DEACONS (a firm) v. WHITE & CASE LTD LIABILITY PARTNERSHIP AND OTHERS

HCA 2433/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2433 OF 2002

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JUDGMENT

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1. This is an application for discovery; in fact, for further and better discovery, brought by the Plaintiff against the Defendants.

2. The application flows from my findings on the issue of liability in this action. On 24th October 2003 I found in favour of the Plaintiff in damages against all Defendants to be assessed, with a right to elect an account of profits against the 3rd and 4th Defendants. By further judgment of 13th November I gave the same right of election as against the 1st and 2nd Defendants as well. On the same date I ordered discovery relevant to the Plaintiff's election between damages or an account of profits, to be complied with by 8th January 2004, with a supporting affidavit.

3. On 21st January the Defendants filed a document described as the Defendants' first combined list of documents and on 27th January a verifying affidavit.

4. The list of documents identified 47 separate matters and a total of 404 documents. The verifying affidavit was completed by a Mr. Latchford described therein as the Chief Financial and Administrative Officer of the 1st Defendant based in New York. He deposed that the documents in the main are bills and proformas which relate to work carried out by the Defendants for the period from August 2002 to date which in their judgment related to matters for which the Plaintiff may be entitled to an account of profits if that be the remedy it elects. By 'proforma' is meant a record of billable time recorded on the particular file or matter.

5. As for expenses, he deposed that there is within the 1st and 2nd Defendants no accountancy undertaken whereby expenses are allocated to a specific fee earned, though that can be carried out. In the meantime he stated that the aggregate revenue of the 2nd Defendant for the period in question was $16.1 million and the overall expenditure, including what is referred to as 'partner compensation', came to $23.49 million.

6. On 2nd March 2004 Messrs. Clifford Chance (CC) for the Plaintiff wrote to Messrs. Johnson, Stokes & Master (JSM) for the Defendants pointing out various deficiencies and followed this up with the summons for further discovery that is now the matter before me. The application seeks within 14 days a further and better list of documents as specified or falling within classes of documents set out in an attached schedule, with copies to be supplied, together with a verifying affidavit.

7. The schedule referred to was attached to the summons. However in subsequent correspondence between the solicitors it came to be replaced by an amended version and it is this which is now the subject of this application. It is I think appropriate to set out the amended schedule, and I do so hereafter:-

1. Revenue

To the extent not already discovered, all bills issued by the First and/or Second Defendants, and all "proformas" generated by either of them, in respect of all matters worked on by, or referred from, the Second Defendant's Business Restructuring Department (including, without limitation, the Third Defendant, the Fourth Defendant, Mr Darton, Mr Leifer and Mr McDonald) since August 2002 irrespective of whether that work:-

(a) was done for a client which was formerly a client of Deacons or otherwise;

(b) was generated by the Second Defendant's Business Restructuring Department or was referred to it by another department of the Second Defendant or by any other office of the First Defendant.

For the avoidance of doubt, this discovery should include:

(i) In respect of any past or current matter falling within the above description, all documents evidencing whether the First and/or Second Defendants will or may be instructed in the future to undertake further work relating to, or connected with, that matter.

(ii) All documents evidencing cross-referrals of work, whether in the business restructuring field or in any other field, and revenue and work in progress thereby generated, within the Second Defendant and/or across the First Defendant's international network, where those referrals are directly or indirectly from or attributable to any member of the Second Defendant's Business Restructuring Department since August 2002.

2. Expenses

All documents detailing, and/or providing a breakdown of, the specific expenses incurred by the Defendants in generating revenues included within category 1 above, including but not limited to:

(a) The First Defendant's audited accounts for 2002 and 2003

(b) The Second Defendant's audited accounts for 2002 and 2003

(c) Management accounts for 2003 for both the First and Second Defendants

(d) Documents providing a detailed breakdown of the US$23.49 million of office overheads said to have been incurred by the Second Defendant between August 2002 and January 2003 in the affidavit of Mr Latchford dated 27 January 2004.

(e) Management accounts or their equivalent from August 2002 for any office of the First Defendant outside Hong Kong (including separate, special purpose entities where applicable) which has generated such revenue.

3. Benefits accruing to Third and/or Fourth Defendants

All documents evidencing any salaries or other emoluments, any share in any profits, bonuses, increases in compensation or any other financial advantages which have accrued to the Third and/or Fourth Defendants as a result of their joining the First and Second Defendants.

5. Financial relationship between First and Second Defendants

All documents evidencing the financial inter-relationship between the First and Second Defendants and demonstrating whether they operate as separate partnerships or whether income and/or profits are pooled and then distributed by the First Defendant.

6. Damages

All documents in the possession, custody or power of all or any of the Defendants evidencing damage (being loss of existing or future business or referrals of business or loss of goodwill) suffered by the Plaintiff as a result of their tortious and fiduciary breaches, including without limitation the documents specified in category 1 above.

8. Specific documents

Without limitation to the discovery sought above:

(a) Documents, including bills and proformas, evidencing revenue and/or work in progress in respect of Standard Chartered Bank matter 4642119-19 and in respect of any Standard Chartered Bank matter subsequent to matter number 26.

(b) Proformas for each of the matters identified in the Defendants' first combined list of documents dated 21 January 2004 for which proformas have not already been discovered.

(c) All bills issued in respect of SK Networks matter 4620179-4 including the invoices numbered 684108 and 4603381.

(d) All bills issued in respect of BRI Finance Limited matter 4618320-2 including invoices numbered 4602577, 4602592, 4603035, 4603036, 4603063 and 4603101.

(e) All bills and proformas in respect of Standard Chartered Bank matter 4642119-6.

8. Prior to the hearing the solicitors for the parties corresponded with a view to agreeing some of the issues or at least reducing the matters in contention. To this extent there was some success; it is I think appropriate to spell out what has been agreed and what remains for me to rule upon.

1. Revenue

9. The Defendants are prepared to give discovery of the bills and proformas asked for, on a quarterly basis, but there is a dispute about the phrases 'all matters worked on' and 'all documents evidencing cross-referrals of work'. As well it seems reference to the 2nd Defendant's Business Restructuring Department needs to be tidied up as there is no such entity in the 2nd Defendant. The Defendants also take issue with the inclusion at (i) because they do not understand what is meant. As an addendum under this head the Plaintiff seeks discovery of all timesheets generated by the fee earners of the Department from which the proformas derive. The Defendants oppose this.

10. I shall return to deal with these issues.

2. Expenses

11. With the removal of the first three lines under this head, this is now agreed.

3. Benefits Accruing to Third and/or Fourth Defendants

12. Amended, thus to read 'Documents evidencing annual salary return, bonus award, contract revisions evidencing changes in compensation which have accrued to the 3rd and/or 4th Defendants as a result of their joining the 1st and 2nd Defendants', this is now also agreed.

5. Financial Relationship between First and Second Defendants

13. The Defendants are prepared to respond by giving answers to provide this specific information sought but object to providing documents, on the basis that this is not a proper matter for discovery. The Plaintiff's viewpoint is that if there are documents it is entitled to view them.

6. Damages

14. The Defendants position is that there is no more discovery to give or at least no more beyond that given or to be given in respect of the account. The Plaintiff responds that this should be verified by affidavit. The Defendants oppose the need for an affidavit.

8. Specific Documents

15. The Defendants are willing to give discovery of all matters under this head.

16. I come now to deal with the issues in turn.

1. Revenue

17. Under this head has to be resolved the following:-

(a) Should the Plaintiff be entitled to discovery in respect of 'all matters' or should there be a limited selection?

(b) given that there is no Business Restructuring Department, whose matters should be caught?

(c) What is the purpose and meaning of the discovery sought at (i)?

(d) Should the Defendants be required to discover the timesheets?

18. The starting point is that there should be discovery sufficient to enable the Plaintiff to make an informed election as to which remedy to pursue in equity and common law.

19. It is the Plaintiff's contention that the discovery should be in connection with all matters generated or worked on by the members of the Business Restructuring Department (leaving aside for the moment who these are, in the absence of such a Department) whether the client in question was a former client of the Plaintiff or not and whether the file in question is a business restructuring matter or not. The reasoning behind that is because an account for profit is not always caught by the common law principles of causation, remoteness of damage and measure of damage. There does need to be established a reasonable connection between breach of duty and the profits for which the fiduciary is accountable. Even so the rules in equity are not strictly defined; there have been awards for all profits made without attempt to separate such part of profits attributable to the breach of a fiduciary duty. The consequence of the Defendants' breaches was that the Plaintiff lost an established and successful business with established clients, goodwill and reputation. In such circumstances it might well be entitled to an account of all profits generated by the departed team.

20. On the issue of timesheets, the Plaintiff seeks discovery because they are the base documents from which the proformas emerge. Without them the Plaintiff would be wholly dependent on the Defendants' account.

21. The Defendants at the outset were prepared to concede only to discovery in respect of those matters undertaken for clients who were formerly clients of Deacons. But before me Mr. Hunsworth representing them said that they no longer disputed the inclusion of all matters undertaken falling into the category of the specialist skills of the members of the departing team. What however should be excluded is such work undertaken that is unrelated to business restructuring. As to the timesheets, the Defendants object to discovering these upon the basis that there is no benefit or point in the Plaintiff having access to them when the information contained therein in summary form is recoverable from the proformas. To call for discovery of the timesheets would require a huge amount of manpower and time for no good purpose, at least not in connection with the Plaintiff's election; time enough for these, for verification purposes, as and when the election is made and the trial is resumed.

22. My ruling is that discovery should be limited to 'all matters only where the client was a client of the Plaintiff prior to August 2002; otherwise, for all matters in the field of or pertaining to business restructuring'. I do not find it conceivable that a claim could lie in respect of any other matter worked on, for a client who had no prior connection with the Plaintiff.

23. There being, by all accounts, no Business Restructuring Department in the 2nd Defendant these words should be excluded, leaving the five named protagonists and 'any associate or other employee working under the directions or supervision of them or any of them'. I do not see the need for the inclusion of (i) which is to be excluded. In (ii) reference in the second line to 'any other field' should be excluded, unless it relates to work undertaken for a former client of Deacons.

24. I find no good reason for the inclusion under this head of timesheets. That will take the issue of election no further. Time enough for audit purposes if there is then a need.

5. Financial Relationship between First and Second Defendants

25. In a letter of 18 June 2004 expanding on what was required by the Plaintiff under this head, CC wrote to JSM as follows:-

".........

13. The reason for the request is that our clients must know whether the Second Defendant is financially independent from the other international offices of White & Case (or any of them) or, if not financially independent, the nature of that dependence. This is in order that our clients can satisfy themselves that: (i) all revenue generated by lawyers of the Second Defendant is reflected in the Second Defendant's accounts; and (ii) all expenses recorded in the Second Defendant's accounts are expenses properly attributable to the Second Defendant.

14. The specific information we seek in relation to revenue includes:

(a) whether there is or can be a revenue credit where work is referred from the Second Defendant to another office of White & Case (for example, if the matter referred was one which did not require any work in Hong Kong by the Second Defendant);

(b) the basis on which inter-office bills are raised and accounted for (for example, where there is an existing matter in Hong Kong for which work on a discrete issue is referred to another office); and

(c) the basis on which revenue is accounted for when time recorded by members of the Second Defendant is billed from, and payable to, another office of White & Case (for example, the invoice to the Foreign Bank Steering Committee of SK Global dated 30 June 2003 which included substantial time recorded by Hong Kong fee-earners, but was billed from and payable to the First Defendant in New York. We refer to document 53 of your clients' first combined list).

15. The specific information we seek in relation to expenses includes:

(a) whether any fee, calculated as a percentage of revenue or on any other basis, is payable to the First Defendant or an associated entity in consideration for the Second Defendant being allowed to use the "White & Case" name;

(b) whether expenses incurred in or by any office of White & Case outside of Hong Kong are recorded in the accounts of, or are otherwise charged to, the Second Defendant. If so, what those expenses are and the basis on which they are charged;

(c) specifically in relation to the "cost of central operations" referred to at paragraph 19 of Mr Latchford's affidavit, discovery of the "allocation principles" to which he refers, both generally and in respect of the period from August 2002 and December 2003; and

(d) whether there are regional management costs which the Second Defendant incurs or contributes to, and the basis on which they are charged.

........."

26. In principle the Defendants do not object to responding to the specific matters raised. It has been submitted on their behalf that documentary production is not appropriate, at least not prior to receipt of the answers that they are prepared to give. I agree. This matter is to stand adjourned with liberty to restore if the answers sought are not forthcoming or are otherwise unsatisfactory by a given period of time that I shall come to.

6. Damages

27. The Defendants claim to have no discovery to give or none to give beyond that intended in compliance with the discovery in respect of the account. That may be so; but I share the view of the Plaintiff that this is a matter that should be confirmed by affidavit. The Defendants have demonstrated no good reason why this should not be done, or why there should not be a verifying affidavit as sought.

28. That I believe concludes all matters, save as to timing. 14 days is too short. I fix 8 weeks, with liberty to apply. I adopt the same time frame for compliance with the matters raised at 5 in the schedule before liberty to restore arises.

29. Costs will be in the cause, nisi at first instance.

Representation:

Mr. N. Cooney instructed by Messrs. Clifford Chance for the Plaintiff.

Mr. N. Hunsworth of Messrs. Johnson, Stokes & Master for the Defendants.

HCA 2433/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2433 OF 2002

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J U D G M E N T

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1. This is an application by the defendants for a stay of all further proceedings in this action and specifically the assessment of quantum until after the Court of Appeal has delivered judgment in the appeal and cross-appeal on the issue of liability.

2. At a pre-trial directions hearing it was ordered that the action be split with liability to be tried first. That was dealt with when I handed down judgment on 24 October 2003 finding in favour of the plaintiff in damages against all defendants, to be assessed, with a right to elect an account of profits against the 3rd and 4th defendants. By supplementary judgment of 13 November I gave the same right of election as against the 1st and 2nd defendants. On the same date I ordered discovery in respect of the plaintiff's right to elect its relief in damages or equity, to be complied with within 56 days, that is by 8 January 2004.

3. Since then, the following activity has taken place:-

1. On 18 December the defendants filed notice of appeal against the order of 13 November;

2. On 31 December the defendants filed notice of appeal against some of the orders on liability made in the judgment of 24 October;

3. On 15 January the plaintiff filed notice of cross-appeal in respect of some of the orders on liability.

Meanwhile, on the issue of discovery, there was correspondence between Johnson, Stokes & Master (JSM) for the defendants and Clifford Chance (CC) for the plaintiff.

4. By letter of 18 December, being the date upon which an appeal against, inter alia, the discovery order was filed, JSM wrote seeking an agreement to a stay of discovery pending the appeal.

5. By letter of 22 December CC wrote that the plaintiff would not agree to a stay.

6. By letter of 6 January JSM wrote that whilst the defendants regarded the discovery order to be wrong in principle they had decided not to seek a stay of it and would comply with it as best they could, but sought an extension to 15 January.

7. By letter of 7 January CC responded that the plaintiff agreed to that extension because the defendants were not seeking a stay.

8. In the event there was compliance but not until 28 January, following two further applications and orders amending the timetable.

9. On 2 March CC wrote pointing out various deficiencies in the discovery and followed this up with a summons for further discovery.

10. This prompted a response from JSM of 3 April 2004 which said in part:

"The difficulty we have with your request for further discovery is that you are, in effect, expecting our clients to provide a full account (with all the consequential costs and time) as part of your clients' decision on election of remedy. This is clearly inappropriate. Your clients have sufficient information from the discovery provided to make an informed election.

If it be your clients' intention to continue with this discovery application, our clients intend to seek a stay of the quantum proceedings pending our clients' appeal on liability......"

11. When CC gave notice that the plaintiff would not be dissuaded from pursing the additional discovery the defendants took out this stay application, filed on 14 April. In support is an affidavit of Mr. Hunsworth who has conduct of the case on behalf of all defendants. In it he states that the discovery sought by the plaintiff relevant to its election as to remedy is extremely far-reaching and, if granted, will involve the defendants in an enormous amount of time and money in producing the material asked for. Further, whatever the election, the actual assessment as to quantum will be a substantial and complex exercise with forensic experts likely to be called by both sides. His estimate, based on counsel's advice, is that the whole exercise will involve many hearings of several weeks spanning a year or more. In the circumstances a considerable amount of expense would be wasted if the Court of Appeal allows the appeal or otherwise varies the nature of the remedies the plaintiff is entitled to. Because the issues of liability and quantum had been split he put the proposition that liability should be finally disposed of before quantum is further to proceed.

12. This reasoning was the subject of Mr. Burns' submission in support. He highlighted that given the various claims and findings at first instance there are numerous possibilities in the outcome of the appeal which will dictate future conduct of the action, and those possibilities include significantly and substantially different orders from those at first instance. He submitted there is clearly no prospect of the issue of assessment of damages or equitable relief being dealt with prior to the appeals. So, the delay in pursuing discovery if, after all, the Court of Appeal does not disturb the orders I made would be no more than about 6 months, balanced against enormous wasted costs incurred in the event that discovery as sought is no longer appropriate.

13. The plaintiff's opposition to the stay is based on two grounds: the first that no good reason had been demonstrated to grant a stay; the second that the defendants by their conduct have waived their right at this stage to pursue a stay.

14. Mr. Chow mounted his waiver argument on the defendants' stated decision not to pursue a stay pending appeal as set out in JSM's letter of 6 January, and then their proceeding to comply with the order for discovery, albeit belatedly and inadequately. As a consequence the plaintiff has acted to its detriment because it took no steps to seek an expedited hearing of the appeal against the order for discovery, raising no objection to it being set down in November to be dealt with with the other appeals.

15. His argument that there are no good grounds is primarily that whatever the outcome of the appeals no massive expenditure will have been incurred before that outcome is known.

16. The power to make an application for a stay derives from Order 59 rule 13 RHC which states that an appeal shall not operate as a stay unless the court below or the Court of Appeal or a single judge directs. In the proper exercise of that discretion a stay will not be granted unless the appellant can demonstrate there are good reasons for doing so; this is because of the principle that a successful litigant should not be denied the fruits of his litigation.

17. Historically, appellants have been granted a stay if the appeal would otherwise be rendered nugatory; similarly where enforcement of the judgment could result in irreparable hardship or difficulty. These are extreme situations in respect of which commonsense and justice warrant a stay. Otherwise the current approach would seem to promote the premise that provided there are arguable grounds for a successful appeal the court will likely weigh the impact upon the appellant if no stay is allowed and he wins his appeal against prejudice the respondent may suffer if a stay is granted and the appeal fails.

18. As Ma J. (as he then was) wrote in his judgment in the unreported case of Star Play Development Limited and Bess Fashion Management Co. Ltd. HCA 4726/2001:-

"Ultimately, the court embarks on a balancing exercise and uses its commonsense, but bearing in mind at all times the starting point that the successful party is not to be deprived of the fruits of its success ...."

19. Although the stay sought is in respect of all activity and in particular the assessment of quantum, the practical reality is that there is no prospect that the parties will be ready to proceed to trial on the assessment of quantum or that an adequate time slot will be available in the Court's diary before the scheduled Court of Appeal hearing. The consequence is that the only matter that will be affected, were there to be a stay, is the plaintiff's summons for further discovery. That has been set down for hearing on 23rd June. Insofar as discovery, albeit the subject of an appeal, is already under way no stay having been sought at the outset, it seems to me that the defendants would have to present strong grounds as to why an application for further and better discovery than that so far produced should now be forestalled.

20. It is argued that there will be wasted costs in the event that the discovery proceeds and then the appeal succeeds. It is argued that if the plaintiff's pending application for extensive additional discovery succeeds, the resultant task of compliance will be extremely time consuming and expensive. In my view these are not compelling reasons for a stay. Wasted costs can be recovered. And the issues of additional discovery have yet to be argued. I do not see why in the balancing exercise the plaintiff's pursuit of discovery should be cut off for six months, perhaps for longer if the appellate rulings are reserved.

21. The defendants, as I find, have failed to demonstrate there is good reason for granting a stay. Their application is dismissed, with costs to the plaintiff in any event. (the costs order is nisi at first instance).

Representation:

Mr. A. Chow instructed by Messrs. Clifford Chance for the plaintiff.

Mr. A. Burns instructed by Messrs. Johnson, Stokes & Master for the defendants.

HCA2433/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2433 OF 2002

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____________________

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J U D G M E N T

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1. There are two applications now before me made by the plaintiff, one by notice of motion, the other by summons. I shall deal with the notice of motion first.

2. This application follows the judgment handed down on 24 October 2003 but prior to the sealing of orders deriving therefrom. There are, in the judgment, findings that the 1st and 2nd defendants acted for their own benefit upon confidential information of the plaintiff given them by the 3rd and 4th defendants, being thus in breach of duties of confidentiality owed to the plaintiff once they received it. As a consequence of that, I found them liable for damages to be assessed as prayed for.

3. The application now before me is to amend the judgment by giving the plaintiff the option of electing, as an alternative to damages, an accounting of profits and/or equitable compensation because, as it is now claimed, this is alternative relief arising directly and inevitably from my finding. Alternatively, I am invited to make a supplemental order having the same effect and for the same reasons.

4. As originally pleaded, this action set out to recover in damages loss occasioned by the breach by the 1st and 2nd defendants of a contract of non-solicitation between the parties. What emerged, after several expansive amendments to the statement of claim and relief, was the joinder of the 3rd and 4th defendants, claims in tort, breaches of equitable and contractual obligations by the 3rd and 4th defendants, and procurement thereof by the 1st and 2nd defendants. The relief sought was similarly expanded to include injunctive relief, exemplary damages and, as against the 3rd and 4th defendants, the right to elect, as an alternative to damages, an account of profits or equitable compensation.

5. Having found, as I did, the 3rd and 4th defendants liable for being in breach of core duties of loyalty, good faith and fidelity, I gave the plaintiff the right to elect the alternative equitable relief as prayed for. Having found, as I did, the 1st and 2nd defendants liable for being in breach of confidentiality owed the plaintiff, I gave no such right of election. My not having done so has given rise to this application. It is made, as it discloses, under Order 20 r. 11, Rules of High Court, and the court's inherent jurisdiction. Order 20 r. 11 states:

"Clerical mistakes in judgments or orders or errors arising therein from any accidental slip or omission may at any time be corrected by the court on motion or summons without an appeal."

It is apparent thus that any amendment under this head must be because of a clerical mistake in the judgment itself. In this case, my omitting to provide the plaintiff with the alternative remedy was not because I forgot about it but because it was not asked for. The omission was not an accident; thus Order 20 r. 11 has no application.

6. There is the alternative proposition that I make a supplemental order to provide the additional relief. As to jurisdiction, I believe I have the right to do so under the inherent power of the court before entry of judgment and the drawing up of the orders; see the White Book at 20/11/8, page 349. But that power should be exercised only if justice demands that course. Order 18 r.15(1) states that the relief or remedy a plaintiff claims must be specifically set out. This is for obvious reasons. A defendant is entitled to know what he is up for. But the court does have power to grant any further relief it thinks is appropriate on the facts as proved if justice requires it; again see the White Book at 18/15/4, page 299.

7. Mr Chow for the plaintiff submits that justice does require it. He argues that the breach of confidence claimed was pleaded and successfully so, giving rise to a finding of liability. It was a breach which, in the normal course, would give rise to the alternative equitable relief now sought. It was not prayed for in the alternative because it was overlooked. That it was an oversight is made apparent by the fact that it was relief argued extensively for and against by counsel in their closing submissions. Though now sought late in the day, it could not be said to have caught the defence by surprise.

8. Mr Burns for the defendants, in opposition to the application, urges that I should not accept that the omission to pray for this remedy was overlooked. He argues that the claim of breach of confidence standing alone was not pleaded. That which the plaintiff relies upon as giving rise to its right to this remedy was pleaded under the head of common design, a tort which does not give rise to this type of relief. In any event I found the tort not made out. There is thus no entitlement to the alternative remedy now asked for.

9. I come now to my ruling. I find that the plaintiff did plead breach of confidence as a specific ground. Although it comes within a section of the statement of claim subheaded "Interference by the 1st to 4th defendants with the plaintiff's business by unlawful means," it is not, by its wording, deprived of being a separate plea and, in my judgment, I did find the 1st and 2nd defendants liable under this head. I accept that the prayer for alternative relief was left out by mistake. It was, as I accept, argued as alternative relief. There is no injustice by its late entry. Having given the plaintiff the right to elect equitable relief as against the 3rd and 4th defendants for breaches committed under the same overall factual matrix, it would be illogical not to give it the same opportunity as against the 1st and 2nd defendants.

10. In the circumstances, I give the plaintiff leave to add to the prayer as an alternative remedy an account of profits and/or equitable compensation for breach of equitable obligations and order in its favour accordingly.

11. I come now to the application on summons. The trial being a split trial with liability to be dealt with first followed by assessment of damages or other quantifiable relief, this application is for discovery of such documents the defendants have or have had in their possession, custody or power relevant to the plaintiff's right to relief by damages or equitable remedy.

12. Mr Burns's opposition to this application, pared back now, given my findings on the notice of motion, is that it is premature. It is wide and general, serving not to determine the limit and extent of documents by class or other particular as may be pertinent to the relief the plaintiff has been found to be entitled to. There should be, as a prelude, an application for directions and a court ruling to this effect, otherwise the defendants are in the dark as to what should be disclosed.

13. Whilst there is practical force in this submission, I think the court would be in no position to give a direction on the extent to which the defendants should comply with disclosure obligations without knowing what has happened since breach of the various obligations giving rise to the plaintiff's right to relief. The plaintiffs would be in similar difficulty in a request for directions. This seems to me to be a case of the egg and the chicken; the cart and the horse. I think it appropriate for the defendants to compile a list of documents they believe fall under the head of relevance to the plaintiff's claims under both alternative heads. Thereafter, if necessary, more particularised discovery can be pursued as may be necessary.

14. I propose to find in favour of the applicant save that the time shall be eight weeks and not four. I order accordingly.

(Submissions re. costs)

15. I note the split order for costs made by Yam J in the case referred to me by Mr Chow. This is, however, an application by way of an indulgence to deal with a conceded omission. I think the appropriate order in this case, and I so direct, is that on the notice of motion, costs are to the defendants in any event. On the summons, they are in the cause.

Representation:

Mr A Chow, instructed by Messrs Clifford Chance, for the Plaintiff

Mr A Burns, instructed by Messrs Johnson Stokes & Master, for the Defendants

HCA 2433/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2433 OF 2002

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J U D G M E N T

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Introduction

1. This claim is about poaching, by one legal practice from another, of partners, senior associates and a substantial client base. A feature of it is that as originally pleaded it was for breach of a non-solicitation term that was part of or collateral to a confidentiality agreement entered into between the two firms as they explored the prospects of merger. But in the course of the discovery process documents emerged which resulted in the joinder of two of the individual protagonists and the evolving of the proceedings to include claims of breaches of fiduciary duty and of the inducing and procuring of those breaches by the defendant firms.

2. The counter to this is that members of the workforce, whether as partners or employees, should be allowed to advance their careers by moving without undue restraint from one principal to another, that principals should not be prevented from recruiting those who want to make the move, and that clients should be free to engage whom they choose.

3. I begin with a brief history.

History

4. The plaintiff (Deacons) is a large well-known local legal practice. Its head office is in Hong Kong, with a presence either directly or through associated firms in a number of other Asian cities including Beijing, Shanghai, Guangzhou, Bangkok and Singapore. In early 1999 its managing partners considered it time for the firm to test the feasibility of a global expansion; to become part of one of those practices which have branches or connected firms in some form or another throughout the world. To this end they began dialogue with partners of the 1st defendant which is a limited liability partnership based in New York controlling an international conglomeration of firms established in 25 or more countries worldwide. One of those firms is based in Hong Kong, the 2nd defendant. (From hereon if I need to specify one firm or the other I shall do so respectively as White & Case LLP and White & Case HK. Otherwise I shall refer to them collectively as White & Case.)

5. At the time White & Case HK was comparatively small; what was envisaged was that Deacons would merge with White & Case HK; thus for White & Case to expand its presence in South East Asia to become one of the largest regional firms and for Deacons to become part of an established global practice. With both sides interested in exploring such prospects they entered into a confidentiality agreement the purpose of which was to limit the extent to which shared sensitive material might be utilised, given of course that at such time the parties were competitors and would remain so until merged if that was to take place. I shall from now on call this the Confidentiality Agreement. It is dated 15 May 1999. Its terms are unremarkable; there is no need for me to refer to them. What however is pertinent is an exchange of letters thereafter. On 20 May the then managing partner of Deacons, Mark Roberts, wrote proposing, inter alia, a mutual undertaking between the firms in the following terms:-

"2. The second issue which is slightly sensitive relates to our respective firms disclosing considerable amount of information about our respective practice groups and our lawyers, which might enable either firm to identify individuals from the other firm as future potential recruits. Obviously it is important that each of our firms have some protection in this area and I would, therefore, like to propose that each firm undertakes not to solicit any lawyer from the other firm during any merger discussions between our respective firms and for a period of twelve months after those discussions come to an end (should there be no agreement to merge). Could you please consider this proposal and let me have your views."

His counterpart in White & Case HK, George Crozer, who is also a partner of White & Case LLP and on its management board, telephoned to agree and followed that up with a letter of 31 May which stated on the point:-

"Secondly, I agree to your non-solicitation proposal. I believe that this should go without saying, but it is good to be clear on the matter, as well as on the specification of a time period as you have indicated."

6. Pausing here, it is the plaintiff's case that the exchange amounted to a variation of and became part and parcel of the Confidentiality Agreement; alternatively, that it formed a collateral contract. There was a preliminary denial by the defendants that the parties were bound by a non-solicitation obligation. But not long before the trial was due to begin a concession was made on the point to which I shall return.

7. After the signing of the Confidentiality Agreement and subsequent exchange of correspondence there followed discussions and swapping of information including financial data. Some of the Deacons partners visited and spoke to White & Case LLP partners in New York. White & Case sought advice on the most tax efficient means of accommodating Deacons in the event of a merger. Then matters were put on hold; White & Case were at this time engaged in negotiating with other firms in other areas which had priority. On 11 November 2001 Deacons' partners resolved to break-off negotiations; the decision was made to stay regional. One of their number, Peter Aherne, was assigned to notify White & Case and he did so, but not until a telephone call with Mr Crozer on 29 January 2002.

8. At all material times Deacons has operated a department called the Finance and Insolvency Department. Within that is a sub-group responsible for a type of activity called business restructuring and insolvency. In the main this comprises advising creditors, particularly banks and accountants, on the financial restructuring of companies overburdened with debt, but where the situation is identified as non-contentious. The Asian financial crisis of 1997 was a shot in the arm for this division of Deacons. By 1998, the sub-group (the BRI group) was headed by a capital partner the 3rd defendant (Mr Fairbairn) whose team included a salaried partner the 4th defendant (Mr Cairns) and an associate solicitor Robin Darton. In mid 2001 a partner of a firm in Australia associated with Deacons called Neil McDonald was seconded to Deacons to assist Mr Fairbairn in work deriving from the HIH Insurance Group collapse. He, too, became an integral member of the team. Not in the BRI group but working closely with it was a member of the Commercial Department, a salaried partner called Jeremy Leifer. Deacons has subsequently come to refer to these five as:-

"complementary and senior members of an important part of the firm's practice with specific expertise in business recovery in addition to general insolvency skills." (See Deane W.S.I p. 102)

By mid 2002 Deacons was holding out the BRI practice to be highly successful within the firm and, of its kind, top tier in Hong Kong. With that success came profit; fees of close to $40 million were earned in 2001. By then its members had developed key relationships with substantial financial institutions and accountancy firms including and in particular Standard Chartered Bank (SCB) and KPMG, from which the bulk of the work was forthcoming.

9. On 11 June 2002 Keith Cole, by then the managing partner of Deacons, and Mark Roberts, his immediate predecessor, received resignation letters from Messrs Fairbairn, Cairns, Leifer, McDonald and Darton. They announced as one a wish to leave simultaneously and that they were all joining White & Case HK.

10. The Deacons' management took the view that White & Case were in breach of the non-solicitation provision that was a part of or collateral to the Confidentiality Agreement of May 1999, and in a letter before action of 14 June notified White & Case HK, copied to White & Case LLP that proceedings would follow unless offers of partnership and/or employment were withdrawn. The response was to deny solicitation and indeed the existence of a restriction on solicitation.

11. On 24 June 2002 Deacons issued a writ.

12. Before coming to the claim against White & Case LLP and White & Case HK as originally propounded, it is I believe appropriate to spell out the various conditions and restrictions binding on the five men in question; specifically as to their contractual obligations and duties, the notice to be given on departure, and restraints upon their activity thereafter.

13. Mr Fairbairn as a capital partner was a party to the firm's partnership agreement. Of its various provisions the following have relevance:-

"5. Obligations of the Partners

The Partners shall except during the periods of leave to which they shall be entitled under Clause 8 devote their whole time and attention to the practice of the Firm and shall carry on and manage the same for the common benefit of the Partners to the utmost of their skill and ability with such assistance from time to time of solicitors, clerks and/or other employees as the Partners shall deem necessary and shall not during the continuance of this Agreement be concerned or engaged directly or indirectly in any business or profession other than the practice of the Firm.

...

9.	Duties of Partners
(A)	Each Partner shall:-
	...
	(ii)	be just and faithful to the other Partners in all transactions relating to the Firm;
	(iii)	at all times give to the other Partners a just and faithful account of all transactions relating to the Firm with which he is directly or indirectly concerned and also upon every reasonable request furnish to the other Partners a full and correct explanation of his participation in and role in respect thereof;
	(iv)	account to the other Partners for and pay into the Firm's banking account forthwith on receipt thereof all moneys received or earned by him from clients or other persons having dealings with the Firm by way of remuneration for services rendered or otherwise in respect of anything done for or in connection with the practice of the Firm including, but without in any way limiting the foregoing, directors' fees;
	(v)	...
	(vi)	disclose to the Firm all transactions or dealings entered into or effected by him which directly or indirectly involve any client of the Firm or any person, firm or body corporate directly or indirectly related to or connected with a client of the Firm.
(B)	No Partner shall without the written consent of the other Partners:-
	(i)	engage directly or indirectly in Hong Kong or elsewhere in any profession or business other than the practice of the Firm but this provision shall not apply to the activities referred to in the proviso to Clause 5;
	...

10. Retirement and Expulsion

(A) Any Partner may give to the others not less than six months' notice in writing expiring on the last day of any calendar month to retire and dissolve the Firm insofar as the Partner giving the notice is concerned, whereupon such Partner shall on the expiry of such notice become a Retiring Partner and the provisions hereof relating to the Shareholdings of Retiring Partners shall take effect in relation to the Shareholding of that Partner.

...

(D) In the event of the service of a notice by or on any Partner in accordance with the provisions of this Clause the other Partners may at any time before the expiry of the notice serve a further notice on the Partner by or on whom the initial notice was served requiring such Partner forthwith to cease attending at the office and/or taking any further part in the conduct of the practice of the Firm and the Partner on whom such further notice is served shall be bound to comply therewith and may be excluded by the other Partners from the office and from further participation in the Firm but such Partner shall continue to be entitled to receive his share of profits distributed prior to the expiry of the initial notice.

...

15.	Restrictive Covenants
(A) Except on dissolution, no Partner ceasing to be a Partner other than by reason of a notice given under Clause 10(C) (except such a notice given to a Partner following a notice given by that Partner under Clause 10(A)) shall:-
(i)	for a period of seven years thereafter act as a Solicitor or Notary or Trade Mark Agent or Patent Agent or Agent for Trade Marks or Agent for Patents or in any similar capacity in Hong Kong whether as principal or clerk or assistant for any person or firm or company who was at the time of his ceasing to be a Partner or had during the period of three years prior thereto been a client of the Firm;
(ii)	for a period of seven years:-
	(a)	be a partner in or sole practitioner in or employee of any firm; or
	(b)	act in collusion with any other person or firm;
which solicits any work (in the practice of Solicitors or Notaries or Trade Mark Agents or Patent Agents or Agents for Trade Marks or Agents for Patents or in any similar capacity) from any person or firm or company who was at the time of his ceasing to be a Partner or had during a period of three years prior thereto been a client of the Firm or any other person or firm or company directly related to or having substantial connection with a person who had been a client of the Firm within that period;
...
(C) Except on dissolution, no Partner shall when a Partner or for a period of three years after ceasing to be a Partner for any reason either himself or through any firm or company by or with whom he may be employed or associated employ any person who was an employee of the Firm as at the date when he ceased to be a Partner or at any time within twelve months prior to such date or induce any such person to leave the service of the Firm."

14. Mr Cairns, a salaried partner, was party to an employment contract dated March 1998. Pertinent clauses included the following:-

"4.	EMPLOYEE'S DUTIES
	During the Employee's employment by the Firm the Employee agrees:-
	4.1	to devote the whole of the Employee's time, attention and skill to the performance of the Employee's duties, to perform all the lawful orders of the Firm, to conduct himself with sobriety and propriety and to discharge the Employee's duties as a Consultant faithfully and to the best of the Employee's skill and ability;
	...
	4.4	not to take or engage in any other employment or business without the prior written consent of the Firm.
	...

11.		TERMINATION
	11.1	The employment of the Employee under this Agreement may be terminated:
		11.1.1 by the Employee giving to the Firm three (3) calendar months' notice in writing or paying to the Firm an amount equal to three (3) months' Salary in lieu of notice in which latter event the employment of the Employee under this Agreement and all Salary, benefits, allowances, entitlements and perquisites payable under this Agreement shall terminate and cease with effect from the date of payment;

12.	RESTRICTIVE CONVENANT
	12.1	The restrictions set out in sub-clauses 11.2 and 11.3 shall apply to the Employee after the termination of this Agreement if the Employee shall thereafter engage in private practice as a Solicitor in Hong Kong.
	12.2	The Employee will not, for a period of twelve (12) months from the date of termination of this Agreement, employ (or cause any third party to employ) any person who was either an employee of the Firm at the date of termination of this Agreement or who ceased to be an employee of the Firm in the six (6) month period immediately prior to the termination of this Agreement.
	12.3	The Employee will not, for a period of four (4) months from the date of termination of this Agreement, act as a Solicitor or provide legal services (including patent, trademark and notarial services) to or for any person who is or was at any time during the continuance of this Agreement a client of the Firm and for whom the Employee conducted or assisted in the conduct of any matter on behalf of the Firm at any time during the Employee's employment with the Firm.
	12.4	Both during and after the Employee ceasing to be employed by the Firm, the Employee will keep confidential and will not without the prior written consent of the Firm divulge to any other person any confidential information. For the purposes of this sub-clause, confidential information shall be any of the following:-
		(a) any matter or thing touching or concerning the business or internal affairs of the Firm;
		(b) any matter or thing divulged to the Employee, or of which the Employee becomes aware, relating to the business or affairs of any client of the Firm as a result of the Employee's employment with the Firm;
		(c) any information relating to any matter in which the Firm is or was engaged during the employment of the Employee by the Firm;
	in each case for so long as such confidential information is not generally known by members of the general public otherwise than as a result of any breach by the Employee of this obligation of confidentiality."

(in clause 12.1, it seems the reference should be to sub-clauses 12.2 and 12.3)

15. Messrs Darton, Leifer and McDonald were all parties to employment contracts also, dated respectively September 1994, April 2000 and May 2001. The format was similar to that for Mr Cairns, save as to amendments in the provisions dealing with notice on termination and restraint I now set out.

16. As to notice:-

(a) in Darton's contract, the employer Deacons had the right to reduce the 3 months' notice to 1 month;

(b) in respect of Leifer, the notice was 2 months;

(c) in respect of McDonald, the notice was 2 months, Deacons having the right to reduce that to 1 month.

17. As to the restrictive covenant clause, in each of the contracts of Darton, Leifer and McDonald the period of restriction at 12.3 in Cairns' contract was 12 months not 4.

18. It is apparent therefore that whilst all evinced the intention to leave simultaneously in order to join White & Case HK at the same time, the differing periods of notice to be worked out prohibited that, unless Deacons agreed to relax the time frames or, in the case of the employees, they bought themselves out earlier. Subject to that Fairbairn was obliged to wait 6 months, Cairns and Darton 3 and Leifer and McDonald 2 apiece.

19. I come now to Deacons' writ and the claim.

The Claim and Defence as Originally Pleaded

20. As originally pleaded the defendants were White & Case LLP and White & Case HK. By virtue of the non-solicitation provision of or ancillary to the Confidentiality Agreement the parties to it, being the plaintiff and defendants, were precluded by such restriction (called therein the "non-recruit term") from offering to take into partnership or employment from the other's firm any lawyer for a period of 12 months from the date of termination of merger discussions. That was a restriction which prevented negotiations leading to hiring being initiated before January 2003. On an unspecified date but in any event before 11 June 2002 the defendants negotiated with five members of the plaintiff's partnership and staff to leave the plaintiff and join the 2nd defendant in breach of the non-solicitation provision, resulting in those five members being offered and their accepting variously positions of partnership and employment with the 2nd defendant. The relief sought was an injunction preventing the defendants taking into partnership or employment any of the five recruits before January 2003 and or in the alternative damages.

21. The defence as originally pleaded was on behalf of both defendants. It denied that the exchange of letters amounted to an agreement to restrict the right of lawyers in the respective firms from exercising their right to pursue opportunities elsewhere, but if it did, then it was void as amounting to an illegitimate restraint in trade. Further, the provision was "non-solicitation" not "non-recruitment". The defendants denied any breach or the plaintiff's entitlement to the remedies sought.

22. As I stated at the outset, these proceedings were to evolve from those originally pleaded; this was by the joinder of Messrs Fairbairn and Cairns as defendants, the removal of Fairbairn from the plaintiff and the expansion of the causes of action to incorporate claims of breaches of fiduciary duties and the inducing and procuring of those breaches. That was because in the discovery process undertaken over a passage of some months following a series of orders (including an unless order) a number of documents, mostly emails, revealed an unfolding relationship between Deacons' BRI team members and White & Case LLP and White & Case HK until their recruitment into White & Case HK.

What Emerged in the Discovery Process

23. By email to himself of 3 December 2001 Mr Fairbairn attached a document dated December 2001 headed "The Core Elements of the Insolvency and Restructuring Practice of the Finance and Insolvency Department". Taken generally the document promoted the attributes of the core team members of the BRI team at Deacons, Messrs Fairbairn, Cairns, Darton and McDonald. It described the practice as comprising:

"the only truly dedicated specialist multi-disciplinary restructuring and insolvency department of any Hong Kong firm".

It listed 40 matters recently handled. It identified what it described as "key relationships" mentioning SCB, Bank of East Asia, HSBC, KPMG, PricewaterhouseCoopers, Ernst and Young, Ferrier Hodgson and RSM Nelson Wheeler. A variation of that document, headed "the Core Elements of the Restructuring Team" was also discovered. This had an electronic header - "John Kuzmik-coreteam. doc." I shall refer to this document hereafter as the Core Elements Document.

24. By email of 22 December 2001, Mr Fairbairn emailed Philip Scorgie, Deacons' Chief Information Officer, the following:-

"Importance:

High

Philip

I refer to our conversation just now. I am trying to identify gross turnover (includes unbilled wip), bills delivered, collections, aged debtor analysis (and profit margin) for files handled by me and Edward for the last 3 years. As we discussed, you may need to list the info by client matter. The main clients for our group are: Standard Chartered Bank, KPMG and PricewaterhouseCoopers.

Apart from myself and Edward the people in our group in the F&I are:

Robin Darton
Neil McDonald
Grace Ng
Annie Ng
Godfrey Wong
Howard Lam (before he left)
Jeremy Low

Other parties that do sufficient amounts of work for us are:

Jeremy Leifer (various matters - too many to list)
Peter Burge (Ferrier Hodgson - One Tel, KPMG - iAsiaworks, KPMG - AsiaOnline, Ferrier Hodgson - Innovative)
Anthony Barrett
Charlotte Kwong (before she left)
Michelle Cheng
Robert Clarke (principally only HIH))

All these parties should be doing work on the files of EAC or myself.

Regards

Mark"

25. Robertson Smart is a recruiting agency in Hong Kong that has in the past endeavoured to secure staff for White & Case HK. It employs a recruiter called Allen Japp. On 9 January 2002, Mr Japp spoke to John Kuzmik, a partner of White & Case HK who then emailed Mr Crozer:-

"Just finished with Japp. The Corp restructuring/insolvency team is from Deacons. Expensive, but appears to be an aggressive and successful team ..."

The next day Mr Japp emailed Mr Kuzmik:-

"I had a thought about your hands off agreement and also spoke to the guys in question about it; they didn't know anything about it and are not concerned by it ..."

Whether Robertson Smart was acting as agent for White & Case in recruiting staff or was independently brokering a deal between employer and employee is an issue to be resolved. But it is pertinent to note that the prospective recruits were at that time identified as the BRI team from Deacons, that there was a resultant exchange between Kuzmik and Crozer and that it took place in January 2002. By email dated 6 February Mr Crozer emailed Mr Kuzmik:-

" Subject:

Fairburn/Cairns

John, Can we get CV's for the group? Also the revenue figures I wrote down are in a state of confusion; perhaps the error is mine. Your notes on your conversation with Japp said HK$45 million of transportable business but for what team? My notes indicate Mark said they have HK$5-5.5 average for each of the four key guys and that the total turnover was HK$38-40 for the four plus assistants. These need to be reconciled, but in any event are not barn burner number if we think that collections three times compensation is break even. Can you do some work on this? Thanks."

26. Then there followed a meeting involving Messrs Kuzmik and Crozer and Mr Fairbairn and after that an email from the latter to the former of 10 February 2002:-

" Sunday 10 February 2002

PRIVATE & CONFIDENTIAL

John and George

Following our discussions, I attach more materials for you. In the main, these materials are confidential and I do not want them generally circulated or copied throughout your organisation at the present time. I think they deal with financials as far as I am able to do so in writing.

The materials include:

1. Draft outline business plan;

2. Draft team projected profitability for BRI matters for 3 years from 2002;

3. Abbreviate CV's for the team and Neil McDonald.

4. Summary of case law in Hong Kong on restrictive covenants.

I will be at the Sukhothai Hotel in Bangkok from tonight until next Friday.

Best regards.

Mark

Kung Hei Fat Choi!"

27. What was enclosed was a 33-page document headed Business Plan for Business Recovery and Insolvency. It is a document featuring prominently in these proceedings; I shall call it from hereon the Business Plan. I pause here to mention that Mr Crozer was subsequently to say from the witness box that this was prepared and forwarded at his request, being the necessary forerunner of a paper that would need to be submitted to the management board in New York of White & Case LLP if a recruitment of such a team were to proceed. In summary it referred to the existence of the BRI team in Deacons, its profile and history, the prominent clients serviced by it, its market standing, CV's of four of the five members that were ultimately to go to White & Case HK (McDonald was missing) details of matters handled, billings, charge out rates, hours charged, and under the head "Opportunities for White & Case" the following:-

" The recruitment of the team will promote the firm into the top tier at a time when BRI is becoming increasingly more important given the gloomy state of the global and regional economy. A further beneficial aspect is the multi-disciplinary nature of the practice which generates "spin-off" work for corporate finance activity.

In brief, the opportunities presented are:

.	To obtain or consolidate banking relationships with Standard Chartered Bank, BNP Paribas Peregrine Capital, The Bank of East Asia, ABSA Asia Limited, Nedcor Asia Limited and Sumitomo Mitsui Banking Corporation
.	To further develop and cross fertilise other areas of practice, in particular, corporate/corporate finance and banking
.	Creation or consolidation of existing relationships with accountants, particularly major accounting firms such as KPMG and PricewaterhouseCoopers and smaller players such as Ferrier Hodgson Limited, RSM Nelson Wheeler and Baker Tilly
.	To be seen at the forefront of a developing and expanding market in Hong Kong and in the region
.	To develop a credible strategy in respect of life and non-life insurance companies to obtain instructions in respect of M&A, run-off (both solvent and insolvent) as well as formal insolvency/regulator appointments
.	Ignoring any contribution from existing matters currently being handled, conservatively additional projected turnover of approximately HK$31 million in the first full year generating into projected additional turnover of HK$39 million in the third year.

The research set out in Appendix 2 (the BRI market) reinforces the need for a multi disciplinary team given BRI's major importance in the corporate finance market in Hong Kong. It also highlights the synergies that can be captured with the team joining the firm; the firm gains market leadership in BRI and the team gains access to a larger international brand recognised for financial services.

...

Growth in client base

The team believe that the following client relationships are likely to follow at the time of their move:

1. Standard Chartered Bank

2. BNP Paribas Peregrine Capital

3. KPMG

4. PricewaterhouseCoopers

5. Ernst & Young

6. Ferrier Hodgson Limited

7. RSM Nelson Wheeler

8. Nedcor Asia Limited

9. ABSA Asia Limited

10. Baker Tilly

In order to obtain instructions from Standard Chartered Bank it would be essential for the firm to be admitted to the Bank's approved panel of lawyers. The team believes that this can be achieved. Moreover, given the firm's international reach any admission to the panel would also present opportunities for the firm in the UK and New York."

28. Then followed details of the restrictive covenant provisions relating in turn to Fairbairn, Cairns, Darton and Leifer; McDonald's was provided as well. There was also case law indicating the prospect of these being upheld in the event of challenge.

29. Finally there was a spread projecting the team's profitability for the following three years.

30. Whether the Business Plan contained data confidential to Deacons is a material issue to be resolved. But on any account it was a detailed and comprehensive discourse on the BRI sub-group and its primary fee earners, with a heavy emphasis on the likely transfer of clients from the one firm to the other.

31. During the weeks following, further information was transferred from Fairbairn to Kuzmik. Some at least would appear to be sensitive material; this one at 18 February:-

"John,

I attach some further historic information for you. As you will appreciate this is highly confidential. ..."

What was enclosed was a document disclosing Deacons' partnership lockstep and the drawings of the partners according to their level of seniority for the year 2001; thus on any view Fairbairn's characterisation of it was accurate. Emails between Kuzmik and Crozer and the managing partner in New York, Duane Wall, indicated ongoing interest by White & Case HK and White & Case LLP in the engagement of the BRI team and what it would bring with it. Mr Wall met Messrs Fairbairn and Cairns in Mr Kuzmik's company. Mr Kuzmik reported to Mr Crozer on 20 February:-

"Duane is reasonably impressed."

32. But Crozer's response of the same day was muted:-

"The sense I get from Duane is that this proposal is not going anywhere unless we can improve dramatically the profitably (sic) figures."

(From the witness box Mr Crozer explained that for lateral hires White & Case looked for a ratio of three (projected fee income) to one (compensation). His email of 6 February to Kuzmik had said as much. Clearly this was passed on to Fairbairn, for Kuzmik's response, still on the same day, was:-

"I just spoke with Mark Fairbairn. He understands the issue, and is confident that even a conservative re-working of the projected fee income and "team" compensation expectations will show a 3:1 ratio within 18 months, and profitability (i.e. a ratio of greater than 3:1) in year 2 and thereafter. We'll see."

This resulted in a revamped projection from Fairbairn to Kuzmik of 24 February. By amendments therein, the desired 3:1 ratio was met.

33. An email from Fairbairn to Kuzmik of 1 March is particularly significant:-

" John

...

Moving on and on the assumption that everything is ok with the management board, I am intending to raise the subject of a move to WC to the Global head of credit of SCB next Tuesday (Jake Williams). It would be helpful if I had a list of any work done by WC in HK or elsewhere for SCB. Can you get something together?

Moreover, in a commercial context, would it be possible for the firm to bank with them in HK (and elsewhere)? This will become an issue which they will consider and perhaps I can fill you in on the telephone. Deacons are major customers for the Bank.

Regards

Mark"

The meeting must have taken place with productive results, for Crozer emailed Wall, on 6 March:-

" Duane, Standard Chartered yesterday gave the debt rescheduling/insolvency team a green light to join W&C. They then asked whether the team had talked to S&S and set up an appointment for them with Ed Turner, the partner here in charge of the S&S HK office. We understand that a first meeting took place. George"

("S&S" is another legal practice with global representation called Shearman & Sterling)

34. The next significant step was a memorandum prepared by Mr Crozer and sent to Mr Wall on 16 March. It was of some 17 pages, and was introduced in this way:-

"Further to your request this memo is intended to serve as an introduction for the possible lateral recruitment of an established insolvency and restructuring team currently with the Finance and Insolvency Department of Deacons in Hong Kong."

It then went on to provide data much of which was gleaned from the Business Plan and other material supplied by Mr Fairbairn, such as reasons why the recruitment should proceed-

"unique opportunity to acquire an established top tier practice at partner level";

a pocket CV of each of the five participants, now including McDonald, ten named clients of Deacons that-

"the team believe ... are likely to follow at the time of their move"

(the first five are SCB, BNP Paribas, Peregrine Capital, KPMG, PricewaterhouseCoopers); reference to the restrictive covenants to which each was subject; historic financial data and projections; a list of recent matters completed; and that Fairbairn and Cairns should be offered contract (capital) partnerships and Darton, Leifer and McDonald salaried partnerships. A paragraph dealing with the prospect of work coming from SCB is significant:-

"In order to obtain instructions from Standard Chartered Bank it would be essential for the firm to be admitted to the bank's approved panel of lawyers. Standard Chartered has been approached and have confirmed the acceptability of White & Case. Moreover, given the firm's international reach any admission to the panel would also present opportunities for the firm in the UK and New York."

35. There followed an exchange of emails as Fairbairn sought to negotiate the entry level of Cairns and himself into the White & Case partnership.

36. An email of 26 March introduced another development; it was from Cairns to Kuzmik to the effect that a friend of his with Rolls-Royce in UK called Michael Kunz was looking for legal assistance concerning a project in Bangkok - "call him if you are interested." Deacons has an affiliated firm in Bangkok.

37. An email on the same theme was sent by Fairbairn to Kuzmik.

38. In early April Messrs Fairbairn and Cairns went to New York for interviews with a selection of partners of White & Case LLP. In introducing them, Wall said by memo of 2 April:-

"... One of the key issues to consider in assessing the initiative is whether Messrs Fairbairn and Cairns can retain Standard Chartered as a client if they leave Deacons because Standard Chartered is reportedly one of the two principal players in the bankruptcy and restructuring business in Hong Kong. ... "

This put four square and upfront what the top man at White & Case regarded as an essential component of the package.

39. One of the interviewers, one Eugene W Goodwillie Junior, reported back:-

"Fairbairn was very clear in stating unequivocally that they had total and complete confidence (presumably based on some sort of discussions) that SCB would follow them to White & Case ..."

40. On 23 April 2002 Fairbairn emailed Kuzmik:-

" Subject:

Additional papers

John

Thanks for the chat yesterday, I thought it was very constructive. I await hearing from you.

Meanwhile, I attach a draft "exit paper" and a paper on the "transition" of our business to White & Case.

Very best regards,

Mark"

41. It later transpired that these documents were requested, and were to emerge exhibited to Mr Crozer's memorandum of 29 April (see paragraph 44) as "Achieving Successful Business Transition - A Brief Analysis and Discussion of Relevant Issues" (exhibit 3) and "Strategy and Action List" (exhibit 4) which I come to. I shall hereafter refer to these as the Business Transition Document and the Strategy and Action List.

42. Thereafter there were further exchanges of emails between Fairbairn & Cairns, Fairbairn & Japp, Fairbairn & Crozer and Kuzmik and Crozer concerning the terms of prospective entry.

43. One, of 18 April, Fairbairn to Japp, copied to Cairns and Darton, identified 7 issues, of which the first was:-

"1. Value of what we give them - a business and an institutional client base - they are not paying for it at all"

which brought Cairns' response:-

"I agree entirely with Mark's comments, specifically:-

1.	Neither Mark nor I have ever asked or sought any form of "earn out" for the business we bring ... we had expected (indeed we were told) that the immediate added value we bring could be reflected in our respective packages. ...",

and was followed by Fairbairn's email to Japp the next day:-

" ... I want fairness. We need W. & C. to understand that we deliver a top tier client base - SCB have told them that as well ...".

These are a commentary leaving no doubt as to what was the essential ingredient in the recruitment package.

44. Then on 29 April, a key document came into being; a memorandum from Mr Crozer to Mr Wall, headed "Business Recovery and Insolvency Practice" proposing the engagement of the five team members, Fairbairn and Cairns as contract partners and the remaining three as salaried partners. The restrictive covenants were referred to. On this topic Mr Crozer wrote:-

"... we have concluded there are good reasons for thinking that the covenants would not be enforced, and that Deacons will positively engage in a commercial solution for each of the team. Fairbairn and Cairns, in consultation with Herbert Smith, have prepared the "Strategy and Action" paper attached as Exhibit 3, and the "Business Transition" paper attached as Exhibit 4. We have reviewed these documents, and on reflection think they are a reasonable way to proceed. We would, of course, continue to be involved in the process and at the appropriate time if necessary would engage in conversations directly with Deacons. While the foregoing approach is not free from risk of a delay in Fairbairn's availability, we nevertheless think the approach has the greatest likelihood of avoiding disruption in our access to the team's clients. We also note that White & Case is not a party to the covenants and it is unlikely that we would become involved in any enforcement proceeding."

Under the head "Due Diligence", Crozer reported:-

"To maintain the team's confidentiality and integrity, we have been asked to limit and direct due diligence to [SCB] and KPMG."

He went on to state that there had been meetings with Jake Williams and Guy Isherwood (SCB) and Paul Brough and Grant Jamieson (KPMG). All expressed confidence in the Deacons BRI team and that the work would follow the team; indeed, that a move to a US based firm was favoured. He wrote:-

"Mr Isherwood indicated that the team would have the full support of Standard Chartered Bank in connection with the exit of the team and transfer of business matters from Deacons to White & Case.

...

Mr Brough and Mr Jamieson confirmed that the Fairbairn/Cairns team is KPMG's preferred Hong Kong BRI legal team; Mr Brough commented that the only situation where he would not recommend the team is where there is clear conflict. ... "

He concluded:

"... the broad skills available generally in the Fairbairn/Cairns team would be an asset for White & Case HK in building own M. & A., corporate finance and litigation practices in Hong Kong. Interestingly, Mr Brough noted that the Fairbairn/Cairns team has made significant in-roads to HSBC and that they have positively engaged Standard Chartered in a dialogue to ensure that work for HSBC will not disrupt the primary Standard Chartered relationship."

45. Exhibit 3 was the Business Transition Document sent by Fairbairn to Kuzmik on 23 April. Referring to White & Case as the Firm and Deacons as the Old Firm it recorded at paragraph 4:-

"4.	The key issue in these negotiations will be the Team's restrictive covenants. These vary in nature and duration. The Firm has already been provided by the Team with extensive legal analysis on the issue of enforceability."

And at 6:-

"6. The prime objective of the Team will be to seek (i) a shortened and uniform notice period for each Team member and (ii) a waiver of all applicable covenants in toto, failing which to achieve a dilution of the restrictions in a form commercially acceptable to the Firm. The Team believes that these outcomes will be achieved as it will be in Old Firm's interests for the following reasons:

...

Client Support for the Team: The Team enjoys the confidence and wholehearted support of its major clients. The Firm will be aware of this from its own enquiries and soundings in the market. This support for the Team exists independently of the Team's presence at Old Firm and is based on the Team's track record. Old Firm does not have other resources at present to convincingly replace the Team and will find it difficult in the short to medium term to recruit replacements. Clients are aware of this fact and the Team believes that major clients will both wish to see current matters transition smoothly with the Team to the Firm and will not wish to be restricted in their ability to instruct the Team at the Firm following their exit from Old Firm.

Client Backlash for Old Firm: The Team believes that Old Firm risks losing a greater amount of work from particular clients if it is not co-operative with the Team's departure. The Team's business is essentially transactional in nature, with the vast majority of those transactions being relatively long-tailed - it is not uncommon for most deals to run for between 1 to 4 years in length; longer significant investment not just in their own management time and fee expenses, but also in the outcome i.e. their own and other parties' recoveries. Banking clients, in particular, also face a reputational risk on deals which they are running involving multiple parties - they need these deals to close smoothly for the benefit of all concerned. Anything which is done to hinder or impede that is unlikely to be well received, particularly if it is seen to be a selfish and protectionist move on the part of Old Firm to look after its own interests first rather its clients' best interests.

...

Press Release: The Team assumes that the Firm will wish to make an early announcement regarding the recruitment of the Team. Old Firm will want the opportunity to inform its clients first. The Team can use this fact to put pressure on Old Firm in negotiations by saying that the Firm intends to announce that the Team will be joining them as soon as possible. Old Firm will want to prevent the Team telling persons of their resignations on their own terms as a damage limitation exercise. Old Firm will want to agree any press statement to be put out by the Firm but of course cannot insist on doing so. Nevertheless the opportunity to indulge in some damage limitation on their part will be attractive and may form an important dynamic in negotiations."

46. It is apparent that of concern were the issues of restrictive covenants and notices to be served and how these might be overcome.

47. Exhibit 4 was the Strategy and Action List. Mr Fairbairn was subsequently to state in evidence that this was prepared in consultation with solicitors Herbert Smith.

48. Under the heading "Tactical Considerations" is the following:-

"	...
	1.	Deacons will not want to seek to enforce the restrictive covenant of seven years before the courts because, if it does so and loses, it risks all partners claiming no restrictive covenant applies to them.
	2.	Deacons will not want to be seen as weak by not enforcing the restrictive covenant of seven years.
	3.	Deacons could risk losing a greater amount of work from particular clients if it is not cooperative with each departure.
	4.	Deacons could assert claims against MGF, with respect to breach of fiduciary duties while partner.
	5.	New Firm will wish to make an early announcement regarding their new recruits. Deacons will want to inform its clients first. MGF can put pressure on Deacons by saying that New Firm is going to announce that he will be joining them as soon as possible.
	...
	7.	Deacons will want to prevent MGF telling persons of his resignation on MGF's terms.
	8.	Deacons will want to agree any press statement to be put out by New Firm but cannot insist on doing so.
	9.	All parties should resign together to place more pressure on Deacons to negotiate a reasonable exit strategy and to be open and honest about the position.
	10.	The terms of MGF's exit are negotiable.
	11.	If MGF and others leave together, Deacons may have a claim against MGF for not reporting the intentions of others earlier. Query: What financial damage could Deacons claim?
	12.	The gardening leave provision in the Partnership Agreement is likely to be enforceable."

49. Under the sub-heading "Strategy" was included the following:-

"	4.	All resignations are to take place simultaneously with a view to negotiating an exit package in respect of all resigning persons.
	5.	How should MGF and other parties conduct themselves after resignation?
		(a) with respect to Deacons
		They must act in Deacon's interests until they leave the firm; they remain as partners/employees. MGF must ensure that he does not breach his obligations, in particular, the duty of fidelity. MGF must not make any preparations for his new position during working hours with Deacons.
		MGF should insist that any further discussions with Deacons re: his resignation take place in the presence of Nigel Francis of Herbert Smith and perhaps a representative on the New Firm.
		(b) with respect to clients
		Each party has a duty to seek to retain clients for Deacons, even when working their notice period. No party must solicit clients nor entertain offers from clients in respect of new work to be directed to New Firm - not even if on gardening leave.

And under the heading "Informing clients"

" MGF may inform clients that he has resigned. MGF should not say anything further voluntarily.

If clients ask questions, MGF may answer but should keep answers simple. Generally, if what MGF says is merely a response to the client's enquiries, this will not amount to solicitation. However, if MGF were to volunteer to clients where he can be contacted, this is likely to amount to solicitation (e.g. "I can be contacted at...")

MGF should avoid giving Deacons any grounds for alleging that he is soliciting clients."

And under the head "Outstanding Legal Questions":-

"...

How would the issue of damages for breach of fiduciary duty be approached?

The principles of causation and remoteness will apply to acts by MGF. In practice quantifying damages will be difficult. Other partners and employees have the absolute right to leave on notice; could it be said that their giving of notice is solely as a result of breaches on the part of MGF. In the normal course, "damages" will be the time and expense of sourcing a replacement."

50. The memorandum concluded with reference to the fee of the headhunter Allen Japp of Robertson Smart, and Fairbairn's fees to Herbert Smith and counsel in London and Hong Kong of US$30,000.00.

51. Pausing here, it is to be noted that the paragraph under "Informing clients" makes for interesting reading given the activity leading up to this presentation and Wall's comment on key issues. In the same context, it is to be noted from a chit retrieved from Deacons' accounts that Messrs Fairbairn and Cairns took Mr Williams of SCB to lunch at the Mandarin Grill on 15 April 2002. The lunch for three cost Deacons $6,300.00.

52. By email of 1 May there was another referral by Fairbairn to Kuzmik, concerning a claim of a Deacons' client in Los Angeles;

"... would you Guys be interested?"

53. By email of 23 May Fairbairn wrote to Kuzmik:-

"I spoke to Brough. He will call you today. He said that you had not got back to him with a reply on the rubber matter! I said, I thought you had called and/or sent him an email as discussed."

54. On 10 June 2002 (that is, the day before they handed in their notices to Deacons) Messrs McDonald, Leifer and Darton signed employment contracts to join White & Case HK as:-

"Local Contract Partner for a term of one year to begin on a date to be mutually agreed between White & Case HK and the Attorney, but in any event no later than 11 September 2002 (or such later date as may be agreed in writing)."

The following day Messrs Fairbairn and Cairns were offered positions with "White & Case LLP" to become contract partners on terms which included that it would become:-

"effective upon the termination of your existing arrangement with your current firm in accordance with your legal obligations to such firm."

55. It is apparent that White & Case were planning on releasing a press statement; on 12 June Mr Fairbairn had received a draft and by email of that date to its author, one Tracy Sawyer of White & Case HK stated:-

"...

4. We should consider whether we mention Standard Chartered Bank as it is common knowledge in HK that we are their preferred counsel. If considered appropriate, George will need to speak to Jake at SCB.

...

My preference is to get something out soon.

By way of background, Deacons have indicated to Jeremy Leifer that it will be a couple of days before they get to us. May be George should initiate a discussion with Deacons on Media issues to keep the pressure up?"

56. The next day Fairbairn had more thoughts and emailed Miss Sawyer:-

"	I have some further comments on these documents. Broadly:
	1.	I remain a Partner of Deacons with legal obligations to that firm. While I may be a future W&C partner, I am not a W&C partner yet. I cannot be a media contact.
	...
	3.	Given issues of fiduciary duties to Deacons under my Partnership Agt, I do not want to be identified as "team leader". We have each decide to join W&C on an independent basis through a headhunter.
	...
	5.	We cannot, at this stage, be seen to actively market our clients through White & Case. We are still at Deacons and going forward, there are restrictive covenants in place."

57. So, Fairbairn wanted to be seen to be loyal to Deacons.

58. An exchange of emails in early August is particularly significant. The first is from Fairbairn to Crozer of 3 August 2002, by which he copied an email from Guy Isherwood of SCB sent to Deacons' managing partner, Keith Cole:-

"Keith

I was unhappy to learn that you are discussing the transfer of our accounts to other partners without consultation with us. In particular, when the cases are at a critical stage as with LSH/CDC and substantial sums of money are involved for Standard Chartered and a major group of banks. Edward must stay on the file as long as possible until his departure.

I would like you to come and see me and Jake next week to discuss the handling of our cases going forward. Perhaps you would call me on Monday to arrange a suitable appointment.

Regards

Guy"

About which he went on to state:-

"This e-mail followed discussions between SCB (Guy Isherwood) and KPMG (Paul Brough) who are also involved in the matters highlighted.

I understand that Guy Isherwood (Area Head GSAM, North East Asia) and Jake Williams (Global Head, GSAM) (and perhaps Pauline Li (General Counsel)) will meet with Deacons next week and inform them that they wish the files to stay under the supervision of me/Edward until we depart afterwhich they expect those matters to transition to W&C.

While this is useful pressure, I think it will only make Deacons more determined to enforce the covenants/seek to sue me for whatever they can. Ultimately, while these claims may fail, it will nevertheless be disruptive to clients (such as SCB) who are being very supportive at this difficult time. In the circumstances, I think it essential that W&C consider whether they can fly in restructuring/insolvency expertise. Not only will this bolster the confidence of our clients to support us and W&C further, it will also critically demonstrate the advantages of an International law firm. In this regard, Deacons are already suggesting to clients that they are recruiting in London (and perhaps from Australia) but that cannot match the ability to fly people in straight away.

I do not know whether Dan Hamilton has yet joined but he may be worth considering as he was in Hong Kong for a period a couple of years ago. Moreover your office in Singapore must have partners/senior people who are very familiar with Asian restructuring, particularly, given the APP matter.

Can I ask you to look into this urgently? It would be good if you could raise it with Jake and Guy BEFORE they go into their meeting with Deacons.

I understand that Jake will be back in the office next Tuesday.

The contact number for Guy Isherwood is 2820 3027.

Very best regards

Mark"

59. The next day Fairbairn emailed Crozer, copying to Kuzmik:-

"I refer to my mail yesterday about demonstrating W&C's tangible support of both SCB and the team by flying in additional resource. I think we should discuss this further tomorrow morning.

It strikes me that one factor which SCB must be concerned about is the ability of W&C to service them in the event the team is "locked up" in court battles. While Neil (who has not acted for SCB) will leave Deacons at the end of the coming week - I do not think that will be sufficient. W&C need to be able to rely on a credible team of experienced practitioners.

I am sure that Deacons will say to the Bank next week that they will enforce all restrictive covenants and W&C therefore has no ability to service the Bank. While SCB will say that this is not acceptable, it would be good if SCB could say additionally that W&C will be flying in additional and experienced resource [*Nevertheless, the immediate point of concern here is the Law Society. Ideally, we need someone who has been in HK before and is a member of the Law Society - Dan Hamilton/Philip Stopford? *]

I look forward to hearing from you.

Best regards

Mark"

Mr Crozer responded on the same day:-

" Mark, I have lined up the following. CV's are on our web site if needed:

1.	Martin Hughes, now in London, ex-CC who did a lot of work for SCB during the sovereign debt days. Martin was here for weeks on end to work on the GDE restructuring. Martin is prepared to spend time here again, as he did on GDE.
2.	Bertie Mehigan, now in Singapore, who, as you know, is heading up our APP team. Bertie will be spending time in this area anyway, as the center of gravity may be moving to China.
3.	Alistair Duffield, also now based in Singapore, formerly in house at Deutsche Bank in London. He knows banking from the inside out and is used to travelling.
4.	Dan Hamilton will be available at the end of September and because he will just be joining he should be mobile.

Is that good enough for the present? Please let me know if you need anything further at the moment.

George"

And Mr Fairbairn replied:-

Seems good to me. I think you need to "pitch" it to SCB (Jake/Guy) asap. You will need to make clear that this is "back-up" for the worst case. I would suggest that you play down the GDE involvement for the people involved.

The meeting with Deacons and SCB (Jake, Guy and Pauline Li) is on Thursday.

I believe Jake is back in the office tomorrow. If not, I will tell Guy that you will "cold" call him tomorrow.

Regards

Mark"

60. Meanwhile with the various members of the team serving out their respective notice periods there was movement into White & Case HK. Mr McDonald joined on 12 August 2002, Mr Darton bought out part of his notice and joined on 26 August; Mr Leifer joined on the same date, all under their contracts of employment. Mr Cairns began as a contractual equity partner on 11 September 2002. On 13 September 2002, Mr Fairbairn was given notice by Deacons that he was excluded from participation in the practice whilst still bound by his obligations to it under the partnership agreement; so began a period commonly known as gardening leave. On 31 December 2002 he ceased to be a capital partner of Deacons and joined White & Case HK on the next day. Timed from their respective dates of departure from Deacons, McDonald's & Leifer's restrictive covenant period ran until 10 August 2003, Darton's ran until 26 August 2003 and Cairns' until 10 January 2003.

61. One further email is worth reproducing, because it deals with a matter specifically pleaded, from Crozer to Wall of 8 August:-

"Subject: Neil McDonald

Moreover, he will be joining us Monday with probably a new deal on Monday from Standard Chartered, a new deal from a new client, an Australian bank, and a possible third deal from a new client, an Australian mining company. He will be free to work on all these matters, as his covenant clearly does not apply to them. He is well aware of his covenant obligations, and, although we will try to make a settlement which includes an early release, our policy is covenant compliance. Of course, Deacons may well try to be disruptive, but our hands will be clean, George."

62. I come now to the pleadings as amended arising out of the emerging discovery.

The Amended Pleadings

63. The original sole ground, the breach of the so-called non-recruit term, has been retained, amended to incorporate reference to the meeting between Allen Japp and a so-called "restructuring/insolvency team" and the introduction of them to Mr Kuzmik culminating in there being offered partnership and employment. Messrs Fairbairn and Cairns having been joined as 3rd and 4th defendants, the first of the new grounds is their inducing and procuring the breach by the 1st and 2nd defendants of the non-solicitation provision. What is pleaded is their knowledge of that and its effect, that by their response they were procuring the breach and that loss to Deacons resulted.

64. The second of the new grounds incorporates the breach by the 3rd and 4th defendants of their equitable and/or contractual obligations to the plaintiff and the procurement by the 1st and 2nd defendants of that breach. Extensive particulars then follow. In particular; the 3rd defendant's partnership agreement and the obligations under it owed to the other partners; the terms of the 4th defendant's contract of employment and pertinent restrictions contained therein; the terms similarly incorporated into the contracts of Messrs Darton, Leifer & McDonald; the equitable obligations of duty owed by a partner to his other partners and by an employee to his employer; that by virtue of their calling these contractual and equitable obligations would have been well-known to the partners of the 1st and 2nd defendants. Then are particularized specific breaches beginning on 9 January 2002 and continuing until the date of retirement in each case from the Deacons' partnership. Included are:- procuring, inducing, encouraging or facilitating employees of the plaintiff to leave that employment and join a competitor; disclosure by the 3rd and 4th defendants to the 1st and 2nd defendants information confidential to the plaintiff in the Business Plan; the contacting, by the 3rd and 4th defendants, of clients of the plaintiff to solicit work for the 2nd defendant whilst still with the plaintiff; by the 3rd defendant preparing the Strategy and Action List, designed to put pressure on the plaintiff not to enforce its rights; disclosure by the 3rd defendant to the 1st and 2nd defendants information confidential to the plaintiff in the Core Elements Document; the encouraging, by the 3rd and 4th defendants, of potential "free" clients to engage the services of the 2nd defendant whilst still with the plaintiff; the 3rd and 4th defendants procuring in August 2002 SCB to instruct McDonald immediately upon his taking up employment with the 2nd defendant on 12 August 2002. These breaches and others particularized were induced and encouraged by the 1st and 2nd defendants.

65. The third of the new grounds is that the 1st and 2nd defendants interfered with the plaintiff's business by unlawful means; the fourth, that the defendants entered into a common design to acquire a substantial piece of the plaintiff's BRI work to the detriment of the plaintiff.

66. What is now prayed for is first as against the 1st and 2nd defendants injunctive relief to prevent employment or other engagement of the five recruits until in each case the end of a period calculated to run from the date the non-solicitation restriction came to an end and notice to be served; that is after the end of August 2003 (Leifer & McDonald) the end of September 2003 (Darton and the 4th defendant) and 1 January 2004 (the 3rd defendant); injunctive relief restraining them from providing BRI legal services to any former client of the plaintiff until after various dates being August 2003, September 2003, January 2004 or as the court deems just; in addition damages, including exemplary damages, they having acted with a cynical disregard of the rights of the plaintiff and in the hope and expectation that in the event of the plaintiff discovering the extent of their wrongdoing the profits that they would make would exceed any damages that they may be required to pay the plaintiff.

67. Against the 3rd and 4th defendants injunctive relief is sought to prevent their joining the 1st or 2nd defendant up to the dates aforesaid. Damages including exemplary damages and/or an account of profits are sought against them as well.

68. It is pertinent to note that on 9 September 2002, during the course of a directions hearing in which the plaintiff was given leave to amend its statement of claim, the 1st and 2nd defendants undertook that they would do whatever they could to ensure compliance by Messrs Leifer, McDonald, Darton and the 4th defendant with their respective restrictive covenants. That undertaking was recorded as part of the preamble in the resultant directions order. No such undertaking was offered in respect of the 3rd defendant, whose restrictive covenant is at clause 15A(i) and (ii) of the partnership agreement. This has been dealt with in arbitration proceedings between Deacons and Mr Fairbairn, and resulted in a finding that the covenant was void and unenforceable.

69. The defence of the 1st and 2nd defendants as amended to become its final form deals first with the particularised provision concerning Allen Japp's preliminary introduction, stating that this was an independent approach by him and not solicitation on their behalf. Breach of the Confidentiality Agreement is denied.

70. On the new ground that the 1st and 2nd defendants procured breaches of the equitable and contractual duties owed by the 3rd and 4th defendants there is a general denial and an adoption of the averments pleaded by the 3rd and 4th defendants. There is similarly a blanket denial that the 1st and 2nd defendants interfered with the plaintiff's business by unlawful means, or that there was a common design and a denial that the plaintiff is entitled to any of the relief sought against them.

71. As to the defence, in final form, of the 3rd and 4th defendants; whilst not having direct knowledge of the merger discussions or the existence of the Confidentiality Agreement and exchange of letters they deny that this was a non-recruiting term and that the decision of the parties to take employment with and partnership in the 1st and 2nd defendants was in breach. As a consequence, they deny they procured such breach.

72. As to the allegations of breach by the 3rd and 4th defendants of their equitable and contractual obligations to the plaintiff; it is admitted that each respectively owed contractual and equitable duties of good faith and loyalty, but breach of these is denied. It is denied that they procured, induced, encouraged or facilitated employees to leave the employ of the plaintiff. It is denied that that Business Plan contained confidential information of the plaintiff, as to the figures disclosed or the clientele revealed. It is admitted that some clients of the BRI team became aware of the move to the 2nd defendant but solicitation of their work is denied. It is admitted that the 3rd defendant prepared the Strategy and Action List, but otherwise the claim concerning that is denied. It is admitted that the Core Elements Document was prepared by the 3rd defendant but breach in respect of that is denied. It is admitted that prospective clients were introduced to the 2nd defendant but denied that these referrals constituted a breach.

73. As to the alleged interference with the plaintiff's business by unlawful means there is a denial of this. Finally, there is a denial of any liability to the relief sought.

74. There is a counterclaim by the 3rd defendant, for capital and other emoluments claimed under the partnership agreement. It has been agreed that this should stand over until determination of the plaintiff's claims.

75. The plaintiff has in respect of both defences filed replies to complete the pleadings.

76. Prior to trial there was a concession of which I made observation at the outset. That was by letter from those representing White & Case to those representing Deacons, dated 30 May 2003:-

"In one area of the case our clients are prepared to make a concession which we hope should materially shorten the time required for the evidence to be heard. The concession is as follows:-

"At all material times up to 11 June 2002, the non-solicitation period provided for in the letter from [Deacons] to White & Case of 20 May 1999 as accepted by the letter from White & Case to [Deacons] of 31 May 1999 was current."

That is the concession referred to in paragraph 6 herein.

The Issues

77. These can now be listed as follows:-

(1)	(a) What were the express terms of the non-solicitation provisions in the exchange of letters in May 1999?
	(b) Did White & Case LLP and White & Case HK solicit Deacons' lawyers in breach of the non-solicitation provisions?
(2)	If so, did Messrs Fairbairn and Cairns or either of them procure that breach?
(3)	Did Messrs Fairbairn and Cairns or either of them conduct themselves so as to be in breach of their contractual and/or their equitable duties to Deacons?
(4)	If so, did White & Case LLP and White & Case HK procure that breach?
(5)	Did White & Case LLP and White & Case HK commit the tort of interfering with Deacons' business by unlawful means?
(6)	Did the four defendants for such purpose enter into a common design?
(7)	In the event that the defendants or any of them are liable in damages, is Deacons entitled to exemplary damages, and/or an accounting of profits? Is Deacons entitled to injunctive relief?

78. And so to the trial of these issues. At the trial Deacons was represented by Mr McGregor QC leading Mr Chow and all four of the defendants by Mr Plowman SC leading Mr Burns.

79. First, the non-solicitation issue.

Non-Solicitation

(a) The terms

80. What first I have to resolve is what it was that Messrs Roberts and Crozer committed their respective firms to in the exchange of letters of 20 and 31 May 1999. It is the defence case that it was all along intended to prevent one or other of the firms from taking advantage of sensitive material exchanged in the merger process by identifying key personnel and then inducing one or more to change camps. This is clear from Mr Roberts' letter of 20 May whose terms were accepted without reservation by Mr Crozer in his reply of 31 May. Thus it is incumbent on the party alleging wrongful solicitation to establish that it was from confidential material supplied that the other was prompted or encouraged to go after the lawyers in question. That being so, there has been no evidence to support the proposition that White & Case came to be attracted to the BRI team by virtue of sensitive or confidential material supplied during the merger process; indeed that it is incontrovertible that nothing was provided that might have had that effect. Mr Japp was not an agent for White & Case HK so that any solicitation by him was independent of White & Case HK. What happened was that the recruits in question were recruited. Solicit does not mean recruit. If on the other hand non-solicit amounts to non-recruit it cannot be enforced as being unlawful, unfairly restricting lawyers of either firm from earning their living as they chose.

81. The plaintiff's contention is that Japp was an agent for White & Case HK having taken on that role from February 2001. Solicitation by him was solicitation by the principal. If Japp is found not to be an agent the role undertaken by White & Case HK, following introduction of the BRI team, amounted to solicitation. Deacons is not obliged to prove that the solicitation resulted from exposure of the confidential material during the merger process. This reads into the non-solicitation agreement words that are not there. The restraint imposed was not so wide as to be rendered unreasonable and void; each firm had a legitimate interest to protect, not only lawyers but practice groups.

82. I come to the law.

83. Where the parties to a contract cannot agree on what it is they are committed to, it falls to the court to decide what it means by establishing what it was intended to mean. This is dealt with not by ascertaining what the parties intended, but what a reasonable man having all the background knowledge would understand to be the intention. So it is necessary to have regard to the history leading up to the commitment to the contract's terms, and that includes paying heed to the recitals and the aim of the contract, in order to arrive at what is sometimes referred to as "the presumed intention".

84. As Mason J (as he then was) said in the High Court of Australia case of Codelfa Construction Pty Limited v. State Railways Authority of New South Wales (1982) 149 CLR at 337:-

"... when the issue is which of two or more possible meanings is to be given to a contractual provision we look not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the contract."

85. And I recite from the headnote of the House of Lords case Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 WLR 896:-

"Held, ... that in construing contractual documents the aim was to find the meaning which the document would convey to a reasonable person having all the background knowledge reasonably available to the parties, including anything which would have affected the way a reasonable man would have understood it, but excluding previous negotiations and declarations of subjective intent; that the meaning which a document would convey to a reasonable man was what the parties using its words against the relevant background would reasonably have been supposed to mean and included the possibility of ambiguity and even misuse of words or syntax;

..."

86. With that principle in mind I turn to the contract itself. It is quite apparent, from an ordinary reading of that part of the letter dealing with the matter, what was troubling Mr Roberts and why protection was sought. But I do not accept on that ordinary reading that the words reveal an intention that the parties were to be bound only where the solicitation sprung from the confidential or sensitive material exchanged. First those limiting words are not so expressed in the proposal or acceptance; and I pay heed that as part of the overall matrix the representatives of both proposer and acceptor are senior, highly experienced legal practitioners who would be expected to write what was intended and not more or less than that. Secondly, they were spokesmen for parties on an equal footing seeking mutual protection readily able to be policed and enforced. And that brings me to the third, that were those limiting words to be implied, there would fall on the injured party the need to prove what might be very difficult, lengthy and costly to establish, namely, not just that there was solicitation, but that it stemmed from wrongful use of the information exchanged. It seems to me that neither party would have wanted that burden; that the reasonable man, cognizant of the facts, would read the words and glean from them that solicitation within the time frame is what the parties intended to prohibit. Thus as I find, and hold, it is incumbent on Deacons to prove White & Case solicited the five lawyers but without regard to how or why.

87. Before coming to that I have to deal with what is meant by the words "not to solicit". Variously this has been described as "non-solicitation", "hands-off" and "non-recruit"; indeed, as I have recorded, it is pleaded as the non-recruit term. I adopt again the mantle of the reasonable man to establish the presumed intention. First, on an ordinary reading of the various terms there is a difference. To solicit connotes the initial approach, the setting in motion, making the running, going after, targeting. I accept that there is authority for the proposition that a person can solicit even if the solicitee makes the first move. Stein JA said as much in Barrett and Ors v. Ecco Personnel Pty Ltd (unreported), CA 4058/96 in a New South Wales Court of Appeal case. But it was also said by him that it is:

"The task of the court to interpret the words ... in their context."

88. The matter was further traversed recently in the Ontario Superior Court of Justice by Chapnick J in the case Insurance Portfolio Inc v. Axion Insurance Services Inc 2002 ACWSJ Lexis 1500. The judge was concerned with what was meant by the word solicit in the context of a claim that the defendant had breached a covenant made with the plaintiff not to solicit or contact customers of a named insurance company. He did not disagree with the proposition advanced by both sides that where there is no ambiguity words in a contract must be given their literal meaning. He went on to quote from various dictionaries that solicit means variously to invite, make appeals or requests to, importune, entice, ask earnestly for, seek assiduously, and so on. Then he went on to state that:

"the words in question cannot be viewed in isolation and must be understood within the context of the agreement as a whole."

89. Vinelott J in the case of Austin Knight (UK) Limited v. Hinds [1994] FSR 52 was required to consider the term solicit in a covenant in which an employee was prevented from "soliciting or endeavouring to entice away" customers of her employer for a period after her termination of employment. It was submitted by counsel for the plaintiff that by making a presentation to a former customer, even one who had approached her, amounted either to soliciting or endeavouring to entice away the customer. His Lordship disagreed. At p. 59 he said:-

"That is not I think, comprehended in the usual meaning of soliciting, and as regards endeavouring to entice a customer away, if [the Plaintiff's] submission were well-founded, the covenant would amount to a covenant not to deal with customers of [the Plaintiff], even customers with whom [the former employee] had never dealt with while an employee of [the Plaintiff] and with whose relationship with [the Plaintiff] she was wholly unaware. On that construction the covenant would ...plainly be an unreasonable restraint".

90. Given that the parties before me were concerned to avoid illicit poaching, it seems to me and I so find that the intention was to stop one firm from going after personnel in the other rather than to prevent recruitment absent that approach. In other words that not to solicit does not, within the context of what was agreed, mean not to recruit, nor that it was a hands-off restriction, the colloquial equivalent.

(b) Solicitation?

91. Was there solicitation, before expiry of the time designated, in breach of the agreement? It is not disputed that when Mr Fairbairn and the others signed up to join White & Case, the non-solicitation restriction was still current. What is in issue is as to whether they had been solicited.

92. To answer this question, I need to go back into the history as I glean from the evidence adduced by those who played a part, namely, Messrs Fairbairn, Cairns, Darton, Leifer, McDonald, Crozer, Kuzmik and Japp. There was also evidence from a witness not previously referred to, a partner of Herbert Smith in Hong Kong, called Nigel Francis.

93. It is apparent that at least by the close of 2001 Messrs Fairbairn, Cairns and Darton had become close colleagues and firm friends; to a lesser but nonetheless significant extent Mr Leifer fell into the same category. When he arrived on the scene in the summer of 2001 Mr McDonald fitted in well, professionally and socially. At that time Messrs Fairbairn, Cairns, and Darton revealed to the others of the group that they were not happy at Deacons, having become somewhat disillusioned by what one called "political faction fighting" in the firm. That came to a head in late November when Mr Darton's promotion to partnership, not for the first time, failed to attract the requisite number of votes. The threesome let it be known, within the group, that they intended to leave, ideally as a team, in order to preserve their professional and social relationships. Both Messrs McDonald and Leifer expressed an interest in being included; it is fair to say however that neither had the same strong feelings against Deacons.

94. Mr Fairbairn contacted Herbert Smith in Hong Kong. Herbert Smith is one of those practices represented worldwide, with its head office in London. There was an expression of interest and he was asked to fill out a form headed "Outline Business Plan" that Herbert Smith habitually used when considering candidates at partnership level. Mr Fairbairn expanded on the template and submitted it. I mention here that in that original form it is very similar though not identical to the Business Plan so-called that was subsequently to be sent to and received by White & Case for the same purpose. As with the Business Plan, the document sent to Herbert Smith dealt with a team recruitment, being Messrs Fairbairn, Cairns, Darton and Leifer. There were several meetings but, in the event, by end December, Herbert Smith decided not to proceed.

95. By then Mr Japp had appeared on the scene. At all material times he was employed by Robertson Smart on salary plus commission, as a recruiter of personnel within the legal profession. Mr Japp describes himself as that sort of recruitment consultant who does not act on the basis of a formal retainer from a law firm; rather he seeks out practices with a general need and individual lawyers who express an interest in making a move, and then attempts to introduce the one to the other. If a recruiting results his employer gets paid and he earns a commission. To this end he approached White & Case HK in early 2001 to learn of its intentions in Hong Kong. He spoke to Mr Kuzmik. He was told that White & Case were looking for recruits for its intellectual property and China practices, and that it would also be interested in adding to its partnership a practitioner whose speciality was banking. Japp submitted his employer's scale of charges payable if a candidate introduced by him came to be employed. During the course of the year he did introduce various candidates to Mr Kuzmik but no recruitment resulted.

96. In December 2001, without particular reason, Mr Japp made contact with and met Messrs Fairbairn and Cairns. He told them he made the approach representing no firm, because he did not, but that would make the necessary overtures if they were interested. He was told that they were planning to move and that two others, Messrs Darton and Leifer, were looking to go with them. Mr Fairbairn prepared and sent to him the document I have earlier described being the Core Elements Document. Mr Fairbairn said he produced this from information held internally by Deacons, used by it for marketing and promoting its personnel and available services. It was agreed that Mr Japp should approach Allen & Overy, Clifford Chance, Freshfields and White & Case to establish levels of interest. He did so. He sent or delivered to each firm the Core Elements Document.

97. Of all the firms approached, only White & Case were prepared to go further. It was Japp's meeting with Mr Kuzmik that gave rise to Kuzmik's email to Mr Crozer of 9 January 2002:-

"Just finished with Japp. The Corp restructuring/insolvency team is from Deacons. Expensive, but appears to be an aggressive and successful team ..."

98. There was a meeting held on 31 January 2002 attended by Messrs Crozer and Kuzmik, and Messrs Fairbairn and Cairns. Mr Crozer invited them to present a case. Mr Fairbairn prepared the Business Plan, adjusting as required the document he had already prepared and submitted to Herbert Smith. This was sent on 10 February. Up to this point those referred to in the Business Plan as candidates for recruitment as a team did not include Mr McDonald. He had not been regarded then as a serious recruit given that he was on secondment from the associate firm in Australia. He came "on board", as it were, shortly afterwards, on terms that need to be examined further.

99. The rest is history. Following the recruitment Robertson Smart submitted a bill to White & Case HK. There seems to have been a difficulty about collection; certainly there was a delay in payment.

100. And so to my findings.

101. Against the argument raised for Deacons to the contrary, I am unable to conclude that there is anything in the proposition that Robertson Smart - through Mr Japp - was acting as agent for White & Case and targeted the BRI team as agent. There was no mandate written or verbal. A year prior Mr Kuzmik had spoken of a need to find an experienced banking practitioner for recruitment at partnership level. He had not alluded to lawyers specialising in restructuring insolvent corporations. Mr Japp as I am satisfied "cold called" White & Case HK as one of several firms at the instigation of the candidates, not the other way round. That White & Case HK paid Robertson Smart when recruitment was achieved is neither here nor there. Nor can I accept the proposition that Messrs Crozer and Kuzmik had on behalf of White & Case initiated an approach to Messrs Fairbairn et al as might amount to solicitation. Their first involvement was to receive from Mr Japp the Core Elements Document. The decision to meet the candidates, and Mr Crozer's request for information (which resulted in the delivery to him of the Business Plan) was a logical and anticipated next step, rather than that it was the initial step in the recruitment process.

102. There was, as I find, no solicitation by White & Case LLP or White & Case HK and thus no breach of the non-solicitation restrictions.

Inducement to Solicit

103. It follows from that finding that there can have been no inducement or procuring by Messrs Fairbairn and Cairns of such breach.

104. And so now to the claims against Messrs Fairbairn & Cairns.

The Contractual and Equitable Duties of Messrs Fairbairn and Cairns

105. The alleged breaches as pleaded have been broken down into a number of sub-issues. For ease of reference, I shall duplicate the numbers used in the statement of claim:

38I

(a)	that the abovenamed without disclosing to Deacons engaged in procuring, inducing, encouraging or facilitating employees of Deacons to leave and join a competitor;
(b)	by the preparation and submission to White & Case of the Business Plan, they disclosed information confidential to Deacons; namely,
	(i)	the annual billings (net income) for themselves and for Messrs Darton & Leifer for the years 1999, 2000 and 2001;
	(ii)	the annual billings (gross and net fee income) for the BRI group for 2001;
	(iii)	their fee earning potential including prospects of cross-referrals to other practice groups;
	(iv)	the fact that eleven named clients were key clients of the BRI group;
	(v)	the fact that ten named clients were likely to follow them should they move to White & Case HK;
(c)	they contacted the clients for the purpose of ascertaining whether they would transfer their business to a competitor of Deacons, namely, White & Case HK;
(d)	Mr Fairbairn prepared and submitted the Strategy and Action List and delivered it to White & Case HK, in which it was stated that the recruits should resign together and thus bring pressure to bear on Deacons to waive or reduce the impact of their restrictive covenants;
(e)	Mr Fairbairn's Core Element Document that he had sent to White & Case contained information confidential to Deacons;
(f)	By referring Michael Kunz to White & Case in Bangkok they deprived Deacons of the fruits of that potential business;
(g)	By referring a Deacons' client with the need for legal assistance in Los Angeles to White & Case Mr Fairbairn was making a referral to a competitor of Deacons, without the knowledge or consent of Deacons;
(h)	Mr Fairbairn referred or facilitated the introduction of potential work known as "the rubber matter" to White & Case HK instead of to Deacons.

38IA

Post resignation (11 June 2002), breaches are alleged pertaining to:
(1)	Mr Fairbairn's email of 12 June to Tracy Sawyer;
(2)	Mr Fairbairn's email of 13 June to Miss Sawyer;
(3)	Mr Fairbairn telling White & Case on 19 July 2002 that he had been recommended to act in the restructuring of a company known as WorldCom.;
(4)	In the exchange of emails in early August between Messrs Fairbairn and Crozer, the former making pertinent proposals on how White & Case could demonstrate their ability and commitment to provide services to SCB;
(5)	Messrs Fairbain & Cairns procuring SCB to instruct Mr McDonald on a new matter to take effect as soon as he had departed Deacons and arrived at White & Case HK whilst Mr McDonald was still an employee of Deacons.

106. Before dealing with the specifics, it is I believe appropriate and necessary to define the contractual and equitable obligations Mr Fairbairn as an equity partner and Mr Cairns as a salaried one owed Deacons.

107. Mr Fairbairn's contractual obligations are at paragraph 13 where I have recited clauses 5, 9A (ii) - (iv) and (vi) and B (i) of the partnership deed. Mr Cairns' are at paragraph 14, being clauses 4.1 and 4.4 of his employment contract.

108. A partner's fiduciary duties owed to his firm have stood the test of time. In the fifth edition of Lindley on Partnership (1888) reproduced in Lindley & Banks on Partnership (18th edition) Lord Lindley wrote:-

"The utmost good faith is due from every member of a partnership towards every other member; and if any dispute arises between partners touching any transaction by which one seeks to benefit himself at the expense of the firm, he will be required to show, not only that he has the law on his side but that his conduct will bear to be tried by the highest standards of honour." (see para 16.01)

109. Lord Lindley's words were repeated in a more modern and local setting by Ma J (as he then was) in Kao Lee & Yip v Koo Hoi Yan Donald [2003] 2HKC 113 at p. 132:

"40. In the case of partners, this is one of the classic fiduciary relationships. The duty of good faith between partners can be traced to Roman law. The standard required to partners in this regard is high."

He quoted from Lord Lindley as above, and then went on to recite from a case equally venerable:

"41. InHelmore v Smith (1886) 35 Ch D 436 at 444, Bacon VC said:

If fiduciary relation means anything I cannot conceive a stronger case of fiduciary relation than that which exists between partners. Their mutual confidence is the life blood of the concern. It is because they trust one another that they are partners in the first instance; it is because they continue to trust one another that the business goes on."

110. As to what is meant by a fiduciary relationship: Millet LJ in Bristol and West Building Society v Mothew [1998] Ch 16 said at p. 18:

"A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary. As Dr Finn pointed out in his classic work Fiduciary Obligations (1977), p. 2, he is not subject to fiduciary obligations because he is a fiduciary; it is because he is subject to them that he is a fiduciary."

111. As far as employees are concerned the implied obligations owed the employer are as well settled.

112. In Robb v Green [1895] 2 QB 1, Hawkins J said at p. 10:

"I have a very decided opinion that, in the absence of any stipulation to the contrary, there is involved in every contract of service an implied obligation, call it by what name you will, on the servant that he shall perform his duty, especially in these essential respects, namely, that he shall honestly and faithfully serve his master; that he shall not abuse his confidence in matters appertaining to his service, and that he shall, by all reasonable means in his power, protect his master's interests in respect to matters confided to him in the course of his service. It would be monstrous to suppose that a servant would be absolved from the observance of these essential elements to good service, unless they were in terms specially provided for in the contract."

113. As alluded to in Robb v Green, the employee's core duty of fidelity to his employer is capable of limitation or variation if the contract between them states as much. In Faccenda Chicken Limited v Fowler [1987] 1 Ch 117, Neil LJ said at p. 135:

" (1) Where the parties are, or have been, linked by a contract of employment, the obligations of the employee are to be determined by the contract between him and his employer: cf. Vokes Ltd. v Heather (1945) 62 RPC 135, 141.

(2) In the absence of any express term, the obligations of the employee in respect of the use and disclosure of information are the subject of implied terms.

(3) While the employee remains in the employment of the employer the obligations are included in the implied term which imposes a duty of good faith or fidelity on the employee. ..."

114. However, I do not find in Mr Cairns' contract any feature which narrows or otherwise limits the implied obligation of good faith owed to Deacons.

115. I come now to the allegations of specific breaches of those obligations.

Procuring Inducing Encouraging or Facilitating Deacons Employees to Leave - 38I(a)

116. It is the plaintiff's case that from the time they formed an intention to depart from Deacons, Messrs Fairbairn and Cairns and with them Mr Darton recognized the advantages of presenting themselves as a team. It was apparent from the Core Elements Document and subsequent Business Plan that that was how they were promoting themselves, not as individuals. With that as a basic premise, Messrs Fairbairn and Cairns had a vested interest in inducing Mr Darton, subsequently Mr Leifer, and finally Mr McDonald to join them. And that is what happened. Mr Fairbairn and to a lesser extent Mr Cairns were the spokesmen and orchestrators, negotiating on behalf of the others in general and particular terms.

117. It is the defence case that there was no inducing; that Messrs Darton, Leifer and McDonald made their own individual decisions to resign. That they acted in concert is irrelevant. That they permitted Messrs Fairbairn and Cairns to do the running for them is also irrelevant. Whilst they may have been influenced by their seniors' decision to leave and to leave together that did not establish inducement; indeed, in the circumstances, it was perfectly understandable.

118. I come now to the evidence on the issue.

119. First there are the documents. They indicate the development of a plan of three, then four, then five moving as one. They reveal that the documentation, the talking, the negotiating and the fine-tuning were all undertaken by Messrs Fairbairn and Cairns. They reveal returns to the recruiter that individuals could not offer.

120. Then there is the evidence forthcoming from the participants. Mr Darton, closely associated with his more senior colleagues both professionally and socially, spoke of his own, independent dissatisfaction with Deacons; in particular, the disappointment at being turned down for partnership. To the proposition that he was somehow induced or procured to leave Deacons, by Fairbairn, Cairns or other agency, he attested he was not. Mr Leifer, who expressed no dissatisfaction with Deacons during his employment with that firm, gave several reasons for leaving. He saw the move to White & Case as a significant career move, given the international nature of the practice. Whilst not specifically in the BRI team he had worked closely with those in it, and most of his own practice was concerned with it. He saw the departure of its key members as a prospective set-back to his own advancement. He denied he was induced to leave. It was a decision he independently and freely made, having considered the pros and cons after a discussion with his wife and no one else. Mr McDonald stated that having learnt that Messrs Fairbairn, Cairns and Darton were definitely leaving Deacons and negotiating to join White & Case then gave thought to his own situation. He was attracted by the prospect of joining, presumably as a partner, a top tier firm, and that the insolvency work in which he specialized would be of an international nature with more interest and challenges. On the other hand, he was reluctant to give up his partnership in Deacons' associate firm in Australia of which he was proud and which he valued. And there was the issue of a more long term absence from Australia. In short, he was torn. I repeat verbatim, how he came by his decision to leave:

"In the end, I thought about the issue over many nights and had lengthy discussions with my wife and some of my most trusted peers and friends. I did not confer at this stage with any of Mark, Edward or Robin about what I should do. The matters concerning Robin's promotion to partnership did not affect my decision in any way. I felt it was a decision I had to make for myself whilst being as objective as possible. Ultimately, I was encouraged by the fact that I received almost unanimous advice from friends and peers that the opportunity to join a major international firm as a partner was one I could not simply give up and that White & Case was an outstanding firm. This view was confirmed to me by a number of Deacons partners in Australia subsequent to my resignation, who all wished me well in my future career."

He went on to state that he was not induced to leave, that it was, in the end, his own decision, in what he felt was in his best interests. All three of the above were subjected to testing cross-examination by Mr McGregor. All declined to support the proposition that they had been induced by Messrs Fairbairn and Cairns to make the move.

121. Messrs Fairbairn and Cairns themselves denied there was any inducement on their part.

122. It seems to me and I so find that there is nothing in the proposition that Messrs Darton, Leifer or McDonald have been less than truthful in their evidence both written and from the witness box on the issue of whether they or any of them had been induced or procured to leave Deacons. The documents and conduct upon which Deacons relies to support that contention do no more than indicate a decision to move together and at the same time, with Messrs Fairbairn and Cairns orchestrating the terms on their behalf. This does not seem to establish inducement or even to infer that. Having read and listened to the evidence of those said to have been under the power of others, I am satisfied that each in his own way was capable of coming to the decision he did independent of any untoward, illicit pressure.

123. But that is not the complete picture. There was as I have found, no procuring or inducing. But that does not rule out encouraging or facilitating. There is no doubt on the evidence that Messrs Fairbairn and Cairns were the first to feel and then to voice their discontent with Deacons and to make it known of their decision to move on. Mr Darton with his partnership prospects all but over was quick to join. Messrs Leifer and McDonald followed thereafter. As the team grew in size to become the core element of the Deacons BRI team, so it was that Mr Fairbairn was able to forecast the prospects of key clients moving with the team; a most attractive proposition for the prospective suitor but a most damaging one to the existing partnership/employer, Deacons.

124. It is apparent to me and I so find that in pursuing the strategy of a co-ordinated exit Messrs Fairbairn and Cairns acted to encourage and facilitate their colleagues' simultaneous departure without regard to the consequences for Deacons save that inevitably it would cause hardship. This as I find was directly at odds with Fairbairns' obligations as a partner. He failed to display "the utmost good faith" of Lord Lindley's famous lines. In fact his conduct has the hallmarks of bad faith. Similarly, Mr Cairns was in breach of his contractual obligations of good faith. There is a further breach under this head; of an obligation to notify one's principal that a course of action proposed will likely be damaging to its interests if it proceeds; see Sanders v Parry [1967] 1 WLR 753.

125. There was also an obligation in both Fairbairn and Cairns to report to Deacons of the other's misconduct, even if to do so would have implicated the notifier; see Sybron v Rochem [1984] 1 Ch 112. I suppose it is hardly surprising that each failed to do so, given they were equally in it together and that that would have amounted to the commission of that most heinous of schoolboy crimes, dobbing in a chum. But when they signed up for Deacons they assumed the mantle of loyalty owed to the partnership; what was displayed was loyalty heading the wrong way.

The Business Plan - 38I(b)

126. Before dealing with the specific allegations, I need to consider the law pertaining to the duty of confidentiality. As to their joint and several obligations I do not find a distinction between those of Mr Fairbairn as a partner and Mr Cairns as employee. This contention is supported by Megarry J in Floydd v Cheney [1970] 1 ALL ER 446 at p. 449.

127. Faccenda Chicken (supra) is the leading case on the issue of the extent to which an employee or fiduciary may impart knowledge or information of the employer or partnership as the case may be. At first instance the trial judge Goulding J categorized information into three distinct classes:

"First there is information which, because of its trivial character or its easy accessibility from public sources of information, cannot be regarded by reasonable persons or by the law as confidential at all. The servant is at liberty to impart it during his service or afterwards to anyone he pleases, even his master's competitor. An example might be a published patent specification well known to people in the industry concerned. ... Secondly, there is information which the servant must treat as confidential (either because he is expressly told it is confidential, or because from its character it obviously is so) but which once learned necessarily remains in the servant's head and becomes part of his own skill and knowledge applied in the course of his master's business. So long as the employment continues, he cannot otherwise use or disclose such information without infidelity and therefore breach of contract. But when he is no longer in the same service, the law allows him to use his full skill and knowledge for his own benefit in competition with his former master; and ... there seems to be no established distinction between the use of such information where its possessor trades as a principal, and where he enters the employment of a new master, even though the latter case involves disclosure and not mere personal use of the information. If an employer wants to protect information of this kind, he can do so by an express stipulation restraining the servant from competing with him (within reasonable limits of time and space) after the termination of his employment. ... Thirdly, however, there are, to my mind, specific trade secrets so confidential that, even though they may necessarily have been learned by heart and even though the servant may have left the service, they cannot lawfully be used for anyone's benefit but the master's ..."

128. The Court of Appeal did not expressly adopt Goulding J's three categories, and in fact was in respectful disagreement with the proposition that information other than that which falls into the third category can be protected by a restrictive covenant. But what does emerge is that there is a crucial distinction between what an employee may disclose during the currency of his employment and what he may do after it is over. Whilst the relationship is current the duty of confidentiality attaches to all kinds of information learned in the course of employment, excluding that which is trivial or in the public domain. After the employee leaves the only information capable of being protected by express or implied restriction is information the equivalent of a trade secret. The same rules apply as between a fiduciary and his partners. It follows as I find that there would be a breach of the core duty of loyalty or of good faith and fidelity if information is misused by the fiduciary or employee for his own benefit and/or the benefit of another, even if the information disclosed falls below Goulding J's third category of a trade secret or its equivalent.

129. It is the defence's contention that the additional ingredient of detriment has to be established for an action founded in breach of confidence. Robb v. Green (supra) is cited in support. Hawkins J expressed the implied term preventing an employee from misusing confidential information requires the qualification that such use shall be detrimental to the employer. But moving forward by nearly a century to the House of Lords case Attorney General v. Guardian Newspaper Ltd No. 2 [1990] 1 AC 109, the celebrated "Spycatcher" case, Lords Goff, Keith and Griffiths touched on the topic without providing a firm view, perhaps because it was not material in that case. The other two Law Lords made no reference at all. In the event I make no ruling because I do not find it necessary to do so as I shall come to.

130. I turn to the specific allegations and defence under this head.

131. The plaintiff's case is that the information disclosed in the Business Plan as itemized (i) to (v) in clause 38I(b) was material confidential to Deacons. Some of the financial information disclosed was of such confidentiality that it could only be assessed through Deacons' intranet by equity partners, and was clearly material confidential to Deacons. The prospect of referrals, a compiled list of clients and an indication of those ready to follow the team fell into the same category. That Fairbairn had marked his covering email as private and confidential indicates he was well aware of that.

132. The defence case is first that Mr Cairns played no part in the production of the Business Plan, beyond that he reviewed and commented on it before it was sent out. That minimal participation permits him to avoid responsibility for it. Next it claims the information imparted was not confidential, but that which both Fairbairn and Cairns were entitled to disclose in pursuit of their career advancements. This is evident from the fact that the Business Plan emerged from a template used by Herbert Smith in the recruitment process, and that Deacons looked for and received such information in its own hires. As to the information naming clients of the BRI team, this was already in the public domain and was thus neither sensitive nor confidential. The reference to some of the clients being likely to follow the BRI team was a statement of belief and not information; certainly it was not information confidential to Deacons. Finally, it is pleaded that as a matter of public policy there should be free movement of labour with no unwarranted interference to prevent an individual from advancing his career.

133. Before I come to my ruling I make brief reference to evidence on the topic from Messrs Scorgie, Fairbairn, Cairns, Darton, Leifer, McDonald and Cole.

134. Mr Scorgie as Deacons' Chief Information Officer was responsible for its computer technology. I have reproduced earlier (see paragraph 24) an emailed request to him by Mr Fairbairn for financial information relating to work undertaken by himself and Cairns. He described the request as an unusual one because it concerned the performance of a sector of a department and not the whole department or one person. He extracted data from level 2 of Deacons' intranet (level 2 is the second highest level of access, restricted to equity partners only) and sent it to Fairbairn. The abnormal nature of the request and the timing of it would suggest that this may have been the source of the financial information that found its way to the Business Plan, and that it came from a secure origin would support the contention that it was information confidential to Deacons. Mr Fairbairn conceded that he did ask for the information because he was then contemplating departure from Deacons. He also conceded that it was confidential to Deacons. But in the end he did not use Scorgie's reports because he believed they were wrong. The figures he supplied were based on his own estimates, from his figures and those provided by other members of the BRI team.

135. Messrs Darton Leifer and McDonald stated that on request by Mr Fairbairn they provided figures relative to their respective financial performances at Deacons. Mr Darton said that he disclosed figures relating to his billings which he would have got from the intranet (at level 4, restricted to associates) or from the hard copy accounts circulated monthly by the Accounts Department. Mr Leifer said he calculated the total value of his chargeable hours and net billings and charge-out rate and gave them to Mr Fairbairn. Mr McDonald said he supplied his financial particulars worked out from the monthly accounts handed out by the Accounts Department. Mr Cairns said he did not extract anything from the intranet and said that Fairbairn:

"produced a business plan in due course based substantially on publicly available information, together with some simple income projections which were really only the product of multiplying an annual number of billable hours by an hourly charge-out rate (together with other assumptions)."

However, in cross-examination he conceded that the financial information was not in the public domain and was not a simple multiplication exercise.

136. Mr Cole explained how it was that the net billings disclosed could not be derived from multiplying the chargeable hours by the relevant charge-out rates, in this way:

"It is not the case, because you work a specific number of chargeable hours, and what you end up billing after you have taken into account write-offs, when you have taken into account client reductions, when you have taken into account the sorts of special deals that you are talking about with people like CLP earlier, is a complete different figure. I have never come across anybody who had managed to say, 'I worked 1,000 hours at $5,000 an hour. Therefore, I have billed exactly $5 million'. It does not work like that. You get reductions, you get deductions, you get write-backs and you get special deals" [Day 14 page 67 line 15 to page 68 line 3]

137. I glean from this and so find that the figures disclosed were not calculated from a simple multiplication process but were actual historic figures extracted either from Deacons' intranet or its Accounts Department. Whether this was via Mr Scorgie's programme made up at Mr Fairbairn's request or from data supplied by the various BRI members or was a mixture of both is not material. Given the various levels of access depending on the seniority of the individuals directing a search, it is apparent as I find (and indeed obvious from any standpoint) that the figures extracted and from which the calculations in the Business Plan derived were not in the public domain, nor trivial, and amounted to information confidential to Deacons to the level of a trade secret equivalent. I come to the same conclusion concerning the disclosure of the overall annual billings for the business recovery part of Deacons' insolvency practice.

138. As to referrals, I am satisfied this, too, was information confidential to Deacons. Mr Fairbairn in cross-examination said that he sourced this information from a partnership conference - hardly in the public domain.

139. I come now to the identifying of key clients and the prospect of their following the BRI team to another firm. Taken in isolation the disclosure of clients of the team is not as I find confidential. Reference is made to their status in Asia Pacific Legal 500 and other widely circulated periodicals. But such information takes on an altogether different complexion when ten of them, clearly the majority and including 'key' clients such as SCB and KPMG, are categorized as clients the BRI team believes will follow the team at the time of their move. I do not regard this as merely being a statement of belief and not information as such. It is, as I find, information which ought to have been disclosed to Deacons. The fact that it was not but instead was passed on to a competitor, under the heading "Opportunities for White & Case" was in my view the passage of information which was not only confidential but obviously harmful to Deacons.

140. The defence proposition that Mr Cairns played no or minimal part in the preparation of the Business Plan is not supported by the pleadings, or the evidence. At paragraph 59 of the statement of defence it is stated in part "It is admitted that the 3rd and 4th Defendant prepared a written business plan". In his supplemental witness statement Mr Cairns stated at paragraph 33:

"33.

Other than providing Mark with a copy of my CV, I was not involved in the preparation of the business plan that was forwarded to White & Case under cover of Mark's memorandum of 10th February, 2002. However, Mark did provide me with drafts of the plan for comment and review and I was happy for the final version of the plan to be presented on behalf of both of us to White & Case."

And in cross-examination:

"I take equal responsibility for it with Mark ... I was happy for the final version of the plan to be presented on behalf of both of us, and I have just said now that I am happy to take joint responsibility for it ... I saw it, I read it and I commented on it. I was happy for it to go in my name" [Day 27 page 148 line 12 to page 149 line 13]

141. Nor do I find from the Business Plan support for the proposition that this was material which a candidate for a particular post in a career move would not be restricted from providing to promote his prospects. It is averred in the statement of claim within clause 38I(b) as follows:

"For the avoidance of doubt, it is the Plaintiff's case that the Third and Fourth Defendants were entitled to disclose to the First and Second Defendants, for the purpose of seeking engagement and/or employment therewith, the following information but nothing more:
(i)	their respective current incomes derived from working for the Plaintiff;
(ii)	a generic description of the types of matter that they had handled at the Plaintiff and the types of client for whom they had acted (without disclosing client names or details of matters undertaken for clients save insofar as such information had appeared in publications such as the Asia Pacific Legal 500); and
(iii)	the number, in broad terms, of their chargeable hours undertaken, sufficient to demonstrate how busy they were."

142. This is a proposition that was accepted by Mr Kuzmik. He said in his evidence, in response to the question "What sort of material does a partner, lateral partner, candidate need to demonstrate to make out a business case":-

"The business case would be a track record of having built and managed a business of a substantial size, a track record of having billed hours consistently over a period of time, or at least being able to manage a team of associates, billing hours over a matter of time. We have only two things in our profession, that is, hours worked and chargeable rates. So it is perhaps a less complicated exercise than in other businesses." [Day 29 page 16 lines 5 to 21]

143. This is a far cry from the depth of information that was disclosed in the Business Plan.

144. Mr Fairbairn's view on the point is pertinent. In cross-examination he was taken to the Core Element Document and the sub-heading therein "Notable Restructuring and Insolvency Matters" and the following line "Whilst financial details of the practice cannot be given ..." and then a list of transactions undertaken by the team. He conceded that he was not prepared to reveal financial details because that would have been a breach of his fiduciary duties. He sought to explain his having done so in the Business Plan was because for the recruitment to be advanced to the next step that was information needed to justify the value of the team. He conceded that merely moving to another stage of the recruitment process does not change the duty owed but sought to justify it by stating "I do not think fiduciary duties can be used to prevent people moving". But his marking of the email to Messrs Kuzmik and Crozer that enclosed the Business Plan as "PRIVATE AND CONFIDENTIAL" tells its own tale.

145. As to the defence that it evolved from the Herbert Smith template, one used freely by that firm in London and elsewhere; two points emerge. The first is that it appears to be designed for individual lateral hire not for more than one person or a team. Secondly it makes no provision for disclosure of the historic figures that were disclosed in the Business Plan.

146. I have not hitherto referred to Mr Fairbairn's email and attachment to Mr Kuzmik of 18 February 2002 in which he disclosed structural details of Deacons' partnership lockstep and the actual drawings of Deacons' first and second year capital partners. In fact from this document one can calculate the drawings of every partner as Fairbairn conceded. The existence of the document is not pleaded to perhaps because it came to light late in the discovery process. It is all too apparent that Fairbairn was aware of its status and sensitivity "As you will appreciate this is highly confidential" and goes to establish his readiness to devulge secret information belonging to his partnership for the purpose of career enhancement of himself and his team.

147. Reverting back to that which is pleaded, the Business Plan; taken as to its parts and the sum total of those parts I find it was a document containing information which was confidential and sensitive to Deacons. The majority of that which was confidential I classify as being within Goulding J's category 3 in Faccenda Chicken. The disclosure of it to the competitor White & Case represented a material breach of good faith and fidelity owed by Messrs Fairbairn and Cairns.

148. Returning to the issue of detriment; whether or not it is a necessary ingredient, I find that on the evidence there was detriment. There was as I find a direct casual link between the supply of the Business Plan and the recruitment process resulting in the loss to Deacons of the BRI team members, some of their client base, and profits that otherwise would have been earned.

Soliciting Clients for a Competitor - 38I(c)

149. In answer to a request for further particulars of this claim, the plaintiff responded that this was directed specifically to SCB and KPMG. Reference was made therein to the statement of belief in the Business Plan, Mr Crozer's email to Mr Wall of 16 March 2002:

"In order to obtain instructions from Standard Chartered Bank it would be essential for the firm to be admitted to the Bank's approved panel of lawyers. Standard Chartered has been approached and have confirmed the acceptability of White & Case";

Mr Goodwillie's memo to Mr Wall of 4 April 2002:

"Fairbairn was very clear in stating unequivocally that they had total and complete confidence (presumably based on some sort of discussions) that Standard and Charter Bank (sic) would follow them to White & Case or another law firm (if they did not choose White & Case) with a top flight reputation";

and to the meetings facilitated by Messrs Fairbairn and Cairns when Messrs Jake Williams and Guy Isherwood of SCB and Messrs Paul Brough and Grant Jamieson of KPMG in turn met Messrs Crozer and Kuzmik. (These have been called the due diligence meetings).

150. First, the law. A fiduciary or employee cannot compete with his principal for business. He cannot solicit his principal's clients to leave his principal. Whether activity undertaken by him goes so far as to amount to soliciting or is preparatory work in anticipation of his departure and is unobjectionable is a matter of degree in the given circumstances. Sanders v Parry (supra) is a well-known case on the point. An assistant employed by a sole practitioner undertook as part of his duties work brought in by an important client. The client having said that if he left to set up on his own account he would transfer his business, the assistant handed in his notice and did so. And the client did follow him. The sole practitioner sued for breach of the implied terms of the contract of employment that the assistant would serve him with good faith and fidelity. The defence was that it was the client who had initiated the arrangement. Havers J held that it mattered not. Even were it to be so, the assistant having accepted the client's offer whilst he was still employed by another and not having informed his employer of the offer was in breach.

151. In Balston Limited v Headline Filters Limited [1987] FSR 330, a director of the plaintiff formed an intention to resign and set up his own business, prospectively in competition. When he did so he attracted business formerly undertaken by the plaintiff. The plaintiff sued inter alia for breach of fiduciary duty as a director. Falconer J stated at p. 412:

"In my judgment an intention by a director of a company to set up business in competition with the company after his directorship has ceased is not to be regarded as a conflicting interest within the context of the principle, having regard to the rules of public policy as to restraint of trade, nor is the taking of any preliminary steps to investigate or forward that intention so long as there is no actual competitive activity, such as, for instance, competitive tendering or actual trading, while he remains a director."

152. Thus on the facts he found there was no breach.

153. I mention one more case; that of Kao Lee & Yip (supra). In a case in which a client made its way from the plaintiff, a firm of solicitors, to the defendant, a former employee, Ma J reviewed the authorities and said at p. 137:

"58. Ultimately, as I have said, the application of the principle depends on the facts and involves matters of degree.

59. The solicitation of clients in the above context can sometimes pose factual difficulties. The following is a familiar scenario. A partner, employee or other fiduciary intends leaving a firm or employers either to join another firm or to set up on his own in competition. What steps can he take to solicit clients during the time he is still in partnership or employment with the old firm? Here, the partner or employee needs to tread very carefully:

(1)	Solicitation as such when he is still working for the old firm or employers is not permitted: see Wessex Dairies. This is so even if this is done in his spare time: see Hivac at 182, Balston at 414.
(2)	Whether or not an act amounts to solicitation will of course obviously depend on the facts in any given case. It is neither possible nor desirable to set out the various circumstances in which this can arise. In some instances, it may be difficult to ascertain whether the relevant act or acts amount to solicitation. One would have thought that merely informing a client that the employee is about to leave a partnership or employment, will not by itself amount to solicitation. It may be different where the client is asked whether he is likely to follow that partner or employee when he moves. ...
(3)	Finally, I should just mention that even where it is the client that initiates the approach to the partner or employee with the intention that the partner or employee should leave whereupon the client would transfer to him the relevant custom or business, the partner or employee will be in breach of his fiduciary duties if he were to go along with this unless consent is obtained from the beneficiary (whether a fellow partner or the employer): see Sanders v Parry [1967] 1 WLR 753.

(The references 'Wessex Dairies' and 'Hivac' are to the cases Wessex Dairies Limited v Smith [1935] 2 KB and Hivac v Park Royal Scientific Instruments Limited [1946] 1 Ch 166).

154. It is the plaintiff's case that the series of emails produced on discovery show that at least by March a specific approach had been made to SCB. Furthermore, that the so-called due diligence meetings which it was said were arranged to enable Messrs Crozer and Kuzmik to obtain verbal references concerning the team and, in particular, its leaders Messrs Fairbairn and Cairns, were in fact a smoke screen; the true intention was to establish beyond the words of Fairbairn and Cairns that the SCB and KPMG work would transfer across. Finally that the interfirm memos of White & Case established that the soliciting, so-called, was a success.

155. The defence case is not to deny that Messrs Fairbairn and Cairns told clients about their intention to leave Deacons. It is contended that there is nothing wrong with this, particularly where there is a close working relationship between client and partner/employee, as long as during the actual currency of his partnership/employment he does not actually compete. There is no evidence of solicitation and the spokesmen for the clients expressly denied there was. Furthermore, there is nothing wrong with a client choosing to remain loyal to an individual rather than the firm he is a partner of or employed by; the fact that such a choice is made is not itself evidence of improper canvassing. The due diligence meetings were undertaken for the purpose of getting references of Messrs Fairbairn and Cairns from professionals closely involved with them but independent of them.

156. Before I deal with this issue it is necessary for completeness to go to the evidence not already referred to.

157. Mr Crozer said of the due diligence meeting he attended with Mr Williams of SCB that it was for the purpose of obtaining "reference checks from people with whom Mark Fairbairn and his team worked". He said Mr Williams told him without prompting that he would continue to instruct them. Mr Kuzmik who attended the meeting with Messrs Brough and Jamieson of KPMG stated in his witness statement that there was no discussion of existing matters on which KPMG had instructed Deacons. But he made no reference to a subsequent transfer of allegiance. And he made no mention of the meeting being for the purpose of obtaining personal references of the candidates, nor that they were in attendance.

158. Mr Fairbairn in his witness statement said of client contact:

"During the period in which we were discussing matters with White & Case, I raised with Jake Williams and Guy Isherwood of SCB that myself, Edward, Robin, Neil and Jeremy were considering leaving Deacons. I did this as White & Case had asked us to identify 2 key relationships in order that they could conduct a "due diligence" exercise or, put another way, take references from clients for whom we had acted.

...

A further meeting (arranged, I believe, by Edward) was held over a lunch with Paul Brough and Grant Jamieson, partners of KPMG, at Morton's Grill in Central. The lunch was attended by myself, Edward and John Kuzmik. The discussions were very general although Paul and Grant did indicate that the 5 Individuals were their preferred legal advisers for insolvency and restructuring matters. I should again make clear that the purpose of the meeting was to enable White & Case to conduct its "due diligence" investigations, and at no stage during the lunch did either of Edward, John Kuzmik or myself raise the issue of a transfer of instructions by insolvency professionals at KPMG from Deacons to White & Case."

In his supplementary statement he said on the topic:

"I did not request or encourage those clients to transfer current or further work from Deacons. My firm belief is that clients choose whom they wish to instruct as their solicitors for themselves, based upon what they believe to be in their own best interests."

159. Mr Cairns said the due diligence meetings came about because he and Mr Fairbairn were asked to identify two key clients from whom references could be obtained. He said that at the lunch meeting he attended there was no discussion about there being a transfer of work by either SCB or KPMG from Deacons to White & Case.

160. Mr Brough described himself as head of KPMG's Finance Advisory Services (FAS) Division with emphasis on Corporate Recovery and Corporate Finance. He said he had come to know both Fairbairn and Cairns having worked with them professionally over a number of years. He learned of their dissatisfaction with Deacons and their decision to leave following the unsatisfactory outcome of Darton's candidacy for partnership. Whilst they discussed with him generally such matters as which firms they should try for this was in a social context; there was no reference made about the transfer of existing or future KPMG work. Speaking of the due diligence meeting, he said he and his partner Grant Jamieson were invited to a lunch at Morton's. Cairns had told him the purpose was for a reference check, that there would be someone from White & Case to ask about himself and Fairbairn. He met John Kuzmik for the first time at the lunch. He said it was generally a casual occasion. Kuzmik asked him "Are these guys any good? If they came to White & Case would you refer work to them?" He responded that if they continued to get work from SCB they would refer that to Fairbairn and Cairns unless there was a conflict. He found it not untoward that Fairbairn and Cairns were present. However, an excerpt from the transcript when he was being cross-examined reveals another side:

"	Q.	Did you think it appropriate that Mr Fairbairn and Mr Cairns, who were under fiduciary and other duties of fidelity to Deacons, should be introducing you to a firm of solicitors and inviting you to tell that firm of solicitors whether you would transfer work to them?
	A.	I did not consider it at the time.
	Q.	Would you please consider it now, Mr Brough. You are a partner in a firm of accountants; you will be familiar with fiduciary duties, not least because you are a partner yourself.
	A.	Mmm-hmm.
	Q.	If you had one of your partners in KPMG and a senior employee in the place of Mr Fairbairn and Mr Cairns at Morton's on this occasion and you had seen them and asked them what they were doing, would you have approved of their conduct?
	A.	No.
	[Day 30 page 159 line 10 to page 160 line 1]"

In the event, following the date in June when the BRI team had signed up for White & Case and given Deacons their notices he and his partner did form the view that certain of the cases that had reached a critical point should follow Mr Cairns. One particular file was known for short as "Leading Spirit". There were difficulties as Deacons, in particular Mr Cole, sought to resist the transfers. But some of the current files were transferred, including Leading Spirit. Others were left behind, amongst them one known as "S. Megga". He concluded as follows:

"At no time prior to their leaving Deacons did Fairbairn and Cairns ever suggest to me that any existing specific cases or any future potential cases which FAS either had or might have with Deacons should be transferred to White & Case. As there was never any discussion of specific cases, so there were never any promises made."

From the witness box he reiterated words to the effect that he was quite capable of choosing his own advisers; there was no canvassing or persuading by Fairbairn or anyone else for and on behalf of White & Case.

161. Finally I heard from Mr Williams. He said he was the group head of Group Special Asset Management of SCB. As such, he was responsible for restructuring/workout globally. He came to Hong Kong in 1999 by which time SCB already had a well-established business relationship with Deacons' BRI team headed by Fairbairn and Cairns. He said that as a banker involved in restructuring he adhered firmly to the view that when selecting professional advisers one picks individual lawyers in whom one has confidence rather than firms, a view shared by other senior personnel at SCB. He said he came to meet Fairbairn and Cairns regularly, mostly on a professional basis. Sometimes there were social events. He was unable to say when he became aware that they were preparing to join White & Case. He does not state how he came to know. He said there was a meeting arranged for 29 April 2002 at which along with Guy Isherwood he met for the first time George Crozer. Crozer asked what he thought of Fairbairn and Cairns and if he would use them again as lawyers and he said that he thought they were good lawyers, easy to get on with and "Yes he would".

162. He came to hear of the resignations of June 2002. Of what happened thereafter, I repeat verbatim the concluding paragraphs of his statement:

"18. There then ensued a dialogue between Keith Cole of Deacons on the one side and me on the other. The dialogue was in telephone conversations and two meetings. Isherwood accompanied me to the two meetings. At one of the meetings, Mark Roberts of Deacons was also present.

19. My position was simple. As the client, I wanted consistency and reliability of legal service. It was for me to decide which lawyer should handle SCB files. I told Keith Cole that SCB's position was that if Fairbairn and the other departing lawyers were to be taken off cases, SCB wanted input into the identity of the lawyers who would take over.

20. These discussions took place over a period of three weeks or a month. I would characterise the discussions as being frank and earnest.

21. The upshot of the discussions was that those cases which were not considered to be at a critical stage stayed with Deacons after SCB was satisfied as to the identity of the individual who would take over the case. In one case, involving the restructuring of a public company, Leading Spirit, matters were at a critical stage. Cairns had worked on this file for over two years and I did not think it possible someone else could replace him. With considerable reluctance and after much heated discussion, Deacons agreed this matter could be passed to White & Case and that Cairns could continue to work on it.

22. Other than this case, I believe the majority of SCB's cases remained with Deacons. In terms of new work, SCB retains its previous criteria i.e. it selects those individual lawyers whom it considers best qualified to deal with the case. Deacons, still, however, remain on SCB's restructuring panel of law firms.

23. At no time prior to their leaving Deacons did Fairbairn or Cairns ever suggest to me that any existing specific cases or any future potential cases which SCB either had or might have with Deacons should be transferred to White & Case. As there was never any discussion of specific cases, so there were never any promises made."

163. From the witness box he was more explicit. I spell out verbatim an exchange in re-examination:

"MR PLOWMAN: You just told us a few minutes ago that there were implications about the conduct of Standard Chartered Bank which you found incorrect and offensive. Can you tell us which matters you are talking about there?

A.	Just reading through this, I get the general impression that somehow we, Standard Chartered - our business was for sale and we were doling it out based on favours provided to us, which again I find offensive. There are some implications to that effect. At least, that was my reading, and admittedly I have just glanced over these proceedings.
	We are a professional group. I am a person who values my reputation, and we are certainly not delivering business or doing anything based on favours.
Q.	Were there any matters other than the delivering of business which you found incorrect and offensive?
A.	I do not recollect. I would have to reread the transcript, and probably a more comprehensive transcript to do that. I just did not like the tone of some of the aspects here, that somehow we were up for sale. We are certainly not.
MR PLOWMAN: Thank you."
[Day 31 page 31 lines 3-25]

164. And so now to the issues to be resolved. It is apparent from the evidence of Messrs Brough and Williams that neither regards KPMG or SCB as having been solicited in the sense of having been canvassed or coerced or pursued or persuaded to transfer their allegiance to White & Case; indeed Mr Williams has taken offence that he could be bought by a good lunch. I accept what they say. These are professional men with professional attitudes looking to do the best by the institutions they represent. That said, I am satisfied that in the context of the allegation that Messrs Fairbairn and Cairns face under this head, the expression soliciting has a wider connotation than its contractual counterpart in the non-solicitation provision of the Confidentiality Agreement between Deacons and White & Case; see that part of Ma J's judgment extracted from Kao Lee and Yip (supra) at paragraph 153. What is apparent from the documents that emerged on discovery and, in particular, the Business Plan, the series of emails between Fairbairn and Crozer and Kuzmik and those internally amongst the partners of White & Case, is that it was an essential ingredient that the BRI team bring with them key clients. I need refer only to Wall's memo to his partners in New York of 2 April (paragraph 38):

"... One of the key issues to consider in assessing this initiative is whether Messrs Fairbairn and Cairns can retain Standard Chartered as a client if they leave Deacons because Standard Chartered is reportedly one of the two principal players in the bankruptcy and restructuring business in Hong Kong ..."

165. This was recognized by Messrs Fairbairn and Cairns at least by the date the Business Plan was prepared and sent - one only needs to refer back to the contents thereof under the heading "Opportunities for White & Case" (paragraph 27).

166. Mr Williams in his statement stated he was unable to remember when he became aware of the proposed move. The sequence of emails and memoranda of 1 March, 6 March and 16 March (paragraphs 33 and 34) would indicate a direct approach on the Tuesday following 1 March. That was 5 March. Fairbairn had in his diary for the day: "12:30 - 14:50 lunch with Jake Williams and Guy I". It is difficult to come to an alternative conclusion than that it was intended to gain SCB's assurance that instructions would continue to be forthcoming; the memo about a green light is to my mind very conclusive on this point, indicating of course a successful outcome. That Fairbairn charged the lunch to Deacons describing it as client entertainment was to be the source of some discomfort to him when Mr McGregor tackled him about it in cross-examination; for good reason.

167. The so-called due diligence meeting as between Messrs Crozer on the one hand and Messrs Williams and Isherwood was in April following the interviews in New York. Whilst it is the defence case that this was to assess the worth of Messrs Fairbairn and Cairns and no more than that, it is again hard to conclude that there was no reference to the transfer of business; the extract from Mr Crozer's document of 29 April "Business Discovery and Insolvency Practice" (at paragraph 44) herein suggests it was a key issue. Mr Isherwood was not called to give a counter version. The due diligence meeting attended by Messrs Kuzmik, Brough, Jamieson, Fairbairn and Cairns is also held out to be for the purpose of assessing the personal worth of Messrs Fairbairn and Cairns. But Mr Crozer's document and the extract at paragraph 44 reveals what I believe was a key issue to be established from the horses' mouths "the transfer of business matters".

168. This summary and sequence of events satisfies me that there was an ongoing, concerted exercise by Messrs Fairbairn and Cairns to solicit for White & Case the transfer of client loyalty from Deacons, amounting to another breach of the core duty of good faith and fidelity owed Deacons.

The Strategy and Action List 38I(d)

169. This is an allegation against Mr Fairbairn alone as the author of the document. The claim is that those proposals under the sub-heading "Tactical Considerations" numbers 5 and 9 (reproduced at paragraph 48) are in breach of his core duties of fidelity and loyalty. The pleaded defence is to admit the content of the document but to deny that the proposals amounted to a breach of fiduciary duty. It was submitted that there is nothing wrong with the devising of a strategy for the negotiation by a partner of his exit from the partnership and others who might wish to do likewise. There is nothing wrong in exerting pressure to achieve appropriate objectives, provided the pressure is not unlawful. There is nothing unlawful about the content of the document.

170. I have to say that I do not agree.

171. The clauses have to be read in the light of the content of the remainder of the Strategy and Action List and the preceding exhibit (the Business Transition Document). It is apparent that the pressure sought to be brought was to accelerate the entry into White & Case of all the BRI team members ahead of their contractual notice periods and unencumbered by restrictive covenants. These tactics spelt out in paragraph 6 of the Business Transition Document (see paragraph 45) make this patently clear. The tactic was designed to put pressure on Deacons to release the BRI team members, to Deacons' direct detriment. I find this pressure to be improper and another breach by Mr Fairbairn of his duty of fidelity and good faith.

The Core Element Document 38I(e)

172. The complaint about this document is that it contains material confidential to Deacons and should not have been disclosed to White & Case. The material complained of is the identity of Deacons' clients, the nature of work carried out for those clients and the expectation of referral work from those clients in other areas of law. The allegation of breach of the duty of fidelity is against the author Mr Fairbairn.

173. The defence is to admit the content but to deny liability.

174. My view is that the document does not offend the obligation of confidentiality taken as to its parts and the sum of its parts. That which is complained of is as I find readily available in the public domain or is promotional puff about which Deacons has no grounds for complaint. There is as I find no breach.

The Referrals - 38I(f)(g) and (h)

175. These have a common theme; I shall deal with them together.

176. The first is that by the emails on 26 March 2002 (referred to in paragraphs 36 and 37) Messrs Fairbairn and Cairns revealed that they had improperly referred work not to Deacons' affiliate in Bangkok but to a competitor; the second is that by the email of 1 May (referred to in paragraph 52) Mr Fairbairn was seen to refer a client of Deacons with need of legal assistance to White & Case instead of to a firm having no presence in Asia; the third was that by the email of 23 May at paragraph 53 Mr Fairbairn referred or facilitated the introduction of new business from Mr Brough of KPMG to White & Case HK instead of to Deacons.

177. The pleaded defence to each of these claims is as to the first: Mr Kunz was looking for a lawyer with particular skills beyond those of the members of the firm affiliated to Deacons in Bangkok. Moreover Messrs Fairbairn and Cairns believed the firms were and are financially independent, with no obligation owed by one to the other to share work; as to the second: Deacons has no presence in Los Angeles. There was no obligation to refer the work to a firm not having an Asian presence. No instructions were forthcoming; and the third: no instructions were forthcoming.

178. I come now to evidence on the matters.

179. Mr Cairns from the witness box said Mike Kunz of Rolls-Royce was a personal friend. He needed legal assistance in a specialized field ideally having lender expertise and credibility with international banks. Neither Kunz nor Rolls-Royce were clients of Deacons. He did not believe the affiliate in Bangkok had that expertise. Indeed he had had an unfortunate experience when working for his previous employer Peregrine; he had had cause to instruct Deacons Bangkok and had been let down. And he said he did not recommend White & Case but suggested a call. He knew of no one else suitable who practised in Bangkok. He went on to say that it was his understanding White & Case were instructed but the project has fizzled; there have been fees earned in the region of US$24,000 with not much prospect of matters proceeding further.

180. Mr Roberts stated there is no Deacons office or affiliate in Los Angeles. But there is an informal arrangement in place that referrals are made to those firms likely to reciprocate with instructions in the future. (I am unable to find evidence to support the defence that no instructions were forthcoming, but there was no denial to that in the plaintiff's reply. I accept there were no instructions).

181. Mr Brough from the witness box said that the so-called "rubber matter" was not a referral at all but a request by him direct to Mr Kuzmik. Mr Fairbairn did not participate in anyway. In the event nothing came of the matter; no fees were derived.

182. It seems to me as I find that the referral of Mr Kunz to White & Case was not in breach of a duty owed to Deacons. Deacons has no direct presence in Bangkok. There was nothing before me to indicate that there is a financial link with the affiliate in Bangkok. Mr Cairns' motives to direct Kunz to White & Case may have been questionable but nothing adverse has been established. There was no significant challenge to his explanation as to why he chose not to contact the affiliate and why he chose White & Case.

183. I come to the same conclusion concerning the referral in Los Angeles. Deacons has no presence there and no affiliate or other connected firm. That the firm referred to has a base in this part of the world is neither here nor there.

184. In respect of the third so-called referral; there was in fact no referral at all. I accept Mr Brough's account that he solicited White & Case for his own reasons without intervention by Mr Fairbairn. It is understandable that Fairbairn's email was capable of raising a suspicion. However it was ill-advised for the partner of Deacons to be hustling a partner in another local firm concerning prospective new business for that firm. It does indicate his mindset at the time.

185. For the reasons given I find no breach of duty proved under these heads.

Post Resignation Conduct 38IA

186. There are five allegations under this head, against both Messrs Fairbairn and Cairns, of activity post 11 June 2002. The pleaded defence to all is one of general denial. I shall deal with all in turn.

(1) Mr Fairbairn's email to Miss Sawyer of 12 June

187. That which offends are the extracts reproduced at paragraph 55 herein, and are self-explanatory. The defence to this is that whatever Fairbairn proposed there was no press release until February 2003, some eight months later. There was no mention of Standard Chartered Bank. And there was no discussion as between Mr Crozer and Deacons. So both suggestions of Mr Fairbairn came to nothing.

188. The fact that nothing came of Mr Fairbairn's proposal does not of itself amount to a defence; that goes to the level of relief only. It was, as I find, conduct which should not have been undertaken by Fairbairn. He was of course still a partner of Deacons and obligated to protect its client base notwithstanding his pending departure. He is in breach under this head. There is however nothing to support the contention that Mr Cairns was involved; the allegation fails as against him.

(2) Mr Fairbairn's email to Miss Sawyer of 13 June

189. The passage complained of is paragraph 5 reproduced at paragraph 56 herein. The claim is that from use of the words 'we cannot, at this stage, be seen to actively market our clients through White & Case' can be drawn the inference that both Messrs Fairbairn and Cairns were doing just that covertly. The defence's riposte is that there is no or no sufficient basis for such an inference.

190. I agree. Pleaded as an independent ground, the words do no more than indicate what must be seen to be happening. There is nothing to suggest that covert activity is to be pursued with sinister intent. There is nothing before me to establish that there is breach under this head. However on the subject of this email, it is worthy of note from the remaining extracts reproduced that Mr Fairbairn was aware of his status in Deacons, and that his core fiduciary duties owed to Deacons were an ongoing obligation.

(3) WorldCom in Asia

191. This concerns an allegation that in or about July 2002 Mr Fairbairn notified White & Case that he had been recommended to be the Asian financial adviser in the restructuring proposed in nine jurisdictions in Asia. The allegation is that there is an inference to be drawn that he did so in order to shift new business from Deacons to White & Case.

192. I am unable to find any evidence adduced in support of this ground; it fails against both Messrs Fairbairn and Cairns.

(4) Email exchanges between Messrs Crozer and Fairbairn between 3 August and 6 August 2002

193. This concerns the exchanges reproduced in paragraphs 58 and 59 herein, the complaint being that Mr Fairbairn was making suggestions on how White & Case should demonstrate their ability to service SCB. The defence is two-fold; whether or not the making of suggestions amounted to a breach of fiduciary duty is wholly academic, it being for SCB to decide whom it instructs; further, no one was flown in the suggestions came to nothing.

194. In my view these emails give rise to a breach and, indeed, a blatant breach, of Fairbairn's obligation owed Deacons, paying scant regard to his perceptions of what these were in his email to Miss Sawyer. The opening email reveals that Fairbairn shared with Crozer the content of Isherwood's email to Cole. Then he made comments about the application of useful pressure; this was advice given to facilitate the transfer of SCB files from Deacons to White & Case. It was put to Mr Fairbairn in cross-examination that this was grossly improper conduct. His reply was to disagree. But there was a certain contriteness in his responses. He gave his reason

"It was to update Mr Crozer precisely on what the situation was. With hindsight, perhaps I should not have done it. But at the time I thought that was the easiest way to give him a full favour of the situation.

...

With hindsight, I regret that I actually forwarded the email.

...

I was certainly giving him information which, with hindsight, I should not have given him, yes."

195. Fairbairn went on to try to justify his conduct by stating:

"As I said I was seeking to look after the interests of clients, looking after a client that has been very close to me over a long period of time, and yes, with the benefit of hindsight, it was probably improper."

196. He was taken to clause 5 of the Deacons partnership agreement (paragraph 13 herein) and the question was asked:

"	Q.	And you were in breach of that covenant and you knew it?
	He answered:
	A.	I did not know it at the time, but I think with hindsight, as I stated earlier this morning, I probably fell short of the requirements of that provision, yes."
	[Day 24 Pages 15-27]

197. In one of his responses at it reads Mr Fairbairn sought to justify his conduct in the client's interest. This has been a common theme in the defences put forward to the allegations of breach of core fiduciary duties. This is not a valid defence. By and large clients may pick and choose who is to represent them. But this is not an absolute right. They may not if that will amount to a conflict of interest and there may be other restraints. And until they shift their allegiance they are a client of the firm they are with to whom the allegiance by the individual partners is owed. A closeness so-called of a relationship as between the client and a partner does not diminish the partner's obligation to his firm or permit a transfer of the loyalty owed. The Privy Council in Bridge & Deacons [1984] AC 705 dealt with the point. Lord Fraser of Tullybelton, delivering the judgment, said at p. 720:

"It must be remembered that the clients are clients of the firm rather than of an individual partner."

There is a commercial reason for this. A firm may have value in its fixtures and fittings, lease, debtors' ledger, work in progress and so on. But its real worth is measured in its client base; without clients there can be no income; no goodwill. New partners arriving and old ones retiring are in turn buying into and selling out of a share of that goodwill.

198. Mr McGregor in his closing submissions described Fairbairn's conduct as '...a gross and inexcusable breach of the duty of loyalty'. Strong words, but ones I choose to adopt in the circumstances. The fact that no one was 'flown in' is neither here nor there.

199. There is no evidence implicating Mr Cairns; he is not liable under this head.

(5) The Procuring of Standard Chartered Bank to instruct Mr McDonald

200. The allegation under this head is that whilst Mr McDonald was still an employee of Deacons Messrs Fairbairn and Cairns procured SCB to instruct Mr McDonald on new business immediately after his departure from Deacons and arrival at White & Case. Particulars of this allegation are pleaded. In summary, I am invited to draw inference of improper conduct by them from the contents of the emails which reveal active participation by them in developing a relationship between White & Case and SCB; the fact that McDonald was specifically referred to in the 4 August email (see paragraph 59); the fact that McDonald not having worked for SCB was not bound by a restrictive covenant; that Mr Crozer made reference to McDonald arriving with new SCB instructions in his email to Wall of 8 August (see paragraph 61), before McDonald's departure from Deacons.

201. The defence position is that Mr Isherwood of SCB alluded to the prospect of instructions to Mr McDonald in a social environment, without involvement or participation by either of Messrs Fairbairn and Cairns. Actual instructions were not forthcoming until after his departure from Deacons and arrival at White & Case.

202. In evidence Mr McDonald confirmed that this was how he came to be instructed and the timing. He said the file was known as the Pressure Vessels file, was a short matter earning fees for his new employer of $610,000. Mr Fairbairn in cross-examination said he knew that something was pending but refused to concede that he played any part.

203. That being the evidence I am unable to conclude that Messrs Fairbairn and Cairns or either of them played any part in White & Case getting instructions or that they or either of them acted improperly under this head; both are not liable accordingly.

204. I come now to the claims founded in tort.

The Tortious Claims

205. There are three. The first, against both of the White & Case defendants, is that they induced, procured, encouraged or facilitated Messrs Fairbairn and Cairns in breaching their equitable or contractual obligations owed Deacons with knowledge of those obligations and with the intention of inducing, procuring or encouraging such breach whereby Deacons has suffered loss. That is a claim founded in direct action by the defendants in question. The second is also against White & Case; the acquisition by White & Case HK by unlawful means of clients of Deacons founded in unlawful interference with Deacons' business. That is a tort involving indirect unlawful interference. The third is against all four defendants. It is founded in the defendants having entered into a common design to acquire business from Deacons by unlawful means. It does not seek to introduce a new tort; it is intended to spread the liability for any torts committed pursuant to a common design amongst all those who were party to that design.

206. There is a fundamental ingredient common to all torts and that is that loss results. Aside from that there are differences; I come to the separate claims next.

Inducement

207. It is pleaded that Messrs Crozer and Kuzmik:-

38K	1.1	induced and encouraged Messrs Fairbairn and Cairns to negotiate the recruitment of the BRI team;
	1.2	sought from them information confidential to Deacons as set out in the Business Plan;
	1.3	made use of the information in their own memorandum of 16 March 2002;
	1.4	encouraged them to contact and secure agreement from clients of Deacons to transfer allegiance from Deacons to White & Case HK;
	1.5	themselves met two such clients to pursue that cause.

208. The pleaded defence is a blanket denial.

209. In his closing submissions Mr McGregor stated that the plaintiff relies on evidence supporting the inducement of Fairbairn's and Cairns' breach of contractual obligations only; their fiduciary obligations being binding on them in their respective contracts with Deacons.

210. Essential to the tort of inducing breach of contract is that the tortfeasor must be found to have induced the breach with knowledge of the existence of the term of the contract breached; see British Motor Trade Association v Salvadori [1949] 1 All ER 208 at 210; also Rickless v United Artists Corporation [1988] QC 40. The requirement of actual knowledge has been extended to incorporate the tortfeasor 'turning a blind eye' and failing to take the elementary step of establishing what the terms of a contract are; see Emerald Construction Co. Ltd v Lowthian and Ors [1966] 1 All ER 1013.

211. I am not satisfied that it has been made out that White & Case in either form induced Messrs Fairbairn and Cairns to break their contracts in respect of the recruitment of themselves and the other team members. I have already found as a fact that the approach came from Fairbairn and Cairns and not the other way round. Nor do I find that Mr Crozer or anyone else representing White & Case induced Mr Fairbairn to produce confidential information as per the Business Plan. It is not in dispute that he did call for detail to support the recruitment of the candidates on commercial grounds; the fact that the information supplied was confidential as I have found does not implicate the recipient. That Mr Crozer used that material by incorporating it into his memorandum to 'sell' the recruitment to New York does not go to the tort of inducement whatever other wrong may flow from this of which more later.

212. However, under the ground of encouraging Fairbairn and Cairns to contact clients to secure their agreement to transfer instructions I find a case clearly made out. It was made abundantly clear, and passed on to Fairbairn and Cairns, that the transportability of client business was the sine qua non of a successful outcome; in particular clients such as SCB and KPMG; see Wall's memo of 2 April 2002 at paragraph 38. Messrs Crozer and Kuzmik actively pursued this. The participants at the meetings that Messrs Crozer and Kuzmik had with, respectively, Messrs Williams and Isherwood of SCB and Messrs Brough and Jamieson of KPMG consistently denied that they were called for any other reason than to establish the credentials of Messrs Fairbairn and Cairns. But I am satisfied that those meetings, set up by Fairbairn and Cairns, euphemistically called 'due diligence', were not for the purpose of obtaining references of Fairbairn and Cairns. Whoever heard of a referee giving his views of a candidate in his presence? White & Case were, as I find, not so much concerned about their suitability for partnership but to establish whether they were going to be supported by these clients. They had had such assurance from the candidates but not from the clients themselves. My finding as to the true purport of the meetings is I believe endorsed by Crozer's memorandum to Wall of 29 April and that part of it, under the heading 'Due Diligence', that I have mentioned at paragraph 44 herein. Although he does state at the outset that they received confirmation that the Fairbairn and Cairns team are 'well known in the field in Hong Kong' he makes no reference to their personal attributes or suitability for partnership as one would expect from a referee. Rather he goes in some length to promote the prospect of their attracting new business from Deacons' key clients to White & Case. There are two further, documented, indications of the support White & Case came to provide under this head. The first is the adoption, by Mr Crozer, of the Strategy and Action List and Business Transition Document exhibited to his 29 April memorandum and his recommendation that they be utilized as 'the greater likelihood of avoiding disruption in our access to the team's clients'; (see paragraph 44). Of course, not the team's clients; Deacons' clients. The second is the active role displayed by Crozer in the exchange of emails with Fairbairn of early August at paragraphs 58 and 59.

213. There remains the ingredient of loss.

214. Beyond question there has been loss suffered by Deacons as a direct result of this unlawful activity. Mr Cole gave evidence that clients have left. Turnover and profits are down. This is not challenged.

215. Thus all the ingredients of the tort under this head have been made out.

Unlawful Interference

216. In its pleadings, Deacons relies on the Business Plan, the memorandum of 16 March 2002 Crozer to Wall, the Business Transition Document and the memorandum of 29 April 2002 Crozer to Wall.

217. There is a general denial pleaded by the defendants.

218. Both counsel in their addresses reproduced an excerpt from the judgment of Jenkins LJ in D C Thomson v Co. Ltd v Deakin [1952] 2 All ER 361 who, at 379, set out the ingredients of this tort:-

"...first, that the person charged with actionable interference knew of the existence of the contract and intended to procure its breach; secondly, that the person so charged did definitely and unequivocally persuade, induce or procure the employees concerned to break their contracts of employment with the intent I have mentioned; thirdly, that the employees so persuaded, induced or procured did in fact break their contracts of employment; and, fourthly, that breach of the contract forming the alleged subject of interference ensued as a necessary consequence of the breaches by the employees concerned of their contracts of employment."

219. In an earlier passage (at p. 367) he said that the actor must have acted with the intention of doing damage to the person damaged and he must have succeeded in his efforts.

220. It is also settled that where confidential information is imparted, in breach of a fiduciary's duty of confidence owed a second party, to a third party, the third party owes the same duty of confidentiality and is in breach if he acts upon it or discloses it save for the benefit of the second party; see Lancashire Fires Limited v Lyons [1996] FSR 629, per Sir Thomas Bingham MR at p. 677.

221. Whilst intent to injure is an ingredient to be established it does not have to be the predominant purpose of the breach complained of; see Lonrho Plc v Fayed [1990] 2 QB 479.

222. The evidence on this ground is clear-cut and hardly warrants repeating. I have already found as a fact that the Business Plan having been delivered to White & Case to promote the recruitment of those who compiled it is a breach of confidence. White & Case HK used the confidential material to compile the 16 March memorandum to White & Case LLP. The memorandum spelt out a 'unique opportunity to acquire an established top tier practice at partner level' with reference to a prospective move of clients of Deacons. The 29 April memorandum and Business Transition Document reflected the way forward devised by Messrs Fairbairn and Cairns and accepted by White & Case as a means of acquiring a client base to the benefit of White & Case. That there would be ultimate damage to Deacons is not only a necessary consequence of that but is in fact contemplated under Tactical Considerations (paragraph 48).

223. In his submission on this claim Mr McGregor submitted no clearer case could be made out of unlawful acts aimed at Deacons since the whole purpose of the disclosure and use of the material was to recruit a team from Deacons with the object that there would be business forthcoming from Deacons' clients. I agree. And that is what happened. I find that there has been loss suffered, and thus that all the ingredients to establish this tort have been made out.

Common Design

224. This is founded on the basis that all four defendants were engaged in a joint enterprise to acquire business from Deacons by unlawful means. It is not a discrete claim but one brought to spread the liability around all members of the joint enterprise.

225. The classic definition of the concept was spelt out by Scrutton LJ in the Koursk [1924] 140 at p. 155:-

"Certain classes of persons seem clearly to be "joint tortfeasors": The agent who commits a tort within the scope of his employment for his principal, and the principal; the servant who commits a tort in the course of his employment, and his master; two persons who agree on common action, in the course of, and to further which, one of them commits a tort. These seem clearly joint tortfeasors; there is one tort committed by one of them on behalf of, or in concert with another."

226. Such a claim as this is very much fact driven as to whether it can be made out. In this case I believe it cannot. Each of the defendants has been targeted in various causes of action, some together others separately. This is not about a series of wrongs alleged against an active participant found, on the evidence, to have been acting on instructions by another or others in a jointly concocted illicit plan, who might but for the tort of common design escape liability. As recognized this is not a separate claim. I make no finding or ruling upon it.

227. I come next to the relief sought.

Relief

228. By order of 29 October 2002 Ma J (as he then was) gave directions as to trial. He ordered (inter alia):-

"	1.	There be a speedy trial of the present action.
	2.	There be a split trial of the action as between liability and damages. For the avoidance of doubt, the trial on liability will include any claim for injunctive relief and as to whether any duty to account exists and if so, to what extent. The trial on damages (if there is one) will include the taking of accounts."

229. In terms of this direction I now turn to the prayers for relief; the first against both versions of White & Case.

230. The following are asked for and I now deal with:-

40-41 - declarations pertaining to the non-solicitation agreement and the undertaking therein.

These fall away upon my finding that there was no breach.

42A - Interim injunctions in respect of the five recruits.

These were not pursued.

42B -

Final injunctions restraining White & Case from employing or otherwise engaging any of the five recruits until after particular dates as set out.

These are remedies sought consequential upon a finding that there was a breach of the non-solicitation agreement. As there was not these go away.

42C -

An injunction restraining White & Case from acting for any person or entity who or which was a client of Deacons' BRI practice division as at or prior to 9 January 2002 until after certain alternative dates as set out or as the court sees fit.

I shall deal with this prayer separately.

43, 44, 44A -

Injunctions prohibitory and mandatory concerning the obligations of White & Case under the Confidentiality Agreement.

With that agreement having long since run its course these are now irrelevant.

45 - Damages for breach of the non-solicitation agreement and/or Confidentiality Agreement.

Based on my findings on this issue, this claim is dismissed.

45A -

Damages including exemplary damages for procuring or inducing or encouraging or facilitating breach of equitable obligations or contractual duties owed to Deacons.

I shall deal separately with the issue of exemplary damages. By my findings that Messrs Fairbairn and Cairns were so induced in the breach of their contractual obligations as to cause damage to Deacons liability has been established; this claim is made out, the damages to be assessed.

45B - Damages including exemplary damages for interfering with Deacons' business by unlawful means.

The claim brought in this genus tort has also been made out; damages to be assessed; I deal separately with the issue of exemplary damages.

46 - Interest.

This will be dealt with in the assessment trial.

47 - Costs.

I shall hear argument on costs.

231. The second series of prayers for relief are against Messrs Fairbairn and Cairns.

232. The following are asked for and I now deal with:-

48 - Interim injunctions restraining acting for Deacons' clients.

These were not pursued.

49 -	Final injunctions restraining them from being engaged by either of White & Case until particular dates as set out. As with the injunctions asked for at 42B and for the same reasons these fall away.

50 - Damages including exemplary damages for breaches of contract.

Leaving aside for the moment the exemplary damages sought, this claim has been made out variously as against the two; damages to be assessed.

51 -	An account for profits and/or equitable compensation for breach of equitable obligations. I shall deal with this topic separately.

52 - Damages for procuring a breach of the non-solicitation provision.

There having been no breach this falls away.

53 - Damages including exemplary damages for interfering with Deacons' business by unlawful means.

There having been no claim made out under the head of Common Design I make no order under this head.

54 - Interest.

This shall be dealt with at the trial for assessment.

55 - Costs.

I shall hear argument on costs.

233. I come next to the injunctive relief sought at 42C.

The Injunction 42C

234. As already stated this is sought to restrain White & Case from representing Deacons' clients until a date to be determined. The basis on which it is sought, as Mr McGregor submits, is threefold:-

(a)	had there been full and proper discovery at the outset, Deacons would have pursued and been granted interlocutory injunctions;
(b)	the 'speedy trial' as ruled by Ma J did not eventuate, robbing Deacons of the opportunity to seek injunctive relief as originally conceived;
(c)	during the course of the delayed discovery and trial evidence emerged:
	(i)	that Fairbairn and Cairns were actively assisting White & Case in August 2002 in capturing Deacons' clients;
	(ii)	that the undertaking given by White & Case to ensure that restricted covenants binding on the recruits were observed was disobeyed in at least one significant case, being S K Global;
	(iii)	White & Case's contention that firms of accountants, such as KPMG, were not clients; that only individual accountants appointed as office bearers could be treated as such; this against documents such as the Business Plan and 29 April memorandum which identified the client to be the firm KPMG.

235. What is contended by Deacons, as argued by Mr McGregor, is that White & Case achieved, at Deacons' cost, illegitimate competitive advantage by its pursuit of and capture of Deacons' clients as highlighted above. This can be offset if not cancelled out by the use of injunctive relief to run for such period as the court determines the illegitimate competitive advantage will last.

236. How long will this be for?

237. Mr McGregor quoted from evidence adduced by Mr Fairbairn in the arbitration proceedings dealing with the legitimacy of his restrictive covenant. He had said in evidence in that matter that the loss of business caused by a transfer of clientele might last 'one to four years'. Before me he adjusted this estimate; 'it certainly could be up to the duration of a year, but it is not four years'.

238. Mr McGregor submitted that his earlier, unguarded estimate was more appropriate; but I should take a conservative median, say two years, and injunct White & Case as asked for, for that period, from either the date of the resignation of the BRI team (11 June 2002) the date of the White & Case undertaking to the court (10 September 2002) or the date of this judgment. However, the injunction is not sought to attach to existing work presently being undertaken, a course which it is accepted would be contrary to the interests of the clients. Thus it is intended to bite only on new work and only on the five Deacons' former members serving former clients of Deacons.

239. I heard evidence on the issue of the alleged breach of the undertaking. Disclosed during the trial were time sheets which revealed that Messrs Leifer and Darton had, during the currency of their restrictive covenants, undoubtedly spent time on the S K Global file which, as I have said, was one of those which, mid-transaction, moved from Deacons to White & Case HK. The client was said to be SCB; thus on the face of it there were breaches. But evidence was adduced in defence that the client so-called was in fact a steering committee representing a conglomerate of banks of which SCB was a member. I was told that legal advice was sought and given, to the effect that White & Case HK representing the committee did not amount to their representing SCB. I have to say I find this an extraordinary conclusion. It is apparent to me and, I should have thought, with respect to those said to have formed a contrary view, to all who had to consider it, that SCB was and remained a client as long as it was represented on the committee which after all has no separate legal status.

240. This was, thus, another cavalier approach by White & Case to its obligations to comply with the law.

241. That said, I do not believe it is appropriate to grant the injunction asked for, not because it is without merit, but because of the timing. One of the principles of this sort of relief, known as springboard relief, is that the victim may not be placed in a better position then it would otherwise be entitled to; see Universal Thermosensors Ltd v Hibben [1992] 1 WLR 840. So, it is important to get right the length of the restraint. As to what that should be, Mr McGregor made use of Mr Fairbairn's calculation. But on what basis did he come to that? And it was, to say the least, a wide spread. I do find that Deacons has made out a case, subject, I think, to a more conservative time frame being imposed. I find 2 years is too long; by how much is not material, for the following reason. I believe the appropriate starting point should be the date of resignation of the recruits; 11 June 2002. By the time this judgment sees the light of day 16 months will have passed. An injunction with less than 8 months to run would seem to achieve no more than be upsetting and would, I believe, be contrary to the public interest and, as I have said, I find a total of 2 years is too long.

242. In the circumstances and for these reasons I do not grant the injunction sought.

Exemplary Damages 45A, 45B, 50

243. Claims for exemplary damages having been made in the above prayers, it is necessary for me to rule on whether the award when made out should be enhanced under this head; see CondéNast Publication Limited v MGN Limited [1998] FSR 427.

244. It is pleaded:-

"Liability of the Defendants for exemplary damages

38R.

With respect to the matters complained of herein the First to Fourth Defendants and each of them have acted with a cynical disregard of the rights of the Plaintiff and in the hope and expectation that in the event of the Plaintiff discovering the extent of their wrongdoing that the profits that they would make would exceed any damages that they might be required to pay to the Plaintiff."

And the pleadings continue to the effect that Deacons relies on the Strategy and Action List, the Business Transition Document, the 29 April 2002 memorandum, the email of 13 June 2002 Fairbairn to Miss Sawyer (paragraph 56) and that employees of Deacons were being induced to leave and join a competitor.

245. There is a general denial by all defendants.

246. Rookes v Barnard [1964] AC 1129 is a House of Lords case which categorized circumstances when it may be appropriate for an award of exemplary damages to be made. Lord Devlin said at p. 1226 such an award is permissible where:-

"The defendant's conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff."

This has come to be referred to as Lord Devlin's second category. It was taken up in another House of Lords case by Lord Hailsham in Cassell v Co. Ltd v Broome [1972] AC 1027, who added at p. 1079 an ingredient:-

"What is necessary is that the tortuous act must be done with guilty knowledge for the motive that the chances of economic advantage outweigh the chances of economic or perhaps physical penalty."

But a third, much more recent, House of Lords decision Kuddus v Chief Constable of Leicestershire [2002] 2 AC 122, reveals that the intervening years have brought about a change of approach. Lord Slynn said that it is the behaviour giving rise to the wrong found to have been committed rather than the cause of action which has to be looked at to decide whether the facts fall into one or other of the prescribed categories. Lord Nicholls said at p. 144:-

"...The availability of exemplary damages has played a significant role in buttressing civil liberties, in claims for false imprisonment and wrongful arrest. From time to time cases do arise where awards of compensatory damages are perceived as inadequate to achieve a just result between the parties. The nature of the defendant's conduct calls for a further response from the courts. On occasion conscious wrongdoing by a defendant is so outrageous, his disregard of the plaintiff's rights so contumelious, that something more is needed to show that the law will not tolerate such behaviour. Without an award of exemplary damages, justice will not have been done. Exemplary damages, as a remedy of last resort, fill what otherwise would be a regrettable lacuna.

...

Nor, I may add, am I wholly persuaded by Lord Devlin's formulation of his second category (wrongful conduct expected to yield a benefit in excess of any compensatory award likely to be made). The law of unjust enrichment has developed apace in recent years. In so far as there may be a need to go further, the key here would seem to be the same as that already discussed: outrageous conduct on the part of the defendant. There is no obvious reason why, if exemplary damages are to be available, the profit motive should suffice but a malicious motive should not.

As I have said, difficult questions arise here. In view of the limited scope of the submissions made by the parties on this appeal, this is not the occasion for attempting to state comprehensive conclusions on these matters. For the purposes of the present appeal it is sufficient, first, to express the view that the House should now depart from its decision in Broome v Cassell Co. Ltd [1972] AC 1027, in so far as that decision confirmed the continuing existence of what has subsequently been described as the "cause of action" condition and, secondly, to note that the essence of the conduct constituting the court's discretionary jurisdiction to award exemplary damages is conduct which was an outrageous disregard of the plaintiff's rights."

247. Lord Scott, at p. 154, expressed reservations about awarding exemplary damages at all:-

" My Lords, the function of an award of damages in our civil justice system is to compensate the claimant for a wrong done to him. The wrong may consist of a breach of contract, or a tort, or an interference with some right of the claimant under public law. But whatever the wrong may consist of the award of damages should be compensatory in its intent. Measured by this fundamental principle of damages, an award of exemplary damages, the intention of which is not to compensate the victim of a wrong but to punish its perpetrator, is an anomaly.

Thus far I have been considering some of the general issues that are prompted by the present appeal. For the reasons I have outlined, I would be receptive to a submission that exemplary damages awards should no longer be available in civil proceedings. However, Mr Mansfield, counsel for the defendant, has not made that submission and, having had the advantage of reading the texts of my noble and learned friends' speeches on this appeal, it is apparent that mine is a minority view."

248. So it is apparent from these extracts that the law on exemplary damages has moved on from the views expressed by Lord Devlin nearly 40 years ago; that it is the conduct giving rise to the breach and not the cause of action that is significant, and that that conduct must be so outrageous with so contumelious a disregard of the plaintiff's rights that nothing less than an award of exemplary damage would achieve justice.

249. Finally I quote from the case British Midland Tool Limited v Midland International Tooling Limited [2003] All ER 174. Hart J concluded his judgment with the following:-

"Exemplary damages

249. The claimant seeks exemplary damages on the ground that the conduct by the defendants has been calculated by them to make a profit which may well exceed the compensation payable to BMT (the plaintiff) referring me to the following passages in the judgment of Lord Nicholls of Birkenhead delivering the majority judgment of the Privy Council in A v Bottrill, [2002] UKPC 44, 6th September 2002.

"...in the nature of things, cases satisfying the test of outrageousness will usually involve intentional wrongdoing with additionally, an element of flagrancy or cynicism or oppression or the like: something additional rendering the wrongdoing or the manner or circumstances in which it was committed particularly appalling. It is these features which make the Defendant's conduct outrageous...[para 23]"

"it is not surprising therefore that when describing conduct meet for an award of exemplary damages judges have often used adjectives or phrases primarily, or even solely, aimed at advertent conduct. These include: malicious, vindictive, high handed, wanton, wilful, arrogant, cynical, oppressive, and contumelious disregard of the plaintiffs rights. [para 25]"

250. Interesting though the discussion in that case is, I am not clear what it has to do with this one. The issue there was the extent to which in the law of New Zealand there is jurisdiction to award exemplary damages in cases of non-intentional wrongdoing. In my judgment the conduct of the defendants in this case which I have found to be unlawful does not meet the necessary criterion, however it be expressed. The Tamworth 4 did not execute their plan in the belief that it would result in a greater profit for themselves than the compensation payable to the claimant. Their principal motive was to be able to work for themselves rather than the Allen Group. Had MIT (the defendant) in fact made profits which exceeded the compensation payable to the claimant, there would have been nothing, given the nature of causes of action relied on, to stop the claimant from claiming an account of those profits. The claim for exemplary damages has plainly been conceived in a punitive spirit. If the adjectives "vindictive" and "oppressive" fit anything in this case they fit best this head of claim. I do not think that it is justified."

250. Mr McGregor took me to conduct which in his submission should give rise to the punitive award sought. That which is most compelling to his cause is the concentration of effort in March and April to ensure client loyalty to the team, being the emails, meetings, discussions, lunches; the Due Diligence; then the direction to Messrs Fairbairn and Cairns to propose how this was all to take place, from which emerged the Business Transition Document and the Strategy and Action List, and the adoption of these documents as 'the way forward'. Clause 4 under 'Tactical Considerations' (see paragraph 48) states 'Deacons could assert claims against MGF with respect to breach of fiduciary duties while a partner'. This identifies a breach, the only query being whether Deacons would sue. And at clause 11:

"If MGF and others leave together, Deacons may have a claim against MGF for not reporting the intentions of the others earlier. Query; what financial damage could Deacons claim?"

Thus is identified another breach, the query being what might the cost of that be. Under the head Outstanding Legal Questions (paragraph 49):-

"How would the issue of damages for breach of fiduciary duty be approached?..."

And the answer

"...in practice quantifying damages would be difficult..."

It is apparent from all this that White & Case and Fairbairn and Cairns were all aware of the breaches of fiduciary duty that would inevitably flow from the recruiting proceeding, yet went ahead anyway knowing the prospect of profit engendered by the movement of business to White & Case coffers outweighed the prospective cost of getting there. The 'without which, nothing', the acquisition of a substantial client base, was within reach. And there was the exchange of emails as between Messrs Crozer and Fairbairn of August 2002. Mr Crozer was cross-examined on the propriety of what was going on. I reproduce a part from the transcript:

"	Q.	Did you think that it was proper for Mr Fairbairn to send such a communication to you?
	A.	I am not an expert in these matters, but by then the H-bombs were going off, and I would have thought that all bets were off at that stage.
	Q.	Mr Crozer, you have been a lawyer since 1968, you told us.
	A.	Correct.
	Q.	Thirteen years in practice here [Hong Kong], many more years in practice in the United States. What do you mean that you are not an expert in these matters.
	A.	I am not an expert on partnership law and fiduciary duties. I practice finance.
	[Day 20 page 66 lines 3 to 15]"

251. I find this answer is disingenuous. But even if it were so, as a senior statesman of a prestigious, worldwide practice he would know who to ask, or where to look it up.

252. I have to say this all amounts to a cynical disregard for the rights of Deacons, putting profit before honour; it is below the belt. But I cannot go so far as to find that it was vindictive, or malicious, or contumelious, and I am not, objectively, filled with a sense of outrage. In the circumstances, on the authorities and specifically those that are current I find against the claim for exemplary damages; but not by much. In further support of the contention is the finding I come to next; as to whether the option of an account of profits is available to Deacons.

Remedy for Breach of Equitable Obligations 51

253. The prayer is for the alternative of an account for profits and equitable compensation. There will come a time, if I hold both remedies are available, for Deacons to make an election between these and damages; it cannot have both; see Island Records Limited v Tring International Plc [1995] 3 All ER. But that need not be until after it has had the opportunity to make an informed election. At this stage I am required to determine whether the equitable remedies are available.

254. I revert back to the findings of fact and resultant holding that Messrs Fairbairn and Cairns have been found liable by virtue of being in breach of their contractual obligations. I am satisfied however that in each case there was a breach of fiduciary duty owed by Fairbairn to his partners and Cairns to his employer. All the breaches amount on the facts to breaches of their core duties of loyalty, good faith, fidelity. Both are liable, in principle, to the equitable remedies of an account of profits or equitable compensation, as an alternative to damages.

Conclusion

255. The orders I make as to liability are as I have recorded under the previous head of Relief. Otherwise this action adjourns to a date to be fixed for costs and such directions as may be sought before trial of the assessment of damages and other relief.

256. It would be remiss to conclude without recording that I had profound assistance from Messrs McGregor QC and Chow for the plaintiff and Messrs Plowman SC and Burns for the defendants for which I thank them.

Representation:

Mr. A McGregor, QC leading Mr. A Chow, instructed by Messrs Clifford Chance, for the Plaintiff

Mr. G Plowman, SC leading Mr. A Burns, instructed by Messrs Johnson, Stokes and Master (for the 1st and 2nd Defendants), and Messrs Herbert Smith (for the 3rd and 4th Defendants)

HCA2433/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2433 OF 2002

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REASONS FOR DECISION

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INTRODUCTION

1. This is an application by the defendants for further and better particulars of the Amended Statement of Claim. The request for the particulars was served on the plaintiff's solicitors on 14 February 2003. There were altogether 65 requests. Some had been disposed of by correspondence. Some had not. By a summons dated 27 February 2003 and amended pursuant to leave granted at the hearing on 1 April 2003, the defendants sought answers to requests 3, 4, 8 to 39, 41 to 51, 53 to 54, 56 to 60, 63 to 65. At the conclusion of the hearing, I allowed the application with the exception of requests 22, 23, 27, 28, 43, 44, 63 and 64. I also gave leave to the plaintiff to supplement the particulars within 14 days after discovery and inspection has been completed. These are my reasons.

2. The background facts leading to these proceedings and the issues involved are set out in the judgment that I handed down on 13 March 2003. I do not propose to repeat them here.

THE LAW

3. Before dealing with the requests individually, it is convenient to first summarise the applicable legal principles and deal with the parties' general submissions on the law.

4. The functions of well particularised pleadings are well settled. They serve :

(a) to inform the other side of the nature of the case that they have to meet as distinguished from the mode in which that case is to be proved;

(b) to prevent the other side from being taken by surprise at the trial;

(c) to enable the other side to know with what evidence they ought to be prepared and to prepare for trial;

(d) to limit the generality of the pleadings, the claim and the evidence;

(e) to limit and define the issues to be tried, and as to which discovery is required; and

(f) to tie the hands of the party so that he cannot without leave go into any matters not included (although if the opponent omits to ask for particulars, evidence may be given which supports any material allegation in the pleadings.

See Aktieselskabet Dansk Skibsfinansiering v. Wheelock Marden [1994] 2 HKC 264, per Bokhary JA (as he then was) at pp.269E-270E.

5. These are not controversial. The debate that took place before me concerns whether further and better particulars should be ordered when the opponent contends that :

(1) the applicant knows the case pleaded against him; and

(2) the facts are within the applicant's own knowledge.

I will deal with the contentions in turn.

(1) The applicant knows the case pleaded against him

6. Mr Rogers for the plaintiff submitted that there is no question that the defendants know the case pleaded against them. Had there been any genuine doubt on their part, the particulars would and should have been sought months earlier. In this connection, he relied on Trust Securities Holdings v. Sir Robert McAlpine & Sons Ltd (1994) TLR, 21 December where the English Court of Appeal said :

"The purpose of pleadings is not to play a game at the expense of the litigants but to enable the opposing party to know the case against him. There is a tendency to forget this basic purpose and to seek particulars which are not necessary when in truth each party knows the other's case."

7. That case has since been fully reported as British Airways Pension Trustee Ltd (formerly British Airways Pension Fund Trustees Ltd) v. Sir Robert McAlpine & Sons Ltd and others (1994) 72 BLR 26. It concerned the cost of remedying a number of alleged defects in a building. The defendants applied to strike out the statement of claim and for dismissal of the action on the ground (1) that the statement of claim did not set out the remedial cost of each alleged defect and did not ascribe to each alleged defect the amount by which it contributed to the alleged diminution in value; and (2) that the plaintiffs had failed in breach of an unless order, made by consent to provide details of the allegation that the assignor of the plaintiff was liable to the plaintiff for the defects. The first instance judge allowed the application. The plaintiffs appealed although they accepted that their pleadings were not sufficiently particularised.

8. On the first ground, the English Court of Appeal held that despite the fact that the plaintiff's pleadings as to damage was embarrassing in the sense that it was open to further particularisation, it was not seriously prejudicial to the defendants who were able to know the case they had to meet and were not facing an unfair hearing. In this connection, Saville LJ said at pp.33A-34D thus :

" The judge described this part of the pleadings as embarrassing, though not sufficiently so on its own to justify striking out the claims. This conclusion is not challenged on this appeal, in the sense that it is accepted that the pleading as it stands is open to a request for further and better particulars which the plaintiffs offered to supply during the course of the hearing. The various defects alleged by the plaintiffs might not all be attributable to all the defendants, the cost of remedying the individual defects was not given and no attempt was made to ascribe to each defect the amount by which it contributed to the alleged diminution in value. At the same time I have some difficulty in seeing how the defendants could fairly be said to be seriously prejudiced by these omissions. The pleading alleges that the defects respectively attributable to McAlpine and PDP each caused the alleged diminution in value. The alleged defects themselves were set out in some detail, McAlpine and PDP had been on site for a considerable time after practical completion and so had their own means of knowledge of the alleged defects. Thus it seems to me that it can hardly be said that these defendants were in any real fashion placed in a position where they were unable to know what case they had to meet or were facing an unfair hearing. They could, in my view, each prepare to deal with the allegation that they were responsible for the defects and could each assess the cost of remedying any particular defect. They could also investigate with their own experts to what extent (if at all) any particular alleged defect or class of defects would diminish the sale value of the building. It is true that the pleading does not seek to apportion liability between the active defendants, but this is because it was the plaintiffs' case (good or bad does not matter in this context) that the defects attributable to each defendant caused the whole of the diminution in value. In any event it seems to me that the defendants themselves, if they were minded to make any offer to settle the proceedings or to pay money into court, could calculate without difficulty their respective responsibility for defects and a proportionate amount of the diminution in value (if any) attributable to those defects. The decisions to make a payment in or an offer of settlement does not depend so much on what the plaintiff is claiming as on what the defendants calculate the claim is worth.

The basic purpose of pleadings is to enable the opposing party to know what case is being made in sufficient detail to enable that party properly to prepare to answer it. To my mind it seems that in recent years there has been a tendency to forget this basic purpose and to seek particularisation even when it is not really required. This is not only costly in itself, but is calculated to lead to delay and to interlocutory battles in which the parties and the court pore over endless pages of pleadings to see whether or not some particular point has or has not been raised or answered, when in truth each party knows perfectly well what case is made by the other and is able properly to prepare to deal with it. Pleadings are not a game to be played at the expense of the litigants, nor an end in themselves, but a means to the end, and that end is to give each party a fair hearing. Each case must of course be looked at in the light of its own subject matter and circumstances. Thus general statements to the effect that global or composite claims are embarrassing and justify striking out. ... are not automatically applicable to every case. With regard to the particular pleadings in question, I remain unpersuaded that either McAlpine or PDP were put to any sort of material unfair disadvantage by the way the matter had been set out by the plaintiffs."

9. On the second ground, the English Court of Appeal held that the plaintiffs' failure to provide proper particulars of the allegation that the assignor was liable to the plaintiffs was embarrassing and the defendants were unable in this respect to know what case they would have to meet. However, that failure could not reasonably justify the order striking out the action because the failure only related to the claim asserted by the assignor; the plaintiffs had been willing to provide further particulars if necessary, and it was not a case in which it could be said that the plaintiffs' claims were fundamentally flawed in the sense that no further particulars could assist their case nor was it a case in which there had been an express refusal to provide particulars or a contumelious disregard of court orders.

10. I fully accept the proposition that pleadings are not a game to be played at the expense of litigants and that there are cases where it would be wrong to seek particulars which are not necessary when in truth each party knows the other's case. But British Airways Pension Trustee Ltd (formerly British Airways Pension Fund Trustees Ltd) does not, in my view, weaken the rigour of the fundamental requirement that pleadings must be properly particularised to enable the opposing party to know the case that he has to meet. (Indeed, in connection with the second ground of complaints raised by the defendants, the English Court of Appeal held that the pleadings were embarrassing and they were in that respect unable to know what case they had to meet.) This requirement is long established. It is a reflection of the overriding principle in our civil justice system that litigation should always be conducted fairly, openly, free from surprise, without unnecessary delay or expense and as far as possible, so as to minimise costs: see Aktieselskabet Dansk Skibsfinansiering at pp.269E-G.

11. The necessary particularity of pleadings is inevitably a matter of degree, dependent on the subject matter and circumstances of each case. A party opposing an application for particulars must demonstrate that in the circumstances of the case, the particulars sought are not necessary because the applicant already knows his case. It is not sufficient for him to simply rely on the dicta of Saville LJ quoted in paragraph 6 above. This is particularly so when he imputes fraud, negligence, or misconduct to his opponent. For it has long been established as a special rule that such allegations must be pleaded distinctly with the utmost particularity. This special rule arises in the present case.

(2) The facts are within the applicant's own knowledge

12. Mr Rogers submitted that most of the requests sought information solely and peculiarly within the knowledge of the defendants. In short, the relevant paragraphs of the amended statement of claim are based entirely on documents disclosed by the 1st and 2nd defendants as part of their original discovery. Mr Smith, SC, for the defendants, relied on paragraph 18/12/61 of the Hong Kong Civil Procedure, 2002, Vol.1 at p.295 :

"It is sometimes urged as an objection to an application for particulars that the applicant must know the true facts of the case better than his opponent (Harbord v Monk (1878) 38 L.T. 411; Keogh v Incorporated Dental Hospital of Ireland [1910] 2 Ir.R. 166, CA). But this objection is misconceived: each party is entitled to know the outline of the case that his adversary is going to make against him, and to bind him down to a definite story."

Mr Smith argued that the objection of the plaintiff is thus not valid.

13. In reply, Mr Rogers considered the two cases referred to in the above commentary in some length. He submitted that the above commentary is on its face not supported the two authorities. But he did not argue that the commentary is wrong if and insofar as it is simply saying that a party cannot oppose an application for particulars simply on the basis that the applicant "knows the true facts better than his opponent".

14. I have already considered the two authorities carefully. But I do not propose to deal with them in detail. In my view, the starting point is always the fundamental principles set out in paragraph 4 above. Under those principles, each party is entitled to know the case of his adversary and tie his hands accordingly. The above commentary in the Hong Kong Civil Procedure in my view represents the correct position and should be followed.

15. Mr Rogers submitted that the plaintiff does not have, or could obtain, knowledge of the particulars sought. To the contrary, the plaintiff's pleading is fundamentally that there was a common design between the defendants to acquire the business of its insolvency group or a substantial tranche thereof. It is unsurprising from the nature of this claim that the plaintiff is not privy to the mechanical detail of what occurred between the defendants. Instead, the plaintiff's claim against the 3rd and 4th defendants is primarily based on documents discovered by the 1st and 2nd defendants in August 2002. And the plaintiff will be asking the court to draw the necessary inferences from the documents.

16. In my view, if that is the plaintiff's position, it is not sufficient simply to say that the defendants know what they had done better than the plaintiff. The plaintiff should be able to give the best particulars which it can at present by making use of the documents discovered so far. If necessary, the plaintiff can supplement them within a reasonable time, say 14 days, after discovery and inspection has been completed.

REQUESTS

17. With the above in mind, I now turn to consider the individual requests. They can be put under three main groups. The first group consists of requests 3, 4, 8, 13 to 15, 16 to 19, 24 to 26, 29 to 30, 31, 32 to 34, 42, 45 to 48, 49, 56 to 57, 59 to 60 and 65. Mr Smith took the point that Mr Rogers has already provided answers to these requests in his written submissions. I have considered Mr Rogers's submissions. I agree with Mr Smith. The answers must however be provided formally in an answer. I therefore allowed the application in respect of these requests.

18. The second group consists of requests 22, 23, 27, 28, 43, 44, 63 and 65. They all relate to the loss and damages that the plaintiff has alleged suffered. Mr Rogers submitted that as a matter of law it is sufficient for the plaintiff to establish the circumstances form which damage can be inferred. There is no requirement on a trial of liability only for it to plead and particularise special damages. The court can and should infer that the plaintiff has suffered loss and damage from the fact that it has lost staff and client. The Amended Statement of Claim is thus more than adequate for the purpose of pleading that damage was suffered in fact. I agree. As I understand Mr Smith, he did not seriously dispute Mr Rogers's submissions. In fact, given the order of spilt trial of liability and damages, these requests are at the moment premature. Accordingly, the application for these requests was refused.

19. The third group consists of requests 20-21, 35-39, 41, 50-51 and 58. They are considered below.

Of: 'in consultation with, and with the agreement of the Third and Fourth Defendants ... the First and Second Defendants met representatives of two of the Plaintiff's clients to secure agreement of the clients to support fully the move of the Recruits and the transfer of instructions from the clients from the Plaintiff to the First and Second Defendants.'

Request

20. Please provide full particulars of all facts and matters relied upon in support of the assertion that the meetings referred to were for the purpose of securing the agreement of the Plaintiff's clients to support fully:

(1) The move of the 'Recruits'; and

(2) The transfer of instructions from the clients from the Plaintiff to the First and Second Defendants.

21. Please provide full particulars of all facts and matters relied upon in support of the allegation that each of the Third and Fourth Defendant agreed that each of the First and Second Defendant should meet with two of the Plaintiff's clients for the purpose pleaded in paragraph 34.7A of the Amended Statement of Claim:

(1) Insofar as such agreement was made orally please provide full particulars of when, where and between whom the alleged agreement was made providing full particulars of the import of the words used.

(2) Insofar as the alleged agreement was made or evidenced in writing please identify and produce copies of all relevant documents which are in the possession, custody or power of the Plaintiff."

21. No particulars have been given in support of the allegation that the purpose of the meetings was to secure the agreement of the plaintiff's clients to the transfer of instructions from the plaintiff to the 1st and 2nd defendants. Mr Rogers submitted that the defendants know the case against them because of the pleading in paragraph 48(4) of the Defence of the 3rd and 4th defendants and certain paragraphs in the statements of Mr Fairbairn and Mr Cairns. However, as rightly pointed out by Mr Smith, what is pleaded and stated in evidence by these defendants is that the 1st and 2nd defendants sought and obtained the permission of the 3rd and 4th defendants to take up references from clients, and that the 1st and 2nd defendants met with representatives of two clients for this purpose. The plaintiff's allegation that the meetings were for the purpose of seeking the clients' approval to transfer instructions to the plaintiff is denied. But it should not prevent them from obtaining the particulars sought. In my view, according to the special rule referred to in paragraph 11 above, the particulars sought must be given.

Of: 'The Third and Fourth Defendant ... were engaged in procuring or inducing or encouraging or facilitating employees of the Plaintiff to leave their employments to join a competitor ...'

Request

35. In relation to each of the Third and Fourth Defendant please provide full particulars of how and when it is alleged that they were engaged in procuring employees of the Plaintiff to leave their employment to join a competitor.

36. In relation to each of the Third and Fourth Defendant please provide full particulars of how and when it is alleged that they were engaged in inducing employees of the Plaintiff to leave their employment to join a competitor.

37. In relation to each of the Third and Fourth Defendant please provide full particulars of how and when it is alleged that they were engaged in encouraging employees of the Plaintiff to leave their employment to join a competitor.

38. In relation to each of the Third and Fourth Defendant please provide full particulars of how and when it is alleged that they were engaged in facilitating employees of the Plaintiff to leave their employment to join a competitor.

39. Please confirm that 'employees' is intended only to be a reference to Messrs Darton, Leifer and McDonald. If other employees of the Plaintiff are intended to be referred to, please identify them.

Under Paragraph 38I(b)

Of: '...the Third Defendant and the Fourth Defendant prepared a written business plan for the First and Second Defendants containing information confidential to the Plaintiff...'"

23. The allegations in paragraph 38I(a) of the Amended Statement of Claim are serious allegations. They are all denied by Mr Fairbairn and Mr Cairns in their witness statements. Mr Rogers submitted that the defendants know the case they have to meet because they have addressed these allegations in their witness statements by denying the same. I am unable to accept this submission. I agree with Mr Smith that if the plaintiff is saying that it relies on all (or any) of the facts and matters to be found in paragraphs 34, 37 & 40-41 of Mr Fairbairn's statement and paragraphs 28, 31 & 33-36 of Mr Cairns' statement, then this should be pleaded and/or properly explained.

Of: 'The Third Defendant and the Fourth Defendant contacted clients of the Plaintiff for the purpose of ascertaining whether those clients would transfer their business to the Second Defendant in the event of the Recruits joining the Second Defendant and thereby solicited work on behalf of the Second Defendant ...'

Request

41. In relation to each of the Third and Fourth Defendant please provide full particulars of :

(1) The identity of the clients (and representatives of those clients) of the Plaintiff which it is alleged were contacted by the Third and Fourth Defendants;

(2) How such clients were contacted:

(i) Insofar as the said contact was made orally, please identify where, how and between whom such contact was made giving the import of the words used.

(ii) Insofar as the said contact was made or evidenced in writing, please identify and produce copies of all relevant documents which are in the possession, custody or power of the Plaintiff.

(3) All facts and matters relied upon in support of the allegation that such contact was for the purpose of ascertaining whether those clients would transfer their business from the Plaintiff to the Second Defendants."

25. These are proper requests and must be answered. The plaintiff is under a duty to plead its case with utmost particularity : see paragraph 11 above.

Of: 'induced and encouraged the Third and Fourth Defendants to negotiate with them terms for the recruitment of not only the Third and Fourth Defendants themselves but the team of Recruits ...'

Request

50. In relation to each of the First and Second Defendant please provide full particulars of how and when it is alleged that they induced each of the Third and Fourth Defendant to negotiate with them terms for the recruitment of themselves and the other 'Recruits'.

51. In relation to each of the First and Second Defendant please provide full particulars of how and when it is alleged that they encouraged each of the Third and Fourth Defendant to negotiate with them terms for the recruitment of themselves and the other 'Recruits'."

27. Mr Rogers submitted that the Court will be asked to draw inferences from specific documents. However, I agree with Mr Smith that inferences are drawn from facts and it is incumbent on the plaintiff to plead the facts on which it relies. If a document is relied on, the effect of the document must be pleaded.

Of: 'themselves met with two (2) clients of the Plaintiff for the purpose of securing the agreement of the clients to support fully the move of the recruits [sic] and the transfer of instructions from the clients from the Plaintiff to the First and Second Defendants.'

Request

58. Please provide full particulars of all facts and matters relied upon in support of the assertion that the meeting or meetings referred to were for the purpose of securing the agreement of the Plaintiff's clients to support fully :

(1) The move of the 'Recruits'; and

(2) The transfer of instructions from the clients from the Plaintiff to the First and Second Defendants."

29. Again, by reason of the special rule mentioned in paragraph 11 above, these requests are proper and must be answered.

30. For the above reasons, I made the order as stated in paragraph 1 above.

Representation:

Mr Rogers of Messrs Clifford Chance, for the Plaintiff

Mr Clifford Smith, SC, instructed by Messrs Johnson, Stokes & Master,for the 1st and 2nd Defendants

Mr Clifford Smith, SC, instructed by Messrs Herbert Smith,for the 3rd and 4th Defendants

HCA2433/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2433 OF 2002

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J U D G M E N T

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INTRODUCTION

1. The plaintiff is a firm of practising solicitors in Hong Kong. The 1st defendant is an international law firm based in New York. The 2nd defendant is its connected local firm operating here. The 3rd and 4th defendants were at all material times respectively a capital and salaried partner of the plaintiff. In about May 1999, the plaintiff and the 1st and 2nd defendants began merger discussions, which subsequently fell through. On 11 June 2002, the 3rd and 4th defendants, together with some other colleagues, tendered to the plaintiff notices of resignation. After the expiry of the notices, the 3rd and 4th defendants joined the 2nd defendant.

2. On 24 June 2002, the plaintiff commenced the present proceedings against the 1st and 2nd defendants. The 3rd and 4th defendants were joined in the proceedings shortly after they commenced employment with the 2nd defendant. Pursuant to the order of Ma J (as he then was) dated 29 October 2002, there will be a spilt trial of the action as between liability and damages. The trial of liability will take place in June this year.

APPLICATIONS

3. There are three summonses on discovery but in substance two applications before me. The plaintiff, by its two summonses dated 6 January and 13 February 2003, seeks to limit discovery so as to exclude any documents relating to matters raised or referred to in paragraphs 9 to 16 and 26(9) of the defence of the 3rd and 4th defendants ("the Defence"). The 3rd and 4th defendants, on the other hand, by its summons dated 11 February 2003, seeks further discovery of documents referred to in the three schedules attached to the summons. As will be seen in a moment, the applications relate to and have bearing on each other in certain aspects.

4. The debate that took place before me concerned mainly on the relevance or otherwise of various matters raised in the pleadings. It is therefore necessary to summarise the parties' respective case in order to understand the nature of the applications. I will begin with the plaintiff's claims.

THE PLAINTIFF'S CLAIMS

5. At all material times, the plaintiff had about 24 capital partners, over 120 legally qualified employees (including about 20 salaried partners) and over 400 supporting staff members. It was divided into a number of departments, one of which was called the "Finance and Insolvency Department". That department included a finance group and an insolvency group. The insolvency group was further divided into two sub-groups, one dealing with contentious insolvency and the other dealing with corporate restructuring. The 3rd and 4th defendants, together with two associates, Mr Robin Darton and Mr Neil McDonald, and one or two junior associates, comprised the corporate restructuring sub-group ("the Corporate Restructuring Group"). Mr Jeremy Leifer was a salaried partner of the plaintiff, working in its Commercial Department. In the course of his practice, he regularly worked with members of the Corporate Restructuring Group.

6. The 3rd defendant's partnership agreement with the plaintiff required the 3rd defendant to, inter alia :

(1) devote his whole time and attention to the practice of the plaintiff and carry on and manage the business of the plaintiff for the common benefit of the partners to the utmost of his skill and ability;

(2) be just and faithful to the other partners;

(3) give to the other partners a just and faithful account of all transactions relating to the firm; and

(4) disclose to the firm all transactions or dealings entered into or effected by him involving any client of the firm.

The plaintiff further alleged that the 3rd defendant owed to his fellow partners equitable obligations to display the utmost good faith and to render true accounts and full information of matters affecting the partnership.

7. Each of the service agreements between the plaintiff and the 4th defendant, Mr Darton, Mr McDonald, and Mr Leifer required each of them, inter alia :

(1) to devote his whole time and attention to the performance of his duties and serve the plaintiff faithfully and to the best of his abilities;

(2) not to take or engage in any other employment or business without the prior consent of the plaintiff; and

(3) to keep confidential and not to divulge to any other person any confidential information, including any matter concerning or touching on the business or internal affairs of the plaintiff.

The plaintiff further alleged that each of them owed to the plaintiff an implied contractual duty to serve the plaintiff with good faith and fidelity.

8. Between May 1999 and November 2001, the plaintiff and the 1st and 2nd defendants were engaged in discussions for a proposed merger of their practices. In connection with those discussions, the parties entered into a confidentiality agreement, which provided, essentially, for the prohibition of any use of "Confidential Material" provided by each party to the other during the course of the merger discussions except for the purpose of evaluating the proposed merger ("Confidential Agreement"). In addition, an agreement was reached, as evidenced by an exchange of letters dated 20 May 1999 and 31 May 1999, prohibiting the solicitation by either party of the other party's lawyers during the time when the merger discussions were on going and for a further period of 12 months after the cessation of such discussions. In the plaintiff's letter of 20 May 1999, the prohibition was stated in the following terms :

"... each firm undertakes not to solicit any lawyer from the other firm during any merger discussions between our respective firms and for a period of 12 months after those discussions come to an end (should there be no agreement to merge)."

9. It is the plaintiff's case that 1st and 2nd defendants effectively agreed not to :

"... whether directly or indirectly by themselves, their employees or agents, offer to take into partnership or employment any lawyer employed by or in partnership with [the plaintiff] or enter into any negotiations with or offer any inducements to such lawyer for such purposes during the merger discussions and for the period of 12 months following the end of the merger process if no merger process if no merger resulted therefrom."

10. The prohibition agreement has been figuratively referred to as "the hands off agreement". The 1st and 2nd defendants' case is that the hands off agreement is limited to the following :

"... each firm undertook not to approach any lawyer from the other firm with a view to enticing such lawyer to join it during any merger discussions between the plaintiff and the 2nd defendant, nor to do so during a period of 12 months after such merger discussions came to an end."

11. During the course of the merger discussions and in reliance on the Confidentiality Agreement and/or the hands off agreement, the plaintiff supplied to the 1st and 2nd defendants confidential and sensitive business information including its financial performance and individual practice areas, its personnel, a profile of its partners and consultants, a detailed list of its most significant clients and details of the profitability of the plaintiff's practice areas. On 11 November 2001, the plaintiff decided to cease further discussion with the 1st and 2nd defendants. The plaintiff's decision was notified to the 1st and 2nd defendants in January 2002.

12. Whilst the merger discussions were still going on, between 1 February 2001 and 9 January 2002, the 1st and 2nd defendants engaged the services a firm of recruitment agent, Robertson Smart, for the purpose of introducing to them practicing lawyers in Hong Kong with certain specialties whom they might seek to employ or engage. It is the plaintiff's case that Robertson Smart was acting at all material times as agent of the 1st and 2nd defendants in approaching lawyers for the aforesaid purpose.

13. On or about 9 January 2002, Robertson Smart informed the 1st and 2nd defendants that they had approached a restructuring/insolvency team of lawyers of the plaintiff who might be interested in joining the 2nd defendant. Thereafter, between January and June 2002, the 1st and 2nd defendants entered into negotiations with the 3rd and 4th defendants, Mr Darton, Mr McDonald and Mr Leifer, which ultimately led to them being offered to join the 1st and 2nd defendants as contractual equity partners (in the cases of the 3rd and 4th defendants) or salaried partners (in the cases of Mr Darton, Mr McDonald and Mr Leifer). On 11 June 2002, they all tendered to the plaintiff notices of their resignation. The 3rd and 4th defendants have since joined the 1st and 2nd defendants as contractual equity partners, and Mr Darton, Mr McDonald and Mr Leifer have since commenced employment with the 1st and 2nd defendants.

14. It is the plaintiff's case that 1st and 2nd defendants acted in breach of the hands off agreement by entering into negotiations with the 3rd and 4th defendants, Mr Darton, Mr McDonald and Mr Leifer and/or offering inducements to them to join the 1st and 2nd defendants. Further, the 3rd and 4th defendants, with knowledge of the hands off agreement, pursued negotiations (on behalf of themselves and/or on behalf of Mr Darton, Mr McDonald and Mr Leifer) with the 1st and 2nd defendants leading to their engagement by them, thereby procured their breaches of the hands off agreement.

15. The plaintiff further alleged that the 3rd and 4th defendants, by (i) procuring or inducing or encouraging or facilitating employees of the plaintiff to leave their employments to join a competitor and/or (ii) preparing a written business plan for the 1st and 2nd defendants using confidential business information of the plaintiff and/or (iii) contacting clients of the plaintiff for the purpose of ascertaining whether they would transfer their business to the 2nd defendant and thereby soliciting work on behalf of the 2nd defendant, acted in breach of their respective contractual (express or implied) and/or equitable obligations to the plaintiff. It is also the plaintiff's case that the 1st to 4th defendants unlawfully interfered with the plaintiff's business by acquiring (or seeking to acquire) the business of the plaintiff's clients by unlawful means (including breaches of contracts and procuring breaches of contracts and equitable obligations).

16. The plaintiff therefore claimed against the 3rd and 4th defendants for injunctions, damages and exemplary damages.

MATTERS RAISED IN THE DEFENCE

17. Before answering the substantive allegations raised in the Re-amended Statement of Claim, the 3rd and 4th defendants pleaded in paragraphs 9 to 16 of the Defence under the heading "Background to the 3rd and 4th Defendants' decisions to resign" the following matters. The partners owed to each other duties including the duty to devote their whole time and attention to the practice of the plaintiff and to carry on and manage the same for the common benefit of the partners to the utmost of their skill and ability, the duty to be just and faithful, the equitable obligation in all their dealings and transactions to the partnership to display the utmost good faith. Certain partners failed to act for the common benefit of the partners or to be just and faithful to other partners, as a result of which, the Insolvency Department and the 3rd and 4th defendants were placed at a disadvantage as compared with other departments and partners. Such grievances were the subject of repeated complaints by the 3rd and 4th defendants. The 3rd and 4th defendants complained of a further grievance related to the blocking of Mr Darton's promotion to partnership for reasons unconnected with merit but related to inter-departmental issues, or issues between partners. All the grievances had been repeatedly raised and discussed with senior and other partners. By November 2001, the plaintiff knew that the 3rd defendant, the 4th defendant and Mr Darton were so dissatisfied that each had independently formed the intention of leaving. By December 2001, the plaintiff was aware that Mr McDonald would also leave if other did and by January, the plaintiff knew that Mr Leifer would do the same.

18. In addressing the plaintiff's substantive allegations, the 3rd and 4th defendants put in issue the following matters :

(1) whether Robertson Smart was acting as agent for the 1st and 2nd defendants in approaching the 3rd and 4th defendants with a view to possible recruitment by the 1st and 2nd defendants;

(2) the 3rd and 4th defendants' knowledge or lack of knowledge of the merger discussions;

(3) whether the 1st defendant was a party to the hands off agreement;

(4) the width and enforceability of the hands off agreement; and

(5) the extent of the 3rd and 4th defendants' knowledge of the Confidentiality Agreement and hands off agreement;

(6) whether the plaintiff had a serious intention to pursue the merger discussions with the 1st and 2nd defendants and whether the plaintiff was capable of a merger with the 1st and 2nd defendants;

(7) whether the 1st and 2nd defendants breached the hands off agreement in entering into negotiations with the 3rd and 4th defendants, Mr Darton, Mr McDonald and Mr Leifer and ultimately taking them as contractual equity or salaried partners;

(8) whether the 3rd and 4th defendants procured the 1st and 2nd defendants' breaches of the hands off agreement;

(9) whether the 3rd and 4th defendants acted in breach of express/implied contractual duties or equitable obligations to the plaintiff;

(10) whether the 1st and 2nd defendants procured breaches of express//implied contractual duties or equitable obligations to the plaintiff; and

(11) whether the 3rd and 4th defendants are liable for unlawful interference with the business of the plaintiff.

The 3rd defendant raised a counterclaim which is, for present purposes, immaterial.

THE PLAINTIFF'S APPLICATION

19. The plaintiff seeks to limit discovery on the ground that the matters pleaded in paragraphs 9 to 16 and 26(9) of the Defence are irrelevant. Mr Chow, counsel for the plaintiff, first addressed the point about jurisdiction. He submitted that Order 24, rule 2(5)(a), Rules of the High Court, under which the plaintiff's application is made, empowers the court to limit discovery on the ground of irrelevance. That particular rule provides :

"(5) On the application of any party required by this rule to make discovery of documents, the court may -

(a) order that the parties to the action or any of them shall make discovery under paragraph (1) of such documents or classes of documents only, or as to such only of the matters in question, as may be specified in the order; or

(b) ...

and the Court shall make such an order if and so far as it is of opinion that discovery is not necessary either for disposing fairly of the action or for saving costs."

20. Mr Chow next relied on the proposition that relevance, the touchstone of discovery, is in the first instance, determined by reference to the pleadings but the relevance of an issue cannot be dictated by a party unilaterally placing it in his pleadings. Even if the opposing party had not applied to strike out the irrelevant allegation, he could take the point on his opponent's application for specific discovery that the allegation was irrelevant to the subject matter of the action. In this connection, counsel derived support from Allington Investments Corp. & Others v. First Pacific Bancshares Holdings Ltd & Another [1995] 2 HKC 139, CA, where Jerome Chan J said at pp.144G-145B thus :

"With respect, the learned deputy judge fell into error when he held the view that the relevance of an issue can be dictated by a party unilaterally simply by placing it in his pleadings. Even if the opposing party has failed to apply to strike out an irrelevant allegation in the pleadings of the other side, he is not barred from taking the point in an application for specific discovery that the allegation made in the pleadings is irrelevant to the subject matter of the action and ought to be disregarded for the purpose of discovery. The court is certainly not bound to take account of any immaterial or irrelevant averment of fact improperly inserted into the pleadings by a party. Otherwise, the court will become helpless and innocent litigants will be held to ransom. An abuse of the discovery process in this manner not only frustrates the legitimate objectives of the judicial process, it will bring the administration of justice into disrepute. A denial, or an implied joinder on pleadings, by the opposing party per se is not sufficient to bring relevance to an otherwise wholly irrelevant allegation. The relevance of an issue, or of a document, is dependent on its substance and contents in the light of the subject matter of the trial; and not simply on its mere presence in pleadings or the existence of a denial of it by a party."

21. As I understand him, Mr Smith, SC, counsel for the 3rd and 4th defendants, did not take any issue regarding the court's jurisdiction to limit discovery under the rules or the above proposition on relevance.

22. Mr Chow argued that paragraphs 9 to 16 of the Defence in substance pleaded that the 3rd and 4th defendants together with others decided to leave the plaintiff because they were disenchanted with the mindset of certain partners, with the plaintiff's business strategy, and with disharmony amongst certain partners and that the plaintiff was made aware of their concerns and their subsequent decision to leave. He contended that the underlying reasons why they chose to leave are irrelevant to the matters in dispute. They were entitled to leave after serving the requisite notice, whatever their reasons for doing so might have been. What are in issue are whether the 3rd and 4th defendants acted in breach of their contractual or equitable obligations owed to the plaintiff; whether they procured breaches of contract on the part of the 1st and 2nd defendants; and whether they unlawfully interfered with the plaintiff's business. They had no right to do any of the matters complained of even if they had good reasons, as alleged, in leaving the plaintiff. Thus, the reasons why they and others left should not be matters calling for determination by the court at trial. They are irrelevant and discovery should not be allowed.

23. Mr Smith, on the other hand, submitted that the matters pleaded in paragraphs 9 to 16 of the Defence are directly relevant to two main issues arising from the pleadings. The first point relates to the effect of paragraphs 38N, 38O and 38Q of the Re-amended Statement of Claim. Those paragraphs are found in the section entitled "Interference by the First to Fourth Defendants with the Plaintiff's business by unlawful means". They read :

"38N. In the premises, [the 1st and 2nd defendants] entered into a common design, with at least [the 3rd and 4th defendants], to acquire the business of the Plaintiff's insolvency Practice Group or a substantial tranche thereof and to employ for such purpose unlawful means namely the breaches of equitable and contractual obligations referred to at paragraphs 38.1 - 38F above and/or the inducement or procurement or encouragement or facilitation of such breaches referred to at paragraph 38J above.

38O. Without prejudice to the generality of the foregoing, in breach of confidence, [the 1st and 2nd defendants] and [3rd and 4th defendants] made use of the confidential information of the Plaintiff specified in paragraph 38I above for the purposes of the said common design.

38P. ...

38Q. The [1st and 2nd defendants] and [3rd and 4th defendants] threaten and intend unless restrained by the Court to carry out the purpose of the common design and thereby cause to the Plaintiff substantial loss and damage of its business."

24. The cause of action pleaded and relied on by the plaintiff in these paragraphs is the economic tort of unlawful interference. However, Mr Smith argued that although the plaintiff had not used the exact wording, the matters pleaded in the above paragraphs supported a plea of conspiracy to acquire the plaintiff's insolvency practice by unlawful means. He referred to the following propositions relating to the tort of conspiracy in Clerk & Lindsell on Torts (18th edn) at paragraphs 21-116 to 24-124 :

"1. A conspiracy consists in the agreement of two or more to do an unlawful act, or to do a lawful act by unlawful means.

2. The tort of conspiracy therefore takes two forms: conspiracy to use unlawful means, and conspiracy to injure. The latter does, but the former does not, require a predominant purpose to injure. Liability for conspiracy to injury where the acts would without combination be lawful, forms a qualification to the general rule that the mere agreement of many persons to act in concert cannot make the act of any one or more wrongful, if it would not be wrongful when done by each alone independently.

3. The tort requires an agreement, combination, understanding, or concert to injure, involving two or more persons. Of the various words used to describe a conspiracy, 'combination' has been preferred on the ground that 'agreement' might be thought to require some agreement of a contractual kind, whereas all that is needed is a combination and common intention.

4. On the point when a party became a party to the conspiracy, the question is whether a particular defendant, having regard to his knowledge, utterances and actions, was sufficiently a party to the combination and the common design. It would appear that the question whether a person is a party to a combination constituting a conspiracy is essentially the same as whether he is liable as a joint tortfeasor in procuring a wrong, by reason of a common design.

5. In judgments involving combinations alleged to be tortuous conspiracies by reason of unlawful means it was usually suggested that the act need do no more than be deliberate and have the effect of injuring the plaintiff."

25. In order to rebut the allegation that the 3rd and 4th defendants conspired or combined with others to acquire the plaintiff's insolvency practice group, Mr Smith submitted, it is both relevant and necessary for them to plead and prove the matters set out in paragraphs 9 to 16 of the Defence, which show the reasons why they, as well as the other individuals referred to, decided to leave the plaintiff.

26. It is trite that the same facts or the same transaction or event may give rise to more than one effective cause of action: see Halsbury's Laws of England, Vol.37, para.18 at p.24. The short answer to Mr Smith's submission is that the plaintiff is not suing on the tort of conspiracy. The tort pleaded is unlawful interference, which remains a separate and distinct cause of action from conspiracy although the two may have some features in common. The 3rd and 4th defendants are not permissible, in my view, to say that it is a plea of conspiracy in order to attach relevance to the matters pleaded in paragraphs 9 to 16 of the Defence. In any event and perhaps more importantly, those matters are simply not relevant to any of the causes of actions pleaded by the plaintiff. Those matters explained why the 3rd and 4th defendants and other individuals concerned left the plaintiff. They were entitled to do so after serving notices. Their resignations could not and did not give rise to any matters the plaintiff now complains of or indeed any causes of action. Viewed thus, the matters pleaded in paragraphs 9 to 16 of the Defence are irrelevant. If on the pleaded case, those matters are irrelevant, then I fail to see how they can become relevant on the pretext that the same pleaded case is in substance a plea of conspiracy. There is no suggestion that a plea of conspiracy per se will admit a wider discovery.

27. The second point taken by Mr Smith concerns the plea of exemplary damages. Paragraph 38R of the Re-amended Statement of Claim alleged that 3rd and 4th defendants acted with cynical disregard for the plaintiff's rights in the hope of making profits that would exceed any damages that might be payable, and claimed exemplary damages. Mr Smith submitted that in order to defend themselves against the allegation, the 3rd and 4th defendants ought to be allowed to plead and prove the various matters referred to in paragraphs 9 to 16 of the Defence. The formation of grievances and the grounds for being aggrieved; the repeated communication to the plaintiff of the grievances, and the communication of the intention to leave, are all highly relevant to the allegation that they acted in cynical disregard of the plaintiff's rights. He further submitted that the court would also consider the plaintiff's conduct in deciding whether to award exemplary damages. If the court concludes that their behaviour was caused or contributed to by the plaintiff's conduct, this might reduce or eliminate the exemplary damages. To support his contentions, Mr Smith referred to Winfield & Jolowicz on Tort (16th edn) at p.753; McGregor on Damages (16th edn), 4th Supplement at para.465 and Thompson v. Commissioner of Police [1998] QB 498 at 517D. He submitted that the court has to decide if the plaintiff is entitled to exemplary damages at the trial on liability. Assessment of such damages, if so ordered, will then be carried out later at the trial on damages. The witnesses will have to be cross-examined on this issue at the trial on liability. This means discovery on this and the related issues cannot be postponed. Accordingly, the 3rd and 4th defendants are entitled to discovery on those matters pleaded in paragraphs 9 to 16 of the Defence now.

28. This line of submissions presupposes that all or some of the plaintiff's causes of action are made out and the 3rd and 4th defendants are thereby liable for damages. As I have already demonstrated, the matters pleaded in paragraphs 9 to 16 of the Defence are not relevant to any of the causes of action or defence pertaining thereto. They might cause or contribute to the resignation and subsequent departure of the individuals concerned, but not the breaches or misconduct on the part of the 3rd and 4th defendants complained of. I do not find them relevant to the question whether the defendants, as alleged, acted in cynical disregard of the plaintiff's rights in the hope of making profits that would exceed any damages that might be payable so that exemplary damages should be awarded.

29. I next consider paragraph 26(9) of the Defence. Mr Smith argued that that sub-paragraph is concerned with the extent to which the plaintiff has a legitimate interest in imposing restrictions on the right of the 1st and 2nd defendants to recruit from within the ranks of the plaintiff. Paragraph 26(9) pleads that in determining the extent of any such interest it will be necessary to take into account the plaintiff's own aggressive recruitment policy/tactics. In paragraph 8 of the Reply, the plaintiff replied to this plea, denying in general that the plaintiff's recruitment differs from the norm, and specifically challenging the example of aggressive recruiting cited in paragraph 26(9) of the Defence and denying that the plaintiff acted improperly with regard to proposed recruitment of Ms Peggy Cheung. Given that the plaintiff's rather lengthy plea, it is difficult to see why discovery should be refused in relation to it.

30. Mr Chow pointed out that no allegation is made as to the circumstances in which the plaintiff obtained that alleged similar information. It is also not clear what particular transactions the 3rd and 4th defendants were referring to, except in respect of one specific example relating to Ms Peggy Cheung. Mr Chow then submitted that irrespective of whether the allegation is true, the plaintiff's recruitment of lawyers over the last five years has no bearing on the specific circumstances surrounding the recruitment of the defendants and others by the 1st and 2nd defendants. The allegation being irrelevant, discovery should similarly be disallowed.

31. As noted, the mere fact that a party pleads to certain matters does not necessarily make them relevant for the purpose of discovery. I agree with Mr Chow's submission in its entirety that those matters raised in paragraph 26(9) of the Defence are simply irrelevant.

32. For the above reasons, I allow the plaintiff's applications to limit discovery.

THE APPLICATION OF THE 3RD AND 4TH DEFENDANTS

33. I now turn to the application for discovery by the 3rd and 4th defendants. There are three schedules of documents attached to their summons. Schedule A relates to documents already disclosed by the plaintiff. The application is for production for inspection "the attachments and/or enclosures, and unredacted originals of the redacted sections" of the documents referred to in that Schedule. Schedule B relates to documents "referred to in a document previously disclosed by the Plaintiff". The application is for a better and further list. Schedule C relates to documents for which specific discovery is sought. In respect of some documents, the plaintiff has already conceded that it will make discovery. In respect of some few others, it has deposed that it is not in possession thereof, which position the defendants are prepared to accept. Here, I shall only deal with those that are in controversy. Mr Chow took a preliminary point that the documents sought, as described in the Schedules, do not fall within a class. Mr Smith addressed the point by re-formulating the requests. The revised requests are contained in the short document entitled "The Classes of Documents" that he handed up in the course of submission. I do not think any further issue arises from this particular point with some few exceptions. When I come to describe the requests in greater detail, I will incorporate Mr Smith's formulation where applicable.

34. The debate again mainly concerns whether the documents sought are relevant. Mr Smith has identified six issues to which, he contended, the documents sought to be discovered are relevant. I will discuss the documents with reference to each of the six issues in turn.

(1) Merger discussions

35. The 3rd and 4th defendants purported to put in issues the plaintiff's serious intention of merging with the 1st and 2nd defendants and its capability of doing so arose in the pleadings in this way. Paragraph 25 of the Re-amended Statement of Claim alleged that on 11 November 2001, the plaintiff held its annual meeting of its capital partners and that at that meeting, it was resolved that the plaintiff should terminate the merger discussions with the 1st and 2nd defendants. In answering paragraph 25, the 3rd and 4th defendants averred in paragraph 34 of the Defence that it is not admitted that the plaintiff had a serious intention to pursue merger discussions with the 1st and 2nd defendants or that it was capable for merger for the reasons stated therein. Other than that, paragraph 25 is admitted.

36. It is common ground that the parties were conducting parallel negotiations with other potential candidates while having merger discussions between themselves. Mr Smith submitted that the issue is as to the date on which merger discussions between the plaintiff and the 1st and 2nd defendants ceased. There are related issues as to whether the plaintiff had any serious intention of merging with the 1st and 2nd defendants and whether it was capable of doing so. Mr Smith argued that the progress of the plaintiff's discussions with others is relevant to the question whether the 1st and 2nd defendants were serious candidates for merger. He further argued that the plaintiff had an association with Messrs Graham & James and discovery is sought in relation to restrictive covenants preventing the plaintiff from merging with any other US law firm.

37. With respect, I fail to see how the discussions with other candidates will throw any light on the factual dispute as to when the merger discussions between the plaintiff and the 1st and 2nd defendants ceased. The issue can only be resolved with reference to the actual merger discussions between the plaintiff and the 1st and 2nd defendants. The plaintiff has already disclosed the documents pertaining to the merger discussions with the 1st and 2nd defendants. Any attempted discovery of documents relating to discussions with other parties on this ground must be refused.

38. The additional points regarding whether the plaintiff had serious intention or capability to merge with the 1st and 2nd defendants do not assist the 3rd and 4th defendants. As rightly pointed out by Mr Chow, the plaintiff did not plead and is not required to plead that it had a serious intention or capability to merge with the 1st and 2nd defendants. The points were raised by the 3rd and 4th defendants by way of non-admission, a non-admission to a plea which the plaintiff had not raised in its pleadings in the first place. I agree with Mr Chow that an issue cannot be created artificially in this manner.

39. In any event, I do consider these additional points relevant at all. It is not in dispute that the parties were conducting parallel merger discussions with other parties at the same them when they were having their own. Mr Chow submitted that the only circumstance in which merger discussions between the plaintiff and other parties might conceivably be relevant is to the extent that such document demonstrated that the plaintiff had already reached an agreement with another firm that precluded the possibility of continuing discussions with the 1st and 2nd defendants or the plaintiff had in fact abandoned or terminated the merger discussions with the 1st and 2nd defendants. No such documents, however, exist, according to Mr Mark Roberts of the plaintiff : see paragraph 13 of his 5th affidavit filed on 17 February 2003. No discovery of such documents is permissible. I agree.

40. Mr Chow further submitted that the degree of the plaintiff's intention or ability successfully to conclude a merge with the 1st and 2nd defendants is irrelevant where it is not disputed that the plaintiff and the 1st and 2nd defendants entered into merger discussions, that the parties entered into the Confidentiality Agreement to protect confidential information exchanged for the purpose of those negotiations and that the parties had also into the hands off agreement. On a closer analysis, the disputed issues in respect of the merger discussions are (1) in respect of the hands off agreement, the period in which the agreement was operative, the effect or scope of that agreement, whether the 1st and 2nd defendants breached the agreement, whether the 3rd and 4th defendants procured such breach; and whether the agreement is void, either wholly or in part, as an illegitimate restraint of trade; (2) in respect of the Confidentiality Agreement, the effect or scope thereof, whether the 1st and 2nd defendants breached the agreement, whether the 3rd and 4th defendants procured such breach. The degree or scale of the plaintiff's intention or capability to merge with the 1st and 2nd defendants bas no bearing on any of these issues. Again, I agree.

41. In connection with the suggestion that the plaintiff's agreements with Messrs Graham & James might have imposed a restriction on its merging or entering into merging discussions with the 1st and 2nd defendants, the plaintiff has already disclosed all the relevant agreements. Any additional discovery on this basis cannot be allowed.

42. With these general points in mind, I now turn to the specific documents that the 3rd and 4th defendants seek to discover with reference to the merger discussions.

(a) Schedule A

A1 : Un-redacted copy of the section of the Minutes of the First Meeting of the Merger Committee entitled "How to respond to G&J's letter dated 14th June, 1999".

I agree with Mr Chow that the redacted part has nothing to do with the 1st or the 2nd defendants. The 3rd and 4th defendants have failed to make out a prima facie case of relevance.

A3 : Un-redacted section of "The Future of Deacons: International, Regional or Local" headed "Deacons Asian Network: Summary of Operation Results for the Period 1/1/98 to 30/6/00".

Similarly, no prima facie case of relevance is shown.

A4 : Un-redacted section of Keith Cole's note dated 19th June, 2001 headed "Current Network Issues".

The 3rd and 4th defendants have themselves disclosed this item in their lists of documents. Mr Smith suggested that they could be handwritten notes in the plaintiff's copy. This suggestion is speculative. It is no more than a fishing expedition.

(b) Schedule B

B3 : Report prepared by David Andrews, and documents created by the Plaintiff which comment on its findings.

The plaintiff is willing to disclose the report only. I agree with Mr Chow's submission that no prima facie case has been established on the existence of the documents created by the plaintiff which comment on the findings of the report. It is also speculative whether such comments, if existed, are relevant to issues in the action.

B5 : Peter Aherne's note to partners regarding the structure of the proposed merger referred to in the Minutes of the First Meeting of the Merger Committee.

The merger discussions with the 1st and 2nd defendants commenced in about May 1999. The note in question predated 23 June 1999. I fail to see how it could have any bearing on the issue when the merger discussions ceased or indeed any other issue.

B8 : Mark Roberts' note dated 15th March, 2000, referred to in Paul Scholefield's note of 17th March, 2000.

No prima facie of relevancy is shown on the note in question.

(c) Schedule C

C1 : Strategic plan and business plans prepared for each practice area of the Plaintiff in contemplation of merger discussions.

Page 4 of that document refers to the need to develop proper strategic plan and valid business plans for each practice area including in particular China. I agree with Mr Chow that it does not say that such plans exist or that such plan, if existed, have anything to do with the 1st and 2nd defendants. No prima facie case of relevance is shown as the report containing the document in question is of a meeting held on 12 December 1998, before the discussions with the 1st and 2nd defendants commenced.

C2 : Documents created by the Plaintiff's culture sub-committee (or members thereof) regarding (a) the issues raised by external consultant David Andrews; and (b) the desirability or otherwise of a merger.

The culture sub-committee was to be formed to look at the issues identified by Mr Andrews. There is no basis to believe that those issues had any relevance. Indeed, no prima facie case of existence of such documents is shown either.

C3 : Counsel's opinion and documents created by the partners of the plaintiff or any of them regarding the enforceability of the restrictive covenants contained in the Further Association Agreement with Graham & James, and all other documents relating to the enforceability thereof.

Leaving aside the questions whether the counsel's opinion is privileged for the purpose of the present proceedings, and whether the remaining documents sought form a class of documents for the purpose of the rules, the enforceability of the restrictive covenants in question is plainly irrelevant. No discovery on the documents is permissible.

C8 : Covering letters enclosing the exchange of information with potential merger partners, including (but not limited to) White Case, Sidley & Austin, Latham & Watkins, Dorsey & Whitney and LeBoeuf" and documents containing the information so provided, hard copies of presentations, attendance notes and documents created during the plaintiff's analysis of the information received from potential merger partners.

Documents relating to exchange of information with the 1st and 2nd defendants have already been disclosed. Documents of similar nature pertaining to other potential merger partners are simply irrelevant.

C9 : Documents recording the content of merger discussions with US and UK firms.

The documents sought are irrelevant.

C10 : Documents created by the Plaintiff's Merger Committee in relation to proposed mergers with other firms (including the First and Second Defendants).

The relevant documents relating to the 1st and 2nd defendants have already been disclosed. The documents relating to other merger candidates are irrelevant.

C12 : Information circulated internally in response to Simon Lai's email of 19th June, 2001 to Keith Cole.

The e-mail, prima facie, has nothing to do with the 1st and 2nd defendants. The reference to information in response to this e-mail is too vague to form a class of documents. No relevance is shown.

C13 : Register prepared by Deacons of information disclosed to LeBoeuf (and other potential merger partners).

This request is based partly on the relevance of the points raised with reference to merger discussions and partly on the scope of the plaintiff's interest. On the first basis, the short answer is information disclosed to other firms is plainly irrelevant. I will deal with the other basis below.

C14 : Minutes or other notes of full partners' meeting on 22nd June, 2001.

The meeting held on 22 June 2001 relates to the authority given to Louisa Ha to pursue discussions with one LeBoeuf and to explore other possible merger candidates. No prima facie case is established.

C16 : Minutes of the meetings of the merger committee and internal documents created by the plaintiff regarding the operations of the said committee established in relation to the proposed merger with LeBoueuf, and referred to in Keith Cole's memo entitled "Merger Discussion & Future Strategy".

Discussions with LeBoeuf are irrelevant. So are the documents sought.

C24 : Documents relating to the decline in the relative position of the firm in the marketplace over the last 10 years, and to the strength of its regional network of offices.

These documents do not form a class and are irrelevant. The 3rd and 4th defendants have also failed to establish a prim facie case of existence. The request is in any event too wide and hence oppressive.

43. For these reasons, I will refuse discovery of all the above documents (except the report under item B3). I next turn to the second issue identified by Mr Smith in support of his application.

(2) Scope of the plaintiff's interest

44. As can be seen from the pleadings, there are issues as to the extent to which confidential information was supplied to the 1st and 2nd defendants and whether such information could have been used by them in soliciting lawyers from the plaintiff. The extent to which the plaintiff had a legitimate interest in protecting itself is relevant. Related to the last point, Mr Smith contended, are the scope of confidentiality and restraint agreements entered into by the plaintiff with potential candidates other than the 1st and 2nd defendants and the extent and nature of the information supplied to such other potential merger candidates. The plaintiff's interest is obviously relevant to the issue of enforceability of the hands off agreement. However, those documents which are not related to the 1st and 2nd defendants and for which discovery is now being sought, are simply irrelevant to this matter. I will deal with the requests in greater detail below. They are all found in Schedule C.

C4 : Correspondence and internal communications of the plaintiff relating to the intended or likely effect of the Confidentiality Agreements contemplated or entered into with parties to merger discussions with the Plaintiff (other than White & Case).

These documents are irrelevant. I agree with Mr Chow that the intended or likely effect of confidentiality agreements contemplated or entered into by the plaintiff with other firms plainly has no relevance to the issues in this action. And no meaningful or useful purpose will be served by comparing the hands off agreement or the Confidentiality Agreement with any of those agreements. The effect of the hands off agreement and the Confidentiality Agreement are to be determined by a proper interpretation of their terms and effects.

C5 : Documents evidencing any agreement contemplated or entered into with parties to merger discussions with the Plaintiff (other than White & Case) which seeks to restrain the solicitation of the Plaintiff's partners or employees.

For the same reasons above, these documents are irrelevant.

C6 : Response to Peter Aherne's letter of 9th August, 1999 requesting written confirmation of non-solicitation agreement.

The non-solicitation provision referred to in the said letter clearly relates to the plaintiff's arrangement with some other firms and not the 1st or 2nd defendants. The documents sought are irrelevant.

C7 : The plaintiff's internal communications relating to the intended or likely effect of the agreement between the Plaintiff and White & Case regarding the non-solicitation of their partners and employees.

The formulation of the request is wide indeed and does not form a class of documents. There is no prima facie case of existence. Mr Mark Roberts has confirmed in paragraph 15 of his 5th affidavit that no further discoverable document exists. I do not think the matter can be taken any further.

C8 and C13

The requests have already been set out in paragraph 42 above. As noted, the documents sought are not relevant. In connection with "Register prepared by Deacons of information disclosed to LeBoeuf (other potential merger partners)", the suggestion that disclosure of information to other potential partners might affect the confidential nature of the information, Mr Mark Roberts has confirmed in paragraph 11 of his 5th affidavit that all information provided to other firms was similarly subject to confidentiality agreements. The confidentiality agreements with other firms bear no relevance to the scope of Confidential Material in the Confidential Agreement. The term is contractually defined, the scope of which is to be determined by a proper interpretation.

45. For these reasons, discovery of the documents sought under this head is refused.

(3) Has confidentiality been lost?

46. The third issue identified by Mr Smith is has confidentiality of the agreements between the plaintiff and the 1st and 2nd defendants been lost. Allied to this issue is question of the extent to which the plaintiff has supplied client information, or information relating to the financial performance of the plaintiff, to persons outside the firm. I agree with Mr Chow's submission that since the term "Confidentiality Material" is contractually defined, for the purpose of the parties' agreements, it matters not whether the information provided by the plaintiff to the 1st and 2nd defendants would otherwise be regarded as confidential. The duty of confidentiality is imposed by contract. No useful purpose will be served by asking the plaintiff to disclose the documents sought. The documents sought are :

C22 : Pitch documents prepared for potential clients, copies of the firms' website entries for its staff, individual partners marketing CVs, press statements, brochures and other marketing materials; shareholders circulars and annual reports prepared by client companies which disclose the amount of legal fees paid to the plaintiff and documents containing information as to :

• "the financial performance of the Plaintiff, its individual departments and individuals within those departments
• the Plaintiff's personnel (including partners and consultants)
• the Plaintiff's clients"

Mr Mark Roberts deposed in paragraph 19 of his 5th affidavit that he is not aware of the existence of any document which might set out the sort of figures referred to in this request. In any event, these documents are, as I have demonstrated, irrelevant to the issues pertaining to the question whether confidentiality has been lost.

(4) Composition of the Insolvency Department

47. The fourth issue identified by Mr Smith is whether the 3rd defendant, the 4th defendant, Mr Darton, Mr Leifer and Mr McDonald comprised the entirety of the corporate Restructuring Group as alleged by the plaintiff or whether they were just part of a Finance and Insolvency Department, as alleged by the defendants. The existence or otherwise of a formal restructuring group within the finance and insolvency department is irrelevant to the plaintiff's claim or the defendants' defence. It may however be relevant to the question of damages, which may be determined later, if necessary. There are two requests in this connection.

C11 : The Departmental Business Plans produced in relation to the Plaintiffs, Finance and Insolvency Department from 2000 to date.

I agree with Mr Chow's submissions that no prima facie case of relevance has been established.

C19 : Internal memoranda, minutes of meetings, Business Plans, marketing material and other similar documents relating to the creation or existence of a formal Restructuring Group within the Plaintiff.

These documents are irrelevant.

(5) Recruiting methods

48. When the plaintiff was proposing to recruit Ms Peggy Cheung from Messrs Baker & McKenzie, it had access to information concerning her billings, as can be seen from an internal memo dated 4 April 2002, a document which the plaintiff has already disclosed. Mr Smith argued that there is an issue on the pleadings as to the extent to which the plaintiff had a legitimate interest in imposing restrictions on the right of the 1st and 2nd defendants to recruit from within the ranks of the plaintiff, having regard to the plaintiff's own recruitment methods. The documents sought are contained in item 18 of Schedule C. They are :

"(a) salaried partners; (b) consultants; (c) senior associates and (d) other associates joining the Plaintiff with, or shortly after, a partner from the same firm. Those persons will include, but are not limited to:

• Chris Britton
• Peter Burge
• Scott Carnachan
• Eugina Chan
• Elizabeth Cole
• Rory Gallaher
• Susan Gordon
• Glenn Haley
• Joseph Kwan
• Jeremy Larn
• Richard Lawrence III
• Martin Lister
• Prudence Mak
• Gavin Nesbitt
• Geoff Shaw
• Daisy Tong
• Nicki Squire
• Syren Johnstone
• Mark Sutherland
• Taylor Hui
• Samuel Ngo
• John Siu
• William Wang
• Charmaine Koo
• John Lo
• Conrad Chan"

I have already dealt with Mr Smith's contentions in paragraphs 29 to 31 above. For the reasons stated therein, I do not consider the documents sought relevant.

(6) Issues pleaded in paragraphs 9 to 16 of the Defence

49. The requests are in items 23 to 26 in Schedule C. They deal with documents said to be relevant to some of the issues pleaded in paragraphs 9 to 16 of the Defence. As I have already ruled that the matters pleaded in those paragraphs are irrelevant, discovery of these documents must be refused.

50. The only remaining request that is disputed is item 27 of Schedule C. It, however, relates to a part-heard hearing before Ma JA. Counsel agreed that the application concerning this item should be adjourned pending the disposal of the part-heard hearing. I so order.

CONCLUSION

51. For the above reasons, I will refuse the 3rd and 4th defendants' application for discovery of all the items which are contested except item 27 of Schedule C. The plaintiff succeeds in its application. It has also successfully resisted a substantial portion of the application brought by the 3rd and 4th defendants. I will therefore make an order nisi that the plaintiff shall have the costs of its summons and the costs of the summons of the 3rd and 4th defendants in any event, to be taxed if not agreed.

Representation:

Mr Anderson Chow, instructed by Messrs Clifford Chance, for the Plaintiff

Mr Hunsworth, of Messrs Johnson, Stokes & Master, for the 1st and 2nd Defendants

Mr Clifford Smith, SC, instructed by Messrs Herbert Smith, for the 3rd and 4th Defendants

Remarks: