Supreme Court New South Wales

• Medium Neutral Citation: Charltons CJC Pty Ltd v Fitzgerald (No 3) [2013] NSWSC 1945
• Hearing dates: 23 to 27 September 2013 and 15 November 2013
• Decision date: 18 December 2013
• Jurisdiction: Equity Division - Expedition List
• Before: Rein J

Decision

Judgment for the plaintiff against the defendants in the amount of $303, 334.81 plus interest at the Reserve Bank rate plus 4% from 1 July 2012

• Catchwords: DAMAGES - what loss has been occasioned to Charltons by virtue of the established breaches of the defendants in performing work for former clients of Charltons in the Restraint Period and in performing work for "shadow clients" whilst still employed by Charltons
• Cases Cited: Alexander v Cambridge Credit Corp Ltd (1987) 9 NSWLR 310; Chappell v Hart (1988) 195 CLR 232; Charltons CJC Pty Ltd v Fitzgerald [2013] NSWSC 350; Charltons CJC Pty Ltd v Fitzgerald (No 2) [2013] NSWSC 958; Commonwealth v Amman Aviation (1991) 174 CLR 64; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; Houghton v Immer (1997) 44 NSWLR 46; Hudak v Adams [2013] NSWSC 1464; Ithaca Ice Works Pty Ltd v Queensland Ice Supplies & Anor [2002] QSC 222; Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298; Kenny & Good Pty Ltd v MGICA (1999) 199 CLR 413; LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1989) 24 NSWLR 490; Maguire v Makaronis (1997) 188 CLR 449; Manly Council v Byrne [2004] NSWCA 123; Marra Development Ltd v BW Rofe Pty Ltd [1977] 2 NSWLR 616; New Zealand Shipping Co Ltd v Societe des Ateliers et Chantiers de France [1919] AC 1; Morgan v Costello [2004] WASCA 260; Orica Investments v McCartney [2010] NSWSC 488; Parramatta City Council v Sandell [1973] 1 NSWLR 151; Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Limited [2013] QSC 148; Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516; Ruthol Pty Ltd v Tricon (Australia) Pty Ltd [2005] NSWCA 443; Simonius Vischer & Co v Holt [1979] 2 NSWLR 322; Wilson v Northampton and Banbury Junction Railway Co (1874) LR 9 Ch App 279; Winkie Meat Works v Ballard [1960] SASR 312
• Texts Cited: Seddon, Bigwood, Ellinghouse Cheshire & Fifoot Law of Contract, 10th Australian ed (2012) Lexisnexis Butterworths
• Category: Principal judgment
• Parties: Charltons CJC Pty Ltd (plaintiff); Alden Gregory Fitzgerald (first defendant); Kamal Kishore (second defendant); Kirat Krishan Prasad (third defendant); Intuitive Accountants & Associates Pty Ltd (fourth defendant)
• Representation: Counsel: Ian Neil SC with David Chin (plaintiff0; Peter M Kite SC with Gerard Boyce (first, second, third and fourth defendants); Solicitors: Whittens & McKeough (plaintiff); FCB Workplace Law ( first, second, third and fourth defendants)
• File Number(s): 2012/00278861

Judgment

1 REIN J: The plaintiff, Charltons CJC Pty Ltd ("Charltons"), conducts an accounting practice and employed Mr Alden Fitzgerald, the first defendant, Mr Kamal Kishore, the second defendant, and Mr Kirat Krishan Prasad, the third defendant, between 1999 and 2012. The fourth defendant, Intuitive Accountants & Associates Pty Ltd ("Intuitive"), was established by Mr Fitzgerald, Mr Kishore and Mr Prasad on 13 July 2012. Mr Fitzgerald left Charltons on 31 July 2012, Mr Kishore Left on 15 August 2012 and Mr Prasad left on 23 August 2012. I shall refer to Mr Fitzgerald, Mr Kishore and Mr Prasad as "the defendants".

2 In Charltons CJC Pty Ltd v Fitzgerald [2013] NSWSC 350 Pembroke J concluded that:

(1) The defendants, Mr Fitzgerald and Mr Kishore, prior to their departure from Charltons, provided accounting services to persons or entities who were not existing clients of the firm and did not bill those persons or entities on behalf of Charltons and that they effectively diverted from Charltons the business opportunity that those clients represented. These clients of Mr Fitzgerald and Mr Kishore are described as "shadow clients" and I shall use the same terminology

(2) After the defendants departure from Charltons, the first three defendants assisted each other and assisted the fourth defendant company, of which they were directors, to solicit and entice away from Charltons a significant number of existing clients from the firm in breach of a valid restraint of trade clause in their respective contracts of employment.

3 In Charltons CJC Pty Ltd v Fitzgerald (No 2) [2013] NSWSC 958 Pembroke J considered the precise identification of individual breaches of each client and shadow client and having dealt with each disputed matter gave reasons as to why the declarations as to the breaches ought be made. Pembroke J used the following wording when making a declaration that one of the defendants had breached their Best Endeavours Term and Fiduciary Duties:

[Defendant] breached his Best Endeavours Term and Fiduciary Duties by failing to well and faithfully serve Charltons and use his best endeavours to promote the interests and welfare of Charltons, in that, on his own account or that of himself and the other defendants, he performed work for and/or provided services within the scope of Charltons' business to [client/ shadow client] in connection with [details of breach]

and his Honour use the following wording when making declarations that a defendant breached their Restraint Terms:

[Defendant] breached his Restraint Terms by soliciting or endeavouring to entice away from Charltons, or accepting an approach from or performing work for a Charltons client with whom he had dealings on behalf of Charltons in his last twelve months of employment, in that after the termination of his contract of employment with Charltons, on his own account or that of himself and the other defendants, [employee] solicited and performed work for [client/ shadow client] in connection with [details of breach]

When referring to the two forms of declarations made by Pembroke J in the balance of these reasons I will use the abbreviated terms "Best Endeavours Term" and "Restraint Term" to describe the declarations made.

4 What remains for determination is the question of damages suffered by Charltons as a result of the breaches determined by Pembroke J.

5 In this part of the proceedings, as at the previous hearing Mr Neil SC with Mr D Chin of counsel appeared for the plaintiff and Mr P.M. Kite SC with Mr G. Boyce of counsel appeared for the defendants. Counsel have provided me with extensive submissions on the issue of damages. I shall refer to the plaintiff's written closing submissions of 8 October 2013 as "PCS", the defendants written closing submissions of 29 October 2013 as "DCS" and the plaintiff's written submissions in reply of 7 November 2013 as "PSR".

6 There are some general principles applicable to the determination of what loss has been occasioned to Charltons by virtue of the established breaches of the defendants which are not in dispute, namely;

(1) In contract damages are awarded with the object of placing the plaintiff in the position it would have been had the contract been performed. The damages can include the difference between what was promised and what was delivered ("the expectation loss") and damages to undo the harm that a plaintiff's reliance on the defendant's promise has caused ("the reliance loss").

(2) What is required, in effect, is a comparison of the position in which the plaintiff actually is placed (by reason of the breaches) and the position it would have been if the breaches had not occurred: Commonwealth v Amman Aviation (1991) 174 CLR 64, 99; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 11-12.

(3) The loss and damage are restricted to what is reasonably foreseeable as a consequence of breach.

(4) The task of assessing damages may be difficult and involves a degree of hypothesis and pragmatism and certainty is impossible.

(5) The injured plaintiff is entitled to have every reasonable presumption as to the benefit which might have been obtained by the bona fide performance of a defendant's contractual and fiduciary obligations (see Wilson v Northampton and Banbury Junction Railway Co (1874) LR 9 Ch App 279 at 285-286per Lord Selbourne cited in Winkie Meat Works v Ballard [1960] SASR 312 per Ross J. In Houghton v Immer (1997) 44 NSWLR 46 at 59 Handley JA (with whom Mason P and Beazley JA agreed) having noted what was said by Hodgson J (as his Honour then was) in LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1989) 24 NSWLR 490 at 508, said:

[The Court should] assess compensation robustly, relying on the presumption against wrongdoers and resolving doubts against those whose actions had made the determination problematic

This approach was applied in Orica Investments v McCartney [2010] NSWSC 488 [39] per Ball J.

(6) The plaintiff bears the onus of proving its loss which includes establishing that the loss for which compensation is claimed was caused by the breaches relied on by it. However, "if the loss in question is the apparent cause or likely result of the breach, the onus shifts to the contract breaker to prove that it was not" Seddon, Bigwood, Ellinghouse Law of Contract, 10th Australian ed, [23.34] and see Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516 at 523 per Barwick CJ, McTiernan J and Menzies J.

(7) In relation to causation, the plaintiff's closing submissions set out the following principles:

(a) Common sense is determinative

(b) The "but for" test is usually a reflection of common sense

(c) Charltons is entitled to recover compensation for loss in respect of which the defendants' conduct need only be a cause of the loss notwithstanding that there may have been other concurrent causes.

(d) Charltons need not prove that the defendants' breach of contract was the real and efficient or dominant cause of the loss that it has suffered. It is sufficient that the wrongful acts or omissions of the defendants are a material cause of Charltons' injury or damage.

(e) It is for the defendants to show that another concurrent cause was the sole cause of the loss, to the exclusion of any causative influence exerted by the defendants' breaches.

citing Chappell v Hart (1988) 195 CLR 232, 268-269, Alexander v Cambridge Credit Corp Ltd (1987) 9 NSWLR 310 at 357; Kenny & Good Pty Ltd v MGICA (1999) 199 CLR 413 at 426, 448, 457, Ithaca Ice Works Pty Ltd v Queensland Ice Supplies & Anor [2002] QSC 222 [16], Simonius Vischer & Co v Holt [1979] 2 NSWLR 322, 346.

(8) The usual position is that damages are assessed from the date of breach.

7 In a sense, Charlton's case for loss is quite straightforward - it points to the fact that in the year following the departure of the defendants it ceased to earn income from a number of identified clients of the firm, quite a number of whom had been clients for many years and from some of whom Charltons held a retainer. Having identified those lost clients whose work generated approximately 22.5% of Charlton's turnover, Charltons points to activities of the defendants both before and after their departure as found by Pembroke J and of which there is further evidence before me, which on Charltons' case, establish that the loss of the particular client was not coincidental. Charltons also points to evidence that Charltons had had a very stable client list until the defendants terminated their employment contracts at Charltons: see Mr Charlton's affidavit of 12 November 2012, [15], [19], [20] and [21].

8 Charltons' approach is to identify the revenue earned in the financial year ending 2012 for client X and to claim the 2012 earning, of say $20K, from the client but in addition to claim the future revenue lost from X. That calculation relies on a multiplier identified by Mr Fayed of 1.0 at its highest or 0.95 at its lowest (I shall say more about Mr Fayed's evidence later). Therefore, continuing my example of client X who earned $20K in the 2011/2012 financial year - Charltons claims an additional $20K (in total $40K) for future lost income.

9 Charltons also claim damages for income denied to Charltons by virtue of work performed by the defendants (largely Mr Fitzgerald) for the shadow clients whilst the defendants were still employed by Charltons. Charltons claims that had Mr Fitzgerald not performed the work that he did for these persons they, or at least a significant portion of them, would have become clients of Charltons and Charltons would have earned income from them. The claim is not only for the income which Charltons did not earn whilst the defendants were employed but for the income that would have been earned in the future, had these persons become clients of Charltons. That claim is put as twice the revenue lost for one year. Evidence was called by the defendants from many of these shadow clients with whom I shall deal separately from the actual clients ("the clients").

10 The defendants dispute a number of aspects of the plaintiff's approach:

(1) They contend that all of the former clients of Charltons would have left Charltons even in the absence of any wrongdoing by the defendants.

(2) They contend that the plaintiff would be recovering twice if it obtains not only the lost revenue for the 12 month restraint period but also the claimed future loss of revenue.

(3) They assert that an allowance must be made for a contingency discount.

(4) They challenge the extent of the revenue made by Charltons in the year before departure which then impacts upon the figures utilised. Mr Kite places emphasis on the fact that Mr Charltons accounts show a total revenue less than the billing schedule of Charltons and that Mr Charlton admitted that he could not explain the discrepancy.

(5) In relation to shadow clients, the defendants contend that none of those shadow clients would have become clients of Charltons.

(6) There are challenges to the precise calculation of earnings in respect of particular clients which take a number of forms.

11 The contention that all of the former clients of Charltons would have left Charltons quite apart from the defendants' breach is vigorously challenged by the plaintiff. The contest in this area has descended into considerable detail and the assertion of a principle on which the plaintiff sets considerable store namely that a person cannot rely on his or her own wrong or misconduct ("the own misconduct principle"). The principle which I will explain below is referred to in a number of cases and its availability here is disputed by the defendants. To explain the competing positions on this I shall use, as an example, the case of Medicine Today Group of companies of which Ms Judith Passlow is one of the owners. Ms Passlow says that by reason of Mr Charlton having recommended her entry into a taxation scheme (including one known as the Grant McKenzie Whisky Scheme) between 1998 and 2003 which caused her expense and loss she has for many years had a low opinion of Mr Charlton. The parties agreed that it was not appropriate for the Court to have to consider the truth of her allegations, the plaintiff accepting that Ms Passlow held the low opinion which she said she held and the defendants accepting that evidence of her belief was not evidence of the truth of the matters which she, by expression of her belief, asserted.

12 The plaintiff's position is that, although Ms Passlow's negative views concerning Mr Charlton were in part derived from matters with which Mr Fitzgerald had no involvement whatsoever he did help to consolidate and fuel her negative views by taking steps in breach of his obligations (and also by steps which he did not take). The plaintiff claims that the negativity engendered by Mr Fitzgerald's actions (and omissions) was inextricably linked with Ms Passlow's negativity. The plaintiff contends that it was incumbent on the defendants to establish that no part of the negativity of Ms Passlow emanated from actions or omissions of Mr Fitzgerald which, the plaintiff contends, the defendants on the evidence have been unable to do. The defendants contend that Mr Fitzgerald's actions or comments could not realistically have blackened Mr Charlton's image any more since Ms Passlow was already so negative about him.

The Own Misconduct Principle

13 In New Zealand Shipping Co Ltd v Societe des Ateliers et Chantiers de France [1919] AC 1 Lord Finlay at 6 stated:

It is a principle of law that no one can in such a case take advantage of the existence of a state of things which he himself has produced.

The PCS also referred to Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Limited [2013] QSC 148 [75] - [79] per Jackson J. Mr Kite referred to Ruthol Pty Ltd v Tricon (Australia) Pty Ltd [2005] NSWCA 443, [19] and [20].

14 One of the illustrations of the principle given by Lord Finlay in New Zealand Shipping is that if A promises B that C shall marry D, B cannot claim on the bond if B himself marries D, and in Ruthol Giles JA described the principle in the field of contract law as being concerned with whether the wrongdoer can enforce its contractual right (see [19]).

15 Whilst the principle is well entrenched in law and part of an even broader concept, in reality the question here is really factually whether the antipathy of the clients to Charltons has been encouraged (or not discouraged) by the defendants in breach of their contractual and fiduciary obligations and if it has, whether that was a factor which caused the particular client to leave Charltons. If the defendants' own actions in breach of their obligations have led to or contributed to the negative attitude of the client which has caused the client to depart Charltons then the defendants will not have established that the departure of the clients is unconnected with their breaches. Mr Neil accepted (at T342.5) that it is a causation argument within a causation argument and is entirely factual.

Mr Fayed's Evidence

16 Mr Fayed was appointed as a joint expert by the parties. His report of 24 September 2013 became Exhibit O. In his view the most appropriate methodology to value the goodwill in, or custom of the lost clients, is to adopt measures of valuation used in the market place to value transfers of interests in accounting firms providing similar services to those provided by Charltons and that are of a similar size to Charltons. He then said:

5.d. In my opinion, the measure of valuation used in the market place is a multiple of revenue expected to be generated by the relevant clients. The expected revenue is based on a review of historical revenue and client turnover, having regard to the nature of the services performed. The applicable revenue multiple for business such as Charltons, (which does not include any financial planning revenue) would be approximately one (1) times annual revenue.

17 Neither party challenged the correctness of Mr Fayed's evidence but both Mr Neil and Mr Kite cross examined Mr Fayed and obtained opinions upon which they respectively rely in their submissions.

18 Mr Fayed regarded the number to be used as a multiplier is between 0.9 and 1.00. The exact number within that range is affected by whether or not payment would be up front or paid over time and whether the clients were longer time clients (see p 8 of Exhibit O). He agreed that the multiplier is the "normalised expression of the market's accumulated experience" (T252.8). He agreed that there is always an assumed level of loss as a result of clients leaving the practice (T253.1 and T256.40). Competition from former employees is built in to the multiplier (T255.17).

19 Mr Fayed also performed a cross check using capitalisation of earning before interest and tax, referred to under the acronym EBIT.

20 Mr Fayed said that before applying the multiplier he would have regard to whether work for which income had been received was a one off (see T260). He would also consider whether the practice tends to generate additional revenue from time to time for the client base used (T260.36, T261.17) although he indicated that is taken into account in the multiplier (T275.7-44). If a client had gone into liquidation that would be a reason to exclude that client from the multiplier: T261.30. If the business was sold in the period before sale that might lead to a reduction but in such a case retirement planning might be expected to replace the lost revenue stream: T261.35-40. Mr Fayed said that the departure of a senior relationship manager would lead to asking some questions "namely around the level of involvement by the principal" leading to a lower value for that particular group of clients (T263.15-30). He would expect to lose 10-15% of revenue as churn clients coming and going: T263. A professional buyer might walk away from a purchase of a client list if the expected loss of custom were more than 30% (T264.17). Mr Fayed agreed that he had not had the opportunity to conduct a confirmatory analysis of the desktop valuation undertaken by him.

21 In my view the approach which the plaintiff seeks to advance is inconsistent with the approach of Mr Fayad which the plaintiff itself relies on. Mr Fayad's approach focuses on the departure of the clients and pays regard to the past year's earnings as at the date of the loss of the client and uses the multiplier of 1 (or 0.95-1) to ascribe the lost income as effectively one year's future income. He did not treat the loss of income as one years' income and then add another year's income. The plaintiff's submissions and the assertion of lost income plus lost future income effectively advances a quite different multiplier to that recommended by Mr Fayad. I accept that a plaintiff may be able to establish that earnings from a lost client would have extended beyond one year but the joint expert has explained his approach and the plaintiff has not advanced any alternative expert opinion.

22 In undertaking the comparison between what would have occurred had the defendants not breached their duties and obligations and what in fact occurred, I think it is necessary to approach the matter by asking and answering two quite separate questions:

(1) Would the relevant client have been likely to have left Charltons within the 12 month restraint period (i.e. after the defendants left Charltons) and in which period the defendants could not perform any work for the client, had the defendants not acted in breach of their duties and obligations.

(2) If the answer to (1) is no would the client have been likely to leave Charltons at the end of the restraint period.

23 The second question which I have framed is closely linked to the question of whether any additional amount is to be allowed for lost income after the expiry of the restraint period. On Mr Fayed's approach there is no need to consider the second question. If the answer to (1) is no but the answer to question (2) is yes the same result would pertain.

24 I will deal with the various clients on an individual below basis but I shall first deal with the matters of more general application:

(1) Pembroke J has held that Mr Fitzgerald particularly (and Mr Kishore to a lesser degree) embarked upon a program of encouraging Charltons clients to leave and commence as clients with him.

(2) Pembroke J held that as part of his strategy Mr Fitzgerald undercharged or did not charge at all some clients of Charltons for work he had performed with a view to ensuring that they would follow him on his departure.

(3) There is evidence that Mr Fitzgerald told Mr Charlton he was intending to retire from accounting at a time when he had decided to embark upon a competing practice and to lure Charltons clients to his new firm (see para 84 of Mr Charltons affidavit of 12 November 2012).

(4) Mr Fitzgerald sought to avoid it becoming known that he had arranged with some Charltons clients that he would commence working for them as soon as he left Charltons and he has endeavoured to hide the fact that during the restraint period he has conducted work in breach of the contract.

(5) Mr Fitzgerald has encouraged some of the Charltons clients to believe that Mr Charlton had no interest in their welfare: see for example Exhibit B, pp 287-289 and T109.15-T109.39, T173-174.

(6) None of the defendants gave evidence and I am entitled to draw the inference that their evidence would not have assisted them: see Manly Council v Byrne [2004] NSWCA 123 and Hudak v Adams [2013] NSWSC 1464 for a recent application of the principle in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, 312.

(7) The defendants have called in their case evidence from a number of former Charlton clients who have denied that the defendants or Intuitive did work for them even when it is clear that the defendants had done so and indeed on occasions in an attempt to contradict findings and declarations made by Pembroke J.

(8) The fact that Charltons' clients were actively encouraged to leave Charltons and commence with the defendants at a time when the defendants were not free to act for those clients means, in my view, that the defendants must establish that the clients would have left Charltons and proceeded to retain accountants other than Charltons and other than the defendants even absent their breaches. Much of the evidence called by the defendants points to the lost clients being willing to move to Mr Fitzgerald's new firm but does not support a finding that they were willing to move to a third firm and then to move to Mr Fitzgerald's firm at the end of the restraint period.

(9) The defendants contend that it is important in determining whether clients would have left Charltons in any event to recognise that the three defendants were senior personnel within Charltons. It is not surprising, they contend, that clients would have left simply because of the fact that Charltons was not, on the defendants' departure, as well staffed as it was before. There are several answers to this made by Charltons which I accept:

(a) The work performed by the defendants to the Charltons earnings for a number of the lost clients, it has been demonstrated, was not as significant as a percentage of the total billings as the defendants seek, by this argument, to contend,

(b) There is nothing to indicate that the staff who were performing the work (other than the defendants) were not well regarded and indeed one of them received an accolade from one of the lost clients,

(c) Mr Charltons gave evidence about replacement staff and restructuring (see paras 23 and 24 of Mr Charlton's affidavit of 3 September 2013 and also T106-107 to fill the void left by the defendants' departure,

(d) There is no evidence which suggests that Charltons was not competent in performing work before or after the defendants' departure, and

(e) It should not be assumed against Charltons that Mr Charlton could not have acted to retain clients who had not received discounts and favours from Mr Fitzgerald whilst he was employed at Charltons and not been encouraged by him to leave.

(10) It is true that mere departure of clients at the time of the defendants' departure cannot be put down to the breaches of the defendants but the plaintiff's case is not based on mere coincidence. On the contrary it is based on the acts of the defendants calculated to achieve the loss of clients by Charltons and their acquisition by the defendants.

(11) The defendants contend (DCS para 5-7) that the question which needs to be answered is what was the loss of profits from the clients who left who, on the balance of probabilities, would have remained with Charltons but for the breaches. The use of the phrase "loss of profits" is contentious because, as Mr Fayed points out, the use of the multiplier is not one based on profits but rather is based on earnings. When the clients left Charltons they ceased to be a source of revenue for Charltons and the task for the Court is to determine whether they would have left irrespective of the breaches by the defendants and, if not, what the value is to be placed on that loss of income. I propose to use the past earnings as I regard it as the best guide to the future earnings and to apply the multiplier, as Mr Fayed says, is appropriate.

(12) The defendants also raise the question of contingency discount. In respect of a client X who it is found left Charltons because, at least in part, of the defendants' breaches and who would have provided earnings of say $20K to Charltons in the restraint period the defendants assert that there should be a discount to allow for the fact that the client later may for example have moved interstate or ceased trading. The defendants contend that a 10% discount is appropriate. Whilst I accept, as a matter of principle, that contingencies should be taken into account, Mr Fayed's approach does in effect take those unknown vicissitudes into account in arriving at the multiplier. The defendants, by their evidence, seek to propound evidence of why the lost clients would have left in any event or why the work would not have been as extensive requiring a detailed examination in respect of each client so this is not a case where an assumption is made in favour of a plaintiff which then needs to be discounted to allow for contingencies or vicissitudes. If the defendants have proven that a client went out of business before their departure that is a reason why no value might be ascribed to the loss of that client. I do not think that there should be any global reduction for vicissitudes, beyond the specific exclusion of clients or revenue established, because they are already accounted for in Mr Fayed's approach, which I adopt.

(13) The defendants make the point that it was important for the defendants in performing their role to build relationships with Charltons' clients and hence it is not surprising that some clients would want to follow them. I accept that, in a general sense, that is true and that, no doubt, is the reason for the restraint clause. Had the defendants left Charltons and done no work for the lost clients and not encouraged them to leave, Charltons would have no claim against them.

(14) The last point links to another contention of the defendants. They point (see DCS para 13(k))to Mr Charlton's failure to spend time with the clients who left and seek to assert that that is the reason or a reason why clients would have left in any event. In my view, to establish that Mr Charlton did not pay sufficient personal attention to his clients is a relevant factor in determining whether the reason that a client left is one attributable to the defendants' conduct. However, once it is established that the defendants' conduct was a cause of the client's departure I do not think it avails the defendants to establish that Mr Charltons' failure to adequately cultivate the clients was also a factor unless it was the sole factor. In any event, I am not persuaded that any of the clients left Charltons during the Restrain period because Mr Charlton was not paying them enough attention.

(15) In respect of one or two of the clients, the defendants raise claims that Charltons had, by virtue of one reason or another, failed to mitigate its loss. Failure to mitigate was not pleaded by the defendants and it appeared in oral submissions to be accepted that it could not therefore be relied upon: see on this point: Morgan v Costello [2004] WASCA 260 per Malcolm CJ at [88] with whom Murray and Wheeler JJ concurred.

(16) The defendants point to the fact that Mr Fayed did not undertake a detailed assessment of the clients in approaching the valuation of the lost clients. Mr Fayed accepted that a customer, in purchasing a practice, would be interested to learn that a number of clients held a negative view of the principal, and that the principal was not responsible for at least 10%-20% of the billable hours expended on that client. I accept that the lack of close connection of the principal might increase the prospect that customers would leave to become clients of firms unconnected with Charltons but I think it is relevant that no attempt has been made by the defendants to establish that any significant number of clients of Charltons, other than the clients for whom they have performed work, left Charltons after the defendant's departure. This rather diminishes the significance of the absence of client contact as a reason why the lost clients would have left irrespective of the defendants' breaches. As can be seen below I am in most instances not satisfied that the lost clients would have left Charltons to become clients of a firm other than Charltons and not connected with Mr Fitzgerald so there is no need to apply some discount factor to take into account the limited client contact by Mr Charlton with the lost clients. If the plaintiffs do establish the causal connection however I regard the multiplier of 0.98 the midpoint between the defendants breaches and loss of the client suggested by Mr Fayed as an appropriate multiplier to be applied to the past years earnings. To the extent that the previous years earnings are shown to be unusually high due to a one off event, such as sale of a business, then that will need to be taken into account. Since almost all of the lost clients are clients who went to the defendants in the Restraint Period the causal link is prima facie established and it is for the defendants to establish that the clients would have left Charltons irrespective of their breaches and, in the context of the one year earnings approach, that they would have done so in the Restraint Period.

(17) It appears that the defendants and many of their witnesses have set about seeking to minimise the billings for the lost clients in the restraint period. This is consistent with Mr Fitzgerald's undercharging whilst still at Charltons. I regard the Charltons financial year ending 2012 ("FY12") billings as the appropriate starting point for calculation of loss.

(18) The defendants in their submissions speak about "the cause" in question being the breach found by Pembroke J (see DCS para 10(d)). The question of breach is rather whether 'a cause" of clients leaving was the defendants' breach those breaches have been found to have occurred.

(19) It is true that an accountant might perform work for a client at no or reduced cost as part of the relationship building with the client as Mr Charlton agreed (T23.32-T24.8) but it is one thing for the principal to make such a decision for the benefit of his practice and another for an employee to take such steps to benefit not his employer but himself which is what Pembroke J has found occurred in a number of instances.

(20) The defendants submitted by the DCS is that Mr Fayed was not assessing the loss or damage arising from the breaches - a point which Charltons by its submissions accepted.

(21) The defendants point to the discrepancy between the annual accounts of Charltons on the one hand and the revenue schedule which as they point out is unexplained (see DCS para 19 and see T74-75, T76, Exhibit CJC2 and Exhibit CJC3). Mr Charlton accepted that the figure in the accounts should be treated as correct figure (at T75.1-35) which has led to the defendants claiming that all billings figures for the lost clients (CJC 2) should be reduced by 10% to take into account the real billing figures not the higher figures. I propose to adopt the approach advanced by the defendants on this and to reduce the FY12 earnings figures by 10%.

(22) There was a question raised about income earned by Charltons from some of the lost clients in the months of July and August 2012. In determining what amount should be allowed for loss of the clients Charltons has used the billings to the 30 June 2012 and excluded the billings sent in the months of July and August: see T374.44-375.4. The previous 12 months earnings is an appropriate yardstick and the question is whether to use June to June or August to August. I do not think it matters which period is taken and since the defendants rely on the difference between the annual accounts and the billings I think it is appropriate to use the June to June figure. It is not then appropriate to deduct the July August billings from the Financial year ending 30 June 2012 figure.

(23) Whilst I am not persuaded that the lost clients would have left Charltons to go to anyone other than Mr Fitzgerald (and the defendants including Intuitive), I think it more probable than not that most of them would have left Charltons at the end of the Restraint Period. It is true that part of the attraction to Mr Fitzgerald may well have been his assistance to the clients which involved a breach of the Restraint Period but it is very difficult to decide whether had there been no such breach the lost clients would have stayed at Charltons. I think it is unlikely that they would have stayed with Charltons after the Restraint Period but there is a prospect that some of them would have done so and I am conscious of the approach identified in [6](5) above. Were it not for my conclusion that Mr Fayed's approach requires only 0.98 of the years earnings to be applied I would allow a 20% rate of retention to reflect that possibility.

25 In his oral submissions, Mr Neil submitted that in relation to the need for the Court to consider what would have occurred but for the conduct of the defendants, particularly Mr Fitzgerald, the Court should make a finding that Mr Fitzgerald's conduct "was appalling and it was dishonest". Further he stated that the hypothetical task which was before the Court was made "all the more difficult because it is very difficult, almost impossible to imagine a state of affairs uninfluenced by Mr Fitzgerald's conduct" (see T348.5-10). He submitted that:

It is impossible for your Honour, we would respectfully submit, to make any finding in favour of the defendants that any one of these clients would have left the plaintiff during the period of the restraint, assuming no misconduct on the part of the defendants. And that's because that circumstance never existed. Not one of the clients in question ever had to actually confront that question, in reality, because Mr Fitzgerald and his cohorts were out there, other defendants, were out there busily plotting and scheming to solicit them, not just away from the plaintiff per se but from the plaintiff to them.

26 Mr Neil also drew attention to what he called the "strikingly discreditable" nature of much of the evidence called by the defendants. The plaintiff's written submissions make very detailed references to the evidence on which Mr Neil relies to support that contention. Of course, every case for breach of contract involves an assessment of what would have occurred had there been no breach or misconduct so I do not know to what additional consideration the point made goes. Pembroke J has already made significant adverse findings against Mr Fitzgerald (and to a lesser extent the other defendants) and I do not think I need to expand upon his Honour's characterisation.

27 I agree with Mr Neil's observations that the overall credibility of many of the witnesses called for the defendants was poor - I gained the impression that a number of them were extremely partisan to Mr Fitzgerald and that some of them (as detailed below) were prepared to say whatever they thought would assist the defendants. Whether they were partisan because of their friendship with Mr Fitzgerald or because of other reasons (Ms Passlow for example, in addition to her deep friendship with Mr Fitzgerald, indicated that Mr Fitzgerald was assisting her sister with some delicate matter about which she was reluctant to disclose: see T196.39-T192.12) does not matter. The effect of this conclusion is first that it induces the need for considerable caution in dealing with the evidence called by the defendants. Secondly it tends to demonstrate that those partisan persons would very likely follow Mr Fitzgerald when able to do so and hence would be unlikely to have stayed with Charltons on the expiry of the 12 month restraint period, given their apparently strong connection with Mr Fitzgerald.

28 There was no argument as to whether the loss, if established, ought to have been reasonably contemplated. It is clear from the findings of Pembroke J that the defendants set out to achieve the transfer of clients from Charltons to themselves.

Res Judicata and Issue Estoppel

29 The plaintiff submits that Pembroke J's declarations definitively resolve once and for all the issues of fact and law and operate as a res judicata or, as an alternative, an issue estoppel: see Parramatta City Council v Sandell [1973] 1 NSWLR 151, 167, Marra Development Ltd v BW Rofe Pty Ltd [1977] 2 NSWLR 616 at 625. I accept that the defendants are not able to put in issue that the defendants relevantly performed work for shadow clients and clients, and that they did so wrongfully, in breach of the contractual and fiduciary duties or the restraint of trade clause. However the defendants are able to argue that although they breached the abovementioned duties, no loss arose from it.

Causation

30 In common law, the "but for" test is said to be the leading, and in almost all cases, the exclusive test of causation: see Alexander v Cambridge Credit Corp (1987) 9 NSWLR 310 at 350F. The plaintiff is entitled to recover compensation for loss in respect of which the defendants' conduct need only be a cause of the loss notwithstanding that there may have been other concurrent causes: see Ithaca Ice Works Pty Ltd v Queensland Ice Supplies Pty Ltd & Anor [2002] QSC 222 per Phillipides J at [17].

31 The PCS also makes reference to the principles of equitable compensation and assert that if the loss would not have occurred but for the breach of duty the defendants must compensate Charltons for that loss and that causation is an issue only in the very limited sense identified in Maguire v Makaronis (1997) 188 CLR 449 at 468. This differential was not developed in the PCS and I do not think that the established breaches of fiduciary duty affects the level of compensation.

32 In dealing with the clients below I should note that the PCS provided a very comprehensive review of the evidence for each client and that little of that review was challenged in the DCS and I have in a number of instances drawn extensively from the PCS.

Clients

Medicine Today Group of companies

33 The Medicine Today Group of companies was a retainer client of Charltons from 1997 until 31 August 2012 (see affidavit of Judith Anne Passlow dated 13 September 2013 at Exhibit E, tab 31). The principles of Medicine Today, Mr Tony Scott and Ms Judy Passlow were also clients of Charltons. Pembroke J found that Mr Fitzgerald had breached the Fitzgerald Best Endeavours Term by providing accounting services to employees and relatives of the principals of Medicine Today Group during his employment at Charltons, as well as breaching the Fitzgerald Restraint Term by providing taxation and accountings services to Medicine Today Group. Further Pembroke J found that Mr Kishore breached the Kishore Best Endeavours Term by providing accounting services to employees and relatives of the principals of the group while still employed at Charltons.

34 Charltons submits, by the PCS, that Medicine Today was a stable client of Charltons for some 15 years and had referred both individuals and companies to Charltons many of whom became clients of Charltons (see Mr Charlton's affidavit dated 3 September 2012 at para 56). The plaintiff drew attention to evidence of Ms Passlow emailing Charltons speaking highly of another senior accountant of Charltons named Halina Parakhina (see Mr Charlton's March affidavit at [99(k)] and Exhibit B, Exhibit CC4 at 335). The plaintiff submits that this is of increased significance because the bulk of the day-to-day accounting was not performed by Mr Fitzgerald but rather by Ms Parakhina who did 76% of the billable work in 2011 and 73% of the billable work in 2012: see Mr Charlton's affidavit dated 20 September 2013 [90]-[91], Exhibit CJC Damages 2, [64]-[66], [67]-[69].

35 In her affidavit, Ms Passlow asserts that she decided to end the retainer with Charltons because of, what she considered to be, unsatisfactory advice from Mr Charlton in relation to investment schemes. Ms Passlow asserts that she entered into a number of investment schemes on the advice of Mr Charlton between 1998 and 2003 where she lost a significant amount of money. In 2008 Ms Passlow made enquiries with the Macquarie Nine Film Fund about the rate of commission that Mr Charlton was receiving and asserts that she felt that the commission was Mr Charlton's motivation in advising her and her business partner to invest the in investment schemes. Ms Passlow contends that the reason that Medicine Today stayed with Charltons after these events is because of her relationship with Mr Fitzgerald and that Medicine Today Group ended its retainer with Charltons on 31 August 2012 because Mr Fitzgerald formally left Charltons.

36 The plaintiff accepts that Ms Passlow had "strongly negative opinions of Chris Charlton" (see Ms Passlow's affidavit at [37] at Exhibit E, tab 31) however contends that the defendants cannot rely on Ms Passlow's state of mind as an innocent concurrent event for Charlton's loss of the business of Medicine Today Group because Ms Passlow's state of mind is inextricably linked to Mr Fitzgerald and Mr Kishore's default and misconduct that Pembroke J found. The plaintiff says that Mr Fitzgerald and Mr Kishore's breaches had the intended effect of strengthening Mr Fitzgerald and Mr Kishore's relationship with Medicine Today to the detriment of Charltons. Further, Charltons contend that Mr Fitzgerald and Mr Kishore materially encouraged Ms Passlow and Mr Scott to form an adverse view of Charltons and, in particular, of Mr Charlton. In support of this contention the plaintiff refers to email correspondence between Mr Fitzgerald and Ms Passlow (see pp 287-295 of Exhibit B) which, the plaintiff contends, shows that Mr Fitzgerald undermined Ms Passlow's opinion of Mr Charlton by disclosing details of internal disputes he has had with Mr Charlton about sick leave entitlement, encourages Ms Passlow's view that Mr Charlton is lazy, implies that Mr Charlton has no real understanding of Medicine Today's business, implies Mr Charlton gives unsound advice and is generally incompetent. The plaintiff also refers to an email between Mr Kishore and Ms Passlow in which Mr Kishore made a representation to the effect that that Mr Charlton is incompetent. Finally, the plaintiff asserts that Mr Fitzgerald was deceptive in that he told Ms Passlow that Mr Charlton was falsely telling clients that Fitzgerald had left to Charltons to retire and did not tell Ms Passlow that in fact he told Mr Charlton that the reason he was leaving was to retire. Instead he said to Ms Passlow "that explains it... my premature 'retirement' which amazingly I was unaware of". I accept Mr Neil's submission that Mr Fitzgerald's actions constituted a concerted effort to undermine Ms Passlow's view of Mr Charlton, particularly evidenced by the email from Mr Fitzgerald dated 22 July 2012 where Mr Fitzgerald proffers significant criticism of Mr Charlton in a manner entirely inconsistent with his obligations as an employee. Mr Fitzgerald's active cultivation of these clients' associates by performing work for which no charge was levied by Charltons is also very likely to be part of the reason for Medicine Today Group's desire to follow him.

37 The plaintiff submits that Mr Fitzgerald continued to involve himself with Medicine Today after his resignation from Charltons by encouraging Ms Passlow's detrimental view of Mr Charlton (see Exhibit K, p 27), reassuring Mr White that he is still a client his but that he had to "keep silent" (Exhibit B, p 292), informing Ms Passlow of his plan to lure Charlton's clients to his new business (email dated 17 August 2012, Exhibit K), informing Ms Passlow of the fall of Charlton's billing as a result of his plan to lure clients away and asking Ms Passlow to stay loyal to him personally rather than Charltons (see Exhibit B, p 335). This material no doubt formed part of the basis of Pembroke J's conclusion concerning Mr Fitzgerald's breaches.

38 In relation to Mr Kishore's breach of the Kishore Best Endeavours Term, Ms Passlow says in her affidavit that she contacted Mr Fitzgerald in mid 2012 to ask if Mr Fitzgerald could assist her sister with negotiating her credit card debt. Mr Fitzgerald referred the matter to Mr Kishore, who was at the time an employee of Charltons. Ms Passlow says that she believed that the advice was covered by Medicine Today's retainer with Charltons and that if Mr Fitzgerald or Mr Kishore could not assist with the retainer then she would have managed the negotiations herself.

39 Ms Passlow was a most unsatisfactory witness, for a number of reasons:

(1) She frequently gave unresponsive answers (see for example T156.11-13, T160.14-23, T162.42-49, T175.41-47) and on several occasions would not permit Mr Neil to finish his questions (see T164.13-19, T155.34-47).

(2) She resisted the clear meaning of an email exchange with Mr Fitzgerald in which they discussed Mr Fitzgerald putting together a private ruling application for her;

(3) She contradicted her evidence by first denying to Mr Neil that she read an email from Mr Fitzgerald as necessarily indicating that he would perform work for her, and thereafter in answer to a question of mine stating that the email obviously meant that Mr Fitzgerald was saying he might have to help her with it and that she hoped he would do the work: T176-177.

(4) She denied that Mr Fitzgerald had discussed with her the fact that Mr Kishore was going to leave with him and set up a business to perform work for Charltons clients (see T172.16-20) but she then had to admit that Mr Fitzgerald must have told her that he and Mr Kishore had in mind persuading Mr Kishore's cousin (who was employed at Charltons) to come and join them (T172.34-50);

(5) She denied that she has supported Mr Fitzgerald's plan to perform work for Medicine Today immediately after he left. Yet in the correspondence it is clear she did, at pp 12, 15, 26, 27 and particularly 32 of Exhibit K where she wrote "Roll on next week. Can't wait to see Alden and get things moving. My only regret is for Galina. I hope you guys can find a space for her and rescue her in the not to distant future." The reference to Galina is to an employee at Charltons Ms Parakhina).

(6) She denied that Mr Fitzgerald had indicated to her that Charltons' retainer clients were leaving Charltons and going to him when it is clear he did;

(7) She denied that Mr Fitzgerald had a hand in drafting Medicine Today's letter terminating Charltons' retainer but later conceded he did;

(8) She denied that she set about persuading Ms Gwen Riggs to leave Charltons when it is clear she did: see T194-195

(9) She asserted that in writing her email of 21 July 2012 to Mr Charlton she had not intended to convey the impression that Medicine Today account work was going to be performed by Charltons (T174.6-12) but it is clear from the letter (see page 20 Exhibit K) that that was the intention (see also p 17 and p 24 of Exhibit K).

(10) She endeavoured on a number of occasions to present Mr Fitzgerald as having resisted her attempts to have him take on Medicine Today as a client (see for example T169.34-44) and (T154.5-10, 46, T155.10) which includes her asserting that Mr Fitzgerald told her "it wouldn't be right" to act for Charltons' client. That attributed statement is so inconsistent with Mr Fitzgerald's actions at the time and with Ms Passlow's encouragement of him as to be obviously false.

(11) The last point is linked to a very clear endeavour by Ms Passlow to present Mr Fitzgerald as having done no wrong against Charltons notwithstanding the findings of Pembroke J and the evidence with which she was confronted. Much of Ms Passlow's evidence involved her making assertions designed to persuade the Court that the material damaging to the defendants found in Exhibit K was not what it appeared to be, which assertions did not stand scrutiny. I will set out, as an example, a short portion of the transcript:

Q. I'll just explore this idea with you. Mr Fitzgerald to your knowledge had had a hand in the drafting of the termination letter?

A. No.

Q. And Mr Scott added something to what Mr Fitzgerald had seen or done or approved?

A. No.

Q. Does that accord with your recollection?

A. No. I'm thinking of another email. This is not the one.

HIS HONOUR

Q. Your evidence is you did not have anything to do with that email?

A. Yes, I stand by that now. I started to read this. I usually edit my business partner's email. He doesn't write very well.

Q. How do you know Mr Fitzgerald didn't have anything to do with the draft of--

A. Because--

Q. Just let me finish. You said that you had nothing to do with it. How do you know that Mr Fitzgerald did not provide a draft to Mr Scott?

A. Okay, I guess I don't know categorically but normally it would be, it would be quite typical for my business partner to do this on his own bat without saying anything to me. He is quite a bit older than me and he does things like that. But it would be unusual for him to have taken such a step without discussing it with me. But you're right, I don't know categorically.

Q. You say categorically, do you know at all?

A. No. If you want to put it that way, no.

40 I set out the following passage in the evidence of Ms Passlow during cross examination of her:

Q. During the course of your long association with Charltons you came to be very upset with Mr Charlton did you not?

A. I certainly did.

Q. You formed an adverse opinion of him?

A. Yes.

Q. As a professional accountant?

A. Yes.

Q. And as a man?

A. As a man. Yes. Eventually. I would say that side of it came much later but eventually, yes.

Q. And you shared those views with Mr Fitzgerald, did you not?

A. Yes.

...

Q. Mr Fitzgerald set out to undermine your view of Mr Charlton, do you accept that?

A. Oh no, not at all.

Q. While he was employed by the firm?

A. He couldn't have undermined it. It is not possible. My opinion of Mr Charlton built up since he first got us into all these problems that turned south on us which started as soon as we went to him in 1998. 1998, 1999, 2000, 2001, 2002, 2003, he put us into scheme after scheme after scheme. We thought he was some kind of hero but it all went south. It cost us an absolute fortune. No, our upon was set in stone long before then, I can assure you.

Q. Long before when?

A. Long before you're trying to suggest. That Alden undermined his opinion. That is absolutely incorrect. He couldn't have. It was already through the floor so it is not possible. Nobody could have brought it lower.

41 If the evidence in [40] is accepted it would make it unlikely that anything Mr Fitzgerald did increased the prospect of Medicine Today staying with Charltons once Mr Fitzgerald had opened his own practice and was permitted to receive Medicine Today as a client. However even if she has not been truthful her willingness to give the evidence she has done is clear demonstration of her support for Mr Fitzgerald and of itself indicates that she and her company were likely to move to Mr Fitzgerald's new practice when he was able to receive her as a client. I think the reference to "eventually" holding negative views about Mr Charlton as "a man" are very likely a consequence of Mr Fitzgerald's conduct. Accepting that Ms Passlow held negative views about Mr Charlton and was very close to Mr Fitzgerald the fact that she remained as a client of Charltons whilst Mr Fitzgerald was working for Charltons at least demonstrates that her antipathy was not sufficient to lead her to terminate the retainer and stop paying substantial fees to Charltons and is relevant in deciding whether she would have left Charltons to use a third party accountant until the Restraint Period was over.

42 I am unable to accept anything that Ms Passlow says. I am satisfied on the evidence that Ms Passlow thought that if Mr Fitzgerald left Charltons he would thereupon commence as Medicine Today's accountant (directly or through a corporate vehicle) and only learnt that he could not do so when Charltons obtained an interlocutory injunction against the defendants.

43 I am not satisfied on the balance of probabilities that Medicine Today would have left Charltons within the 12 month Restraint Period if Mr Fitzgerald and Mr Kishore had not breached their obligations and I am satisfied, on the balance of probabilities, that Charltons would, until the end of the Restraint Period, have earned a similar income to that which they earned in the proceeding year subject to the multiplier of 0.98. I take the amount of $60, 800 reduced by 10% to allow for the reduction reflected in FY12 return and multiplied by 0.98 i.e. $53, 625.60

Harris Family Group

44 On 27 August 2013, Pembroke J made a declaration that Mr Fitzgerald breached the Restraint term in respect of the Harris Family Group.

45 The Harris Family Group consists of various Harris family members and their various corporate entities including Arbre Beauty Programs Pty Ltd, the Arris Family Trust and Pacific Laboratories Pty Ltd.

46 The Harris Family Group was a client of Charltons from 1999 until 28 August 2012. The last occasion on which Charltons performed work for the Harris Family group was in February 2012, when it prepared financial statements and tax returns for the Harris Family Superannuation fund, and the last time Charltons prepared end of year personal and corporate financial statements and tax returns was in May 2011.

47 The work for which Charltons was periodically engaged by the Harris Family Group included the preparation of annual tax returns (both corporate and personal) and the preparation of financial statements.

48 The Harris Family Group of entities and individuals were stable clients. At the time of terminating its relationship with Charltons, the Harris Family Group had been a client for some 8 years on a regular basis, the group's relationship with Charltons was such that not only did Peter and Janet Harris engage Charltons on a regular basis in respect of their individual and corporate tax returns but so too did their son and daughter in law, Luke and Anita Harris, and at no time prior to 28 August 2012 (nor thereafter) had the Harris Family Group made any complaint to Mr Charlton about the work and nor did Mr Fitzgerald report any complaint to Mr Charlton.

49 Although Mr Fitzgerald was the primary point of contact, most of the day-to-day work was performed by other Charltons staff. In the 2010/2011 financial year, only approximately 32.2% of billable work was performed by Mr Fitzgerald, with the remaining 67.8% being recorded by other Charltons staff. More than half of the billable work was performed by Ms Parakhina (20.2%) and Mr Jimmy Yin (30.8%). In the 2011/2012 financial year, Fitzgerald only performed approximately 11.3% of billable work, with most of the billable work being recorded by Ms Parakhina (71.9%) and Mr Yin (14.5%).

50 Mr Fitzgerald was the Harris family's primary point of contact at Charltons for several years.

51 The Harris Family Group formally terminated its relationship soon after termination of Fitzgerald's employment. The Harris' 28 August 2012 termination letter was sent to Charltons just under a month after Fitzgerald's last day of employment (31 July 2012) and mere days prior to Prasad's last day of employment (31 August 2012).

52 The Harris Family Group subsequently engaged the defendants to perform work for the group.

53 Mr Harris deposed that he had decided to "wind-down" arrangements with Charltons since late 2011 by reason of long-held concerns that he had with Charltons service and the fees it charged, and that he did not have any confidence that the staff at Charltons (after Mr Fitzgerald's departure) would be able to perform his work in a timely manner.

54 By his letter of 28 August 2012 Mr Harris wrote to Mr Charlton saying, inter alia, that:

We are moving our accounting needs to a smaller firm that will be placing documents on our behalf with the relevant authorities.

I would like to thank you for your assistance over the years and consideration.

The letter also asks that documents be forwarded to his post office box.

55 Mr Harris asserted in his affidavit that he was concerned that Charlton's fees were excessive and that he had made an appointment with a Newcastle firm to review the Charltons cost and that they had told him Charltons were charging too much for the services provided. He complained in his affidavit about Charlton's response to his attempts to retrieve tax records and files and other records and that Charltons, since mid 2012, resisted the requests. He claimed that accounting requirements for Arbre (one of his companies) are now being handled by a bookkeeper.

56 There are a number of reasons why I am unable to accept Mr Harris' account of matters:

(1) He could not recall the name of the small accounting firm that he had mentioned in the letter of 28 August 2012: T240 and Exhibit N.

(2) He said he did not know the name AGF Pty Ltd (T240) but Ms Carol Faulkner, a bookkeeper with experience in MYOB and with whom Mr Fitzgerald was closely associated, billed AGF Pty Ltd for worked for Arris Family Trust Pacific Laboratories and Arbre Pty Ltd in August 2012 and AGF is a company owned by Mr Fitzgerald and Mr Fitzgerald gave Ms Anita Harris, at Arbre, the details of AGF (see Exhibit N)

(3) The timing of the departure by Mr Harris is very close to Mr Fitzgerald's departure.

(4) Mr Harris asserted that he had notified Charltons of his dissatisfaction with the firm by his letter but not only does the letter give no indication of dissatisfaction, it communicated the opposite (see Exhibit N)

(5) At T244.5-11 there was the following exchange:

Q. You see, what I want to suggest to you is that that reference was an indication that AGF had been engaged, not just to provide work, accounting services to the Arris Family Trust, Pacific Laboratories and Arbre Pty Ltd, but also to perform ongoing accounting work. Are you able to say anything about that?

A. I think you'd have to ask Alden Fitzgerald.

Mr Harris admitted that he was the person making decisions about which accountancy would be used but asserted ignorance of AGF (which had arranged for Ms Faulkner to carry out work for his companies). I think it is more likely that Mr Harris was the person who could refute that AGF had not been engaged by the Harris Group, were it not true.

(6) There is no evidence of any failures by Charltons to return documents before 12 August 2012.

57 I do not accept that Mr Harris and his companies left Charltons by reason of any dissatisfaction with Charltons or their fees and I think that Mr Harris left Charltons when he did because he was encouraged to do so by Mr Fitzgerald in the belief that Mr Fitzgerald could perform the Harris Group's accounting work. I am not satisfied that Pacific Laboratories was closed down and did not generate accounting work.

58 Charltons claim $7,125 as the lost revenue for these clients but the defendants say it is has not been established that all of the invoices are in fact companies connected with Mr Harris. Mr Harris did not give evidence that they were unconnected and the FY12 Revenue Schedule refers to the invoices in question which were not put in evidence. I shall treat the two companies as associated with the Harris Group. I propose to allow the $6125 but reduce it by 10% and multiply by 0.98 i.e. $6125 x 90% x 0.98 = $5,402.25.

Face Today Group

59 Pembroke J found that Mr Fitzgerald had breached the Fitzgerald Best Endeavours Term by providing bookkeeping services and breached the Fitzgerald Restraint Term by performing work for Face Today Group in connection with the provision of taxation and accounting services. The defendants rely upon the affidavit of Nicole Louise Jackson-Belle sworn 11 September 2013 to assert that there was no loss to Charltons as Face Today had planned to end its retainer with Charltons long before the restraint term took effect. Ms Jackson-Belle is the sole director and shareholder of Face Today Mediclinic Pty Limited that operates Face Today. I shall refer to this client as "Face Today".

60 Face Today was a client of the plaintiff since 2007. Ms Jackson-Belle's evidence is that in around February to March 2011, Mr Charlton refused to attend or provide an accountant to attend "a critical" mediation in her divorce proceedings. She said in her affidavit that she "relied heavily on Helen [her business partner Ms Koi] and Alden [Mr Fitzgerald] to advise her during the Divorce Proceedings" (see para 15 of Ms Jackson-Belle's affidavit). Ms Jackson-Belle says she had to engage another accountant for the mediation and, as a result of the incident, she decided that Face Today would leave Charltons. Ms Jackson-Belle did not act upon this decision until April 2012. She also attributes her decision to leave Charltons because Mr Charlton had a "general change in his demeanour" (see T296.37-T297 and Ms Jackson-Belle's affidavit of 11 September 2013). In her affidavit, she says that since ceasing Face Today's relationship with Charltons, she has interviewed three different accountants (none being the defendants) but that she is yet to formally appoint one.

61 There were a number of reasons which led me to doubt the veracity and reliability of Ms Jackson-Belle:

(1) Ms Jackson-Belle was a most unsatisfactory witness:

(a) She gave a number of non-responsive answers (see T294, T296, T300, T309.4-14, T314.9-15)

(b) She would not make appropriate concessions (see T298.4-7, T298.24-31, T309.47-T310.8, T322.44-T323.21)

(c) She made assertions that were proven to be incorrect by other evidence. For instance she asserted that Mr Fitzgerald had nothing to do with her divorce proceedings yet there is a letter dated 15 February 2011 from Mr Fitzgerald to Ms Jackson-Belle's lawyers attempting to settle her divorce proceedings (see T299.10-21) and there is an invoice which "includes attendances by Alden Fitzgerald gathering material, compiling reports" (see Exhibit Q).

(d) She often asserted that she could not remember dates (T311) even important dates such as when she reached settlement in her divorce proceedings (see T302.9-19).

(e) Even when she had said that she could not assist on matters that were within the province of Ms Helen Koi she was willing to positively assert that Mr Fitzgerald had not performed accounting services for Face Today (see T319.31-35) and did so in the face of evidence that, either directly or through Ms Carol Faulkner, he had done so and in the face of Pembroke J's findings.

(f) She sought to alter her version of Mr Fitzgerald's inability to attend the mediation (see her affidavit paras 11, 15 and 16 and T291, T298-300 and T297) when she saw that it was somewhat inconsistent to criticise Mr Charlton for not attending the mediation (as she alleged) when Mr Fitzgerald had told her he could not attend.

(g) She had positively asserted in para 16 of her affidavit and during cross examination that Mr Fitzgerald had gone overseas at the time of the mediation but she sought to resile from that and say that she did not know whether he had gone overseas (T300) and she had assumed he was overseas (T300.31-301.20)

(h) She spoke on several occasions of telling "my truth" (T300.17-20, 296.21, 304.10, 314.44) when her evidence was inconsistent with the objective evidence and even on one occasion when reminded of the need to confine herself to answering questions asked.

(i) She said that she was not involved in the accounts side of the business and did not know why she was "asked here" (T322.20) yet she is the witness from Face Today who gave evidence for the defendants concerning decisions relating to which accountants Face Today would retain.

(2) There is evidence (in addition to Mr Charlton's own evidence) that Mr Charlton did attend the divorce mediation: see Exhibit Q at p 4 which contains an invoice from Charltons that states "attendances by Chris Charlton at the offices of Swaab Attorneys and a meeting with Marilyn Hauptman at Charltons" and a letter at p 3 from Mr Charlton to Ms Jackson-Belle dated 21 December 2010 which notes that the divorce mediation had occurred in December 2010 and that it had been successful. After being confronted with the invoice in cross examination, Ms Jackson-Belle admitted that Mr Charlton did attend the meeting but she said she "forgot" this because "[h]e ran in, he ran out, he said 'hi' to Marilyn" (T304.31-32). Ms Jackson-Belle admitted to having remembered the fact that Mr Charlton had attended her mediation after she wrote her affidavit and before giving oral evidence but did not choose to amend her affidavit when invited to in examination in chief because she said she did not "think it was important" (see T304.17-37). The fact that Ms Jackson-Belle made an assertion that Mr Charlton did not attend her mediation in her affidavit and repeated in her oral evidence in circumstances, where Face Group paid an invoice for his attendance and she admits that before giving oral evidence she remembered the fact Mr Charlton had attended, leads me to strongly doubt her veracity as a witness and undermines her explanation for leaving Charltons.

(3) Ms Jackson-Belle says she made the decision to end the retainer with Charltons at the time of her divorce mediation because of a change in Mr Charltons' demeanour. However, there is evidence that up until December 2011, the same month that the mediation occurred, that Ms Jackson-Belle was on very friendly terms with Mr Charlton which suggests that, contrary to her oral and affidavit evidence, she did in fact think highly of Mr Charlton (see her letter to Mr Charlton dated 6 December 2010, Exhibit Q). The claimed "change of demeanour" of Mr Charlton as an additional factor in her decision seemed equally devoid of any content and was, I infer, part of the fabricated excuse for leaving Charltons that was put forward in an endeavour to exculpate Mr Fitzgerald.

(4) There was a period of over a year between the time that Ms Jackson-Belle says she decided to leave Charltons (which she says was at the time of her divorce mediation in December 2010) and formal notice being given in April 2012. Ms Jackson-Belle explanation for this lapse in time is unconvincing. In her affidavit she asserts that she felt she could not leave Charltons in the midst of her divorce proceedings, when Charltons had all her documentation and had been intimately involved in the proceedings. However, the divorce proceedings were finalised in the Family Law Court in April 2011. When Mr Neil drew this to her attention, Ms Belle-Jackson asserted it was not a priority to get a new accountant as it "was not like it was an emergency" (see T309.4-14 and T313.30) and also asserted that she was in fact "mentally" in the midst of the divorce proceedings until March 2012 (T310). Ms Jackson-Belle also contended that she believed that she would not be able to retrieve all Face Group and her own files. I found her explanation for the lapse of time between her claimed decision to end the retainer with Charltons and the termination of the relationship to be unconvincing and this also undermines her credibility. The defendants were unable to tender any evidence to show that any employee from Face Group had requested the return of files from Mr Charlton before 13 September 2012 (see Exhibit Q). The timing of the request for files is clearly linked to the departure of Mr Fitzgerald.

(5) I gained the impression that Ms Jackson-Belle had manufactured a "story" about why she had decided to leave Charltons at a time before Mr Fitzgerald had set about his plan to leave Charltons and take clients with him.

(6) The fact that Face Today had not, according to Ms Jackson-Belle's evidence, appointed any new accountant is relevant as a factor which in all the circumstances only reinforces my conclusion that Face Today was not going to use anyone but Mr Fitzgerald.

62 For the reasons listed above, I do not regard Ms Jackson-Belle to be a credible witness and I am unable to rely on her evidence at all. I am not persuaded that:

(1) She had formed any negative view of Mr Charlton in 2011 or 2012.

(2) She resolved to leave Charltons by reason of matters unconnected with Mr Fitzgerald's departure and her belief that Mr Fitzgerald could perform Face Today's accounting work.

(3) She would have left Charltons at any time prior to the end of the Restraint Period and commenced using a different accountant other than Charltons or Mr Fitzgerald had Mr Fitzgerald advised her that he would not be able to perform work for Face Today or any of its staff before the expiry of the Restraint Period.

63 It also follows that I am not persuaded that there would, in the Restraint Period, have been any reduction in the level of work that Charltons would have performed had there been no breach. It follows that I am satisfied that Charltons would have, on the balance of probabilities, earned $31, 320 in the 12 month period (the figure is taken from what is stated in the accounts of Charltons) which should be reduced by 10% and multiplied by 0.98 i.e. $27, 624.24.

Maroon Group

64 There were two clients in the Maroon Group - PJC Holdings Pty Ltd ("PJC Holdings") and BDF Holdings Pty Ltd ("BDF Holdings"). Ms Nelly Maroon - Yacoub and Mr Arthur Maroon-Yacoub own or control PCJ Holdings. BDF is owned by other members of the family.

65 Charltons had acted for PJC Holdings (and BDF Holdings) since 2004 and on 16 August 2012 Mr Maroon-Yacoub sent a termination letter on behalf of the Maroon Group (both PJC Holdings and BDF Holdings). BDF in about October 2012 reengaged Charltons. Most of the work for the Maroon Group was performed by Mr Charlton and a Mr Reade (an employee of Charltons). For PJC Holdings 88% of the work was performed by Mr Reade (see Mr Charltons affidavit dated 20 September 2013 and Exhibit CJC-Damages 2 to Affidavit of Mr Charlton dated 20 September 2013 at paras 16-18).

66 Ms Nelly Maroon-Yacoub in her affidavit deposed that there were three reasons why she agreed with her husband's decision to terminate the retainer agreement with Charltons in August 2012:

(1) Following a split in the family business between PJC Holdings and BDF Holdings she wanted to avoid having the same accountants,

(2) Mr Fitzgerald was no longer employed by Charltons and she felt that Charltons could not offer her the same level of service without him, and

(3) She had no confidence in Mr Charlton's ability to service the accounting needs of PJC Holdings.

67 Charltons accepts that Ms Maroon-Yacoub had the state of mind to which she deposes and referred to in the preceding paragraph.

68 Charltons disputes that PJC's departure was a result of the matters asserted and for the following reasons:

(1) Mr Charlton spoke with Nelly and Arthur Maroon-Yacoub periodically when they visited Charltons' offices and at the offices of Brown Wright & Stein, who have from time to time acted as lawyers for the Maroon family. On none of those occasions did Nelly Maroon-Yacoub express any concern in relation to how often Mr Charlton visited the business premises of PJC Holdings or whether Mr Charlton had a sufficient understanding of the Maroon Group or its financial problems or in relation to the quality of Charltons' services. Nor is there any evidence of such a complaint having been made by Arthur, Peter or Najwe Maroon-Yacoub to Mr Charlton, Mr Fitzgerald or any other Charltons staff member.

(2) Ms Maroon-Yacoub developed a "strong personal relationship" with Mr Fitzgerald over the years while he was employed at Charltons. She continued to socialise with Mr Fitzgerald after he left Charltons (see Ms Maroon-Yacoub's affidavit at para 6, Exhibit E).

(3) Mr Fitzgerald drafted, or assisted with the drafting of, the termination letter sent by the Maroon Group on 16 August 2012.

(4) Ms Maroon-Yacoub concedes that from at least about 5 September 2013 PJC Holdings engaged Intuitive to undertake work for PJC Holdings. Ms Maroon-Yacoub has not claimed that PJC Holdings terminated its relationship with Charltons in order to engage an unrelated, third party accountant.

(5) Ms Maroon-Yacoub denied that Mr Fitzgerald has performed work for PJC Holdings since he left Charltons. She did so in the face of objectively clear documentary evidence (and contrary to the breach findings already made against Mr Fitzgerald in these proceedings) that Mr Fitzgerald continued to provide services to the Maroon Group in conjunction with a bookkeeper, Ms Shirley Fyander, with whom Mr Fitzgerald had worked as a team in respect of the Maroon Group while he was employed by Charltons: see Exhibit P. Ms Maroon-Yacoub agreed that it appeared that way (see T284.20-25) but she sought unconvincingly to explain it away. She also sought to deny that Mr Fitzgerald was endeavouring to organise a "PJC dinner" (see Exhibit P) saying that it was she and her husband were organising it. An email from Mr Fitzgerald of 12 February 2013 to Ms Fyander in which he tells her, in response to her query as to what he wants her to do in connection with a BAS statement for PJC, that he has since September been unable to act for PJC "under Court instructions" is revealing because it suggests that Ms Fyander had understood up to the point of time that Mr Fitzgerald could act for PCJ and, I infer, because Mr Fitzgerald had asked her to perform that work.

69 The fact that the termination letter was sent on behalf of the group (and not just PJC) undermines the "conflict" contention and the fact that it was drafted by Mr Fitzgerald and its timing points to the termination having a great deal more to do with Mr Fitzgerald's departure than any other reason.

70 I accept that it is very likely that PJC would have left Charltons at the end of the Restraint Period but I am not persuaded that it would have done so during the Restraint Period but for the actions of Mr Fitzgerald.

71 In the financial year 2012 Charltons' gross revenue for Mr Maroon-Yacoub/PJC Holdings was $40K, with a 10% reduction (accounts reduction) this reduces to $36K and using the 0.98 multiplier this reduces to $35, 280.

Pivotal Group

72 On 27 August 2013, Pembroke J made a declaration that Mr Fitzgerald breached the Restraint Period term in respect of the Pivotal Group of companies and its principal Mr Jose (Joe) Duarte.

73 Pivotal Group consists of Pivotal Training and Development Pty Ltd, Pivotal and Civil Pty Ltd, Pivotal Point HR Pty Ltd, Antgon Pty Ltd, FDFT Trust and Pivotal HR Management and Solutions Pty Ltd.

74 The Pivotal Group was a long-standing and stable client of Charltons. Pivotal Group, Mr Duarte and his family were clients of Charltons continuously from about the mid-1990s until 3 September 2012. Pivotal Group was a Charltons retainer client. On 3 September 2012, Charltons received a letter from the Pivotal Group terminating its retainer with Charltons.

75 Charltons' work for the Pivotal Group included management accounting, tax work, preparation of financial statements, liaising with banks, on-site visits, general ad hoc advice relating to accountancy and business management.

76 Charltons also performed personal work for Mr Duarte, including his superannuation funds, and provided additional accounting services to Pivotal Group during litigation in which Pivotal Group was involved.

77 Charltons no longer provides any services to or derives any revenue from Pivotal Group, its principals including Mr Duarte or any individuals associated with Pivotal and Mr Duarte. Recently, Mr Duarte started a new company called Pivotal Australia Pty Ltd (Duarte Affidavit dated 10 September 2013, para 2) who has never instructed or retained Charltons.

78 Mr Fitzgerald was the primary point of contact with Pivotal Group and Mr Duarte.

79 Mr Duarte deposed that terminating the retainer agreement with Charltons in September 2012 was a cost-cutting measure, and that he had intended to continue to use Charltons for the Pivotal Group's accounting and taxation needs.

80 In his affidavit, Mr Duarte did not assert that he discontinued or reduced his use of Charltons' services in order to engage another accountant unrelated to the defendants. Rather, Mr Duarte asserted that he and the Pivotal Group are still clients of Charltons (albeit in respect of a reduced range and amount of services) although he admitted that he has requested Intuitive to perform some of the Pivotal Group's accounting work.

81 Under cross-examination Mr Duarte eventually agreed, after having initially denied the proposition, that certainly by 19 August 2013 it was well settled between him and Mr Fitzgerald that the Pivotal Group's accounting and taxation work would be transferred to Mr Fitzgerald.

82 Charltons submits that Mr Duarte's state of mind, and his subsequent decision to transfer Pivotal accounting and taxation work to Fitzgerald, were inextricably connected with Mr Fitzgerald's default and misconduct:

(1) Mr Fitzgerald sought to undermine the connection between the Pivotal Group and Charltons while he was employed by Charltons by disclosing to Mr Duarte the dispute he had with Mr Charlton about his sick leave in April 2012 (in the same way that Mr Fitzgerald had done with Ms Passlow).

(2) Consistent with a common theme underlining the evidence of many of the witnesses called by the defendants in these proceedings, Mr Duarte was highly reluctant to admit that Mr Fitzgerald had performed work for him after he left Charltons ("I didn't employ Mr Fitzgerald to do any work at all"; "I doubt that he did [tax work on Mr Duarte's behalf] because he didn't have any authority to ring the tax office...": see T202.20-33). This reluctance is contrary to objectively clear documentary evidence that Fitzgerald continued to perform such work: see Exhibit L.

(3) Mr Duarte attempted to conceal that he had discussed with Mr Fitzgerald a plan for Mr Fitzgerald to perform work for the Pivotal Group. When pressed, Mr Duarte contradicted his evidence and claimed that the earliest time such a discussion took place was August 2013 - a claim about which, at that moment, he expressed himself to be quite confident. In further contradiction of his evidence, Mr Duarte eventually conceded that it was possible that he discussed with Mr Fitzgerald, before Mr Fitzgerald had left Charltons on 31 July 2012, the idea that Mr Fitzgerald would perform work for him after leaving Charltons.

(4) Mr Duarte's affidavit evidence to the effect that, as at 10 September 2013, Pivotal remained a client of Charltons and Mr Duarte intended to continue to use Charltons' services, was false. Mr Duarte conceded both in cross-examination and re-examination that he had previously decided to no longer use Charlton's services. His explanation that his position had changed after swearing his affidavit because he wanted "to be loved" by Charltons and his evidence in re-examination - that he had firmly decided to no longer use Charltons over the last "two months" were false.

(5) Mr Fitzgerald's interference with the Pivotal Group was so successful that Mr Duarte was prepared to give such false evidence in a futile attempt to protect Fitzgerald after the Court had already made adverse breach findings against him.

(6) In the result, the natural and irresistible inference is that Mr Fitzgerald's solicitation and default or misconduct was a material cause of the Pivotal Group's termination of its retainer and client relationship with Charltons' client.

83 The defendants do not challenge the plaintiffs contentions about Mr Duarte's lack of credibility. The defendants do however assert that Mr Duarte was dissatisfied with Mr Charlton and had no relationship with him. I have difficulty accepting anything that Mr Duarte says but I do accept that he has a strong relationship with Mr Fitzgerald as is evidenced by his willingness to give false evidence on Mr Fitzgerald's behalf. I think it is likely therefore that Mr Duarte would have left Charltons at the end of the Restraint Period. I am not persuaded that Mr Duarte and Pivotal Group would have left Charltons to engage another accountant other than Mr Fitzgerald.

84 Charltons claim that it lost not only the business of Pivotal Group but also that of Ms Drennan who was a client associated with Pivotal and Mr Duarte. The defendants do not take issue with that but they claim that in addition to the global factors the plaintiff's claim needs to be reduced by the amount of $65, 500 in respect of Pivotal HR Management Solutions Pty Ltd because it went into liquidation in March 2013.

85 If, as the defendant's contend, the task is to value the loss as at the date the clients were lost to Charltons, which I have accepted, I have considerable doubt that it is appropriate to examine what in fact occurred in the following year. In any event, as the PSR point out Mr Duarte formed a new company Pivotal Australia Pty Ltd (Exhibit E, tab 14, affidavit of Mr Duarte at [2]) and it is appropriate to assume (see [6](5) above) that it would generate similar accounting income to Charltons as its predecessor had done.

86 The amount to be allowed for this loss is $90,900 x 0.90 x 0.98 which equals $80, 173.80

Marian O'Neill and Precision Optics

87 The defendants concede that causation has been established in respect of these clients. Charltons earned $30,003 for their clients in FY12. The defendants claim that the invoices produced for Marian O'Neill and Precision Optics (and Ted O'Neill) total $6850 for FY12. Other invoices relate, they contend, to entities and individuals who have no connection, on the evidence, to the named clients. The plaintiff's response is that the tax invoices at tab 8 of Exhibit 5 demonstrate that $30, 003 invoices were rendered and refer also to Mr Charlton's affidavit of 28 March 2013 at para 152. There is detailed reference to the invoices, in the PSR but tab 8 of Exhibit 5 contains only the Notice to Produce, I assume by an oversight. I proceed on the basis that PSR (paras 16-17) correctly describe invoices that were produced (nothing was said about this in oral submissions) and I think that it is clear that all of the entities in respect of which the work was performed were connected with the O'Neills and their trusts and companies.

88 I am satisfied that it is appropriate to start with $30, 003 for FY12. It is not appropriate to reduce the amount by 10% because the invoices that have been rendered have been identified and accordingly using a multiplier of 0.98 I arrive at a figure of $26, 462.65.

Cubic Pacific and Madeleine Jelfs

89 On 27 August 2013, Pembroke J made a declaration that Fitzgerald engaged in a Restraint breach in respect of the Cubic Pacific Group of companies (Cubic Pacific) and its principals Mark Ganley and Paul Jelfs.

90 Pembroke J also made a declaration that Mr Fitzgerald breached his Restraint Term in respect of Madeleine Jelfs, by soliciting her in connection with the provision of taxation and accounting services.

91 Cubic Pacific includes the company PJ & PJ Holdings Pty Ltd and A.C.N. 091 561 125 Pty Ltd (formerly Cubic Pacific Pty Ltd).

92 Cubic Pacific and Mark Ganley and Paul Jelfs were clients of Charltons from about 1999 (a retainer client from 2005 or 2006) until 3 September 2012.

93 Ms Jelfs is the daughter of Paul Jelfs, and was a client of Charltons from about May 2011 until about July or August 2012. Charltons has not been asked to do work for Ms Jelfs since at least 31 July 2012.

94 Despite the fact that Mr Fitzgerald was the primary point of contact with Cubic Pacific, Mr Charlton habitually spoke to Mr Ganley once or twice a year throughout the period of Charltons' retainer to discuss the affairs of Cubic Pacific, and most of the day-to-day work was not performed by Fitzgerald, but rather by other Charltons staff:

(1) in the 2010/2011 financial year, Mr Fitzgerald recorded approximately 40.1% of billable work (including 3.1% estimated) while Milena Lakic recorded approximately 48.3%; and

(2) in the 2011/2012 financial year, Mr Fitzgerald recorded approximately 45.4% (including 9.5% estimated) while Ms Lakic recorded approximately 42.7% and Ms Parakhina recorded approximately 8.2%

95 Mr Jelfs deposed that Mr Ganley wrote to Charltons on 31 May 2012 terminating the retainer agreement. The letter annexed to Mr Jelfs' affidavit indicated that, at that time, Cubic Pacific wanted to convert its relationship with Charltons to "[a] time only basis, as required" which "will work better for us going forward" (see Mr Jelfs' affidavit at para 17, Exhibit E, tab 34).

96 On 3 September 2012, Charltons received an email from Cubic Pacific in which Charltons was told that all of Cubic Pacific's corporate and personal tax affairs would be attended to in-house, and which requested the return of all records "as we are not appointing any other financial advisors at this point" (see Mr Charlton's affidavit dated 12 November 2012 at para 103 and Exhibit A at pp 63-66).

97 Charltons no longer provides any services or derives any revenue from Cubic Pacific or its principals or the individuals associated with it, including Madeleine Jelfs.

98 In May 2012 Cubic Pacific terminated retainer work with Charltons following the sale of Cubic Pacific's business in December 2011. Mr Jelfs who gave evidence said that the sale and his unhappiness with the quality of Charlton's service was the reason for termination. Charltons' asserts that the decision to withdraw all business from Charltons occurred in September 2012 and claim that this was because Mr Fitzgerald had agreed to perform work and did work for Mr Jelfs after Mr Fitzgerald had left Charltons: see Exhibit R, tab 4, and see Mr Charlton's affidavit dated 28 March 2013 at para 181 and Exhibit C, pp 588-599.

99 I am satisfied that the defendants were performing work for Mr Jelfs and that the departure of Mr Jelfs and his wife were brought about by Mr Fitzgerald's encouragement of them to do so and his willingness to perform work within the Restraint period. It is however very difficult to assess how much should be allowed for this client there being no doubt that Cubic Pacific had been sold. There is no evidence that Mr Jelfs established another business but it is clear he had substantial commercial investments and would, I infer, need some accounting work. I would treat the $5, 100 as a starting point for Mr and Mrs Jelfs add $2000 for the work that Mr Fitzgerald in fact performed (i.e. $7,100) discounted by 10% and multiplied by 0.98 i.e. $6,262.2.

Bourkes Transport Industries group of companies

100 Pembroke J found that Mr Fitzgerald breached the Fitzgerald Best Endeavours Term by providing bookkeeping services and breached the Fitzgerald Restraint Term by providing taxation and accounting services.

101 Mr Wayne Bourke is the director and half owner of Bourkes Transport Industries and holds interests in related entities. Mr Bourke swore an affidavit dated 13 September 2012 where he asserts that he was a client of Charltons between 1999 and July 2012. Mr Bourke says that Mr Charlton was the primary point of contact at Charltons for approximately 3 years, in which time Mr Charlton travelled to Taree to visit the business and Mr Bourke thought highly of Mr Charlton. Mr Bourke's opinion of Mr Charlton changed about 3 to 4 years ago, he said, because Mr Charlton had not come to visit him or the business in nearly ten years, this change of opinion was reinforced when Mr Bourke received a Subpoena in late March 2013. Between 2002 and 2012 Mr Fitzgerald became the primary contact and Mr Bourke says he trusted Mr Fitzgerald and "perceived him as a very important business partner for the Bourke Group" (see para 4 of Mr Bourke's affidavit dated 13 September 2013).

102 In July 2012 Mr Fitzgerald notified Mr Bourke that he would no longer be working for Charltons and Mr Bourke says that Mr Fitzgerald did not request that Bourke Group accounting and taxation business be transferred. Mr Bourke says the reason he has ended his retainer with Charltons is because Mr Fitzgerald is no longer working there and he does not want to use and pay for Charltons' services without Mr Fitzgerald working there.

103 In cross examination Mr Neil put to Mr Bourke that he left Charltons because he knew that Mr Fitzgerald would continue to do the group's accounting work immediately after he left Charltons. At first, Mr Bourke denied this (see T118.15-19) however he later admitted it (see T125.26-35). Further, in cross examination Mr Bourke admitted that he gained the knowledge that Mr Fitzgerald would continue to do the group's accounting work from Mr Fitzgerald himself (T125.33-35) who told Mr Bourke prior to his departure from Charltons that Mr Bourke could move over to Mr Fitzgerald's new business immediately after he left Charltons employment (T120.20-23). Mr Bourke explained in re-examination that Mr Fitzgerald was his "primary contact through Charltons for many years" and he "trusted him" and he "became a friend" (T126.31-36).

104 The admissions that Mr Bourke made establish that Bourkes Transport left Charltons because Mr Bourke thought he could use Mr Fitzgerald's service immediately and by virtue of Pembroke J's findings because, by performing bookkeeping services, in breach of his Best Endeavours Term, Mr Fitzgerald had cultivated a close relationship with him to that end. I do not need to consider other points relevant to Mr Bourke's credit. I am satisfied, on the balance of probabilities, that Bourke Transport would have generated $51, 632 less 10% and multiplied by 0.98 i.e. $45, 539.42. The defendants pointed out that the figure claimed by Charltons includes amounts for Niche Wrape Investments Pty ltd and Megan Bourke and that Pembroke J did not make any findings in respect of these entities. These two clients were part of the Bourke Group and I do not think it is appropriate to exclude them.

Corporate Carbon Group

105 On 27 August 2013, Pembroke J made a declaration that Fitzgerald breached the Restraint Term in respect of the Corporate Carbon Group ("CCG") of companies

106 Causation is accepted by the defendants and the only issue is the quantum of damages.

107 Charltons claims an amount between $20K to $30K on the basis of Mr Charlton's evidence that the items of work set out in the to do list supplied by Mr Warnken of CCG including personal returns would equate to this. Given the very small amount of work generated by this client with Charltons in financial year 2012 and the large amount and nature of anticipated work in the to do list, it seems that the CCG held back work until Mr Fitzgerald had left Charltons.

108 Mr Warnken estimated the value of the work as only $2000 per year (Exhibit E, 33, affidavit of Mr Warnken of 13 September 2013 at para 10) and said he would not have been willing to pay $20K. Mr Warnken's evidence was that CCG uses other accountants in Melbourne and would have used them if Mr Fitzgerald was not available.

109 I am inclined to think that Mr Warnken's estimate of the cost of service sought at $2K is unreasonably low and I would be inclined to accept Mr Charlton's lower figure of $20K as more realistic. I am persuaded that Mr Warnken's departure from Charltons was closely connected with Mr Fitzgerald's breaches but on the assumption that Mr Fitzgerald was not available in the restraint period there is Mr Warnken's evidence that he would have used accountants in Melbourne. That assertion was not the subject of cross examination and the PSR do not respond to this point.

110 There was no attack of Mr Warnken's credit and accordingly I accept his evidence of what he would have done I therefore reject any claim in respect of CCG.

Blue Horseshoe Trading and Annacott Holdings

111 The defendants accept causation has been established in respect of these clients and the only issue is quantum.

112 Charltons claim that loss of value of these clients is $2, 700 for which there is evidence: see Charltons affidavit dated 20 September 2013 at para 8 and Exhibit CJC Damages 3 at pp 45 and 54. Applying the 10% and 0.98 reduction this yields $2, 381.40

Angela Domenici

113 On 27 August 2013, Pembroke J made a declaration that Mr Kishore breached the Restraint Term in respect of Ms Angela Domenici.

114 Ms Dominici, her partner Mr Craig Rosevear and Angela Dominici's company The Big Blue Sailing School Pty Ltd (Big Blue) were Charltons clients from about 2004 until 2012. Charltons no longer provides any services to or derives any revenue from Ms Domenici of her company.

115 No evidence has been led by the defendants from Angela Dominici or anyone else associated with Big Blue. Nor has any evidence been led suggesting any reason why Ms Domenici no longer calls upon Charltons' services, other than as a result of the defendants' conduct.

116 Mr Kishore actively and wrongfully interfered with Charltons' client relationship with Angela Domenici by soliciting and performing work for her. In September and October 2012, Mr Kishore provided accounting services and/or advice to Ms Dominici in respect of an audit under the guise of communicating with the Australian Tax Office as Ms Dominici's "friend".

117 Ms Dominici, Big Blue and Mr Rosevear were stable and longstanding clients of approximately 8 years' association with Charltons. I infer that Mr Kishore's contractual breaches and default or misconduct were designed to bring these clients to himself or Intuitive a material cause of the loss of Ms Dominici, Big Blue and Mr Rosevear as clients.

118 The defendants rely on a letter dated 7 September 2012 from Ms Domenici to Mr Kishore (see Exhibit CC4, p 563). No evidence was called from Ms Domenici. The plaintiff contends that the letter in question was written at the behest of Mr Kishore who also has not given evidence. I proceed on the basis that her departure was, in part as a result of Mr Kishore's breach of obligation and her belief that she could engage Mr Kishore in the Restraint Period. Pembroke J found that Mr Kishore did perform work for her in the restraint period.

119 The amount to be allowed is $3, 750 x 90% x 0.98 i.e. $3307.50

Anthony Anderson and Cassie Anderson

120 On 27 August 2013, Pembroke J made a declaration that Mr Kishore breached the Restraint Term in respect of Anthony and/or Cassie Anderson.

121 Anthony Anderson and Cassie Anderson were Charltons' clients continuously from about 1990 until about May 2012. Charltons has received no work from them since May 2012, Mr Anderson does not suggest that he has any intention of returning to Charltons, and he has instead taken up the accounting services of Mr Kishore, as outlined below. Charltons has lost these clients.

122 These clients were stable and longstanding clients of approximately 22 years' association with Charltons.

123 Mr Kishore contacted Mr Anderson in the restraint period not only about the tax returns but also about Mr Anderson's BAS and superannuation - the fact that Mr Kishore wrote back saying he could not perform that work is of little assistance to the defendants. Pembroke J declared that Mr Kishore had engaged in a restraint breach in respect of tax returns which leads to the inference that the letter was just a cover, particularly in the absence of any evidence from Mr Kishore. I find that 90% of $750 should be allowed with a multiplier of 0.98 (i.e. $661.50).

John Penfold

124 On 27 August 2013, Pembroke J made a declaration that Fitzgerald breached the Restraint Term in respect of John Penfold.

125 Mr Penfold was a client of Charltons from 2007 until 2011 (when he left due to a conflict of interest), and resumed as a client in 2012 until 24 October 2012. On 24 October 2012, Charltons received an email from Mr Penfold terminating Charltons' services. During the last 12 months of his employment, Fitzgerald had dealings with Mr Penfold on behalf of Charltons.

126 Mr Charlton spoke with Mr Penfold on several occasions between 2007 and 2010, including at his place of business where Mr Charlton inspected Mr Penfold's sail-making machinery. At no time during this period did Mr Charlton receive any complaint from Mr Penfold in respect of the commercial terms offered by Charltons and nor was Mr Charlton informed of any such complaint by Mr Fitzgerald. Mr Charlton's evidence is that had he received or been informed of any such complaint, he would have contacted Mr Penfold to discuss it.

127 Mr Penfold deposed that he held the belief that he no longer had any need for the services of an accounting firm the size of Charltons following the sale of his business PK Marine Pty Ltd, and that he had previously been unimpressed by the commercial terms offered by Charltons.

128 Charltons accepts that Mr Penfold had the state of mind to which he deposed. However, Charltons submits that Mr Penfold's state of mind was inextricably connected with Mr Fitzgerald's default and misconduct. Between 24 and 26 October 2012, Mr Fitzgerald and Mr Penfold exchanged emails about procuring an unsecured personal loan. In light of the timing of Mr Penfold's termination letter, the clear inference to be drawn is that Mr Penfold had terminated his relationship with Charltons in order to engage Mr Fitzgerald, and had done so materially influenced by Mr Fitzgerald's involvement in the loan applications.

129 The amount of $700 is claimed as the work Charltons would have performed is modest and I allow it less 10% and multiplied by the 0.98 multiplier, i.e. $617.40.

Patrick Spedding

130 On 27 August 2013, Pembroke J made a declaration that Mr Kishore engaged in a Restraint breach in respect of Patrick Spedding.

131 Patrick Spedding was a client of Charltons from about 1994 until about October 2012. The last occasion on which Charltons performed work for Mr Spedding was in about October 2012 when Charltons prepared personal tax returns for Mr and Mrs Spedding. Charltons no longer provides any services to or derives any revenue from Mr Spedding. Since October 2012 Charltons has not been asked to do work for Mr Spedding.

132 Mr Spedding deposed that he decided to cease using Charltons because he "lost trust and respect" (see Mr Spedding's affidavit at paras 11-14, Exhibit E) for Charltons after having received a subpoena to produce documents from Charltons in the course of these proceedings in March 2013. He claims to have been "extremely surprised and angry" that he had received the subpoena (see Mr Spedding's affidavit at para 12, Exhibit E) Charltons accepts that Mr Spedding had the state of mind to which he deposed

133 The PCS provides a number of answers to the defence but the short answer to the defendant's contentions is that if Mr Spedding has decided to leave Charltons because he received a subpoena then there is a causal link between Mr Kishore's breach and the departure of Mr Spedding. Charltons was entitled, as part of its case against the defendant, to subpoena clients who it had reason to believe had been lured away by the defendant.

134 I allow 90% of $964 x 0.98 multiplier i.e. $850.25.

Sean Colin St Clair

135 Mr St Clair deposed that he was "comfortable" with Mr Kishore and that he would not engage Charltons services unless Mr Kishore was working there.

136 Charltons accepts that Mr St Clair has the state of mind to which he deposed. However, Charltons submits that Mr St Clair's state of mind was inextricably connected with Kishore's default and misconduct, for the following reasons:

(1) Mr St Clair's evidence is that Mr Kishore had been "assisting" him with his finances and performing work for Mr St Clair since about April 2008 which, since Mr St Clair did not become a client of Charltons until May 2012, appear to have been in breach of Mr Kishore's contractual and fiduciary duties to Charltons (and are breaches that have only emerged as a result of Mr St Clair's evidence in these proceedings).

(2) According to Mr St Clair, Mr Kishore "through Charltons prepared and lodged [St Clair's] FY2010/2011 company tax return for St Clair. I remember getting a decent refund that year" (see the affidavit of Sean Colin St Clair dated 27 August 2013 at Exhibit E, tab 10 para 11) The work in progress records of Charltons show that more than half of the work performed in 2012 was performed by Ms Milena Lakic, another accountant at Charltons, suggesting that Mr St Clair's "decent refund" was in a large part due to Ms Lakic's work.

(3) In or about September 2012, Mr Kishore wrongfully provided accounting or taxation services or advice to Mr St Clair in relation to a credit card debt consolidation.

(4) Mr Kishore also provided accounting services to Mr St Clair in preparing his 2011/2012 tax return (see St Clair Affidavit at [25] at Exhibit E).

137 If Mr St Clair delayed lodging his 2011/2012 tax return, it was a result of, or was materially affected by, Mr Kishore's solicitation. But for Mr Kishore's solicitation in breach of the Restraint, Mr St Clair would have engaged the services of Charltons or, at least, Charltons would have had the chance of maintaining Mr St Clair's business without interference from Mr Kishore in the period during which the tax return was due.

138 The defendants contend that the plaintiff has led no evidence of the value of the work in connection with credit card debt. In my view it can be inferred that by Mr Kishore having undertaken the credit card work that he has, or is intending, to perform the tax return work. I infer that Mr St Clair took his tax work away from Charltons in the expectation that Mr Kishore would do the work at a time when Mr Kishore was not permitted to do such work. I assess the loss as $1, 300 x 90% x 0.98 i.e. $1146.60.

Leanne Follett

139 Pembroke J found that Mr Fitzgerald breached the Best Endeavours Term by providing accountancy services to her during his employment at Charltons. Although Mr Fitzgerald registered her as a client of Charltons it seems that he performed the work himself and did not charge her when he left. Charltons asserts that it should be inferred that he performed work for her so that Mr Fitzgerald could obtain her work when he left.

140 Ms Follett asserts in her affidavit of 10 September 2013 that she first engaged Charltons to do work for her in 2009 when her friend, Joanne Dawkins, asked Mr Fitzgerald to assist Ms Follett with her outstanding tax returns. Ms Follett says, despite the high fees at Charltons, she continued to use Charltons because she was impressed with Mr Fitzgerald. She engaged Charltons to prepare her tax return for 2009-2010 however she felt as though the amount Charltons' charged for was too high and "decided to find an alternative"(see Ms Follett's affidavit dated 10 September 2013, Exhibit E). However, in May 2012 Ms Follett said her personal circumstances changed as she received a redundancy pay out which made her tax return more difficult to complete. Ms Follett says she asked Mr Fitzgerald for help "as a friend" and Mr Fitzgerald assisted her write a letter to her previous employer. Ms Follett contends that if Mr Fitzgerald could not assist her with the letter, she would not have used Charltons as she did not want to pay for this advice. Ms Follett asserts that Mr Fitzgerald has undertaken no work for her in the 12 months before his resignation.

141 Ms Follett denies that she was ever a client of Charltons in 2012 as she never had an appointment, engaged Charltons for any services or been invoiced for any work relating to that year.

142 Ms Follett says that she had no intention of using Charltons once Mr Fitzgerald left Charltons and if she could not engage Mr Fitzgerald to do her tax returns then she would have done them herself and would not go back to Charltons.

143 Ms Follett's denial that Mr Fitzgerald performed accountancy work for her in 2012 seeks to contradict Pembroke J's finding that he did do such work. It thus casts doubt on the veracity of Ms Follett's testimony. Nevertheless she was not cross examined and her evidence is that she would not have used Charltons if she could not use Mr Fitzgerald. I think this client is really a shadow client but with the added feature that Mr Fitzgerald arranged for her to be listed as a client of Charltons to benefit her and hence improve his prospect of his retention of her as a future client. I therefore shall take the limited potential loss of her business into account as one of the shadow clients.

Tony White

144 Pembroke J declared that Mr Fitzgerald breached the Fitzgerald Restraint Terms by providing taxation and accounting services to Tony White. Mr White was not included in the plaintiff's schedule of damages handed up with the plaintiff's closing submissions and I take the claim in respect of him to have been abandoned by Charltons.

Shadow Clients

145 There are many shadow clients. Charltons claims in respect of the shadow clients is in total $82K-$85K without Ms Follett, and the figure claimed is contested by the defendant on a similar basis to that advanced in respect of the clients. Having regard to the relatively small amounts involved I propose to approach the matter using a broad brush and to make the following observations:

(1) A surprisingly large number of these clients say that they are a friend of Mr Fitzgerald and that is why he has charged them nothing or very little. It might be thought that the assertion of friendship suits these clients and Mr Fitzgerald for reasons that have nothing to do with this case but that is what they say and none of the witnesses who gave evidence were cross examined on this point.

(2) Many of the witnesses assert that had they not been able to use Mr Fitzgerald for free or at a low cost they would have not used an accountant at all or would have used someone else but would not use Charltons.

(3) One of the witnesses (Mr Verghese) is Mr Fitzgerald's cousin.

(4) A number of witnesses claimed that they did not pay Mr Fitzgerald anything or very small amount when there is evidence that this was not so, for example Mr Solevski.

(5) Some of the shadow clients did not give evidence (Mr Jordan, Mr Blood, Mr Hodges, Ms Edwards, Mr Birks and Ms Hardyanti-Hodges, Ms Guest)

(6) The claim in respect of Ms Serjeant was not pressed.

(7) I accept that a significant number of shadow clients would have been unlikely to use Charltons but I am not prepared to accept that had Mr Fitzgerald acted in accordance with the contract and used his best endeavours to promote Charltons and refused to do work outside of Charltons that none of them would have become clients of Charltons.

(8) I do not accept the defendants' contention that once the shadow clients are made known to Charltons it has the opportunity "to gain and retain those clients" and has failed in most cases to do so. That appears to advance an argument that Charltons failed to mitigate its loss and it is not open but it also ignores the reality that Mr Fitzgerald appears to have been charging very low fees to these shadow clients making it very difficult to expect them to engage Charltons even if they otherwise might have.

146 I propose to adopt a modest percentage of 20% of the prospective earnings to reflect the considerable uncertainty as to whether the shadow clients and Ms Follett would have yielded any income to Charltons. In relation to the amount of the prospective earnings to be used I think that the figure of $85K contended by Charltons is too high in part because it in effect takes the amount for one year and doubles it. The position in relation to the shadow clients however is not the same as the lost clients because much of the lost revenue for shadow clients was in the period when Mr Fitzgerald and Mr Kishore still worked for Charltons. There is also a question about whether the estimate of how much would have been earned (even excluding the doubling) is reliable and I therefore will take as the amount of total revenue from the shadow clients (including Ms Follett) as $40K, allow 20% of that for the period that the defendants were still employed i.e. $8000 and allow a further 75% of that amount to allow for income that would have been earned in the Restraint Period (i.e. $6000) i.e. a total of $14K. No differentiation was made between the position of the four defendants.

Conclusions

147 I therefore determine damages in summary as follows:

(1) Medicine Today: $53, 625.60

(2) Harris Group: $5, 402.25

(3) Face Today: $ 27, 624.24

(4) Maroon Group: $35, 280

(5) Pivotal: $80, 173.80

(6) O'Neill & Precision: $26, 462.65

(7) Cubic Pacific: $6, 262.20

(8) Bourkes Group: $45, 539.42

(9) Corporate Carbon: Nil

(10) Blue Horseshoe: $2, 381.40

(11) Angela Domenici: $3, 307.50

(12) Andersons: $661.50

(13) Penfold: $617.40

(14) Spedding: $850.25

(15) St Clair: $1, 146.60

(16) Shadow clients including Ms Follett: $14K

148 There should therefore be judgment for the plaintiff against the defendants in the amount of $303, 334.81 plus interest at the Reserve Bank rate plus 4% from 1 July 2012 which interest will need to be calculated.

Costs

149 I will hear the parties on the issue of costs

**********

Decision last updated: 07 January 2014