The recent decision of the New South Wales Supreme Court in Global Risk Alliance Group Services Pty Ltd v Harmer [2024] NSWSC 79, is a useful example of the statutory duties of employees under the Corporations Act 2001 (Cth) (the Corporations Act) in relation to their employer and in some cases, other companies within the corporate group of the employer.

Additionally, the case provides a useful distinction between whether a person is an employee or officer of a company and the statutory duties which attach to each of those roles under the Corporations Act.

The Facts

The first plaintiff, Global Risk Alliance Group Services Pty Ltd (Global Risk Alliance) and the second plaintiff, Aerosafe Risk Management Pty Ltd (Aerosafe) are members of a group of companies known as the Global Risk Alliance Group (the GRA Group), which provide risk management services to its clients. Aerosafe is the main operating entity of the GRA Group and has the primary responsibility for entering into and servicing contracts with clients whereas Global Risk Alliance’s role is to employ staff and engage contractors who work for other members of the GRA Group.

The defendants, Mr Harmer, Mr Binks and Mr Dillion were each employed by Global Risk Alliance and had the primary responsibility of servicing certain contracts held by Aerosafe with the Australian Navy.

In 2016, Mr Harmer, Mr Binks and Mr Dillon actively took steps to divert those contracts with the Australian Navy from Aerosafe to a competitor, in which Mr Dillon had a personal financial interest. These steps included:

1. In relation to Mr Dillion:
   1. advising key personnel in the Australian Navy that he intended to leave the GRA Group and would be available to undertake similar work for the competitor;
   2. recruiting employees of the plaintiffs (including Mr Harmer and Mr Binks) and accessing Aerosafe’s records in order to do so;
   3. concealing from Aerosafe a request for quotation and tasking statement (Quotation Request) provided by the Australian Navy;
   4. preparing a tender submission on behalf of the competitor in response to the Quotation Request and drawing on knowledge gained through Aerosafe’s previous work in order to do so;
   5. assuring the Plaintiffs that he was working on ensuring that the contracts with the Australian Navy would roll over for a further term; and
   6. taking steps to advance the interests of the competitor, in which he had a personal financial interest.
2. In relation to Mr Harmer and Mr Binks:
   1. communicating (through Mr Dillion) to key personnel of the Australian Navy that they would be leaving Aerosafe and would be immediately available to undertake work of a similar nature for the competitor;
   2. assisting Mr Dillion in taking steps to have contracts for future work with the Australian Navy awarded not to Aerosafe but to the competitor;
   3. concealing the Quotation Request from Aerosafe;
   4. providing personal instead of Aerosafe email addresses to the competitor in relation to the contracts with the Australian Navy; and
   5. attending meetings with the competitor in relation to the Australian Navy contracts without reporting the same to Aerosafe.

The complexity for Global Risk Alliance arose in circumstances where Mr Harmer, Mr Binks and Mr Dillion were each employed by Global Risk Alliance, however, Aerosafe was the entity with the entitlement to the benefit of the contracts with the Australian Navy.

Therefore, whilst the actions of Messres Harmer, Binks and Dillions were in clear breach of their employment contracts with Global Risk Alliance, as Global Risk Alliance did not hold the contracts with the Australian Navy, it did not suffer damage because of the defendant’s actions.

Issues for Determination

The Court therefore had to determine whether the defendants were:

1. employees of Aerosafe, whether under their employment contracts or otherwise; and
2. officers of Aerosafe, as that term is defined in the Corporations Act.

Were the defendants employees of Aerosafe?

Justice Nixon found that although the employment contracts of each of the defendants described an intragroup administrative arrangement between Global Risk Alliance and Aerosafe, this did not mean Aerosafe was the employer.

Instead, Justice Nixon pointed to the clear and unambiguous language of the employment contract which stated, “Employing Entity: Global Risk Alliance Group” and upheld that contract term so that only Global Risk Alliance was entitled to sue the defendants for breach of the employment contracts.

Were the defendants officers of Aerosafe?

The Plaintiffs alleged that Mr Dillion and Mr Harmer were officers of Aerosafe pursuant to section 9(b) of the Corporations Act.

Section 9(b) of the Corporations Act states that an officer of a company includes a person who:

• makes, or participates in making, decisions that affect the whole, or a substantial part of the business of the corporation; or
• who has the capacity to affect significantly the corporation’s financial standing; or
• in accordance with whose instructions or wishes the directors of the corporation are accustomed to act …

In applying the above definition to the role performed by Mr Dillion, Justice Nixon found that Mr Dillion was indeed an officer of Aerosafe. Justice Nixon reached this decision based on the following facts:

1. Mr Dillion was one of three individuals in the executive leadership team, who were the only reports to the director;
2. Mr Dillion participated in decision-making which affected Aerosafe’s operations;
3. Whilst the sole director of Aerosafe was on long service leave, Mr Dillion ran the day-to-day operations of Aerosafe and was the acting Chief Executive Officer;
4. Mr Dillion had a key role in managing Aerosafe’s engagement and relationship with important clients, which had the capacity to affect Aerosafe’s financial standing.

This finding can be compared to Justice Nixon’s determination that Mr Harmer was not an officer of Aerosafe. Although Mr Harmer had held a role in the executive leadership team prior to 2016, at the time of the diversion of the Australian Navy contracts, Mr Harmer had been demoted and a majority of his responsibilities were transferred to other employees. Therefore, Nixon J found that in the relevant period Mr Harmer did not make decisions that affected the whole or substantial part of Aerosafe or significantly effect Aerosafe’s financial standing.

Statutory duties of employees of a company

Employees have an obligation under sections 182 and 183 of the Corporations Act to not use their position, or information gained from their position as an employee to:

1. gain an advantage for themselves or someone else; or
2. cause detriment to the corporation.

As Mr Dillion, Mr Harmer and Mr Binks were each found to be employees of Global Risk Alliance, Aerosafe did not have recourse against the defendants under those provisions.

Whilst Global Risk Alliance was successful in proving that the defendants actions were in contravention of sections 182 and 183 of the Corporations Act, its claim failed as there was no damage caused to Global Risk Alliance due to the defendant’s diversion of contracts from Aerosafe to a competitor.

Statutory duties of officers of a company

Officers of a company owe the duties set out in sections 180 to 183 of the Corporations Act, which include duties to act in good faith and with care and diligence as well as the duties imposed on employees, as descried above.

In circumstances where Mr Dillion was found to be an officer of Aerosafe, Justice Nixon found that by his conduct, Mr Dillion had:

1. breached his duty to act in good faith in the best interests of Aerosafe and for a proper purpose as required by section 181 of the Corporations Act; and
2. improperly used his position to seek to gain an advantage for himself or someone else or to cause detriment to Aerosafe, in contravention of section 182 of the Corporations Act.

Conclusion

Global Risk Alliance Group Services Pty Ltd v Harmer [2024] NSWSC 79 is an important reminder to employers and employees alike of when an employee’s and/or company officer’s statutory duties arise and whether a company may seek recourse for improper employee behaviour when its business operates through a multi-company group structure.