Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Nicholls & Ors v Michael Wilson & Partners Ltd [2012] NSWCA 383 Hearing dates: 25, 26 July 2012; 17, 28 August 2012 (further written submissions) Decision date: 28 November 2012 Before: Meagher JA at [1] Barrett JA at [2] Sackville AJA at [3] Decision: 1. The parties file agreed short minutes of order within 14 days, including provision for interest, costs and any other outstanding issues. 2. In the absence of agreed short minutes, the appellants file and serve their draft short minutes of order and brief submissions in support within 14 days. 3. The respondent file and serve its draft short minutes of order and brief submissions in support within a further 14 days. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: EQUITY - equitable compensation for breach of fiduciary duties by employees and consultants - assessment after remitter of case by High Court to Court of Appeal - fiduciaries deliberately breached duties by diverting opportunities for legal work from a legal and consulting firm in Kazakhstan to their own firm and by knowingly assisting in other breaches of fiduciary duty - principles governing assessment of equitable compensation for lost opportunity to perform legal work and to receive financial rewards for involvement in projects - need to establish causation - significance of fiduciaries' resignation from firm in order to further their wrongful conduct - extent to which plaintiff is entitled to rely on the presumption against wrongdoers where there are gaps in the evidence. EVIDENCE - admissibility of expert report - report estimates legal work likely to be performed on particular projects and fees or other rewards likely to be derived by the firm performing the work - whether expert's opinion met the requirements of s 79 of the Evidence Act 1995 - whether opinions shown to be based on the expert's specialised knowledge - whether report should be given any probative weight. Legislation Cited: Evidence Act 1995 Cases Cited: Armory v Delamirie (1722) 1 Stra 505; 93 ER 664 Barnes v Addy (1874) LR 9 Ch App 244 Beach Petroleum NL v Kennedy [1999] NSWCA 408; 48 NSWLR 1 Canadian Aero Service Ltd v O'Malley [1974] SCR 592; 40 DLR (3d) 371 Canson Enterprises Ltd v Broughton & Co (1991) 85 DLR (4th) 129 Edmonds v Donovan (2005) 12 VR 513 Environment Agency v Empress Car Co (Abertillery) Ltd [1998] 2 WLR 350 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; 230 CLR 89 Furs Ltd v Tomkies [1936] HCA 3; 54 CLR 583 Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; 56 NSWLR 298 Houghton v Immer (No 155) (1997) 44 NSWLR 46 Maguire v Makaronis (1997) 188 CLR 449 McKenzie v McDonald [1927] VLR 134 Michael Wilson and Partners Ltd v Nicholls [2011] HCA 48; 282 ALR 685 Michael Wilson and Partners Ltd v Nicholls [2009] NSWSC 1033 Michael Wilson and Partners Ltd v Nicholls [2009] NSWSC 1377 Mordecai v Mordecai (1988) 12 NSWLR 58 Nicholls v Michael Wilson & Partners Ltd [2010] NSWCA 222 Nocton v Lord Ashburton [1914] AC 932 O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 Re Dawson (dec'd) [1966] 2 NSWR 211 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 Swindle v Harrison [1997] 4 All ER 705 Target Holdings Ltd v Redferns [1996] 1 AC 421 Warman International Ltd v Dwyer [1995] HCA 18; 182 CLR 544 Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; 212 CLR 484 Texts Cited: I E Davidson, "The Equitable Remedy of Compensation" (1982) 13 Melbourne University Law Review 349 R Meagher, D Heydon and M Leeming, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies 4th ed (2002) LexisNexis Butterworths W M Gummow, "Compensation for Breach of Fiduciary Duty" in J G Youdan, Equity, Fiduciaries and Trusts (1989) Category: Principal judgment Parties: Robert Colin Nicholls (First Appellant and First Cross-Respondent) David Ross Slater (Second Appellant and Second Cross-Respondent) Temujin Services Limited (Third Appellant and Third Cross-Respondent) Temujin International Limited in its own capacity and as trustee of the Temujin Trading Trust (Fourth Appellant and Fourth Cross-Respondent) Temujin International FZE (Fifth Appellant and Fifth Cross-Respondent) Michael Wilson & Partners Limited (Respondent and Cross-Appellant) Representation: Counsel: G O Blake SC, G W McGrath SC and S Adair (Appellants) B Walker SC, M Walton SC and D F C Thomas (Respondent) Solicitors: Henry Davis York (Appellants) Clayton Utz (Respondent) File Number(s): 2009/298561 Decision under appeal Citation: Michael Wilson & Partners Ltd v Nicholls [2009] NSWSC 1033 Michael Wilson & Partners Ltd v Nicholls [2009] NSWSC 1377 Before: Einstein J File Number(s): SC 2006/50151 Judgment 1MEAGHER JA: I agree with the orders and directions proposed by Sackville AJA for the reasons his Honour gives. 2BARRETT JA: I agree with Sackville AJA. 3SACKVILLE AJA: On 1 December 2011, the High Court allowed an appeal from orders made by this Court on 15 September 2010 setting aside declarations and orders made by the primary Judge (Einstein J). The High Court remitted the matter to this Court for further consideration of certain grounds in the amended notice of appeal filed by the appellants and of the cross-appeal filed by the respondent: Michael Wilson & Partners Ltd v Nicholls [2011] HCA 48; 282 ALR 685. 4The principal issue debated on the remitted appeal is the correctness of the primary Judge's award of equitable compensation to the respondent by reason of the appellants' now uncontested breaches of fiduciary duty. The case is unusual because the respondent, Michael Wilson & Partners Ltd ("MWP"), is an entity which carried on a legal practice and business consultancy in Kazakhstan and the appellants' breaches of fiduciary duty mostly occurred in that country. The outcome of the appeal, however, depends on the application of the law of New South Wales to the particular facts. COURSE OF THE LITIGATION Supreme Court Proceedings 5MWP instituted the proceedings in the Supreme Court. The defendants (appellants in this Court) were Mr Nicholls, Mr Slater and several corporations associated with them. The corporations included Temujin International Ltd ("TIL"), Temujin Services Ltd ("TSL") and Temujin International FZE ("TFZE"). At the time the proceedings were commenced, Mr Nicholls and Mr Slater were Australian citizens and residents. 6Mr Nicholls and Mr Slater were employed by MWP until early 2006. MWP alleged, among other things, that Mr Nicholls and Mr Slater breached their contractual and equitable duties to MWP; conspired with a member of the firm, Mr Emmott, to divert clients and business opportunities from MWP to their own companies, particularly TIL; induced Mr Emmott to breach his own contractual obligations to MWP; and knowingly assisted Mr Emmott to breach his fiduciary duties to MWP. Mr Emmott, who left MWP in mid-2006, was not a party to the Supreme Court proceedings, but was a party to an arbitration in London in which MWP sought relief against him. 7The trial of MWP's claims in the Supreme Court took place over 32 hearing days between 12 June 2009 and 10 September 2009. The primary Judge delivered two judgments. The first, handed down on 6 October 2009, recorded his Honour's findings and concluded that MWP was entitled to elect "as between ultimate forms of relief on the sundry causes of action upheld in the reasons": Michael Wilson and Partners Ltd v Nicholls [2009] NSWSC 1033. The second judgment, handed down on 11 December 2009 dealt with the remedies to which MWP was entitled: Michael Wilson and Partners Ltd v Nicholls [2009] NSWSC 1377. I shall refer to the first judgment as the "Liability Judgment" and the second as the "Remedies Judgment". 8In the result, Einstein J dismissed the proceedings against one of the defendants (Temujin Holdings Ltd ("THL")), but upheld MWP's claims against Messrs Nicholls and Slater and TIL, TSL and TFZE. His Honour granted declaratory relief and made orders that all five defendants pay compensation or damages to MWP. The compensation and damages primarily related to work done by TIL for and benefits obtained by TIL from entities associated with Mr Schoonbrood and Mr Sinclair, both of whom had instructed MWP. 9In the case of Mr Nicholls, declarations were made that he: * acted in breach of various fiduciary duties owed to MWP (Declarations 1 and 2); * was liable under the so-called second limb of the rule in Barnes v Addy (1874) LR 9 Ch App 244, in respect of Mr Emmott's breaches of fiduciary duties (Declarations 3 and 4); * acted in breach of several of his contractual duties to MWP (Declaration 5); * committed the tort of inducement of breach of contract with respect to Mr Emmott's breaches of his contractual duties to MWP (Declaration 6); and * was liable for conspiracy to injure MWP by unlawful means (Declaration 7). 10The primary Judge, in reliance on Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; 230 CLR 89, at [160], said (at [273]) that the second limb of Barnes v Addy: "makes a defendant liable if that defendant assists a trustee or fiduciary with knowledge of a dishonest and fraudulent design on the part of the trustee or fiduciary". 11In addition to declaratory relief, the primary Judge ordered that: "in consequence of: (i) the ... breaches by [Mr Nicholls] of equitable obligations owed to [MWP]; (ii) the ... breaches by [Mr Nicholls] of contractual duties owed to [MWP]; (iii) commission by [Mr Nicholls] of the ... tort of inducement of breach of contract with respect to Emmott's breaches of his contractual duties; [Mr Nicholls] is jointly and severally liable with [Mr Slater, TIL, TSL and TFZE] to pay to [MWP] the sums of $US3,508,793.91, €555,258.94 and [AUD] 4,000,000.00." 12Similar declarations and orders were made against Mr Slater. 13Declarations were made that TIL, TSL and TFZE were liable under the second limb of Barnes v Addy in respect of the breaches of fiduciary duty by Messrs Nicholls, Slater and Emmott. In addition, declarations were made that they had induced Mr Emmott to breach his contractual duties to MWP. Each of the companies was ordered to pay MWP the same amounts as Messrs Nicholls and Slater were ordered to pay. The Appeal 14The defendants against whom declarations and orders were made ("the appellants") appealed to this Court on numerous grounds. The grounds of appeal included the following (using the numbering in the amended notice of appeal): (1) The primary Judge should have disqualified himself on the ground of a reasonable apprehension of bias. (2) The primary Judge should have declined relief because the litigation lacked a territorial connection with New South Wales. (3) The primary Judge wrongly imposed on the appellants the onus of proving the identity and content of applicable law and thus incorrectly applied the law of New South Wales to various causes of action, rather than the law of Kazakhstan. (4) The proceedings were an abuse of process by reason of the London arbitration between MWP and Mr Emmott. (5) The primary Judge failed to give adequate reasons for his decision. (6-9) The primary Judge erred in making certain findings as to credit and as to the fiduciary obligations of the appellants. (10) The primary Judge made numerous erroneous factual findings. (11-15) The findings as to liability were erroneous. Furthermore, the primary Judge ought to have found that there was no causal connection between the appellants' wrongful conduct (if any) and such loss or damage as may have been sustained by MWP. (16-20) The award of equitable compensation, insofar as it related to fees or benefits concerning specific projects, failed to take into account the evidence of Messrs Sinclair and Schoonbrood, principals of the clients which had instructed MWP and (later) TIL. (Their evidence, in substance, was that they did not wish to engage or be associated with Mr Wilson and only engaged MWP because of their pre-existing association with Mr Emmott. Nor had Mr Emmott solicited their business.) Moreover, the award of AUD 4 million as equitable compensation was arbitrary and bore the character of punitive or exemplary damages. (21) The primary Judge erroneously admitted into evidence the report of Mr Schilling, a Canadian lawyer practising in Romania, who was said to have experience in providing legal services to developing market economies. His report was tendered by MWP in support of its claim for equitable compensation and damages, but according to the appellants was inadmissible. (22) The orders made by the primary Judge could not stand because they were inconsistent in material respects with the award made in the London arbitration. 15The Court of Appeal (Basten and Young JJA, Lindgren AJA) allowed the appeal on two independent grounds: Nicholls v Michael Wilson & Partners Ltd [2010] NSWCA 222. In substance these were the following: * A fair minded lay observer might reasonably have apprehended, by reason of what occurred in several interlocutory applications made to the primary Judge by MWP without notice to the appellants, that his Honour might not have brought an impartial and unprejudiced mind to the resolution of the issues in the trial. * The institution and prosecution of the proceedings in the Supreme Court constituted an abuse of process, since MWP had sought relief in the arbitration proceedings for substantially the same breaches of fiduciary duty. The Supreme Court proceedings were therefore a form of collateral attack on the arbitrator's findings. 16The Court of Appeal made orders for a further hearing of the proceedings in the Equity Division, subject to a direction that the trial not commence until the conclusion of the London arbitration. As a consequence, the Court was not required to deal with MWP's cross-appeal on the quantum of damages and equitable compensation. Thus the cross-appeal was dismissed, but not on the merits. 17Although the appeal was upheld on the grounds of apprehension of bias and abuse of process, members of the Court of Appeal addressed other issues. Lindgren AJA (with whom Basten and Young JJA agreed on this issue) rejected (at [335]) the appellants' contention that the primary Judge had erred in placing the onus on them of proving the content of foreign law. Lindgren AJA also rejected the appellants' contention that MWP's equitable claims were to be determined otherwise than in accordance with New South Wales law, as the law of the forum (at [342], [346]). 18Young JA (with whom Lindgren AJA agreed on these issues) expressed his opinion on three matters. First, in his view (at [140]), there were good reasons why the primary Judge ought not to have made declarations in favour of MWP. In any event, Young JA considered that the declarations made by the primary Judge were deficient in form. 19Secondly, Young JA said (at [145]) that the primary Judge had incorrectly assumed that having assessed equitable compensation for the appellants' breaches of fiduciary duty, he did not need to consider separately the questions of damages for the torts of inducing breach of contract or conspiracy to injure by unlawful means. Young JA pointed out (at [147]-[149]) that the principles governing the assessment of equitable compensation and common law damages for the same basic wrongful act are not necessarily identical. 20Thirdly, Young JA criticised the approach taken by the primary Judge to the assessment of equitable compensation, in particular the award of $4 million which was said to be in respect of MWP's loss of fees or business opportunities. The primary Judge justified the award as a "robust" assessment of equitable compensation. Young JA commented (at [179]) that: "[t]he word 'robust' in this context does not give judges liberty to 'think of a number', nor does it allow exemplary damages to be awarded under some other name". 21Young JA also identified what he described as an additional "error" in the primary Judge's assessment of equitable compensation. The error was (at [186]): "[the] failure to consider whether the gains made by the appellants could have been earned by [MWP]. This was particularly significant in view of the evidence that two of the clients involved [Messrs Sinclair and Schoonbrood] gave firm evidence accepted by the primary judge that they would not have retained MWP to act for them in any event". Young JA observed (at [188]) that he had made his comments for the "guidance" of the parties and the Judge conducting the rehearing required by the orders of the Court of Appeal. The Appeal to the High Court 22The High Court granted MWP special leave to appeal from the decision of the Court of Appeal and unanimously allowed the appeal. The Court held that there could be no reasonable apprehension that the primary Judge was biased and, further, that the proceedings did not constitute an abuse of the process of the Supreme Court: MWP v Nicholls, at [5], per Gummow ACJ, Hayne, Crennan and Bell JJ; at [118]-[119], per Heydon J. 23The High Court made orders: * setting aside the orders of this Court; * remitting the matter for further consideration of specific grounds of appeal, namely grounds 5(b)-(c), 6-15, 17(b)-(d), 18, 20 and 21 of the amended notice of appeal; and * providing that the costs of the appeal to the Court of Appeal were to be in the discretion of the Court. 24The orders made by the High Court disposed of the appellants' arguments based on alleged apprehension of bias and abuse of process. In addition, the orders limited the grounds of appeal available to the appellants at the remitted hearing in this Court. In particular, the orders precluded the appellants relying on their contentions relating to choice of law or the alleged lack of territorial connections with New South Wales. The Resumed Appeal Narrowing of Issues 25The appellants' supplementary written submissions, belatedly filed on the eve of the resumed hearing in this Court, indicated that they did not press a number of the remitted grounds of appeal. A document handed up by the appellants at the conclusion of the hearing recorded that only the following grounds of appeal were pursued: 5(c), 6, 7, 10(e), 13-15, 17(b), (c), 18(a), (b),(i),(ii),(iii),(v), 18(c), 20 and 21. 26I shall summarise the appellants' arguments later in this judgment. It is sufficient to note here that they no longer dispute the credit findings made by the primary Judge. Nor do they dispute the findings that MWP made out the pleaded causes of action against the appellants. The remaining issues in dispute concern the assessment of MWP's entitlement to equitable compensation by reason of the appellants' breaches of fiduciary duty. No issue arises on the appeal in relation to damages for MWP's common law causes of action, since MWP relies only on its entitlement to equitable compensation. Conduct of the Appeal 27The belated filing of the appellants' supplementary submissions, meant that the members of the Court had to read written submissions in advance of the hearing, significant portions of which turn out no longer to be relevant to the appeal. Moreover, at no stage have the appellants prepared revised and consolidated written submissions limited to the arguments ultimately relied on by them. Since original written submissions cannot be readily related to those arguments, the task of preparing a judgment has been made substantially more difficult than it should have been. The purposes of written submissions include a clear identification of the remaining issues and a succinct presentation of the arguments advanced in relation to those issues. If the written submissions do not achieve those objectives, their value is diminished, if not eliminated. 28Exemplifying the difficulties that the appellants' approach has created, the Orange Book as filed included a schedule of 105 pages listing the findings of the primary Judge challenged by the appellants and MWP's response to each challenge. The appellants' supplementary submissions did not incorporate a revised schedule of challenges to factual findings. A revised schedule was ultimately prepared at the request of the Court and handed up during the second day of the appeal. It is 13 pages in length. 29A further major difficulty in the conduct of the appeal concerns the report prepared by Mr Schilling. Mr Schilling was asked, among other things, to give his opinion as a lawyer with experience of practice in emerging legal markets, as to the total fees and disbursements he would reasonably have expected to be billed for certain projects on which MWP or TIL (or both) had performed work. The primary Judge relied heavily on Mr Schilling's report to assess the quantum of equitable compensation to which MWP was entitled. An important issue in the appeal was whether Mr Schilling's report (or sections of it) had been correctly admitted into evidence or had been given undue weight. 30The Blue Books prepared for the appeal included those parts of Mr Schilling's report said to have been admitted into evidence. The version of the report reproduced in the Blue Books had some portions crossed out because, so this Court was told, the primary Judge had ruled that those portions were inadmissible. Other sections of Mr Schilling's report were not reproduced in the Blue Books. Counsel for both parties apparently assumed that the sections not reproduced had not been admitted into evidence and the argument proceeded on that assumption. 31In the course of oral argument, members of the Bench expressed puzzlement as to the form of the report and the apparent absence of material supporting Mr Schilling's opinions. Neither party suggested at the hearing that the evident gaps in the report were due to mistakes in the preparation of the appeal books. 32After the hearing concluded, the solicitors for MWP forwarded a folder of documents which purported to provide answers to queries raised by the Bench in the course of oral argument. The "response to the Court's queries" informed the Court that substantial sections of Mr Schilling's report admitted into evidence had not been reproduced in the Blue Books. MWP asserted that: "[i]t is plain that this Court cannot properly evaluate Mr Schilling's evidence whilst it is incomplete". MWP also asserted that Mr Schilling's opinions had been based in part on "transaction summaries" about which some evidence had been given. No reference had been made to these transaction summaries in argument. Nor was any explanation given for the omissions from the Blue Books, other than that an incorrect version of Mr Schilling's report had been reproduced. MWP's response then proceeded, without leave, to supplement the arguments already put by new arguments based, in large part (but not entirely), on the material omitted from the Blue Books. 33This unfortunate development necessitated a post-hearing directions hearing. The parties were directed to file further written submissions as to the admissibility of Mr Schilling's report in the form admitted into evidence. These submissions were duly filed, along with a consolidated version of Mr Schilling's report in the form in which it was in fact admitted into evidence. Naturally the filing of supplementary submissions has delayed the preparation of this judgment. BACKGROUND Overview 34The judgment of the plurality in the High Court recounts the nature of the proceedings and the history of the litigation. It is convenient to reproduce that account here (MWP v Nicholls, at [6]-[16] and [20]-[26], per Gummow ACJ, Hayne, Crennan and Bell JJ). It will be recalled that the respondents to the High Court appeal are the appellants in this Court and were the defendants in the proceedings determined by the primary Judge. "The parties 6. ... [MWP] was incorporated in the British Virgin Islands. MWP was controlled by Michael Earl Wilson, who described himself as a 'corporate transaction lawyer'. At the times relevant to this matter, MWP practised as a law firm and [on the primary Judge's findings] a business consultancy in the Commonwealth of Independent States [an association of states that had been constituent republics of the Union of Soviet Socialist Republics] from offices in Kazakhstan. 7. In December 2001, MWP made an agreement with John Forster Emmott, an English and Australian solicitor, that Mr Emmott would join MWP as a director and shareholder with effect from January 2002. They agreed that 'in effect' MWP would 'operate as a quasi-[p]artnership between them'. The agreement provided that each party should have and would observe 'the usual partnership obligations and duties to each other'. 8. From 24 April 2004 until 1 March 2006, the first respondent (Mr Nicholls, an Australian barrister) was employed by MWP as a senior associate or, as he described himself, a 'senior expatriate lawyer'. From 1 September 2005 to 9 January 2006, the second respondent (Mr Slater, an Australian solicitor) was employed by MWP as an associate. 9. By the end of June 2006, Messrs Nicholls, Slater and Emmott had all left MWP. Mr Slater did not return to work from annual leave he took from 21 December 2005; Mr Nicholls left employment on 1 March 2006; by letter dated 30 June 2006, Mr Emmott gave notice terminating his agreement with MWP with immediate effect. 10. The third, fourth and fifth respondents ('the Temujin companies') are companies that, at the relevant times, were associated directly or indirectly with some or all of Messrs Nicholls, Slater and Emmott ... [TIL] operated as a business adviser, agent and arranger, and provided legal services. Two of the Temujin companies (TIL and [TSL]) were incorporated in the British Virgin Islands; the third ([TFZE]) was incorporated in a Free Trade Zone in the United Arab Emirates. ... 11. MWP alleged that each of Messrs Nicholls, Slater and Emmott, separately and together, furthered his or their own interests at the expense of MWP. A central allegation was that Messrs Nicholls, Slater and Emmott had conspired together to divert, and had in fact diverted, clients and business opportunities away from MWP to their own benefit by having one or more of the Temujin companies act for the clients in question or by taking advantage of business opportunities that would otherwise have gone to MWP. Arbitration and action 12. MWP sought relief in several different jurisdictions. The persons and entities MWP sued were located in different places. The principal proceedings brought by MWP were an arbitration in London against Mr Emmott and the proceedings in the Supreme Court of New South Wales against Messrs Nicholls and Slater, the Temujin companies and ... other defendants ... 13. MWP served a notice of arbitration on Mr Emmott in August 2006; it commenced the New South Wales proceedings against Messrs Nicholls and Slater and others in October 2006 ... 14. The London arbitration between MWP and Mr Emmott was instituted in accordance with an arbitration clause contained in the agreement those parties had made. Because Messrs Nicholls and Slater and the other defendants in the New South Wales proceedings were not parties to that (or any other) arbitration agreement with MWP they could not be added as parties to the arbitration between MWP and Mr Emmott. 15. After MWP had commenced its action in New South Wales against Messrs Nicholls and Slater and others, it invited Mr Emmott to consent to being joined as a party to the New South Wales action. Mr Emmott declined that invitation ... 16. Because MWP had made the agreement it had with Mr Emmott, the controversy between MWP and those who it alleged had acted together to harm MWP was to be resolved as to part in one venue (the London arbitration) and as to part in another (the Supreme Court of New South Wales). Although MWP alleged that Mr Emmott had breached fiduciary duties he had owed it, and that Messrs Nicholls and Slater and the corporate defendants in the New South Wales proceedings were liable to MWP because, among other things, they had knowingly assisted Mr Emmott in those breaches, MWP could not have those complaints heard and determined by the one process, whether arbitral or curial. ... The nature of the claims made by MWP 20. MWP alleged that Mr Emmott had acted in breach of contractual and fiduciary obligations he owed to MWP. It claimed, in the London arbitration, an account of the profits Mr Emmott had made from what it characterised as clients and work he had diverted from MWP to his own benefit. MWP claimed damages for breach of contract, and compensation for the loss occasioned to it by Mr Emmott's breach of fiduciary duties. It appears likely that at some point in the London arbitration MWP also claimed that there should be a general accounting between it and Mr Emmott (in effect, an accounting as between partners) but on the basis of wilful default by Mr Emmott. That was the relief the arbitrators granted. 21. In the New South Wales proceedings, MWP alleged that Messrs Nicholls and Slater had acted in breach of their contractual and fiduciary obligations and had knowingly assisted Mr Emmott in his breaches of his fiduciary obligations. MWP claimed (among other relief) damages, compensation and an account of profits. 22. There was substantial but not exact overlap between the allegations made in both proceedings. ... The course of the London arbitration and the New South Wales proceedings 23. ... [N]otice of arbitration was given on 14 August 2006 and the New South Wales proceedings were commenced on 9 October 2006. Hearing of the arbitration (on issues of liability only) commenced on 10 November 2008 and concluded on 24 February 2009; trial of the New South Wales proceedings on all issues began on 15 June 2009 and concluded on 10 September 2009. 24. The primary judge ... made final orders granting MWP substantially the relief it had claimed ... 25. On 14 December 2009, the present respondents gave notice of appeal to the Court of Appeal of the Supreme Court of New South Wales. 26. On 22 February 2010, the London arbitrators published, as their 'Second Interim Award', an interim award on questions of liability. That award held that Mr Emmott was liable to MWP in some but not all of the respects in which Einstein J had found Messrs Nicholls and Slater liable to MWP for knowingly assisting in Mr Emmott's breaches of his fiduciary obligations. In particular, the arbitrators found that some of the clients taken from MWP would not have stayed with MWP once Mr Emmott had left, because they did not want to deal with Mr Wilson. Accordingly, the arbitrators gave MWP no relief against Mr Emmott in respect of the loss of those clients. By contrast, Messrs Nicholls and Slater were held liable in the New South Wales proceedings to compensate MWP in amounts that included an assessment of the value of the lost opportunity for MWP to continue to deal with those clients." Relationship Between Supreme Court Proceedings and the Arbitration 35Having regard to the limited issues remaining in the litigation, it is not necessary to refer in detail to the reasoning of the High Court, which in substance dealt with other questions. However, some observations made by the plurality in rejecting the contention that the Supreme Court proceedings were an abuse of process bear on the remaining issues. 36Their Honours pointed out (at [100]) that all of the abuse of process contentions had a common starting point, namely that: "any liability of the respondents to MWP for knowingly assisting Mr Emmott in the breach of his fiduciary duties was limited by the nature and extent of the relief MWP sought and obtained in the arbitration of its claims against Mr Emmott." This starting point assumed that the liability of the appellants was no more than "ancillary, or co-ordinate with" Mr Emmott's liability. 37The plurality gave three reasons for rejecting the starting point: * First, MWP could not recover compensation for more than it had lost (at [101]). The appellants and Mr Emmott had an equity to prevent enforcement of an award or judgment against them where to do so would lead to double recovery. Moreover, as between Mr Emmott and the appellants the doctrine of contribution would regulate the ultimate allocation of the burden of satisfying MWP's claims. * Secondly, the fact that the award made in the London arbitration required a general accounting between MWP and Mr Emmott did not mean that MWP was barred from pursuing to judgment claims against persons who allegedly knowingly assisted Mr Emmott in the breach of his fiduciary duties (at [102]-[103]). The bare fact of the award did not constitute satisfaction of Mr Emmott's liability to MWP. Whether the appellants would have an equity to prevent enforcement of the judgment against them would depend on whether MWP's claims for compensation had been satisfied. * Thirdly, the abuse of process submissions overlooked the nature of the claims made by MWP in the Supreme Court proceedings. They included not only claims for knowingly assisting Mr Emmott in breaches of his fiduciary duty, but claims based on the torts of conspiracy and procuring breach of contract. The tortious claims did not require proof that Mr Emmott had breached his fiduciary obligations. Pursuit of those claims in New South Wales could not be said to be an abuse of process. 38The plurality identified a "more fundamental reason" why the abuse of process argument was flawed. Their Honours explained the flaw this way (at [105]-[106]): "105. ... No matter how the allegation of abuse of process was formulated, the allegation depended upon treating the liability of the respondents as necessarily confined by the extent of Mr Emmott's liability to MWP. This was said to be because the respondents' liability to MWP was no more than accessorial to the principal wrongdoing of Mr Emmott. That is not so. The claims against the respondents, as knowing assistants, were not dependent upon the claims made against Mr Emmott in the fashion asserted by the respondents. 106. As MWP rightly pointed out, this Court has held that liability to account as a constructive trustee is imposed directly upon a person who knowingly assists in a breach of fiduciary duty. The reference to the liability of a knowing assistant as an 'accessorial' liability does no more than recognise that the assistant's liability depends upon establishing, among other things, that there has been a breach of fiduciary duty by another. It follows, as MWP submitted, that the relief that is awarded against a defaulting fiduciary and a knowing assistant will not necessarily coincide in either nature or quantum. So, for example, the claimant may seek compensation from the defaulting fiduciary (who made no profit from the default) and an account of profits from the knowing assistant (who profited from his or her own misconduct). And if an account of profits were to be sought against both the defaulting fiduciary and a knowing assistant, the two accounts would very likely differ. It follows that neither the nature nor the extent of any liability of the respondents to MWP for knowingly assisting Mr Emmott in a breach or breaches of his fiduciary obligations depends upon the nature or extent of the relief that MWP obtained in the arbitration against Mr Emmott." THE PRIMARY JUDGMENTS Liability Judgment 39Although the liability of the appellants is no longer in contest, the findings of the primary Judge as to the nature of the appellants' breaches are important on the question of equitable compensation. It is thus necessary to recount in some detail the analysis and findings of the primary Judge. Some factual findings are contested by the appellants and these will be dealt with later. MWP's Case 40The primary Judge summarised MWP's case as follows (at [21]-[22]): "21. [MWP's] case is that before, during and after the occasions when Messrs Slater, Nicholls and Emmott left the employ of MWP, sundry activities were engaged in by each of these persons which constituted wrongdoing of the kind pleaded [by MWP] ... [MWP's] conspiracy case is that the whole of the staged departures by these persons from the employ of MWP was carefully planned. [MWP's] case is that during the period from about 19 December 2005, TIL with the assistance and cooperation of THL and Mr Shaikenov [a principal of Shaikenov & Partners LLP, which had an office in Almaty] assisted, procured and solicited Messrs Nicholls, Slater and Emmott to: (i) prefer the business and interest of TIL and Shaikenov to the business and interests of MWP; (ii) compete with the business of MWP; (iii) divert clients and contacts of MWP to become clients and contacts of TIL and Shaikenov; (iv) solicit staff, consultants ad [sic] other personnel and cause them to act in breach of their contract and obligations to MWP; (v) divert fee and other income, remuneration and compensation from MWP to themselves, TIL, THL and Shaikenov at the expense of MWP; (vi) wrongly provide, make available for use and disclose confidential, copyright and privileged data, documents and information belonging to MWP and its clients. 22. The case is that Mr Emmott continued with MWP and during the period when he alone had not yet departed from his employ with MWP, his activities involved his having one foot in his employers [sic] camp and the other foot squarely planted in the business activities in which [unknown to MWP] he already had an interest and to which he would migrate once he left MWP." (Emphasis in original.) (The Shaikenov interests were not joined as parties to the proceedings because of difficulties in serving them.) The Parties and their Relationships 41MWP was a law firm offering legal services and a business consultancy in Kazakhstan, the Central Asian and Caucasus Region, Russia and Ukraine (at [1]). Mr Nicholls was a senior associate of MWP from 24 April 2004 to 1 March 2006; Mr Slater was an associate from 1 September 2005 until 9 January 2006; and Mr Emmott was a director of MWP from 7 January 2002 until 20 July 2006 (at [2]). 42The primary Judge made findings (at [20]) as to the successive departures of Messrs Slater, Nichols and Emmott from MWP: * Mr Slater simply failed to return to work on 19 January 2006, following a period of annual leave. Before leaving, Mr Slater sent from MWP's email account to his own account a "considerable number of important documents". His failure to return to work constituted a unilateral resignation. * On 31 January 2006, Mr Nicholls gave one month's notice of his intention to resign. His last day of employment was 1 March 2006. * Mr Emmott purported to resign with immediate effect on 30 June 2006, by leaving a letter on Mr Wilson's desk when Mr Wilson was away from Almaty, Kazakhstan's largest city. 43The primary Judge identified (at [27]) a number of matters illustrating the difficulties faced by MWP in its endeavours to pursue the appellants, particularly TIL. These included the following: * the sole director of TIL was a Mr Vasquez, but he played no part in the proceedings; * Messrs Slater, Nicholls and Emmott described themselves as "consultants" to TIL, but produced no documentation relating to their consultancies; * Mr Slater described himself in correspondence as a director of TIL, but gave evidence that he was not in fact a director; * evidence as to TIL's activities was given by Messrs Slater, Nicholls and Emmott, but their role as "consultants" was "vague"; and * none of the consultants gave evidence of TIL's earnings or profitability. 44An essential part of MWP's business involved the structuring of investments in Kazakh energy and mineral assets for listing on a public stock exchange (at [36]). The fee structure often included a success fee or commission component, including an opportunity to take an equity investment (at [37]). 45Mr Wilson left legal practice in England in 1998 to establish MWP (at [40]). Mr Nicholls, an Australian lawyer, was employed by MWP as a senior associate in April 2004 (at [42]). Mr Slater, a solicitor admitted to practice in New South Wales, commenced his employment on 1 September 2005 (at [44]). 46Mr Emmott is admitted to practice in England and New South Wales. He and MWP entered into a written agreement whereby he agreed to become a director and full-time employee of MWP as from 7 January 2002. He was subject to the usual partnership obligations of co-operation, disclosure and good faith in carrying on MWP's business (at [46]). The agreement provided that: "their fundamental strategy is to create the leading independent legal and business consultancy firm, not only in Kazakhstan, but also throughout the Region". 47It was agreed that MWP would "function and operate as a quasi-Partnership between [the Parties]" and that Mr Emmott would have a 33 per cent profit sharing interest. Mr Emmott and MWP agreed to co-operate in order to "develop and enhance the business of MWP in the Region and shall not compete in any manner whatsoever". Mr Emmott agreed to bring with him to MWP all clients and matters relating to Kazakhstan and the region in which he was involved as instructed. Either party was entitled to terminate the agreement on six months notice (at [47]-[48]). 48Mr Nicholls and MWP entered into a contract of employment on the basis of the terms set out in a letter of offer he was asked to sign in March 2004 (at [83]). The terms of employment required him to "maintain strict confidentiality as to all matters" and to give three months notice if he wished to leave MWP. He also agreed that if he left MWP he would not: "approach, solicit or make offers to any of our contacts, clients or staff and will not seek to work on any projects or developments in which we are involved, without our prior consent." 49Mr Slater's contract of employment was very brief, but included provisions similar to those in Mr Nicholl's contract (at [91]). 50TIL was incorporated in the British Virgin Islands ("BVI") on or about 19 December 2005, with Mr Slater as the sole shareholder (at [27]). Mr Shaikenov, the legal principal of Shaikenov & Partners LLP which had an office in Almaty, attended to the incorporation at Mr Slater's request. From about 28 March 2006, Mr Slater was the general director of TIL's branch office in Kazakhstan. Curiously enough, as already noted, the sole director of TIL was a Mr Vasquez, who played no part in the proceedings. TIL was the trustee of the Temujin International (Trading) Trust (at [52]). 51TSL was incorporated in the BVI on about 8 March 2006 by Messrs Nicholls, Slater and Emmott. Mr Slater described it in his evidence as a functioning law firm, which would also introduce opportunities to investors and take a fee for such introductions (at [51]). 52TFZE was incorporated in the United Arab Emirates (UAE) on 8 March 2006. It provided financial and other services to TIL and clients in the UAE. Mr Nicholls was the manager of TFZE and held all shares in the company on trust for TIL (at [53]-[54]). Credit Findings 53The primary Judge made the following findings as to credit: * Mr Wilson had a reasonable recollection of events and, with limited exceptions, could be regarded as a witness of truth (at [221]); * Mr Nicholls was a "difficult witness" whose evidence had to be very carefully checked against contemporaneous documentation before it could be accepted (at [222], [231]); * Mr Slater was a witness whose credit could not be accepted save as corroborated by contemporaneous documentation or other reliable evidence; indeed, except insofar as it was corroborated, Mr Slater's evidence was "worthless" (at [232], [237]); * Mr Schoonbrood was a reliable witness (at [244]); and * Mr Sinclair was a witness of credit despite adopting a fairly partisan approach (at [270]). The Breaches 54Towards the end of September 2005, Mr Slater drafted a proposal for a business arrangement (at [96]). The proposal contemplated the incorporation of a company in the BVI, which would act as an "arranger" to clients of MWP (at [97]). The role of arranger accurately described much of the work undertaken by MWP in Kazakhstan and elsewhere in central Asia (at [98], [104]). 55The company was to be the trustee of a trust, the beneficiaries of which would be Messrs Wilson, Emmott and Slater or their nominees (at [99]). Any proposed payment by shares for the provision of services by MWP would be directly transferable to the off-shore entity (at [100]). 56The primary Judge considered the circumstances surrounding the creation of the proposal to be "suspicious" (at [102]). Although it was drafted only a month after Mr Slater joined MWP, he was named as an equal beneficiary of the trust (at [103]). Mr Slater's evidence was that he showed the proposal to Mr Wilson, but his Honour rejected that claim (at [105]). The business proposal in fact had many similarities to a Co-operation Agreement subsequently entered into by Messrs Emmott, Slater and Nicholls (at [107]). 57The primary Judge found that a series of meetings occurred in the second half of November and early December 2005 to discuss a new venture. The participants were, variously, some or all of Messrs Emmott, Nicholls, Slater, Shaikenov and Kachshapov (the last being a proposed financier of the new venture) (at [110]-[121]). The result was that a series of agreements were signed on 20 December 2005 at a meeting kept secret from Mr Wilson. The agreements were: * a Co-operation Agreement to which Messrs Emmott, Nicholls, Slater and Shaikenov were parties; * a Service Agreement between TIL and Shaikenov LLP; * the Temujin International (Trading) Trust Deed (which was apparently never activated); and * a facility between TIL and a company controlled by Mr Kachshapov (at [125]). 58The primary Judge found that: * although the Co-operation Agreement was drafted in a form that suggested that the parties could "elect" to participate in the new Temujin venture, it was intended to be immediately binding (at [128]); * a strange feature of the Co-operation Agreement was that it anticipated that it would make profits from its first month of operation, an assumption Mr Slater could not justify in his evidence (at [129]); * the projected cash flow prepared by Mr Slater anticipated the arrival of Mr Nicholls in March 2006 and Mr Emmott in July 2006 (at [131]); and * the Co-operation Agreement was deliberately drafted in a way to suggest that Messrs Nicholls and Emmott were not bound to join the new venture but this was an attempt to "disguise what really was an immediate partnership involving each of Messrs Nicholls, Slater and Emmott" (at [132]). 59In December 2005, Mr Slater sent seven emails to his newly opened Gmail address attaching copies of documents relating to the Karamandybas (Roxi), Chilisai and Urals Gold transactions (at [136]). MWP was acting in relation to these transactions at the time (at [137]). Mr Slater then systematically deleted the emails from MWP's system. These were not the actions of an honest man (at [138]). 60The primary Judge found (at [141]) that: "The combination of Mr Slater's forwarding of MWP documents to his private Gmail address, the deletion of the emails from MWP's servers and the forecast of immediate profits arising from Temujin indicate in the strongest terms that the defendants intended to secretly deploy MWP's clients in their own interests." 61When Mr Slater left Almaty on 21 December 2005, he created the impression that he was merely going on holidays. He in fact went to Helsinki where he met with Mr Rassmussen of Kangamiut Seafoods, later a client of TIL (at [142]-[146]). Mr Slater returned to Almaty on 7 January 2006 and commenced TIL's operations on 9 January 2006 from Shaikenov LLP's offices (at [148]). 62Mr Wilson became suspicious about Mr Slater's activities from January 2006 onwards, but Mr Emmott gave evasive answers to Mr Wilson's inquiries and endeavoured to "cover the tracks of the master plan" (at [150], [154]). Moreover, Mr Nicholls was fully aware of Mr Emmott's intention to resign from MWP on 30 June 2006 (at [160]-[166]). Mr Nicholls himself "abruptly resigned" on 1 March 2006 as part of the appellants' "cloak and dagger" tactics (at [155]). 63The primary Judge found (at [169], [178]) that: "169. Mr Emmott was highly involved in the affairs of [TIL] after it was established and whilst he was still working at MWP and that Mr Slater was fully aware of Mr Emmott's involvement. ... 178. [T]he position which [Mr Emmott] held with MWP was entirely antithetic to the activities which, following the departure of Mr Slater and then Mr Nicholls, he was secretly undertaking.... Mr Emmott's role was 'leading the transactions'. Mr Sinclair left it entirely to Mr Emmott to use whatever lawyers he chose to assist him. These activities were in flagrant breach of his relevant fiduciary obligations." 64The primary Judge enumerated (at [179]) twelve duties to which Mr Emmott was subject as a senior lawyer and a director of MWP. These included a duty to resign his office as soon as he had formed an irrevocable intention to engage in a competitive business, provided the business did not exploit confidential information or business opportunities available to Mr Emmott by virtue of his position in MWP. 65The primary Judge found (at [182]) that from the time of the Co-operation Agreement until Mr Emmott left MWP, he was in "flagrant breach" of his fiduciary obligations to MWP. His Honour identified these (at [180]) as: * the "no conflict duty", not to enter into any engagement in which he had a personal interest that conflicted with MWP's interests; * the "no profit duty", not to obtain for himself or a related third party a profit by means of a transaction in which he was concerned on behalf of MWP, unless all material facts were disclosed to MWP and approved by a general meeting; * the "duty of loyalty"; * the "no harm duty", not to inflict harm on MWP in furthering his own interests or those of a competitor of MWP; and * the "duty of confidence". 66The primary Judge repeated (at [182]) his earlier finding that: "Mr Emmott from around the time when the Cooperation Agreement came to be made and up until and indeed after he left MWP to join [TIL] was in flagrant breach of these fiduciary obligations. ... Mr Emmott was really the backbone of the plot which had been hatched and likely played the dominant role in every step of [TIL's] initial and ongoing activities." 67An analysis of TIL's bank accounts justified the following findings (at [189]-[190]): "189. TIL was established entirely on the basis of income derived from former clients of MWP and an interest free loan made by Horizon Services [Mr Kachshapov's company] of $US200,000.00. The loan has been repaid by TIL from earnings also derived from income earned from former MWP clients (as featured in Temujin Holdings' Euro account). 190. Secondly, save for minor items, the bank accounts [to 20 November 2006] derived disclosed by [TIL] only show income derived from former MWP clients, the very clients that MWP in these proceedings say are the subject matter of the allegations made against the [appellants]." Mr Schoonbrood and his Projects 68Mr Schoonbrood was the Chief Executive Officer of Roxi Petroleum plc ("Roxi"), a company registered in England and listed on the Alternative Investments Market ("AIM") of the London Stock Exchange (at [244]). He was a director of Pinegrove Equities Inc ("Pinegrove"), a company registered in the BVI, and Executive Chairman of UMC Energy plc ("UMC"), also listed on the AIM (at [245]). In late 2005, UMC instructed MWP, through Mr Emmott, to undertake due diligence in connection with an acquisition known as the North Karamandybas Project. Mr Emmott was the partner responsible and Messrs Nicholls and Slater worked on the project. UMC did not complete the acquisition (at [248]). 69In February 2006, Mr Schoonbrood looked for start-up investors to invest in a similar business. Pinegrove was established as a special purpose vehicle to acquire interests in resources in the Commonwealth of Independent States ("CIS"), including Kazakhstan. However, Mr Schoonbrood intended to onsell the interest, if the enterprise was successful, to a company to be listed on the AIM (at [248(iv)]). 70In May 2006, Mr Schoonbrood was able to revive Pinegrove's interest in the North Karamandybas Project. That company instructed Mr Emmott at MWP. However, following Mr Emmott's departure in late June 2006, Mr Schoonbrood terminated MWP's retainer to act on behalf of Pinegrove (at [248(v)]). 71The primary Judge summarised (at [248(vi)-(xi)]) Mr Schoonbrood's evidence, which his Honour appears to have accepted, as follows: "vi. The only reason [Mr Schoonbrood] had gone to MWP [in May 2006] was because he wanted to use Mr Emmott, so following his departure Pinegrove had no interest in continuing to instruct MWP. ... vii To the best of his recollection MWP was only instructed act [sic] for Pinegrove in relation to the North Karamandybas field ... viii UMC never had any involvement in any negotiations to acquire interests in Ravninnoye or Beibars-Munai oil fields. Pinegrove commenced negotiations with the vendors of the Ravninnoye or Beibars-Munai oil fields in about August 2006. ix In or about early July 2006 he telephoned Mr Nicholls to ask if he could act for Pinegrove with respect to the North Karamandybas field. After some deliberation on his part, Mr Nicholls agreed to accept his instructions and told him that he was then working at [TIL]. He arranged for Pinegrove to retain TIL. TIL was instructed to assist in the acquisition by Pinegrove of a 50% interest in the North Karamandybas field. x If Mr Nicholls had refused to act for Pinegrove he would not have instructed MWP to act for Pinegrove in relation to the North Karamandybas field, or for any other projects on behalf of Pinegrove. The only reason that he instructed MWP to act for Pinegrove was because he wanted Mr Emmott acting for Pinegrove. xi None of Messrs Emmott, Slater or Nicholls ever approached, solicited or encouraged him to instruct TIL on behalf of Pinegrove. xii He arranged for all outstanding fees owed by Pinegrove to MWP to be paid...". (Emphasis added.) 72The primary Judge accepted Mr Schoonbrood's evidence that the business opportunities he was pursuing were "at all times highly uncertain and speculative" (at [250]). Mr Sinclair and his Projects 73Mr Sinclair was associated with Sokol Holdings Inc ("Sokol") which was involved in the Chilisai Phosphate Project. This Project involved arranging the acquisition of a phosphate mine in Kazakhstan by a company which would obtain listing on the AIM. Ultimately the Project led to the flotation of Sunkar Resources plc ("Sunkar") on the AIM in June 2008, with a market capitalisation of £191.8 million. 74Mr Sinclair was also the chief financial officer of Frontier Mining Ltd ("Frontier"), which in 2007 acquired an interest in a copper-molybdenum-gold deposit in north-western Kazakhstan. That acquisition, which took place by Frontier purchasing a 50 per cent interest in the company holding rights to the deposit, was known as the "Benkala Copper Project", referred to later (at [95]). 75MWP commenced work in August 2005 on the Chilisai Phosphate Project, instructed by Mr Sinclair and others on behalf of Sokol. Messrs Emmott, Nicholls and Slater worked on the Chilisai Phosphate Project while they were at MWP. 76Mr Sinclair's evidence was that he was unaware of any fees being paid in cash or kind, other than directly to MWP. Nor was he aware of any benefits given to the appellants or Mr Emmott (such as "free of charge" shares) in relation to any of the Sokol or Frontier projects (at [252(b)]). Mr Sinclair denied that the appellants or Mr Emmott solicited his business; rather he moved the work to TIL on his own accord (at [252(c)]). Mr Sinclair asserted that he had doubts about Mr Wilson's character and wanted to ensure that he (Mr Wilson) was not involved in any of Mr Sinclair's projects (at [252(e)]). It will be recalled that the primary Judge found Mr Sinclair to be a witness of credit. 77After 20 December 2005, Mr Sinclair deliberately engaged both MWP and TIL to work on the Chilisai Phosphate Project by means of a split retainer. He did so because he wanted Messrs Emmott, Slater and Nicholls to act in relation to the Project "regardless of which firm they were working for" (at [255]). 78Sokol was involved in the Urals Gold Project, which concerned the acquisition of the Maminskoye gold mine in Russia. MWP and TIL worked jointly on this Project from January to May 2006, for the same reasons as they worked jointly on the Chilisai Phosphate Project (at [260]). After Mr Emmott left MWP, that firm was no longer retained. The deal was aborted in September 2006, when Sokol swapped this investment for another, the Benkala Copper Project in Kazakhstan (at [262]). 79Mr Sinclair's evidence was that he would not have instructed Messrs Nicholls or Slater had Mr Emmott not been the head lawyer (at [265]). 80MWP acted on Mr Sinclair's behalf in relation to the Max Petroleum Project, relating to the proposed initial public offering in a company known as Max and the sale to Max of the Astrakhansky oil field in December 2005 (at [268], [280]). Second Limb of Barnes v Addy 81The primary Judge concluded that the conduct of Messrs Nicholls and Slater satisfied the second limb of Barnes v Addy. This conclusion followed from these findings (at [276]): "i. both Mr Nicholls as well as Mr Slater had actual knowledge that what was occurring as Mr Emmott, whilst still with MWP, distributed work to Temujin, involved his breaching his duties of fidelity as well as his fiduciary obligations owed to MWP; and ii. that they were participating with knowledge in that exercise." No Profit and No Conflict Duties 82The primary Judge then identified the breaches of fiduciary duty by reference to the "no profit" and "no conflict" rules, as follows (at [280]-[283]): "280. They are shown as in breach of the 'no profit' rule in that: i. Messrs Nicholls and Slater took advantage of their positions within MWP to take establish TIL and TSL. They used MWP's resources to document the establishment of the business. They used MWP's resources to provide them with a set of precedent documents relevant to the deals they intended to work on in the new business. ii. Once they had left MWP they continued to use MWP's resources, in the form of Emmott, to supervise their work and direct work to them. In fact the business was entirely reliant on Emmott doing this from within MWP. iii. This too involved a breach of the no-profit duty because Messrs Slater and Nicholls had clearly both resigned in circumstances which meant that this duty was ongoing. iv. Their resignations from MWP could 'fairly be said to have been prompted or influenced by a wish to acquire for themselves' the business opportunities that MWP had. As [MWP] has submitted no better evidence of this can be given than the fact that Mr Slater emailed out to himself (and therefore TIL) contractual documents dealing with Chilisai, Urals Gold and Karymandybas and the fact that, at the time Mr Nicholls resigned from MWP to join TIL, the only TIL work was in fact MWP work. v. There is therefore a direct causal relationship or 'historical involvement' between the relevant breach of fiduciary duty, and respectively the 'maturing business opportunity which the company', that is MWP, was not only actively pursuing but actively had. vi. As MWP has contended the relevant business opportunity is appropriately defined broadly and slightly differently with respect to Mr Sinclair's business and Mr Schoonbrood's business: a) With respect to both Mr Sinclair's business and Mr Schoonbrood's business it was the opportunity to act in relation to the sales of assets to listed companies. b) With respect to Mr Sinclair's business this opportunity was more defined because at the relevant time MWP had acted in relation to both the initial IPO of Max ('Max 1') and the selling of an additional oilfield (Astrakhansky) to Max in December 2005. c) With respect to Mr Schoonbrood's business this strategy - first at UMC and then from February 2006 on his own account - had not led to an asset sale. However in considering what the relevant business opportunity was it should be remembered that: (i) Mr Schoonbrood's strategy involved him in looking at the acquisition of many possible oilfields. (ii) MWP's role included a 'watching brief' to introduce oilfields to him. (iii) By the time Pinegrove had been established, Schoonbrood was acting on behalf of investors not only in relation to North Karymandybas but also the other assets which formed the basis of the Roxi admission which was a natural consequence of the business relationship that existed between MWP and Mr Schoonbrood (whether through UMC or later Pinegrove). 281. It should be remembered that but for the breaches of duty in relation to Chilisai, Urals Gold and Kangamiut, TIL could not have been established and the additional work with Sinclair and Schoonbrood could not have taken place. 282. In the result there has been proven a direct causal connection between the 'no profit' breaches of fiduciary duty and: i. The establishment of TIL; ii. The Chilisai Phosphate and Urals Gold/Benkala transactions on behalf of Sinclair; and iii. Work done for Pinegrove and Roxi on ... the Roxi AIM admission. 283. They are shown as in breach of the 'no conflict of duty' rule in that: i. Nicholls in the period 20 December 2005 (at the latest) until his resignation on 1 March 2006 was in a position of conflict with respect to the Sokol/Sinclair work that was being undertaken by Slater at TIL; ii. Slater, Nicholls and through them TIL, well aware of Emmott's position within MWP and his interest in the Temujin business being run through TIL, received work sent their way as a result of that conflict of interest were accessories in Emmott's breach of duty; [As an aside in relation to Emmott it is also clear that: a) Emmott in the period 20 December 2005 (at the latest) until his resignation on 30 June 2006 was in a position of conflict with respect to the Sokol/Sinclair work that was being undertaken by Slater at TIL; and b) Emmott was in a position of conflict when in a telephone conversation with Schoonbrood on or about 30 June 2006 he directed Schoonbrood to Nicholls at TIL.] iii. Liability for the consequences of breach of the 'no conflict' rule ... is strict because ... 'the consequences of conflict are not discoverable'. In other words, the law recognises that it is simply not practicable to conduct a forensic investigation into what would have happened to the work had Emmott not acted in breach of the 'no conflict' duty." Torts 83The primary Judge found (at [289]) that the tort of conspiracy to injure by unlawful means had been made out, as had the tort of interfering with contractual relations (at [302]). Remedies 84His Honour next turned to the question of remedies. He noted (at [368]) that liability for breaches of equitable obligations could either be of a restitutionary nature such as an account of profits, or compensatory. As to the latter, the Court has an inherent power to grant relief by way of monetary compensation for breach of a fiduciary duty or other equitable obligations (at [374]). MWP was entitled to elect which remedy it would pursue, but it was not required to do so until after judgment had been delivered (at [380]). 85After pointing out (at [387]) that different tests of causation apply to equitable and common law remedies, the primary Judge observed (at [390]-[391]) that although the Court had to ascertain what was lost by MWP, "exactitude" was not achievable. A factor requiring close attention was that of time in the continuation of fiduciary duties (at [392]). 86His Honour identified two types of benefits which the appellants had obtained from their breaches of fiduciary duty which could be "disgorged" to MWP. These were (at [394]-[395]): "394. The first type constitutes financial benefits for the services provided by [TIL], in particular for legal services provided to former clients of MWP. These payments were made out to [TIL] from the clients and have been readily identified by the plaintiff. 395. The second type would be non-financial benefits received for the services provided by [TIL]. There is evidence that both the corporate and individual defendants have received shares from former MWP clients through their work on various client projects." 87His Honour considered (at [396]) that the appropriate course was to canvass the benefits received by the appellants on a transaction by transaction basis. Chilisai Phosphate Project 88The primary Judge made the following findings in relation to the Chilisai Phosphate Project: * MWP commenced work on the Project on 25 August 2005 on the instructions of Sokol (at [398], [399]); * Messrs Nicholls and Slater both worked on the Project while at MWP (at [400]); * Mr Slater emailed documents to himself relating to the Project on 20 December 2005, in preparation for leaving MWP and commencing operations at TIL (at [400]); * Mr Slater recommenced work on the Project at TIL on 9 January 2006, at which time there was, in effect, a joint retainer between MWP and TIL (at [401]); * Mr Emmott was heavily involved behind the scenes and when he resigned from MWP Mr Sinclair no longer retained that firm (at [402]); * after years of work, the Chilisai Phosphate Project led to the flotation of Sunkar on the AIM (at [403]); * the listing on AIM raised ₤31 million in net proceeds, with a market capitalisation on admission of approximately ₤191.8 million (at [404]); * TIL rendered invoices to Sokol for work between 9 January 2006 and 30 September 2006, totalling USD 266,330, although the invoices appeared to involve some duplication (at [406]); * although no invoices had been produced by TIL for the period after 30 September 2006 and Mr Slater asserted that TIL had ceased to work on the Chilisai Project after that date, TIL had clearly continued to perform work for Sokol after September 2006 (at [408], [411], [412]); * as at December 2006, TIL had an expectation that it would receive shares as part of a pre-IPO placement of "founder's shares" in the ultimately listed entity (Sunkar) (at [413]); * a pre-IPO issue of shares in Sunkar took place on 30 November 2007, as recorded in the AIM admission document (at [417]); and * accordingly, there was "strong evidence to suggest that [TIL] received Sunkar shares from the pre-IPO place[ment]" (at [418]). 89The AIM document for Sunkar showed, by reference to "Material Contracts" many different transactions directly involving Sokol, not merely the IPO (at [419]). From this it could be inferred that TIL "could have worked on any number of such transactions under the Material Contracts" heading. 90The primary Judge stated (at [421]) his conclusion as follows: "...notwithstanding the long period of time that had passed between the time when [TIL] began to work on the project in 2006 and the pre-IPO issue of shares in 2007: (a) It is clear that through Mr Slater copying of confidential documents relating to the transaction and the relaying of work to him by Mr Emmott whilst he was still working at MWP, that a substantial amount of work could not have been carried out but for such breaches of fiduciary duty. (b) Notwithstanding Mr Slater's assertions, [TIL], in fact, worked on this transaction long after [TIL] was established. (c) The evidence regarding the [appellants'] expectations of receiving founders' shares demonstrates that the work done on the project was to culminate in the defendants receiving such a return if the project succeeded. (d) Therefore, it is appropriate to conclude that all instances of work done by the defendants up to 30 November 2007 are interconnected - for the sake of project success. (e) In a situation where work is interconnected in such a way, any temporal gap between the breaches of fiduciary duty and the completion of the work is irrelevant for determining whether the work is no longer tainted by the breaches." In short, all work attributed to TIL regarding the Chilisai Phosphate Project up to the pre-IPO issue of shares flowed from the appellants' breach of fiduciary duties owed to MWP (at [422]). 91His Honour further accepted (at [424]) that "Material Contracts" related work represented business opportunities lost to MWP as a result of the appellants' actions. 92His Honour stated (at [427]) the "ultimate ruling" for the Chilisai Phosphate Project as follows: "[MWP is] entitled to an election between remedies concerning the Chilisai Phosphate project for all amounts paid to [TIL] in the form of legal fees between September 2006 and the pre-IPO issue on 30 November 2007 relating to success of the transaction." Urals Gold Project 93MWP was instructed to act by Sokol in early September 2005 on the Urals Gold project which involved the acquisition of the Maminskoye goldmine in Russia (at [428]). TIL worked on the deal after it (TIL) commenced operations (at [431]). TIL rendered invoices totalling USD 109,292 in respect of the period 9 January 2006 to 30 November 2006 (at [432]). 94These invoices represented benefits received by TIL arising from the appellants' breach of duty, in that: (a) MWP had worked on the transactions long before TIL was established; and (b) the appellants had exported the work to TIL through their communications before and after TIL was established (at [433]). Consequently, MWP was entitled to an election between remedies concerning the Urals Gold project for all amounts paid to TIL in legal fees up to 30 November 2006 (at [436]). Benkala Copper Project 95As I have noted, the Benkala Copper Project involved the acquisition by Frontier of an interest in a company holding rights to a copper-molybdenum-gold deposit in Kazakhstan. MWP was not retained in relation to this project (at [442]). 96MWP claimed that it was entitled to the value of the lost opportunity to work on the Benkala Copper Project. It valued the lost opportunity by reference to a "success fee" of 12.5 million, calculated as 5 per cent of the valuation of USD 250 million attributed to the project in a press release by Frontier (at [443]). 97The primary Judge rejected (at [444]) MWP's claim for an account of profits or equitable compensation, for two reasons: "(a) Barring the fact that Frontier Mining was an MWP client, there is no connection between MWP and the Benkala Project. In particular, the shift in resources [sic] Benkala Project occurred months after Mr Emmott left MWP. [MWP has] failed to make out any compensable loss. (b) There is no or insufficient evidence that [TIL] in fact received any benefits of the 5% variety that [MWP] alleges that can be accounted for." Roxi Petroleum Project 98The primary Judge said (at [446]) that the Roxi Petroleum Project was best characterised as a conglomerate of business opportunities associated with Mr Schoonbrood. His commercial plan was to acquire oilfields ultimately to be "housed" in a public company which came to be Roxi (at [447]). (Roxi was admitted to the AIM on 20 May 2007.) It was clear that the appellants and Mr Emmott, in establishing TIL, appropriated Roxi Petroleum Project work from MWP (at [448]). Mr Emmott, Mr Slater and Mr Nicholls undertook work at MWP in connection with the North Karymandybas acquisition (at [449]) and Mr Slater copied documents relating to that transaction (at [450]). North Karamandybas, Revninnoye and Beibars (Munai) 99By February 2006, Mr Schoonbrood's plan was to sever his ties with UMC and establish Pinegrove to acquire resource interests in the CIS. These would be on-sold to a listed company (at [451]). To this end, Mr Schoonbrood retained MWP to carry out a "watching brief", bringing possible acquisitions to Mr Schoonbrood's attention (at [452]). Thus it was part of MWP's role to find oil fields to introduce to Mr Schoonbrood and Pinegrove (at [453]). In the result, three assets played a part in the listing of Roxi Petroleum, namely the North Karamandybas Area, the Ravinnoye Area and the Beibars (Munai) Area (at [454]). 100MWP acted from 26 April 2006 onwards in relation to a proposal that Pinegrove acquire the North Karamandybas Area (at [455]). Mr Schoonbrood switched firms in late June 2006 when Mr Emmott disingenuously told him that MWP could no longer look after the project (at [457], [459]). TIL immediately started work on the Karamandybas project (at [458]). 101On about 10 August 2006, Mr Slater sent Mr Schoonbrood a proposal whereby TSL would act as exclusive commercial advisers to Pinegrove in order to arrange for it to acquire a 50 per cent interest in the Ravninnoye deposit. TSL sought a 5 per cent success fee (at [460]). The Beibars Munai Area was merely an area to be explored and was not an oilfield (at [461]). 102The primary Judge concluded as follows (at [463]): "The Roxi Petroleum work was clearly obtained through the [appellant's] breaches of fiduciary duty, in particular, through Mr Slater's theft of the Roxi documents via email and Mr Emmott's dishonesty in telling Mr Schoonbrood that he could no longer work on the project. [MWP] should it determine to do so as between alternate remedies, may elect for an account of profits relating to the above-identified invoices for the three assets: Karamandybas, Ravninnoye and Beibars Munai." 103His Honour set out in tabular form the invoices sent by TIL in respect of work performed in relation to the three "sub-projects". In the case of the Karamandybas Project, TIL performed work between 1 July 2006 and 31 December 2006, for which it rendered invoices totalling €163,992 (at [465]). In the case of the Ravninnoye Project, TIL performed work between 1 August 2006 and 31 December 2006, for which it rendered invoices totalling €124,419 (at [466]). In the case of the Beibars Munai Project, TIL performed work between 1 September 2006 and 31 December 2006, for which it rendered invoices totalling €101,817 (at [467]). The total of these three amounts was €390,228. Project X 104Roxi was also involved in the acquisition of other interests in oil fields. These included the possible acquisition of Eragon Petroleum plc, a proposal referred to as "Project X" in an email sent by Mr Slater to Mr Schoonbrood on 12 December 2006 (at [470]). On 13 December 2006, Mr Emmott wrote to Mr Slater indicating that Mr Rigoll (apparently an entrepreneur associated with Mr Sinclair in some way not clarified in the submissions) had agreed "to a 1/3 split to [TIL] of any upside" (at [471]). TIL invoiced Mr Schoonbrood's interests for work connected with Project X in late 2006. The invoices totalled €29,950 for the period 1 November 2006 to 31 December 2006 (at [472]). 105The primary Judge found (at [473], [474]) that notwithstanding that Project X involved a former client of MWP, it was beyond the scope of the appellants' breaches, for four reasons: * the first reference to Project X in correspondence occurred six months after Mr Emmott left MWP; * the first invoice from TIL related to a period beyond any breach of fiduciary duty; * MWP was not involved in the transaction; and * Project X was not referred to in Roxi's AIM admission document. Eragon and ADA Transactions 106Roxi was involved in another transaction involving a reverse take-over of Eragon Petroleum plc, followed by a suspension of Eragon from the AIM and its readmission to trading. The contemplated transaction included the acquisition, apparently by Roxi, of an option to acquire a 50 per cent interest in the ADA Group for an aggregate consideration of USD 425 million (at [475], [476]). An Australian company called PJT Corporate Services Pty Ltd ("PJT"), in which Mr Slater and an associate (Ms Lighezzolo) had an interest, acted as an intermediary between Roxi and TIL (at [477]). 107On 22 August 2007, TIL entered into an engagement contract with Ms Lighezzolo that confirmed the terms on which legal advisory services would be provided by TIL to PJT (at [479]), [480]). By another agreement executed on the same date Roxi requested PJT to manage all aspects of Roxi's readmission to the AIM (at [481]). 108On 25 September 2007, Mr Slater prepared two draft agreements in the form of letters to Mr Schoonbrood in relation to the proposed acquisitions of Eragon and ADA (at [483]). The first letter set out the terms on which PJT was to act as a "facilitator project manager" to Roxi to arrange the acquisition of 59 per cent of Eragon from a company called Baverstock Gmbh (at [484]). The consideration for PJT's services was to be USD 12.5 million, with a non-refundable cash fee of USD 500,000 (at [485]). The primary Judge emphasised (at [484]), however, that this Eragon transaction was not the same as Project X, which occurred earlier in the year. 109The second letter, relating to the ADA acquisition provided for assistance in conducting due diligence for a total consideration of USD 17.5 million, including a non-refundable cash fee of USD 500,000, payable by a deposit of USD 200,000 and six equal monthly payments of USD 50,000 (at [486]). On 3 October 2007, Mr Slater wrote to Mr Schoonbrood nominating TIL as the recipient of the cash fees in each case (at [487]). 110TIL rendered invoices to PJT for legal work connected to the Eragon and ADA transactions. The invoices covered work for the period January 2007 to January 2008 (at [489], [490]). 111There was evidence indicating that in early 2008 Mr Slater obtained a beneficial interest in Roxi as a consequence of Eragon's readmission to the AIM (at [491]). The evidence included correspondence indicating that 6,169,230 shares in Roxi were to be issued to Lynus Development Ltd, a company registered in the Seychelles (at [493]). The correspondence initially suggested that Mr Slater's associate was to be the ultimate beneficial owner of the shares (at [494]). 112However, the primary Judge referred to a letter dated 25 January 2008 stating that if certain arrangements relating to a foundation effectively owned by Mr Slater were not completed by the date the shares in Roxi were issued, the shares would be issued to Mr Slater personally (at [503]). Eventually the shares were issued to Mr Slater (at [505]). 113The primary Judge observed (at [504]) that a reference in the letter of 25 January 2008 to the "Project X Project Management Agreement" was: "a frank acknowledgement that the Project X arrangements which were referred to in the email of 13 December 2006 between [TIL] and David Rigoll which at that stage referred to a one third of the upside going to [TIL] had come to fruition." 114MWP, in pressing for the benefits received by TIL regarding the AIM readmission transaction relied on Mr Schoonbrood's evidence (at [506]). He said (at [508]) that in the Eragon case, that a "finder's fee" was paid in the form of shares in Roxi because a project was "sent in our direction". The deal would not have been possible without Mr Slater's intervention. Mr Schoonbrood also said that if a deal was genuine and would not have happened without Mr Slater "we are quite happy to defend 5 per cent vis-à-vis shareholders and board" (a reference to paying TIL USD 12.5 million) (at [508]). 115The primary Judge rejected MWP's claim that it had lost business opportunities in relation to the Eragon and ADA transactions notwithstanding that there might have been "a connection between [MWP] and the Eragon transaction in that the opportunity may have [arisen] while Mr Schoonbrood was an MWP client". His Honour gave four reasons (at [513]) for rejecting the Eragon claim: * The Roxi readmission to the AIM was separate from its original admission. The former was a distinct business opportunity on which MWP had done no work at all. * Mr Schoonbrood's evidence about a possible finder's fee made no reference to MWP. * The appellant's wrongful actions, for example in copying documents, did not relate to these transactions. * The Roxi readmission occurred on 31 January 2008, almost two years after Mr Emmott left MWP for TIL. It was unjust to allow a plaintiff to "sit back" and wait for a defendant to make a profit. 116In the case of the ADA transaction there was even less of a connection. There was no evidence that the opportunity existed while Mr Schoonbrood was MWP's client (at [514]). 117Thus MWP was not entitled to remedies concerning the amounts received by TIL for work done in connection with the readmission of Roxi to the AIM (that is, the Eragon and ADA transactions) (at [516]). Project Ablai 118Project Ablai involved the acquisition of gold mines, which would be sold to Frontier and then developed (at [517]-[518]). The primary Judge concluded (at [525]), as follows: "It clear that Project Ablai is an opportunity that [TIL] took from MWP. The [appellants] and Mr Emmott had done a substantial amount of work into the project before instructions were withdrawn. Evidently, the [appellants] would have had been intimately familiar with the transaction and were, in fact, in a prime position to continue it after they defected from [MWP]." Thus MWP was entitled to the amounts invoiced by TIL for Project Ablai. Maersk Oil Joint Venture 119It was clear that TIL had appropriated work in the Maersk Oil Joint Venture (at [532]). It was liable for the amount of the invoice rendered for this work (at [534]). Kangamiut Seafoods 120Although Kangamiut Seafoods had never become a client of MWP, Mr Slater obtained the work for TIL when Kangamiut had been seeking to have MWP represent its interests (at [537], [539]). The benefits obtained from the Kangamiut work were therefore "accessible" to MWP as equitable compensation (at [540]). The invoices rendered by TIL for Kangamuit work amounted to USD 39,750, in respect of the period 31 March 2006 to 30 June 2006 (at [538]). "Missed Legal Costs" 121Mr Schilling's expert evidence was apparently an attempt to identify what MWP could have charged in legal fees to the clients that TIL had appropriated, had the appellants not committed their wrongdoing (at [545]). His Honour noted that several sections of Mr Schilling's report had been rejected, although some parts of the report had been "cross-examined back in" (at [547]-[549]). 122The primary Judge recorded that Mr Schilling had been asked to give his opinion on the value of work performed by MWP for specified clients and whether it had been entitled to charge more for that work than it had actually billed. Mr Schilling had also been asked, by reference to evidence given by Mr Slater and to the TIL invoices, to estimate the total fees and disbursements which he "would expect to be reasonably billed for" each of a number of projects (at [550]). 123The primary Judge said (at [553]) that he had been: "impressed by the evidence given by Mr Schilling. He had obviously carried out an enormous amount of work in a very difficult environment. The task set of him involved a requirement that he carry out his best estimate of the appropriate level of legal fees for certain transactions in situations where there had been a need to treat with reconstructed files, those which survived being clearly incomplete. In this respect he gave a number of estimates." 124In assessing damages or compensation, the primary Judge invoked the maxim "nullus commodum capere potest de injuria sua propria" ("no one can take advantage of his or her own wrong"). The maxim was enlivened "by way of a presumption against the wrongdoer" where the actions of a defendant made it difficult to assess the compensation due to the plaintiff (at [554] - [555]). 125Based on the evidence of Mr Schilling the primary Judge found (at [559]) that MWP had: "established that [it] could have charged the clients that [TIL] appropriated much more in legal fees than are revealed by the [TIL] invoices. Mr Schilling has quantified the extra amount (... 'missed legal costs') in his report." Entitlement to Equitable Compensation 126His Honour set out (at [561]) the results of this approach in a table reproduced below. He noted that the table did not include the Benkala Copper Project (in respect of which no remedy was awarded). The figures for the Karamandybas Project and for Kangamiut Seafoods were left blank as Mr Schilling's valuation was in a currency different to that used in TIL's invoices. 127The table and the explanation for its columns are as follows (the dollar figures are in USD): Client: Project Schilling's MWP TIL Missed valuation invoices invoices legal costs Sokol:Urals Gold $400,000.00 $1,678.00 $109,292.00 $289,030.00 (aka Maminskoye) Sokol: Chilisai Phosphor $1,750,000.00 $97,571.00 $218,630.00 $1,433,799.00 Frontier: Project Ablai $500,000.00 $0.00 $31,959.00 $468,041.00 Pinegrove: Karamandybas $250,000.00 $0.00 €153,992.00 Kangamiut Seafoods $167,500.00 $0.00 €39,750.00 (a) The column entitled 'Client: Project' identifies the project analysed. (b) The column entitled 'Schilling's valuation' identifies the final amount that Mr Schilling assigned as the value of the services provided to the client for the particular project. (c) The column entitled 'MWP invoices' identifies the amount that MWP had billed to the client. (d) The column entitled 'TIL invoices' identifies the amount billed to the client by TIL. (e) The column entitled 'Missed legal costs' is the remaining amount, derived by subtracting the aggregate of the amount charged by MWP and TIL to the client from the amount estimated by Mr Schilling of the services provided. (f) The figure of USD 218,630 for the total TIL's invoices to Sokol in respect of the Chilisai Phosphate Project is different from the total value of the discovered invoices (at [88] above). The explanation would seem to be that the primary Judge adjusted the total of the invoices to remove duplication and the like. 128In the light of "the uncertainties that shroud [Mr Schilling's] exercise", the primary Judge considered (at [567]) it appropriate to discount Mr Schilling's figures "for exigenc[ies]". 129The primary Judge found (at [570]-[579]) that MWP was not entitled to the remedy of a constructive trust over the assets of TIL or the shares held by Mr Slater in TIL. However, MWP was entitled (at [581]) to relief arising from the breaches of fiduciary and contractual obligations by way of: * an equitable account of profits from each of the appellants; or * in the alternative, equitable compensation from each of the appellants. 130While the conspiracy count had been made out, his Honour considered (at [582]) that it was difficult to see what additional remedy would be available for this cause of action. The same could "arguably" be said in relation to the findings that each appellant had committed the tort of interfering with contractual relations. 131The primary Judge recorded on the coversheet to his reasons for judgment the "decision" in consequence of the Liability Judgment, as follows: "[MWP] disentitled to relief by way of a constructive trust. [MWP] entitled to elect as between ultimate forms of relief on the sundry causes of action upheld in the reasons inter alia including an election for an equitable account of profits or equitable compensation." The parties were directed (at [654]) to bring in short minutes to give effect to the decision. Remedies Judgment 132In the Remedies Judgment, the primary Judge recorded (at [21]) that MWP had elected to pursue an award of equitable compensation and not an account of profits. His Honour restated (at [23]) that in determining quantum he had drawn on the maxim "Nullus commodum capere potest de injuria sua propria". 133The primary Judge noted (at [35]) that some figures in MWP's claim for equitable compensation were uncontroversial. These were as follows: (i) the Roxi Petroleum transactions undertaken by TIL (in relation to the Karamandybas, Ravinnoye and Beibars Munai projects) yielded invoices totalling €390,228. These receipts were "concrete evidence of benefits obtained by the [appellants]" and thus MWP could be compensated for the amount of the invoices, plus interest; and (ii) the amount claimed by MWP in respect of the Maersk Oil Joint Venture (otherwise the "Lancaster Matter") of USD 19,504 was identical to the value of the invoices discovered relating to legal fees charged by TIL. 134The balance of MWP's claim was based on Mr Schilling's valuation, less the amount of MWP's invoices in respect of the particular client or project (see [127] above). For example, the legal fees for the Chilisai Phosphate Project were valued by Mr Schilling at USD 1,750,000. When the MWP invoices of USD 97,571 for this project were deducted, MWP's claim was USD 1,652,429. 135As his Honour had previously explained, he considered it appropriate to reduce Mr Schilling's figures by a discount factor. He considered (at [36]) that the appropriate discount figure was 10 per cent. A discount of 10 per cent reduced the figure for the Chilisai Phosphate Project, for example, to USD 1,487,186.10. On this basis, the amounts to be awarded, together with interest, were as shown in the table reproduced below (at [43]) (the dollar figures are in USD): Project Principal at 20/12/2005 Principal at 10/12/2009 Chilisai $1,487,186.10 $2,116,130.52 Urals Gold $358,489.80 $510,098.37 Ablai $450,000.00 $640,309.06 Lancaster $19,504.00 $27,752.42 Kangamiut $150,750.00 $214,503.54 Seafoods Total $2,465,929.90 $3,508,793.91 Karamandybas €163,992.00 €233,345.70 Ravninnoye €124,419.00 €177,036.92 Beibars Munai €101,817.00 €144,876.33 Euro Total €390,228.00 €555,258.94 136The second column in the table sets out Mr Schilling's valuations in each case, less MWP's invoices in respect of the particular transactions, reduced further by the discount factor of 10 per cent. The third column, although headed "Principal", shows the amount to be awarded, inclusive of interest. MWP was therefore entitled to the sums of USD 3,508,793.91 and €555,258.94 as equitable compensation (at [44]). 137The primary Judge observed (at [45]) that MWP was not entitled to any separate form of equitable compensation, beyond that already awarded, under the second limb of Barnes v Addy. Nor was there any "principled way" to award additional damages by reason of the finding that the appellants were liable for the tort of conspiracy to injure by unlawful means (at [50]). 138The primary Judge indicated (at [29]) that he proposed to deal separately with MWP's claim to the lost opportunity to benefit from an allocation of shares in Sunkar as part of a pre-IPO placement. He observed (at [30]-[31]) that because the appellants had concealed their activities, MWP could do no more than "satisfy the court that there was strong evidence to suggest that [TIL] received Sunkar shares from the pre-IPO [placement]" (emphasis in original). 139His Honour then returned to the maxim that no-one can take advantage of his or her own wrong. He referred to Houghton v Immer (No 155) (1997) 44 NSWLR 46, in which the Court of Appeal cited the chimney-sweeper's case, Armory v Delamirie (1722) 1 Stra 505; 93 ER 664. The Court of Appeal applied (at 47) the principle that, where a defendant fails to keep proper accounts: "the Court should assess compensation robustly, relying on the presumption against wrongdoers and resolving doubts against those who had made the determination problematic". 140The primary Judge stated his conclusions as follows (at [59]-[60]): "59. The current circumstances and findings amply justify the Court in assessing the equitable compensation sought robustly relying on the aforesaid presumption against wrongdoers and resolving doubts against those whose actions had made the determination problematic. 60. In all of the circumstances the [appellants] in addition to the other orders reflected in these reasons will be required to pay equitable compensation to MWP in the sum of $AUS4,000,000.00." 141The primary Judge said that as Mr Slater stood in the same position as Mr Nicholls, orders would be made against each in the same form (at [61]). The accessorial liability of TSL, TIL and TFZE followed the liability of Messrs Slater and Nicholls, their effective controllers (at [65]). 142His Honour did not explain the basis for making the declarations as to liability (see at [9]-[13] above). SUBMISSIONS Matters not in Dispute 143As I have noted, the issues in the appeal were narrowed in consequence of the orders made by the High Court in remitting the proceedings. The parties' submissions narrowed the issues further, in the following respects: (i) The appellants do not challenge the primary Judge's findings that the appellants breached fiduciary duties owed to MWP and are also liable to MWP in tort. (ii) No challenge is made in the appeal to the findings concerning Mr Wilson's credit. (iii) MWP, for the purposes of the appeal and the cross-appeal, relies only on the causes of action for breach of fiduciary duty and accessorial liability for these breaches. Mr Walker SC, who appeared with Mr Walton SC and Mr Thomas for MWP, accepted that MWP could not recover common law damages in respect of the tortious causes of action (conspiracy and interference with contractual relations) in an amount greater than its entitlement to equitable compensation. (iv) MWP does not submit that the appellants were subject to ongoing fiduciary duties that survived the termination of their employment or association with MWP. However, MWP does submit that the appellants' breaches of fiduciary duty entitle it to claim compensation in respect of opportunities that might have accrued to MWP, instead of TIL, had the appellants not terminated their association with MWP for the purpose of furthering their nefarious activities. On MWP's case, the consequences of the breaches of fiduciary duty continued after the appellants and Mr Emmott terminated their association with MWP. (v) The appellants do not dispute that MWP is entitled to equitable compensation in respect of the fees derived by TIL for work done in connection with the Maersk Oil Joint Venture (or Lancaster Matter) and Kangamiut Seafoods (see at [119], [120] above). The appellants say, however, that the correct figure for the Maersk Oil Joint Venture is USD 16,960, not USD 19,504 and this is not disputed by MWP. The appellants' concession in relation to Kangamuit Seafoods was expressed by reference to the total of the invoices rendered by TIL, namely USD 39,750 (see [120] above). Appellants' Submissions 144Mr Blake SC, who appeared with Mr McGrath SC and Mr Adair for the appellants, reduced the remitted grounds of appeal to three arguments. Causation 145First, the award of USD 3,508,793.91 and €555,258.94, calculated by reference to the value of work performed by TIL for clients or former clients of MWP, could not stand because there was no causal or sufficient causal connection between the claimed Iosses and the appellants' breaches of fiduciary duty. Mr Blake did not take issue with the primary Judge's exposition of the relevant principles (at [377] of the Liability Judgment). The appellants' complaint was that his Honour failed to consider whether, as the authorities and his Honour's own exposition required, the loss would have occurred had there been no breach of fiduciary duty. This omission tainted the findings (at [282], [283]) that there was a sufficient causal connection between the no-profit and no-conflict breaches of fiduciary duty and the work performed for Messrs Schoonbrood and Sinclair and their various companies. 146According to Mr Blake, the primary Judge erred in two respects, both of which had been referred to by Young JA in the first Court of Appeal decision (see at [21] above). His Honour had not taken into account the findings that Mr Schoonbrood and Mr Sinclair would not have engaged MWP if Mr Emmott was no longer associated with that firm. His Honour also appeared to hold that MWP did not have to demonstrate that it would have obtained the benefit of the business opportunity for itself. Whatever the position had MWP claimed an account of profits, once it had elected to claim equitable compensation it had to show that it could have taken advantage of the business opportunity. 147If Mr Emmott had left MWP on 30 June 2006 without breaching his fiduciary duties, he would have been able to provide legal services to Messrs Schoonbrood and Sinclair the very next day had they asked him to do so. Since they wished to deal with Mr Emmott and not with Mr Wilson, their business would simply never have been given to MWP. Thus any fees derived by TIL in respect of work performed after 30 June 2006 could not form part or constitute the measure of the equitable compensation to which TIL was entitled. 148In addition Mr Blake submitted, somewhat faintly, that the evidence of Messrs Schoonbrood and Sinclair justified a finding that even fees derived by TIL before 30 June 2006 could not be recovered. The basis for this submission seemed to be that Messrs Schoonbrood and Sinclair would not have continued to engage MWP, at least in relation to some transactions, once Messrs Slater and Nicholls had severed their connection with the firm. Admissibility of Mr Schilling's Report 149The appellant's second submission was that the report of Mr Schilling, on which the primary Judge relied, should not have been received in evidence, since it did not satisfy the requirements for the admissibility of opinion evidence stated in s 79 of the Evidence Act 1995 ("Evidence Act"). Mr Blake pointed out that the appellants had objected to the tender of the report on this and many other grounds. While his Honour rejected portions of the report, in the principal judgment dealing with the objections (given on 10 August 2009) he did not address the appellants' objection that s 79 of the Evidence Act had not been satisfied. 150Mr Blake submitted that the report was inadmissible because Mr Schilling had not demonstrated specialised knowledge that permitted him to express the opinions stated in his report. In particular, Mr Schilling had no demonstrated expertise in the market for legal services in Kazakhstan, nor in the charging practices adopted by legal firms in that country. In any event, so Mr Blake contended, the opinions expressed by Mr Schilling as to the value of legal work performed by MWP or TIL were not based on such expertise he might have had. Furthermore, Mr Schilling's opinions were not probative of the proposition (accepted by the primary Judge) that TIL had performed substantial legal work beyond that covered by the invoices produced by TIL on discovery. 151Mr Blake submitted that if Mr Schilling's report is held to have been wrongly admitted into evidence, there is no basis for awarding MWP compensation for the lost opportunity to perform work exceeding the fees recorded in the invoices discovered by them. While this is the maximum figure that should be considered, it should be reduced further by reason of the appellants' first argument (the absence of a causal connection between the breaches and the claimed losses). Award of AUD 4 Million 152The appellants' third submission is that the award of AUD 4 million referable to MWP's lost opportunity to participate in the pre-IPO issue of shares in Sunkar cannot stand. Mr Blake challenged the finding by the primary Judge (Liability Judgment, at [418]) that there was "strong evidence to suggest that [TIL] received Sunkar shares from the pre-IPO place[ment]". He submitted that the evidence gave rise to no more than a speculative possibility that TIL received shares in the placement and that the finding overlooked other evidence indicating that there had been no placement. Once the finding was set aside, there was simply no basis for the award. 153Mr Blake also contended that the primary Judge had failed to give adequate reasons for the award and, in any event, had misapplied the maxim upon which he relied (no one can take advantage of his or her own wrong). In the absence of reasons, the quantum of compensation selected by the primary Judge was essentially arbitrary. 154If these arguments are not accepted, Mr Blake, supported by Mr McGrath, submitted that there are three additional reasons for not awarding compensation for the lost opportunity to participate in the placement of Sunkar shares: * in the absence of proof of the law of Kazakhstan, New South Wales law applied and under New South Wales law "remuneration of this nature" would not be permitted; * the finding (Liability Judgment, at [36], [37]) that MWP's activities included a structured investments business, which often resulted in payment of a success fee or an opportunity to take an equity investment, was wrong; and * the value of the shares was speculative and accordingly there was no basis for an award of any amount. The first of these submissions was not developed and, as Mr Walker pointed out, was not supported by any pleading. Nothing more need be said about it. MWP's Submissions Response to the Appeal 155MWP's answer to the appellants' causation argument is that the appellants had asked the wrong question. According to Mr Walker, the termination of Mr Emmott's association with MWP does not mark out the temporal limit of MWP's entitlement to compensation for the appellants' flagrant breaches of fiduciary duty. Equity approaches the assessment of compensation on the basis that conduct of that kind is to be discouraged and that wrongdoers cannot take advantage of their own conduct in order to minimise an award of compensation. The concept of "causation" as applied to equitable compensation requires the court to hypothesise that there have been no breaches of fiduciary duty and to consider what would have occurred in the absence of the breaches. The question is not (as the appellants, in effect, had contended) how they could lawfully have achieved the objective of taking over MWP's clientele on the assumptions most favourable to their case. 156Mr Walker submitted that, for the purposes of assessing equitable compensation, the Court must assume that TIL would not have been set up, because to do so would have required it to engage in the "delinquent taking of business". Moreover, MWP must be given the benefit of any doubt as to what would have occurred had the appellants not succumbed to the temptation to breach their fiduciary obligations. 157Mr Walker accepted that MWP was required to establish a "sufficient connection" between a claimed lost opportunity and the appellants' breaches of fiduciary duty, if it was to be awarded equitable compensation for that lost opportunity. He also accepted (in his words) that there was a "welded seam" between: * work performed by TIL on transactions in respect of which MWP had acted before the matter was taken over by TIL (whether TIL performed work on the matter before or after 30 June 2006); and * work performed by TIL on instructions from Mr Schoonbrood and Mr Sinclair, where the transactions were new and MWP had never previously acted in relation to those transactions. Nonetheless, so he argued, MWP is entitled to compensation assessed by reference to the fees earned by TIL (whether or not invoiced) in relation to both kinds of transactions. Mr Walker submitted that the cross-appeal identifies the proper approach to the limits of TIL's entitlement to compensation. 158Mr Walker further submitted that the key to the second issue (the assessment of equitable compensation, leaving aside the Sunkar shares and cross-appeal issues) lay in the yawning gaps in the evidence given on behalf of the appellants. In his oral submissions (which preceded the revelation that the wrong version of Mr Schilling's report had been reproduced in the Blue Books), Mr Walker defended the primary Judge's decision to admit the report. It was an attempt to fill the gaps in the evidence attributable to the appellants' own conduct. Mr Schilling had sufficient expertise to evaluate the extent of work that TIL must have performed in relation to the various transactions. Any apparent deficiencies in Mr Schilling's report were attributable to the paucity of the primary material. 159In any event, independently of Mr Schilling's evidence, the assessment of equitable compensation had to take into account that the work done by TIL on projects "purloined" from MWP was not accurately or completely reflected in the invoices discovered by TIL. The appellants should not be permitted to benefit from their secrecy, deception and withholding of documentation. 160On this issue and others, Mr Walker supported the primary Judge's reliance on the principle applied in Armory v Delamirie, Houghton v Immer and similar cases. This was a case of "evidential obscurity" created by the conduct of the appellants, whose egregious wrongdoing was now conceded. The obscurities in the evidence should not provide an undeserved advantage to the appellants. 161MWP's entitlement to equitable compensation is not to be limited by the total of the fees recorded in TIL's discovered invoices relating to work done on behalf of Mr Schoonbrood, Mr Sinclair or their associated entities. Allowances must be made for the work that his Honour found TIL had done for those clients, but in respect of which it had not produced invoices. The Court had to do the best it could with the limited information available, taking a robust approach where the lack of evidence could be laid at the appellants' feet. Even if Mr Schilling's report was held to be inadmissible, an award equivalent to twice the value of the discovered invoices, at least in relation to the Chilisai Phosphate Project, was warranted. 162On the third issue, MWP supported his Honour's finding that the appellants (or some of them) benefited from an allocation of shares in Sunkar. MWP's principal submission is that the primary Judge attributed too little value to MWP's lost opportunity to participate in the pre-IPO allotment of shares in Sunkar. This is the subject of Ground A in the cross-appeal, referred to below. 163MWP's fall-back position is that his Honour's award of AUD 4 million, despite somewhat economical reasoning, was justifiable and indeed, bearing in mind the Armory v Delamirie principle, was modest. The primary Judge had not awarded exemplary damages in the guise of compensation. He had merely attempted to assess compensation as best he could, having regard to the appellants' secrecy and failure to disclose relevant material. Cross Appeal 164MWP's cross-appeal challenges the assessment of compensation for its lost opportunity to participate in the pre-IPO allotment of shares in Sunkar. In addition, the cross-appeal, to use Mr Walker's description, makes other "more ambitious" claims than those accepted by the primary Judge. MWP should be compensated for rewards derived by TIL from work that it received from the same connections (Mr Schoonbrood and Mr Sinclair) who had instructed MWP, regardless of whether MWP had worked on those particular transactions. The grounds of the cross-appeal fall under three headings. 165Ground A: Equitable Compensation and Damages Relating to the Sunkar Shares and the Chilisai Phosphate Project Ground A of MWP's notice of cross-appeal states that the primary Judge erred in his assessment in failing to give adequate reasons and in not considering the general principles governing equitable compensation. MWP asserts that his Honour should have found that the loss sustained by MWP was equivalent to 5 per cent of the total market capitalisation of Sunkar at the time of its IPO on 30 June 2008. On this basis, his Honour should have awarded equitable compensation equivalent to 5 per cent of ₤191.8 million, (₤9,590,000). 166Ground B: Extent of Relief Granted in relation to the Urals Gold/Benkala Copper Project The primary Judge should have awarded compensation for MWP's lost opportunity to participate in the benefits that flowed to the appellants from the Urals Gold/Benkala Copper Project. His Honour paid insufficient attention to the findings that Mr Nicholls and Mr Slater had breached their fiduciary duties in relation to the Project and to evidence that Mr Sinclair intended to provide benefits to Mr Emmott for his role in the Project. Furthermore, the primary Judge should have found that Sokol had swapped the Urals Gold project for the Benkala Copper Project and that Sokol had instructed TIL on the Benkala Copper Project before 20 July 2006. MWP was entitled to compensation assessed at five per cent of the value of the project, being USD 12.5 million. 167MWP submits that its business attracted success fees, often taken in the form of equity in the listing vehicle. The evidence suggests that success fees were to be paid in relation to the Chilisai Phosphate Project and that shares were in fact issued as a reward for the involvement of MWP, through Mr Emmott, Mr Slater and Mr Nicholls. MWP accepts that the precise number of shares issued is unascertainable, as is the identity of the recipients of the shares. (It was apparently for this reason that MWP elected to claim equitable compensation rather than an account of profits.) But the most likely success fee paid or payable was 5 per cent of Sunkar's market capitalisation. Had TIL not been established as a consequence of the appellants' breaches of fiduciary duty, the benefits of the Chilisai Phosphate Project would have remained with MWP. 168Ground C: Extent of Relief in relation to the [ADA and Eragon Transactions] The primary Judge wrongly denied MWP relief in respect of the ADA and Eragon transactions because he failed to acknowledge that the no profit duties of Messrs Slater, Nicholls and Emmott extended beyond the dates of their departures from MWP. The relevant opportunity had been foreshadowed by Mr Schoonbrood as early as February 2006, when he started to look for assets to acquire in the CIS, including Kazakhstan. The ADA and Eragon transactions were precisely of this kind. Had TIL not been established in breach of the appellants' fiduciary duties, the opportunity would have accrued to MWP. Consequently, MWP's entitlement to equitable compensation included: * USD 1 million paid as management fees in connection with the ADA and Eragon transactions; and * success fees assessed at USD 11.5 million for the Eragon transaction and USD 17.5 million for the ADA transaction. EQUITABLE COMPENSATION 169As I have noted, MWP has elected to pursue equitable compensation as its remedy for the appellants' breaches of fiduciary duty. It does not seek an account of profits (or any other equitable relief). Nor does MWP seek an award of damages in respect of its common law causes of action. The Court is therefore concerned with a personal remedy requiring the appellants to compensate MWP for its losses arising from the appellants' breaches of fiduciary duties: Nocton v Lord Ashburton [1914] AC 932, at 952, per Viscount Haldane LC; W M Gummow, "Compensation for Breach of Fiduciary Duty" in J G Youdan, Equity, Fiduciaries and Trusts (1989), at 59. Principles 170There is no disagreement between the parties as to the principles to be applied in the assessment of equitable compensation. Indeed neither takes issue with the primary Judge's exposition of the principles, although they differ as to the application of the principles to the particular circumstances of the case. Nonetheless, the relevant principles should be restated. 171Equitable compensation has three principal features: Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (4th ed 2002), at [23-020]. First, the primary purpose of the remedy is compensation for what has been lost. Thus, compensation is ordinarily computed by reference to the detriment suffered by the plaintiff: see McKenzie v McDonald [1927] VLR 134, at 146-147, per Dixon AJ. This reflects the observations of the High Court in the present case (at [101]), see at [37] above). Secondly, the assessment of equitable compensation is not fettered by common law principles, such as remoteness of damage or foreseeability, which can diminish the quantum of damages at common law. The justification for the difference in approach is that the obligation to make restitution which courts of equity have imposed on defaulting trustees and fiduciaries is of a more absolute nature than the common law obligation to pay damages for tort or breach of contract: Re Dawson (dec'd) [1966] 2 NSWR 211, at 216, per Street J; I E Davidson, "The Equitable Remedy of Compensation" (1982) 13 Melbourne University Law Review 349, at 350-353. Thirdly, although the equitable duties imposed on a fiduciary have an element of deterrence (W M Gummow, above, at 79), as a general proposition there is no element of penalty in the assessment of compensation: cf Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; 56 NSWLR 298, at [44], per Spigelman CJ; at [404]-[407], [470], per Heydon JA. 172It is common ground that a claim for equitable compensation requires a causal link between the breach and the loss: Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; 212 CLR 484, at [44] (adopting the observations of Mummery LJ in Swindle v Harrison [1997] 4 All ER 705, at 733-734, that there "is no equitable by-pass of the need to establish causation" and that "in questions of causation it is important to focus on the relevant equitable duty"); O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262, at 269, 274, per Spigelman CJ (with whom Priestley and Meagher JJA agreed); Beach Petroleum NL v Kennedy [1999] NSWCA 408; 48 NSWLR 1, at [449], per curiam. Thus to claim equitable compensation for the appellants' breaches of fiduciary duty, MWP must establish that it has sustained losses and that there is a causal link between the losses claimed and the breaches. 173The parties agree that the principles relating to causation for the purposes of equitable compensation are as stated by Spigelman CJ in O'Halloran v Thomas. That was a case involving breaches of fiduciary duty by a former director of a company. However, Mr Blake did not dispute that the same principles applied to MWP's claim for equitable compensation. 174The principles stated by Spigelman CJ may be summarised as follows (with additional references in square brackets): * Analysis of causation depends on the rule being applied. Thus, the "common sense" answer to a question of causation will differ according to the purpose for which the question is asked. In order to answer such a question, it is necessary to identify the purpose and scope of the relevant rule (at 271-272, citing Environment Agency v Empress Car Co (Abertillery) Ltd [1998] 2 WLR 350, at 356, per Lord Hoffmann). * Questions of causation of loss said to arise from breaches of fiduciary obligations are to be determined in a different way from questions of causation arising from breaches of common law obligations (at 272). * The object of equitable compensation is to restore persons who have suffered loss to the position in which they would have been if there had been no breach of the equitable obligation. Unlike damages at common law, however, the loss as a consequence of the breach is to be assessed with the full benefit of hindsight (at 272-273, citing Target Holdings Ltd v Redferns [1996] 1 AC 421, at 432, 439, per Lord Browne-Wilkinson; Canson Enterprises Ltd v Broughton & Co (1991) 85 DLR (4th) 129, at 163, per McLachlin J). [Thus losses are to be assessed using the full benefit of hindsight at the date of the trial: Youyang v Minter Ellison, at [35], per curiam.] * Where equitable compensation is sought for breaches of fiduciary duty, it is necessary to identify criteria which supply an adequate or sufficient connection between the equitable compensation claimed and the breaches of duty (at 276, citing dicta in Maguire v Makaronis (1997) 188 CLR 449, at 473, per Brennan CJ, Gaudron, McHugh and Gummow JJ). [See also Beach Petroleum v Kennedy, at [429]-[430], pointing out that there is a normative aspect to the determination of issues of causation.] * In the case of a trustee dealing with trust property in breach of a trust, a sufficient connection will be established irrespective of the identification of a separate and concurrent cause when the loss would not have occurred if there had been no breach of duty. The policy underlying this strict principle applies equally to a breach of fiduciary duty by a director of a company, since equity is concerned not only to compensate the plaintiff, but to enforce the duty of the director (at 277). Thus the approach to causation which has been adopted for the trustee of a traditional trust should be applied to fraudulent dispositions of company property in breach of fiduciary duty (at 278). 175The particular issue in O'Halloran v Thomas was whether the registration of a share transfer by a former director of a company in breach of his fiduciary duty to the company caused the company to lose the opportunity to sell the shares to a third party. The issue arose because the loss of opportunity might also have been caused by a number of other acts or omissions for which the defendant was not necessarily responsible (the separate and concurrent causes). As Meagher JA observed (at 281), since the defendant had committed serious breaches of fiduciary duty, equity would not enter into a debate as to whether the loss was also caused by the other acts or omissions. 176The causation issue in the present case is somewhat different. Neither party suggests that this is a case involving separate and concurrent causes of loss. The appellants accept that their breaches of fiduciary duty caused some relatively minor losses sustained by MWP, for example the loss of opportunity to undertake work for the Maersk Oil Joint Venture and Kangamiut Seafoods, for which they are liable to compensate MWP. Their principal contention is that the primary Judge erred in awarding compensation for other claimed losses because neither Mr Schoonbrood nor Mr Sinclair would have dealt with MWP had Mr Emmott not been with the firm. It follows, so the appellants argue, that any loss of opportunity for MWP to act on behalf of Messrs Schoonbrood or Sinclair was not caused by the appellant's breaches of duty, at least insofar as the claimed losses are attributable to work on projects undertaken by TIL after Mr Emmott left MWP. 177MWP relies on the judgment of the Supreme Court of Canada in Canadian Aero Service Ltd v O'Malley [1974] SCR 592; 40 DLR (3d) 371. In that case, a former director of a company used confidential information to acquire an opportunity actively sought by the company. Laskin J, delivering the judgment of the Court, said (at [24]-[25]): "24. [The directors] stood in a fiduciary relationship to [the company], which in its generality betokens loyalty, good faith and avoidance of a conflict of duty and self-interest. Descending from the generality, the fiduciary relationship goes at least this far: a director or a senior officer ... is precluded from obtaining for himself, either secretly or without the approval of the company (which would have to be properly manifested upon full disclosure of the facts), any property or business advantage either belonging to the company or for which it has been negotiating; and especially is this so where the director or officer is a participant in the negotiations on behalf of the company. 25. An examination of the case law in this Court and in the Courts of other like jurisdictions on the fiduciary duties of directors and senior officers shows the pervasiveness of a strict ethic in this area of the law. In my opinion, this ethic disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather than a fresh initiative that led him to the opportunity which he later acquired." 178Canadian Aero has frequently been cited with approval in Australia. The passage to which I have referred was quoted with approval (through the intermediary of another Canadian decision) by this Court in Mordecai v Mordecai (1988) 12 NSWLR 58, at 65, per Hope JA (with whom Samuels and Priestley JJA agreed). (See also Edmonds v Donovan (2005) 12 VR 513, at [58], per Phillips JA (with whom Winneke P and Charles JA agreed) and cases cited there.) However, it is important to appreciate that, as Phillips JA pointed out in Edmonds v Donovan (at [57]), the contrast drawn by Laskin J is between a fresh initiative leading to the opportunity acquired by the director after his resignation and an opportunity "to which he is led by his own position with the company". Phillips JA also pointed out that the effect of Canadian Aero is that the obligation of a director or employee to continue observing a fiduciary duty after resignation, where the duty arises before resignation, will be clearer if the resignation can fairly be said to have been prompted by the desire to obtain the "corporate opportunity". 179The approach to be taken to the assessment of equitable compensation is illustrated by Warman International Ltd v Dwyer [1995] HCA 18; 182 CLR 544. In that case, the defendant was employed as a manager by the plaintiff, an importer of gearboxes under an agency agreement with an Italian supplier. In breach of his fiduciary obligations to the plaintiff, the defendant secretly negotiated with the supplier to set up a joint venture. In consequence of these negotiations, the supplier terminated the plaintiff's agency agreement and entered into the joint venture with the defendant. 180The trial Judge assessed equitable compensation for the plaintiff's loss of the chance of retaining the agency. The assessment of $325,000 reflected a finding that the supplier, which was dissatisfied with the plaintiff's performance, probably would have terminated the agency in any event, but would have waited a little longer to do so had the defendant not breached his fiduciary duty. The trial Judge valued the lost opportunity to retain the agency at one year's profits, after tax. The order ultimately made in favour of the plaintiff, however, was not for equitable compensation, but was based on an account of the profits derived by the joint venture. The trial Judge awarded the plaintiff, in effect, a sum equivalent to four years profit from the new venture. 181The appeal in Warman v Dwyer turned on the period for which the defendant had to account for the profits he had derived from the joint venture embarked upon in breach of his fiduciary duties. What is relevant for present purposes is that the High Court expressly approved the trial Judge's approach to the assessment of equitable compensation. On that basis, the Court pointed out (at 565) that the agency agreement between the plaintiff and the supplier was terminable on three months notice. Given that the supplier was dissatisfied with the plaintiff's performance, it was reasonable to conclude that the arrangement would not have continued for much longer even if the defendant had not breached his fiduciary duties. In assessing equitable compensation, the trial Judge had correctly considered what would have happened but for the defendant's breach. His Honour had taken account of various contingencies, including the remote possibility that the agency might have continued indefinitely, and concluded that the agreement, in all likelihood, would have remained on foot for a further year but no longer. Thus, in considering the hypothetical situation where the defendant was not in breach of his fiduciary duties, the High Court took into account objective facts (in this case the supplier's dissatisfaction with the plaintiff's performance under the agency agreement) to assess the extent to which the plaintiff's losses could be attributed to the defendant's breach of fiduciary duty. 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. Basis for Assessment of Compensation 201It follows from the six propositions I have outlined that MWP's entitlement to equitable compensation should be assessed on the following bases: * Since Mr Emmott must be taken not to have breached his fiduciary duties to MWP, he must be assumed to have given MWP the six months notice of termination required by his contract. That notice must be taken to have been given no earlier than 30 June 2006, the date Mr Emmott's resignation from MWP took immediate effect. * Had Mr Emmott not breached his fiduciary duties to MWP, he would not have been able to accept for his own benefit instructions to act on behalf of clients or former clients of MWP until the required six months period of notice had expired. Thus he would not have been able to accept instructions until 1 January 2007. * During the notional six months period of notice, Mr Emmott would not have been entitled, consistently with his fiduciary obligations, to assist Mr Slater and Mr Nicholls to act for their own benefit on behalf of clients or former clients of MWP. * Neither Mr Slater nor Mr Nicholls would have been entitled to undertake work on behalf of clients or former clients of MWP referred or diverted to them by Mr Emmott during the period he was serving out his period of notice. To do so would have involved them knowingly participating in Mr Emmott's breaches of fiduciary duty. * Similarly, during this period neither Mr Slater nor Mr Nicholls would have been entitled to perform work on behalf of clients subject to Mr Emmott's supervision. To do so would also have involved them knowingly participating in further breaches by Mr Emmott of his fiduciary duties. * An allowance should be made for the time that would have been required to establish TIL as a functioning entity, once Mr Emmott's association with MWP had (notionally) terminated and he was free to set up his own firm. As I have said, a period of about a month would seem to be appropriate for this purpose. This would mean that in practice the earliest time at which TIL could have performed work on behalf of clients or former clients of MWP was the beginning of February 2007. * Both Mr Schoonbrood and Mr Sinclair would have instructed TIL in relation to ongoing transactions and new transactions as soon as Mr Emmott was prepared to accept instructions from them on behalf of TIL, regardless of their previous association with MWP. Neither Mr Schoonbrood nor Mr Sinclair would have required solicitation by the appellants or any of them to transfer work from MWP to TIL. 202A failure by the primary Judge to apply these propositions in full would not necessarily demonstrate error in the assessment of equitable compensation. However, the major challenge to that assessment was his Honour's admission into evidence and reliance upon Mr Schilling's report. If that challenge succeeds, it will be necessary to reassess the equitable compensation to which MWP is entitled. That reassessment will have to take into account the propositions I have identified. MR SCHILLING'S REPORT 203In response to the directions given after the hearing of the appeal, the parties filed a consolidated version of Mr Schilling's report in the form admitted into evidence. This Court was informed that the appellants objected at the trial to the admissibility of the entire report on the ground, among others, that Mr Schilling's expression of opinion did not meet the requirements of s 79 of the Evidence Act 1995. It appears that the primary Judge did not expressly address this objection and thus never ruled on it. 204It is not clear why the appellants' objection to Mr Schilling's report was not the subject of an express ruling. Nor is it clear what, if anything, was done to bring the omission to his Honour's attention. The importance of ruling promptly on objections to the admissibility of evidence has recently been emphasised by the High Court: Dasreef Pty Ltd v Hawchar [2011] HCA 21; 243 CLR 588, at [19], per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ. In any event, no suggestion has been made that the appellants are precluded from contending that the report should not have been admitted into evidence. 205Although the primary Judge did not deal with the appellants' blanket objection to Mr Schilling's report founded on ss 76 and 79(1) of the Evidence Act, he did rule on other objections advanced by the appellants. In consequence, his Honour rejected substantial portions of the report. MWP does not challenge any of these rulings. 206The appellants submit that the primary Judge erred in admitting the remainder of Mr Schilling's report into evidence. They contend that the report was inadmissible in its entirety for three reasons: (i) the opinions expressed in the report were not shown to be based on Mr Schilling's specialised knowledge in the sense required by s 79 of the Evidence Act; (ii) the facts assumed by Mr Schilling for the purposes of his report were not proved by evidence; and (iii) the report was fatally deficient in that it did not reveal Mr Schilling's process of reasoning. Alternatively they submit that if the report was correctly admitted into evidence, the primary Judge should have given it no weight as it lacked any probative value. 207The appellants contend that if the primary Judge wrongly admitted the report or gave it undue weight, it must follow that his assessment of equitable compensation miscarried, since on any analysis it was heavily dependent on Mr Schilling's opinions. Evidence Act 208Section 76(1) of the Evidence Act provides that evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed. Section 79(1) states an exception to the opinion rule, as follows: "If a person has specialised knowledge based on the person's training study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge." Principles 209The appellants and MWP accept that the principles governing the application of s 79(1) of the Evidence Act are those stated by the plurality judgment (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ) in Dasreef Pty Ltd v Hawchar [2011] HCA 21; 243 CLR 588. The following propositions can be derived from that judgment: * Section 79 assumes that opinion evidence is tendered to prove the existence of a fact. It is necessary to identify why the evidence is relevant: that is, why the evidence, if accepted, can rationally affect the assessment of the probability of the existence of the fact in issue in the proceeding (Evidence Act, s 55(1)) (at [31]). * To be admissible under s 79(1), the evidence must satisfy two criteria. First, the witness must have specialised knowledge based on his or her training, study or experience. Secondly, the opinion expressed by the witness must be wholly or substantially based on that knowledge (at [32]). * It follows that the party tendering an expert report must demonstrate that the author has specialised knowledge based on training, study or experience that enables him or her to express an opinion on a matter that is relevant to an issue in the proceeding. The tendering party must also be able to demonstrate that the opinion was wholly or substantially based on that knowledge (at [35]). * These requirements explain why the opinion should be presented in a form which makes it possible to determine whether the opinion is wholly or substantially based on specialised knowledge (at [36], citing HG v The Queen [1999] HCA 2; 197 CLR 414, at 427, per Gleeson CJ). * Ordinarily, the evidence of the expert must explain how the field of specialised knowledge in which the witness is expert and on which the opinion is substantially based applies to facts assumed or observed to produce the opinion propounded (at [37], citing Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; 52 NSWLR 705, at [85], per Heydon JA). * A failure to demonstrate that an opinion is based on the witness's specialised knowledge based on training, study or experience is a matter that goes to the admissibility of the evidence, not its weight (at [42]). Contents of the Report 210In order to consider the appellants' challenge to the admissibility of Mr Schilling's report reference should be made to the contents of the report. The following material includes some references to oral evidence given by Mr Schilling. Mr Schilling's Qualifications 211Mr Schilling is a Canadian citizen and a graduate in law from McGill University, Montreal. At the time his report was completed (17 October 2008), he had retired from his position as Managing Partner of Linklaters' Emerging Europe Group, based in Bucharest, Romania. When he gave oral evidence (13 August 2009), he was no longer practising law. 212Mr Schilling summarised his qualifications as follows: "Since early in my career in Hong Kong almost 20 years ago, I have had experience working as a lawyer in emerging market economies. Over the past 14 years I have specialised in providing legal services in economies at various stages of transition towards mature market economies. During the last 14 years I have been either a managing partner of an office of an international law firm in an emerging market (at Burns Schwartz this included management of offices in Prague, Budapest and Bucharest, at Linklaters this included management of the Bucharest office) or a managing partner of a legal practice within an international firm focusing on emerging markets (for many years I led a practice group focused on South Eastern Europe and for the last year I have lead a practice group focusing on Emerging Europe including CIS markets in Central Asia). As a partner in Burns Schwartz and more recently as a partner in Linklaters I have also participated in regional management as a member of a regional management committee. As a member of the International Board of Linklaters between 2006 and 2007 I have also had experience dealing with a wide range of law firm governance issues at a global level." 213There is nothing in Mr Schilling's detailed curriculum vitae to indicate any familiarity with legal practice or consultancy in Kazakhstan. He has clearly had extensive involvement in organising project finance and infrastructure transactions, but his experience appears to have been concentrated on eastern Europe, notably Romania, Czechoslovakia and Balkans countries. 214In cross-examination, Mr Schilling gave the following evidence: "Q. ...in emerging markets is the practice adopted that you charge the client whatever the market will bear? A. There is a broad range of discretion for what can be charged in commercial matters. That is certainly true in emerging markets. But for many practitioners, expatriate practitioners in the region there are also rules that apply either locally in many jurisdictions, or for some solicitors or practitioners the rules of their own home jurisdiction apply. That's why I referred to the overseas rules of conduct because in the case of the UK because that was applied globally. Q. And what Kazakh local rules in relation to costing did you look at? A. None. Q. Do you know if there were any? A. To my knowledge there are none. Q. Well did you look to see whether there were any? A. No. Q. Did you make any enquiries at all about that issue? A. No. ... Q. Can I take up two things that flow from what his Honour said. Firstly, you do not know whether it's true or not true that there are laws governing costings of solicitors or lawyers in Kazakhstan. That's the case? A. I would be very surprised if there were in commercial matters. There certainly would be in court - in litigation matters. Q. You have no knowledge of whether that's true or not-- A. I have no knowledge; I have no expertise in Kazakh law." Mr Schilling also accepted that he had no specialist costing expertise and no particular expertise in relation to costing in Kazakhstan. Assumptions 215Mr Schilling's report set out the assumptions he was asked to make. For present purposes, the most significant is that Mr Schilling was asked to assume that the Court would accept certain affidavit evidence given by Mr Wilson. Mr Schilling was also asked to assume that transaction summaries prepared by MWP related to the transactions to which Mr Wilson referred in his affidavits. 216On the first day of the hearing the primary Judge observed that one of Mr Wilson's affidavits identified in Mr Schilling's report appeared to be almost entirely inadmissible. Perhaps discouraged by his Honour's observations, MWP did not read the affidavit evidence Mr Schilling was instructed to assume would be accepted by the Court. The affidavits therefore did not form part of the evidence. 217Mr Schilling did not annex the transaction summaries to his report, but MWP tendered them at the trial. The appellants objected to the tender. His Honour ruled that the summaries would be admitted but on the basis that they were "evidence of the documents provided to the expert Mr Schilling": Michael Wilson and Partners Ltd v Nicholls (23 July 2009, unreported), at [12]. Thus although the summaries detail the nature of particular transactions and at least some of the work said to have been done in connection with them, they were not admitted to prove the truth of their contents. 218MWP points out that Mr Wilson gave oral evidence. However, it has not identified evidence which establishes that each of the transaction summaries was accurate or could reliably be used to estimate the value of work performed either by MWP or TIL on behalf of Mr Sinclair, Mr Schoonbrood or their respective companies. The Questions 219Mr Schilling was asked to give his opinion, based on specified assumptions, as to the value of work performed by MWP and TIL for particular clients and in respect of particular transactions. The questions were as follows: "[Question 1] (a) By reference to: (i) each of the MWP Clients and projects on which MWP acted in respect of those clients; (ii) the terms of engagement in respect of which MWP was engaged by those clients; and (iii) the work conducted by the MWP employees in respect of those MWP Clients and projects, in your opinion for each of the MWP Clients: (A) what was the value of the legal work performed for the MWP Clients; and (B) what amounts was MWP entitled to charge the MWP Client for such work performed over and above amounts actually billed to MWP Clients. Please indicate these amounts by reference to the actual bills (hereinafter referred to as the "MWP Invoices" and listed in Appendix F to this Report). [Question 2] (a) By reference to (i) the description of professional services provided contained in the Affidavit of David Slater sworn on 27 February 2008; and (ii) the summary of work performed for each project in the TIL invoices (hereinafter referred to as the "TIL Invoices" and listed in Appendix G to this Report); in your opinion and for each project listed under the column heading "Description of Client File" in the Affidavit of David Slater and each project for which a TIL Invoice has been issued, what would be the total fees and disbursements which you would expect to be reasonably billed for each project? If there is insufficient information in Mr Slater's Affidavit and the TIL Invoices to enable you to make such an assessment please state this in your report and please state what documents would be required for you to make such an assessment." 220Mr Slater's affidavit, referred to in Question 2(a)(i), described in general terms work performed by TIL on behalf of various clients before 20 July 2006. For example, the work performed on behalf of Sokol in relation to the Chilisai Phosphate Project was described as follows: "Reviewing all documents provided to TIL by client) including due diligence reports and subsoil use contract, drafting and amending structure memorandum, drafting and amending various alterations of transaction documents including option agreement, sales and purchase agreement, facilitation agreement, shareholders agreement, purchaser accession deed, and arranging for the execution of such documents, drafting and reviewing broker terms sheet, reviewing and amending disclosure document and loan note agreements, various meetings, telephone attendances and emails with representatives of the client, the clients offshore legal advisors and TIL staff." The Answers 221Some answers to Questions 1 and 2 were not admitted into evidence. Many of Mr Schilling's "preliminary observations", commenting on the documentation and his own methodology, were also rejected. 222By way of example of the answers admitted into evidence, the answer to Question 1 in relation to the Chilisai Phosphate Project was as follows: "The least well documented parts of this matter are the earliest and last phases when there was clearly a great deal of work done by the team at MWP lead by Mr Emmott. Given what I was able to see in the two binders of reconstructed MWP Client file it is clear to me that in the earliest phase of this project Mr Emmott spent far more the [sic] five hours on this matter. With a dozen major transaction documents, due diligence and corporate structuring the early period from April 2005 through to the month before the first MWP Invoice was issued in April 2006 it is apparent that a great deal of work was done. Moreover, the work required in support of the AIM listing would necessarily have been on a scale consistent with that involved in the Max Petroleum listing considered below at 3.6(h). Taking a view of the whole I would have thought that a considerable amount of work had been done before the first invoice issued in April 2006. Thereafter, a steady stream of work appears to have been done both by fee earners at MWP and at Temujin up to and including the AIM listing specified in the assumptions I am instructed to make. Taken as a whole I would estimate the level of legal fees at approximately $1.75 million bearing in mind that the actual time recorded might have been slightly less and that the success would have justified at least some premium. Since MWP Invoices amounted to only $97,571, this means an amount of $1,652,429 above the amounts actually invoiced. Given the migration of fee earners from MWP to Temujin in the course of this matter, I would have expected the former's fees for legal services to have been in the range of approximately $500,000 and inclusive of the appropriate premium of 15% I would estimate the amount at approximately $1.25 million." (It should be noted that para 3.6(h) of the report, referred to in this extract, was rejected by the primary Judge.) 223Before giving answers to Question 2, Mr Schilling explained that: "the task at hand is to give my opinion, based on my approximately 20 years of professional practice including the last fourteen years of professional experience as an expatriate managing partner of law offices and legal practices in emerging markets, as to what would be the value of legal services provided by [TIL] with respect to each project based on the above-referenced descriptions either in the [Mr Slater's affidavit] or in the TIL invoices were available." 224Mr Schilling stated that the TIL invoices were deficient in a number of respects. Based on his review of Mr Slater's description of work performed by TIL and the invoices, Mr Schilling considered that the available documentation was insufficient to enable him to assess what would reasonably be billable for each project: "except in relation to those projects which are ones in respect of which Mr Slater has provided a description in his affidavit and are a continuation of a project for which at least some substantive documentation exists in the reconstructed MWP Client files." 225The projects for which insufficient information was available included Ravninnoye, Beibars (Munai), Project X and the Eragon and ADA Transactions. However, Mr Schilling apparently considered that he had enough information to give responses to Question 2 for the Urals Gold Project; the Chilisai Phosphate Project and Project Ablai. 226Mr Schilling noted that he had been asked to limit his analysis of the answers to Question 2 by reference to Mr Slater's description of the work and the invoices. Given the limited nature of the information available, he considered that only an "Estimate approach" was suitable. By that expression he appears to mean an approach analogous to estimates of fees given at the outset of a project, based on a variety of assumptions as to the nature, extent and complexity of services to be provided. As Mr Schilling explained: "the 'Estimate' approach entails treating the description in [Mr Slater's affidavit] and details provided in the TIL Invoices as a definitive scope of work for that matter and then estimating fees on the basis of that scope of work." 227On this basis, Mr Schilling answered Question 2 in relation to the Chilisai Phosphate Project as follows: "This is an apparent case of the continuation of a project begun with MWP which continued with [TIL] and given the risk of double counting, I will try to breakdown the fees between firms. I have disregarded the unsigned perhaps duplicate invoice of 11 August 2006 and the apparently reversed invoice of 11 May 2006 in respect of the prior month for which a largely [sic] invoice with the same date was paid. The five remaining invoices tell me more about what was not billed by MWP in this matter than what they say about the work done by [TIL]. My reading of the correspondence in the MWP Client file indicates that the intensity of the work in this matter was highest in the period up to June 2006 which is reflected in the parallel billing by [TIL]. In the period from January through March 2006 Mr Slater apparently recorded 132 hours to this matter. Given the migration of fee earners from MWP to Temujin in the course of this matter, I would have expected the latter's fees for legal services to have been in the range of approximately $425,000 before any premium for the successful outcome of the matter and inclusive of the appropriate premium of 15% I would estimate the amount at $500,000." Admissibility of the Report 228According to MWP, the fact in issue to which Mr Schilling's report was directed was the quantum of fees MWP could have charged to the clients that TIL wrongfully appropriated, had the appellants not breached the fiduciary duties they owed to MWP. The primary Judge, in substance, identified (at [545]) this as the fact in issue to which Mr Schilling's evidence was relevant. 229As I have explained, the primary Judge did not consider whether Mr Schilling's report satisfied the requirements of s 79(1) of the Evidence Act. I n my view, the tender of the report at trial should have been rejected on the ground that MWP, as the tendering party, did not demonstrate that Mr Schilling's opinion was wholly or substantially based on his specialised knowledge gained by him through training, study or experience: Dasreef Pty Ltd v Hawchar, at [35]. 230The opinions expressed by Mr Schilling, exemplified by those expressed in relation to the Chilisai Phosphate Project (at [227] above), concerned the total fees and disbursements that he expected would reasonably be billed for each project identified in his instructions. This task required Mr Schilling to assess the nature and quantity of work performed on each project, to estimate the fees and disbursements that he expected could reasonably be billed for the services provided and to compare the bills actually tendered to the client for the work (whether by MWP or TIL, or both). 231The first difficulty faced by MWP is that neither Mr Schilling's report nor the oral evidence demonstrates that such specialised knowledge as he had enabled him to express an informed opinion on the matters addressed in his report. There is nothing in the report indicating that Mr Schilling had any familiarity with Kazakhstan or with transactions in that country or the region of the kind in respect of which MWP or TIL provided legal or other services. Mr Schilling's statement of experience (Appendix D to his report) asserts that he had worked in "much of the CIS", but none of the "transactions of significance" to which he refers illustrates his experience in Kazakhstan or the region of which Kazakhstan forms part. 232In his cross-examination, Mr Schilling said that while at Linklaters' Bucharest office he had done some work in the CIS including Kazakhstan. However, he was not asked, either in cross-examination or re-examination, to provide further details. Thus there is no evidence establishing that any work Mr Schilling performed in or relating to Kazakhstan was relevant to the opinions expressed in his report. 233Mr Schilling's oral evidence makes it clear that he had no knowledge of the law of Kazakhstan or of any local requirements governing or regulating the fees charged by firms such as MWP or TIL. Nor had Mr Schilling made inquiries in this regard. Further, as I have noted, Mr Schilling acknowledged that he had neither specialist costing expertise nor any particular expertise in relation to fees charged by lawyers operating in Kazakhstan or (so I would infer) in that region. 234The second and related difficulty is that Mr Schilling's report, or at least those parts admitted into evidence, does not demonstrate how he used such specialised knowledge as he had in order to form the opinions recorded in the report. For example, the report does not explain how Mr Schilling's experience with resource transactions in eastern Europe enabled him to estimate the nature and extent of the services required to bring transactions in Kazakhstan to fruition and to quantify the fees that a firm in Kazakhstan would be expected to charge for those services. The report assumes rather than demonstrates that the market for resource-related legal services in eastern Europe has essentially the same characteristics as the market for such services in Kazakhstan or the CIS. An attempt to make good the assumption would have required Mr Schilling to undertake more extensive inquiries than those revealed in the report. 235The point can be illustrated by Mr Schilling's analysis of the Chilisai Phosphate Project. In answering Question 1, the report states that a "great deal of work" was done by MWP before it issued its first invoice in April 2006 and a "steady stream of work" was undertaken by MWP and TIL up to the time Sokol was listed on the AIM. But the report does not explain how Mr Schilling, on the basis of those general observations, utilised his specialised knowledge to estimate that the services for the Project would have generated legal fees of USD 1.75 million. 236Similarly, the response to Question 2 does little more than assert that of the total estimated fees of USD 1.75 million, TIL could have been expected to charge USD 425,000 plus a premium of USD 75,000. In the absence of a more detailed reasoning process, it is impossible to know whether or not the estimate given by Mr Schilling is or was not based on his specialised knowledge. 237It may well be true, as MWP argues, that the information available to Mr Schilling was limited. But that does not relieve a party tendering an expert's report to ensure that it complies with s 79(1) of the Evidence Act. Nor does the fact that the appellants adduced no expert evidence relieve MWP from the need to demonstrate that Mr Schilling's opinions are based on his specialised knowledge. As the High Court held in Dasreef Pty Ltd v Hawchar, a failure to comply with that requirement goes to admissibility, not weight. 238MWP complains in its supplementary written submissions that the appellants did not discover a large volume of documents in hard copy and electronic form until 11 November 2008, after Mr Schilling's report had been completed. These documents included files maintained by TIL relating to the transactions on which that firm worked. But the trial did not commence until June 2009, seven months after additional discovery was given. No explanation has been provided as to why this additional material, if relevant to the analysis undertaken by Mr Schilling, could not have been dealt with in a supplementary report. 239MWP sought to overcome the problem I have identified by pointing out that Australian courts have received expert evidence as to the expected costs of litigation. So they have: see, for example, Dorajay Pty Ltd v Aristocrat Leisure Ltd [2005] FCA 1483; 147 FCR 394, at [29]-[44], per Stone J. But it is one thing to admit into evidence an opinion as to costs clearly based on an expert's specialised knowledge (as in Dorajay, where the opinion was based on the expert's specialised knowledge of costs likely to be incurred in representative proceedings). It is quite another to admit evidence of an opinion not shown to be based on specialist knowledge. 240It follows that the primary Judge erred in admitting Mr Schilling's report into evidence. The requirements of s 79(1) were not satisfied. Other Arguments 241In view of this conclusion, it is not necessary to address the appellants' other arguments on the admissibility of Mr Schilling's report or the weight the primary Judge should have given it. Nonetheless, I think it is appropriate to consider those arguments. Failure to Prove Assumptions 242Different views have been expressed as to the consequences of the failure of a party tendering an expert's report to prove the assumptions on which the report rests. In Dasreef Pty Ltd v Hawchar, Heydon J expressed the view (at [102]) that an opinion tendered under s 79 of the Evidence Act is inadmissible unless there is evidence admitted or to be admitted before the end of the tendering party's case, capable of proving matters sufficiently similar to the assumptions to render the opinion of value. By contrast, the Court of Appeal held in a case decided four months before Dasreef Pty Ltd v Hawchar (but not referred to by Heydon J), that it is enough for an expert to identify facts and a reasoning process which he or she asserts justifies the opinion, since this allows the court to evaluate the opinions expressed: Hancock v East Coast Timber Products Pty Ltd [2011] NSWCA 11; 80 NSWLR 43, at [77], per Beazley JA (with whom Giles and Tobias JJA agreed), following Australian Securities and Investments Commission v Rich [2005] NSWCA 152; 218 ALR 764, at [105], per Spigelman CJ. 243It is not necessary to resolve in the present case the apparent conflict between the two approaches. It is enough for present purposes to note that even if an opinion based on assumed but unproven facts is admissible, the opinion may be given little or no weight if the assumption is not made good by the evidence: Ramsay v Watson [1961] HCA 65; 108 CLR 642, at 649, per curiam. 244While Mr Schilling's report does not expose his reasoning process in any detail, it is clear that in answering Question 1 he relies, as he was instructed to do, on the accuracy of the transaction summaries prepared by MWP. Those summaries were not admitted into evidence as truth of their contents. The evidentiary basis for Mr Schilling's opinion as to the fees that could have been charged by MWP in respect of each transaction is therefore wanting. 245The position in relation to Question 2 is less clear. Mr Schilling does not expressly refer to the transaction summaries in answering Question 2. However, he records that he was asked to answer Question 2 on the basis of the "foregoing assumptions", including that the transaction summaries were accurate. Appendix C to the report lists the transaction summaries among the documents upon which the report is based. Furthermore, in answering Question 2, Mr Schilling frequently refers to his answers to Question 1 and these are based, at least in part on the transaction summaries. Thus, I think it can be inferred that Mr Schilling's answer to Question 2 also assume the accuracy of the transaction summaries. 246MWP submitted that this evidentiary gap can be filled by Mr Wilson's oral evidence. MWP's supplementary written submissions on the question of admissibility of the report refer to various passages in the transcript where Mr Wilson mentions the transactions. The submissions also identify documentation, such as TIL's invoices, which relate to the various transactions. But no attempt was made at the trial or on appeal to demonstrate that this scattered evidence supported the facts asserted in the transaction summaries which were provided to Mr Schilling. 247In the absence of proof that the transaction summaries were substantially accurate, the foundation for Mr Schilling's opinions is removed. In these circumstances, even if Mr Schilling's report had been properly admitted into evidence, the primary Judge should have given it little or no weight. Absence of Reasoning 248This conclusion is reinforced by the absence of a clear reasoning process justifying the opinions expressed in the report. For example, it is not possible to discern and evaluate the process of reasoning that leads Mr Schilling to conclude in relation to the Chilisai Phosphate Project that: * MWP and TIL, between them, could have been expected to charge fees amounting to USD 1.75 million (as distinct from a substantially lower amount); and * TIL's share of those fees could have been expected to amount to USD 500,000. 249Mr Schilling's analysis takes as its starting point the brief description given by Mr Slater of work performed in connection with the Chilisai Phosphate Project. However, the report does not explain how Mr Slater's brief description justifies Mr Schilling's opinion as to the amount of fees to be expected from this work or, indeed, anything like that amount. Nor does the report explain how the transaction summary for the Chilisai Phosphate Project (or other documentation available to Mr Schilling) supports Mr Schilling's opinion. The impression given by the report is that Mr Schilling essentially made educated guesses as to the fees he thought might be derived from work on the various projects and that his guesses were based on a series of assumptions. Some assumptions were dictated by Mr Schilling's instructions but were not necessarily independently supported by evidence, while others are not articulated in the report. 250The absence of reasoning is equally apparent in other sections of the report. For example, Mr Schilling acknowledges that Project Ablai began with work performed by MWP, yet he places his assessment of legal fees expected from Project Ablai "entirely on the side of [TIL]". Mr Schilling also acknowledges that the correspondence available to him suggested that the work on Project Ablai began in May 2006 but was "aborted" some time in June 2006 (prior to Mr Emmott's departure from MWP). Nonetheless, because Mr Schilling was instructed to assume that the Ablai Project was successfully completed, he attributes fees of USD 500,000 to it, including a "success premium" of 25 per cent. In the absence of more detailed analysis, this figure seems to represent little more than a guess. 251MWP's supplementary written submissions refer to passages in Mr Schilling's cross-examination which are said to provide a more detailed account of his reasoning. Had the tender of the report been rejected in its entirety, as should have occurred, Mr Schilling would not have given oral evidence. In any event, his evidence does not carry his reasoning process significantly further. 252When asked about the Chilisai Phosphate Project, for example, Mr Schilling gave the following answers: "Q. [The Chilisai Phosphate Project], you record that that was one of the least documented projects that you had a look at? A. Sorry, the part that I found to have involved the most work was the less well documented but there was a considerable amount of documentation. Q. How did you arrive at your estimate of $1.25 million for that work [presumably by MWP]? A. Because it was apparent from what I had seen that a considerable amount of work had been done, as I describe later in that first paragraph [of the report]. Q. Did you assume that work had been done even though you couldn't see what had been done? A. Again from the file it was clear to me that a great deal of work had been done even though parts of the file were missing, so to that extent, yes, I did assume that there was more work done than reflected in the file. Q. And you made quite a detailed assumption as to the amount of work that was done" A. That's correct." 253In his evidence, Mr Schilling went on to say that if documentation relating to a particular project was missing but "final documentation" was available, he worked backwards "trying to configure in my own mind what ethically would need to be done for somebody to provide the services being provided." By this, Mr Schilling appears to have meant that, even though there was no material that showed the nature or extent of work undertaken by MWP or TIL, he inferred from documents recording the culmination of a project that MWP or TIL must have undertaken extensive negotiations and due diligence in connection with the project. 254However, Mr Schilling's oral evidence does not identify the assumptions he considered he could make as to the nature and extent of work performed by MWP or TIL in relation to each project. Nor did he explain in his evidence the inferences that he felt able to draw from the "final documentation" in each case where there was such documentation. Similarly, his evidence does not outline the reasoning process by which he felt able to attribute a value to the work he assumed had been carried out, beyond his indication that he made broad estimates. 255For these reasons, if (contrary to my view) the relevant portions of Mr Schilling's report were correctly admitted into evidence, the primary Judge should not have given Mr Schilling's opinions any significant weight in assessing equitable compensation. REASSESSMENT OF EQUITABLE COMPENSATION 256Since the primary Judge's assessment of equitable compensation depended heavily on Mr Schilling's report, it is necessary to reassess the quantum of compensation. I consider each of the relevant projects in turn, taking into account the propositions stated earlier. Chilisai Phosphate Project 257The primary Judge found that the individual appellants committed egregious breaches of fiduciary duty in deliberately diverting to TIL the work associated with the Chilisai Phosphate Project, dishonestly appropriating documentation concerning the Project, involving Mr Emmott in the work while he was still with MWP and concealing their activities from Mr Wilson. 258His Honour awarded equitable compensation to MWP for its lost opportunity to perform legal work by reference to Mr Schilling's estimate of the value of the legal work performed in relation to the Chilisai Phosphate Project. I have explained (at [134]-[135]) how his Honour arrived at the figure of USD 1,487,186.10, to which interest was added, producing a final award of USD 2,116,130.52 as equitable compensation for MWP's loss in relation to the Chilisai Phosphate Project. In essence, subject to a small allowance for contingencies, his Honour allowed MWP the full amount of Mr Schilling's estimate of the value of work performed by both MWP and TIL on the Project, less the face value of MWP's invoices for the Project. 259In addition to the award for MWP's lost opportunity to perform legal work, the primary Judge awarded AUD 4 million as compensation for MWP's lost opportunity to derive a success fee (see at [140] above). 260In reassessing the award of equitable compensation in respect of the Chilsai Phosphate Project it is necessary to deal separately with the two components of the award. It is convenient to deal first with challenges made by the appellants to several key findings of fact made by the primary Judge, including to the rather curiously expressed finding that there was "strong evidence" that TIL received Sunkar shares from the pre-IPO placement. Challenge to Findings of Fact Nature of MWP's business 261The appellants challenge the findings (at [36]-[37]) that an essential part of MWP's business involved the structuring of assets in Kazakhstan for listing on a public stock exchange and that the business often had a success fee component which included an opportunity to take equity in the investment. This challenge was designed, among other things, to undercut the primary Judge's award of compensation for MWP's loss of opportunity to participate in a success fee. 262The appellants' submissions in support of this challenge appear to rest largely on their now discarded contention that the primary Judge should not have accepted Mr Wilson as a witness of truth. Mr McGrath SC, who had the carriage of this challenge in oral argument, said that although Mr Wilson's credit was not now in issue, nonetheless the primary Judge should not have accepted Mr Wilson's evidence on this point. Mr McGrath pointed to Mr Wilson's "unsupported testimony" and the absence of accounting evidence corroborating his claims. He also pointed to the absence of any notation in the AIM listing documents for some of the companies referred to by Mr Wilson in directing that MWP had acted in relation to the listing. 263It was open to the primary Judge to accept Mr Wilson's evidence as to the nature of MWP's business and the rewards that it sought from clients. Mr Wilson recounted in some detail the work performed by MWP in its role as an "arranger", explaining the use of special purpose vehicles as the means of securing listing for a project. He listed a number of corporations MWP had assisted in raising capital for the purpose of listing on the AIM. The fact that the AIM listing documents for these corporations do not refer to MWP does not demonstrate that Mr Wilson's evidence was inaccurate. There was nothing to indicate that the role played by MWP, as described by Mr Wilson, had to be recorded on the listing documents. 264There was other evidence to support Mr Wilson's claims. Mr Wilson gave a transaction involving Steppe Cement Pty Ltd as an example of MWP receiving a success fee in the form of shares in a corporation. He said that MWP was allotted a 10 per cent shareholding in 2004, a claim supported by MWP's (reconstructed) financial statements. He also gave evidence of MWP's role in what he described as the "Max Petroleum privatisation", as the result of which MWP acquired an equity interest. 265Mr Emmott's own "quasi-partnership" agreement with MWP described MWP as an "independent legal and business consultancy firm". In a file note of a meeting that took place on 24 May 2006 between Mr Emmott and representatives of a trustee company, he referred to himself as a partner in MWP and described the firm as one which "specialises in providing legal and consultancy services for numerous business projects in the Central Asian region". He also said at the meeting that he had received "gifts" from Sokol of shares in Max Petroleum. In his affidavit of 30 March 2009, Mr Emmott said that his principal task was "helping to build the business of" MWP and that he did "not join MWP as simply another pair of hands to do legal work". 266The appellants' challenge to the findings as to the nature of MWP's business cannot be sustained. Extent of Work 267The primary Judge found that the invoices produced by TIL relating to work done in connection with the Chilisai Phosphate Project did "not paint the full picture" (at [407]). His Honour rejected Mr Slater's evidence that TIL did no work on the Project after 30 September 2006, the last date to which the invoices related (at [409]). He found that work continued after that date (at [411]-[412]). The appellants challenge each of these findings. They submit that there was no evidence that they had destroyed evidence or failed to produce relevant material on discovery. They contend that the primary Judge's findings were based on "isolated emails" and Mr Wilson's unsupported suppositions. 268The evidence supporting the primary Judge's findings includes the following: * an email of 26 October 2006 from Mr Emmott to Mr Slater (after the last invoice had been sent) stating that Mr Sinclair thought it was better if Mr Emmott's name did not appear on invoices so as not "to give Wilson any ammo"; * the last invoice of 9 October 2006 had incorporated explicit references to Mr Emmott's work; * email correspondence in late June 2007 between Mr Sinclair and Mr Slater concerning the form of documentation which, as Mr Emmott confirmed in his evidence, related to the Chilisai Phosphate Project; * an email of 3 July 2007 from Mr Nicholls to Mr Slater, noting that Mr Emmott was to travel to London at Mr Sinclair's request and commenting on documentation, concerning the Chilisai Phosphate Project; and * email exchanges between Mr Nicholls and Mr Sinclair on 4 December 2006 relating to the listing of Sunkar and the issue of founder shares in that company which Mr Slater accepted indicated that TIL was still acting at that time in relation to the Chilisai Phosphate Project. 269The primary Judge was also entitled to take into account the (now) unchallenged findings that Mr Slater had dishonestly deleted emails from MWP's computer system in an attempt to conceal his activities and had otherwise attempted systematically to conceal his activities. These findings do not affirmatively establish that Mr Slater and Mr Nicholls either withheld invoices from discovery or deliberately avoided creating invoices in relation to work performed by TIL after 30 September 2007. But they do allow the inferences adverse to the appellants to be drawn more readily from the evidence to which I have referred in the previous paragraph. 270The primary Judge was entitled to find that TIL performed work on Sokol's instructions after September 2006 and did so until the pre-IPO placement in November 2007 of shares in Sunkar. The evidence does not permit a finding to be made as to the volume of work performed or the amount of fees that TIL would have charged Sokol had TIL issued invoices and produced them to the Court. Placement of Shares in Sunkar 271The primary Judge found (Liability Judgment, at [418]) that there was "strong evidence to suggest" that TIL received Sunkar shares from the pre-IPO placement. His Honour explained the form of his finding as flowing from the appellants' deliberate concealment of their activities. Because of their concealment, MWP could do no more than provide "strong evidence" to suggest that TIL had received shares (Remedies Judgment, at [31]). Both parties accept that, despite its apparently curious form, the finding should be interpreted as concluding that TIL had received some Sunkar shares. They also seem to accept that the finding should be interpreted as meaning that the allotment of shares was not necessarily made to TIL itself, but would have been made for the benefit of the controllers of TIL, namely Mr Emmott, Mr Slater and Mr Nicholls. 272The appellants submit that the evidence does not justify a finding that TIL or anyone associated with TIL received any shares in Sunkar. They contend that if the finding is set aside, there is no basis for awarding MWP compensation for the loss of an opportunity to participate in a placement of shares in Sunkar. 273The appellants' submission encounters the difficulty that the primary Judge accepted neither Mr Slater nor Mr Nicholls as a reliable witness and found that both had deliberately concealed their activities designed to divert transactions from MWP to TIL. I accept that these findings do not affirmatively establish that TIL or any of the other appellants received, directly or indirectly, the benefits of shares issued by Sunkar in its pre-IPO placement. However, as I have explained, the findings do justify drawing inferences more readily from material that otherwise might be regarded as equivocal on the issue of whether Sunkar shares were issued to any of the appellants. 274The evidence relied on by the primary Judge and by MWP in support of the finding that shares were issued to TIL included the following: * On 9 July 2006, Mr Sinclair asked Mr Slater whether his Bahamas/BVI companies were "activated yet to hold Phosphate shares". * In an email of 22 August 2006, Mr Emmott identified the time spent on the Chilisai Phosphate Project in June and July 2006 (time that justified charging USD 36,750 in fees). He added that TIL was always ready to discuss fees and agree on a cap: "although the size of the cap would depend to some extent on what else we get by way of shares etc". * On 4 December 2006, Mr Emmott said in an email to Mr Nicholls that as far as he was aware: "there is still going to be an issue of founders [sic] shares although the total number is changing. This includes all the pre IPO investors and I understand us - at least that was the case when I last mentioned it a couple of months ago". Mr Emmott confirmed in his evidence that the email related to the Chilisai Phosphate Project and that "us" was a reference to TIL. * The Sunkar AIM admission document recorded the following: - on 27 April 2007, Sunkar had issued 95,202,400 Ordinary Shares to founding shareholders and other subscribers for cash, at values ranging from 0.1p to 35p per share; - a pre-IPO placement agreement between Sunkar, the directors of Sunkar and the "founders" was entered into on 30 November 2007 (there was no evidence as to the terms of the agreement); and - there were many "Material Contracts" entered into by Sunkar or its subsidiaries any number of which (as the primary Judge found) might have been worked on by TIL. 275In assessing the significance of this material it is necessary to take account of some curious gaps in the evidence that cannot be attributed exclusively to the appellants' active concealment of their activities. Despite extensive cross-examination of Mr Emmott, Mr Slater and Mr Nicholls, little time seems to have been devoted to exploring whether they had received, through TIL or otherwise, the benefit of a placement of shares in Sunkar. Nor does there appear to have been significant attention directed in cross-examination to whether TIL performed work or services of the kind in relation to the Chilisai Phosphate Project that might be expected to attract a "success fee" or a "finder's fee" (as distinct from legal work that might be expected to attract fees calculated in more or less an orthodox fashion). 276Some of the gaps in the evidence were adverted to at the hearing. MWP subsequently filed what was described as a note responding to the Court's questions as to whether the individual appellants and Mr Emmott had been cross-examined as to their receipt of shares in Sunkar. The note identified some cross-examination of Mr Emmott and the individual appellants on documents to which the primary Judge referred, but it cannot be said the issues were explored in any depth. For example, Mr Slater was asked by reference to the email of 4 December 2006 whether Mr Emmott had discussed with him the suggestion that TIL was to receive a number of founders' shares in respect of the Chilisai Phosphate Project. Mr Slater said he recalled a discussion with Mr Emmott about a conversation with Mr Sinclair on the subject. When asked whether anything came of it, Mr Slater said that, to his knowledge, nothing had. The topic was left there. Although both Mr Emmott and Mr Sinclair were cross-examined at length about benefits Mr Emmott received from the Max transaction, he does not appear to have been asked about any benefits he may have received from the Chilisai Phosphate Project. 277Mr Sinclair, who might have been expected to know whether TIL or the other appellants received shares in Sunkar, was not asked that question. He was also not asked whether TIL or Mr Emmott (with whom he clearly had a close business and professional relationship) had provided services to Sokol or Sunkar, in respect of the Chilisai Phosphate Project, of a kind that would have warranted a success fee or similar reward in the form of shares in Sunkar. 278Similarly, the Court was not taken to evidence of efforts to obtain from Sunkar or the AIM records that might have revealed whether the appellants or any of their associated persons or entities had received shares in Sunkar and, if so, in what quantities. Mr Walker's response was that such inquiries would be unlikely to reveal anything material. But unless inquiries were undertaken, it is not possible to know what the records might have shown. 279With the evidence in this unsatisfactory state, one can understand why the primary Judge expressed his finding as to the issue to TIL of shares in Sunkar in the manner he did. On the balance of probabilities, I think that the evidence supports a finding that Mr Emmott and the appellants (or some of them) received the benefit of an allotment of shares in Sunkar. It appears that Mr Emmott and the appellants had an expectation that they would receive the benefit of an allotment of shares. For Mr Sinclair and Sunkar to take this course would have been consistent with the practice previously adopted in relation to Mr Emmott, for example with the listing of Max Petroleum. The records of Sunkar, although not examined in the detail that might have been expected, are consistent with Mr Emmott and the appellants (along with many others) having received the benefit of an issue of shares in the company. 280For these reasons, I think that the primary Judge was justified in finding that TIL (by which I include Mr Emmott, Mr Slater and Mr Nicholls) probably received the benefit of an allotment of shares in Sunkar. However, this is not a finding that shares were issued in Sunkar for any particular reason. Specifically, it is not a finding that shares were issued in Sunkar as a "success fee" for the role played by Mr Emmott or the appellants in the successful listing of Sunkar. Nor is this a finding that shares allotted to or for the benefit of TIL, Mr Emmott or the individual appellants had any particular value. The primary Judge made no findings on these matters. Assessment of Equitable Compensation for the Chilisai Phosphate Project: Loss of Opportunity to Earn Fees 281The amounts charged by TIL for work on the Chilisai Phosphate Project, as disclosed by the discovered invoices for the period from 9 January 2006 to 30 September 2006 and adjusted for duplications, amounted to USD 218,630.00. The primary Judge found that TIL continued to perform work on the Project after September 2006, but that invoices for that work were not discovered by TIL. His Honour did not make a finding as to whether invoices existed and were destroyed or simply not produced, or whether no invoices had been raised for the work. He did find, however, that there was a desire to conceal TIL's continuing activities from MWP and Mr Wilson (at [411]). 282The appellants submit that any missing invoices in respect of the period after September 2006 were irrelevant. They say that a distinction must be drawn between work performed by TIL before 30 June 2006 (when Mr Emmott resigned from MWP) and work performed after that date. Mr Blake, although not conceding MWP's entitlement to compensation for the fees derived by TIL during the period up to 30 June 2006, submits that there can be no entitlement to compensation in respect of fees derived after that date. Since Mr Sinclair (the principal of Sokol) would have engaged TIL exclusively once Mr Emmott left MWP, there was no prospect of the work accruing to MWP. Thus the equitable compensation in respect of the Chilisai Phosphate Project should be limited to the face value of the invoices rendered for the period from 9 January 2006 to 30 June 2006, a total of USD 232,570. 283For the reasons I have given, no dividing line can be drawn between work performed by TIL before Mr Emmott's departure from MWP and work performed after that date. In assessing the losses sustained by MWP, the question is what benefits would have accrued to it had the appellants not breached their fiduciary duties. Mr Emmott could not have accepted a retainer from Mr Sinclair or Sokol in relation to the Chilisai Phosphate Project until after 1 January 2007. Consistently with the fiduciary obligations he owed to MWP, he could not have performed work on the Chilisai Phosphate Project prior to that time, otherwise than on behalf of MWP. Mr Slater and Mr Nicholls could not have undertaken work on the Chilisai Phosphate Project in conjunction with Mr Emmott before that time and Mr Sinclair would not have instructed them independently of Mr Emmott. When the time required to establish TIL is taken into account, TIL could not have performed work on the Chilisai Phosphate Project before 1 February 2007. 284It can be accepted that, as the primary Judge found, Mr Sinclair and Sokol would have instructed TIL as soon as Mr Emmott was prepared to accept the instructions on behalf of that firm. But it is clear that, despite Mr Sinclair's unwillingness to involve Mr Wilson in his projects, he was content to instruct MWP so long as Mr Emmott was the lead lawyer in performing the work. Since Mr Emmott could not have accepted instructions on his own account from Mr Sinclair until February 2007, MWP lost the opportunity to perform remunerative work on behalf of Mr Sinclair and Sokol from January 2006 until 31 January 2007. 285I have rejected the appellants' challenge to the primary Judge's finding that TIL continued to perform work on the Chilisai Phosphate Project until November 2007. However, in view of the findings concerning Mr Sinclair's firm intention to instruct Mr Emmott regardless of the firm with which he was associated, MWP cannot establish that it lost an opportunity to perform work on behalf of Mr Sinclair and Sokol from and after February 2007. Even without any breaches of fiduciary duty by the appellants, MWP would not have performed that work. While theoretically there may have been a chance that MWP's retainer would have continued beyond February 2007, on the evidence that possibility was no more than speculative and of no value. MWP is therefore entitled to compensation for the loss of the opportunity to perform work in connection with the Chilisai Phosphate Project between January 2006 and the end of January 2007. 286Once the relevant period is determined, I do not understand Mr Blake to dispute that compensation should be measured by the gross fees charged or chargeable by TIL for the work performed on behalf of Sokol during that period. In principle, as was pointed out in argument, the compensation should take account of the cost of providing the services which MWP lost the opportunity to perform on behalf of Sokol. However, the appellants make no submission that any such allowance should be made and point to no evidence that would permit an allowance to be quantified. 287The state of the evidence makes it difficult to assess compensation for MWP's lost opportunity to perform work in the Chilisai Phosphate Project. As I have indicated, the primary Judge did not make a finding independently of Mr Schilling's evidence concerning the volume of work performed by TIL and the fees attributable to that work. But on his Honour's findings, MWP is entitled to invoke the principle that where a party's actions have made an accurate determination of damage or loss problematic, doubtful questions should be resolved against that party and the court should assess damages or compensation in a robust manner: Houghton v Immer, at 59, per Handley JA (with whom Mason P and Beazley JA agreed). This principle is not a licence for the Court to choose an arbitrary figure and certainly not a licence to award compensation designed to punish the appellants for their misconduct. 288Once Mr Schilling's report is rejected or given no weight, there is no sound basis for challenging the accuracy or completeness of the invoices produced by TIL in relation to the Chilisai Phosphate Project for the period ending on 30 September 2006. The invoices reveal average monthly billings of approximately USD 24,292.00 during the nine month period January to September 2006. However, the billings for July 2006 (USD 22,206) and for August-September 2006 (USD 11,554 for the two months) suggest a marked decline in the volume of work towards the end of the period. In the absence of evidence, it is not possible to know whether the decline was temporary, indicative of a continuing pattern or reflective of a failure to invoice for all work performed during the relevant period. 289In view of the findings that the appellants falsely denied that they had performed work after September 2006 and did not produce invoices for that period, I think it appropriate to allow the average monthly billing of USD 24,292.00 for the nine month period to September 2006 as the benchmark for the four month period from 1 October 2006 to 31 January 2007. That produces a figure of USD 97,168.00 to which must be added the invoiced sum of USD 218,630.00 for the period up to 30 September 2006, producing a total of USD 315,798.00. 290The primary Judge made a modest allowance of ten per cent for contingencies (that is, the possibility that MWP would not have retained the work for reasons unconnected with any breaches of fiduciary duty), but applied this discount only to the compensation assessed by reference to Mr Schilling's estimates. I can see no reason in principle why the discount should not be applied to compensation assessed by reference to the value of work performed by TIL in relation to transactions that otherwise would have been the subject of instructions to MWP. If anything, this allowance may be somewhat generous to MWP, particularly taking into account Mr Sinclair's evidence that Sokol and its associates instructed a number of law firms to act in relation to its various projects. However, I do not think that this Court should depart from the figure chosen by the primary Judge and I do not understand the parties to have suggested otherwise. Thus the amount to be awarded as equitable compensation for MWP's lost opportunity to continue its retainer for the Chilisai Phosphate Project is USD 284,218.00 (that is, USD 315,798.00 less USD 31,580.00). An allowance for interest will need to be added to this amount and to the other amounts allowed below. Assessment of Equitable Compensation - MWP's Lost Opportunity for a Success Fee 291I have upheld the primary Judge's finding that TIL, Mr Emmott and the individual appellants probably received the benefit of a placement of shares in Sunkar. I have pointed out that the finding does not specify the reason or reasons why any such allotment was made or quantify the value of any shares allotted. 292In its written submissions on the cross-appeal, MWP accepts that the primary Judge gave no reasons for choosing AUD 4 million as the award of equitable compensation for MWP's lost opportunity to derive a success fee from participating in the Chilisai Phosphate Project. Using exchange rates current on 11 December 2009 (the date of the Remedies Judgment), MWP calculates that his Honour allowed 1.17 per cent (₤2.24 million) of Sunkar's market capitalisation on its admission to the AIM as compensation for the lost opportunity. MWP contends that the appropriate level of compensation is 5 per cent of Sunkar's market capitalisation on listing. Its fallback position is that the primary Judge's award should be upheld despite the lack of reasoning justifying the award. 293MWP relies on a number of matters to support the higher award: * MWP's business had a fee structure that often included a success fee in the form of an opportunity to take equity; * Mr Slater's business proposal of 29 September 2005 stated that in his experience in Australia, an "Arranger" could expect a success fee of between 3 and 10 per cent in cash or some combination on listing; * Mr Wilson gave uncontradicted evidence that if MWP raised finance "typically in the case of equity, you can look for anything from 5% to 15% of the amount raised"; * Mr Schoonbrood gave uncontradicted evidence that an introducer of a project in Kazakhstan might ultimately receive a fee of 5 per cent or more, depending on the transaction and whether there were other means of exploiting the same opportunity; * an email sent by Mr Slater to Mr Schoonbrood on 10 August 2006 on behalf of TSL, offered to act on Pinegrove's behalf in arranging the purchase of an interest in the Ravninnoye deposit and sought a success fee of 5 per cent of the gross proceeds or total consideration paid in respect of the transaction; * Mr Slater stated in an email of 19 April 2007 to a legal adviser that TSL intended to introduce business opportunities to various parties for a management fee and a percentage of shares that were issued; * agreements prepared and executed by Mr Slater in October 2007 in relation to the acquisition of Eragon and ADA each contemplated success fees calculated at 5 per cent of the value of the company; * Mr Sinclair gave evidence that Sunkar (like Benkala and Max Petroleum) was a "world class potential" project (although he also said that it had only reached the stage of test production); * Mr Emmott received a placement in 2005 of shares in Max Petroleum for his benefit; and * Sunkar, upon its listing on the AIM on 30 June 2008, had a market capitalisation of ₤191.8 million. 294MWP also relies on these matters to support its fallback position that an award of AUD 4 million is not unreasonable as compensation for its lost opportunity. 295The evidence upon which MWP relies is general and does not relate specifically to any success fee that MWP says might have been received by Mr Emmott or the appellants in connection with the Chilisai Phosphate Project or the listing of Sunkar. I have found that Mr Emmott and the appellants probably received the benefit of an allotment of shares in Sunkar. That does not mean, however, that an allotment was made as a form of "success fee", in the sense of a percentage of the capital raised on the listing of Sunkar on the AIM or of Sunkar's total capitalisation. 296Shares might have been issued in Sunkar for reasons other than as a reward or success fee for services rendered in arranging or introducing an entire transaction. For example, the documentary evidence, such as Mr Emmott's email of 22 August 2006, is consistent with shares in Sunkar having been issued for the benefit of Mr Emmott or the appellants as compensation for TIL agreeing to a cap on fees. Another example can be drawn from the primary Judge's acceptance of Mr Sinclair's evidence (Liability Judgment, at [259]) that Mr Slater (and Mr Wilson) located a number of investors in the Chilisai Phosphate Project. It would be consistent with the evidence of Mr Schoonbrood and others that a reward or commission might be paid for introducing investors to the Project. But any reward to Mr Slater or others for introducing investors would be highly unlikely to take the form of a percentage of the entire value of the Project or of all capital raised for the Project, as distinct from a percentage of the capital actually raised through the introduction of an investor. (It will be recalled that the primary Judge found that the listing of Sunkar on the AIM raised ₤31 million and that on admission Sunkar had a market capitalisation of ₤191.8 million (at [88] above)). 297I do not think that the evidence justifies a finding that Mr Emmott or the appellants received shares in Sunkar as a reward for arranging the Chilisai Phosphate Project or introducing it as a business opportunity to Mr Sinclair or his associates. MWP did not direct attention to evidence that would establish or be probative of the proposition that such services were provided. Mr Sinclair gave evidence, apparently accepted by the primary Judge (at [76] above), that he was unaware of any benefits given to the appellants or Mr Emmott in respect of Sokol's projects. As I have noted, the issue was not further explored with Mr Sinclair in his evidence, notwithstanding that he presumably would have known whether any success fee had been earned or paid in connection with the Project or the listing of Sunkar, especially a fee calculated as a percentage of the total value of the Project or the total value of capital raised for the Project through the listing of Sunkar. 298MWP accepts that the primary Judge gave no reasons for awarding AUD 4 million as compensation for the loss of its opportunity to participate in a success fee in respect of the Chilisai Phosphate Project. However, his Honour appears to have been influenced by the presumption against wrongdoers and the principle that doubts should be resolved against those whose actions make determination of an issue difficult. The primary Judge rejected Mr Slater's evidence that TIL had performed no work on the Chilisai Phosphate Project after September 2006 and found (at [411]) that Mr Slater (and presumably the other appellants) had a continuing desire to conceal TIL's activities from MWP. However, those findings and the rejection of other evidence called on behalf of the appellants do not justify an inference that a success fee worth millions of dollars was paid to or for the benefit of Mr Emmott or the appellants. As I have indicated, MWP could have taken additional steps to fill gaps in the evidence relating to the payment of a success fee but, for whatever reason, did not do so. 299The questions that have to be answered are: * What opportunity did MWP lose in relation to the Chilisai Phosphate Project (other than to earn fees) by reason of the appellants' breaches of fiduciary duty? * What was the value of that opportunity? 300The limitations of the evidence make both questions difficult to answer and impossible to answer with any precision. The difficulties are compounded by the need to take into account that Mr Sinclair's association was with Mr Emmott, not Mr Wilson. Indeed, Mr Sinclair did not want Mr Wilson involved in any of his projects. 301The best answer that can be given to the first question is that MWP lost the opportunity to make contributions to the Project, for example by introducing investors or capping or foregoing fees, that may have resulted in MWP receiving an issue of shares in Sunkar or similar reward based on those contributions. On the evidence, I do not think that there was any realistic chance of MWP, assuming no breaches of fiduciary duty by the appellants, receiving the benefit of a success fee calculated as a percentage of the value of the Project or of total capital raised for the Project. 302The second question is even more difficult to answer. I think that the value of MWP's lost opportunity is to be assessed at a relatively modest figure and certainly nowhere near AUD 4 million. There can be no precision in this process. However, an allowance of one third of the total fees charged by MWP and TIL in connection with the Chilisai Phosphate Project represents, in my view, an appropriate allowance for the lost opportunity and the best that can be done in the circumstances. 303The primary Judge found that MWP invoiced Sokol for fees totalling USD 97,571.00 in respect of the Chilisai Phosphate Project. His Honour also found that TIL invoiced Sokol a total of USD 218,630.00 in respect of the Project for the period 1 January 2006 to 30 September 2006. I have concluded that it is appropriate to assess the fees charged by TIL to Sokol for the period from October 2006 to January 2007 amounted to USD 97,168.00. Thus the total fees charged by both MWP and TIL in respect of the Chilisai Phosphate Project until 31 January 2007 amounted to USD 413,369.00. As I have explained, one third of that sum should be allowed as equitable compensation for MWP's lost opportunity to gain a reward (other than fees) in relation to the Chilisai Phosphate Project. So calculated, the allowance is USD 137,789.67, which should be rounded to USD 140,000.00. Urals Gold Project 304The primary Judge found that the appellants were liable to pay equitable compensation to MWP for breaches of their fiduciary obligations relating to the Urals Gold Project. As with the Chilisai Phosphate Project, his Honour assessed the quantum of compensation by reference to Mr Schilling's report. This approach cannot stand, given that Mr Schilling's report should not have been admitted into evidence or given any weight. 305In their written schedule, the appellants challenge the findings (at [433]) that MWP had worked on the Urals Gold Project long before TIL was established and that the appellants "exported" the work to TIL. The basis of their challenge does not emerge clearly from the various sections of the written submissions cross-referenced in the schedule. Insofar as the challenge is based on the appellants' causation argument, I have already dealt with it. 306No issue arises as to the completeness of the invoices discovered by TIL concerning fees charged to Sokol for work performed on the Urals Gold Project. They indicate that work was performed during the period of January 2006 to 30 November 2006. Consistently with my reasoning on the compensation payable in respect of the Chilisai Phosphate Project, MWP is entitled, subject to the allowance for contingencies, to compensation assessed by reference to the total fees charged by TIL to Sokol (USD 109,292). After allowing ten per cent for contingencies, the appropriate amount is USD 98,363. Roxi Transactions North Karamandybas, Ravninnoye and Beibars (Munai) Projects 307It follows from what I have said that, contrary to the appellants' submissions, no distinction can be drawn, for the purpose of assessing equitable compensation, between the work performed by TIL in respect of the North Karamandybas, Ravninnoye and Beibars (Munai) Projects before 30 June 2006 and work performed after that date. But for the appellants' breaches of fiduciary duty, MWP would have received instructions in relation to these three Projects. 308As with the compensation for MWP's lost opportunity to perform work on the Chilisai Phosphate Project, I think it appropriate to award equitable compensation for the lost opportunity to work on the three Projects calculated by reference to the fees actually charged by TIL. This was the approach taken by the primary Judge. However, I can see no reason why the ten per cent discount for contingencies should not be applied to the face value of the invoices. The fees charged by TIL totalled €390,228. After the discount, the compensation to be allowed is €351,205. Project X 309MWP's cross-appeal challenges the primary Judge's finding that there was insufficient connection between the appellant's breaches of fiduciary duties and the losses claimed by MWP for its lost opportunity to participate in Project X. MWP's written submissions contend that MWP should receive compensation for the lost opportunity because TIL's billing for work on Project X commenced in November 2006, well within the six months period of notice Mr Emmott was required to give MWP. 310MWP is entitled to compensation for the lost opportunity to perform work in relation to Project X. The lost opportunity relates to the work done by TIL during the period Mr Emmott notionally would have been serving out the six months period of notice he would have had to give to MWP on 30 June 2006. 311The primary Judge found that TIL issued invoices in respect of Project X amounting to €29,950, covering work in November and December 2006. No invoices were in evidence relating to any subsequent period and his Honour made no finding that any work was done on Project X after December 2006. In particular there was no finding that TIL performed work on Project X in January 2007. 312The measure of MWP's loss, subject to a reduction for contingencies, is the amount of fees charged by TIL for work in connection with Project X during November and December 2006. The appropriate equitable compensation for MWP's lost opportunity is therefore €29,950, less 10 percent for contingencies. This produces a figure of €26,955. 313It is a separate question as to whether MWP is entitled to compensation for a lost opportunity to obtain a success fee in relation to Project X. The primary Judge noted (at [504]) that the letter of 25 January 2008 relating to the issue of 6,169,230 shares in Roxi beneficially to Mr Slater was an "acknowledgement" that the Project X arrangements referred to in the email of 13 December 2006 between TIL and Mr Rigell "had come to fruition". It is not entirely clear what his Honour meant by this observation, as he found (at [484]) that the Eragon transaction, to which the issue of shares to Mr Slater in Roxi related, was not the same transaction as Project X. 314MWP's submissions on the cross-appeal seek compensation for a lost opportunity to derive benefits similar to the cash fees of million apparently paid to PJT pursuant to the agreements entered into between PJT and Mr Schoonbrood in 2007. The submissions also seek compensation for "success fees" totalling USD 29 million which are said to be the value of the shares issued to Mr Slater pursuant to the two agreements. However, MWP does not attribute its claim to compensation to Project X, presumably because of the finding that the Eragon and ADA transactions were quite separate. Thus no issue as to a success fee arises in relation to Project X. Eragon and ADA Transactions 315By its cross-appeal, MWP contends that the primary Judge erred in not awarding equitable compensation in respect of the Eragon and ADA transactions. The cross-appeal on this issue is to be approached by reference to the principles I have already stated. 316The invoices produced by TIL suggest that no work was done by it on the Eragon and ADA acquisitions before January 2007. For some reason not identified in the primary judgment and not explained in submissions, the invoices issued on 12 October 2007 in respect of each of these transactions covered work performed throughout the nine month period from 1 January 2007 to 30 September 2007, but apparently did not segregate work performed according to the month. The fees charged for the nine month period in relation to both transactions amounted to USD 492,500. The primary Judge made no findings as to the proportion of fees attributable to work performed in January 2007. This Court was not taken to the invoices themselves or any documentation that would enable an apportionment to be made. 317MWP is entitled to compensation for the lost opportunity to perform work on behalf of Roxi or Mr Schoonbrood in relation to the Eragon and ADA acquisitions during the month of January 2007. (It will be recalled that the assessment of compensation is to be approached on the basis that Mr Emmott would be free to act on instructions from Mr Schoonbrood as from 1 January 2007, but that he would have required approximately a month to set up the necessary infrastructure for the new firm.) It is difficult to assess the value of the chance, since it is by no means clear that even if the infrastructure for the new firm had not been established, Mr Schoonbrood would have instructed MWP to act on a new transaction for a very short period, particularly when Mr Emmott no longer was associated with the firm. 318MWP charged fees of an average of approximately USD 55,000 per month in respect of the Eragon and ADA transactions during the period of nine months from January to September 2007. The best that can be done, taking into account the very many uncertainties, is to award a proportion of that average monthly figure as compensation for MWP's lost opportunity. The sum of USD 15,000 is, in my view, adequate as compensation for the lost opportunity. 319MWP has not established a basis for claiming compensation in respect of the lost opportunity to have participated in the "success fee" apparently paid by Roxi to Mr Slater or for his benefit in the form of shares in Roxi. On the findings of the primary Judge, the issue of shares was a consequence of agreements entered into in October 2007, long after Mr Emmott and Mr Slater would have been free to accept work from Mr Schoonbrood. Even if MWP had performed some legal work in January 2007 in connection with the Eragon and ADA acquisitions, there was no realistic prospect that it would have received any portion of the success fee agreed to eight or nine months later. Given the relationship between Mr Schoonbrood and Mr Emmott, it is not merely speculative, but fanciful to suggest that a short-term temporary arrangement would have produced any benefit for MWP other than the standard fees charged for services rendered to Roxi or Mr Schoonbrood. Benkala Copper Project 320The primary Judge rejected MWP's claim for equitable compensation for the lost opportunity to work on the Benkala Copper Project and to participate in possible "success fees". He did so for two reasons, reproduced earlier in this judgment (see at [97] above). 321MWP's cross appeal challenges the primary Judge's findings that: * the shift in resources to the Benkala Copper Project occurred months after Mr Emmott left MWP (at [444(a)]); and * there was insufficient evidence that TIL received benefits in the form of a success fee in respect of the Project (at [444(b)]). 322MWP points to the evidence of Mr Slater who prepared a table describing work done by TIL on behalf of various clients before 20 July 2006. The table includes the following information concerning the Benkala Copper Project: Client Description of Client File Client Representatives Description of professional services provided Sokol Holdings Limited Benkala Copper Project Tom Sinclair Attendance at various meetings with representatives of the Seller, and the Purchaser and their local and offshore legal and financial advisors, reviewing and amending memorandum of understanding, reviewing draft subsoil use contract, various telephone and email attendances between representatives of the Seller, and the Purchaser and their local and offshore legal and financial advisors and various TIL staff. 323MWP also relies on what it said was Mr Sinclair's evidence that Sokol "swapped" the Urals Gold Project for the Benkala Copper Project. In fact all that Mr Sinclair said in his affidavit was that when Sokol decided, apparently in mid-2006, that it would not proceed with the Urals Gold Project, it decided to swap its investment in that Project for an investment in the Benkala Copper Project. The latter was not simply a continuation of the Urals Gold Project on which MWP had worked. 324The evidence does not establish that TIL or Mr Emmott worked on the Benkala Copper Project before Mr Emmott resigned from MWP on 30 June 2006, although Mr Slater's table is consistent with a relatively small amount of work being done by TIL before that date. However, the table is clearly evidence that TIL performed some work on behalf of Sokol in relation to the Benkala Copper Project even though TIL produced no invoices relating to work performed on the Project. 325For the reasons I have given, the fact that MWP did not perform any work in relation to the Benkala Copper Project does not rule out a claim for equitable compensation for the lost opportunity to perform that work. Similarly, the fact that most if not all the work done by TIL on the Project was undertaken after Mr Emmott had left MWP, is not a fatal barrier to MWP's claim for equitable compensation. TIL commenced work on the Project at a time when Mr Emmott would have been with MWP had he not been in breach of his fiduciary duties. The likelihood, on the assumption that Mr Emmott would have remained with MWP until December 2006 (and that TIL would not have been established until February 2007), is that Mr Sinclair would have instructed MWP to act in relation to the Benkala Copper Project. 326I therefore respectfully disagree with the primary Judge's conclusion that there was insufficient connection between TIL's work on the Benkala Copper Project and the loss of opportunity to work on that Project claimed by MWP. The difficulty is to assess the value of that opportunity. 327There was no evidence of the extent of work performed by TIL on the Project, other than Mr Slater's evidence. The primary Judge made no finding that TIL had destroyed or deliberately withheld invoices, but it can be inferred from Mr Slater's evidence that some fees must have been charged to Sokol for the work performed by TIL. 328MWP is entitled to the benefit of the principle stated in Houghton v Immer (see at [287] above). But MWP must bear some responsibility for the paucity of evidence as to the fees charged or chargeable by TIL for work on the Benkala Copper Project. For example, the Court was not taken to any cross-examination where Mr Sinclair, the individual appellants or Mr Emmott were asked about the nature and extent of work performed by TIL for the Project. The submissions did not address or draw attention to documentary evidence (not necessarily emanating from TIL) from which inferences might be drawn as to these matters. No explanation was given as to why it was not feasible to have obtained production of relevant documentation, such as the material referred to by Mr Slater in the table prepared for his affidavit. 329As both parties seem to accept, in this unsatisfactory state of the evidence, the Court has to do its best. Giving some leeway to MWP (but not too much), I think the loss to it before allowing for contingencies should be assessed at two months' work at the same average monthly fee level revealed by TIL's invoices for the Chilisai Phosphate Project. This produces a figure of USD 59,200. An allowance of 10 per cent for contingencies reduces this figure to USD 53,280. 330MWP's submissions do not identify any evidence indicating that TIL or any of the appellants received any success fee, much less benefits amounting to USD 12.5 million (5 per cent of the value attributed by MWP to the Benkala Copper Project). The claim for this amount rose no higher than speculation as to a possible outcome, devoid of a firm evidentiary base. It is one thing to say that a party should not benefit in litigation from a deliberate withholding of evidence or lack of frankness. It is another to use a void in the evidence to justify an extravagant claim. 331The primary Judge correctly rejected MWP's claim to equitable compensation for loss of a chance to obtain a highly lucrative success fee from the Benkala Copper Project. Project Ablai 332The primary Judge found (Liability Judgment, at [522]) that TIL received instructions from Mr Sinclair in connection with Project Ablai before Mr Emmott left MWP. Only one invoice was rendered by TIL in respect of Project Ablai, for work performed between 1 June 2006 and 30 June 2006 (at [524]). The amount of this invoice was initially recorded by the primary Judge as USD 36,959, but he seems later (at [561]) to have adjusted this figure to USD 31,959, a figure repeated in the Remedies Judgment (at [27]). 333Given the inadmissibility of Mr Schilling's report, there is no evidentiary basis for concluding that TIL performed work in relation to Project Ablai to a value greater than the invoiced fees. It follows that MWP is entitled to compensation assessed by reference to the invoiced fees, less an allowance of ten per cent. This produces a figure of USD 28,764.00. Maersk Oil Joint Venture and Kangamuit Seafoods 334As I have noted (at [143(v)] above) the appellants do not dispute that MWP is entitled to compensation in respect of fees derived by TIL for work in connection with the Maersk Oil Joint Venture and Kangamuit Seafoods. There is agreement that the appropriate figure in relation to the Maersk Oil Joint Venture is USD 16,960. The appellants accept that MWP is entitled to recover the face value of invoices rendered by TIL for work performed on behalf of Kangamuit Seafoods (USD 39,750). (They do not ask for this amount to be reduced for contingencies.) Since the primary Judge's award of compensation in respect of Kangamuit Seafoods was based on Mr Schilling's report and since I have held that the report was inadmissible, the compensation should be assessed at USD 39,750. CONCLUSION 335The appellants have succeeded on their appeal in that the award of equitable compensation made by the primary Judge should be reduced. In particular, the awards made in respect of the Chilisai Phosphate Project, the Urals Gold Project and the Roxi Project must be reduced. In addition, the award of AUD 4 million in respect of MWP's lost opportunity for a success fee in relation to the listing of Sunkar cannot stand. 336MWP has succeeded to a limited extent in its cross-appeal. Contrary to the findings of the primary Judge, MWP is entitled to relatively modest equitable compensation in respect of Project X, the Eragon and ADA transactions and the Benkala Copper Project. 337The outcome of the appeal and cross-appeal is shown in the following table (exclusive of interest): Project Primary Judge's Award Adjusted Award Chilisai (Lost Fees) USD 1,487,186.10 USD 284,218.00 Chilsai (Success Fee) AUD 4,000,000.00 USD 140,000.00 Urals Gold USD 358,489.80 USD 98,363.00 Roxi €390,228.00 €351,205.00 Project X Nil €26,955.00 Eragon and ADA Nil USD 15,000.00 Benkala Copper Nil USD 53,280.00 Project Ablai USD 450,000 USD 28,764.00 Maersk USD 19,504.00 USD 16,960.00 Kangamiut Seafoods USD 150,750.00 USD 39,750.00 338Thus in total MWP is entitled to the following amounts: USD 676,335.00 €378,160.00 It will be necessary for interest to be added to these amounts. 339As I have noted, Young JA in the earlier decision of this Court criticised the form of the declarations made by the primary Judge. However, the appellants did not make any submission that the declarations should be set aside. Nor did the High Court make any reference in its decision to the form of the declarations. In these circumstances, the declarations should stand. 340Orders should be made allowing the appeal and cross-appeal in part, setting aside the sums specified in Orders 8(iii), 16(iii), 20, 24 and 28 made by the primary Judge on 11 December 2009 and substituting the appropriate sums inclusive of interest. 341I propose the following directions: 1. The parties file agreed short minutes of order within 14 days, including provision for interest, costs and any other outstanding issues. 2. In the absence of agreed short minutes, the appellants file and serve their draft short minutes of order and brief submissions in support within 14 days. 3. MWP file and serve its draft short minutes of order and brief submissions in support within a further 14 days. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 November 2012