Blue Visions Management Pty Ltd v Chidiac & Ors [2019] HCATrans 15 (15 February 2019)

Last Updated: 18 February 2019

[2019] HCATrans 015

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S241 of 2018

B e t w e e n -

BLUE VISIONS MANAGEMENT PTY LTD (ACN 095 779 972)

Applicant

and

SAM CHIDIAC

First Respondent

ARUN GUNASEGARAM

Second Respondent

ASPIRE CORPORATION PTY LIMITED (ACN 168 909 779)

Third Respondent

Application for special leave to appeal

GAGELER J
NETTLE J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 15 FEBRUARY 2019, AT 11.09 AM

Copyright in the High Court of Australia

____________________

MR B.W. WALKER, SC: May it please the Court, I appear with my learned friend, MR G.E.S. NG, for the applicant. (instructed by Somerville Legal)

MR D.F. JACKSON, QC: If the Court pleases, I appear with my learned friends, MR A.J. McINERNEY, SC and MS E.L. BEECHEY, for the first and third respondents. (instructed by Fox & Staniland Solicitors)

GAGELER J: Mr Walker.

MR WALKER: I should say at the outset that the statutory question that is raised in our application is not one which, given the way the case was run, I can suggest has any independent prospect in relation to special leave or, indeed, appeal. That is not to say that Justice Basten may not have laid down a marker for the future, but I cannot take advantage of it.

GAGELER J: So it is a conflict rule or nothing?

MR WALKER: Exactly so, exactly so. Now, of course, I say that that makes this a good case for special leave, for the following reasons. The existence of the fiduciary obligations which will be given content, case by case, was not contested in this case either as a matter of principle or its application to the relations in question. After all, Mr Chidiac was a senior employee whose particular skills and diligence were critical, it would appear, certainly very important, in the discharge by my client of its valuable contract. There is no dispute, as Justice Meagher records at page 113, paragraph 55, line 31, it was just not in issue that Mr Chidiac was a fiduciary.

That begins, of course, a cascade of other questions which will be critical. It appears for the majority in the Court of Appeal that what was critical was that his activities in permitting our client to discharge its obligations under the contract did not extend to either having originally negotiated, or having currently a responsibility to foster the renewal in due course of that contractual relationship. One can see what we submit is the critical status of that position factually in the reasoning of the majority at page 119, paragraphs 73 and 74, starting at about line 10, and going down to about line 52. I will not read it, but it is plain to demonstration that is how Justice Meagher saw the matter, using the expression at the beginning of paragraph 74, a “fundamentally different” set of circumstances.

Similarly, in the reasoning of Justice Gleeson, page 155, at paragraph 199 it is said that those circumstances placed this particular case, apart from many others in the area, see line 30, because there was “no real or sensible conflict” and then his Honour explains how that is true, namely that Mr Chidiac was not responsible for considering or deciding on the novation, et cetera:

Does that make a difference -

his Honour asked at line 40. In my view, it does. So it would appear this case then, if it be a vehicle, presents as follows. A man is a fiduciary, that is, has fiduciary obligations, because as an employee in this particular case, the way in which he performs is very significant, maybe even critical, to the performance of the contract that his employer has. While unquestionably still an employee, while still having all the obligations, legal and equitable, he is asked whether, in effect, he would be available outside his employment, after his employment, to continue to perform those activities for the erstwhile customer.

The majority decides that because his was not the responsibility of either having gained or currently seeking to retain the contract in the future, there was no conflict, “real or sensible”, as Justice Gleeson puts it, there was no conflict between the loyalties that he owed as an employee whose activities were required to be good enough for his employer to perform the contract, and the interest he had to obtain a rivalrous contract in the future.

GAGELER J: The real problem, which is highlighted by Justice Meagher at the beginning of his judgment, is that, one, the facts may have come out differently for you, but given the way the facts have come out, you did not run a business opportunity case. So much effort has gone into doctrine in this area over the last 20 years teasing out the two strands of fiduciary loyalty and for some reason your case has been nailed to one of those strands and not the other. Your entire description of it makes it look like it, at least arguably, should fit within the strand that you did not run.

MR WALKER: Now, it is true that Justice Meagher perceives a problem that your Honour, with respect, has fairly captured. It is not true, however, in our respect, that it had the fatal effect that the majority thought. The first thing is, it is of course trite to observe and true that these two socalled rules or aspects overlap obviously enough. The socalled profit rule is very often breached - quite difficult to think of a case where it is not breached - in cases where there was a breach of conflict rule.

The conflict rule exists precisely because one of the socially significant aspects of this area of doctrine is to terrify, not simply to compensate, that is, to provide death’shead examples of what happens to people who betray those who are vulnerable, and thereby are owed duties of loyalty; the difference between the equitable and common law fountain from which all this springs.

Now, in this case, it is true that it was run below under the banner only of the socalled conflict rule. But I stress, it was run in order to recover the profits that were gained by reason of the breach constituted by acting, as he did, in a position of conflict. It is true, therefore, as I tried to capture in my opening here, that the case required to be decided by, in particular, ascertaining whether there was a conflict, we lost on that by majority in the Court of Appeal and we submit that that is sufficiently counterintuitive to justify a grant of special leave.

It is said after all that there is no conflict in a person simultaneously being the key person for his employer’s performance of a contract, and at the same time entertaining, and in the way I am going to explain, fostering the removal of the benefit of that performance of contract to himself from exactly the same customer.

GAGELER J: So, in a sense, you are turning a weakness into a strength, you are saying.

MR WALKER: I am trying to, yes. That is what I am for, your Honour.

GAGELER J: You are saying the absence of one obvious limb of an argument makes focus on the other more intense.

MR WALKER: Without any facetiousness, of course I do have to. I do not seek to move one iota from the way the case was pleaded and run before, because it is not of matter of defending it, it is a fact. I do not have a vehicle, unless the way in which it was run as well as the facts that go to the substantive merit make it appropriate for this Court.

EDELMAN J: I suppose if the case had been run as the profit rule, one would inevitably have been asking the same sort of questions, would one not?

MR WALKER: Yes, and if there had been, and there was not, an extra or independent or slightly nonoverlapping statutory claim under the heading of impropriety, the same questions of merit would come up. In each of those three, that is what was actually done forensically, what might have been done just under equity, and what might have been done under extended statute as well, under each of those three, the same counterintuitive proposition would apparently inform the majority’s rejection of the case as actually run, as it might have been run in equity, and as it might also have been run in the statute.

EDELMAN J: Do you have a causal finding in your favour? So even if your arguments about conflict were accepted, is there a finding that the profit would not have been made but for the actions of Mr Chidiac?

MR WALKER: No. I am afraid I cannot go to a plain affirmative to your Honour. The furthest we go is something that bears, I have to say, a slightly speculative character, namely that there is an unexcluded possibility that the chances of us having retained the contract or suffering a less disadvantageous socalled novation, or truncation, would have been enhanced had Mr Chidiac not behaved as he did.

EDELMAN J: But it was not a loss of chance claim that was put.

MR WALKER: Lost opportunity is to be found in some of the discussion of the case. But the proper answer to your Honour is no, not overtly. However, the valuation of chance or opportunity was part and parcel of the consideration both at first instance and in the Court of Appeal, in case the matter ever arose, of how much was required to be accounted for.

Your Honours appreciate that the assessment, whether it be an account of profit or equitable compensation, will involve some consideration under one heading or another of means and justifications for reducing what might otherwise be given to the plaintiff, on account either of the nonnefarious efforts of the defendant, or on account of the chance or risk that the plaintiff, in any event, would not have continued to retain the profitmaking opportunity.

However, it is not a common law inquiry, and it is not answered by sine qua non causal reasoning; not least because this is an area where it is of the essence that a defendant not be allowed simply to say, “Look, even if I had not been delinquent, you would have not retained the benefit that I, in fact, wrongfully diverted to myself”. That is the reason why there is a counterintuitive character, very strongly counterintuitive character, that is, it feels wrong to say that a person bound by employee obligations to work well, to permit his employer to discharge its contractual obligations to a customer, is able, by the kind of dealing about which I will say something briefly in a moment, is able to produce the diversion of that very contract which he is engaged to help perform, to himself.

The dealing in question is this, and it has led to understandable argument against us on special leave, and this is fact-specific. May I deal with that on a general and specific level. Like a negligence case, a fiduciary duty case, for all the reasons the doctrine in this Court makes very clear, requires a proper understanding and inflection of the decision, according to the facts of the case. That is an unremarkable proposition. It does not immunise cases against a grant of special leave, and, notoriously, has not. Specifically, however we say this about the facts in this case - they are not by any means maverick or unlikely ever to recur.

GAGELER J: There was a rather strange conversation between Mr Hamilton and Mr Chidiac.

MR WALKER: I am going to come to that. But the strangeness all conduces in our favour as to the merit of our claim and conduces in favour of my argument that it is such a counterintuitive finding that there was no conflict that this case should be taken up by the Court.

GAGELER J: Exactly where and when did the conflict arise?

MR WALKER: At the time of the approach by Mr Hamilton on behalf of the customer to Mr Chidiac, then our key employee, a conflict arose between his duty of loyalty as a senior employee engaged in carrying out the performance of the contract for us, and the encouragement, the fostering of Mr Hamilton exploring commercial means of depriving us of the benefit of that contract. That is where the conflict arose.

GAGELER J: And to discharge his duty of loyalty at that point in time, what should he have done?

MR WALKER: The first thing is it is a travesty of our case below and of our position here to suggest that we are arguing that equity, perversely, would require a lie to be told; so let us put that out of all consideration. The second thing is we accept that the context of notice being given to terminate employment, and if you want to, the fact that there is no restraint of trade agreed contractually, apparently no confidential information, the nondisclosure of which might inhibit commercial competition, we accept all of that.

One thing is for certain and that is that he should have refrained from doing anything which, to the detriment of his employer, would encourage the employer’s customer to set about commercial dealings which would deprive us of the benefit of the contract. The obvious way, as you see recorded in the arguments considered below, is to say, “While an employee, I cannot talk to you about these matters concerning my employer’s contract with you”, ironically not least because it was not his job to do so, that is, the thing that is said to be against us by the majority actually illustrates what a disloyal impertinence it was, and irrelevant to his duties it was for Mr Chidiac to say, “Well, yes, I would be available”, and then not to communicate to us because Mr Hamilton was going to take it up.

EDELMAN J: I suppose that type of argument does avoid invidious distinctions between, “I am interested”, “I am very interested”, “I am extremely interested” or, “I would do it.”

MR WALKER: That is right. Which distinctions are unworthy of this area of the law, and unworthy of the moral underpinning of the allocation of the label “wrongdoing” to that form of disloyalty; those distinctions do not matter, they are all disloyal. The fact that somebody is outrageous in their disloyalty may or may not be reflected in other aspects, including as to remedy. But disloyalty is disloyalty, be it outrageous and flagrant or otherwise.

Now, the other thing to be said about the way in which the majority has dealt with it, so as to make this a fit case for special leave, is that it leaves open the possibility that there is a distinction between truthfully, as it is said against us, answering the question: “Would you be interested in taking up the contract that I might truncate, take away from your employer?”, that it is okay because it is not your job to either have got or keep that contract, it is okay to say the thing which is calculated to lose it for the employer, but it would not have been okay to have touted that unbidden.

That again is an unworthy and invidious distinction. Why would equity, in relation to the loyalty of a senior employee to an employer, possibly say, in a way that would expose the law, that is, the doctrine to disrepute, it is okay if asked to say, “You bet I will take up the work, so that you can do my present employer out of it” but it is not okay to send a letter to say so unsolicited.

Does the feeling of disloyalty actually alter, in any viscerally or severably detectible fashion, depending upon whether you send the letter unsolicited, or whether you answer the question when asked, and, of course, the disloyalty is the same. It is absurd to suppose either at law or in equity one would ever impose, by implication or otherwise, a term on an employment relation that, “You may subvert my contracts, but only in response to an approach by a customer”. That is utterly contrary to any efficacy, business or otherwise, which would be engaged in that inquiry.

It is for those reasons, in our submission, that the factspecific nature of the case, the particular circumstances of the case, that is the lack of restraint of trade, the lack of apparently any inhibitions imposed by confidentiality, all of those combine, in our submission, to make this an ideal vehicle to consider something which Warman v Dwyer does not, of course, need to consider.

What arises when there is an overlap, as always, between conflict and profit rule and concentrating on the conflict which characterised the exhibition of disloyalty, there is this argument that it was an unsolicited approach which was simply truthfully responded to, and that in any event, the employer may have had difficulties retaining the contract. It is for those reasons, in our submission, that this is a case apt and appropriate for this Court’s intervention.

GAGELER J: Thank you, Mr Walker. Mr Jackson, we do not need to hear from you.

In our opinion there are insufficient prospects of success to warrant a grant of special leave to appeal in this matter. Special leave to appeal is refused with costs.

The Court will adjourn to reconstitute.

AT 11.31 AM THE MATTER WAS CONCLUDED