Australia, Aug. 2 -- New South Wales Land and Environment Court issued text of the following judgement on July 1:

1. HIS HONOUR: Between 8 June 2023 and 8 August 2024, there was a mass departure of 36 personnel from the Australian professional services partnership conducted by the plaintiffs (EY), 6 of whom were partners including the second-sixth defendants (individual defendants), with all being employed by the first defendant (A&M), a global competitor of EY that had announced intention to operate in Australia from late October 2022.

2. The remaining partners of EY were, in the circumstances outlined below, not happy about the departure both in terms of loss of personnel and potential loss of clients. They contend that the individual defendants have breached partnership regulations and assert they may be entitled to make claims for relief against A&M and one or more of the individual defendants for engaging in wrongful conduct. [1]

3. Fairy tale analogies, much less fairy tale endings, are not generally the vernacular readily invoked in contested litigation involving international tax firms. Yet the "Goldilocks Zone" was parlance deployed [2] by EY's senior counsel to explain a dilemma in the case. Put simply, he contends that EY knows enough to be concerned but not enough to make a sensible and informed decision about whether or not to commence substantive proceedings against the defendants. [3]

4. In Goldilocks [4] terms, he contends that EY's knowledge (a word which I note rhymes with porridge) "is just right", allowing for a fairly broad scope of "temperature". [5] In Southey's original story, the porridge of Wee Bear being "just right" was a close to ideal state, but did not satiate the old Woman as the little porridge-pot "did not hold enough for her". [6] Unlike Goldilocks, but like the old woman, EY wants more information or knowledge. Pressing the literary porridge theme imperfectly further, essentially EY comes to the Court, a little like Oliver Twist [7] saying "Please sir, I want more [gruel]", [8] i.e. here the request is for more knowledge.

5. Consequently, EY have sought to navigate out of the "zone" by making an application for preliminary discovery to address the lacuna in knowledge and to make an informed decision. Needless to say, EY's application is opposed.

Parties

6. The plaintiffs are the partners of EY, a professional services partnership, governed by a partnership agreement with places of business in all Australian States and territories, other than Tasmania. [9] As at 3 July 2024, EY had 734 partners in Australia. [10]

7. For the purposes of the application before the Court, it was common ground that the partners of EY and relevantly the individual defendants were each bound by the terms of the Firm Partners' Agreement Australia dated 1 July 2020 (PA) which (without attempting to be precise) imposed contractual obligations inter alia in relation to solicitation of the staff and clients of EY, non-compete clauses in relation to undertaking business the same or similar in nature to the work undertaken while a partner at EY, and prohibitions on use of confidential information belonging to EY. [11]

8. Pursuant to the PA, the first named plaintiff, David Larocca (Mr Larocca), as the Country Managing Partner, has all powers and responsibilities relating to EY, subject to limited carve-outs. He also has the ability to delegate his powers. [12]

9. EY is relevantly structured such that there are 5 service lines being relevantly (1) Assurance including Audit; (2) Consulting; (3) Strategy and Transactions; (4) Tax & Law (T&L); and (5) Core Business Services (CBS). The first four service lines are integrated client facing services and the fifth (CBS) performs internal functions. [13]

10. In addition to those service lines, EY has an Asia-Pacific Financial Services Organisation (FSO) market segment which provides services to clients in banking, capital markets, insurance, wealth and asset management only. [14] FSO operates across all 5 of the above-mentioned service lines. [15]

*Rest of the document can be viewed at: (https://www.caselaw.nsw.gov.au/decision/197bf03fedd8c49031c91208)

Disclaimer: Curated by HT Syndication.