disregarded.  In the context of these cases that approach is sometimes described as the blue pencil rule.  In this case, in order to hold the parties to the bargain they struck I would delete from clause 10.8.1 the words “or interested” and “any activity, occupation or project which would or might have the effect of promoting or assisting directly or indirectly” so that the clause would read: 
10.8.1 be employed directly or indirectly in any competitor of the Employer in any way;
169	The ‘blue pencil principle’ approach to severance is submitted to be relevant in respect of the consideration of all the restraints at issue in this proceeding, and the Plaintiffs make the points concerning severance and construction as to reasonableness, including geographical reasonableness, in respect of all of the restraints in the agreements at issue.
170	The Defendants’ position was that severance, including by use of a blue pencil, is either not available or would not be sufficient to cure the defects in these restraints.  Those arguments were made in connection with specific restraints at issue and are detailed further below. 
F.2.2	Consideration
171	While the decision to pick up a blue pencil must necessarily be made in light of the particular clause which the Court is considering, it is appropriate for me to make some general observations as to how the principle applies in this case.
172	First, the application of the ‘blue pencil principle’ is distinct from the construction of the relevant contractual provision regarding severance.  It has become commonplace for restraint clauses to contain a provision allowing severance and providing for a cascading series of options for matters such as geographic area and duration.  The latter is simply a matter of applying the contractual provisions for severance if, for example, the restraint applies to too wide a geographic area or for too long a time.  The former involves the Court deleting words which make the restraint unreasonable, within the confines established by the authorities, without altering the nature of the contract. 
173	Second, insofar as the ‘blue pencil principle’ itself is concerned:
(a)	the impugned part of the clause must be capable of being crossed out, without any re‑writing of the clause; and
(b)	the severed part must be able to be deleted without affecting the meaning of the remaining part.
174	The application of this principle to the particular restraint clauses in issue will be dealt with in detail below, as this arises in respect of particular questions.
F.3	Alleged repudiation of Employment Agreements by 2nd Chapter and whether these contentions form part of the separate questions to be tried
175	Part of Sealey and Vickers‑Willis’ defence regarding their alleged breaches of the restraints in the Employment Agreements is that the restraints are unenforceable against them by reason of 2nd Chapter’s alleged repudiation of their Employment Agreements.  
176	The Defendants allege that the non‑compete period in cl 13.5 of the Sealey and Vickers‑Willis Employment Agreements is not enforceable because 2nd Chapter repudiated those Employment Agreements when it wrongfully sought to terminate the agreements, by letter dated 21 August 2023 (the 21 August Letter).  The Plaintiffs deny that allegation.
177	The extent to which the alleged repudiation of the Employment Agreements by 2nd Chapter was the subject of the separate questions before me, and in respect of which questions repudiation was a relevant matter for determination, were matters somewhat at issue between the parties.
178	As I understand it, the Plaintiffs’ approach to the scope of the repudiation question (ie, question nine and how repudiation may fit into earlier questions) is that it is not broad enough to encompass findings as to any potential repudiation by them.  In this regard, the Plaintiffs submit, in respect of the Defendants’ approach to question nine and when it arises, that I should be careful to confine myself to the terms of the individual questions and I should not entertain the Defendants’ allegations that it was the Plaintiffs who repudiated the Employment Agreements of Sealey and Vickers‑Willis.  
179	I do not accept the Defendants’ submission that the scope of question nine (or questions four through seven) requires me to make a determination as to whether the Employment Agreements of Sealey and Vickers‑Willis were repudiated by the 21 August Letter.  I have reviewed the transcript of the hearing before Sifris J where his Honour determined the content of the separate questions to be tried and I do not consider that the alleged repudiation by 2nd Chapter by the 21 August Letter falls within the scope of the employment restraint questions.  It is very clear that questions four through seven are directed to the enforceability of the restraints without reference to the factual background of what occurred around the termination of the employment of Sealey or Vickers‑Willis, including any alleged repudiation of agreements (whether by 2nd Chapter or by Sealey and Vickers-Willis).  Further, the scope of question nine is clear on its face: it is confined to the allegation that Sealey and/or Vickers-Willis repudiated their Employment Agreements by reason of the conduct pleaded in section E.3 of the 2FASOC, which section does not include the matters which the Defendants urged me to take into account.
G	Question one: the SPA restraints
Are any of the restrictive covenants set out in cl 20.2 to 20.6 of the SPA enforceable against any or all of Sealey, Vickers‑Willis, Terrung and JCVW? If so, which restrictive covenants are enforceable and to what extent?	
G.1	Plaintiffs’ submissions
180	The Plaintiffs say that there is an element of value judgment involved in determining the question of whether a restrictive covenant is lawful.
181	The first agreed proposition is that a restraint of trade is presumed to be void as contrary to public policy.  The presumption may be rebutted if there are special circumstances which demonstrate the covenant to be (a) reasonable as between the parties; and (b) not unreasonable in the public interest.  The Plaintiffs say that there are special circumstances demonstrating that the covenants are reasonable as between the parties here, noting that this is dependent on the situation of the parties.  
182	The Plaintiffs make submissions on the SPA restraints, first in terms of their reasonableness as between the parties, and second in terms of their reasonableness in the public interest.  
G.1.1	Scope of the restraints
183	The Plaintiffs say that the covenants in the SPA are reasonable as between the parties in connection with the protection of the goodwill of the Escala Partners business.  That goodwill, considered as a whole and inseverable asset, points to the reasonableness of the scope of the restraints, as applying to all clients and not just those with whom the restrained person has had dealings.
184	In their submissions, the Plaintiffs pointed to caselaw by way of analogy, to illustrate to the Court the circumstances and sorts of restraints that have been found to be reasonable.  
185	One case cited by the Plaintiffs is Allan Janes LLP v Johal, concerning restraints in the employment contract of an assistant solicitor.  In that case, 12‑month restraints applying to solicitation of any clients of the solicitor’s old firm in the prior year were found to be reasonable, because the solicitor would be introduced to a large proportion of the firm’s clients who had special status.  The Plaintiffs submit that Sealey’s situation has parallels to the circumstances of that case, as he was involved in training all of the teams in the business, knew what business had been won and lost and was involved in prospects and marketing.  The Plaintiffs say it was within the contemplation of the parties when Sealey joined (and the agreements were entered into) that he would be introduced to a portion of the clients with whom he did not deal.  
186	In Bridge v Deacons, another decision concerning a restrictive covenant applying to a solicitor, the Privy Council considered a restraint which prevented a partner of a law firm from acting in Hong Kong for anyone who had been a client of the firm in the three years before the solicitor ceased to be a partner, and which operated for five years.  The partner had no contact with the majority of the firm’s clients and the firm’s office was divided into a number of departments which were largely separate from each other.  The restraints were valid, because they protected the goodwill of the business as a whole, where all of the partners had determined that the covenants were reasonable.  The Plaintiffs say that the circumstances of that case are not unlike those before the Court, as the restrained persons account for a small percentage of the firm’s total revenue and had no connection or dealings with the majority of the clients of the firm.  Importantly, no one knows precisely what would happen at the time at which the contract is entered into, and so facts such as the percentage of revenue for which Sealey and Vickers‑Willis were ultimately responsible are apt to mislead.  It is goodwill overall and as a whole which is protected by the restraints.
187	Another case cited by the Plaintiffs is GW Plowman & Son Ltd v Ash, in which the defendant was a sales representative subject to a covenant preventing him from soliciting any farmer or market gardener who had been a customer of the employer during the term of his employment, including those with whom the defendant had no dealings.  The covenant was upheld because the plaintiffs in that case had a proprietary interest in maintaining their connection with both discontinued and existing customers:
(..[t]his is, in my opinion, the nub of the matter) that though customers are limited to those who were customers during the period of employment, it does not exclude people who have ceased to be customers and therefore form no part of the goodwill of the employer, nor does it confine itself to customers with whom in some way or other the employee has come into contact.  It is on that ground, I think, that the judge refused the motion.  I have felt great doubt on this point, but on the whole, if a man was a customer at the beginning of the employment, I do not see why hope should be abandoned of his becoming a customer again at the end of it and why, therefore, people who have, for the time being at any rate, ceased to be customers have fallen outside the proprietary interest.
188	The Plaintiffs also point to that decision in respect of solicitation or accepting approaches from persons that are not known to be former clients of Escala Partners through practicing circumspection and asking people whether they were clients of Escala Partners during the relevant period of time.
189	The Plaintiffs submit that the meaning of ‘engage in’ must be construed together with exceptions identified in cl 20.7 so that they only prevent engaging in the relevant conduct at a material or influential level.
190	The Plaintiffs submit, in response to any criticism of the restraints based on the fact that they are not drafted and tailored with respect to the interests of the individual advisors in the SPA, SHA and Management Deed, that of course they are not: the restraints are drafted to protect the goodwill of the business, which is a single indivisible asset.  The individual advisors are themselves not the goodwill of the business; they are sources of that goodwill, and collectively with other advisors they generate the goodwill.  
G.1.2	Geographic reach
191	In respect of the geographic reach of the covenants in the SPA, the Plaintiffs say that they cover the areas in which Escala Partners operates.  Accordingly, the covenants comply with the general rule that the area of the covenant must not be more extensive than that of the business sold.  
192	The Plaintiffs also submit that nationwide restraints are more readily seen as appropriate in light of the reality of the contemporary business environment, where large parts of the interaction between clients and service providers occurs online, such as via Zoom, and clients may be based across Australia.  The Plaintiffs took the Court to references to such online communications in the evidence as a basis for this flexibility.  Nowadays, a lot of the personal connection and communications can be managed by electronic means, such that one may more readily accept an Australia‑wide restraint.
193	The Plaintiffs cite Taxation Services of Australia Ltd v Townsend, which concerned a restraint for one year post‑termination against soliciting, serving or acting for clients of the employer at any time in the six months prior to termination:
It seems to me that the mere fact that the defendant here had been manager in Sydney for Taxation Services of Australia Ltd. might be a very great attraction to and an influence over the clients of that company in Melbourne, Brisbane or Adelaide and might enable him to entice them away from the plaintiff company.  That attraction and influence would not be due to his inherent or acquired ability and experience (which the authorities say he is entitled to exploit) but to the special characteristic he possessed of being an ex‑employee of the company.  This is close to the distinction between “objective” knowledge and “subjective” knowledge mentioned by Lord Shaw.  The exhibition of his plate by the defendant, opening an office or inserting an advertisement as to starting business would be a soliciting by the defendant of all and sundry (including the clients of the plaintiff company) to come and do business with him.  In fact, if counsel for the defendant be right in his argument that the covenant is void because it extends to other States, the defendant would be entitled to issue circulars and insert advertisements in any one of those States worded thus: “To the clients of Taxation Services of Australia Ltd. Mr W.H. Townsend former manager of the company in Sydney has started practice on his own account in this city and solicits your patronage.”
Is this something which the plaintiff company is entitled to protect itself against by a covenant with its employee?  I think it is.  Lord Atkinson contemplated the possibility of the employee enticing away clients by “other means” than soliciting and I think that the opening of an office in this case would be “other means.”  As the Court will not in many cases prevent a professional man altogether from practising his profession the only way in such cases of preventing a professional man enticing away the clients of his former employer is to allow him to start practice and to secure a covenant from him that he will not “act for” the clients of his former employer for a fixed period of time.
In my approach to the case I have, so far, not referred to the possibility of the defendant being transferred from Sydney to one of the other States.  Having regard to the actual instances proved this does seem to me to have been a possibility and this possibility of transfer to another State is, I think, an additional argument in support of the necessity for and the validity of such a wide covenant, although it is not the basis of my decision.
Mr. Weston, however, argued that, if the company were entitled to protect itself against an officer soliciting, serving or acting for its clients in any other State than that in which the officer was employed at the date of the covenant, the covenant should at any rate have been limited so that it should operate in that other State only in cases in which the officer was in fact transferred by the company to that other State and there employed by the company.  I do not think that that was necessary, as the defendant might, either by proper or improper means and either during or after the period of his employment, acquire knowledge of the customers in another State and lists of their names without ever actually being stationed in that State.
194	In terms of geographic reach, the Plaintiffs submit from this decision that particularly for Vickers‑Willis, but also for Sealey, the fact of their seniority in Escala Partners might be very attractive to clients in locations across Australia, and enable them to entice those clients from Escala Partners.  That attraction and influence would not be due to their inherent or acquired ability and experience, but due to the special characteristics each possessed because of being an ex‑employee of the company.  In this regard, the Plaintiffs submit that both Vickers‑Willis and Sealey refer to their successful prior employment with Escala Partners: each rely on the fact that they have had success at Escala Partners on a publicly‑available webpage to attract customers to Crestone.
195	In addition, the potential geographic reach of the client base of Sealey and Vickers‑Willis at the time of the execution of the agreements must be considered, and one must allow for potential developments in the role of the employee and the nature of the business for which he or she might be responsible in the future.  For example, an office may have been opened in Adelaide or Brisbane during an employee’s tenure at the business and that employee might have gained a client base or been re‑located there.  Similarly, increased use of technology is a potential development for which allowance must be made, even though the time at which reasonableness is assessed is the date of execution.
G.1.3	Duration
196	In respect of the five‑year maximum duration of the covenants, the Plaintiffs say that this operates together with the Earn Out payments which are payable in each of the first five years post-Completion, assuming revenue targets are met.  There is a symmetry in this operation of the restraints and it is reasonable for the restraint period to last for the period during which the purchaser is liable to pay for the assets it acquires (and it is therefore vulnerable to destruction of goodwill of the business), and the vendors are entitled to receive monies such as the Earn Out amounts.  
197	The Plaintiffs also submit that how valuable as a source of goodwill each principal might be in five or 10 years may change, and the restraints cannot be drafted to have different durations because the information about how valuable that person will be to the goodwill of the business is not known.
198	In situations where the restraint is given as part of the sale of a business, the question is: does the duration of the restraints do no more than is reasonably necessary by reference to the time that it would take the vendor to subtract the goodwill from the business?  The duration of the prohibition is a substantive aspect in dispute in respect of the SPA, up to the fifth anniversary of the Completion Date (31 March 2024).  In this regard, the interrelated context of the Management Deed and SPA is important, as at the time of entry into the SPA, it was known that the vendors would remain in the business for some time.
199	Moreover, the Plaintiffs say that there are cases where restraints lasting as long as 10, 12 or 20 years have been found to be reasonable in the context of a sale of business transaction.  This is subject to the caveat, however, that each case turns on its own set of facts and cases in this area provide only limited assistance to the Court in considering the specific facts of the case before it.
200	The Plaintiffs point to caselaw which indicates that a five‑year duration of a restraint is not unreasonable.  The Plaintiffs refer to the decision of Gray J in Positive Endeavour Pty Ltd v Madigan, which cited with approval the following extract from the decision of Maugham VC in Connors: 
If the restriction as to space is considered to be reasonable, it is seldom in a case where the sale of a goodwill is concerned that the restriction can be held to be unreasonable because there is no limit as to time. Their Lordships accept as correct the statement by Lord Cave in Fitch v Dewes, at p 168: 
… it has been settled (I think) since Hitchcock v Coker, that where there is a goodwill to be protected, a covenant in restraint of trade, even when imposed as a condition of employment, may be so framed as to give adequate protection not only to the covenantee himself but also to his successors in the business, and this although it may be necessary for that purpose to impose a restriction upon the covenantor for the remainder of his life.
201	Here, the duration is said to be reasonable to protect goodwill in the context of the financial advisory business, where it typically takes a long period of time for a financial advisor to build up a relationship of trust and connection with a client.
202	Further, the Plaintiffs cite the observations of McDonald J in Southern Cross Computer Systems Pty Ltd v Palmer (No 2):
Finally, I accept the plaintiffs’ submission that whilst the consideration of the reasonableness of a restraint turns upon the facts of a particular case, there is nothing exceptional in a four year restraint in the context of a goodwill case where the vendor receives a substantial amount of consideration. In Lloyd’s Ships Holdings Pty Ltd v Davros Pty Ltd, a ten year restraint was upheld. In C & S Constructions Pty Ltd v Dawson, a five year restraint was upheld. In Pioneer Concrete Services Ltd v Galli, a five year restraint was upheld. In Bridge v Deacons, a five year restraint was upheld.
G.1.4	Consideration received
203	The negotiation process for the sale of the Escala Partners business took several months.  There is no suggestion that the parties to the SPA paid, or accepted, a sum for the Escala Partners shares other than what they were worth: this was not a sale of distressed assets.  The Plaintiffs say that both Sealey and Vickers‑Willis were compensated in exchange for providing the covenants and disposing of their shares, with each also retaining an ongoing entitlement to profits from Escala Partners through their shareholdings in 2nd Chapter.  However, they also submit that, while relevant, the adequacy of the consideration received in exchange for giving the restraint is not determinative of reasonableness, and that it is unclear as to whether or not one can look at the value of what is being paid for a covenant.
204	In respect of the significant cost at which Focus Financial purchased the Escala Partners business, the Plaintiffs say that the initial purchase price of $57.6 million is an eight times multiple of the EPBC.  Given this cost, the Plaintiffs suggest that the five‑year duration of the restraint in the SPA is almost inadequate.  Sealey received approximately $4 million from the acquisition under the SPA, and had not paid any consideration for over half of his initial shareholding in Escala Partners.  The Plaintiffs say that the five‑year SPA restraint against competing with the business he sold does not appear to be a terrible imposition, in those circumstances.  
205	The Plaintiffs accept, however, that the situation of Vickers‑Willis might be a little different to that of Sealey because of the lower quantum obtained by Vickers‑Willis pursuant to the SPA.  
G.1.5	Express acknowledgement and agreement
206	The Plaintiffs refer to the express acknowledgement and agreement of Terrung and JCVW that the restraints are reasonable in cl 20.8 of the SPA.  In this regard, the Plaintiffs place reliance on the comments of Menzies J in Amoco:
… [w]hen parties negotiate a commercial arrangement from positions where one does not have the other at an unfair advantage and do, after hard bargaining, reach an agreement which each finds in its interests to accept, the Court will not readily find that their bargain is unreasonable as between themselves, notwithstanding the well‑established policy of the law against restraints of trade.
207	Although it is accepted that Vickers‑Willis received less compensation than Sealey, the Plaintiffs nevertheless submit that the SPA is an agreement which Vickers‑Willis elected to sign and he agreed, by signing, that it was reasonable.  The Plaintiffs submit that Vickers‑Willis might have been in a powerful position if he had elected not to go along with signing the documents for the acquisition, and the Plaintiffs note that there has been no evidence from the Defendants that Vickers‑Willis would have been forced to sell his shares in that situation.
208	Vickers‑Willis and Sealey both entered into sign‑on bonus agreements on around 22 May 2023 with Crestone, each of which included in the agreement recitals a statement that their respective employment at Crestone was ‘expected to commence on 22 March 2024’.  This date was around 10 months after they both resigned from their roles at Escala Partners and the sign-on bonus for each was in the amount of $1.5 million.  On a somewhat similar note, the Plaintiffs say that the delayed commencement indicates that Vickers‑Willis and Sealey intended to honour at least part of the restraint period, which in turn indicates that their restraints are reasonable as between the parties. 
G.1.6	Severance
209	The Plaintiffs say that cl 20.6 provides that the separate restraints are intended to be treated as such and as separate covenants, each being severable from the other.  Accordingly, if the Court is not persuaded that the covenants in cl 20.2(a)‑(f) are enforceable against each of the first to fourth defendants until the fifth anniversary of the Completion Date, being 31 March 2024, across the whole of Australia, it should find the restraints are enforceable for a more limited duration or over a more limited geographical area. 
210	There is also said to be scope for the ‘blue pencil principle’ to be applied, if necessary.  In this regard, the Plaintiffs did not specifically address such amendments in relation to the SPA, but said later when addressing the Employment Agreements and giving examples of how the blue pencil may be wielded that they made the same submissions regarding the use of the blue pencil for all of the agreements.
211	The Plaintiffs’ submissions did not address the Defendants’ argument concerning a limit to severance arising out of the fact that severance was specifically covered in the SPA.
G.1.7	Public interest considerations
212	The Plaintiffs say that the SPA covenants are not unreasonable in the public interest.  The Defendants’ public interest point is described as an ephemeral grasp at straws.  The wealth management industry is highly competitive, with many advisors that the public can choose between, such that there will not be any appreciable injury to the public interest, should Sealey and Vickers‑Willis be kept to their SPA covenants.  Further, the Plaintiffs submit that retaining key employees assists in training new staff which ultimately benefits the general public who receive those services.  They say that there would be less incentive to provide training and career development if staff could leave ‘at the drop of a hat’ to work for a competitor.  
213	The Plaintiffs submit, in response to the Defendants’ public interest argument, that while Sealey and Vickers‑Willis are very, very good, skilful and highly‑qualified and experienced financial advisors, they properly admitted that they are not the ‘best’ technical advisors in Australia, and it could only be in the bests interests of the client to follow Vickers‑Willis and Sealey if they were the best (noting that there is no available information about the difference in fees, service, or outcomes should a client leave Escala Partners).  Accordingly, it is not in the best interests of the clients to follow Vickers‑Willis and Sealey.  The Defendants bear the onus of establishing that the restraints are unreasonable in the public interest and, in the Plaintiffs’ submission, that onus has not been discharged.
G.2	Defendants’ submissions
214	The Defendants submit that the restraints in cl 20 of the SPA are presumed to be void as contrary to public policy, and it is for the Plaintiffs to rebut that presumption, by showing that the restraints go no further than reasonably necessary to protect the Plaintiffs’ legitimate interest, such that they are reasonable as between the parties.  They accept the general proposition that a purchaser of a business is entitled to protect itself from competition by the vendor, but they say that the assessment of reasonableness for restraints in the SPA is the same as is customary for restraints accompanying the sale of goodwill, and by this assessment standard, they are nevertheless unreasonable.  
215	The Defendants agree that there is an element of value judgment in determining whether the restraints go further than is reasonably necessary.  
216	The Defendants say the  reasons that the SPA restraints are unreasonable (outlined below) apply cumulatively (and this cumulative operation is said to demonstrate further the unreasonableness of the restraints).
G.2.1	Scope 
217	The Defendants emphasise the importance of the context of the Escala Partners business at the time of acquisition.  In early 2019, there were more than 40 employees at Escala  Partners.  The advisors in the business worked in teams, and one team included Sealey, Vickers‑Willis and Allen.  There were at least 10 other teams at that time and at least 16 other key personnel with standing equal to or greater than Sealey.  The team in which Sealey, Vickers‑Willis and Allen worked was responsible for a small proportion of the business and, even if this was around 10% of the business, that does not reflect their contribution to the business, as their team dealt with only 5% of the total assets held.  The clients with whom team members dealt as individuals and the respective assets of those clients is a smaller proportion still, which is relevant to the importance placed on the personal connection of advisors with clients.  In addition, the evidence is consistent with the Defendants’ position that teams deal with their own clients in a segregated way, without any meaningful crossover between advisors and teams.  Teams are discrete units.  The work and clients were not shared between teams and advisors did not win new business by injecting themselves into an existing relationship, other than where existing advisors were exiting the business.  
218	The abovementioned context is submitted to be applicable to all of the restraints at issue in the proceeding.  This context is the reality revealed by the evidence and it does not accord with the context as described by the Plaintiffs.  
219	The Defendants reject the Plaintiffs’ prism of Escala Partners as one big valuable business with a small number of principals who work closely together and make equal and individually significant contributions to the revenue. 
220	The Defendants dismiss the Plaintiffs’ suggestion that advisors might have relationships with the clients of other advisors or that there was cross‑fertilisation among advisors or teams.  
221	In respect of Bennard’s evidence that advisors may have some knowledge of clients of Escala Partners with whom they did not work, by example arising from Sealey’s involvement in coaching other advisors, the Defendants say that this does not amount to any meaningful or material dealings with other clients or a suggestion that the client will know about the other advisors at the firm.  
222	Sealey’s evidence was that he did not know the relationship between other advisors and their clients or about the service offering of other advisors, as this was not commonly spoken about, and he was not questioned in any substantive way about the relationships he had with clients of other advisors.  His evidence was that he might know a couple of dozen client names of other advisors but would not have contact information for them.  Any work that he assisted other advisors with did not amount to anything significant.
223	Perry’s evidence was that there was some discussion and awareness across the organisation of investment instruments, strategies for client events and interactions, and best practice conversations, and that Sealey had spearheaded an initiative where he and Perry would sit down with advisors on a quarterly basis to go through business won and lost, to gauge how individual advisors were tracking.  According to Perry, Sealey had the opportunity to know every single client won by the firm through his involvement in those meetings.  But, the Defendants submit, Perry also accepted that Sealey and Vickers‑Willis did not work generally in direct relationships with clients of other advisors.  Further, knowledge that a client has been won does not suggest a relationship between the client and Sealey.  The evidence on this point appears to go no higher than that there might be some knowledge of some names of clients being managed by other advisors.  It does not amount to a personal connection and a personal relationship of sufficient strength that if the advisor exits the business, they will take the client with them or the client will choose of their own accord to move their business to the advisor’s new firm.
224	The evidence of Vickers‑Willis was that he sometimes attended training with advisors, on occasion including advisors from other teams, that he had social conversations with advisors in other teams, and that he attended some meetings or social functions, in which the name of a client might be discussed by an advisor.  He also accepted that some clients may attend social functions, but said that he would focus on his own clients at those events.  He would, very rarely, chat with other advisors at Escala Partners about their clients and said that he only knew the names of 10 to 20 clients of other advisors at the firm.  This does not amount to a personal connection with clients of other advisors.
225	Perry gave evidence that an advisor with access to client information could approach clients with whom there was no existing relationship and offer to provide the same services at half the cost to that client.  The Defendants submit that this evidence is far too general and vague to assist the Court.  The Plaintiffs could have chosen to lead evidence about the information which an advisor could obtain and how that could be deployed in that scenario or evidence from experienced advisors as witnesses, perhaps with real life examples of this scenario occurring, but did not do so.  The Plaintiffs did not lead evidence explaining the implementation of pricing structures, establishing that pricing structures are sensitive or confidential, or setting out how realistic it is for a wealth management advisor to undercut fees of competitors as Perry suggested.  Evidence from Sealey and Vickers‑Willis suggests that pricing structures and fees are fairly standard across the industry, and Vickers‑Willis stated that he could not undercut a competitor as Perry had hypothesised.  The Defendants also observe that knowing this information does not provide a great advantage; one can approach a potential client, inquire about their fees and then make a lower fee offer, or offer to provide services at half the price of whatever that potential client is being charged.  Clients know their fees and are able to disclose this to Sealey or Vickers‑Willis, or any other advisor, as part of assessing whether they wish to move their business to another firm.
226	The Defendants submit that the correct approach to the analysis of the restraints in respect of persons who were not clients of the restrained persons is that set out in Wallis Nominees, Harlow Property Consultants Pty Ltd v Byford and Cactus Imaging Pty Ltd v Peters.
227	Noting the above, the Defendants say that the Plaintiffs have failed to establish that an advisor has a valuable personal relationship with all the clients of Escala Partners, or that what interaction or awareness there was with clients of other advisors is of such value as to legitimise a restraint protecting against its misuse.  
228	The Defendants submit that the importance of a personal relationship in this business is common ground and it illustrates the ‘vice’ in the restraints at issue: the fact that the restraints are not confined to clients with whom such a relationship existed, and where the Plaintiffs’ own evidence is that the risk relates to clients leaving with exiting advisors on the basis of a close personal relationship.
229	The Defendants urge against viewing Sealey and Vickers‑Willis as a combined entity and looking at the restraints applying to them in this way.  This would be incorrect.  The reasonableness of the restraints must be assessed as at the date in which they were entered into, not with the benefit of hindsight, and each restraint needs to be assessed separately in respect of the particular individual to which it applied and separately from the other restraints at issue.
230	The Defendants also say that Focus was content for the relationship with Vickers‑Willis to be severed on the acquisition of Escala Partners, as his continued involvement with Escala Partners was not required for the deal to go ahead (in contrast to the advisors listed in Part 1 of Schedule 4, including Sealey).
231	The Defendants submit that these were standard‑form restraints that were not individually crafted to account for the particular circumstances of Escala Partners or any of its key personnel and they were not negotiated.  As Bennard accepted, no attempt was made to differentiate restraints according to the compensation received by shareholders under the SPA.  This indiscriminate approach supports the view that the restraints go further than is reasonably necessary to protect a legitimate interest.  
232	Other deficiencies in the Plaintiffs’ evidence were also the subject of submissions from the Defendants.  Notably, the Plaintiffs did not lead evidence from people working as financial advisors: Bennard has never been a financial advisor and Perry has not worked in that capacity since before the acquisition of Escala Partners.
233	What is more, Perry’s statement during cross-examination that ‘[w]e constantly and continuously have people that our clients haven't met, that have knowledge of those clients that … try to approach our clients to go to other firms.  It happens frequently’ highlights the deficiency in the evidence on what comes of these frequent approaches, and whether there is a difference in success rates between advisors with detailed knowledge of those clients or approaches without that depth of knowledge based merely on a client’s public profile.  If high‑end clients are frequently approached by the competition, the Defendants ask: what is the true risk of those clients being poached by a competitor who does not have a personal connection with the clients?  
234	In respect of the scope of the non‑competition restraint, the Defendants make the submission that cl 20.2(a)(i) and (ii) which sets out the businesses and activities which the restrained persons should not ‘engage in’ is unreasonable in its terms because it is anti‑competitive and broad.  The non‑competition restraint would prevent the restrained persons from undertaking a wide range of activities, including being employed as a financial advisor, even in circumstances that would not damage or endanger the goodwill of the Escala Partners business (for example, being employed by Crestone in respect of Crestone’s existing client base).
235	The cl 20.2(a) restraint would also prevent the restrained persons from:
(a)	providing any service at all to a relevantly similar or competing business, such as financial research or analysis, even as a third‑party contractor or consultant;
(b)	having a 0.1% shareholding in a private company or a 5.1% shareholding in a publicly listed company, even if the shareholding was indirectly held;
(c)	lending money, directly or indirectly, to a business, regardless of the terms of the funding arrangement; or 
(d)	having involvement as a ‘beneficiary’, which arguably would prevent them from being clients of a competing business. 
236	The Defendants submit that if a non‑solicitation provision is excessive in the circumstances, so too is a more onerous non‑competition provision.  The reasonableness of the non‑competition clause must be assessed by reference to the adequacy of the protection of the legitimate interests offered by the non‑solicitation clause and will only be upheld if the latter provides inadequate protection.  
237	In the case of the SPA, the Defendants submit that there is no additional interest beyond client connection that only the restraint in cl 20.2(a) can adequately protect.  To illustrate this point, the Defendants refer to Pryse v Clark, which concerned partners of a law firm leaving for another firm.  In that case, there were restraints that applied to a ‘Client’, defined to include a client of the partnership ‘with whom the Outgoing Partner had material dealings in the course of performance of duties’.  Justice McDougall accepted that it was strongly arguable that the identified legitimate interests of the law firm were sufficiently protected by those carefully drafted clauses, and in those circumstances, his Honour observed that there was a powerful argument that the remaining restraints in other clauses directed to restricting competition went beyond what was required for the law firm’s legitimate protection, because their real purpose was to suppress competition.
238	What is more, the Plaintiffs have not made out any case in their evidence to justify protecting themselves from competition of the kind stipulated in clause 20.2(a). There is no evidence to support their case. 
239	Further, the Defendants say that the restraint in cl 20.2(b) of the SPA regarding soliciting, canvassing, approaching or accepting an approach from customers or clients of Escala in the 24 months after the Completion Date is unreasonable in its terms.  This is because it applies to clients with whom Sealey or Vickers‑Willis had no dealings, including former clients.  
240	Insofar as cl 20.2(b) captures clients with whom individual advisors had no material dealings, the Defendants submit that, in the circumstances (including that Sealey and Vickers‑Willis’ clients accounted for only around 5% of the revenue of the business at the time of the SPA being entered into), the reasonableness of the non‑solicitation restraint in the SPA is to be assessed in the same way that a non‑solicitation restraint imposed on a former employee is assessed.  The Defendants say that the following principles should guide that assessment:
(a)	Covenants against soliciting customers including those with whom an employee has had no dealings are, as a matter of principle, wider than is reasonably necessary to protect the employer’s customer connection and will be invalid unless they can be upheld on other grounds. 
(b)	The more significant the personal relationship between the employee and customers is to the finding of legitimate interest, the less likely it is that a restraint will be found reasonable if it relates to customers with whom the employee did not have dealings. 
(c)	By definition, a non‑solicitation or client restraint which extends beyond those customers with whom the employee had a substantial connection would go beyond the legitimate interests of the employer in protecting the customer connections developed by the employee. 
(d)	The more important a role, the more quickly one would expect an organisation out of necessity to be content to replace the employee who is leaving or unavailable with another employee, including where that replacement would be performing the same role and interacting with the client. 
(e)	A restraint may be reasonable even though it extends beyond customers with whom the employee has personal contact if the employee has gained special knowledge of and/or influence over customers or potential customers or their requirements.  This is in contrast to a situation where the employee’s contact with other clients is incidental and those other clients had a primary attachment to someone else.   
(f)	It might also be reasonable where the employee is very senior (like a CEO or COO) in a business with limited customers such that there is no real difference between a restraint operating in respect of customers with whom that employee had contact and all of the business’ customers.
241	Having regard to these principles, the Defendants say:
(a)	The restraint is wider than is reasonably necessary because it applies to all customers or clients of the Group or the Business.  There is no distinction between those clients with whom Sealey or Vickers‑Willis had a substantial connection and those with whom they had no connection or relationship at all.  The restraint is anti‑competitive and offends public policy.
(b)	There is little scope for an advisor to win new business by injecting him or herself into an existing relationship between a client and another advisor, because of the close client‑advisor relationship.  This makes the restraint less likely to be reasonable insofar as it relates to clients with whom Sealey or Vickers‑Willis had no material dealings. 
(c)	Having regard to the importance of the role between advisor and client, one would expect Sealey or Vickers‑Willis to be replaced if they were unavailable to clients during their notice period and/or were directed to facilitate the transition of clients to a replacement in the notice period. 
(d)	There is no evidence to satisfy the Court that Sealey or Vickers‑Willis had acquired influence over or special knowledge of Escala Partners’ clientele such as would justify a restraint that applied to customers of Escala Partners with whom they did not deal and, indeed, the contrary view is supported by the evidence.  
(e)	This is not a situation in which Sealey or Vickers‑Willis held very senior executive roles in a business with limited customers, such that it might be inferred that they had knowledge or influence in relation to the clients. 
242	The Defendants submit that insofar as the restraint captures former clients with the business from 1 April 2017 to 30 March 2019, it is also unreasonable.  The revenue model which Escala Partners operates requires funds to be under management and an ongoing relationship with clients (in contrast to a business like a medical practice where some time may elapse between appointments).  Clients who left the business many months or years prior would not have this ongoing relationship with advisors in the business and there is nothing in evidence to suggest that the business had any expectation of those clients returning.
243	Insofar as the restraint captures unsolicited approaches, the Defendants say this cannot be justified when it applies equally to current and former clients of the business with whom Sealey and Vickers‑Willis had no material dealings and (in the case of current clients) with whom there was no expectation they would start a relationship even if they remained with the business as set out in the transition plan.
244	The Defendants understand that the restraints in cls 20.2(c) to (e) are not relevant to the proceeding.  They say that cl 20.2(f), which restrains the encouragement or inducement of another person to do the things set out in the earlier sub‑paragraphs, is unreasonable in its terms a fortiori, if the restraints in the earlier sub‑paragraphs are found to be unreasonable.
G.2.2	Geographic reach
245	Clause 20.5 provides that the restraints apply to activity within: (a) Australia; (b) the East Coast States, WA and the ACT; (c) NSW, Victoria and the ACT; (d) NSW and Victoria; and (e) Sydney and Melbourne.  The Defendants submit that all of the relevant restraints in cl 20.2 are unreasonable as between the parties because, at all levels, they operate in locations where Sealey and Vickers‑Willis had no or negligible clientele.
246	The relevant time at which reasonableness must be assessed is when the parties entered into the restraints.  The Defendants say that the restraints in the SPA were agreed before the COVID‑19 pandemic, when online interactions were limited.  At that time, Escala Partners’ shareholders were based in Victoria or NSW; the business had real estate in Melbourne and Sydney and a small Perth office; most advisors were in Melbourne, there were fewer in Sydney and only one advisor in Perth; the business in Sydney was a recent expansion and the core business was based out of Melbourne.  In terms of the team led by Sealey and Vickers‑Willis, all advisors were based in Melbourne and the client mix was largely based in Melbourne or Victoria, with around a fifth based in Tasmania and a very small number of not more than 5% based in Sydney or Brisbane.
247	The Defendants’ position is that it is therefore unreasonable to impose a restriction in respect of former clients other than those based in Melbourne, Victoria, or Tasmania.  The cascading geographic reach of the restraints in cl 20.5 at each level goes beyond those areas and is therefore unreasonable.
G.2.3	Duration
248	The Defendants submit that the duration of the restraints in the SPA is not reasonable.
249	The relevant restraints in cl 20.2 are timed by reference to cl 20.4, which defines the duration of the restraints as the period from the Completion Date to each of the fifth, fourth, third, second and first anniversaries of the Completion Date.  The Completion Date was 31 March 2019 and the alleged breaches in this proceeding are pleaded as having taken place from June 2023 onwards, more than four years after the Completion Date.  As a result, sub‑paragraphs 20.4(b) to (e) are irrelevant and the SPA restraints in cl 20.2 are only relevant for the purpose of this proceeding if the Plaintiffs can establish that each restraint is valid and enforceable for the maximum duration of five years post-Completion (per sub‑paragraph 20.4(a)).  The Defendants submit that all of the relevant restraints in cl 20.2 are unreasonable as between the parties because they operate for five years, which is unreasonable in length.  
250	The restraint in cl 20.2(a), if valid and enforceable for five years, would have prevented Sealey and Vickers‑Willis from being employed by Crestone in the period from their commencement in October 2023 to 31 March 2024, as this would involve engaging in a business or activity that is accepted to be in competition with Escala  Partners.  The restraint in cl 20.2(b) would have prevented Sealey and Vickers‑Willis from soliciting or accepting an approach from clients from June 2023 to 31 March 2024, if valid and enforceable for five years.  The restraint in cl 20.2(f) would have prevented Sealey and Vickers‑Willis from encouraging or inducing Allen from soliciting or accepting an approach from clients from June 2023 to 31 March 2024, if valid and enforceable for five years.
251	The Defendants submit that the risk to which the restraints are directed is described by the Plaintiffs as a failure to realise the value of Focus’s investment in Escala Partners.  However, a consideration as to how long it may take to recover the full investment based on the agreed purchase price is not to the point of the exercise.  The key question in respect of restraints protecting the interest in customer connection is how long it will take to protect the goodwill from being subtracted by the vendor or former employee.
252	The Defendants submit that the correct approach in respect of assessing the reasonableness of a restraint accompanying the sale of goodwill is to take as the primary consideration the time required for severing the relationship between the covenantor and those clients who would patronise the business after its sale.  The Defendants say that the contrary view (that it is seldom the case that a restraint accompanying the sale of goodwill will be treated as unreasonable on account of its duration if the restraint is otherwise reasonable) should not be adopted.
253	In connection with the Defendants’ preferred approach, they ask the question: how long would it take to sever the relationship between an advisor and his or her client, in the context where it was expected that the advisor would continue to service that client after the Completion, but there was no guarantee for how long the advisor would remain with the business?  
254	Advisors gain new clients by winning work through a competitive pitch in response to a tender, referrals from other service providers such as accountants, word‑of‑mouth referrals, and through a transition from another advisor within the business who is leaving or has left the business.  This last way of gaining a new client is important here.  
255	The Defendants say that the evidence of the Plaintiffs on how long it would take for a transition to occur in which another advisor secures a relationship with a client falls short of justifying a five-year restraint.  
256	In contrast, the Defendants say their evidence on the transition time suggests that five‑year restraints are unjustified.  According to the Defendants, clients can make the decision to engage an advisor relatively quickly (eg, in one or two meetings over a month) and then, once engaged, it can take one to three months to develop a good working relationship.  There are no barriers to clients taking their business to another advisor, so advisors have to demonstrate value to clients in a matter of months or expect that the client will move elsewhere.  It is significant that clients of the Escala Partners business are mainly sophisticated, high‑net‑worth individuals and families and their controlled entities.  These are sophisticated clients with significant sums to invest and they are more likely to invest their money based on the value proposition than because of friendly correspondence with a service provider.  The Defendants therefore say that any assessment of the reasonableness of the duration of the restraints should take this into account.
257	In the Defendants’ submission, it is incumbent on the Plaintiffs to establish that there was nothing else that the Plaintiffs could do to protect their legitimate interest, other than to impose the restraints at issue in the proceeding.  The Plaintiffs cannot establish this as they did not take such common sense steps and measures, such as implementing a transition protocol and holding handover meetings with Sealey and Vickers‑Willis and the clients. 
258	The transition plans in evidence did not contemplate Vickers‑Willis or Sealey (or anyone in their team) taking on clients from other teams in the event that another team lost an advisor.  There was nothing exceptional or unique in the position of either Vickers‑Willis or Sealey in the business; they were overshadowed by other partners in terms of revenue and client share and their shareholdings were not among the largest.  There was no exceptional issue or difficulty identified in the transition plans for Vickers‑Willis or Sealey, in contrast to other more prominent advisors.  
259	Further, there is no evidence of the talented and successful advisors who remained with Escala Partners being deployed in respect of clients of Vickers‑Willis and Sealey, or of any other attempt to maintain those clients other than by the use of restraints.  The Defendants submit that in this way, the evidence before the Court falls far short of the standard required to persuade the Court that the restraints are valid.  I note in respect of this point that counsel for the Plaintiffs objected that these factual assertions were not pleaded.
260	The Defendants emphasise that the question as to the reasonableness of the duration of the restraints is in respect of the individual Principal under the SPA who has given the covenant, and that the restraints in question were designed to apply to each of Sealey and Vickers‑Willis if one of them departed Escala in October 2019 in the same way as if they both departed the business at the same time in October 2023.  The Defendants say that there is no evidence to support this operation or to explain why a period as long as five years is needed to sever the relationship between advisor and client.  Further, the specific plan to deal with the departure of Sealey and/or Vickers‑Willis did not suggest that a significant period of time was needed to manage the transition to new advisors in contrast to other identified difficulties in that plan.
261	In reply to the Plaintiffs’ submissions summarised at paragraph 144 above, the Defendants submit that there is direct evidence regarding the correlation between the proportion of the assets under management and number of clients, as both Sealey and Vickers‑Willis have given evidence on the number of clients with whom they had contact.
262	Exacerbating this point on the duration of time needed to sever a relationship is the issue (discussed further below) of the restraint applying to clients of Escala Partners with whom Sealey and Vickers‑Willis never had a relationship.
G.2.4	Consideration received
263	The Defendants take issue with the consideration paid for the restraints.  They submit that the relevant restraints in cl 20.2 are unreasonable because JCVW received negligible consideration for the sale of its shares, and Terrung received substantially less than some other shareholders subject to the same restraints.
264	The Defendants submit that the consideration paid under the SPA is a distraction to the Court: the payment of significant consideration is apt to distract the Court from analysing the interest being protected and the question of what was reasonably necessary to protect that interest, but a low consideration may point against the reasonableness of a restraint. 
265	Vickers‑Willis paid $16,491.60 for his shares in Escala Partners and received $16,981.40 as part of the initial purchase price in the acquisition by Focus Financial and Focus Escala Holdings.  He received a further $7,103.66 over the next four years in connection with the additional payments and Earn Out payments.  In respect of the substantial total purchase price, Vickers‑Willis therefore received only $24,085.05.  The Defendants submit that the fact that Vickers‑Willis would be bound to the same restraints as those who made many millions of dollars from the sale points to the entirety of the restraint being unreasonable insofar as it applies to him.
266	The Defendants acknowledge that Sealey had a larger stake in Escala Partners and Terrung received substantial compensation for its shares.  However, they say this was still significantly less than seven other shareholders.  The Defendants say it cannot be reasonable for Sealey to be subject to the same restraint as those seven other shareholders.  Accordingly, the Defendants say that even if a five‑year restraint could be reasonable in the context of the acquisition of Escala Partners, the Court should find that the only persons potentially subject to such a long restraint were the seven shareholders with holdings larger than Sealey’s.
G.2.5	Express acknowledgement or agreement
267	The Defendants also made submissions regarding the express acknowledgement as to reasonableness in cl 20.8 of the SPA.  First, they submit that it is a matter of law whether the restraint clause is reasonable as between the parties.  While it has been said that the courts give considerable weight to what parties have negotiated and embodied in their contracts, a contractual consensus cannot be regarded as conclusive, even where there is a contractual admission as to reasonableness.  They also say that the particular acknowledgement in cl 20.8 is of diminished importance, given that the contract contains a cascading series of restraint terms, periods and areas, which constitutes an implicit acceptance that not all permeations of these multiple restraints may be reasonable as between the parties to the agreement, and cl 20.6 expressly contemplates that some of the restraints may be struck down.  The Defendants also say that the evidence is that neither Sealey nor Vickers‑Willis were involved in negotiating the restraints and neither obtained independent legal advice before entering into the agreements. 
G.2.6	Confidential information
268	The Defendants also made submissions in respect of confidential information.  The Defendants accept as uncontroversial that a covenantee may have a legitimate interest in protecting confidential information and trade secrets, including by a non‑competition restraint in limited circumstances.  However, they reject any suggestion that the SPA restraints could be so justified.  The information that is said to be sufficiently confidential and could be used to the detriment of the covenantee was not sufficiently identified at the time the SPA was entered into, as is necessary to justify the restrictive covenant on this basis (although it is not necessary for the information to be identified with precision by the covenantee).  Confidential information does not appear to be associated with the way in which advisors gain clients or practice their craft, and it is well‑known that business records will not be protected if there is no evidence that there is anything secret with how the business is conducted.  The Defendants also say that neither Sealey nor Vickers‑Willis had a senior management role suggestive of access to confidential information concerning the operation of another advisor’s practice, if that information existed. 
269	The Defendants understand that the confidential information raised by the Plaintiffs in this case is the names, contact details and portfolio size of clients.  The Defendants say this is quite a limited set of information which does not justify the restraints, for the reasons set out in the following sub‑paragraphs:
(a)	First, the evidence is not sufficient to satisfy the Court on the balance of probabilities that the information is confidential and/or justifies the restraints.  
(b)	Second, the evidence does not demonstrate that the identity of clients or potential clients, or any other information about them, is truly confidential.
(c)	Third,  problems associated with a non‑solicitation covenant that goes beyond customers with whom the covenantor dealt directly cannot be overcome merely by the identity of customers being described as confidential information.
(d)	Fourth, the Plaintiffs have not acted consistently with the notion that the identity of their clients and their assets are confidential, as all this information has been put into evidence by Perry on an open basis. 
(e)	Fifth, the restraints do not restrict any future business or activity in which ‘[the covenantor] may be able to make use of any part of the confidential information to the detriment of [the covenantee]’. 
(f)	Sixth, the Defendants say that the Plaintiffs’ concern is clearly centred on misuse of confidential information about clients with whom the advisor has had dealings and there is no justification for a restraint to go beyond the solicitation of those clients, even if the restraint is designed to protect the covenantee’s confidential information.
(g)	Seventh, there is no explanation in the evidence as to what use an advisor can make of information about the high-net-worth and sophisticated clients of another advisor.   
(h)	Eighth, even if a covenantee has established that the protection of confidential information is a legitimate interest, they must still justify the reasonableness of the restraint by reference to how long the information is likely to remain current and of commercial advantage, and the Plaintiffs have not done so.  The extent to which such information might not be remembered by the covenantor and/or might become stale or lose its commercial advantage is also relevant, and there is no evidence about this.  The Plaintiffs have not led any evidence about any of these matters. 
(i)	Ninth, the covenantee must show that the restraint goes no further than is necessary for the protection of the interest and the Plaintiffs have not done so.  This is in circumstances where there are obvious commonsense ways that confidential information might be protected that have not been taken and there has been no demonstration of why the extensive confidentiality provisions in the SPA, SHA, Management Deed, statutory obligations or obligations imposed in equity do not provide adequate protection.
(j)	Tenth, the evidence from Bennard and Perry to the effect that advisors learn confidential information about clients with whom they have no business/advisor dealings due to participating in meetings or social activities does not justify the restraints because much of this information is not confidential, the Plaintiffs have not identified any specific confidential or proprietary information which can be misused other than general statements, and even if confidential, it is a low order of confidentiality and there is no evidence that the Defendants have taken or memorised lists of clients to be misused.
270	The Defendants say that the only real protectable interest is client connection.  To the extent there is any protectable confidential information, it is information that flows from and augments the client connection.  Accordingly, the Defendants say that protection of confidential information here does not justify anything beyond a non‑solicitation restraint in respect of clients with whom the advisors had material dealings for a period of one to three months. 
G.2.7	Severance
271	The Defendants submit that the restraint in cl 20.2 is not amenable to severance: the parties have turned their mind to how severability will operate for this clause and have treated each sub‑clause in cl 20.2 as a discrete, unified, non‑severable suite of obligations, in contrast to how severability operates in respect of cls 20.3 and 20.5.
272	More particularly, with regard to the principles relevant to severance in the context of restrictive covenants, the Defendants say there can be no relevant severance within cl 20(2)(b).  This is because:
(a)	clause 20.6 provides for the severance of separate provisions or undertakings, but it does not provide for severance within any provision or undertaking; 
(b)	the words ‘customers or clients’ cannot be re‑written so as to create a distinction based on whether the covenantee had material dealings with them;
(c)	the words ‘at any time during the 24 months ending on the Completion Date’ cannot be re‑written to include only those clients who were still clients of the Group or the Business; and
(d)	 the words ‘accept an approach’ cannot be severed in circumstances where the restraint is wide and subject to a combination of variables, and therefore operates in terrorem of the covenantor against a well‑resourced covenantee.
273	Similarly, the Defendants say that there can be no severance within cl 20.2(a), because:
(a)	clause 20.6 provides for the severance of separate provisions or undertakings, but it does not provide for severance within any provision or undertaking;
(b)	the clause is more onerous than cl 20.2(b) and this cannot be cured except by a wholesale rewrite of the clause, which is impermissible;
(c)	the word ‘employee’ cannot be severed from the definition of ‘engage in’ without also severing other words (eg ‘consultant’, ‘advisor’, ‘contractor’, ‘principal’ or ‘partner’) which would allow the covenantee to perform the same type of work as an employee, albeit pursuant to a different legal relationship.  Such substantial amendment to the definition would be impermissible;
(d)	severance of other offending words in the definition of ‘engage in’ (eg ‘indirectly’, ‘shareholder’, ‘financier’ and ‘beneficiary’) would also substantially amend the meaning of the definition and is impermissible; and
(e)	in circumstances where the restraint is wide and subject to a combination of variables, and therefore operates in terrorem of the covenantor against a well‑resourced covenantee, no particular word or set of words can be severed. 
274	The Defendants reject any idea that cl 20.2(b) can be fixed by being amended with a blue pencil: the clause cannot be re‑written by the Court.
275	For there to be severance, the covenants must be distinct, ie, there must be an independent covenant capable of removal without offending the remaining part.  The only change should be the sphere of operations of the clause.  Importantly, courts have demonstrated reluctance to engage in curial disentanglement, if the clause is not a genuine attempt to establish reasonable protection for the legitimate interests of the employer. 
G.2.8	The importance of the circumstances of the particular case
276	The Defendants submit that the cases to which the Plaintiffs refer are no more than examples of the application of judgment in the particular circumstances of each of those cases and caution is advisable with respect to those authorities.  In this regard, the Defendants refer to Stacks Taree:
I accept that the decision – in particular, the speech of Lord Birkenhead – identifies the principles and the relevant considerations of fact.  I accept, too, their Lordships’ reasoning process.  But I have to say that I have some doubt as to whether the case would be decided in the same way today – at least, in this country.  Competition law has moved a long way in the 90‑odd years since the dispute between Messrs Dewes and Fitch came before the courts.  It might now be thought appropriate to give greater recognition to the public interest in ensuring competition, and hence efficiency, in the market for the provision of legal services.
There can of course be a problem with excessive reliance on decided cases.  The question of validity of a covenant in restraint of trade (including, in this, a covenant against solicitation of the covenantee’s customers or clients) is not really a question of law.  Decided cases state the relevant principles, and may provide useful, indeed valuable, guidance as to their application in particular factual circumstances. But the validity of a covenant in restraint of trade is to be assessed having regard to the terms of the particular covenant and the facts of the particular case.  See Evans LJ, with whom Nourse and Ward LJJ agreed, in Dawnay Day and Co Ltd v de Braconier d’Alphen [1998] ICR 1068 at 1111 – 1112.
277	In support of the Defendants’ suggestion that caution must be exercised when considering the authorities, they draw out differences between some of the Plaintiffs’ cited cases and the facts of this proceeding.  For example:
(a)	Isaac v Dargan did not involve a sale of business or an employee restrictive covenant, rather it concerned a contractor in a mortgage brokerage business, who had downloaded a confidential customer list and sought to use that information.  That decision is also notably from New South Wales and, as a result, the Court was required to have regard to the Restraints of Trades Act 1976 (NSW).  These differences are clear from the Court’s statement of the legal principles it applied (at 355-6 [60]‑[62]), and can be contrasted with the position in Victoria, where, absent severance, if any part of the clause goes too far then the clause as a whole falls over.  The Defendants also refer to Stafford, in respect of unreasonableness of a restraint where voluminous information to which a restrained person had access could not be carried away in his head and there was no suggestion he had downloaded the information.
(b)	Allan Janes involved facts that are completely different to the proceeding before this Court and this is evident from an examination of the case headnote:
On the evidence it was within the contemplation of the parties in 2000 that the defendant would be introduced to a large proportion of the firm's clients with a view to establishing a relationship with them, and she had been endowed with a special status on which she could rely even vis‑à‑vis those clients with whom she had no prior contact; and that, therefore, as a non‑dealing covenant, had the advantage of being certain as to the area of application and, having regard to the matters which were in the minds of the parties at the time the contract was made, the protection which it provided was reasonable, both as regards the restriction and the limited period of time in which it was to operate…
(c)	Bridge v Deacons is a case which also has a number of differences to the present proceeding.
278	The same point about the importance of the circumstances of the individual case applies to cases to which Defendants refer.  For example, Pryse v Clark does not involve the same facts as this proceeding.  In that interlocutory decision, the Defendants say that there is the notion of material contact with clients, numerous partners working on advices for the one client, some partners who were not client‑facing but nevertheless contributed to the business, and some partners who worked primarily on business development for other partners, in circumstances of a partnership in equal shares, in contrast to the differing ownership stakes in the business in this proceeding and siloed teams at Escala Partners.
G.2.9	Public interest
279	The Defendants say that the restraints in SPA cls 20.2(a) and (b) are unreasonable in the public interest.  The Defendants accept that they have the onus of establishing this proposition.  
280	The Defendants say that the restraints are unreasonable in the public interest because they prevent clients, even those with no former association with Sealey or Vickers‑Willis, from selecting either as their preferred financial advisor, and prevent  Sealey or Vickers‑Willis from accepting an approach from a client who wishes to seek their advice, as well as preventing other firms from employing or engaging Sealey or Vickers‑Willis, even where that would have no direct impact on Focus Escala Holdings or Focus Financial.  This means that the interests of the clients are placed below that of the Plaintiffs.  It could also prevent Sealey or Vickers‑Willis from working at another firm with a better service offering and then accepting an approach from an existing client or prevent a fully‑informed client from engaging an advisor of their choice or continuing to engage an advisor of their choice.
281	As a result of the above, the Defendants say that the restraints are inconsistent with the obligations of a holder of an AFSL and their representatives pursuant to s 921E of the Corporations Act and the Financial Planners and Advisors Code of Ethics 2019 (Code of Ethics).  Standard 2 of the Code of Ethics requires an advisor to act in the best interests of the client.  The advisor must also act in a way that demonstrates, realises and promotes trustworthiness, competence, honesty and diligence.  The clear intention of the Code of Ethics is that the financial interests of the licensee are subsidiary to the client’s best interests.  As was accepted by Bennard in cross‑examination, there are situations where it may be in a client’s best interests to retain the services of a former Escala advisor, and this is prevented by the restraints in the SPA.
G.3	Consideration
282	Clause 20.2 of the SPA sets out the prohibited activities.  I did not apprehend cl 20.2(e) to be in dispute between the parties, and cl 20.2(c) and (d) were not the focus of the parties’ submissions.  Rather, it was the activities in cl 20.2(a), being the non-compete provision, and cl 20.2(b), being (broadly speaking) the non-solicitation provision, which were in issue.  Clause 20.2(f) is relevant as well in the same ways.
283	Bearing that in mind, the answer to question one as it is phrased is that none of the restrictive covenants in cls 20.2 to 20.6 of the SPA are enforceable against any of Sealey, Vickers‑Willis, Terrung and JCVW, for the reasons set out below.
284	The legal tests and principles to be applied are well‑known and agreed by the parties.  The parties do not agree on how those legal tests and principles apply to the facts before me.  
285	The Court derived extremely limited assistance from the cases to which the Plaintiffs referred as examples of how the principles have been applied by the courts in other circumstances.  The cases themselves underscore that the application of the principles is so fact‑specific that no analogy to other cases can be easily made.  In this regard, I agree with the second paragraph of the passage cited from Stacks Taree in paragraph 276 above.
G.3.1	Legitimate interest and need for restraints
286	First, as outlined in section F.1.3, I find Focus, Escala Partners and 2nd Chapter have a legitimate interest in the protection of customer connections as a primary source of the goodwill of the business which was acquired  and that this interest can be protected by restraints.  I must now consider whether the restraints in question do no more than is reasonable to protect their interests.
287	As a general matter, Bennard’s affidavit evidence was that the contractual restraints at issue are:
absolutely necessary to ensure (to the greatest extent possible) that Focus is able to realise the value of any investment it makes in a partner firm and to disincentivise principals from taking significant purchase price consideration from Focus, and then leaving the business and taking the clients with them.
288	The Defendants argue that the risks which necessitate the restraints are, in part, of Focus’ own making through its model.  Bennard accepted in cross‑examination that it would be open to Focus to change its acquisition and business model, so as to take a hands‑on role in day‑to‑day operations of firms it oversees or to involve itself in the relationships between clients and advisors.  However, Bennard did not agree that the risks are part and parcel of Focus’ business model, or that being more involved in operations would necessarily ameliorate those risks.  She stated that it would be hard to say whether those risks possibly could be reduced, because this would depend on the management in place.  I agree with counsel for the Plaintiffs that I should not engage in speculation of how the risks to the interests of the various parties could have been managed if the transaction had been different.  In my view, the focus of the reasonableness question is the arrangements between the parties to the transaction, such that what may have resulted from some other form of transaction is not to the point.  
289	The Defendants also argue that Escala Partners could have done other things to protect the goodwill of the business.  It is suggested that the restraints are not the only option available in that regard.  Under cross‑examination, Bennard accepted that it is open for Escala Partners to put in place strategies for substituting advisors who exit the firm in retaining clients, such as when advisors exit due to ill‑health or retirement, for example.  Bennard’s evidence is that this is done and it is common business practice for its partner firms.  This work happens but it is not a way that Focus, via its partner firms, manages the risks arising when advisors leave.  To the extent that it may be suggested that Focus could have controlled day‑to‑day management of advisors, the Plaintiffs say this goes nowhere: Focus bought what it bought and the contractual agreements that were put in place are the contractual agreements.  To say otherwise would be to say that Focus could have managed that risk differently if they had a completely different transaction.  
290	Accordingly, it is not the case that measures to transfer client work to new advisors does not occur, on Bennard’s evidence.  I accept that evidence, although I also accept that insofar as Sealey and Vickers‑Willis are concerned, they were not involved in any such measures with respect to their clients at Escala Partners after they gave notice of their resignation.  Perry’s evidence was that Sealey and Vickers‑Willis were not involved because trust was gone.  I consider that it was open to Escala Partners to mitigate risks of clients leaving with advisors through such measures, but such measures do not necessarily supplant the need for restraints to prevent solicitation of and approaches by clients.  This situation is a textbook example in which one would expect to see restraints in place, and an appropriately drawn restraint is likely to be acceptable to this Court.  However, the scope of the restraints must be appropriate.  It is convenient to note here that while it may be true that measures other than restraints could have been used to protect the goodwill of the business, in particular the customer connections, I do not accept the Defendants’ argument  that the potential availability of such measures means that the restraints are unreasonable.
G.3.2	Scope of the restraints
291	One aspect of the restraints that is particularly important in this case is the scope of the restraints against solicitation and acceptance of approaches, in terms of which clients, or former clients, are captured.  In this regard, careful analysis of the evidence is required.
292	I accept Bennard’s evidence that advisors may have awareness of clients with whom they have had no dealings through, for example, coaching other advisors, involvement in succession or transition planning, assisting other advisors with particular advice for those clients, or hearing about the clients through discussions about client relationships, retention or profitability.  That evidence was very general but it does appear to make sense and I accept that this awareness could include knowing the identity of those clients.  Advisors would be aware of the firm’s fee model, and it is possible that the advisor may even know information about fees for those clients because they might have access to that information.  
293	Perry similarly noted that it would be possible for someone such as Sealey to know every client won by the firm and every pitch or prospective client.  Perry says that, armed with information about clients of the other advisors (even without a physical copy of a client list), it would be easy for Sealey or Vickers‑Willis to offer to those clients of other advisors the same services at 50% less.
294	Sealey acknowledges that he knows the identity and other information of some Escala Partners clients despite not working with them directly, that he has met some of those clients, and he had access to the CRM software used by Escala Partners, which contained detailed notes about clients.  He also agrees with Perry about his role in ensuring accountability in the business through reviews of pitches and business won or lost and that he was involved in client event discussions.
295	Perry’s evidence was that personal relationships might develop outside of the assigned client relationships, and for his part considers that he has personal relationships with persons with whom he has interacted at an annual golf day, or where he has been involved in giving advice.  His evidence suggested that the teams at Escala Partners were much less segregated and distinct than Sealey and Vickers‑Willis say.  He did not agree that, generally, financial advisors don't work directly with clients who are being serviced by other teams.  However, I consider that Perry’s experience as CEO is distinct from that of Sealey and Vickers‑Willis.  Further, while there may not be a completely siloed operation at Escala Partners, it is the evidence of both Sealey and Vickers‑Willis that they did not interact with clients serviced by other teams and that their exposure to those clients was limited.
296	Access to CRM software or awareness of pitches may lead to the advisor being aware of clients of the firm.  However, the evidence did not clearly show that Sealey or Vickers‑Willis would be aware of the fee structures of other clients.  What is more, Perry’s own evidence is that many of the clients of Escala Partners are high‑net‑worth individuals or families with some public profile, and that those clients are regularly approached ‘cold’, as it were.  I do not see how a general awareness of a high‑profile client’s identity would give an exiting advisor any greater prospect of winning that work than a third-party advisor.  The evidence of the Plaintiffs as to what information might be gleaned by Vickers‑Willis or Sealey and how that might be deployed (including in relation to undercutting pricing of competing firms) was so vague as to be almost speculative, and it is not sufficient in my view to justify the application of the restraints beyond clients with whom there is a personal connection.  Sealey and Vickers-Willis both gave evidence that while they had access to CRM data concerning other clients, they did not access the CRM for that purpose.  That evidence is not really to the point, as I accept that it is the risk which is relevant here.  Nonetheless, the real point is that even with access to that information, the close personal connection between advisor and client does not exist for clients of Escala Partners who were not clients of Sealey or Vickers-Willis.
297	Bennard accepts that it would be ‘unlikely’ for clients with whom an advisor has had no dealings and who have never met the advisor leaving with that advisor.  She accepted in cross-examination that when an advisor leaves, generally the risk is related to their client base but at the same time asserted that generally, the risk applies to the whole business.  She says there could be a risk that an advisor with a larger role in the business reached out to clients to whom they were not assigned because the advisor had awareness of those clients as part of their larger role.  Her example of such a role and potential risk is Sealey’s responsibility for coaching advisors at Escala Partners.  This is unconvincing evidence.  Even if Sealey gained some information about a client from coaching an advisor, he would have had no contact with the client and no ability to forge a close relationship with that client.  Given the negligible risk associated with clients with whom the advisor has no relationship, the risk identified by Bennard and relied upon to justify the SPA restraints is more speculative than real.
298	When asked why the restraints are not limited to clients with whom an advisor has had contact (whether as an allocated advisor or as part of a larger role they play in the business), Bennard’s reply was that the restraints are standard ones covering the entire business and not specific to individual advisors.  Bennard was taken at length to her description of the risk at paragraphs 85 and 86 of her affidavit, which does not encompass a risk where there was no client contact with an advisor.  Her evidence is that it is hard to say whether that risk does not exist at all, but she agrees that Principals only maintain and service a client relationship which they are assigned.
299	Bennard’s evidence, outlined above, demonstrates how the application of the restraints to solicitation of or accepting approaches from clients with whom restrained persons have had no dealings means that the restraints go further than reasonably necessary to protect the legitimate interests of Focus and Escala Partners.
300	General awareness of client names or information as to a successful pitch is not the same as the purpose of protecting customer connection by the restraints and, as I clarified with Bennard at the hearing, information regarding the fee model and fees charged to particular clients would be confidential information that a former employee would be bound not to disclose or misuse.  The risk that a former employee might misuse that information is already guarded against by confidentiality obligations and the restraints cannot be justified by an assertion that principals/employees might misuse that information when there are already contractual and other protections addressing that risk.
301	None of the submissions put forward by the Plaintiffs as to the involvement of Sealey in coaching or in business development and pitching reviews, involvement in conversations around clients, prior access to CRM software, or attendance at the odd client event convince me that there is a need for Sealey to be restrained in respect of clients with whom he had no dealings.  He simply did not have the connections with those customers.  The case of Allan Janes, referenced by the Plaintiffs, does not provide a true parallel to the circumstances of this case.  Relevantly, in that case the restraint was much more confined in its temporal and geographic operation, and I do not consider that Sealey’s limited awareness of clients is the same as the role of the solicitor in that case, and I do not think that the contemplated roles can be conflated.  Similarly, I am not convinced that Bridge v Deacons is sufficiently analogous to be helpful in this case. 
302	The above finding in respect of Sealey means that the situation is even clearer‑cut insofar as Vickers‑Willis is concerned.  His exposure to or awareness of the firm’s broader client base was much less than Sealey and, insofar as the restraint applies to clients with whom he had no dealings, it goes further than is reasonably necessary.
303	The evidence before me establishes that advisors at Escala Partners were assigned to particular clients and had extremely limited opportunities to develop relationships with other clients of the firm.  In my view, in this context the restraints do go further than is reasonably necessary to protect the customer connections of the firm.  While goodwill can be seen as an inseverable asset, and it is goodwill overall and as a whole which is protected, that goodwill accrues to Escala Partners through the close connections established between an advisor and their clients, and it is these connections which can be legitimately protected by restraints.  As the restraints apply even where there would be no such connection, they go beyond what is needed to protect the goodwill.  None of the variations referred to in the passage from Wallis Nominees cited at paragraph 118 above as justifying a restraint which applies to clients (or former clients) of Escala Partners with whom Sealey and Vickers-Willis did not have an advisor/client relationship.
304	If the restraints applied only to clients with whom the restrained persons had dealings, I would allow those restraints to encompass both restrictions on solicitation and acceptance of approaches from clients.  In this regard, it is clear to me that clients who have developed a level of trust and connection with their advisor may seek to follow that advisor to another firm without any solicitation (as, indeed, Sealey’s evidence has confirmed) and in these circumstances a restraint could extend to approaches from those clients without going too far.  However, insofar as the restraints prevent an approach by or solicitation of a client who has had no dealings with the restrained person, I think they do go too far; there is no relationship of trust or connection there to be protected.  However, and for the sake of completeness, the practical problem referred to by the Defendants, of Sealey or Vickers-Willis being able to identify someone who approaches them as an Escala Partners client if they have had no connection with them, is not a basis for rejecting the restraint on accepting approaches if the restraint were otherwise reasonable.  Such a practical difficulty could be readily overcome by Sealey or Vickers-Willis asking the person making an approach if they were a client of Escala Partners.
305	In respect of former clients of Escala Partners, being persons who were clients at some point during the 24-month period ending on the Completion Date (ie in around 2017 to 2019), I would draw the same distinction; where there was or has been a customer connection with that former client and an advisor then the restraints on solicitation could be justified, however, it is on the application of the restraints to former clients with whom there were no dealings and therefore no customer connection that the restraint is not tenable.  In this regard, I refer to Plowman (at 572).
306	I will elaborate the topic of severance further in section G.3.8.  However, as will be clear from that section, it is not possible to narrow the scope of the restraint in cl 20.2(b), such that cl 20.2(b) cannot be enforced.
307	The Defendants say that if a non‑solicitation restraint is not enforceable as it is goes further than is reasonably necessary, then a non‑competition restraint will also be unenforceable.  The non‑competition restraint in cl 20.2(a) is too broad, including in terms of the activities covered, and I find that it too is not enforceable.  I accept the Defendants’ submissions in this regard.  I reject the Plaintiffs’ submission that the meaning of ‘engage in’, construed with the exceptions identified in cl 20.7, means that the restraint operates only to prevent conduct at a material or influential level.  The exceptions in cl 20.7 are limited and do not support that construction.  Indeed, only one exception relates to activity outside of the Escala Partners business, being the exception of ownership of 5% or less of the shares of a listed company.  A wider material threshold is not supported by the text of cl 20, but  even if it were, such a restraint would still operate to prevent the restrained persons from plying their trade, including in respect of customers who have never received services from Escala Partners; this goes much further than is necessary to protect the goodwill of that business.  It would also prevent the restrained persons from broadly-defined engagement in a business substantially the same as that of Escala Partners, even if that engagement did not involve the exiting advisor providing financial advisory services.  Again, this goes much further than necessary to protect the goodwill of Escala Partners.
G.3.3	Geographic reach 
308	The parties appeared to agree about the geographic spread of the client base of Sealey and Vickers‑Willis, with roughly around 40‑50% of clients in Melbourne, 20‑30% in regional Victoria, 20 to 30% in Tasmania and around 5% in other locations in Australia.
309	It also seems to be accepted by all that Melbourne was the primary base of Escala Partners at the time of the negotiation of the acquisition and entry into the restraints, and that there was a newer, smaller Sydney office and a small Perth office, with clients in other parts of the country.  
310	Bennard’s evidence was that the geographic scope of the restraints concern the business of Escala Partners as a whole and did not take into account the client base of individual advisors in the restraints which apply to those advisors.  In the negotiations, she did not inquire directly with Sealey or Vickers‑Willis as to the location of their clients and, while during due diligence client locations were discussed, they did not drill down advisor‑by‑advisor on this topic.  Her evidence was that it was not necessarily an advantage for advisors to be located close to clients before the widespread use of remote conferencing technology, because many advisors travel to clients.
311	In my view, the geographic application of the restraints to the whole of Australia is not unreasonably broad.  It is clear that the restraints referring to particular states do not reflect the client base of Sealey and Vickers‑Willis, notably Tasmania is not mentioned despite being a state where Sealey and Vickers‑Willis had a significant client base.  However, I do not think that in this agreement, in the context of a sale of a business, the restraint is too broad.  Escala Partners was a business which was growing at the time of the acquisition, both in terms of the physical offices of the firm and its client base.  In the context of a growing business which had clients across Australia (and allowing for potential development and growth in the client base of its advisors including Sealey and Vickers‑Willis across Australia), the fact that the restraint operates across Australia does not render it unreasonably broad.  
312	I do not need to delve further into the parties’ submissions regarding the contemporary business environment post‑COVID-19 and the prevalence of Zoom these days as opposed to when the restraints were entered into.  Even before the COVID‑19 pandemic and reliance on those technologies, Sealey and Vickers‑Willis maintained relationships with clients in multiple states, including Tasmania, NSW and Queensland.  While Sealey and Vickers‑Willis had relatively few clients in Sydney, for example, they did appear to have had at least one client there.  The Defendants say that at all levels, the geographic scope included locations beyond Melbourne, Victoria or Tasmania where most of the restrained persons’ clients were based.  Yet, it is not improbable that they might gain clients in other areas or that their existing clients might themselves move to another part of the country and wish to retain the services of a trusted financial advisor.  I am satisfied that an Australia‑wide restraint does not go further than reasonably necessary in the circumstances of this case.
G.3.4	Duration
313	Vickers‑Willis’ evidence as to the impact of an absence of more than a year from the industry, was that he would ‘simply need to move on’ and would be ‘starting from scratch’ if he were to return to the industry after a gap of more than a year.  Similarly, Sealey’s affidavit evidence was that, in his experience:
there is no “standard” time that it takes to transition a client from one employed advisor to another, although this obviously depends on the nature of the client, the advisor and the relationship between the two. It varies on a case by case basis. However, where relationships have been particularly successful, or have been long‑standing, these transitions may take significantly longer.
314	Sealey goes on in his affidavit to say that the impact of his being out of the industry for a year or more would be severe: 
If I were not working in the industry for at least a year, as the Plaintiffs have sought, all of the activity connected with winning and servicing clients would cease.  My “centres of influence” would need to send clients to other advisors, clients would not refer friends or contacts to me, and my knowledge of industry trends and developments would become out‑of‑date.  Upon being able to resume in the industry, I would be starting again from scratch after spending over 10 years building up a reputation and my capabilities.
315	Perry did not agree that there would be an enormous impact on an advisor of being out of the industry for over a year as a general or blanket statement, but he appreciates that this is the opinion of Vickers‑Willis.
316	Bennard appeared to justify the duration of the various restraints being in excess of three months (in contrast to the restraints in the Crestone employment contracts) as resulting from the fact that Sealey and Vickers‑Willis held equity in the business, they acquired that equity in the transaction whereby the restraints were entered into and the parties agreed by that transaction about the way that the business would operate moving forward.  In those circumstances, there was material consideration given for the restraints.  Her experience in respect of employment restraints in Australia (based on Focus’ eight or nine Australian businesses) is that employees who do not hold equity in the business are restrained for more than three months.
317	The difficulty with that argument is that the same duration applies to principals with very little equity (such as Vickers-Willis) as applies to those with larger shares of equity (such as the founding principals) or those in the mid-range (such as Sealey).  A five‑year restraint may be reasonable for those at the upper end, but it is difficult to see how a restraint of that length is justified for someone who held 0.0335% of the shares sold to Focus, as JCVW did.  It is also difficult to see how a five-year restraint on Sealey is justified.  Accordingly, a five‑year restraint is therefore unreasonable.
318	I agree with the Defendants’ submission as set out in paragraph 251 above.  As was said in DXC Eclipse (at 121 [157]), the key question is not how long it may take to recover the full investment based on the purchase price, but how long it will take to protect the goodwill from being subtracted from the business by the vendor.  There is no evidence to suggest that it may take five years to protect the goodwill here.
319	The Plaintiffs’ argument that the Earn-Out period under the SPA justifies the five‑year duration of the restraint, as set out at paragraph 196 above, cannot be accepted.  That argument is superficially attractive, but it requires closer analysis.  In respect of the purchaser’s position, Focus only has to pay the Earn Out payments above a certain revenue threshold.  If revenue is lower than the relevant threshold, say, for example, because some of the principals have left, then Focus’ liability for an Earn Out payment is reduced.  The restraints are not necessary to protect Focus’ interests in respect of the Earn Out payments.  Focus does not need to protect the Earn Out payments via a restraint, because it is liable for those payments and does not benefit from them.  Focus is not made more vulnerable to the destruction of the goodwill of the business because of its liability for the Earn Out amounts.  It is the vendors, not the purchasers, who benefit from that payment.  The situation is different in respect of the vendors, who stand to benefit from payments in that five-year period, and I accept that the symmetry argument in respect of the vendors has greater relevance.  However, it was not made clear how the SPA restraints were justified to protect the vendors’ interests.  Even if that had been made clear, I am not satisfied that the restraints go no further than in reasonably necessary to protect the vendors’ interests, for the same reasons as set out above.
320	Accordingly, in the circumstances of this case, a five-year restraint post-Completion of the SPA is unreasonable.
G.3.5	Consideration received
321	The problem with the standard‑form nature of the restraints imposed under the SPA is most apparent when one looks at the compensation received by shareholders in the transaction.  It is hard to see why it is fair for someone in the position of Vickers‑Willis to be restrained in the same way as someone in the position of Perry, for example, when the consideration given to Perry for signing up to the SPA so outstripped that given to Vickers‑Willis. 
322	The Plaintiffs’ somewhat grudging acceptance that the situation may be a little different for Vickers-Willis (see paragraph 205 above serves to illustrate this point.  The Plaintiffs did not elaborate on this or explain how it was consistent with their submissions that the circumstances of the individual advisors do not need to be taken into account (see paragraph 190 above)
323	Perry says that Vickers‑Willis’ compensation under the SPA could be described as a fair price, although he accepts it was lower than what Perry himself received as a result of their different shareholdings.  Perry’s evidence in cross-examination on why the difference in compensation did not mean it was unfair for Vickers‑Willis to be subject to the same restraints was:
I'll speak specifically to Mr Vickers‑Willis and executing that contract. Mr Vickers‑Willis’s career was built by Escala Partners, while he worked at Escala Partners.  When he joined our organisation, um, he produced no revenue for the business.  He worked very hard.  He’s a very sharp guy and he was helped by the entire business and all the employees of it to get to the level that he achieved.  These contracts are a moment in time and they have to be treated as such…I can’t speak for him and why he thinks it’s not fair.  But he thought it was fair when he signed the contract.
324	Perry’s evidence in this regard does not justify the restraints on Vickers-Willis.  That Vickers-Willis may have been young and relatively inexperienced when he joined Escala Partners and benefited from the training and experience he gained there is not to the point.  There was no suggestion in the Plaintiffs’ case that protecting the investment of an employer’s resources in developing the skills of the employee is a legitimate interest to be protected by restraints.
325	In terms of compensation paid (based on shareholding), Bennard says that there is not necessarily a direct relationship between the shareholding of an advisor and their relative importance to the business in terms of their revenue generation; this will vary based on the firm and transaction.  However, this observation merely illustrates that the consideration paid under the SPA was not connected to the relative importance of each person to the business in terms of their capacity to generate revenue, and further, that the restraints under the SPA do not differentiate between the relative importance of each person to the business. 
326	The position of Sealey is different to that of Vickers‑Willis, as Sealey received greater compensation in return for entering into the SPA.  
327	It is undeniable that Focus spent a great deal of money on the Escala Partners business, and that most of the value of the business that Focus bought was in respect of its goodwill.  The courts are more willing to find a restraint as reasonable in circumstances of a sale of a business for valuable consideration, and where the negotiations were conducted between two experienced commercial entities on equal bargaining terms.  The fact of significant money being spent by Focus alone, however, is not sufficient to justify such heavy restraints applying to all Principals irrespective of their relative shareholdings or positions in the business.  In particular, this will not be sufficient where the restraints go much further than is necessary to protect the goodwill of the business, in this case, such as through application to clients where there is no client connection with the restrained advisor.  That is, the compensation does not cure the problems of scope affecting the SPA restraints.
G.3.6	Express acknowledgement or agreement
328	I do not consider that cl 20.8 is curative of the restraints’ problems either; I give this little weight.  
329	The Defendants’ argument that the cascading structure of the restraints means that the parties contemplated the possibility that the restraints might be found to be unreasonable and unenforceable, such that the effect of the acknowledgment in cl 20.8 is diminished, has considerable force.  
330	Neither Sealey nor Vickers‑Willis in fact obtained independent legal advice in respect of the SPA, although on its own I give that little weight.  However, of more concern is the evidence that Sealey and especially Vickers‑Willis did not have any role in negotiating the SPA or the restraints.  The negotiations for the transactions were conducted by Bennard and Kodialam for Focus and by Perry for Escala Partners.  Perry’s role was in respect of Escala Partners as a whole; his primary concern or responsibility was not the interests of individual shareholders.  There is no evidence that individual Principals had any real input into the negotiation of the restraints.  The evidence that does exist is that Vickers‑Willis says that when he asked Perry about seeking his own legal advice on the acquisition documents, he was told words to the effect that he had to sign the paperwork overnight if he still wanted a job; Vickers‑Willis signed the paperwork overnight without receiving legal advice, and certainly without having any real ability to negotiate the restraints.  
G.3.7	Confidential information
331	I agree with the Defendants’ position in respect of confidential information; the protection of confidential information cannot be used to justify these restraints.  The Plaintiffs did not put their case sufficiently clearly so as to allow for that justification.  Further, the Plaintiffs have other avenues to protect their confidential information.
G.3.8	Severance
332	Severance and interpretation of the restraints is a matter covered in cl 20.6 of the SPA.
333	As noted in the Defendants’ submissions (and was not disputed), the three references to cl 20.3 in cl 20.6 of the SPA appear to be erroneous and should be references to cl 20.4.  These are obvious typographical errors in cl 20.6, most evident where that clause refers to ‘each period in clause 20.3’.  Clause 20.3 relates to undertakings given by the Vendors and Principals and several liability of those persons under cl 20.  There are no periods in cl 20.3.  The periods of restraint are found in cl 20.4.  As it is written, the interpretation of the agreement insofar as the actual cross-references are concerned is nonsensical or absurd. It is obvious to me that the drafting of the SPA miscarried in respect of these clause references, and the parties objectively intended to refer to cl 20.4.  This is a clear error in language and it is self‑evident that the error can be corrected by reading each reference to cl 20.3 as a reference to cl 20.4.  I can and do construe the SPA so as to correct that obvious drafting mistake to avoid absurdity.  
334	The cascading operation of the SPA restraints in cls 20.4 and 20.5 (in respect of the duration and geographic reach of the restraints, respectively) clearly accommodates severance, should any of the broader geographic reach or durations in those sub‑paragraphs be unenforceable, per cl 20.6.  Clause 20.6 confirms that the relevant sub‑clauses should be treated as separate provisions, each being severable, and with each separate provision resulting from a combination of the undertaking in sub‑cl 20.2 with the cascading periods and areas in sub-cls 20.4 and 20.5.
335	However, the overly broad scope of the non‑solicitation restraint (in its application to clients with whom advisors had no dealings and where there is no legitimate interest in customer connection to be protected) cannot be fixed by severing parts of the restraint.  The ‘blue pencil principle’ does not assist; the authorities are clear that I cannot add words or re‑write the clause, and there is no way to remedy this problem with the scope of the non‑solicitation restraint by merely striking through certain words.  The only way to amend sub-cl 20.2(b) in that regard would be to add words, which is not permissible under the ‘blue pencil principle’.
336	The nature of the over-reach of the non-competition restraint also cannot be cured through the use of the blue pencil.  Confining the restraint to clients of Escala Partners with whom Sealey and Vickers-Willis had a client relationship would require the addition of words.  More importantly, narrowing the scope of ‘engage in’ to circumstances where Sealey or Vickers-Willis’ engagement concerns them providing financial advisory services would require the addition of words, since there are no deletions from that definition which would achieve that result.
G.3.9	Public interest
337	Bennard accepted that it might, potentially, be in the best interest of a client to take their business to another firm and to work with a former advisor of Escala Partners, if that is the client’s choice.  However, she did not accept that the effect of the restraints might potentially subordinate the client’s interests to those of the firm.  She rejected the idea that the restraints concern client behaviour or prevent clients from doing anything.  With respect, this ignores the practical outcome of the restraints.  If followed, the restraints would prevent the restrained persons from providing services to certain persons and that would have the practical outcome that certain clients have a more limited choice in whom they select as an advisor during the operation of the restraints.  While the restraint would not prevent a client from approaching Sealey or Vickers‑Willis, it would prevent either from accepting that approach.  That restriction on choice is part of why restraints on trade are presumed void in the first place.  That said, it does not necessarily follow that a restraint that restricts choices available to consumers of services will invariably be unreasonable in the public interest.  In this instance, I am not satisfied that this restriction on clients is contrary to the public interest.
338	I do not agree with the Defendants’ submission that the restraints are contrary to the Code of Ethics.  While I would not go so far as to describe this part of the Defendants’ position as an ephemeral grasp at straws, it did have a flavour of a throw‑everything‑including‑the‑kitchen‑sink approach to fighting the enforceability of the restraints.  There was no evidence to suggest that the public interest was adversely impacted by restraints being placed on individual financial advisors.  The evidence is that financial advisory and wealth management services is a competitive industry with plenty of choice available to clients.  I do not consider that they have discharged the onus of establishing that the restraints are unreasonable in the public interest.  
339	I did not find the Plaintiffs’ submissions as to the Defendants’ public interest arguments persuasive, but that is of no consequence given that the burden lies with the Defendants in this respect and they have not discharged it.  
340	Given that I have found the restraints not to be reasonable as between the parties as a result of their broad scope, my finding on the public interest does not change the answer to this question.
G.3.10	Conclusion regarding question one
341	Flowing from the above, the Plaintiffs have failed to demonstrate that the restrictive covenants in the SPA are reasonable as between the parties, and the SPA restraints are therefore void as contrary to public policy.  The relevant restraints in the SPA are therefore unenforceable against all of Sealey, Vickers-Willis, Terrung and JCVW.
H	Question two: the Management Deed restraints
Are any of the restrictive covenants set out in sections 3.2 to 3.6 of the Management Deed enforceable against either or both of Sealey and Vickers‑Willis? If so, which restrictive covenants are enforceable and to what extent?	
H.1	Plaintiffs’ submissions
342	The Plaintiffs say that the Management Deed restraints in cl 3.2 are directed to the protection of the goodwill of the Escala Partners business.  They say that similar matters as relate to the SPA covenants apply to the restraints in the Management Deed.  
343	One difference, however, is that in respect of cl 3.2 of the Management Deed, the consideration included a proportion of the ongoing cash flow, which depended on the performance of 2nd Chapter and its staff.  The purpose of the Management Deed restraints was the protection of the interests of all shareholders in 2nd Chapter, who all obtain the benefit and have the burden of them.  The Management Deed restraints operated to stop them from leaving but also kept them together.  Here, importantly, the vendor and purchaser of the business are effectively going into business together.  The Plaintiffs characterised this ongoing relationship as almost like the former Escala Partners shareholders were joint venture partners with Focus Escala Holdings following the acquisition.  The Management Deed’s context is people going into business together: Focus, 2nd Chapter and the Principals.  Each of them stands to benefit and each of them is at risk.  Focus bought the shares in Escala Partners and Escala Partners assigned half the value of the ongoing business to 2nd Chapter.  In that way, one can view the parties as agreeing to go into business together for five years (generating goodwill and protecting each other’s interest) and, if it ends at that point, agree not to compete with each other for one or two years after that point.  It is not unlike a fixed‑term partnership agreement.
344	The Plaintiffs submit that the time taken for the vendor, departing shareholder, manager or principal under the Management Deed to erode the goodwill must start after that departure.  A restraint for two years after that date is reasonable, given the nature of the investment and risks, and the commitment made by those involved to grow the business together.
345	The Plaintiffs refer to the transition plan contemplated at the time of the acquisition, included as a schedule to the Management Deed.  In that schedule, both Vickers‑Willis and Sealey are listed as ‘key members’.  Counsel for the Plaintiffs suggested that they are young employees with a long future in the industry to look forward to and offering significant revenue generation possibilities for their employer, they are good with clients, they are good advisors, and it is because they are so important and because personal relationships in the industry are so important, that the restraints are necessary to protect the investment made by Focus Financial into Escala Partners.  
346	The Plaintiffs make the same points in respect of severance and the use of the ‘blue pencil principle’ for the Management Deed as for the restraints in the other agreements.
H.2	Defendants’ submissions
347	The Defendants say that the reasonableness of the Management Deed restraints must be assessed according to the strict approach taken for employment restraints.  This is because the Management Deed required Sealey and Vickers‑Willis to devote the whole of their time, energy and efforts to the performance of the services, and on cessation of employment with 2nd Chapter, a Principal’s obligations under the Management Deed also effectively come to an end. 
348	Using this strict approach, they say that the presumption that the Management Deed restraints are void as contrary to public policy cannot be rebutted for several reasons which apply cumulatively (and that this application further demonstrates their unreasonableness).  
H.2.1	Scope
349	On the Plaintiffs’ submission that the Management Deed restrains should be assessed in the context of the arrangement into which the parties entered, the Defendants say this is a bootstraps argument; the Plaintiffs cannot create the risk through having no day‑to‑day involvement in the operations of the partner business and say that they have an entitlement to the onerous restraints because that is the only way they can control the risks they created.  The Plaintiffs’ submission overlooks the underlying public policy that underpins this area of jurisprudence: that people should be free to ply their trade, subject to the fact that if there is a legitimate interest, a restraint which does no more than is reasonably necessary can be imposed.
350	The Defendants also submit that the term Management Deed is a misnomer, as neither Sealey or Vickers‑Willis had any management function in respect of the business operations.  They remained advisors working with clients.
351	The restraint in section 3.2(a) is in substantively the same terms as cl 20.2(a) of the SPA and the Defendants repeat their submissions for that clause in respect of why such a restraint is unreasonable as between the parties. 
352	The Defendants say that the non‑competition restraint in the Management Deed is anti‑competitive and too broad; preventing Sealey and Vickers‑Willis from a wide range of activities, not just from being employed as a financial advisor. 
353	The restraint in section 3.2(b) is expressed to apply during the ‘Current Restraint Term’.  The Defendants submit that, if it operates beyond the Principal’s period of employment, it is unreasonable because it applies to clients with whom Sealey or Vickers‑Willis had no dealings and to the acceptance of an approach from any client, including ones with whom Sealey or Vickers‑Willis had no dealings.  Moreover, the restraint has the potential to prevent the Principal from soliciting or accepting an approach from a client of Escala Partners who only became a client after the relevant Principal ceased to be employed by 2nd Chapter, which is unreasonable.
354	What is more, section 3.2(c) is unreasonable in its application to clients with whom Sealey or Vickers‑Willis had no dealings, former clients (including those with whom Sealey or Vickers‑Willis had no dealings), and the acceptance of an approach from any such person.  The Defendants say that this restraint is substantively the same as cl 20.2(b) of the SPA, and repeat their submissions in that regard.
355	The Defendants contend that sections 3.2(d) to (g) are not relevant.
356	The Defendants submit that the restraint in section 3.2(h) is unreasonable if the restraints in the earlier sub‑paragraphs are found to be unreasonable.
H.2.2	Duration
357	In respect of the duration of the restraints in the Management Deed, section 3.4 provides that they commence at the beginning of the Current Restraint Term, and cease on the second anniversary, or the first anniversary, of the Cessation Date for the relevant Principal (being the date of the termination of their appointment as an authorised representative of Escala Partners).  The Defendants submit that the duration of one year (or two years) after the Cessation Date in section 3.4(a) and (b), is too long, such that all of the relevant restraints in section 3.2 are unreasonably long.  The unreasonableness of this duration is exacerbated in circumstances where there is contractual uncertainty and confusion about the Cessation Date.
358	This confusion over the Cessation Date is canvassed in the Defendants’ closing submissions.  According to the terms of the Management Deed, the appointment of a Principal as an authorised representative is subject to and in accordance with the terms and conditions of an authorised representative appointment deed (defined as an AR Appointment Deed).  The SPA provided that before Completion, AR Appointment Deeds would be executed by Escala Wealth Management and persons employed by 2nd Chapter to provide financial services after Completion. The Sealey Employment Agreement and Vickers‑Willis Employment Agreement also included acknowledgements on behalf of Sealey and Vickers‑Willis respectively that they are party to an AR Appointment Deed and provided that it was a requirement of their employment that they comply with the terms of the Management Deed and the AR Appointment Deed.  The Defendants say that accordingly, it was contemplated that AR Appointment Deeds would be executed in conjunction with the other acquisition agreements.  However, the terms of such deeds were not annexed to the SPA, Management Deed or Employment Agreements, with the consequence that the termination of a Principal’s appointment as an authorised representative ‘remained a mystery’ for the purposes of construing the Management Deed in accordance with orthodox principles of contractual construction.  
359	As concerns Perry’s evidence of ‘authorised representative appointment deeds’ entered into by Sealey and by Vickers‑Willis (both on 24 July 2014), the Defendants say that these documents cannot be the AR Appointment Deeds, because they were executed in 2014 (rather than near to the time of the acquisition agreements being executed), they are not deeds, and they do not contain terms and conditions.  The Defendants say that this causes confusion.  
360	The Defendants also highlight the initial error made by the Plaintiffs regarding whether the AR Appointment Deeds for Sealey and Vickers‑Willis had in fact been terminated, which was corrected by an amendment in the 2FASOC.  The Defendants describe this correction as a ‘volte‑face’, and point to the evidence of Sealey and Vickers‑Willis that the MoneySmart register suggests that Escala ceased their status as an Authorised Representative on 21 June 2023.  The Defendants say that the correction, and the difficulties in reconciling the Management Deed and references to the AR Appointment Deeds, show the uncertainty about when and how a person ceases to be an authorised representative.
361	From the above, the Defendants submit that the Court should conclude that at the time the Management Deed was executed, it was not possible to work out how the Principal’s appointment as an authorised representative of the Company could be terminated, such that the Cessation Date was unknown and the anniversary dates of the Cessation Date were unknown.  These unknowns mean that the restraints were unreasonable.
362	On the assumption that the Cessation Date was 21 June 2023, the Defendants nevertheless submit that the restraints are too long in duration.  They repeat the submissions made in respect of the duration of the restraints in the SPA, but submit that the Court should be less lenient in its assessment of the Management Deed restraints, which do not involve the sale of goodwill.
363	The Management Deed provides that the deed will operate for a term of six years from the date of execution and, following that initial term, it will automatically renew and continue in full‑force and effect for successive periods of one year until 2nd Chapter gives Focus 12 months’ prior written notice of 2nd Chapter’s election not to renew the deed, subject to Article 6 of the Management Deed.  Article 6 sets out early termination for cause requirements.  There is no capacity for any Principal to terminate the Management Deed, and so the restraints operate indefinitely unless and until it is terminated by 2nd Chapter on 12 months’ notice or there is a basis for termination for cause.  This is a fundamental difference between the Management Deed restraints and the SPA restraints, as the former may still be operating decades after the acquisition of Escala Partners.
364	Generally, the Defendants emphasise that there was no obligation for any Principal (including Sealey or Vickers‑Willis) to remain involved with Escala Partners following completion of the initial term of the Management Deed of six years.  Once a Principal’s employment ceased with 2nd Chapter, their Management Deed obligations would also come to an end, subject to the usual exception concerning obligations intended to survive termination.  The Employment Agreements could be terminated on three months’ written notice by either party.  If a Principal ceased employment with 2nd Chapter, 2nd Chapter and the other Principals were obliged to ensure that the management and ownership of the Management Company transitioned to another person or persons in accordance with the Transition Plan.
H.2.3	Geographic reach
365	The Defendants say the geographic reach of the restraints in section 3.5 of the Management Deed is also unreasonably wide.  That section provides for a cascading geographic operation similar to the SPA.  The operation is across Australia at its widest and within Sydney and Melbourne at its narrowest.  The Defendants say this is too broad and therefore unreasonable, as it purports to operate in locations where Sealey and Vickers‑Willis had no or negligible clientele.  Similar arguments as to the reach of the SPA restraints apply. 
H.2.4	Consideration received
366	Moreover, the Defendants say that the restraints are unreasonable because the Management Deed did not provide Vickers‑Willis and Sealey with adequate (if any) compensation for the covenants.  The structure of compensation under Article 4 of the Management Deed meant that Sealey and Vickers‑Willis could receive little or no compensation for their covenants and obligations, and the extent of the restraints were not fashioned or conditioned upon the extent of the compensation received.
367	In response to an argument that the compensation under the Management Deed reflected some kind of joint venture between the former Escala Partners shareholders and Focus Escala Holdings, the Defendants underline that the thresholds for compensation turned on EBPC, which included wages and remuneration of principals, such that profit share was necessarily reduced and the quantum of compensation that might be paid was, at the very least, uncertain.  It left Sealey and Vickers‑Willis at risk of receiving little or no compensation for the obligations and covenants imposed on them under the Management Deed.  
H.2.5	Express acknowledgement or agreement
368	The Defendants deny the assertion that sub‑section 3.8(c) makes the restraints reasonable as between the parties.  In respect of sections 3.6 and 3.8(c), the Defendants repeat their submissions for this point in respect of cl 20.8(a) and 20.6 of the SPA, which are substantively similar.
H.2.6	Confidential information
369	Further, the Defendants say that the purported protection of confidential information does not justify the restraints, as the relevant restraints in the Management Deed are not justified by reference to any protectable interest in confidential information in the hands of the covenantee.  The submissions in respect of confidential information and the SPA are referred to and repeated.
H.2.7	Severance
370	As with the restraint in the SPA, the Defendants submit that the structure of the restraint in sections 3.1(b) and 3.2(a) of the Management Deed is a single covenant, not amenable to severance.  The restraint in section 3.2(b) is also a single covenant, not amenable to severance.  With respect to the restraint in section 3.2(c), the Defendants say that it is also a single covenant, not amenable to severance.  
H.2.8	Public interest
371	The Defendants submit that the restraints in sections 20.2(a) and (b) are unreasonable in the public interest because:
(a)	they prevent clients, even those with no former association with Sealey or Vickers‑Willis, from selecting either as their preferred financial advisor;
(b)	they prevent any other firm from employing or engaging Sealey or Vickers‑Willis, even in circumstances that could have no direct impact on Focus or 2nd Chapter; and
(c)	their application is inconsistent with the Code of Ethics.
H.3	Consideration
372	The restraints in ss3.2(d) to (g) were not in contention between the parties.  Their focus was on ss 3.2(a) to (c).  Section 3.2(h) is only relevant if any of ss 3.2(a) to (c) are enforceable.
373	The submissions of the parties were, as a result of the overlap in some aspects of the numerous restraints in this case, duplicative.  To avoid unnecessary repetition, I have dealt with these duplicative submissions with similar brevity, by referring to earlier paragraphs of these reasons. 
374	To my mind, the relevant Management Deed restraints are no better than the SPA restraints.  Indeed, they may be worse.  While the SPA, Management Deed and SHA were a suite of documents relating to the one transaction, being the purchase of Escala Partners and the future operation of the business, each of the agreements served different purposes and created different sets of rights and obligations.  The provisions of the Management Deed mean that it is appropriate to assess the reasonableness of the restraints through the prism of an employment relationship, given it is ongoing and the obligations and duration of the restraints are linked to the principal being an Authorised Representative such that it is their activities in providing financial advisory services which are viewed as important, rather than through the prism of a sale of business.  The Court views restraints in the employment context more strictly.  
375	The Management Deed restraints also encompass solicitation or acceptance of approaches by clients with whom a restrained person has had no dealings and where, as a result, there would not be a customer connection.  While I accept that there is a legitimate interest in the protection of customer connections, these restraints go further than is reasonably necessary. The Management Deed also contains a very broad non‑competition restraint, as a result of the wide meaning given to the phrase ‘engage in’.  Thus both the non-solicitation and non-compete restraints go further than is reasonably necessary to protect Focus’ and 2nd Chapter’s legitimate interest in protecting customer connections, for the same reasons as I found the scope of the restraints in the SPA to be too broad.
376	There are further difficulties raised by the Cessation Date and lack of clarity over the AR Appointment Deeds, both in terms of identifying those deeds and when they were terminated.  It appears that the parties now agree that Sealey and Vickers‑Willis ceased to be authorised representatives on 21 June 2023, however, I accept the Defendants’ submission that these difficulties regarding uncertainty over the Cessation Date, which date was critical to determining when the restraint would be in effect, further point to the unreasonableness of the restraint.  Given that the termination of the AR Appointment Deeds may occur at any time at the Plaintiffs’ election, a restraint commencing from that date is unreasonable as it is not necessarily tied to when the exiting principal ceases with Escala Partners. 
377	The geographic reach of the Management Deed restraints is similar to the SPA restraints’ cascading operation and, for the same reasons as expressed regarding the SPA, I consider that the geographic reach of the restraints across Australia is not excessive to protect the legitimate interests of Focus and Escala Partners.
378	The compensation arrangements under the Management Deed were such that it was possible that Sealey and Vickers‑Willis would receive very little under the Management Deed profit-sharing arrangement.  This does not support the reasonableness of the restraints in terms of the Plaintiffs’ argument of the new enterprise being a joint venture and all the Principals and Focus going into business together, however, it is not a significant factor in my consideration.
379	I do not accept that sub‑section 3.8(c) of the Management Deed makes the restraints reasonable as between the parties.  The same reasoning regarding the SPA can be applied here.  
380	My findings and reasoning in respect of confidential information and the public interest argument regarding the SPA apply to the restraints in the Management Deed.  
381	The answer to question two is that none of the relevant restrictive covenants in sections 3.2 to 3.6 of the Management Deed are enforceable against Sealey or Vickers‑Willis.
I	Question three: the SHA restraints
Are any of the restrictive covenants set out in cl 20.2 to 20.5 of the SHA enforceable against any or all of Sealey, Vickers‑Willis, Terrung and JCVW? If so, which restrictive covenants are enforceable and to what extent?	
I.1	Plaintiffs’ submissions
382	The Plaintiffs submit that each of the covenants in cl 20.2 (a)‑(f) should be held to be enforceable against Sealey and Vickers‑Willis  until the second anniversary of Terrung and JCVW ceasing to be shareholders in 2nd Chapter, and that the covenants should apply across the whole of Australia.  The restraints are said to be reasonable as between the parties and not unreasonable in the public interest.  
383	As to whether the covenants in the SHA are reasonable as between the parties, the Plaintiffs contend that ongoing revenue to shareholders in the form of potential dividends is the interest which is protected by the SHA restraints.  
I.1.1	Consideration received
384	As to the argument outlined at paragraph 409 below, the Plaintiffs say that there is, in any company, a discretion in the board to pay dividends in the ordinary course, and the absence of any dividend at a point in time is not a relevant factor to take into consideration in assessing the validity of the SHA restraints, given that the test of reasonableness is at the time of entering into the agreement.  Clause 2 of the SHA says that these persons were all intending to go into business together and to grow the business.  The Defendants’ argument on this point has no substance.
385	The Plaintiffs say that it is irrelevant that the shareholders received no premium for their shares in exchange for the restraint: the shareholders’ promises in the SHA represented a commitment made to each other to continue to participate in the business, to help each other and share the burden and benefits of the restraints.  The Plaintiffs liken the situation of the SHA to partners in a law firm or accounting practice, which go into business to expand and make money together.
386	Noting the ability of any party under the SHA to apply for injunctive relief in respect of a breach of the restraints, the Plaintiffs say that Sealey and Vickers‑Willis obtained the benefit of the equivalent promises by fellow shareholders in connection with the burden of their obligations under the SHA.
387	Perry’s evidence was that there is little 2nd Chapter can do to prevent clients moving with a departing advisor other than through use of restraints.  Further, he personally would not have entered into the SHA without the benefit of the restraints imposed on the other shareholders by the SHA, as his entitlement to dividends under the SHA depended on 2nd Chapter’s ability to earn management fees under the Management Deed (which, in turn, depended on fees earned by Escala Partners on account of services to clients of the business).
I.1.2	Express acknowledgement or agreement
388	The Plaintiffs point to the agreement and acknowledgement in cl 20.7 of Sealey and Vickers‑Willis, among others that the prohibitions and restrictions were reasonable in the circumstances, necessary to protect the goodwill of the business, ‘and have served as a critical inducement to the entry by each Shareholder into this Agreement’.  
389	By that clause, there was also an agreement that standing was conferred upon all of the parties to the SHA to apply for injunctive relief, in the event of breach or threatened breach of a restrictive covenant.  This cures any issue with the covenants being given under the SHA by shareholders ‘severally to the Company’.  
I.1.3	Duration
390	In respect of the duration of the restraints, the Plaintiffs note that the restraints run from two years, or one year, after Terrung and JCVW cease to be shareholders.  Each entity is presently still a shareholder in 2nd Chapter and there is a separate dispute between the parties relating to the purchase of those shares concerning whether Sealey and Vickers‑Willis are ‘bad leavers’ as defined in the SHA.  While this may drag out the period of the restraint under the SHA, potentially to a maximum of four years from their departure, as long as they remain shareholders, Terrung and JCVW are still in a position to benefit economically from the business.
391	Further, to the extent that the Defendants say that 2nd Chapter has delayed the transfer process for those shares, the Plaintiffs refer to the cross‑examination of Sealey on this point and say that the ball is in the Defendants’ court to have delivered a notice under cl 18.2 of the SHA of the existence of the market value dispute, so that the dispute could be referred to expert determination and resolved in a timely way, or a mediation notice under cl 26.  Accordingly, it cannot be said that 2nd Chapter or the other shareholders are responsible for dragging the process out.  There could have been action on both sides to resolve this issue.
I.1.4	Geographic reach
392	Regarding the geographic scope of the restraints, the Plaintiffs submit that the restraints cover the areas in which Escala Partners operates.
I.1.5	Severance
393	The Plaintiffs also submit that cl 20.9 provides that the restraints are intended to be treated as separate covenants, with consequent options for severance should parts of the restraints be found to be unenforceable.  There is also scope to take out the ‘blue pencil’ in respect of the SHA restraints, as for the Employment Agreements.
I.1.6	Public interest
394	The Plaintiffs say that the covenants are not unreasonable in the public interest, because the wealth management industry is highly competitive and there will not be any appreciable injury to the public interest in the event Sealey and Vickers‑Willis are restrained in accordance with the SHA.
I.2	Defendants’ submissions
395	The Defendants submit the Plaintiffs are unable to rebut the presumption that the SHA restraints are presumed void as contrary to public policy, and repeat their submission on this point as I have outlined earlier in these reasons.
396	The Defendants say that the reasonableness of the SHA cl 20.2 restraints is to be assessed in line with the strict approach typically used in employment restraints, as the SHA is an instrument that regulates the affairs of 2nd Chapter and purports to restrain a shareholder following the buy‑back of their shares in 2nd Chapter.  The SHA is not directly concerned with the sale of the business.  The Defendants cite Popham Holdings Pty Ltd v Franklin, which concerned a restraint in a share buy‑back agreement of a former employee who held a small minority stake in the company, where there was no evidence that the former employee had been paid a significant premium for his shares in order to secure the additional restraint. In the circumstances of that case, the Court considered that it should take a stricter view of the restraint than a restraint contained in a sale of business, and that the restraint in question was unreasonable.
397	Here, the Defendants say that adopting a stricter assessment akin to an assessment of an employment restraint shows the SHA restraints are unreasonable as between the parties and not in the public interest.  
I.2.1	Why the scope of the restraints is unreasonable
398	The Defendants highlight that the restraints in the SHA are otherwise the same as the restraints in the Management Deed, such that the SHA restraints are similarly unreasonable, as between the parties.  Accordingly, there is a repetition of the submissions set out earlier, noting in respect of duration that these restraints should be treated more strictly than those in the SPA. For example, the Defendants say that the restraints are unreasonable as between the parties because cl 20.4 is geographically too wide, like the Management Deed restraints.
399	In addition, the Defendants point to a further factor for the unreasonableness of cl 20.2(c) as between the parties: as it is defined as applying to clients in the 24 months before the Cessation Date, and the Cessation Date might be as late as two years after the Prohibited Person ceased employment, it is possible for the 24-month period to be in part or entirely a period in which the Prohibited Person was no longer employed at 2nd Chapter.  This potential operation of the restraint is described as extreme.
400	Further, cl 20.2(b) is expressed to apply during the ‘Current Restraint Term’ to current clients, such that it ends on the Cessation Date.  Accordingly, it may operate as late as two years after the Prohibited Person resigns from 2nd Chapter, and while it does not apply to former clients, it could still apply to a client of Escala Partners who became a client after the Prohibited Person had resigned.
I.2.2	Duration
401	The duration of the restraint in cl 20.3 commences from the first or second anniversary of the Cessation Date which applies to the Principal or Shareholder (as applicable).  
402	In the present circumstances, Sealey and Vickers‑Willis are still shareholders and, assuming that their departure date is treated as 21 June 2023, the buy‑back may not be complete until 21 June 2025.  If so, 21 June 2025 would be the Cessation Date, and the SHA restraints would be operating potentially until 21 June 2026 or 21 June 2027.  However, the reasonableness of the restraints is to be assessed as at the date the SHA was entered into.  On that date, the Cessation Date for each shareholder was not known and it was possible that it would not be until the very end of the buy‑back period, being up to 24 months after the termination of the Principal’s employment.
403	In reply to the submission at paragraph 391, the Defendants submit that it is not the case that Sealey and Vickers‑Willis are dragging their feet or delaying the sale process for their shares in 2nd Chapter.  There does not appear to have been a response to correspondence on this issue, and more fundamentally, the SHA confers upon 2nd Chapter a discretion as to when and if it repurchases the shares during the buyback period, irrespective of whether there is a pricing dispute.  Properly construed, the Cessation Date was within the control of 2nd Chapter and could be only at the end of the Buy Back Period (which might be up to 24 months after the termination of the applicable Employment Agreement).  The discretion of 2nd Chapter in this regard was unfettered.  As a result, the duration of the restraints was not known and the shortest possible duration could be for up to three years after the relevant employment relationship ceased.  This is said to be unreasonable.  Given this three‑year operation is unreasonable, any operation for four years is also unreasonable.  The Defendants repeat submissions set out earlier in these reasons that the duration of these restraints should be treated more strictly than those in the SPA.  They say that any period more than three months is unreasonable between the parties in respect of the SHA. 
404	In respect of the suggestion that Vickers‑Willis might have been in a powerful position to elect not to sign the SHA in the negotiations, the Defendants point to the evidence of Vickers‑Willis that he was told by Perry to sign the agreement if he wanted to keep his job.
I.2.3	Consideration received
405	The observations of Elliott J in Popham Holdings are also cited with respect to compensation as an analogous case.  The Defendants note that under the SHA, shares are bought back at ‘Market Value’, calculated as a current valuation of the shares by reference to earnings on a multiple of seven.  They submit that the evidence is that the ‘Market Value’ did not include a premium payable to compensate shareholders for the restraints on the ‘Prohibited Person’ from working in their chosen field for a period up to four years after the termination of their employment (as it lasts for two years after the Cessation Date, which might be two years after termination of employment).
406	The Defendants say that importantly, there may also be a discount on the market value of 35% if the shareholder is deemed to be a ‘bad leaver’.  
407	Correspondence from 2nd Chapter to Sealey outlined the asserted value of the shares of 0.3185 cents per share, which would mean that Sealey’s shareholding was worth a total of $222,950.  When a 35% ‘bad leaver’ discount is applied, the amount which 2nd Chapter was willing to pay Sealey for his shares drops to $144,915.  This valuation does not sit with an assertion that the shares held by Sealey and Vickers‑Willis have significant value.
408	The Defendants say that assessing the enforceability of the restraints in the SHA should not take into account any money paid to shareholders in the sale of Escala Partners to Focus Escala Holdings, because that money was paid by Focus Escala Holdings and/or Focus Financial in exchange for the SPA restraints.  In contrast, the SHA restraints come into play when a shareholder ceases employment and shares are bought back by 2nd Chapter. 
409	The Defendants specifically reject the argument of the Plaintiffs that, while still shareholders, Sealey and Vickers‑Willis could enjoy the economic fruits of the business.  They say that these fruits are more apparent than real.  Most significantly, while they continue to be entitled to receive dividends when one is declared, the Board has sole discretion in determining whether a dividend is payable and they lose all of the rights attached to the shareholding on their departure from the position as director, entailing a loss of influence over the affairs of 2nd Chapter and any part in making decisions such as whether a dividend should be declared.
I.2.4	Confidential information
410	The Defendants also note that the restraints in the Management Deed are not justified by reference to any protectable interest in confidential information in the hands of the covenantee, and repeat earlier submissions on that point.
I.2.5	Express agreement or acknowledgement
411	The Defendants submit that cl 20.7(a) does not assist the Plaintiffs, in the same was as cl 20.6 of the SPA does not assist with the assessment of reasonableness of the restraints in that agreement.
I.2.6	Public interest
412	Finally, the Defendants refer to and repeat earlier submissions in respect of the Management Deed restraints being unreasonable in the public interest.
I.3	Consideration
413	The answer to question three is that none of the relevant restrictive covenants in the SHA are enforceable against any of Sealey, Vickers‑Willis, Terrung and JCVW.  
414	The legitimate interest of 2nd Chapter and its shareholders as conceptualised by the Plaintiffs is the ongoing revenue earned by shareholders in the form of potential dividends arising from the profits derived from services provided by 2nd Chapter to Escala Partners.  That ongoing revenue is threatened when Principals providing those services exit the business and take clients with them, including the prospect of future referrals.  As described in section F.1.3 above, I consider that there is a legitimate interest here in protecting this ongoing revenue through protecting customer connections with appropriately drafted restraints.  However, the restraints in the SHA are not appropriately drafted. For the reasons set out below, they go further than is reasonably necessary to protect the legitimate interest they are aimed at protecting.  The Plaintiffs’ submissions set out at paragraphs 384 and 385 above seem to me to suggest that a purpose of the restraints in the SHA is to lock Sealey and Vickers-Willis in, rather than preventing competition with the business or solicitation of clients.  I do not consider that to be a legitimate interest capable of being protected by such restraints.
415	As with the Management Deed, I consider that the SHA restraints should be viewed in an employment context rather than a sale of business context, for the same reasons.  An exiting Controlling Principal is required to also exit as a shareholder.  Their role as a financial advisor is a key aspect. 
416	Fundamentally, the scope of the restraints is too broad as they would operate where there is no risk to customer connection, in respect of clients with whom restrained persons have had no dealings.  In respect of cl 20.2(c), this breadth is also too wide because it applies to clients in the 24 months before the Cessation Date.  The restrained person may have ceased employment in that time such that it would apply to clients of the firm who began to receive services after the restrained person was no longer employed.  Clause 20.2(b) is too broad for similar reasons.  In addition, cl 20.2(a) of the SHA goes further than is reasonably necessary, for the same reasons as cl 20.2(a) of the SPA does (which is in identical terms), including the breadth of ‘engage in’.
417	I do not give weight to the dividends paid to date under the SHA as I agree with the Plaintiffs that the focus of my inquiry is on the reasonableness of the restraints when they were entered into.  I accept that the shareholders (and their Principals) were going into business together and they entered into these restraints as part of protecting their interests in receiving ongoing revenue from that business which was dependent on the customer connections of advisors, including the Principals.  I further accept that Sealey and Vickers‑Willis would also have received under the SHA the benefit of the other Principals being subject to similar restraints.  
418	The duration of the Current Restraint Term in the SHA is unreasonable, be it for one year or two years.  This is because of the manner in which the commencement of the Current Restraint Term is determined.  It commences on the Cessation Date, which is when the shareholder ceases to be a shareholder.  Under the SHA, a shareholder ceases to be a shareholder at the end of the buyback period which was largely within 2nd Chapter’s control and could be up to 24 months after the termination of the Employment Agreement.  As a consequence, the potential duration of the restraints under the SHA is up to four years (or three years) from the time Sealey or Vickers-Willis resigns from their employment with 2nd Chapter.  No reasonable justification for a restraint of that length has been established.  That Terrung or JCVW may continue to receive dividends is not to the point.  The potential ‘consideration’ to Terrung and JCVW for the restraints does not serve to make the restraints reasonable. 
419	Whether or not one party or the other has delayed the resolution of any dispute as to the buyback of Terrung or JCVW’s shares is not relevant for the purposes of this proceeding.
420	My view of the geographic scope of the restraints in the SHA is the same as it was in respect of the Management Deed and SPA restraints.
421	I do not consider that the restraints are justifiable by reference to any protectable interest in confidential information, for the same reasons as already expressed.
422	The problem with the scope of the restraints cannot be addressed by severance; the same issues as set out above apply.
423	I also do not accept the Defendants’ public interest argument as it applies to the SHA restraints, for the same reasons as have been set out elsewhere.
424	Accordingly, the relevant restraints in cls 20.2 to 20.5 are not enforceable against Sealey, Vickers-Willis, Terrung or JCVW.
J	Question four: clause 13.5 of the Sealey Employment Agreement
Are any of the restrictive covenants set out in cl 13.5 of the Sealey Employment Agreement enforceable? If so, which restrictive covenants are enforceable and to what extent?	
J.1	Plaintiffs’ Submissions
J.1.1	Reasonable as between the parties
425	The Plaintiffs say that the non‑compete period in cl 13.5 of each of the Employment Agreements is reasonably necessary to protect 2nd Chapter’s interests.  The Plaintiffs point to the line of authority that courts will be prepared to enforce restraints in employment contracts that are reasonably necessary to protect a legitimate business interest of the employer.  Legitimate business interests include the protection of confidential information and connection with customers.
426	The Plaintiffs suggest that the area requirement is to be inferred into cl 13.5 by reference to the words ‘that is in direct competition with’ the business.
J.1.2	Birdanco Nominees
427	The Plaintiffs cite Birdanco Nominees Pty Ltd v Money, in which the Court of Appeal upheld the validity of a three‑year restraint in an accountant’s employment contract in the following terms:
(a)	Not on my own account, or for any other person, for a period of 3 years after ceasing employment with the Company, to provide any of the Services to either:
(i)	any person who as a client of the Company was provided with any of the Services by me at any time during the 3 years prior to my ceasing to be employed by the Company, and who was a client of the Company at the time of my ceasing employment with the Company.
428	The Plaintiffs say that it was critical to the reasoning of the Court of Appeal that the accountant had a close client connection with clients he had advised during his employment.  A parallel is drawn with the circumstances before me.
J.1.3	Timing of new employment
429	The Plaintiffs refer to the warranty that each of Vickers‑Willis and Sealey were required to give as part of accepting offers of employment with Crestone that they were not subject to, among other things, any restrictive covenant, non‑competition or non‑solicitation provision with a former employer that may prevent them from commencing with Crestone in March 2024.  Rhetorically, they say that this was a much safer warranty for Vickers‑Willis and Sealey to give if they were to start with Crestone in March 2024, and points to the reasonableness of a 12‑month restraint in the employment contracts with 2nd Chapter.  Under cl 13.1 of their respective Employment Agreements, Sealey and Vickers‑Willis were required to provide three months’ notice of the termination of the agreements.  Based on a resignation date of 20 June 2023, both Sealey and Vickers‑Willis’ notice period, where both would be on gardening leave from 2nd Chapter and Escala Partners, was to run to around 19 September 2023.  The non‑compete period under cl 13.5 of the contract would therefore be from around 19 September 2023 to around 20 March 2024, if found to be enforceable at a duration of six months.  The Plaintiffs infer from this timing that Sealey and Vickers‑Willis intended (with the benefit of legal advice from Gadens) to comply with the three‑month gardening leave and notice period under their Employment Agreements and to comply with the full six‑month non‑compete period under cl 13.5 of the Employment Agreements.
J.1.4	New employment compensation
430	The Plaintiffs say that it is a well‑established and known feature of the industry for a sign‑on bonus to be payable when an advisor moves to a new firm.  They contend this may help an employee through the duration of any non‑compete period where he or she might have to sit out of the market.  They submit that in cross-examination Sealey agreed that it was common for there to be non‑solicitation clauses and that this could be the reason, or one of the reasons, for the sign‑on bonus.  They also note that the sign‑on bonus for each of Sealey and Vickers‑Willis was in the amount of $1.5 million, and that in the first year at Crestone, they would receive 70% commission.  Accordingly, the Plaintiffs say that, in respect of both the non‑compete and non‑solicit elements of the restraints in the Employment Agreements, it is an agreed and well‑established feature of the industry that employees who leave for another firm are likely to be compensated by the new employer for the time they are subject to the restraint.  This is said to be a commercial circumstance of common industry practice, known to all parties.  It is something that the parties would anticipate occurring, and which the Plaintiffs say is relevant here.  This is said to be in respect of future employment generally, not merely only where Sealey or Vickers‑Willis move to an advisor role with their next employer.  In this way, the Plaintiffs say that the industry self‑regulates and balances itself out. 
431	The Plaintiffs cite Ausdale Enterprises v Sandford:
As the authorities demonstrate, the restraint must be reasonable in relation to the party restrained in the sense that it preserves that party’s fullest liberty of action consistent with what is necessary for the adequate protection of the restraining party.  It is not an error to focus on what was reasonably necessary for the protection of the [employer].  However, that assessment ordinarily includes consideration of the nature and extent of the impact of the restraint on the party who is restrained. 
J.1.5	Severance
432	The Plaintiffs submit that, if the Court finds that the covenants are too wide and not each enforceable, the bullet points in cl 13.5 should be severed using the ‘blue pencil principle’ and the Court should hold that each of the remaining bullet points are enforceable for the period until six months from the date of termination, or alternatively, until three months from that date.  The Plaintiffs submit that each bullet point operates as independent covenants from the balance of cl 13.5.  The Plaintiffs say that this would not amount to curial disentanglement as identified in Peck.
433	In addition, the Plaintiffs say that the following words (or some of them, depending on the Court’s findings as to the reasonable scope of the restraint) could be removed using the ‘blue pencil principle’ from cl 13.5, as shown below:
13.5 	The non‑compete period, is for 6 months or if that period is unenforceable, 3 months from the date of termination of employment. During this period, in consideration of this agreement and the payments to you, referred to in clause 7, you must not (and will ensure that your Affiliates do not), directly or indirectly, on your own behalf or on behalf of any other person or entity, in any capacity, engage or prepare to engage in any business or activity that is the same or similar to the business activities of Escala or the Company in whole or part, or that is in direct competition with the business of Escala or the Company.
Without the prior written consent of the Company you also agree;
•	not to accept or conduct any activity or business which would be in direct competition with the business of Escala or the Company, with any person or entity who at any time during 12 months preceding your termination was a client of Escala or the Company; and
•	not to solicit, encourage, assist or seek to entice any individual to leave their employment with the Company 
J.1.6	Public interest
434	The Plaintiffs also submit that the covenants are not unreasonable in the public interest, because the wealth management industry is highly competitive and there will not be any appreciable injury to the public interest in the event Sealey and Vickers‑Willis are restrained in accordance with their respective Employment Agreements.
J.2	Defendants’ Submissions
435	The Defendants say that the restraints in cl 13.5 (which are in two limbs) are presumed to be void as contrary to public policy, and that presumption cannot be rebutted for the reasons set out in the following paragraphs. The Defendants submit that the covenants in both limbs are not reasonable as between the parties, assessed in the same strict way as restraints in contracts of employment are normally assessed. 
J.2.1	The first limb
436	The first limb is comprised of the first paragraph of cl 13.5 of the Sealey Employment Agreement.  
437	In particular, as to the first limb the Defendants say:
(a)	it is anti‑competitive; 
(b)	 it has no geographical restriction, with the potential to restrict Sealey from working anywhere in Australia or world‑wide for a business that provides wealth management services to high net‑worth clients; 
(c)	it prohibits Sealey from being employed by a competitor, anywhere in Australia or the world, even if he has no involvement with current or former clients of Escala Partners in his new role; and
(d)	it would prevent Sealey from starting a wealth advisory firm or embarking on preparations to start such a firm, even if he had no plans to take on any of his own former clients, or any other clients of 2nd Chapter. 
438	They contend that the first limb restraint is unjustified for any period of time because if prevents Sealey from competing with 2nd Chapter.  In doing so, it goes beyond any legitimate interest that 2nd Chapter might be seeking to protect.  The restraints cannot be rewritten or relevantly severed. Accordingly, the first limb is unreasonable between the parties and unenforceable.
J.2.2	The second limb
439	The second limb of the restraint is the bullet point list in cl 13.5 which sets out additional agreements of the employee not to do particular things without the prior written consent of the Company.
440	As to the second limb the Defendants say:
(a)	it is anti‑competitive; 
(b)	it has no temporal limitation, as it is without reference to any time period; 
(c)	it has no geographical limitation; 
(d)	it applies to any client during the 12 months preceding termination, even if that client had no dealings with Sealey, or was a former client who left without any involvement of Sealey, and it extends to accepting approaches from clients regardless of whether he had any material dealings with them;  
(e)	it applies to former clients; and
(f)	it prohibits Sealey (or a business that employs him) from accepting the business of a client. 
441	The Defendants say that the first dot point of the second limb would also prevent Sealey from starting a wealth advisory firm in partnership with, or using the funding from, any client of Escala Partners, and therefore it is a covenant against mere competition, which is not enforceable.  The first dot point of the second limb is the only part of the restraint in issue in this proceeding.
J.2.3	Birdanco Nominees
442	In respect of Birdanco Nominees, the Defendants submit that the facts in that case and the nature of the restraint at issue were materially different.  One difference is that in that case, the restraint was confined to persons with whom the former employee had a direct connection and the clause did not purport to prohibit the employee from providing services to such clients, rather, it provided a mechanism where moneys earned from such services could be recouped by the former employer.  The restraint did not, for example, purport to prohibit the former employee from working in his chosen profession.
J.2.4	New employment compensation
443	As to the Plaintiffs’ argument summarised at paragraph 430 above, insofar as they say that the Court should have regard to the sign‑on bonus and commission rates at Crestone agreed with Sealey and Vickers‑Willis, the Defendants’ position is that one cannot assume that a sign‑on bonus will be paid or that an employee will receive a higher commission rate at their next employer.  The evidence does not support that assumption so as to allow it to inform the Court’s approach.  Also in connection with the sign‑on bonus, the Defendants submit that it was not payable until Sealey and Vickers‑Willis started work at Crestone and so it should not be suggested that the bonus is compensation for the fact that they will be out of work.  The commission rates also could not be earned until Sealey and Vickers‑Willis started work at Crestone.  These forms of compensation in the Crestone contracts cannot have a role to play in enforcing the non‑competition restraints, as those clauses are aimed at preventing Sealey and Vickers‑Willis from earning that compensation.  The parties should not be presumed to have understood that hardship occasioned by the restrains could be ameliorated by compensation at the restrained person’s next place of employment; that suggestion does not bear scrutiny and there is a paucity of evidence on this point.
J.2.5	Confidential information
444	The Defendants make the same point as they have made in respect of the other agreements regarding confidential information: that the restraints in cl 13.5 of the Sealey Employment Agreement are not justified by reference to any protectable interest in confidential information in the hands of 2nd Chapter.
J.2.6	Severance
445	The Defendants submit that the covenant that the first limb seeks to put in place is a single covenant, which is not amenable to severance.  The same is true of the covenant in the second limb.  
J.2.7	Public interest
446	Further, the Defendants say that the covenants in both limbs are unreasonable in the public interest as they operate to prevent unrelated third parties from being able to have a professional relationship with Sealey.  For the same reason, the covenants are also inconsistent with the Code of Ethics.
J.3	Consideration
J.3.1	The first limb of cl 13.5
447	The first limb of cl 13.5 is unreasonable, for the following reasons:
(a)	There is no geographic limit to the restraint.  I do not accept the Plaintiffs’ submission that one can be inferred by the phrase ‘in direct competition with the business of Escala or the Company’.  That Escala Partners, as at the time of entry into the restraints, serviced clients in Australia (and continues to do so) is insufficient to infer such limitation.
(b)	It applies irrespective of Sealey’s role in the new firm, not just to him being a financial advisor.
(c)	Neither of these unreasonable aspects of the restraint in the first limb of cl 13.5 can be made reasonable through the use of the blue pencil.
(d)	Confidential information can be protected by other contractual provisions and legal obligations, hence it is unnecessary to rely on a restraint to perform this function.  Further, I do not consider that the restraint is directed to this concern: it smacks of after-the-fact justification.
448	I do not accept the Plaintiffs’ attempts to justify the duration of the restraint by relying on inferences arising from the start date agreed between Crestone and each of Sealey and Vickers-Willis (see paragraph 429 above).  This is a bootstraps argument that lends nothing to an assessment of the reasonableness of the restraint at the time it was entered into.
449	Nor do I accept the Plaintiffs’ argument that the significant sign-on bonuses Sealey and Vickers-Willis obtained from Crestone function as compensation for the restraints, such that the terms of the restraints and their duration are reasonable (see paragraph 430 above).  I accept the Defendants’ submissions, set out at paragraph 443 above.  Further, Sealey and Vickers-Willis both gave evidence that the sign-on bonuses were part of their remuneration package as it would take them time to build the commission element of their remuneration.  More importantly, it is simply unfathomable that at the time of entering into the Employment Agreement, the parties considered it reasonable to restrain the employee from competing with the employer for a substantial period of time because after that time they would receive a substantial sign-on bonus or remuneration.  Rather, the ‘compensation’ for the employee agreeing to the restraint needs to be a function or product of the terms of the employment relationship that imposes that restraint.
450	Both Sealey and Vickers‑Willis gave evidence of their experience of restraints in the wealth management industry and referred to restraints they had been subject to in other roles that had a much shorter duration.  In contrast, Perry says in his experience, he has seen ‘the gamut’, including being subject to a seven‑year restraint himself (with UBS in the United States) and having negotiated and hired employees with restraints over six months in Australia.  Perry agrees, however, that five‑year restraints outside of a purchase of a business are not seen often.
451	A three-month, or possibly even six-month, non-compete period for Sealey (and Vickers-Willis) in their employment contracts may have been reasonable, had the scope of the restraint been reasonable.  It is not, so the duration question is not determinative.  Had I taken the view that three months was reasonable but six months was not, then the ‘blue pencil principle’ could have been used here.
J.3.2	The second limb of cl 13.5
452	The second limb of cl 13.5 is unreasonable, for the following reasons:
(a)	The second limb contains no time limit.  As far as I can ascertain, the Plaintiffs did not directly address this issue.  It is possible that it may be contended that the second limb of cl 13.5 is to be read with the first limb, so that the time limit of six or three months applies, however that is not especially clear.
(b)	More importantly in the context of this case, the scope of the restraint in the second limb of cl 13.5 is too broad.  It should only apply to clients with whom the financial advisor has worked, given that it is the close customer connection that needs to be protected.  The same considerations as discussed earlier in these reasons regarding this aspect apply here.  The scope being too broad cannot be fixed by using the blue pencil, as it would require the addition of words.
J.3.3	Reliance on Birdanco Nominees
453	I struggle to see why the Plaintiffs place emphasis on Birdanco Nominees, in particular in respect of the importance of close client connections in upholding a three‑year restraint.  Birdanco Nominees relates to a restraint on the provision of services to persons who had been clients serviced by the restrained person in their former employment.  The non-compete and non‑solicitation restraints in the Employment Agreements are directed at all clients of the firm including those who have not been provided with any services by Sealey, Vickers‑Willis or Allen.  This is a fundamental difference between the circumstances of both cases.  Birdanco Nominees does not assist the Plaintiffs in establishing the reasonableness of the restraints in cl 13.5.  I also consider that Birdanco Nominees is far more relevant to cl 14.1 of the Employment Agreements, because of this aspect regarding non‑solicitation.  However, as the parties refer to it in their submissions in respect of cl 13.5, I have discussed this here, noting that it is of no more assistance to the Plaintiffs in respect of cl 14.1 than it was for cl 13.5.
J.3.4	Conclusion regarding cl 13.5
454	Accordingly, for these reasons the answer to question four is No.  None of the restrictive covenants in cl 13.5 of the Sealey Employment Agreement are enforceable against Sealey.
K	Question five: clause 14.1 of the Sealey Employment Agreement
Are any of the restrictive covenants set out in cl 14.1 of the Sealey Employment Agreement enforceable? If so, which restrictive covenants are enforceable and to what extent?	
K.1	Plaintiffs’ Submissions
455	The Plaintiffs say that similar principles and considerations apply in respect of these restraints as the employment contract restraints considered in question four (see the summary of the Plaintiffs’ submissions in section J.1 of these reasons).  Particular submissions in respect of cl 14.1 are elaborated below. 
456	The Plaintiffs refer to the principle articulated in Wallis Nominees: 
… a restraint clause that goes beyond solicitation, such as accepting a customer’s offer, may be reasonable where there is a strong customer connection and solicitation might not be necessary (for example, the customer might approach them).
457	The Plaintiffs submit, in respect of Escala clients who are looked after by another advisor at Escala and with whom Sealey does not have the same relationship as his direct clients, that the advisors worked in teams and that, undoubtedly, teams would refer work at times from one team to another.  
458	The Plaintiffs say that the restraint in question is reasonable, because the Court will observe that clients do seem to migrate to Crestone despite no apparent solicitation.  I note that there was some evidence before the Court as to persons who had moved their business to Crestone.
K.1.1	Duration
459	The Restraint Period is 12 months, alternatively nine, six or three months.  While Vickers‑Willis said that it would be harder to get a client after a 12‑month gap in communications, Perry’s evidence was that some clients only touch base with their advisors on an annual basis.  The Plaintiffs say that there is no reason to conclude that 12 months goes further than is needed in circumstances where some of the clients only get seen once a year.
460	Clause 14.2 does not state when the Restraint Period applicable for cl 14 of the Employment Agreement commences.  The Plaintiffs say it has to commence from when the employment ends, otherwise the clause would be pointless.  
K.1.2	Geographical reach
461	In respect of the restraint’s geographical scope, the Plaintiffs say that when the agreements were executed, changes in client locations and employee responsibilities were anticipated.  With travel options and technology to communicate with clients remotely, it is reasonable for the restraint to operate across Australia.  The business of Escala Partners was expanding and Focus invested in the business to assist that expansion, which all supports a wider geographical scope of the restraints.  The Plaintiffs also observe that the new employment contracts signed by Vickers‑Willis and Sealey and Crestone impose an Australia‑wide restraint.
462	In respect of cl 14.3, Australia is a reasonable geographical scope.  The Court could reduce the scope down to the city of Melbourne, if necessary (but the removal of ‘including all surrounding suburbs’ was described as ridiculous by counsel for the Plaintiffs).
K.1.3	Severance
463	The Plaintiffs submit that cl 14.1 is reasonable as it reads.  However, the Plaintiffs say that if the Court concludes otherwise, there is ‘blue pencil potential’ in cl 14.1, and the Court should make such subtractions to the maximum extent possible in order to make the clause reasonable.  The Plaintiffs submit that the Court could pick up a ‘blue pencil’ and subtract from cl 14.1 so that it reads:
14.1 	In consideration of this agreement and the payments to you referred to in clause 7 which are greater than those payable to at law, you agree that you will not, and will ensure that your Affiliates do not, during the Restraint Period and in the Restraint Area, directly or indirectly, on your or their own behalf or on behalf of any other person or entity, in any capacity:
•	solicit, canvas, approach, encourage, entice, or assist any person or entity who at any time during the period of 12 months preceding the termination of your employment was a client of the Company or Escala, to cease doing business with Escala or the Company, or reduce the amount of business the client may or would conduct with Escala or the Company, or alter the terms of the client’s dealings with Escala or the Company;
•	assist another person or entity to solicit, canvas, approach, encourage, entice, or assist any person or entity who, at any time during the period of 12 months preceding the date of termination of your employment, was a client of Escala or the Company, to cease doing business with Escala or the Company, or reduce the amount of business the client may or would conduct with Escala or the Company, or alter the terms of the client’s dealings with Escala or the Company;
•	do or say anything harmful to the reputation of Escala or the Company or which may lead a person or entity to cease, curtail or alter the terms of their dealings with Escala or the Company;
•	accept any approach from any person or entity who, at any time during the period of 12 months preceding the date of termination of your employment, was a client of Escala or the Company with a view to obtain the custom of that client in a business that is the same or as similar to any part or parts of the business of Escala or the Company;
•	not interfere with the relationship between any employee, or member of Escala or the Company and any of their clients; and
•	not solicit, encourage, entice, assist (including assisting any other person or entity to do so) any individual/s to leave their employment with Escala or the Company.
14.2 	Restraint Period means each of the periods described below separately:
•	Twelve (12) months; if that is not enforceable, then
•	Nine (9) months; if that is not enforceable, then
•	Six (6) months; if that is not enforceable, then
•	Three (3) months.
14.3 	Restraint Area means each of the areas described below, separately:
•	Australia; or if that is unenforceable;
•	The state of Victoria; or if that is unenforceable;
•	the city of Melbourne in Victoria, including all surrounding suburbs.
464	As best as I can tell, these were the deletions proposed by the Plaintiffs during closing submissions.  I have to note, however, that it was not entirely clear for the first dot point whether the words from and including ‘to cease doing business’ were also to be deleted.
465	Notably, the Plaintiffs say that the entire bullet point concerning approaches could be subtracted to ensure the validity of cl 14.1.  However, they say this is not necessary as it is permissible to protect the goodwill of a business by precluding an ex‑employee from accepting an approach, even where that approach is unsolicited.  Here, the Plaintiffs note that Sealey gave evidence that he had been approached by a former client.
K.2	Defendants’ Submissions
K.2.1	Expiration
466	The Defendants submit that the restraints have expired and are therefore not enforceable.  Clause 14.1 imposes restraints during the Restraint Period, defined to mean three, six, nine or 12 months.  There is no nominated commencement date for the Restraint Period.  The Defendants say that cl 14.1 therefore reads as beginning on the date that the Sealey Employment Agreement was signed, expiring no later than March 2020.
K.2.2	Why the restraints are unreasonable
467	In the alternative, and assuming that the Restraint Period commences on the date of termination of employment, the Defendants say that the restraints in cl 14.1 are presumed to be void as contrary to public policy, and the Plaintiffs cannot rebut this presumption for the reasons set out in the following paragraphs.  Those reasons mean that the restraints are not reasonable as between the parties, with the assessment of reasonableness being strict, as restraints in contracts of employment are normally assessed.
468	The effect of the first bullet point in cl 14.1 is to prevent Sealey from soliciting, encouraging or assisting a client to cease doing business with Escala or to reduce the business they conduct with Escala.  The Defendants say that this bullet point would prevent an Escala Partners client asking Sealey for his opinion about whether to engage an advisor with a particular attribute or to invest in a particular product in respect of an unrelated firm and whether that firm met that client’s requirements.  It would also prevent Sealey from giving advice to an Escala Partners client in a social setting, if asked for his opinion about withdrawing funds from their Escala Partners portfolio to fund a real estate investment and that opinion was followed by the Escala Partners’ client.  
469	This bullet point imposes an unreasonable restraint as between the parties because of its application to clients with whom Sealey had no dealings and former clients (including those with whom Sealey had no dealings, and even if the client left Escala Partners of their own accord) in the 12 months preceding termination of employment.  
470	The second bullet point in cl 14.1 is said to be unreasonable for the same reasons and, if the first bullet point is unreasonable then the second bullet point is equally so.  
471	The Defendants say that the covenant in the fourth bullet point of cl 14.1 is unreasonable because it applies to clients with whom Sealey had no dealings, former clients (including those with whom Sealey had no dealings), and to the acceptance of an approach from any client (even former clients and clients with whom Sealey had no dealings). 
472	The Defendants contend that the restraints set out in the other bullet points in cl 14.1 are not relevant. 
473	The Defendants submit that the reasons that the relevant restraints are unreasonable apply cumulatively not separately, and that this demonstrates their unreasonableness all the more. 
K.2.3	Duration
474	The Defendants point to the cascading duration of the restraints in cl 14.2, which they say are all unreasonable in length.  The restraints in cl 14.1 are unreasonable if they operate beyond three months.
K.2.4	Geographic reach
475	The geographic application of cl 14.1 is also submitted to be unreasonable insofar as the restraints purport to operate outside the areas where Sealey had a client base at Escala Partners.  In closing submissions, the Defendants contended that the restraints are all unreasonable if they operate outside of Melbourne.
K.2.5	Severance
476	Where restraint clauses are expressed as a single covenant, such as cls 13.5 and 14.1 of the Employment Agreements, there can be no severance using the ‘blue pencil principle’, as the Plaintiffs advocate.  The first bullet point in cl 14.1 is submitted to be a single covenant not amenable to severance.  Clause 14.4 does not allow for severance within each of the bullet points.  The clause describes the class of person who is to be subject of the non‑solicitation, and this is a single descriptor with no waterfall or stepping of the clause, such that a deletion suggested by the Plaintiffs would change the meaning of the clause.  The fourth bullet point of cl 14.1 contains another single covenant which is not amenable to severance.  
K.2.6	Confidential information
477	As elsewhere, the Defendants submit that these restraints are not justified by reference to any protectable interest in confidential information in the hands of 2nd Chapter, as those interests are well protected by 2nd Chapter’s other rights.
K.2.7	Express acknowledgement or agreement
478	Further, for the same reason that cl 20.8 in the SPA does not assist the Plaintiffs, cl 14.5 of the Sealey Employment Agreement does not assist 2nd Chapter, especially when read with cl 14.4.
K.2.8	Public interest
479	The Defendants further submit that the restraints in cl 14.1 are unreasonable in the public interest because they prevent unrelated third parties from being able to have a professional relationship with Sealey, and are inconsistent with the Code of Ethics.
K.3	Consideration
480	The restraints in the first two dot points of cl 14.1 are somewhat curious.  They prevent Sealey from soliciting, canvassing, approaching, encouraging, enticing or assisting an Escala client (including a former client) from ceasing to be a client of Escala, reducing their business with Escala, or altering the terms of their dealings with Escala.  However, unlike cl 20.2(b) of the SPA, subcls 20.2(b) and (c) of the SHA, and subsections 3.2(b) and (c) of the Management Deed, those prohibitions are not linked to doing so for the purpose of obtaining the client’s custom in a business that is the same or substantially similar to Escala Partners’ business or in competition with it.  The Plaintiffs did not address this aspect, however, the Defendants did (see paragraph 468 above).  I accept the Defendants’ submissions in this regard.  The restraint in those two dot points is far too broad in that it goes beyond what is reasonably necessary to protect the Plaintiffs’ interests.  Restricting the scope of the first two dot points to soliciting, canvassing, approaching, encouraging, enticing or assisting an Escala client (including a former client) from ceasing to be a client of Escala, reducing their business with Escala, or altering the terms of their dealings with Escala with a view to obtaining the client’s custom in a similar business may have been reasonable, but this cannot be achieved via severance under cl 14.4 or by using the blue pencil.
481	Further, the restraint in the first two dot points is not confined to clients or former clients with whom Sealey has had dealings.  
482	The problem with the application of the restraints to clients with whom the restrained person has not had any dealings is that it is manifestly excessive to protect a legitimate interest based on customer connections with advisors, as there is no connection between those persons if they have not dealt with each other before.
483	The Plaintiffs submit, and it is accepted by Vickers‑Willis and Sealey, that it would be easy for either to ascertain whether a person approaching them at Crestone had previously been a client of Escala Partners.  However, the problem with the restraints applying to clients of Escala Partners with whom the restrained persons may not have had any dealings is not just a matter of impracticability.  Clearly, a restrained person could easily find out if a person had been an Escala Partners’ client in the relevant time periods by asking that person or reviewing their financial records and documents as part of an onboarding process.  Thus the practical difficulties could be easily overcome, but that does not render the scope of the restraint reasonable.
484	Perry’s evidence was that 2nd Chapter would not have hired Sealey (or Vickers‑Willis or Allen) without the restrictive covenants in their respective Employment Agreements, as these covenants are essential for the business to know with a degree of certainty that its employees will not seek to solicit former clients.  Of course, solicitation is only part of the scope of the restraints included in the Employment Agreements.  I accept that there is a legitimate business interest in protecting the customer connections of 2nd Chapter employees who are providing services to Escala Partners.  I do not accept, however, that the restraints in this case are directed at the legitimate business interest of the protection of confidential information; there are ongoing obligations under other clauses of the Employment Agreements which protect that interest.
485	Clause 14.4 is somewhat ambiguous.  It is unclear whether there is one restraint (all the dot points in cl 14.1) that can be seen as more than one restraint once combined with the differing duration and geographic elements in combination, or whether each dot point in cl 14.1 is a separate restraint that then is combined with the differing geographic and duration elements to create even more restraints.  I think it more likely that the latter is the correct construction here, but the lack of clarity tends towards the unreasonableness of the restraints.  In any event, severance does not assist the Plaintiffs here given that the elements which I have found to be unreasonable cannot simply be excised within each dot point so as to make the remainder reasonable.  Further, that cannot be fixed by using the blue pencil as words need to be added, not just deleted.
486	With respect, the Plaintiffs’ suggested use of the blue pencil for cl 14.1 is unhelpful here.  It appeared to be done on the run and without sufficient thought as to the finished product.  By way of example:
(a)	as noted above, the amendment of the first dot point is not entirely clear; and 
(b)	the second dot point was not amended in a similar way, which does not make sense.
487	Nonetheless, the Court itself can wield the blue pencil to make the otherwise unreasonable restraint reasonable.  For the reasons already stated, however, no use of the blue pencil here within the parameters permitted under the ‘blue pencil principle’ is going to render the restraint reasonable.
488	I do not find the Defendants’ submission that the restraint in cl 14.1 has expired (see paragraph 466 above) to be at all persuasive.  Rather than the obligation commencing for the stipulated period with the signing of the Sealey Employment Agreement, it can only be sensibly interpreted as applying from the time the employment ceases.  In my view, a six-month or three-month period for the restraint would be reasonable, rather than nine or twelve months.  However, it is not necessary to determine this given that I have found the scope of the restraint to be unreasonable. 
489	For the same reasons as expressed earlier, I do not consider an Australia-wide restraint in cl 14 to be unreasonable.
490	I do not accept the Defendants’ public interest arguments, for the same reasons as expressed earlier, but that is not determinative here given the above finding.
491	Accordingly, none of the restraints in cl 14.1 of the Sealey Employment Agreement are enforceable against Sealey.
L	Question six: clause 13.5 of the Vickers‑Willis Employment Agreement
Are any of the restrictive covenants set out in cl 13.5 of the Vickers‑Willis Employment Agreement enforceable? If so, which restrictive covenants are enforceable and to what extent?	
L.1	Submissions
492	The Plaintiffs and Defendants repeat their submissions on question four mutatis mutandis in respect of the identical clause considered in question six (see sections J.1 and J.1.6 above, respectively).
L.2	Consideration
493	My findings in respect of the identical clause considered in question four apply, and I refer to section J.3 above.
494	Accordingly, the restrictive covenants in cl 13.5 of the Vickers-Willis Employment Agreement are not enforceable against Vickers-Willis.
M	Question seven: clause 14.1 of the Vickers‑Willis Employment Agreement
Are any of the restrictive covenants set out in cl 14.1 of the Vickers‑Willis Employment Agreement enforceable? If so, which restrictive covenants are enforceable and to what extent?	
M.1	Submissions
495	The Plaintiffs say that similar considerations apply in respect of these restraints as the employment contract restraints considered in question five (see the summary of the Plaintiffs’ submissions in section K.1 of these reasons). 
496	The Defendants repeat their submissions for question five mutatis mutandis in respect of the identical clause considered in question seven (see section K.2 above).
M.2	Consideration
497	My findings in respect of the identical clause considered in question five apply, and I refer to section K.3 above.  The answer to the question is No.  The restraints are not enforceable.
N	Question eight: clause 14.1 of the Allen Employment Agreement
Are any of the restrictive covenants set out in cl 14.1 of the Allen Employment Agreement enforceable? If so, which restrictive covenants are enforceable and to what extent?	
N.1	Plaintiffs’ Submissions
498	The Plaintiffs point to a summary of the Escala Partners business in which Allen is mentioned as a person who had begun to close out clients on his own and therefore was a source of goodwill himself.
499	The Plaintiffs say that similar considerations apply in respect of these restraints as the employment contract restraints considered elsewhere in these reasons and repeat the submissions they made in respect of the above questions regarding employment restraints. 
N.2	Defendants’ Submissions
500	The Defendants repeat their submissions for question five mutatis mutandis in respect of the identical clause considered in question eight (see section K.2 above), subject to a handful of differences in the situation of Allen compared with Sealey and Vickers‑Willis.  
501	2nd Chapter permitted Allen to commence his employment with Crestone in April 2023, which is why cl 13.5 of the Allen Employment Agreement is not in issue in these proceedings.  There are also differences in that Allen was relatively junior as an employee with an initial base salary inclusive of super of $87,600 (less than half the salaries of Sealey and Vickers‑Willis), he was not a shareholder of Escala Partners at the time of the acquisition and he was not a shareholder of 2nd Chapter.
N.3	Consideration
502	It is true that Allen was a relatively junior employee when he entered into the Allen Employment Agreement compared to, say, Sealey.  However, the assessment of the reasonableness of the restraints at the time when they were entered into can accommodate changes in the employee’s responsibilities such as that he might gain seniority during his employment.  That said, my findings in respect of cl 14.1 of the Allen Employment Agreement are the same as in respect of the same clause in the Sealey Employment Agreement and Vickers‑Willis Employment Agreement.  Those reasons apply here.
503	The answer to the question is No.  The restraints are not enforceable.
O	Question nine: Repudiation of Employment Agreements
Whether Sealey or Vickers‑Willis has repudiated the Sealey Employment Agreement or Vickers‑Willis Employment Agreement, as alleged in section E.3 of the 2FASOC?	
O.1	The pleadings
504	By section E.3 of the 2FASOC, the Plaintiffs allege that: 
(a)	in 2023 and prior to 23 May 2023, each of Sealey and Vickers‑Willis negotiated with Crestone to become employed by Crestone and:
(i)	communicated with Crestone about the benefits that would or may accrue to Crestone if it employed him, whilst he was still employed by 2nd Chapter; and
(ii)	communicated with Crestone about the remuneration and other benefits that would or may accrue to him if he were to be employed by Crestone, and if he was able to enhance the economic performance of Crestone’s business, including by generating new business for that firm, whilst he was still employed by 2nd Chapter; 
(b)	while still employed by 2nd Chapter, entered into an employment agreement with Crestone; and
(c)	failed to disclose to the Plaintiffs, the fact that he had communicated and negotiated with Crestone, or had entered into an employment agreement with Crestone, until after the commencement of these proceedings.
505	The Plaintiffs plead that as a result of the abovementioned allegedly wrongful conduct, each of Sealey and Vickers‑Willis have breached their obligations under the Sealey Employment Agreement and Vickers‑Willis Employment Agreement, respectively, to:
(a)	devote his whole time and attention and the whole of his skills to his duties during the hours of work and such reasonable additional hours as may be necessary to perform his duties (as required by cl 2.4); 
(b)	use his best endeavours to promote the business interests of 2nd Chapter (as required by cl 2.4); 
(c)	faithfully, diligently and lawfully perform his duties (as required by cl 2.4);
(d)	not undertake any other trade, business or profession without prior written approval of 2nd Chapter (as required by cl 2.5); 
(e)	not be involved in any activity, which creates or may create a conflict of interest with 2nd Chapter, Escala Partners or the Clients, the requirements of his position or his ability to carry out his duties without prior written approval of 2nd Chapter, (as required by cl 2.5); and
(f)	devote his full time and energy and efforts to the performance of the Services and the performance of the Management Company’s duty to the Company and to not engage, directly or indirectly, in any other business activity, whether or not similar to that of the Company (other than acting authorised representatives of the Company); (as required by cl 2.6, and also cl 2.6 of the Management Deed).
506	The Plaintiffs further allege that Sealey and Vickers‑Willis have both evinced an intention no longer to be bound by the Sealey Employment Agreement and Vickers‑Willis Employment Agreement, respectively, and have thereby repudiated their respective Employment Agreements.
507	The Plaintiffs say that 2nd Chapter accepted the abovementioned repudiations and terminated the Sealey Employment Agreement and Vickers‑Willis Employment Agreement on or about 21 August 2023.
508	In respect of the alleged repudiation of the Employment Agreements of Sealey and Vickers‑Willis described above, the Defendants plead that Sealey and Vickers‑Willis were not under a legal obligation to make the pleaded disclosure to the Plaintiffs and no cause of action arises from the non‑disclosures. The Defendants plead that the execution of the agreements and non‑disclosure (assuming those are the repudiations) was not repudiatory conduct.  On that basis, 2nd Chapter could not have accepted the repudiations by their letter dated 23 August 2023.  That letter purported to accept repudiation based on insufficient notice and, at that time, the Plaintiffs were not aware of Sealey and Vickers‑Willis’ new employment at Crestone.  The Plaintiffs cannot as a matter of law rely on conduct of which they were not aware to justify what purported to be an acceptance of a repudiation constituted by entirely different conduct.  
O.2	The evidence
509	On 22 May 2023, Vickers‑Willis received a letter of offer of employment with Crestone.  The offer specified a commencement date of employment of 22 March 2024.  Sealey also received an offer of employment with Crestone on 22 May 2023 which specified the same start date of 22 March 2024.
510	Vickers‑Willis’ evidence is that he decided to resign in mid‑May 2023, just prior to when he received the Crestone offer and negotiated the terms of his contract with Ginnivan.  He says he decided the date of resignation would be by 30 June 2023, so that he and Sealey could assist clients with work associated with the busy end of financial year period. Sealey agrees with this evidence from Vickers‑Willis.
511	By accepting the offers of employment, Vickers‑Willis and Sealey were required to agree with the warranties set out in the offer letters. Those warranties included the following:
You warrant that you are not bound by any legal or other obligation which is inconsistent with you accepting this offer of employment with LGT Crestone or performing your work as an employee of LGT Crestone. In particular, you warrant that;
a. By entering into this Letter and performing your duties under this Letter, you will not be in breach of any agreement with, or obligation owed to, any third party;
b. You are not subject to any restrictive covenant, notice provision, non‑competition or non‑solicitation provision with any former employer or any other agreement or court order that may prevent you commencing or remaining in employment with LGT Crestone or restrict you in the performance of your duties;
c. You have diligently reviewed all copies of your agreements with your former employer to ensure that these warranties are correct…
512	On 23 May 2023, each of Sealey and Vickers‑Willis executed employment agreements and sign‑on bonus agreements with Crestone.  It is common ground that Sealey and Vickers‑Willis did not disclose to the Plaintiffs that they had entered into these employment and sign-on bonus agreements until after the proceeding commenced. 
513	Sealey’s evidence is that he made the final decision to join Crestone in late May 2023 and, until he signed his offer of employment letter with Crestone, he was still considering other possible options.
O.3	Plaintiffs’ Submissions
514	On the question of repudiation, the Plaintiffs say that the following approach is preferable: 
One would ordinarily expect that on a repudiation by the grantor (employee) a restraint clause would survive acceptance of the repudiation and would apply notwithstanding termination, because that is the purpose of a clause which is intended to apply after termination of the contract.  By contrast on a repudiation by the grantee (employer) the presumed intention would ordinarily be that the restraint trade would not survive termination.
515	Whether the clause survives termination is a question of construction of the relevant agreement.  The Plaintiffs say that cl 13.7 expressly provides that the restraints were to survive termination.
516	The Plaintiffs’ case is that 2nd Chapter terminated the Sealey Employment Agreement and the Vickers‑Willis Employment Agreement following the repudiation by Sealey and Vickers‑Willis of those agreements.  That repudiation involved both Sealey and Vickers‑Willis, while each was employed by 2nd Chapter:
(a)	negotiating and entering into employment agreements with Crestone;
(b)	communicating with Crestone about the benefits that would or may accrue to Crestone if it employed either of them; and
(c)	communicating with Crestone about the remuneration and other benefits that would or may accrue to either of them if they were to be employed by Crestone, and if they were able to enhance the economic performance of Crestone’s business, including by generating new business for Crestone.
517	Sealey and Vickers‑Willis did not communicate this information to 2nd Chapter prior to their resignation.  The Plaintiffs submit that this conduct evinces an intention not to be bound by their Employment Agreements with 2nd Chapter.  Those contracts of employment with Crestone provided for each of Sealey and Vickers‑Willis to receive a relatively low salary and relatively high commission, and a significant sign‑on bonus, as long as they met certain revenue targets.
518	The Plaintiffs say that the impugned conduct described above was a clear repudiation of the Employment Agreements, which the Plaintiffs were entitled to accept.  Entry into the employment contracts with Crestone and failing to disclose this, in the Plaintiffs’ submission, constitutes being involved in an activity that created or may create a conflict of interest with 2nd Chapter, Escala Partners, and its clients, in breach of cl 2.5 of the Sealey Employment Agreement and Vickers‑Willis Employment Agreement.  This is a serious and persistent breach of those Employment Agreements.
519	The Plaintiffs say that cl 2.5 expressly refers to being engaged as an employee of another firm as an act that might create a conflict, and the Employment Agreements also stipulate that the employee must immediately notify 2nd Chapter of any prospective conflict that arises.  Because of this, the clause does not require the conflicting employment to have commenced for there to be a breach, if there is no compliance with the requirement for disclosure of the prospect of a conflict.  As soon as the contract is signed, it is inevitable that there is a prospective contract with the competitor, and they will be paid under the contract by reference to how much they earn for that competitor.  Sealey and Vickers‑Willis have signed up to the competition and are committed to starting on a set date, with obligations owing under their new employment contracts and the general law as soon as they start, and before they start under the terms of the contracts.  The Plaintiffs say this is a prospective conflict at the very least.  There is a potential conflict in that it might then be to Sealey and Vickers‑Willis’ benefit not to service their existing clients, because the clients may then become unhappy and leave Escala Partners.  Those same clients, unhappy with their service by Sealey and Vickers‑Willis at Escala Partners, might think that their advisors’ poor service was due to their imminent exit and then elect to follow Sealey and Vickers‑Willis to Crestone.  Counsel for the Plaintiffs says that this potential conflict and turn of events is not speculative, and point to the long‑term relationships and loyalty to which Sealey refers in his Crestone website profile.
520	According to the Plaintiffs, Sealey and Vickers‑Willis’ obligations under their respective Employment Agreements to act in the best interests of Escala Partners would involve servicing their clients and assisting with the transition of clients to other advisors so as to enable Escala Partners to continue receiving revenue flow, and disclosing their departure to Perry and others at 2nd Chapter so as to facilitate a smooth transition for clients.  
521	The Plaintiffs submit that they did not accept the repudiation at the time because they were not aware of it, but this does not preclude subsequent acceptance of the repudiatory conduct.  In this regard, even if 2nd Chapter’s reasons for termination in the 21 August Letter were ‘rolled up’, the Plaintiffs can rely on different grounds based on facts which existed at the time, even if those facts were not known by 2nd Chapter at the time.  The grounds can be relied on to entitle 2nd Chapter to terminate the employment of Sealey and Vickers‑Willis without notice pursuant to cl 13.6.
522	The Plaintiffs say that the repudiation is particularly clear because Sealey had been communicating with Crestone as early as July 2022, less than two months after receiving his third Earn Out payment, leading to the inference that Allen left Escala Partners as part of a pre‑arranged plan to ‘establish a beach head’ at Crestone.  According to the Plaintiffs, after Allen left Escala Partners, clients who were normally serviced by Vickers‑Willis and Sealey began to leave and refer their work to Allen.  The Plaintiffs submit that, as Allen did not give evidence, a Jones v Dunkel inference is available.  The Court can infer that Allen left at the instigation of Crestone, Sealey and Vickers‑Willis to establish this base for Sealey and Vickers‑Willis.  That is said to be the ‘antithesis’ of the obligations in the Employment Agreements.
O.4	Defendants’ Submissions
523	The Defendants say that question nine only arises in certain circumstances, namely:
(a)	if the Court would otherwise find that some or all of the relevant restraints in the Employment Agreements are valid and enforceable because they are reasonable as between the parties and not unreasonable in the public interest;
(b)	by relying on an allegation that Sealey and Vickers‑Willis breached their Employment Agreements by tendering contractually defective resignation notices, 2nd Chapter engaged in repudiatory conduct when it purported to terminate the Employment Agreements on 21 August 2023.  In relying on this repudiatory conduct, Sealey and Vickers‑Willis validly terminated the Employment Agreements; and  
(c)	as a consequence of Sealey and Vickers‑Willis validly terminating their Employment Agreements following the repudiatory conduct of 2nd Chapter, the restraints — which otherwise would have been valid and enforceable — in the Employment Agreement can no longer be relied upon by 2nd Chapter.
524	I shall put to one side the contentions in (b) and (c) above, as I have already determined that these allegations do not fall to be determined in the trial of the stated separate questions.
525	In respect of whether Sealey and Vickers‑Willis repudiated their Employment Agreements, the Defendants accept that the dismissal of an employee may be justified on grounds upon which the employer did not act and of which the employer was unaware when the employee was discharged. 
526	The Defendants submit that Sealey and Vickers‑Willis’ failure to inform 2nd Chapter that they were moving to Crestone is relevant only up until the point of their notice of resignation on 20 June 2023, after which time their move to Crestone was known. 
527	Leaving aside the issue of 2nd Chapter’s alleged repudiation, the Defendants articulate the following issues arising from question nine:
(a)	Issue one: By negotiating to become employed with Crestone, signing an employment contract with Crestone, and then failing to inform 2nd Chapter of these matters until after their notice of resignation, did Sealey and Vickers‑Willis breach the relevant contractual provisions?
(b)	Issue two: If yes to (1), would the breaches have entitled 2nd Chapter to terminate the relevant Employment Agreements?
528	Put shortly, the position of Sealey and Vickers‑Willis is that there was no such repudiatory breach.  Nothing suggests that they were evincing an intention not to fulfil their obligations under their respective Employment Agreements.
529	As to issue one, the Defendants reject the allegation that Sealey and Vickers‑Willis breached terms of their Employment Agreements.  Sealey and Vickers‑Willis admit that they engaged in negotiations and discussions with Crestone prior to signing their contracts with Crestone on 23 May 2023.  They say that they were not required to resign prior to looking for other employment or to disclose to their employer that they were looking for other work or had signed employment contracts with another employer.  Their employment contracts with Crestone provided that their employment would commence on 22 March 2024 (10 months after the contracts were executed).  Merely executing contracts of employment to commence in the future does not constitute embarking on another trade, business or profession or any other business activity.  Because the work would not start for 10 months, there was no conflict of interest or failure to devote best endeavours to promote the business interests of 2nd Chapter or to faithfully and diligently perform their duties.
530	Here, the Defendants point to the statement of the High Court in respect of analogous fiduciary interests that ‘[a]n actual repugnance between his acts and his relationship must be found.  It is not enough that ground for uneasiness as to its future conduct arises’.
531	The Defendants submit that there is no allegation that the negotiations or execution of the Crestone employment agreements took place during business hours or otherwise in a way that prevented Sealey and Vickers‑Willis from doing their work, or took them away from their work, at 2nd Chapter.
532	The Defendants say that the evidence is to the contrary: Sealey and Vickers‑Willis delayed giving notice of their resignation because they wanted to service clients through to the end of the financial year, as this was an important and busy time for the business.
533	As to issue two, the Defendants submit that if there was a breach by reason of the impugned conduct, it was not a serious or persistent breach because the employment was not due to start for another 10 months, and so there was no ability of 2nd Chapter to terminate their respective Employment Agreements without notice.  Moreover, there is no evidence about the consequences to 2nd Chapter of Sealey and Vickers‑Willis not disclosing that they had negotiated and then executed contracts of employment with Crestone.  
534	Further, the Defendants reject the Plaintiffs’ argument at paragraph 519 that Sealey and Vickers‑Willis created a conflict of interest or potential conflict of interest because they entered into employment contracts with Crestone, due to commence in March 2024.  When Sealey and Vickers‑Willis signed their contracts, they were still employed by 2nd Chapter, they did not have employment obligations to Crestone, and it was contemplated that Sealey and Vickers‑Willis would terminate their employment with 2nd Chapter prior to commencing employment at Crestone.  There is no conflict or prospective conflict because it was never envisaged that they would be engaged by both Crestone and 2nd Chapter at the same time.
O.5	Consideration
535	I agree with the Defendants’ submission that two issues arise here, as set out in paragraph 527 above.  
536	Pursuant to cl 2.5 of the Employment Agreements, Sealey and Vickers‑Willis agreed not to undertake any other trade, business or profession or be involved in any activity, which creates or may create a conflict of interest.  As was noted by the Plaintiffs, this clause included an express reference to being engaged as an employee. 
537	I do not accept the Plaintiffs’ contention that by negotiating employment with Crestone, signing an employment contract with Crestone, and then failing to inform 2nd Chapter of these matters until after their notice of resignation, Sealey and Vickers‑Willis breached the terms of their employment contracts.  Rather, I accept the Defendants’ submissions on this point.  Merely executing a contract of employment to commence in the future does not constitute embarking on another trade, business or profession or any other business activity.  No conflict of interest existed at this stage.
538	Clause 2.5 also contains a requirement that, should a prospective conflict of interest arise, the relevant employee notify 2nd Chapter of the conflict in order to obtain written permission to engage in the interest or activity.  I accept the Plaintiffs’ submission that this clause does not require the conflicting employment to have commenced for there to be a breach.  However, I do not accept that as soon as the contract is signed, it is inevitable that a prospective conflict will arise.  That may have been the case if, for example, the employee planned that their employment with 2nd Chapter and new interest or activity would overlap.  That is not this case.
539	I do not find the Plaintiffs’ submissions on the topic of prospective conflict to be at all persuasive.  For example, I find it highly unlikely that either Sealey or Vickers‑Willis could start neglecting their Escala Partners clients but that those same clients would elect to follow the two to Crestone, having surmised that the poor service they received was due to Sealey and Vickers‑Willis’ imminent exit.  Especially in the context of the relatively sophisticated and high-net-worth client base of Escala Partners, it appears unlikely that clients who begin to experience poor service would move firm to follow the very same people who provided the poor service.   These submissions were highly speculative and are contrary to common sense; I reject them.  
540	The Plaintiffs submit that Sealey and Vickers‑Willis had obligations under their respective Employment Agreements to act in the best interests of 2nd Chapter, which would involve servicing their Escala Partners clients and assisting with the transition of clients to other advisors.  However, the Plaintiffs have adduced no evidence that Sealey or Vickers‑Willis failed to act otherwise than in the best interests of the company or that they refused to assist in a transition process.
541	I accept Sealey’s evidence that he continued to work for Escala Partners in order to service clients’ needs through the end of the financial year, that he ensured that detailed and complete status notes were entered into Escala Partners systems for all clients, and that he sought direction from Perry as to how to comply with his obligations on resignation.  This evidence was supported by Vickers‑Willis.
542	I do not accept the Plaintiffs’ suggestion at paragraph 520 that Sealey and Vickers‑Willis ought to have told their current employer as soon as they signed their contracts with Crestone, and have provided a month’s notice to facilitate a smooth transition.  This seems to me to be a spurious argument, which mischaracterises the notices provided by both Sealey and Vickers‑Willis to their employer.  I consider that both intended to serve out their notice period rather than to cease their employment immediately on tendering their resignations, and the fact that they continued to be paid their entitlements, along with enquiries they made to Perry about next steps, supports my view.  Sealey and Vickers‑Willis properly gave notice of their resignation and, pursuant to their Employment Agreements, there was a three‑month notice period during which 2nd Chapter could direct their cooperation in the transition to new clients.  That they were not involved in this way was a decision made by 2nd Chapter.  It is hard to see how things would have changed had Sealey and Vickers‑Willis flagged an intention to resign a month earlier than they did; they would likely have been put straight onto gardening leave at that time.  I do not see how this would have facilitated a smooth transition as I do not think that Perry would have been any more willing to involve the exiting advisors in the transition process if he was told a month earlier of their intention to exit.  As noted earlier, Perry’s evidence regarding involving Sealey in transitioning the clients was unequivocal.  This argument simply does not go anywhere. 
543	The Plaintiffs say that the repudiation is particularly clear because Sealey had been communicating with Crestone as early as July 2022.  However, I do not consider that this has any bearing on whether a conflict did or was likely to arise.  The critical factor is that Sealey and Vickers‑Willis were not set to commence their employment with Crestone until 10 months after the contracts were executed.  The date at which negotiations commenced has little if any bearing on this.  Further, the Plaintiffs’ repeated allegation that Sealey and Vickers-Willis had facilitated Allen’s exit so as to provide a beach head for their future arrival at Crestone went nowhere.  The Plaintiffs adduced no evidence in support of it and the allegations were denied by Sealey and Vickers-Willis in cross-examination.  These allegations amounted to little more than unfounded insinuations.  Allen is a party to this proceeding and his affidavit was not read and he did not give evidence, so it is possible to infer that his evidence on this topic may not have assisted Sealey and Vickers-Willis.  However, the Plaintiffs never made it clear how this allegation, which is not made in section E.3 of the 2FASOC, was relevant to or affected consideration of this question nine.
544	In my view, Sealey and Vickers-Willis have not breached their Employment Agreements in the manner alleged in section E.3 of the 2FASOC.  Nor have they evinced an intention, by virtue of that conduct, no longer to be bound.  In signing contracts of employment with Crestone, it is tolerably clear that Sealey and Vickers‑Willis intended to terminate the Employment Agreements in the future.  This does not amount to evincing an intention no longer to be bound as soon as that decision was made.  They were entitled, under the Employment Agreements, to terminate those agreements in accordance with their terms.  Exercising their rights under the Employment Agreements, or evincing an intention to do so, is not repudiatory conduct.  Further, there was no renunciation of their employment.  To the contrary, the evidence is that Sealey and Vickers-Willis continued to perform work under their Employment Agreements up until they handed in their respective notices of resignation.  Thus the question of repudiation does not arise.
545	Even if the conduct alleged in section E.3 of the 2FASOC constituted a breach of the Employment Agreements, I am not satisfied that this constitutes a repudiatory breach.  The Plaintiffs’ submissions on this point seemed to conflate breach and repudiation.
546	Accordingly, the answer to question nine is: No, neither Sealey nor Vickers-Willis repudiated their Employment Agreements as alleged in section E.3 of the 2FASOC. 
P	Conclusion
547	From the findings made above, the Court answers the questions before it as follows:
(a)	Question one: Are any of the restrictive covenants set out in cl 20.2 to 20.6 of the SPA enforceable against any or all of Sealey, Vickers‑Willis, Terrung and JCVW?  If so, which restrictive covenants are enforceable and to what extent?  No, none of the relevant restraints are enforceable.
(b)	Question two: Are any of the restrictive covenants set out in sections 3.2 to 3.6 of the Management Deed enforceable against either or both of Sealey and Vickers‑Willis?  If so, which restrictive covenants are enforceable and to what extent?  No, none of the relevant restraints are enforceable.
(c)	Question three: Are any of the restrictive covenants set out in cl 20.2 to 20.5 of the SHA enforceable against any or all of Sealey, Vickers‑Willis, Terrung and JCVW?  If so, which restrictive covenants are enforceable and to what extent?  No, none of the relevant restraints are enforceable.
(d)	Question four: Are any of the restrictive covenants set out in cl 13.5 of the Sealey Employment Agreement enforceable?  If so, which restrictive covenants are enforceable and to what extent?  No, none are enforceable.
(e)	Question five: Are any of the restrictive covenants set out in cl 14.1 of the Sealey Employment Agreement enforceable?  If so, which restrictive covenants are enforceable and to what extent?  No, none are enforceable.
(f)	Question six: Are any of the restrictive covenants set out in cl 13.5 of the Vickers‑Willis Employment Agreement enforceable?  If so, which restrictive covenants are enforceable and to what extent?  No, none are enforceable.
(g)	Question seven: Are any of the restrictive covenants set out in cl 14.1 of the Vickers‑Willis Employment Agreement enforceable?  If so, which restrictive covenants are enforceable and to what extent?  No, none are enforceable.
(h)	Question eight: Are any of the restrictive covenants set out in cl 14.1 of the Allen Employment Agreement enforceable?  If so, which restrictive covenants are enforceable and to what extent?  No, none are enforceable. 
(i)	Question nine: Whether Sealey or Vickers‑Willis has repudiated the Sealey Employment Agreement or Vickers‑Willis Employment Agreement, respectively, as alleged in section E.3 of the 2FASOC? Neither Sealey or Vickers‑Willis has repudiated the Sealey Employment Agreement or Vickers‑Willis Employment Agreement, respectively, as alleged in section E.3 of the 2FASOC.
548	By 4:00pm on 13 November 2024:
(a)	the parties are to confer and provide my Chambers with a proposed form of order to give effect to these reasons, including as to costs; or
(b)	if the parties are not able to agree on the form of order, then each party is to provide their preferred form of order to my Chambers.
549	If sub-paragraph (b) applies, then the proceeding will be listed for 10:00am on 15 November 2024 for the making of orders, including as to costs.

SCHEDULE OF PARTIES

		
	S ECI 2023 04506	

BETWEEN:		

2ND CHAPTER PTY LTD (ACN 631 879 439)	First Plaintiff 	
		
FOCUS ESCALA HOLDINGS, LLC	Second Plaintiff	
		
FOCUS FINANCIAL PARTNERS, LLC	Third Plaintiff	
		
ESCALA PARTNERS PTY LTD (ACN 155 884 236)	Fourth Plaintiff	
		
‑ and - 		
		
PAUL STUART SEALEY	First Defendant	
		
JONATHAN CHARLES VICKERS‑WILLIS	Second Defendant 	
		
TERRUNG INVESTMENTS PTY LTD (ACN 163 610 517) 
AS TRUSTEE FOR SEALEY INVESTMENT TRUST	Third Defendant	
		
J C VICKERS‑WILLIS PTY LTD (ACN 616 679 102) 
AS TRUSTEE FOR THE VICKERS‑WILLIS FAMILY TRUST	Fourth Defendant	
		
WILLIAM ALLEN	Fifth Defendant	

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