Application of Principles
182It will be necessary to examine each of the projects or transactions in respect of which MWP has made claims in the light of the principles outlined above. That examination will be assisted by first stating some propositions relevant to the circumstances of the present case.
183First, each of the appellants has been found to have committed serious and deliberate breaches of the fiduciary duties they owed to MWP. They include the breaches by Mr Nicholls and Mr Slater of the no profit and no conflict rules set out in detail by the primary Judge (at [65] above). Those two individuals took advantage of their position within MWP to establish TIL and TSL. Neither could have been established but for the breaches of their fiduciary duties, including their knowing participation in Mr Emmott's breaches. They assisted Mr Emmott in diverting work from MWP to the new entity, which initially relied entirely on revenue from that work. They used the resources of MWP to set up TIL and TSL and used MWP's resources to facilitate their work on behalf of TIL's clients (including supervision of their work by Mr Emmott). Mr Slater dishonestly sent copies of confidential documents to his own email address relating to transactions in respect of which MWP was already acting. The resignations of Messrs Slater, Nicholls and Emmott from MWP were prompted by their desire to acquire business opportunities available to MWP and were part of the "master plan" to divert clients to TIL. Mr Slater and Mr Nicholls were well aware that Mr Emmott's conduct in sending work to TIL while he remained at MWP involved a conflict between his personal interest and his duties to MWP. But for the breaches of duty relating to the Chilsai Phosphate Project, Urals Gold and Kangamiut, TIL could not have been established.
184Secondly, the reasoning in Canadian Aero suggests that if a partner or employee of a firm owes fiduciary duties to the firm and resigns in order to take advantage of a maturing business opportunity actively pursued by the firm, the obligation not to usurp that opportunity for his or her own benefit survives the departure of the partner or employee from the firm. Mr Walker preferred to rely on Canadian Aero for the proposition that breaches of fiduciary duty prior to the departure may have continuing consequences after the departure, rather than relying on the decision to support findings that the individual appellants and Mr Emmott continued to breach their fiduciary duties to MWP after they left the firm. However the point is put, Canadian Aero supports MWP's case that Mr Emmott's departure from MWP (by his resignation on 30 June 2006) cannot mark out the temporal limited of the appellants' liability to pay equitable compensation for their breaches of fiduciary duty. The individual appellants and Mr Emmott all left MWP in order to take advantage of the business opportunities "purloined" (to use Mr Walker's word) from MWP.
185Thirdly, as O'Halloran v Thomas and Warman v Dwyer demonstrate, the appellants' causation argument requires the Court to consider what MWP's position would have been had the appellants not breached their fiduciary duties to MWP. In fact Mr Slater left the firm on 9 January 2006, Mr Nicholls on 1 March 2006 and Mr Emmott on 30 June 2006. Mr Walker acknowledged that the fiduciary duties owed by these three to MWP did not require them to retain their association with MWP indefinitely. They were free to resign at any time in accordance with the terms of their respective contracts. Mr Emmott, for example, could have given six months notice on 30 June 2006 of his intention to resign. Giving such notice would not, of itself, have breached his fiduciary duties to MWP.
186Even a failure by Mr Emmott to give the contractually required period of six months notice to MWP would not necessarily have involved a breach of his fiduciary duties to the firm. If he had resigned purely for family reasons, for example, he may have breached his contract, but he would not have breached the no conflict or no profit duties he owed to MWP as a fiduciary. But in this case the primary Judge found that Mr Emmott resigned with immediate effect in order to enable him to divert to TIL transactions on which he had worked at MWP for his own benefit. Similar findings were made in relation to Mr Slater and Mr Nicholls.
187In considering what would have occurred had the individual appellants and Mr Emmott not breached their fiduciary duties, the appellants cannot take as the starting point their resignations from MWP in breach of those very duties. It must be assumed that, had they not breached their fiduciary duties, all three would have given the requisite period of notice under their respective contracts. There is no evidence to support a finding that, had there been no breaches of fiduciary duty, they would have left the firm in any event without giving the appropriate periods of notice.
188Mr Walker pointed out that the individual appellants did not give evidence that if they had not purloined work from MWP, they would have resigned when they did (with or without notice). The absence of such evidence, given their denials of any wrongdoing, is hardly surprising. However, I do not think that it is realistic or a proper inference from the evidence to assume that if the appellants had not breached their fiduciary obligations to MWP, they would simply have continued their association with MWP indefinitely. Nor is there a basis for finding that they would have continued that association for a particular period of time before giving the contractually required periods of notice. If anything is clear, it is that the appellants were alive to the commercial opportunities presented by their association, principally through Mr Emmott, with Mr Sinclair and Mr Schoonbrood.
189The objective facts suggest that the likelihood is that if the appellants were not prepared to breach their fiduciary duties, they still would have sought to benefit from their association with Mr Sinclair and Mr Schoonbrood by severing their connections with MWP. They would have taken the necessary steps as soon as they could lawfully do so.
190Each of the individual appellants and Mr Emmott in fact terminated his connection with MWP at various times during the first half of 2006. Each could have taken commercial advantage of their association with Mr Sinclair and Mr Schoonbrood by severing his connection with MWP, but in a manner which involved no breach of his fiduciary or other duties to MWP. Thus each of the appellants and Mr Emmott could have given the contractually required period of notice on the date that he in fact left or indicated his irrevocable intention to leave MWP. Each would have been obliged to refrain from any conduct during the period of notice that would breach his fiduciary duties to MWP. Those duties would include refraining from knowingly assisting Mr Emmott during his required period of six months notice from breaching his own fiduciary duties to MWP.
191Once Mr Emmott's period of notice expired, the appellants, acting in concert with Mr Emmott, could have established TIL or any other entity for the purpose of providing legal and other services to Mr Sinclair, Mr Schoonbrood or their various companies. Thereafter, they could have accepted work on other commercial opportunities offered, without solicitation, by Mr Sinclair or Mr Schoonbrood. Doing so would not have breached their fiduciary duties to MWP.
192I accept Mr Walker's submission that the appellants cannot resist MWP's claim for equitable compensation on the ground that if they had not breached their fiduciary duties to MWP as they did, they would have achieved the same result by breaching their duties in some other way. However, I think that MWP's entitlement to equitable compensation should be assessed by reference to what was likely to happen if the appellants severed their association with MWP (as each of them did), but without breaching their fiduciary duties. On this basis, the appropriate starting point, for the purpose of quantifying MWP's losses by reason of the appellants' breaches of fiduciary duty, is to assume that the individual appellants and Mr Emmott would have given the periods of notice contractually required on the dates each of them resigned (or, in Mr Slater's case, simply failed to return to work).
193Had Mr Emmott given the notice required by his contract, he would have remained subject to the no conflict and no profit duties identified by the primary Judge for a period of six months from 30 June 2006 (the date he in fact resigned). During that period, whether or not Mr Emmott was actively working on matters at MWP, he could not, consistently with his fiduciary obligations, have diverted to TIL any transactions or matters in respect of which MWP had already been retained. Indeed, he could not have taken steps during that period to set up or assist in setting up TIL or any other entity intended to compete with MWP for the custom of MWP's clients, much less utilised MWP's resources to do so.
194Mr Slater and Mr Nicholls were required to give shorter periods of notice (three months in each case). But while they would have been free to pursue other opportunities after giving the appropriate notice, they could not have assisted Mr Emmott to breach his fiduciary duties to MWP for as long as he owed such duties. It would not have been open to them, for example, to accept work that they knew Mr Emmott had diverted from MWP during the time Mr Emmott was serving out his notice with that firm. Nor, during this period could they have performed remunerative work on behalf of their own clients while being supervised by Mr Emmott.
195Fourthly, the primary Judge found that the very establishment of TIL involved Mr Emmott, Mr Slater and Mr Nicholls in breaches of their respective fiduciary duties to MWP. Moreover, TIL derived all revenue in its first months of operation from work diverted to it from MWP.
196Had Mr Emmott not been in breach of his fiduciary duties, he could not have set up or taken steps to set up TIL as a potential competitor to MWP until he had at least given and served out the period of notice required by his contract of employment. The establishment of TIL as a viable competitor to MWP required the partners to acquire and fit out premises, engage staff and presumably comply with any applicable local regulatory requirements. It can be inferred from his Honour's findings that the steps required to establish TIL as a going concern would have taken some time to organise. If Mr Emmott could not have been involved in the process until he had served out his period of notice, it is reasonable to infer TIL could not have commenced operations for at least one month after Mr Emmott's period of notice had expired. It is appropriate to approach the assessment of equitable compensation on this basis.
197Fifthly, irrespective of the principle stated in Canadian Aero, certain fiduciary and other duties owed to MWP by the individual appellants and Mr Emmott would have survived termination of their relationship with MWP. For example, it is likely that MWP could have prevented the appellants and Mr Emmott from utilising confidential information obtained in the course of duties performed by them on behalf of MWP. Mr Slater and Mr Nicholls agreed in their respective contracts of employment that, if they left MWP, they would not solicit or make offers to any of MWP's clients and would not work on any projects or developments in which they were involved, without MWP's consent. In addition to these contractual obligations they may have had fiduciary duties of a similar nature which survived the termination of their employment or association with MWP.
198Sixthly, since MWP's entitlement to equitable compensation involves consideration of what would have occurred had the appellants not breached their fiduciary duties to MWP, it is necessary to take account of the primary Judge's findings concerning Mr Schoonbrood and Mr Sinclair. Mr Schoonbrood only instructed MWP because he wanted Mr Emmott to work on his transactions. He would not have retained or continued to retain MWP had Mr Emmott not been associated with the firm (as is demonstrated by his termination of MWP's retainer in late June 2006 (see at [70]-[71] above)). Mr Sinclair also instructed MWP because he wanted Messrs Emmott, Slater and Nicholls to work on his projects regardless of the identity of the firm with which they were associated. Mr Sinclair would not have retained or continued to retain MWP but for Mr Emmott's association with that firm. Indeed, Mr Sinclair stated unequivocally in his evidence that he did not want Mr Wilson involved in any of his transactions, including the Chilisai Phosphate Project. In other words, Mr Sinclair, like Mr Schoonbrood, wished to instruct whichever firm Mr Emmott worked with. Both gave evidence, accepted by the primary Judge, that Mr Emmott and the individual appellants had not solicited their work, presumably because there was no need to do so.
199The courts have made it clear that ordinarily it is not appropriate to speculate as to what a wrongdoer would have done had he or she not yielded to the temptation to prefer personal interest over duty. The facts are usually within the knowledge of the wrongdoer and in any event involve "matters of surmise" based on an assumed state of facts: Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134, at 154, per Lord Wright; Furs Ltd v Tomkies [1936] HCA 3; 54 CLR 583, at 592-593, per Rich, Dixon and Evatt JJ. However, the findings made about the attitudes and likely conduct of Mr Sinclair and Mr Schoonbrood form part of the circumstances of the present case that must be taken into account.
200As Warman v Dwyer illustrates, the finding in a particular case as to what would have occurred had no breach of fiduciary duty taken place requires the objective facts to be taken into account. In Warman v Dwyer it was the fact that the supplier would have terminated the agency agreement at an early stage independently of any breach of fiduciary duty by the defendant. In the present case, neither Mr Schoonbrood nor Mr Sinclair would have instructed or continued to instruct MWP once Mr Emmott terminated his association with the firm. Moreover, each would have instructed TIL (or any other entity established by Mr Emmott) as soon as Mr Emmott was prepared to accept instructions from them and they required no solicitation to give those instructions.