COURT
    OF APPEAL FOR BRITISH COLUMBIA

Citation:

RBC
          Dominion Securities Inc. v.
Merrill Lynch Canada Inc. et al,

2007
          BCCA 22

Date: 20070112

Docket: CA032462

Between:

RBC
    Dominion Securities Inc.

Respondent/
Appellant on Cross Appeal

(
Plaintiff
)

And

Merrill
    Lynch Canada Inc., James Michaud, Don Delamont,
Reginald Bellomo, James Swift, John Evin, Dave Neilson,
Victor Kravski, Christine Clarke, Alan Duffy, Connie Dodgson,
Norma Juozaitis, Alison Van Nest Klein, Barbara Daniel and Holly Hale

Appellants/
Respondents on Cross Appeal

(
Defendants
)

Before:

The
          Honourable Chief Justice Finch

The
          Honourable Madam Justice Southin

The
          Honourable Madam Justice Rowles

S.
          K. Gudmundseth, Q.C.

Counsel for the Appellants

M.
          E. Royce

Counsel for the Respondent

Place
          and Date of Hearing:

Vancouver, British Columbia

11th and 12th May, 2006

Place
          and Date of Judgment:

Vancouver, British Columbia

12th January, 2007

Written
          Reasons by
:

The
          Honourable Madam Justice Southin

Concurred
          in by:

The
          Honourable Chief Justice Finch

Dissenting
          Reasons by:

The
          Honourable Madam Justice Rowles  (P. 59, para. 113)

Reasons
    for Judgment of the Honourable Madam Justice Southin:

[1]

What remedy, either at law or in equity, is properly awarded against
    persons, servants of another, departing their master en masse without notice,
    with records pertaining to the deserted firm's clients, and entering into
    a similar relationship with a competitor of the master?  I have used the terms
    "servants" and "their master" rather than the contemporary
    nomenclature "employee" and "employer" because the authorities
    which are at the root of this case, even if the cases cited are only from
    the last century, use those terms.  Although in this appeal there are many
    issues, the issue of consequence is what is the proper balance in the year
    2007 between the rights
inter se
of a brokerage firm (the master) and
    those who are known as investment advisors (the servants), including an advisor
    who was also the branch manager, upon the latter quitting the master's employment,
    and, in arriving at that balance, what weight, if any, is to be given to the
    interests of the clients to whom are owed by all those engaged in this litigation,
    duties of competence and honesty?

[2]

The learned trial judge, the Honourable Madam Justice Holmes, who,
    in addressing the broad question of "liability", gave no weight
    to the interests of the clients although she did so in assessing punitive
    damages, awarded to the respondent judgment in the sum of $2,058,700 ($1,964,699
    plus interest of $94,001).  Because I am of the opinion that the learned judge
    did not strike a balance appropriate to present times, I would allow the appeal
    by substantially reducing the damages awarded.

[3]

The retail securities brokerage business has aspects about it which
    differ from many other businesses:

1.
    Both the companies and those who deal directly with clients  what were once
    called, generically, stockbrokers, and are now known as investment advisors,
    and to whom I shall hereafter refer only as advisors  must hold licences
    from the appropriate provincial authority.

2.         The clients, whom the advisors are bound to
    "know", deal usually with only one advisor, and if the advisor goes
    to another firm, many of his or her clients, what is known as the "book
    of business", may well go with the advisor, just as a lawyer's clients,
    if he leaves one firm, will go with him, because a relationship of confidence
    has developed between them.  Two extracts from the evidence are apposite,
    assuming one needs evidence for a proposition so obvious:

-   From an expert report, "Assessment
    of Damages", tendered in evidence by the respondent:

Retail
    brokerages have traditionally relied on personal service and relationship
    management to attract and retain profitable clients.  The skills and abilities
    of IAs [investment advisors] in this regard are key to the success of a firm.
    New IAs are expected to develop a client base, or a book of business, through
    aggressive networking and cold calling.  An IA that develops an active client
    list with significant assets under management can generate substantial revenues
    for himself or herself and the employing firm.

-   From the
viva voce
evidence of the appellants' expert:

Q
    ...

You include in your reports some definitions, and I'd like you to particularly
    deal with and explain the definitions relating to goodwill and personal goodwill.

A      Goodwill, My Lady, is an intangible
    asset perhaps best explained by an example.  If the company earns 100,000
    a year profit and it's determined the appropriate multiple is five times,
    then the value of the operations would be $500,000, if -- as compared to the
    value of the net assets in the business.

If the assets less the liabilities -- that is the operating
    assets -- less the liabilities equal 300,000, for example, then the difference
    between the 500,000 and the 300,000, 200,000 can be ascribed to goodwill.
    That's -- may be commercial goodwill.  That is goodwill.  It could be sold,
    transferred.  Or it may be a personal goodwill that is not easily sold or
    transferred.

The definition of personal goodwill is that goodwill that attaches to an individual.
    An example of that would be if I were to try and sell my own practice.  It
    would be difficult for me to obtain any value for it because people come to
    me and it's personal.  So that type of goodwill is not easily sold.

3.         These advisors are remunerated only by commission.
    Whatever commission is charged to the client is split in some arranged proportion
    between the house and the advisor.  As the expert put it:

Revenues
    in the retail brokerage industry are primarily earned from either commissions
    or fees.  Commission revenue is generated from transaction volume and active
    account management including stock and options trading, fixed-income product
    trading and mutual fund commissions and trailers.  Fee revenue is earned from
    advisory service, insurance and retirement products, or is charged as a fixed
    percentage of the client assets managed by the firm.  As brokerage revenue
    is sensitive to fluctuations in market activity and asset values, the larger
    firms attempt to minimize profit risk by offering a wide selection of investment
    products with varying fee structures.

4.
    It can, on occasion, be of grave importance to a client that there should
    be no break in the service available to the client from his or her advisor.
    The client may well require immediately  the market crash of 1987 comes to
    mind  advice from the person with whom he or she has a relationship of confidence
    as to what to do about his or her investments.

[4]

I make mention of these points, particularly the fourth, because during
    the hearing of this appeal I was left with the uneasy impression that the
    respondent, RBC Dominion Securities Inc. (hereafter DS), was more concerned
    with its own bottom line than it was with the firm's clients being able, without
    interruption, to consult with and give instructions to their respective advisors.

[5]

In so remarking, I do not discount the possibility, or even probability,
    that if the positions were reversed, the appellant, Merrill Lynch Canada Inc.
    (hereafter Merrill Lynch), might take the same line.  These two firms were,
    in fact, fighting over the clients, although so far as counsel informed us,
    no clients, especially of the appellant, Delamont, who was the key "producer",
    were called to give evidence as to why each took his or her custom to Merrill
    Lynch.  Did the clients go because DS was unable to provide immediate service,
    which it might have been able to provide with sufficient advance warning of
    the departures, or did the clients go because they wanted to continue with
    their respective advisors?

[6]

There are three further introductory comments to be made:  First, in
    the final minutes of his submissions, Mr. Royce made the point, as I understood
    him, that, as the appellant, Merrill Lynch, had agreed to indemnify the other
    appellants for any amounts awarded to DS, should it sue them, the Court should
    not worry itself unduly with the measure of damages which the learned judge
    adopted, whatever might be necessary in any future case of a departing advisor
    who had no such indemnity.  I do not accept that proposition which, whether
    intentionally or no, is an invitation to deep pocket justice.  Secondly, since,
    as Mr. Royce informed us and I have no reason to doubt him, this case is the
    first of its kind in Canada, I consider the Court ought not to consider itself
    constrained by the arguments of counsel.  Thirdly, I regret the length of
    this judgment, but it is important in this case to "condescend to particulars".

AN OVERVIEW

[7]

Reduced to its essentials, the case of DS, the plaintiff below, here
    the respondent and cross-appellant, against the defendant, Merrill Lynch,
    here an appellant and cross-respondent, and the other defendants, here appellants,
    was that, in the year 2000, Merrill Lynch and its local manager, the appellant
    Michaud, by dangling various inducements to the other appellants, including
    the indemnity, enticed away from their employment the other appellants, all
    of whom were employed by DS either as advisors or investment advisor
    assistants in the respondent's Cranbrook branch (which had a satellite office
    in Nelson), and one of whom, Delamont, was also the branch manager, and for
    such enticing away, or stealing if one prefers, what was essentially the whole
    staff of DS in that branch  all but two junior advisors and two clerical
    staff remaining  and inducing them, or at least encouraging them before they
    left DS, to bring records concerning their clients, Merrill Lynch and Michaud,
    and for permitting themselves to be enticed away without giving any intimation
    of their impending departure and for bringing the records, the other appellants,
    should pay damages, the measure of which should be the loss of profits which
    DS suffered from the departure of many clients.  Depending upon one's point
    of view, one can characterize the conduct of Merrill Lynch as either poaching
    or headhunting.  To the "game", this may have been nothing more
    than an invitation to better themselves economically, which each of us is
    entitled to do with certain limitations.  In our capitalist society, the pursuit
    of self-interest is not, in and of itself, actionable.  Thus, the broad legal
    question in all of this is whether in it there is something which is actionable,
    and, if there is something which is actionable, what is the proper measure
    of the damages?

[8]

I shall hereafter, in order not to do an injustice to the pleader,
    set out the statement of claim so that the reader may judge for himself or
    herself what causes of action are sought to be raised by the material facts
    alleged.

[9]

What I understand to be raised by the statement of claim, albeit in
    a manner I have not found easy to follow, are these causes of action:

1.         As against all the appellants

(a)        an action in tort for conspiracy, although
    it is not clear whether the alleged conspiracy was a conspiracy to do an unlawful
    act or a conspiracy to injure;

(b)
    an action in tort for conversion founded upon the investment advisors removing
    the documents, and upon Merrill Lynch receiving the documents knowing them
    to be the property of DS.

2.         As against the appellants, save
    Merrill Lynch and Michaud

(a)        an action sounding in contract, founded upon
    a term said to be implied in the contract of service of each of them that
    he or she will not, upon leaving the employ of DS, compete "unfairly";

(b)        an action for the misuse of confidential information,
    whether founded on the respondent's right of property in the information or
    upon an implied term in every contract of service, including those here in
    issue, that a servant will not misuse his master's confidential information,
    whether during the continuance of the employment or after its termination;

(c)        an action sounding in contract for failing
    to give reasonable notice terminating the contract of service;

(d)
    an action for breach of fiduciary duty.

3.         As against Merrill Lynch

(a)        an action in tort for inducing
    the DS staff:

(i)         to terminate their contracts of
    service without notice, such contracts containing an implied term requiring
    reasonable notice, a form of action once known as an action for "enticing
    away the master's servants" (see Bullen & Leake's
Precedents of
    Pleadings
, 10th ed. (London: Stevens, 1950) at 382);

(ii)
    to compete unfairly in breach of a contractual obligation of the servants
    not to do so.

[10]

To clear away what may be cleared away, it is convenient to note now
    that the learned judge did not find (and the respondent did not ask this Court
    to find the contrary) either a conspiracy to which the appellants or some
    two or more of them were parties, or the inducing by Merrill Lynch of breach
    by the staff of their contracts of service by quitting without notice, or
    any fiduciary duty on the part of the advisors.

[11]

As to the claim in conversion, DS conceded, as I understand the learned
    judge's reasons, that there was really no foundation for compensatory damages
    for this tort because of the return of the documents.  It was, however, the
    foundation for the award of punitive damages, and, as, in the circumstances,
    I see no error in that award, I shall say nothing more about the claim in
    conversion.

THE JUDGMENTS
    BELOW

[12]

In reasons for judgment pronounced the 26th November, 2003, Holmes J.
    acceded to the submissions of DS (see para. 45
infra
).  This was the
    judgment drawn up and entered on the rolls of the court:

THIS ACTION coming on for trial at Vancouver, on the 26th to 29th days of
    May, 2003, the 2nd to 5th and 9th, 10th and 12th of June, 2003, and on hearing
    M.E. Royce and R. Kirshblum, counsel for the Plaintiff, and S.K. Gudmundseth,
    Q.C. and S. Miller, counsel for the Defendants,

AND JUDGMENT being reserved to this date:

THIS COURT ORDERS that:

1.
    The Plaintiff recover damages against the Defendants in amounts to be determined
    at a continuation of the trial of this action.

[13]

Subsequently, on the 10th November, 2004, the learned judge delivered
    reasons for judgment upon which this judgment was drawn up and entered:

THIS ACTION coming on for trial at Vancouver, on the 5th to
    8th and 12th and 13th days of July, 2004 and on hearing M.E. Royce and R. Kirshblum,
    counsel for the Plaintiff, and S.K. Gudmundseth, Q.C., and S. Miller, counsel
    for the Defendants,

AND JUDGMENT being reserved to this date:

THIS COURT ORDERS that:

1.
    The Defendant Merrill Lynch Canada Inc. shall pay to the Plaintiff damages
    in the sum of $250,000 plus interest pursuant to the
Court Order Interest
    Act
in the amount of $11,961, plus costs at scale 3;

2.
    The Defendant James Michaud shall pay to the Plaintiff damages in the sum
    of $10,000 plus interest pursuant to the
Court Order Interest Act
in
    the amount of $478, plus costs at scale 3;

3.
    The Defendant Don Delamont shall pay to the Plaintiff damages in the sum of
    $1,483,239 plus interest pursuant to the
Court Order Interest Act
in
    the amount of $70,966, plus costs at scale 3;

4.
    The Defendant Reginald Bellomo shall pay to the Plaintiff damages in the sum
    of $65,093 plus interest pursuant to the
Court Order Interest Act
in
    the amount of $3,114, plus costs at scale 3;

5.
    The Defendant James Swift shall pay to the Plaintiff damages in the sum of
    $39,607 plus interest pursuant to the
Court Order Interest Act
in the
    amount of $1,895, plus costs at scale 3;

6.
    The Defendant John Evin shall pay to the Plaintiff damages in the sum of $34,896
    plus interest pursuant to the
Court Order Interest Act
in the amount
    of $1,670, plus costs at scale 3;

7.
    The Defendant Dave Neilson shall pay to the Plaintiff damages in the sum of
    $37,358 plus interest pursuant to the
Court Order Interest Act
in the
    amount of $1,787, plus costs at scale 3;

8.
    The Defendant Victor Kravski shall pay to the Plaintiff damages in the sum
    of $15,512 plus interest pursuant to the
Court Order Interest Act
in
    the amount of $742, plus costs at scale 3;

9.
    The Defendant Christine Clarke shall pay to the Plaintiff damages in the sum
    of $15,941 plus interest pursuant to the
Court Order Interest Act
in
    the amount of $763, plus costs at scale 3;

10.
    The Defendant Alan Duffy shall pay to the Plaintiff damages in the sum of
    $8,053 plus interest pursuant to the
Court Order Interest Act
in the
    amount of $385, plus costs at scale 3;

11.
    The Defendant Connie Dodgson shall pay to the Plaintiff damages in the sum
    of $1,000 plus interest pursuant to the
Court Order Interest Act
in
    the amount of $48, plus costs at scale 3;

12.
    The Defendant Norma Juozaitis shall pay to the Plaintiff damages in the sum
    of $1,000 plus interest pursuant to the
Court Order Interest Act
in
    the amount of $48, plus costs at scale 3;

13.
    The Defendant Alison Van Nest Klein shall pay to the Plaintiff damages in
    the sum of $1,000 plus interest pursuant to the
Court Order Interest Act
in the amount of $48, plus costs at scale 3;

14.
    The Defendant Barbara Daniel shall pay to the Plaintiff damages in the sum
    of $1,000 plus interest pursuant to the
Court Order Interest Act
in
    the amount of $48, plus costs at scale 3;

15.
    The Defendant Holly Hale shall pay to the Plaintiff damages in the sum of
    $1,000 plus interest pursuant to the
Court Order Interest Act
in the
    amount of $48, plus costs at scale 3.

[14]

The defendant, James Michaud, was the regional manager for Merrill
    Lynch in the Kootenay; Mr. Delamont, as I have noted, was the manager of the
    DS branch in Cranbrook, as well as an advisor; the defendants named in clauses
    4-10 were advisors; and the other defendants were "assistants".

[15]

Counsel for Merrill Lynch summarized the damages awarded in this way:

41.       Following the damages stage of the trial, the learned Trial
    Judge awarded the following damages:

a.
    for Mr. Delamont's breach of his duties as manager, he is personally liable
    for DS's profits for 5 years, less a contingency discount of 14.73% in the
    second year, 24.73% in the third year, 34.73% in the fourth year, and 44.73%
    in the fifth year (net of the contingency discount, this amounts to some $1.4
    million);

b.
    for the IAs failure to give proper notice of their departures, all of the
    IAs, including Mr. Delamont, must personally reimburse DS for lost profits
    during the 2 1/2 week notice period (this loss amounts to some $40,000);

c.
    for the IAs unfair competition during the notice period, all of the IAs, including
    Mr. Delamont, are liable for 11.5% of DS's profits for 5 years.  Mr. Michaud
    and Merrill Lynch bear joint and several liability for these damages (this
    amounts to some $225,000);

d.
    the IAs' assistants must pay nominal damages of $1,000.00 each for failure
    to provide reasonable notice; and

e.         punitive damages of $250,000 against Merrill
    Lynch, $10,000 against Mr. Delamont and Mr. Michaud and $5,000 against each IA.

I am unable to reconcile paragraph c. with the judgment
    as it was drawn up.

[16]

Why two judgments were thought necessary, I do not understand.  It
    was within the power of the learned trial judge to give a direction upon her
    handing down her first reasons for judgment that no judgment should be drawn
    up until she delivered her reasons on damages.

THE CASE AS PLEADED

[17]

Although I have summarized, I hope fairly, the respondent's case as
    pleaded, I shall now go through the statement of claim paragraph by paragraph,
    not only to identify with particularity the issues of fact as pleaded and
    the learned judge's findings thereon, but also, in case I have not summarized,
    in the opinion of the respondent, its case fairly, to give the respondent
    the opportunity to speak in its own voice.

[18]

The first 19 paragraphs identify the parties.

[19]

Paragraph 20 -

20.
    Each branch is managed by a Branch Manager who has responsibility for running
    the day-to-day operations of the branch, hiring, coaching, counselling and
    supervising employees, ensuring compliance with regulatory requirements, representing
    the firm in the local community, arranging local advertising and setting the
    budget for each branch.  The Branch Managers also develop, service and maintain
    clients for DS in the same manner as Investment Advisors.

I do not understand this paragraph to be disputed.

[20]

Paragraphs 21, 22, 25 and 26 -

21.
    In addition to the confidential information to which Investment Advisors are
    privy, as described below in paragraph 25, Branch Managers are privy to additional
    confidential information of DS, including:

a.         the identity of all clients of the branch
    in question and the investment portfolios, objectives and preferences of those
    clients;

b.         daily revenue information on all branches;

c.         specific monthly targets and totals of objectives
    for all branches;

d.         daily trading summaries which show all transactions
    by account within the branch in question; and

e.         controllable cost reports on all branches.

22.       DS provides investment services to its clients
    in each branch through Investment Advisors.  These clients pay to DS fees
    and commissions which are split between DS and its Investment Advisors.

* * *

25.
    Investment Advisors are privy to confidential information of DS including:

a.         the names of DS clients for whom they provide
    services and in particular, the appropriate contact people for investment
    needs;

b.         the financial circumstances of the DS clients
    for whom they provide services, including the assets, income and investment
    objectives of those clients and their dependants;

c.         the investment portfolio of DS clients for
    whom they provide services, including the particulars of their portfolios
    and objectives, including the specific securities and respective originating
    values; and

d.         selected revenue information on the branch
    at which they are employed.

26.
    Investment Advisor Assistants such as the Defendants Dodgson, Juozaitis, Van
    Nest Klein, Daniel and Hale are employed by DS to provide assistance to its
    Investment Advisors and are privy to the confidential information referred
    to in paragraph 25 herein and, to one extent or another, develop close relationships
    with the clients of DS with whom they have regular contact.

It is not disputed that the personal appellants were
    privy to the information as therein described or that DS considers it confidential.
    But it does not follow inexorably that the use of any of the various species
    of information thus described for a purpose other than a purpose sanctioned
    by DS is actionable.

[21]

Paragraphs 24 and 28 -

24.
    While DS at all times makes it clear to its Investment Advisors that all clients
    belong to DS, rather than to any individual Investment Advisor, Investment
    Advisors are expected to and do develop a close rapport with the clients with
    and for whom they work and obtain extensive knowledge of the individual financial
    circumstances of each of these clients and their investment objectives and
    portfolios.  In developing their relationships with clients, Investment Advisors
    rely substantially upon the advertising and the research carried out by DS
    and, perhaps most importantly, upon DS' nation-wide reputation as the leading
    Investment Dealer in Canada for many years.

* * *

28.
    DS nevertheless recognises the right of any Branch Manager, Investment Advisor
    or Investment Advisor Assistant to leave its employ and work in due course
    for a competitor, provided that the Branch Manager, Investment Advisor or
    Investment Advisor Assistant, gives DS a reasonable opportunity to persuade
    any affected clients to remain with DS and further provided that the Branch
    Manager, Investment Advisor or Investment Advisor Assistant does not make
    any improper use of any confidential information or material proprietary to
    DS.  Indeed, DS has not traditionally required that Branch Managers, Investment
    Advisors or Investment Advisor Assistants enter into any form of written non-competition
    or non-solicitation agreement, because it relies upon its Branch Managers,
    Investment Advisors and Investment Advisor Assistants to behave in a fair
    and reasonable manner if they leave the employ of DS.

As will appear hereafter, I consider it material to the
    question of whether the appellant is entitled to the damages awarded to it
    against the appellant Delamont that the respondent drew no distinction in
    these paragraphs between the appellant Delamont's obligations as Branch Manager
    and the obligations of the other staff.

[22]

On paragraphs 24 and 28, these questions arise:

1.         Do the clients "belong"
    to DS, a question which itself raises the question of what does "belong"
    mean in such a context?

2.         Do departing servants of DS have
    any legal obligation to give it a "reasonable opportunity to persuade
    any affected clients to remain with DS"?

3.
    Do departing servants have a legal obligation "to behave in a fair and
    reasonable manner" after they leave the service of DS, whatever the words
    "fair and reasonable" mean in the context?

[23]

As to the first question, my answer is "no".  DS has no right
    of property in any client.  What DS has is that species of property which,
    if it had sold the branch to another for a price greater than the value of
    the branch's tangible assets, would result in the purchaser including on its
    own balance sheet as "goodwill" the difference between the value
    of the tangible assets and the price.  As
The

Shorter Oxford English
    Dictionary
(3d ed.) puts it:

Goodwill
...

4.
Comm.
The privilege, granted by the seller of a business to
    the purchaser, of trading as his recognized successor; the possession of a
    ready-formed connection of customers, considered as a separate element in
    the saleable value of a business 1571.

[24]

My answer to the second and third questions is also "no"
    for reasons which I will address hereafter.

[25]

Paragraph 31 -

31.
    No later than the Summer of 2000, Merrill Lynch and the Defendant Michaud
    contacted the Cranbrook Sales Force in an eventually successful attempt to
    induce them to breach their contractual and legal duties to DS by:

a.         resigning from the employ of DS on November
    20, 2000 without giving any or reasonable notice;

b.         removing and/or making improper use of confidential
    information and material proprietary to DS for the benefit of Merrill Lynch;
    and

c.
    moving contemporaneously as a single group from DS to Merrill Lynch so as
    effectively to destroy the ability of DS to carry on business in Cranbrook
    and Nelson, to the benefit of Merrill Lynch.

[26]

Subparagraphs a. and b. are true and c. is true in the sense that moving
    contemporaneously as a single group did, if not destroy, at least seriously
    impair the ability of DS to carry on business profitably in Cranbrook and
    Nelson, but, on this paragraph, the issue is the use of the words "so
    as", a point which I address again
infra
paragraphs 29-30.  As
    to b., the learned judge made this finding in paragraph 4 of her first
    reasons, 44 B.L.R. (3d) 72, 2003 BCSC 1773:

[4]
    In the two or three weeks before the group departure, most of DS's confidential
    client records were
removed or copied
and sent to Merrill Lynch, ostensibly
    to facilitate the opening and handling of accounts at Merrill Lynch for the
    large proportion of clients expected to follow the IAs.  Merrill Lynch returned
    this material to DS on the Friday after the Monday departures, evidently on
    the advice of its solicitor, and does not dispute that its original removal
    of the material was improper.

[27]

By this passage and the words I have emphasized, the learned judge
    appears to be drawing no distinction, as a matter of legal consequence, between,
    on the one hand, making a copy, by whatever means, of a piece of paper belonging
    to A and taking the copy away, and, on the other, taking away A's piece of
    paper.  There is, in the modern world, the further complication that big brokerage
    houses keep clients' original accounts not on paper but on computers from
    which the client's account can be printed out, perhaps on a piece of paper
    for which the brokerage house had paid.

[28]

The learned judge made further reference to the records at paragraph
    92
et seq
and in paragraphs 134-136.  But she did not expressly answer
    the question of whether DS was, by the removal of records, deprived of the
    ability to communicate with the clients.  Not addressed is whether, for instance,
    DS was able to send, on 20th November, 2000, to all the clients, a letter
    in the form:

Dear Client,

As you may be aware, Reg Bellomo and Dave Neilson have resigned from RBC
    Dominion Securities to join the firm of Merrill Lynch.

I know that many of our valued clients appreciate the strength and stability
    of RBC Dominion Securities, not only because of our relationship with the
    Royal Bank, but because of our firm's reputation, trustworthiness and leadership
    as Canada's dominant investment firm.

As the Branch Manager, it is my hope that you will remain a client of
    our firm and keep your account with our Cranbrook branch.  I will have a new
    Investment Advisor contact you as soon as possible to ensure your investment
    needs are continuously attended to.

If
    you have a preference for another Investment Advisor or wish to discuss your
    account with me, please call me at....

Yours
    truly,

Cindy Taylor, CIM
Branch Manager
RBC Dominion Securities

[29]

Paragraph 32 -

32.
    The Plaintiff states that the said acts as detailed in sub-paragraphs 31(a),
    (b) and (c) were unlawful in that:

a.         the Cranbrook Sales Force owed a duty to DS
    to provide reasonable notice of their resignations;

b.         the Cranbrook Sales Force owed a duty to DS
    not to remove or make improper use of confidential information and material
    proprietary to DS for the benefit of Merrill Lynch;

c.         the Cranbrook Sales Force having decided to
    enter into competition with DS, owed a duty to DS to do so fairly; and

d.
    moving contemporaneously as a single group without notice was intended and
    calculated to cripple the DS operations in Cranbrook and Nelson for the foreseeable
    future.

[30]

The learned judge found subparagraph a. to be so, and the appellants
    do not here contest that finding.  Therefore, I need not grapple with the
    interesting question, although there is a hint of it in the evidence, of whether
    the custom of the brokerage industry is to the contrary, and if so, whether
    a custom to the contrary excludes the usual implied term as to notice.  Subparagraph
    b., if treated as a proposition of law, is true, but it does not answer the
    question of what information is of such a nature that use of it for other
    than the business of DS is actionable.  As to subparagraph c., the issue of
    whether there is any duty to compete "fairly" is the same issue
    which I raised in paragraph 22

supra
.  Subparagraph d., like
    subparagraph c., appears to be asserting a conspiracy to injure DS in its
    trade.  But if that is so, it was an attempt to revive that tort as it was
    sometimes understood before the House of Lords, in
Crofter Hand Woven
    Harris Tweed Co. v. Veitch
, [1942] 1 All E.R. 142, brought it into
    the modern world.  Apposite here is this passage from Lord Wright's speech,
    at 163:

I have attempted to state principles so generally accepted as to pass
    into the realm of what has been called jurisprudence, at least in English
    law, which has for better or worse adopted the test of self-interest or selfishness
    as being capable of justifying the deliberate doing of lawful acts which inflict
    harm, so long as the means employed are not wrongful.

[31]

As I have already noted, the learned judge rejected the assertion of
    conspiracy:

[129]  Although I find the departures to have been coordinated, and to
    have involved the breaches of numerous duties to DS, I do not find the defendants'
    conduct to amount to a conspiracy, as DS alleges.

[32]

Paragraph 32A -

32.A.
    The misconduct referred to in paragraph 31 herein constituted the implementation
    of an ongoing, widely practised and entirely unlawful corporate policy and
    practice of Merrill Lynch described in a Merrill Lynch document entitled "Preparation
    Guidelines For Receiving a Competitive Recruit". Pursuant to these Guidelines,
    Merrill Lynch required that its Branch Managers and other employees take every
    possible step to cause employees joining Merrill Lynch from competing investment
    dealers to provide to Merrill Lynch, for the benefit of Merrill Lynch, complete
    information with respect to the clients of the competing investment dealer
    with whom the Investment Advisor in question had been dealing, notwithstanding
    the fact that the said information was proprietary to the competing investment
    dealer and the employees in question had no entitlement whatever to provide
    that information to Merrill Lynch.  Merrill Lynch was at all material times
    aware that the said policy and practice was unlawful but nevertheless induced
    the Cranbrook Sales Force to carry out the unlawful conduct referred to in
    paragraph 31 herein with full knowledge that it was unlawful for each and
    every one of the Defendants to do so.

[As this is not a plea of a material fact within the
    meaning of British Columbia Supreme Court Rule 19, I assume it was made as
    a foundation for the claim for punitive damages.]

[33]

It is so that Merrill Lynch did have such a policy.  As it played an
    important part in the award of punitive damages, I quote it, in part:

Moving the Book to Merrill Lynch

* * *

The
    recruit will need to provide the following information to the SIU [Manager
    of the Special Incoming Unit]:

□

The most recent portfolio
    printout of your clients' holdings.

□

A breakdown of the
    number of client account types:

* Cash/margin

* RRSPs/RRIFs/RESPs

* Locked-in RRSPs

* Group RRSP plans

* Option accounts

* Short hedge accounts

*
          Commodity accounts

□

A list of accounts
    that are currently set up for Systematic Plans or Pre-Authorized Contributions.

□

A list of accounts
    that hold mortgages in RRSP accounts (consider who will pay the legal fees)....

[34]

DS also had a competitive recruitment guide which is not as blatant,
    but certainly contemplates inducing advisors to depart from one brokerage
    house and take up with DS.  Part of its guide, "Transitioning Your Competitive
    Hire", includes:

Tips
    on how to Organize the Process

Before you begin the process of filling out
    documentation and sending out packages you should:

* * *

q

Have the IA and team
    review the Client list to ensure accuracy in the names and addresses

q

Group all accounts
    by Household

q

Create a list of top
    20 clients to whom they may wish to hand deliver the packages

q

Identify Platinum
    clients and arrange On-line Access and Platinum welcome package....

Is the advisor to create his client list from memory?

[35]

Paragraph 33 -

33.
    DS states that the Cranbrook Sales Force owed and owe, individually and collectively,
    a fiduciary duty to DS which, among other things, prohibits those Defendants
    from soliciting or dealing with clients of DS until the expiration of a period
    of time sufficient to give DS a reasonable opportunity to replace them and
    retain its clients in Cranbrook and Nelson.  That fiduciary duty was and is
    owed to DS by those Defendants because:

(a)
    the Defendant Delamont was a Vice-President and Branch Manager;

(b)
    as to the remainder of the Cranbrook Sales Force, they entered into a joint
    venture or scheme with the Defendant Delamont and are thus fixed at law with
    the same fiduciary duty as is he;

(c)
    as to the entire Cranbrook Sales Force and the Defendant Delamont, their close
    and special relationship with the clients of DS rendered DS particularly vulnerable
    to subsequent competition by those Defendants;

(d)
    the Cranbrook Sales Force effectively constituted the full DS sales force
    in Cranbrook and Nelson and was thus the "whole show" at law;

(e)
    any other conclusion would result in manifest unfairness of a kind this Honourable
    Court should not countenance.

[36]

The words "until the expiration of a period of time..." are
    an echo of paragraph 28 of the statement of claim.  Subclauses (a) and (d)
    are true in the sense that Mr. Delamont was, indeed, the branch manager,
    although not a vice-president, and the Cranbrook sales force did effectively
    constitute the full DS sales force in Cranbrook and Nelson.

[37]

I do not know any principle of law arising from some group of people
    being a "whole show".

[38]

The learned judge found no fiduciary duty on the part of any of the
    appellant advisors and assistants.

[39]

Paragraph 34 -

34.
    In the alternative, if the Cranbrook sales force did not owe a fiduciary duty
    to DS, they nevertheless owed at law a duty to make no improper use of confidential
    information or material provided to DS and to compete, if at all, in a fair
    manner.  For the reasons set out elsewhere in this Statement of Claim, the
    Cranbrook Sales Force have fundamentally and repeatedly breached the said
    duties.

[40]

This paragraph also raises the question of whether there is any duty
    after leaving an employment to compete "in a fair manner".

[41]

Paragraph 35 -

35.       While still employed by DS, the Cranbrook Sales
    Force took numerous steps to benefit Merrill Lynch and prejudice DS, all in
    violation of the duties of fidelity and good faith owed by those Defendants
    to DS.  While full details of that misconduct are not yet known to the Plaintiff,
    the misconduct includes the fact that the Cranbrook Sales Force, while still
    employed by DS:

(a)
    in early November removed original confidential material proprietary to DS
    including all or substantially all of the client files located at the DS Cranbrook
    Branch and caused those files to be transferred to the Merrill Lynch Branch
    in Cranbrook and/or the Merrill Lynch Regional Office in Abbotsford, British
    Columbia;

(b)
    caused or permitted employees of Merrill Lynch to review the said client files
    in early to mid-November and to make use of the information and material in
    those files to, among other things, prepare solicitation letters to each DS
    client;

(c)
    photocopied confidential material proprietary to DS with a view to subsequently
    transferring the said copies to the premises of Merrill Lynch to be used for
    the benefit of Merrill Lynch; and

(d)
    communicated with clients of DS for the purpose of soliciting those clients
    to accompany them to Merrill Lynch.

[42]

The primary facts in subparagraphs (a) and (b) are true.  As to (c),
    the exact nature of the material, other than lists of clients and documents
    relating to an individual client, is not clear to me.  It is unfortunate that
    the appellants did not demand particulars, especially of subparagraph (c).
    As to (d), this is the relevant passage in the learned judge's first reasons:

[105]
    Here the IAs' conduct extended far beyond cautious letters and phone calls
    to clients, and amounted to a determined and frenetic campaign to move the
    clients to Merrill Lynch.  This campaign began with the removal of client
    information weeks before the move, and continued with telephone calls in the
    case of some IAs before the move, and in the case of others immediately after.
    I find, despite some evidence otherwise, that letters to clients on Merrill
    Lynch letterhead were sent within at most two or three days of the move.
    At the DS Nelson office, an assistant was left behind for the express purpose
    of referring all clients to Merrill Lynch.

[106]  It was suggested that the letters to clients were no more than
    is required by professional courtesy, to advise clients of the IAs' departure
    from DS.  The text of the letters belies this suggestion.  For example, the
    letter under the signatures of Mr. Delamont and Mr. Duffy, who worked
    together as IAs, is taken from the Merrill Lynch "Preparation Guidelines
    for Receiving a Competitive Recruit" and began as follows:

We are pleased to announce an exciting new business opportunity.  We have
    decided to move to Merrill Lynch Canada Inc., Canada's pre-eminent financial
    service organization serving the needs of the individual investor.  We believe
    that in order to improve one's situation, one must periodically assess and
    make changes, and that is exactly what we have done.

After
    describing Merrill Lynch's attributes as a firm, Mr. Delamont and Mr.
    Duffy thank the client and invite him or her to contact them at indicated
    telephone numbers "[s]hould you have any questions or concerns".

[107]
    It is difficult to conceive of an "exciting new business opportunity",
    as announced in the first line, other than the opportunity to do business
    with Messrs. Delamont and Duffy at Merrill Lynch.  On a literal reading, the
    opportunity might refer [to] Mr. Delamont and Mr. Duffy's own move to
    Merrill Lynch.  However, the letter as a whole and its general tenor make
    clear that Mr. Delamont and Mr. Duffy will continue at Merrill Lynch to perform
    the types of services they performed at DS.  The letter cannot be read as
    a regretful announcement of the termination of their relationship with the
    client.

[108]
    It is unnecessary for me to determine whether the letters went so far as to
    solicit the DS clients.  The letters themselves may, like the letter in
Investors
    Group
, [
Investors Group Financial Services Inc. v. Smith
,

[1994] N.S.J. No. 466 (Q.L.) (S.C.)], have come up to but not over the
    line.  However, they clearly provided clients with the ready means to continue
    their relationship with the IAs at their new firm.  They did so while DS was
    reeling from the departures and not in a position to even send its own letters
    to clients, let alone to reassure clients that DS would provide satisfactory
    replacements for the IAs who had left.

[109]  I have no difficulty concluding that Loo J.'s evocative metaphor
    applies, and that the IAs were in fact well past the starting line before
    DS had any inkling that a race was on.  This was unfair competition.

[43]

Paragraphs 36 to 40 -

36.       Because of the aforementioned communications
    by the Cranbrook Sales Force, DS became aware on or about November 16,
    2000 that certain members of the Cranbrook Sales Force might be intending
    to leave the employ of DS.  When confronted about this on November 16, 17
    and 18, the members of the Cranbrook sales force were initially equivocal
    and in particular refused to confirm or deny their intention to move to Merrill
    Lynch.

37.       On Monday, November 20, 2000, the Cranbrook
    Sales Force either failed to attend for work at all or attended only very
    briefly before leaving the Cranbrook and Nelson offices of DS.  They immediately
    began working at Merrill Lynch with the result that, while the Cranbrook branch
    of DS had, as of November 17, 2000 one Branch Manager, eight experienced Investment
    Advisors, two very junior Investment Advisors and seven support staff, those
    branches had as of the morning of November 20th, only two very junior Investment
    Advisors and two support staff.

38.       On and after November 20, 2000, the Defendants
    continued an active campaign of communicating with all DS clients in Cranbrook
    and Nelson by means of letters, telephone calls and meetings with a view to
    attempting to persuade them to transfer their business from DS to Merrill
    Lynch.

39.       The Defendants did not return to DS any of
    the original confidential documentation proprietary to DS, including in particular
    client files, until on and after November 24, 2000.

40.
    The Defendants conspired amongst themselves from at the latest the summer
    of 2000 through November, 2000 to effect the many unlawful acts referred to
    in this Statement of Claim.

[44]

Paragraphs 36-39 are true.  As to paragraph 40, as I have noted, the
    learned judge did not find there to have been an actionable conspiracy.

THE FIRST REASONS FOR JUDGMENT

[45]

The learned judge, in her second reasons, 36 B.C.L.R. (4th) 138, 2004
    BCSC 1464, summarized her first reasons, 2003 BCSC 1773, thus:

Introduction

[1]
    Earlier reasons for judgment (2003 BCSC 1773) set out numerous findings as
    to liability associated with the coordinated departure of most of the sales
    staff of the RBC Dominion Securities Inc. ("DS") Cranbrook branch
    for the competitor Merrill Lynch Canada Inc. branch, and the defendants' unfair
    competition and conversion of DS's records.  These reasons address the damages
    arising.

[2]
    The underlying body of evidence concerning DS's financial position before
    and after the employee departures is not in dispute.  Numerous issues nonetheless
    arise from the evidence and the parties' detailed and helpful submissions,
    and are determined in principle below.  If the parties are unable to agree
    on the precise aggregate effect for each defendant of these determinations,
    they may settle the matter before a Registrar or arrange through the court
    registry to appear before me (by telephone or in person) for further direction.

Summary of Previous Findings as to Liability

[3]
    I found the following breaches of duties to DS:

·

The DS employees (namely
    Mr. Delamont, the IAs [investment advisors], and the assistants) each breached
    the implied term in their employment contracts with DS to provide reasonable
    notice of the termination of their employment.

·

The DS employees also
    breached their larger contractual duty not to compete unfairly with DS by:

○

failing to provide
    reasonable notice of termination (which itself breached an implied contractual
    duty, as noted above)

○

engaging in concerted
    and vigorous efforts to move clients to Merrill Lynch well before DS was in
    a position to try to protect its relationship with those clients, and

○

removing all DS's
    confidential client records several weeks before the move in order to facilitate
    the transfer of DS clients to Merrill Lynch (actions which also constituted
    the tort of conversion, as noted below).

·

Mr. Delamont also
    breached his contractual duty to faithfully perform the functions of his role
    as branch manager.  Although he was specifically remunerated (over and above
    his earnings as an IA) for this role, over a period of months (beginning June
    2000 at the latest) he promoted and coordinated the departure of virtually
    all of the sales staff of the DS branch.

·

As was acknowledged
    at the trial, Mr. Delamont, the IAs, and the assistants bear liability for
    the tortious conversion of DS's confidential client records. Merrill Lynch
    and Mr. Michaud also bear liability for that conversion.

·

Merrill Lynch and
    Mr. Michaud tortiously induced the DS employees' breaches of their duty not
    to compete unfairly with DS after they left DS.

[4]
    I was satisfied that each of the various breaches caused loss to DS, but I
    did not at that stage of the proceedings assess the extent of the loss from
    each breach or particularize the loss caused by each defendant.

[5]  I did not find Merrill Lynch or Mr. Michaud to have induced Mr. Delamont's
    breach of his duty to faithfully perform his role as branch manager.  I mention
    this because plaintiffs counsel read ¶145 of my reasons as sufficiently broad
    to encompass such a finding.

[46]

Thus, it appears the learned judge:

1.         accepted the plea of DS that the
    Cranbrook staff, either individually or collectively, owed a legal duty "[to
    give] DS a reasonable opportunity to...retain its clients", "to
    behave in a fair and reasonable manner", to compete "fairly",
    and "to compete, if at all, in a fair manner";

2.         found,
although there was no
    plea to that effect
, that Mr. Delamont, in breach of a duty specific
    to him, "promoted and coordinated the departure ...";

3.         held the investment advisors to
    have a contractual duty to give notice;

4.         found that Merrill Lynch and Michaud
    committed the tort of inducing breach of the advisors' contracts "not
    to compete unfairly" after they left DS;

5.
    found the advisors and Merrill Lynch and Michaud liable for the tort of conversion.

[47]

As to the first and fourth of these conclusions, when one analyzes
    the pleas of DS and the learned judge's findings, the concept of competing
    unfairly appears to come to this question:  Does a servant who is contemplating
    departure, or has departed, owe any contractual duty to the master to refrain
    for some period of time from immediately competing in order to give the master
    a window of opportunity to persuade the clients to remain?

[48]

If there is no such contractual obligation, it would follow that there
    can be no inducing a breach of it.

[49]

I address this question, together with the other questions arising
    on these conclusions, in paragraphs 59 and following.

EVIDENCE ON THE QUESTION OF DAMAGES

[50]

At the hearing before the learned judge, the principal evidence was
    that of two expert valuers, Mr. Wayne Rudson, for DS, and Mr. Robert Mackay,
    for Merrill Lynch and the other appellants.

THE SECOND REASONS FOR JUDGMENT

[51]

In her second reasons, the learned judge put the position of the parties
    and the issues, thus (I have added in square brackets the answers which she
    gave consequent upon her discussion of the issues):

Positions of the Parties as to Damages

[6]  DS submits that without the breaches set out above, the departures
    to Merrill Lynch would not have happened and the DS Cranbrook branch would
    have continued to function unimpaired into the indefinite future, subject
    to usual employee turnover.  In particular, the mass departure would never
    have gained its momentum without Mr. Delamont's breach of his duty as manager.
    In any event, with reasonable notice of their intention to depart DS would
    have been able to persuade the employees to stay.  The defendants are therefore
    liable for either the drop in value of the branch as a capital asset, or for
    its profits lost since and because of the departures.

[7]  DS submits that even if some of the IAs would have left DS in any
    event, without the breaches enough IAs would have remained (or could have
    been hired) to staff a viable branch which would have been able to retain
    a greater proportion of the DS clients serviced by the IAs who departed.

[8]  The defendants respond that the breaches did not cause the virtual
    collapse of the branch as DS maintains because the employees were entitled
    to leave their employment, whether separately or together; the employees were
    discontented with significant aspects of their employment, and would have
    left DS in any event.

[9]  The defendants submit that therefore the losses caused by the breaches,
    and for which DS is entitled to damages, are only those flowing from the absence
    of reasonable notice and the employee's unfair competition during what should
    have been the notice period.  Since the court concluded that in these unusual
    circumstances of a mass departure which left behind almost no staff the appropriate
    notice period was "a matter of weeks", DS should therefore be awarded
    damages limited to its lost profits during the several weeks after the departures.

[10]
    DS makes, and the defendants resist, a forceful claim for punitive damages,
    in part on the basis that compensatory damages will be inadequate to condemn
    the prolonged course of unlawful conduct.

Issues

[11]
    The positions of the parties and the evidence in relation to damages raise
    the following issues:

Damages Payable
    By Mr. Delamont

1.
    Did Mr. Delamont's breach of his duty as branch manager to work against the
    departures, and not to promote and coordinate them, cause the virtual collapse
    of the Cranbrook branch as DS maintains?

[Yes:  "[48]  In summary, Mr. Delamont's breach
    did much more than provide the mere occasion for the mass departure.  His
    various acts and failures in breach of his duty to DS led directly to the
    circumstances in which the employees determined to leave.  I am satisfied
    that his breach caused the mass departure and the near collapse of the DS
    branch, but did not cause the departures of Mr. Swift and Mr. Kravski." ]

2.         If so, are DS's damages arising from the virtual
    collapse of the branch too remote to be compensable by Mr. Delamont?  [No]

Damages Payable
    By (Variously) All Defendants

3.
    Are the defendants liable for DS's losses beyond the notice period because,
    with reasonable notice of the employees' termination, DS could have persuaded
    them to stay?

[Yes:
    "[64]  The IAs are therefore liable for DS's loss of profits during the
    2 ½ week notice period, to December 4, 2000.  The loss in relation to that
    period will be calculated in accordance with the principles discussed below.
    The IAs will bear individual liability in relation to the total amount of
    this loss of profits in proportion to their share of the total of the assets
    under management at DS at the time of the departures.

[65]  The assistants will pay nominal damages of $1,000 each in relation
    to their breach of duty to give notice." ]

4.
    If the DS employees had competed only fairly after their departure (including
    by not competing during the period of reasonable notice of termination), would
    DS have retained a higher proportion of clients?

[Yes:  "[80]  DS retained 13.5% of the assets under
    management in the departing IAs' client books.  I am satisfied that had DS
    had a reasonable notice period within which to regroup and enter into a fair
    competition for clients, it would have been able to increase that retention
    rate to 25%." ]

5.         Did DS unreasonably fail to mitigate its loss?
    [No]

6.
    If DS is to be compensated for the near-collapse of the branch, what method
    should be used to value that loss?

[Loss of profits:

"[93]  For several reasons, I agree with the defendants that the
    loss of profits approach (though not necessarily the defendants' application
    of that approach) is the more suitable of the two approaches here." ]

7.
    If the loss of profits method of valuation is used,

(a)
    Should DS's actual profits since the departures include the profits generated
    by Cindy Yates, an IA who joined DS after the trial?

[Yes:
"[104]  In the application of the loss of profits method of valuing DS's
    loss, DS's actual profits since the departures will therefore include those
    generated by Ms. Yates." ]

(b)
    What equivalent business should serve as a guide to how DS's profits would
    have continued had the breaches not occurred?

[Group
    average:
"[110]  Mr. Royce for DS suggested that because no single group of branches
    can offer a perfect basis for comparison, an average of the various groupings
    Mr. Rudson considered [including the DS private client division involving
    all branches in Canada, and various branch groupings, both in B.C. and Canada,
    as listed in para. 107] is the most reliable basis on which to project DS's
    lost future profits.  I agree.  Mr. Rudson's groupings attempt to isolate
    key characteristics of the Cranbrook branch, insofar as they may be reflected
    in the financial information available.  Averaging will reduce the effect
    of any anomaly within any particular grouping.

[111]  The calculation of DS's lost profits will therefore be based on
    an averaging of the six groupings Mr. Rudson considered." ]

(c)
    For how long into the future should the defendants compensate DS?

["[118]  For all these reasons, I conclude that DSs compensable
    loss runs for five years, to October 31, 2005.  However, it will also be subject
    to an appreciable discount for contingencies, to which I now turn."]

(d)
    By what percentage should DS's projected profits be reduced to reflect uncertainties
    inherent in assumptions as to the future (a contingency reduction)?

["[122]
    In my view, more appropriate to the industry and the Cranbrook branch in particular
    is a rate which increases over time.  The discount rate will therefore be
    as follows:

20% on the loss to October 31, 2001

30% on the loss to October 31, 2002

40% on the loss to October 31, 2003

50% on the loss to October 31, 2004

60% on the loss to October 31, 2005 "]

(e)
    Should there be a reduction equivalent to the amount Merrill Lynch paid as
    incentives to the IAs to leave?

[No:
"[123]  The defendants submit that the calculation of DS's lost profits
    should include a deduction for the financial incentives Merrill Lynch paid
    the employees to move from DS, because DS would have had to offer similar
    incentives to retain them.  Mr. Mackay concluded that the aggregate present
    value (as at the date of the departures from DS) of these incentives (which
    were forgivable loans and incentive bonuses) was approximately $1.4 million.
    He was unable to determine the negative impact on profits that the higher
    commission rates to IAs may have had.

[124]
    I am not persuaded that DS would have had to offer the IAs the same incentives
    to stay.  In their evidence, most of the IAs spoke about their dissatisfaction
    at DS in a fashion I described earlier as euphemistic, emphasizing client
    interests and Merrill Lynch's superior technological system at the time.
    Although it was evident from the IAs' evidence as a whole in this area that
    their dissatisfaction stemmed largely from their actual remuneration or from
    the expected downward pressure on their remuneration by DS's banking arm,
    the evidence was not specific as to amounts.  Also, as I have noted in other
    contexts, the group departure took on its own momentum and in its final days
    responded to an extent to social, rather than financial, pressures.

[125]
    I note also that the very fact that IAs who move from one firm to another
    retain considerably less than 100% of their client book indicates the financial
    risk to an IA in making such a move.  A financial incentive to move serves
    in part to compensate the IA for the inevitable loss of some clients, and
    therefore commissions, as a result of the move.

[126]
    Finally, I note that this issue (which relates only to the calculation of
    DS's loss of profits associated with the near-collapse of the branch) has
    the greatest, though not its only, effect in relation to damages payable by
    Mr. Delamont.  It was Mr. Delamont's own breach which created the situation
    in which the IAs were susceptible to the financial incentives Merrill Lynch
    offered, and he should not benefit from that breach.

[127]
    For all these reasons, I do not conclude that absent Mr. Delamont's breach
    similar financial incentives would have been required to keep the IAs at DS.
    No doubt adjustments to remuneration would have been required from time to
    time, as part of the normal operation of the branch within the overall DS
    structure.  However, such adjustments would not be unique to the Cranbrook
    branch, and to the extent that they would have decreased the branch's profits
    they are reflected in the profits of the groups of equivalent businesses Mr.
    Rudson considered.

[128]  In the calculation of DS's lost profits, there will be no deduction
    equivalent to the financial incentives Merrill Lynch gave the IAs to move. "]

8.         Is DS entitled to damages for the conversion
    of its documents?

[No:
    "[129]  As Mr. Royce candidly acknowledges, it is difficult to identify
    any component of DS's loss which flows uniquely from the conversion of DS's
    documents.

[130]
    The documents were returned to DS on the Friday after the Monday move, and
    any Merrill Lynch documents prepared from them were destroyed.

[131]  There will be no compensatory damages in relation to the conversion.
    However, I will return to the matter in relation to the discussion of punitive
    or exemplary damages below." ]

9.         Should punitive damages be awarded?

[Yes:
    "[143]  Mr. Delamont and Mr. Michaud will each pay $10,000 in punitive
    damages.  The other IA defendants will each pay $5,000.  The assistants acted
    under instruction and will not pay punitive damages.  Merrill Lynch will pay
    $250,000." ]

ERRORS ALLEGED

[52]

In this Court, the appellants, in their factum, allege these errors:

Damages Against Mr. Delamont Personally

1.
    The pleadings do not support the award of damages against Mr. Delamont
    personally.

2.
    The learned Trial Judge erred by failing to give proper consideration to the
    reasonable expectations of the parties to the employment contract.

3.
    In finding that Mr. Delamont
caused
DS' loss, the learned Trial Judge
    erred by:

a.
    failing to apply the proper test for causation in contract;

b.
    making inconsistent findings regarding causation.

4.
    The learned Trial Judge erred by failing to apply the doctrine of minimum
    performance.

5.
    The learned Trial Judge erred by awarding damages without adequate reduction
    for contingencies.

Damages Generally against all Defendants

6.
    The learned Trial Judge erred by awarding damages for failing to give notice
    when notice would not have been accepted by the employer.

7.
    The learned Trial Judge erred by finding the IAs liable to pay damages of
    11.5% of DS's lost profits over a 5 year period
in addition

to
finding the IAs liable for DS's lost profits during the notice period.

Punitive Damages

8.
    The learned Trial Judge erred by awarding punitive damages or by awarding
    excessive punitive damages.

[53]

They seek these orders:

... that the appeal be allowed and the following orders
    be made:

a.
    The Lost Profit Damages be set aside; or

In
    the alternative, the Lost Profit Damages be set aside and a new trial be ordered;
    or

In
    the alternative, the Lost Profit Damages be set aside and replaced by damages
    equal to Mr. Delamont's branch manager compensation for the period of breach,
    from June to November 2000; or

In
    the alternative, the Lost Profit Damages be reduced by 29%, which is the percentage
    of lost profits attributable to Mr. Delamont's book of business and by
    the percentage attributable to Mr. Bellomo;

In
    the alternative, a contingency rate of 50% be applied to DS' future lost profits;

b.
    The award of damages for notice period losses be set aside;

c.
    The award of damages for losses incurred as a result of the IAs conduct during
    the notice period be set aside;

d.
    The award of punitive damages against each Appellant be set aside, or

In
    the alternative, the award of punitive damages against each Appellant be reduced.

[54]

For its part, DS not only seeks an order that the appeal be dismissed,
    but also that the cross appeal be allowed to:

(a)
    increase the award of punitive damages against the departing IA's and Mr.
    Michaud to the amounts of their respective signing and incentive bonuses;

(b)
    increase the award of punitive damages against ML to $1 million dollars; and

(c)
    award damages against the departing IA's equal to the damages awarded against
    Mr. Delamont with respect to the near destruction of the Cranbrook Branch.

[55]

In support of that position, DS says:

73.       By way of cross-appeal, DS submits that:

(a)        if this Honourable Court is prepared to interfere
    with the discretion of the learned Trial Judge as to the extent to which punitive
    damages should be awarded in this case, the punitive damages awarded against
    the departing IA's should be increased to reflect the signing bonuses paid
    to them by ML, the punitive damages as against Mr. Michaud should be increased
    to reflect the bonus paid to him by ML for recruiting the Cranbrook Branch,
    and the punitive damages awarded against ML should be increased to reflect
    better the financial status of ML; and

(b)
    the learned Trial Judge erred in that, having concluded that it is probable
    that, if the Appellant IA's had provided DS with reasonable notice, most would
    have been persuaded by DS to stay and not move to ML, the learned Trial Judge
    concluded that, as a matter of law, this probable consequence of the misconduct
    of the departing IA's did not give rise to an entitlement to damages on the
    part of DS.

ANALYSIS

[56]

In
Canada 3000 Inc., Re; Inter-Canadian (1991) Inc. (Trustee
    of)
, 2006 SCC 24, Binnie J. remarked:

71        It is difficult to endorse the indignation of the legal titleholders
    with respect to detention of their aircraft until payment is made for debts
    due to the service providers.  They are sophisticated corporate players well
    versed in the industry in which they have chosen to invest.  The detention
    remedies do not affect their ultimate title.  Lenders who have done their
    due diligence will recognize that detention remedies have deep roots in the
    transport business.

[57]

What we have here is a respondent who is a sophisticated master.  It
    deliberately chose not to obtain non-competition and non-solicitation clauses
    from its servants, nor to put a term as to length of notice or a term "you
    promise if you leave our employment you will not compete unfairly" (I
    have never seen such a term, whatever it might mean) into its written contract,
    if any, with any of these servants, including Mr. Delamont.

[58]

Had it taken proper care of itself by obtaining such provisions, the
    appellant advisors might well not have entertained the thought of leaving,
    either because they felt they should observe express terms of a contract,
    or out of fear of the consequences of not observing such terms.

(a)
The Asserted Obligation "Not to Compete Unfairly"

[59]

In paragraph 47, I posed the principal question of law, using that
    word to include equity, which I understand to arise on the pleas of DS and
    the learned judge's findings.

[60]

I appreciate that in the various authorities there may be some phraseology
    which one could construe as creating a general duty not to "compete unfairly"
    after leaving the master's service.  I have in mind the reasons for judgment
    of my colleague, Hall J.A., in
Barton Insurance Brokers Ltd. v. Irwin
(1999), 63 B.C.L.R. (3d) 215 (B.C.C.A.) at 221-222:

[17]      It
    must, of course, be observed that the problem presented in this case is a
    rather different one from the one referred to in the cases mentioned above,
    cases concerning the enforceability of covenants.  There was no covenant in
    this case.  However, from that field of the law came the development of the
    area we are here concerned with: namely, the duties of an employee to a former
    employer.  Absent any express contractual terms,
the law has developed
    to provide that a former employee will not be at liberty to act in an unfair
    way to a former employer
.  Whether it be called a fiduciary duty, a duty
    of good faith or a duty of confidence, the theme running through this whole
    area of the law is that in appropriate circumstances, a former employee may
    be found to have breached an enforceable duty owed to a former employer and
    may be successfully sued for injunctive relief or for damages.

[18]      Clearly, an employee has duties to a present
    employer not to divulge trade secrets or to work against the interests of
    his or her employer but the duty is not just limited to current employment.
    After leaving employment, an employee may be obligated not to pursue certain
    activities to the detriment of the former employer.  For instance, it has
    been usually reckoned to be unfair conduct to permit a former employee to
    take with him or her customer lists to use for solicitation of business or
    to divulge trade secrets or to seek to appropriate maturing business opportunities
    of the former employer.  On the other hand, I suppose to avoid what might
    otherwise be a condition of almost involuntary servitude, it has long been
    held that an employee is free to compete for custom with a former employer.
    As usual in human affairs, the difficulty is in the details and it is often
    difficult to know where to draw the line.

[Emphasis mine.]

[61]

As Binnie J. remarked in
R. v. Henry
, [2005] 3 S.C.R.
    609, 49 B.C.L.R. (4th) 1, in a passage as applicable to a judgment of
    this Court as to a judgment of the Supreme Court of Canada:

[57]  ... The notion that each phrase in a judgment of this Court should
    be treated as if enacted in a statute is not supported by the cases and is
    inconsistent with the basic fundamental principle that the common law develops
    by experience.

[62]

Lord Reid put the same proposition thus in
Cassell & Co.
    Ltd. v. Broome
, [1972] 1 All E.R. 801 (H.L.) (the famous case arising
    from the publication by the appellant of the work
The Destruction of Convoy
    PQ17
, which indicted the respondent naval officer not only of incompetence
    but, also, more woundingly, of cowardice) at 835-836:

The very full argument which we have had in this case has
    not caused me to change the views which I held when
Rookes v. Barnard
[[1964] 1 All E.R. 367, [1964] A.C. 1129], was decided or to disagree with
    any of Lord Devlin's main conclusions.  But it has convinced me that I and
    my colleagues made a mistake in simply concurring with Lord Devlin's speech.
    With the passage of time I have come more and more firmly to the conclusion
    that it is never wise to have only one speech in this House dealing with an
    important question of law.  My main reason is that experience has shown that
    those who have to apply the decision to other cases and still more those who
    wish to criticise it seem to find it difficult to avoid treating sentences
    and phrases in a single speech as if they were provisions in an Act of Parliament.
    They do not seem to realise that it is not the function of noble and learned
    Lords or indeed of any judges to frame definitions or to lay down hard and
    fast rules.  It is their function to enunciate principles and much that they
    say is intended to be illustrative or explanatory and not to be definitive.

[63]

Many authorities have been cited in this case, and I have read many
    more, but I can find no authority warranting an affirmative answer to the
    question.

[64]

As to the passage which I have quoted from the judgment of Hall J.A.
    in
Barton Insurance
, it is
obiter dicta
, for he was affirming
    a judgment dismissing an employer's action against a departing employee who
    had used the telephone directory to create a list of customers for her new
    employer.  The ratio of the decision will be found in paragraph 39:

[39]      In the case at bar, I am of the respectful view that the conclusions
    of the learned trial judge were soundly based in law and fact.  Absent an
    enforceable agreement to refrain from soliciting former customers, I am not
    of the view that any duty, fiduciary or otherwise, should have been found
    to prevent Ms. Irwin from canvassing former clients.  In cases involving activity
    by key or senior former employees, or by directors in situations disclosing
    manifest unfairness, such as found in
Palmer
[
57134 Manitoba Ltd.
    v. Palmer
(1989), 37 B.C.L.R. (2d) 50 (C.A.)] or
Tree Savers International
    Ltd.
[
v. Savoy
(1991), 81 Alta. L.R. (2d) 325 (Alta. Q.B.), aff'd
    on point (1992), 87 D.L.R. (4th) 202 (Alta. C.A.)], a court may be persuaded
    to grant injunctive relief or to award damages against former employees.
    However, the general interest of the public in free competition and the consideration
    that in general citizens should be free to pursue new opportunities, in my
    opinion, requires courts to exercise caution in imposing restrictive duties
    on former employees in less than clear circumstances.  Generally speaking,
    as I noted from the earlier authorities referred to, the law favours the granting
    of freedom to individuals to pursue economic advantage through mobility in
    employment.  To find liability against the defendants on the facts of this
    case would, in my view, not be appropriate.

[65]

In my opinion, there is no such thing on the part of a servant, upon
    leaving his master's employ, as an obligation not to compete "unfairly".
    Such a broad open-ended legal duty, whether treated as an implied term of
    a contract of service or as some obligation outside the contract but imposed
    by law, would be dependent for its scope on the length of any particular judge's
    foot.  To put it another way, the allegation in paragraph 28 of the statement
    of claim, which is echoed in paragraphs 33 and 34, does not assert an ingredient
    of any cause of action known to me.

[66]

This is not the place to engage in a disquisition on the general principles
    of implication of terms.  But if each of these servants had been asked on
    entering into the service of DS, "If you leave our employ, do you promise
    not to compete unfairly?" would he or she have answered, "of course"?
    I think not.  I think, at least if he or she were intelligent, the response
    would have been, "What does that mean?  I have to make a living."

[67]

To the extent, therefore, that the judgment below is founded upon an
    implied obligation not to compete "unfairly", it cannot be sustained.
    As, in my opinion, that concept loomed large in the learned judge's approach
    to the issues, its rejection puts in doubt the validity of all the learned
    judge's ultimate conclusions.

(b)
The Claim for Breach of Confidence

[68]

What the law does protect is the master's goodwill and other property,
    by holding that the servant may not take away confidential documents and trade
    secrets.

[69]

Although there are no trade secrets at issue in the case at bar, this
    passage from
Morison v. Moat
(1851), 9 Hare 241 at 255, 68 E.R.
    492 at 498 [a case about a secret recipe for a medicine], a judgment of Turner
    V.-C., is apposite:

The Plaintiff's case was rested in argument upon the ground
    that the Defendant had obtained this secret by breach of faith or of contract
    on the part of Thomas Moat. ... The true question is whether, under the circumstances
    of this case, the Court ought to interpose by injunction, upon the ground
    of breach of faith or of contract.

That the Court has exercised jurisdiction in cases of this nature does not,
    I think, admit of any question.  Different grounds have indeed been assigned
    for the exercise of that jurisdiction.  In some cases it has been referred
    to property, in others to contract, and in others, again, it has been treated
    as founded upon trust or confidence, meaning, as I conceive, that the Court
    fastens the obligation on the conscience of the party, and enforces it against
    him in the same manner as it enforces against a party to whom a benefit is
    given the obligation of performing a promise on the faith of which the benefit
    has been conferred;
but, upon whatever grounds the jurisdiction is founded,
    the authorities leave no doubt as to the exercise of it
.

[Emphasis mine.]

[70]

To the same effect as to the foundation of an action for breach of
    confidence, is the judgment of Sopinka J. in
Lac Minerals Ltd. v. International
    Corona Resources Ltd.
, [1989] 2 S.C.R. 574 at 615.

[71]

Whether any particular piece of information should be considered "confidential"
    depends upon its nature.  Some information within that rubric is of the "nothing
    very special" variety.  See the judgment of Binnie J. in
Cadbury
    Schweppes Inc. v. FBI Foods Ltd.
, [1999] 1 S.C.R. 142 ¶ 65-66, although
    it is not a case of master and servant.

[72]

I have found very considerable assistance in considering the issues
    arising from the allegations in paragraph 35 of the statement of claim, certain
    passages in the judgment of Sir Donald Nicholls, then the Vice-Chancellor
    and now Lord Nicholls, in
Universal Thermosensors Ltd. v. Hibben
,
    [1992] 3 All E.R. 257 (Ch.), the only other case of a mass departure which
    I have come across and which does not appear to have been cited to the learned
    trial judge.  I need not set out the conduct of the servants before their
    departure.  It is sufficient to say that it might be thought to be more egregious
    than that which took place here.  It is important to note, however, that the
    individual defendants may have given sufficient notice of their impending
    departure so that they were not actually in breach of their obligation to
    give reasonable notice.

[73]

Lord Nicholls said, in part, at 266-267:

Save on one point the underlying applicable legal principles were not in dispute.
    The contracts of employment between the plaintiff and the three individual
    defendants did not include any provision restricting their activities after
    their employment ended.  So when they left they were free to set up at once
    a directly competing business in the immediate locality.  Further, they were
    entitled to approach the plaintiff's customers, and seek and accept orders
    from them.  Still further, they were entitled to use for their own purposes
    any information they carried in their heads regarding the identity of the
    plaintiff's customers, or customer contacts, or the nature of the customers'
    product requirements, or the plaintiff's pricing policies, provided they had
    acquired the information honestly in the ordinary course of their employment
    and had not, for instance, deliberately sought to memorise lists of names
    for the purposes of their own business.  What the defendants were not entitled
    to do was to steal documents belonging to the plaintiff, or to use for their
    own purposes information, which can sensibly be regarded as confidential information,
    contained in such documents regarding the plaintiff's customers or customer
    contacts or customer requirements or the prices charged.  Nor were they entitled
    to copy such information onto scraps of paper and take these away and then
    use the information in their own business.

The one point of disagreement on the law concerned a contention by the plaintiff
    to the effect that once it is shown that the defendants had stolen documents
    containing confidential information, and that they had used those documents
    in soliciting orders, there arises an irrebuttable presumption that any business
    resulting from the orders derives from the wrongful use of the confidential
    information and that the defendants are liable in damages accordingly.  The
    court will not inquire at all into whether the defendants knew the name of
    the particular customer or contact anyway.  I am not able to accept a proposition
    expressed in such comprehensive and rigid terms.  In assessing and awarding
    damages here the object of the law is to award fair compensation to a plaintiff
    for the wrong done to him by a defendant's misuse of his confidential information.
Whether particular business obtained by a defendant was obtained as a result
    of misuse by him of a plaintiff's confidential information is essentially
    a question of fact in each case.  In seeking to answer that question, the
    court will inquire into the facts and surrounding circumstances as much in
    this case as in any other
.  In doing so, of course, a court will not take
    leave of common sense.  It will view with considerable circumspection, even
    scepticism, a contention by a defendant who has chosen to use a list, that
    he already carried some of the information in his own head and that looking
    at the list for any particular name or names was quite superfluous and unnecessary.
    Moreover, any doubts and obscurities arising from the evidence are likely
    to be resolved against the defendant.  So, in practice, such a defendant will
    have a difficult row to hoe.  But this approach by the court is far removed
    from saying that in no circumstances will the court look further once user
    of the list is proved.  That would be altogether too sweeping, and it could
    easily result in a plaintiff being awarded more than fair compensation for
    the loss suffered by him from the misuse of his confidential information.
    I do not understand Nourse LJ to have said otherwise in
Roger Bullivant
    Ltd. v. Ellis
, [1987] ICR 464 at 475, when he observed that, having made
    deliberate and unlawful use of the plaintiff's property, a defendant cannot
    complain if he finds that the eye of the law is unable to distinguish between
    the potential customers whom, had he so chosen, he could have contacted lawfully
    and those whom he could not.

[Emphasis mine.]

[As I discuss in paragraphs 80-83
infra
, I am
    of the opinion that in the context of this case, the concluding words of the
    first paragraph are too all-encompassing.]

[74]

Before the court in that case were two issues:  the plaintiff's claim
    for damages for misuse of confidential information, and the defendants' claim
    for damages on the plaintiff's undertaking as to damages upon an interlocutory
    injunction which was conceded apparently by the plaintiff to have been far
    too wide.  As for the plaintiff's claim, the learned judge said, at 268:

Nor can it be right to infer any damage to the plaintiff's goodwill, with
    consequent loss in trade, flowing from TPL's unsuccessful canvassing of orders
    from other customers (TPL [the competing business set up by the defendants]
    was in touch with 121 of the 218 customers whose names are in the schedule
    to Warner J's order of 9 July 1990).  There was no evidence before me to suggest
    that the defendants indulged in any denigration of the plaintiff to such customers
    or at all.  The plaintiff placed much reliance on the award of general damages
    made by Hawkins J in
Robb v. Green
[1895] 2 QB 1 at 19-20, but that
    was a very different case.  TPL has ceased trading.  The identity of each
    of the customers who dealt with TPL is known and in this case, unlike in
Robb
    v. Green
, the circumstances in which each of the plaintiff's customers
    began to trade with TPL were investigated with a fine toothcomb.  The only
    exceptions were Ricardo (whose business was minimal) and Tempcontrol.

The overall result is that, in substance, the plaintiff's
    claim for damages based on loss of profits fails.  I do not find this surprising.
    The reverse in the plaintiff's trading fortunes in 1990 may well be explicable
    by a combination of
factors for which in law the defendants are not liable:
    internal disorganisation following the loss of many employees
, trade recession,
    and (quite possibly) the loss to TPL of some orders which TPL obtained otherwise
    than by the misuse of confidential information.

[Emphasis mine.]

[75]

As to the defendants' claim on the undertaking, he said, at 269-270,
    that the injunction had been far too wide:

In my view this contention is well founded.  In July 1990 the plaintiff was
    entitled to be protected, by means of an injunction, against any
further
misuse by the defendants of the plaintiff's confidential information.  For
    instance, they must no longer use the item 3 list.  An injunction in those
    terms would be without limit in point of time.  For the
future
TPL
    must obtain from independent sources any information it needed about potential
    customers and contacts.  It must search through directories, and it must then
    make sustained efforts over the telephone to reach the appropriate personnel.
    In aid of this injunction the plaintiff was entitled to have documents such
    as the item 3 list delivered up.

The matter stands quite differently regarding misuse which
    had
already
occurred before July 1990.  By this date TPL had already
    made contact with many of the plaintiff's customers.  In respect of such past
    misuse the clock could not be put back.  The plaintiff was entitled to appropriate
    financial recompense, by way of damages or restitutionary relief such as an
    account of profits.  In my view, however, in respect of misuse which had already
    occurred the plaintiff was not entitled to more.  In particular, if by misuse
    of confidential information TPL had already made contact with a customer and
    had received an order from him, an injunction to restrain TPL from fulfilling
    that order or any future order would go too far.  An injunction in such a
    form would not be aimed at preventing further misuse of confidential information.
    The misuse occurred when the plaintiff's customer and contact were approached.
Fulfilling outstanding or future orders would not be a further misuse of
    confidential information by TPL
.

* * *

In those circumstances, to grant an injunction to restrain TPL from dealing
    after July 1990 with customers
it had already approached
was to put
    the plaintiff in a better position for the future than if there had been no
    misuse of information.  I can see no justification for that.

[Emphasis mine.]

[76]

In the upshot, the plaintiff obtained judgment on its claim for damages
    for the stealing of confidential information, £186, and the defendants, on
    their claim on the undertaking, for £20,000.

[77]

Of relevance is the passage in which Lord Nicholls says that the defendants
    were not liable in law for loss of profits from "internal disorganisation
    following the loss of many employees".  I appreciate, however, he does
    not say why that is so.

[78]

The critical point of this judgment is its emphasis on the significance
    of the investigation into why the various customers, all of whom were known
    to the plaintiff, had given orders to the defendants.

[79]

In the case at bar, there was no true investigation of the circumstances
    in which the various customers or clients began to trade with Merrill Lynch,
    so whether the business of a particular client was obtained as a result of
    misuse of "confidential" information was never determined.

[80]

But what should be considered confidential information?  In the opening
    paragraph of these reasons, I asked the question, what weight is to be given
    to the interests of the clients to whom are owed, by all those engaged in
    this litigation, duties of competence and honesty?

[81]

In my opinion, a client is entitled to know immediately upon his advisor
    leaving one firm for another where that advisor has gone so that he or she
    can decide whether to change to the new firm or remain with the old.

[82]

Because of that important interest of the client, an advisor should
    be able, without fear of litigation, to prepare a list of his own book of
    business from the records of the brokerage house.  To hold in the 21st century
    that an advisor, who usually, by considerable personal diligence, has built
    up a book of business, must rely on his memory for the full names, addresses,
    telephone numbers and e-mail addresses of his clients, is not, in my opinion,
    in the interests of the clients and, therefore, is not in the public interest.
     I emphasise "his own book of business".  He is not entitled to
    take a list of other advisors' clients.  To put it another way, the interests
    of the brokerage house should not be put ahead of the interests of the clients.

[83]

I do not say that an advisor is entitled to take copies of account
    statements and other papers concerning the client, such as the Know Your Client
    form.  If the client wants to change to the new firm, he or she can give instructions
    to the old firm to hand over copies of all relevant documents, or give the
    advisor a copy of his or her own statements, and so forth.  For the advisor
    to take other documents would be quite wrong because the client may consider
    that parts of those documents are confidential and he or she would not wish
    them to be in the possession of the new firm.  I have in mind, for instance,
    that a client is obliged to give to an investment firm where he has an account,
    his social insurance number.

[84]

There was here a breach of confidence, but a breach limited in scope.
    The communication with the clients, in and of itself, was not a breach, but
    the removing of the various documents was.  However, in the absence of evidence
    as to why any particular client chose to take his or her custom to Merrill
    Lynch, it cannot be said that there is any causal connection between that
    breach of confidence and DS losing the client's custom.  It is as probable
    as not that the client wished to remain with the advisor, no matter what brokerage
    firm the advisor chose as his master.  One can, of course, construct a case
    in which a former servant obtains the custom of a client by, for instance,
    making derogatory remarks about the former master, but there is nothing of
    that sort in the evidence in this case.  The loss of custom here came, on
    the evidence, simply from the advisors leaving, as all were entitled to do,
    whether individually or in concert, subject of course to each having given
    reasonable notice.

(c)
The Failure to Give Reasonable Notice and its Consequence

[85]

I do not recall any case in this jurisdiction in which a master has
    sued a servant for damages for quitting before the expiry of a period of reasonable
    notice, although the books are replete with cases in which a servant has sued
    a master for not giving reasonable notice.

[86]

But to adopt the words of Lord Evershed, M.R. in
Laws v. London
    Chronicle (Indicator Newspapers), Ltd.
, [1959] 2 All E.R. 285 (C.A.)
    at 287, as "a contract of service is but an example of contracts in general,
    so that the general law of contract will be applicable", the cause of
    action plainly exists.  Implicit, I think, is that during the notice period
    the master was entitled to the services of the servant and he is entitled
    to be compensated for that loss.

[87]

The measure of the loss may be put as the reasonable and probable consequence
    of the loss of services during that period.  The underlying reason is the
    rule in
Hadley v. Baxendale
(1854), 9 Exch. 341, 156 E.R. 145.

[88]

If, for instance, a master could only replace the servant by paying
    a replacement higher wages, then I should think that the measure of loss is
    the difference between the replacement's pay and the departing servant's pay.

[89]

Where, as here, the departing servant is a commissioned salesman, then
    in my opinion the master is entitled in principle to damages measured by the
    amount the master would have received from the commissions which the clients
    would have paid during the period in question, less the salesman's portion
    of the commissions.

[90]

There is, in the case of a master suing a servant, a hidden complexity.
    The rule in
Hadley v. Baxendale
, a case of non-delivery of a
    piece of machinery at the appointed time, speaks of the contemplation of the
    parties at the time the contract was made.  A contract of service is made
    when the servant is first employed.  But what is the appropriate date if over
    the years the servant's duties have changed?  Is the
punctum temporis
the date of original hiring or some later date?  Fortunately, that question
    need not be answered in this case.

[91]

In arriving at my conclusion as to the measure of loss, I have been
    much assisted by the judgment of Anglin J., later C.J.C., in
Sheppard
    Publishing Co. v. Harkins
(1905), 9 O.L.R. 504 (Ont. H.C.J. (Div.
    Ct.)), a judgment which I do not understand was cited to the learned judge
    below, although it is mentioned in the judgment of this Court in
57134 Manitoba
    Ltd. v. Palmer
(1989), 37 B.C.L.R. (2d) 50 at 57.  As Anglin J.
    put it at 504:

The plaintiffs sue for an account of profits alleged to have been made
    by the defendant while employed as their advertising manager by devoting to
    other enterprises time and labour which he had agreed to give to them, and
    by engaging as principal in competitive business.

It had been found as a fact that the defendant had engaged
    to devote his entire time and attention to the interests of the plaintiffs
    and to engage in no other business.

[92]

Anglin J. then said, at 505:

Such being the nature and the terms of their servant's employment,
    the plaintiffs claim to be entitled to an account of profits made by him by
    engaging in work in breach of his agreement with them for exclusive service,
    on the grounds, first, that the time which he so spent was their time and
    that they are therefore entitled to his earnings or profits made by using
    it for his own purposes, and second, that as their servant he was bound to
    refrain from engaging in any competitive business and that to that extent
    his relation to them was fiduciary and such as would entitle them to an account
    of profits made by him in breach of such duty.

[93]

This passage, at 508, is, I think, of consequence:

The contract of the agent or servant is merely to do his employer's business
    for his employer's benefit.  He may violate his contract, express or implied,
    not to engage in any other business, or to devote his whole time and attention
    to his master's work, by undertaking other employment, but it is quite another
    thing to say that he must be deemed to have agreed that if he does other business
    than that of his employer it shall be on his employer's account or for his
    benefit.  The right of the employer to the earnings or profits derived from
    such extraneous employment of his servant must, if it exists, rest upon something
    other than such an implied agreement on the part of the servant.

[94]

Having put aside, then, the expenditure of spare time in non-competitive
    business, Anglin J. said, at 509-511:

...
    two questions remain for solution.  If the servant, without his employer's
    consent, devotes to his own purposes time which he should, under his agreement
    fairly construed, have given to the service of his employer, is the latter
    entitled to earnings or profits so acquired?  If the servant devotes only
    his spare time to a rival or competitive business, is the master entitled
    to an account of the earnings or profits which he so makes?

If the master is so entitled, in the former case, it must
    be because the time and labour expended by the servant is to be regarded as
    the master's property, and the earnings and profits as the value or proceeds
    of that property, converted by the servant to his own use and sold for money
    which in his hands is to be deemed money had and received to the use of his
    master.

* * *

I am unable to distinguish profits made by the servant by
    working on his own account from wages earned by him in the service of another.
     Neither one nor the other may represent any real damage sustained by the
    master.  As such neither one nor the other can be recoverable by him.  As
    money obtained by the servant by the sale of time and labour which belonged
    to his master, and, therefore, in contemplation of law, the proceeds of the
    master's property, his right to follow and demand them may be upheld:
Taylor
    v. Plumer
(1815), 3 M. & S. 562.  I am bound, I think, to
    hold profits so made by a servant to be in his hands the property of his master
    for which the servant must account to him.

and
    later, at 513:

... I think that we should not hesitate to declare it to be law that no
    servant can be permitted to retain as against his employer profits acquired
    by engaging, during his term of employment, without his master's consent,
    in any business which gives him an interest conflicting with his duty to that
    employer.

[95]

In the case at bar, the learned judge did make such awards, which we
    were told amount in total to about $40,000.00.  I would uphold those awards.

[96]

But the awards against the departing staff, to the extent they are
    founded on the "loss of profits for some years to come" approach
    which the learned judge adopted, must be set aside.

[97]

Should, however, the respondent be entitled to damages against Mr. Delamont
    for the breach which the learned judge found him to have committed and, if
    so, what is the proper measure?

[98]

I think not.  First, the case was not pleaded as a claim against him
    for breach of duty as branch manager in "masterminding and coordinating,
    etc."  The focus of the action against him, as well as the other advisors,
    was the assertion of a duty not to compete unfairly.

[99]

But, secondly, and of general importance, is the question of the extent
    of obligation of someone in his position to his employer.

[100]

As to what his position was, he gave this evidence:

Q         Mr. Delamont, you're 55 years old?

A          Yes.

Q         And you've been in the industry,
    the investment advisor industry, for some 16 years?

A          Yes.

Q         You don't have any post-secondary
    education?

A          No.

Q         You grew up in Cranbrook?

A          Yes.

Q         And your family has been there for
    some three

generations; is that correct?

A          Yes.

Q         Your first involvement in the industry
    was when you joined Pemberton Securities in 1987; is that correct?

A          That's correct, yeah.

Q         And you joined Pemberton as an investment
    advisor in Cranbrook; is that right?

A          That's correct.

Q         And you were made a branch manager
    of Cranbrook in 1988?

A          That's right.

Q         And then Pemberton merged with DS
    or was bought out and taken over by DS in 1989?

A          Yes.

Q         Now, you were nominated to become
    a vice-president of DS at one time; is that correct?

A          Yes.

Q         I believe the record indicated that
    was in 1995?

A          Yes.

Q         And what was your response to your
    nomination as a vice-president?

A          I -- I declined it at the time.

Q         I take it you never completed the
    examination to qualify as a vice-president and officer or director of company?

A          That's right.

Q         And accordingly you have never been
    a director or officer of the company; is that right?

A          Yes.  I don't know -- during the
    interim period there, you're -- you're a vice-president while they're -- while
    you're waiting to do the exam, but I determined that it wasn't in my interests
    and told them that I wasn't interested.  And my boss at the time, Adrian Koot
    [phonetic], phoned me and asked if there was any problem, and I just said
    no, I -- there was no problem, but I just have no interest in pursuing the
    exam just for the VP title.

Q         And as a manager at the Cranbrook
    time, what was the -- your ‑- what is your estimate of the breakdown
    of time spent in -- well, you were a producing manager.  Let me begin with
    that.

A          Yes, I was a producing manager.

Q         Which is to say you had your own
    book of business and dealt on a day-to-day basis with your own clients?

A          Yes.  In small branches there's
    not enough for a manager to do on a full-time basis, so producers are asked
    to take on some of the management responsibilities.

Q         Okay.  And how much of your time
    in the last year or two of your time at the Cranbrook branch was allocated
    to so-called managerial functions as opposed to your book of business?

A          It would vary, but I would say
    it would probably average 20 to 25 percent.

Q         Of your time would be spent in respect
    of which?  Managerial or in -- with respect of your book of business?

A          25 percent -- 20 to 25 percent
    would be managerial and the balance of my time would be with clients.

Q         And of the time spent on managerial
    duties, how much of that time would be spent on so-called compliance-related
    matters?

A          More than half, probably.  You
    did daily reviews in the morning and compliance would be the largest part
    of it.  I would say probably 50 to 60 percent.

Q         Okay.  And the servicing of your
    book of clients, what did that entail on a day-to-day basis?  If you could
    just generally describe what was involved in -- in that.

A          Well, you would receive incoming
    calls from a variety of clients making requests for meetings or raising capital,
    would be a common occurrence, or issuing cheques to them or to the nominees.
    That would take up a small part of your time.  And then the major part of
    your time would be doing reviews and setting up appointments for clients to
    come in and go over those reviews.  And then based on those reviews there
    would be time spent entering orders or changes in client portfolios and then
    reviewing the actual portfolio itself for individual clients.  I usually had
    a schedule of a number of clients per day that I reviewed.

Q         What -- was your principal source
    of income salary or commissions?

A          My principal source of income was
    commissions.

Q         And those were derived from your
    --

A          From the client base.

Q         -- client service and your book
    of business; is that right?

A          That's correct, yeah.

Q         And as at November 2000, what was
    the volume of assets that you were looking after as part of your book of business,
    measured in dollars?

A          I was managing approximately $124
    million in client assets.

Q         And what was your estimate of that
    as a percentage of the assets in the Cranbrook branch at the time?

A          It was probably 35 to 40 percent of the branch.

[101]

I appreciate that he gave this evidence:

Q
    So by this stage in early November, a meeting at your house, it's decided,
    we are going to go and we're going to go together?

A          There's a very high probability
    at that stage we were going to go, that's correct.

Q         And whatever else may be said, sir,
    you will surely concede that at that point you owed a clear, unequivocal duty
    to get a hold of Milligan right away and tell him about it?

A          Yes.  I failed to do that in protecting
    my own interests.  I would agree with that.

Q         And you, to put it more clearly,
    sir, put your own financial and other interests ahead of those of your employer
    to whom you owed the duty of good faith we've talked about earlier?

A          Yes, I would have to say that's
    true.

Q         And you were in clear breach of
    that duty of good faith and knew you were?

A          Yes, I'd have to say I agree with
    that.

Q         Because you decided to put your
    own self-interests ahead of that of the person or entity to whom you owed
    that duty of good faith?

A          Yes, I would have to agree.

Q         And certainly there was no doubt
    in your mind at that stage, early November, that you had a clear duty, A,
    to report to Milligan; right?

A          Yes.

Q         And B, you still owed a duty, sir,
    to try to stop this thing, didn't you, as branch manager?

A          Yes, I would suppose I did, yeah.

[102]

But whether there was a breach of contract by him in his capacity as
    branch manager is to be judged objectively.

[103]

The proposition that a servant owes a duty of loyalty to his master
    is easy to state but its application depends on circumstances.

[104]

I know of no authority for the proposition that it is a breach of such
    obligation, no matter how vital the servant is to the master's business, for
    the servant to entertain an offer of employment from someone else, including
    a competitor, or to accept it, even during the continuance of the contract
    of service.  A breach will only occur if the servant departs before the contract
    of service has expired, either by effluxion of time or by the giving of notice.
    Nor do I know of any authority for the proposition that a servant is contractually
    obliged to give his master, by for instance informing him of the terms offered
    by the new master, an opportunity to retain his services by matching those
    terms.

[105]

If what the learned judge found was indeed an actionable breach, then
    the question to be posed, founded on
Hadley v. Baxendale
, is
    this:  At the time the contract was made, i.e. 1995, when he became branch
    manager, a part-time position, what damages could fairly and reasonably be
    considered as arising naturally from the asserted breach?

[106]

The difficulty with posing the question thus is that neither of the
    parties to this contract would have ever thought about this sort of alleged
    breach.  It is thus very different from a case in which the promise is to
    do a certain thing by a certain time.  A different way of looking at the problem,
    although I know of no direct authority for it, is this:  If the contract of
    employment had contained an express term, "You will not encourage any
    other employee to leave our employ to work for a competitor.", what damages
    would flow from applying the rule in
Hadley v. Baxendale
?  I
    do not propose to attempt to answer that question, or indeed to answer the
    question of whether such a term would be found to be an invalid restraint
    of trade.  As I have said earlier, the focus of this case was not on any asserted
    breach of special duty on the part of Mr. Delamont to DS.  Therefore, I see
    no foundation for treating Mr. Delamont differently from the rest of
    the staff.

PUNITIVE DAMAGES

[107]

As I indicated at the outset, I see no error in the learned judge's
    awards of punitive damages and I would not set those awards aside.

CONCLUSION

[108]

It follows from all this that I would allow the appeal of the advisors
    and set aside clauses 3-10 of the judgment of 10th November, 2004, save to
    the extent that the amounts awarded are for loss of profits during the notice
    period and punitive damages.

THE CROSS APPEAL

[109]

At paragraph 54,
supra
, I set out the orders sought on the cross
    appeal.

[110]

In my opinion, the awards of punitive damages here were sufficient
    to the purpose.

[111]

As to the award sought of damages "against the departing IA's
    equal to the damages awarded against Mr. Delamont with respect to the near
    destruction of the Cranbrook Branch", my conclusion that there was no
    contractual obligation on the part of the advisors not to compete unfairly
    after their departure disposes of this claim.

COSTS

[112]

As the appellants have been largely successful, I would award them
    the costs of the appeal and of the cross appeal.  I would order that the costs
    in the Supreme Court of British Columbia be remitted to the trial judge.

The
    Honourable Madam Justice Southin

I agree:

The Honourable Chief Justice Finch

Reasons for Judgment of the Honourable Madam Justice
    Rowles:

I.  Introduction

[113]

This appeal raises issues concerning the foundation and extent of the
    damages awarded against a former employee for the breach of an implied duty
    of good faith in a contract of employment.

[114]

The respondent, RBC Dominion Securities Inc. ("DS"), and
    the appellant Merrill Lynch Canada Inc. ("ML") are both securities
    and investment dealers doing business in Canada and other countries.  In 2000,
    each had a branch in Cranbrook, British Columbia.  DS's Cranbrook branch also
    had a smaller sub-branch in Nelson, British Columbia.  In the Cranbrook and
    Nelson areas, each firm was the other's main competitor.

[115]

On 20 November 2000, Mr. Don Delamont, the branch manager of the Cranbrook
    and Nelson offices of DS, together with almost the entire sales force of DS's
    Cranbrook and Nelson offices, left to join ML.  Prior to their leaving, the
    sales staff copied client records and used the records to assist in establishing
    new accounts for the clients with ML.

[116]

In the action brought by DS, damages were sought against ML, Mr. James
    Michaud who was MLs Regional Manager for the territory that included Cranbrook
    and Nelson, Mr. Delamont, the Investment Advisors who had left en masse, and
    some Assistants to the Investment Advisors.

[117]

The trial judge found that Mr. Delamont, beginning some six months
    prior to 20 November 2000, had encouraged and facilitated a coordinated departure
    of virtually all of the Investment Advisors and Investment Assistants from
    DS to ML in contravention of his implied duty of good faith in his contract
    of employment as branch manager.  The departure included the copying of client
    records of DS to facilitate the setting up of new client accounts with ML.

[118]

By agreement of counsel, the trial was divided so that liability for
    damages of the various defendants was determined first with the damage issues
    to be heard later.  The trial judges reasons on the liability issues may
    be found at 2003 BCSC 1773 (Reasons on liability) and on the damage issues
    at 2004 BCSC 1464 (Reasons on damages).

[119]

The matters for determination on the liability part of the trial concerned
    the extent of the fiduciary or other duties of Mr. Delamont and the other
    Investment Advisors and Assistants who left DS on 20 November 2000, and the
    responsibility of ML and its regional manager, Mr. Michaud, in relation to
    their departures.  DS alleged that Mr. Delamont owed fiduciary duties to DS
    and violated those and other duties inherent in his employment by leading
    the group departure and soliciting DS clients away to ML.  Against the Investment
    Advisors and their Assistants, DS alleged that they shared in Mr. Delamont's
    breaches of fiduciary duty, and that because they left as virtually "the
    whole show", they owed higher duties to DS than if they had left individually.
    DS alleged that ML and Mr. Michaud induced the various breaches by the
    DS staff and therefore bore direct liability for the breaches, as well as,
    in the case of ML, vicarious liability.

[120]

The trial judge concluded that none of the former DS employees stood
    in a fiduciary relationship with DS but found that each had breached duties
    to DS  including the duty to provide reasonable notice of termination which
    in turn contributed to their larger breach of the duty not to compete unfairly
    with DS after their departure (Reasons on liability at para. 144).  The trial
    judge found that Mr. Delamont also breached his duty to faithfully perform
    the functions of his role as branch manager, in the months before the departures
    (Reasons on liability at para. 144) and that his breach caused the mass departure
    of the other Investment Advisors.  The compensatory damage award against Mr.
    Delamont was for $1,483,239.00.  The award of damages against the Investment
    Advisors varied, the highest amount being $65,093.  Modest amounts were awarded
    against the Investment Assistants.

[121]

Madam Justice Southin, whose reasons I have read in draft, has concluded
    that the damage award against Mr. Delamont and the Investment Advisors must
    be set aside and that the awards against them restricted to the amounts that
    represent loss of profits during the two-week notice period following their
    departure from DSs employ, and punitive damages.  I am unable to agree that
    the award against Mr. Delamont ought to be set aside.

[122]

In my opinion, the result my colleague has reached with respect to
    the damage award against Mr. Delamont does not accord with the law concerning
    an employees implied duty of good faith or with the findings of fact made
    by the trial judge concerning the extent and effect of the breach by Mr. Delamont
    of his obligations as the respondents branch manager for Cranbrook and Nelson.
    It is also my view that DSs pleadings were such that the claim against Mr.
    Delamont could readily be distinguished from the claim against the Investment
    Advisors and that the trial judge was not in error in rejecting the appellants
    argument that the pleading on causation in relation to Mr. Delamont was inadequate.

[123]

The appellants do not take issue with the judges finding that Mr. Delamont
    breached his implied duty of good faith as DSs branch manager of its Cranbrook
    and Nelson offices.  Instead, the thrust of the appellants argument concerning
    the award of damages against Mr. Delamont appears in the opening statement
    of the appellants' factum:

The appeal centres on whether the legal standard necessary to establish
    causation has been met in the holding that the appellant Delamont was liable
    for the respondents losses over a 5 year period following the resignation
    of the employees in the respondents Cranbrook branch.  Further, in calculating
    damages is the doctrine of minimum performance as it relates to breach of
    contract claims applicable.  That would require that damages be reduced to
    take into account that the appellant Delamont and other employees could have
    lawfully resigned on proper notice to the employer.

[124]

The following errors in judgment, as set out in the appellants factum,
    are alleged with respect to the award of damages against Mr. Delamont:

Damages
    Against Mr. Delamont Personally

1.
    The pleadings do not support the award of damages against Mr. Delamont
    personally.

2.
    The learned Trial Judge erred by failing to give proper consideration to the
    reasonable expectations of the parties to the employment contract.

3.         In finding that Mr. Delamont
caused
DSs
    loss, the learned Trial Judge erred by:

a.         failing to apply the proper test for causation
    in contract;

b.
    making inconsistent findings regarding causation.

4.
    The learned Trial Judge erred by failing to apply the doctrine of minimum
    performance.

5.
    The learned Trial Judge erred by awarding damages without adequate reduction
    for contingencies.

[Italics in factum.]

[125]

As to the assertion that causation was not pleaded, the appellants
    state in their factum at para. 46:

DS did not plead the material fact that Mr. Delamonts
    breach of his duties as branch manager
caused
the IAs to leave or that
    he
caused
DS to suffer loss as a result of the IAs departures and
    yet this was the basis for the Trial Judges award of $1.4 million against
    him personally (Lost Profit Damages).  [Italics in factum.]

[126]

For the reasons which follow, I would not give effect to the grounds
    the appellants put forward on their appeal from the damage award against Mr.
    Delamont.  I would not dissent from the result my colleague has reached with
    respect to the awards against the Investment Advisors, although my reasons
    for arriving at that result are not the same as those of my colleague.  I
    would dismiss the cross-appeal.

II.  Employment contracts and the implied duty of good
    faith

[127]

In awarding damages against Mr. Delamont, the trial judge found that
    Mr. Delamont had breached an implied duty of good faith in his contract of
    employment with DS and, as a result, DS suffered substantial damages.  In
    reaching those conclusions the trial judge considered the nature of Mr. Delamonts
    employment duties and the extent and consequences of the breach of his implied
    duty of good faith in the performance of his duties as DSs branch manager
    for the Cranbrook and Nelson offices.

[128]

That damages may be awarded for breach of an implied duty of good faith
    is well established.  Mr. Geoffrey England, in
Employment Law in Canada
,
    4th ed., looseleaf (Markham: LexisNexis Canada Inc., 2005) vol. 2 in
    chapter 11, provides an informative background on the origin of an employees
    obligation of fidelity.  Portions of that chapter are reproduced below.

§11.2
The dominance of the common law in providing
    the source of the employees obligations springs from the pre-Industrial Revolution
    era in England.  In that neo-feudal culture rights, duties and social roles
    were largely determined on the basis of status, not free contract.  A high
    degree of subordination to superior authority was expected in all walks of
    life and absolute loyalty on the part of subordinates was expected, with a
    reciprocal obligation to care for them being placed on their superiors  Not
    surprisingly, the courts designed the rules of the employment law to mirror
    this culture.  Thus, the courts implied a standard duty of fidelity on the
    servant which rigorously entrenched the masters absolute authority to
    determine virtually all aspects of the relationship beyond the basic issue
    of remuneration, which alone was considered suitable for express bargaining.
    Significantly, the employees obligations were imposed by courts as a matter
    of public policy, as natural incidents of the status of master and servant,
    not as the product of mutual agreement through contract

§11.3
The legacy of this ancient duty of fidelity is todays still relatively
    extensive set of standard implied obligations considered in this chapter which
    comprise the employees duty of loyalty.  Although the Industrial Revolution
    reformulated many status relationships  including that of employer and employee
     with contractual relationships based on free exchange, nonetheless the judges
    transposed the ancient duty of fidelity virtually intact into the modern
    employment contract

[Footnotes omitted.]

[129]

In his introduction to the implied obligations of an employee, England
    expands on the duty of fidelity:

§11.54
Today, this implied duty of fidelity remains largely intact, providing
    an all pervasive, residual obligation to further the interests of the employer
    which is not capable of exhaustive categorization but which can be relied
    on by the courts to compel faithful service in a myriad of work situations

[130]

At §11.118, England describes the components of an employees duty
    to respect the employers trading and business interests, which is part of
    the duty of fidelity: an employees obligation not to make a secret profit
    from his or her employment, an employers presumed right to any inventions
    or copyrights, an employees obligation not to compete, an employees obligation
    not to misuse trade secrets or confidential information of the employer, and
    an employees fiduciary obligation to his or her employer.  In his discussion
    on the employees obligation not to appropriate trade secrets and confidential
    information for his or her own benefit, England states:

§11.142
The implied duty of fidelity under the employment
    contract prohibits an employee from appropriating for his or her own benefit
    the employers trade secrets, customer lists and other confidential information,
    both during and after the employment relationship has ended.  Even in the
    absence of such a contractual prohibition, the employer has a proprietary
    interest in such material which the courts will protect in equity against
    misappropriation by another party

§11.143
Furthermore, while the courts have always permitted an employee to compete
    with a former employer after his or her employment has ceased, this right
    is subject to the additional proviso that any such competition must not be
    unfair.  This appears to blur somewhat the line between regular employees
    and employees who are in a fiduciary relationship with their employer
    Nevertheless, the courts have emphasized time and again that the duties owed
    by a fiduciary to a former employer are stricter than those of a regular
    employee so that the fairness proviso will almost certainly not result in
    the full-scale fiduciary obligation being applied to regular employees.
    However, the "fairness" proviso unquestionably leave[s] the law
    somewhat uncertain and unpredictable.

[Footnotes omitted.]

[131]

With regard to customer lists, England states:

§11.153
Regarding the enticement of customers of
    a former employer, the implied duty of fidelity treats customer lists as a
    form of confidential information in certain circumstances so that an employee
    will be prohibited from enticing such individuals to do business with him
    or her even though the period of employment has ended

[Footnote omitted.]

[132]

In terms of the damages recoverable by a former employer for breach
    of an implied duty of good faith in an employment contract, England states:

§11.163
Where there has been wrongful misuse of
    confidential information or trade secrets, the employer may also recover damages
    against the employee for profits it has lost as a consequence of his or her
    breach of the implied term of the contract of employment, or elect to take
    the judgment for an account of profits obtained by the employee from the wrongful
    exploitation of the material in question instead of damages

§11.165
Also, the employer may be awarded punitive
    damages if the employee has wilfully and deliberately abused confidential
    information.  Furthermore, if the employees misuse of the confidential information
    takes the form of the tort of conversiondamages may also be assessed on the
    basis of the principles of the law of tort

§11.166
In addition to seeking relief against the offending employee, there
    is ample authority for recovery of damages, as well as an injunction, against
    third parties who have profited from trade secrets or confidential information
    improperly divulged by employees, such as a new employer of the employee who
    makes use of the material as part of its business

[Footnotes omitted.]

[133]

In
Employee Obligations in Canada
, looseleaf (Aurora: Canada
    Law Book Inc., 2003), James A. DAndrea also extensively canvasses the
    topic of use of confidential information.  DAndrea confirms that there is
    a duty on the part of employees not to disclose or misuse confidential information
    of a former employer, and opines that customer lists constitute confidential
    information.  With regard to the remedies available for a breach of this duty,
    DAndrea states, at 2:110:

The traditional remedy for breach of confidence or misuse of confidential
    information is an accounting of profits or damages.  Generally speaking, the
    plaintiff is to be placed into the same position from a monetary viewpoint
    that he or she would have been in had the breach not occurred.  This can usually
    be accomplished by an award of damages and consequently a restitutionary remedy
    would be appropriate.  Often, however, an accounting of profits is also available
    notwithstanding that an accounting is not generally thought to be restitutionary
    in nature.  The measure of damages in that case is governed by the defendants
    gain and not by the defendants gain at the plaintiffs expense

[134]

In
Barton Insurance Brokers Ltd. v. Irwin

(1999), 170
    D.L.R. (4th) 69, 1999 BCCA 73, to which the trial judge in this case referred,
    Hall J.A., for the Court, considered the duty of good faith as an implied
    term in employment contracts.  In
Barton
, a claim was made against
    an insurance broker who had worked with the plaintiff company for 14 years
    before leaving and starting work for a competing company.  After the broker
    left, she was encouraged by her new employer to go through the phone book
    and attempt to recall former clients to solicit them to her new company.
    She did not actually remove confidential customer lists from the plaintiff
    company.  In determining whether the broker breached any duties to her former
    employer, Hall J.A. made the following general observations about the
    way in which the law has developed:

[17]
     Absent any express contractual terms, the law has developed to provide that
    a former employee will not be at liberty to act in an unfair way to a former
    employer.  Whether it be called a fiduciary duty, a duty of good faith or
    a duty of confidence, the theme running through this whole area of the law
    is that in appropriate circumstances, a former employee may be found to have
    breached an enforceable duty owed to a former employer and may be successfully
    sued for injunctive relief or for damages.

[18]  Clearly, an employee has duties to a present employer not to divulge
    trade secrets or to work against the interests of his or her employer but
    the duty is not just limited to current employment.
After leaving employment,
    an employee may be obligated not to pursue certain activities to the detriment
    of the former employer.  For instance, it has been usually reckoned to be
    unfair conduct to permit a former employee to take with him or her customer
    lists to use for solicitation of business or to divulge trade secrets or to
    seek to appropriate maturing business opportunities of the former employer.
On the other hand, I suppose to avoid what might otherwise be a condition
    of almost involuntary servitude, it has long been held that an employee is
    free to compete for custom with a former employer.  As usual in human affairs,
    the difficulty is in the details and it is often difficult to know where to
    draw the line.

[Underlining added.]

[135]

In my opinion, what Mr. Justice Hall said in
Barton
encapsulates
    the present state of the law.

[136]

Madam Justice Southin has considered the question of whether there
    can be any foundation for an award of damages for breach of good faith after
    employment has ceased and has concluded that there is no implied obligation
    in a contract of employment that a servant on leaving his master's employ
    will "compete fairly".

[137]

The tag expression compete unfairly is imprecise and its use unfortunate.
    As England points out in 11.143 of his text, quoted above, the fairness
    proviso unquestionably leave[s] the law somewhat uncertain and unpredictable.
    However, the case authorities recognize that, in certain circumstances, an
    employee, as a consequence of an implied duty of good faith in a contract
    of employment, may not be free to act in a manner inconsistent with that duty
    after the employment has come to an end.  Whether injunctive relief or damages
    is available depends very much on the nature of the employees duties and
    the nature of the employees breach.  Examples of conduct that may attract
    injunctive relief or damages include appropriation by a former employee of
    the employers trade secrets or unauthorized use of the employers confidential
    information.

[138]

What occurred in this case was unusual.  What the trial judge found
    was that Mr. Delamont encouraged and facilitated a coordinated departure of
    virtually all of the Investment Advisors and Investment Assistants from DS
    to ML, in breach of his duties as branch manager.  In her reasons for judgment
    on the issue of damages, the trial judge said:

[23]  From early on (though not at the outset of Mr. Michaud's recruiting
    campaign), Mr. Delamont presented the potential move as a coordinated group
    undertaking involving all of the DS sales staff except the two most junior
    rookies, subject always to the option of any individual to remain with DS.
    Over a period of almost six months, he encouraged IAs to consider a move to
    Merrill Lynch, arranged or hosted meetings with Merrill Lynch representatives,
    assisted some of the IAs in their contractual negotiations with Merrill Lynch,
    helped coordinate the transfer of DS client records to Merrill Lynch in the
    weeks before the expected move, and did so with nary a hint to more senior
    DS management who would undoubtedly have tried to prevent the mass departure.
    It was in these unique circumstances flowing from Mr. Delamont's fundamental
    and extended breach of his duties to DS that momentum for the move developed
    and reached its climax in the mass departure.

[139]

As the trial judge found, the breach by Mr. Delamont of his implied
    duty of good faith included helping to coordinate the transfer of DS client
    records to Merrill Lynch in the weeks before the expected move (Reasons on
    damages at para. 23). This was not a simple removal of a list of clients.
    The information contained in the records that were removed was confidential
    in two respects.  First, it was confidential client information, that is,
    information that a client of an investment dealer would expect to be held
    or kept in confidence.  Second, it was confidential to DS in that the information
    contained in the records, which was essential to the operation of its investment
    business, was not known by its competitors.

[140]

In response to the appellants arguments, among others, that "it
    is not uncommon within the securities industry for departing employees to
    take copies of their employers client documents" (Reasons on damages
    at para. 135), the trial judge said:

[137]
     Although IAs leaving a firm may take client information or copies of records,
    this course of conduct is known to be improper; the defendant IAs here were
    clearly aware that it was so.  Moreover, the IAs removed not simply a list
    or a few records, but rather records (whether originals or copies) of DS's
    entire client base.  The copying and removal took place surreptitiously over
    several weeks, much of it after business hours when the risk of detection
    was low.
This was a planned, prolonged, secret scheme to arrange a wholesale
    transfer of information to a competitor.

[138]
     More than DS's proprietary interest was involved.  Most, if not all, of the
    documents contained clients' financial information, the confidentiality of
    which DS and the IAs were bound to protect.  Without the clients' consent
    or even knowledge, the defendants transferred detailed and voluminous private
    information out of DS's protection and to a firm with which the clients may
    not have wished to deal.

[Underlining added.]

[141]

On the facts of this case, it appears to me that, despite the evidence
    of the acceptance in the investment industry of investment dealers soliciting
    investment advisors from other companies, injunctive relief would have been
    available to restrain the use of client records and information that had been
    copied in preparation for the move and then removed from DSs business premises
    in advance of the departure of Mr. Delamont and the Investment Advisors.
    As it happened, DSs records were returned, on the advice of counsel, within
    a few days of the employees leaving, but that does not sanitize or neutralize
    the misuse of the records in advance of the mass departure or the benefits
    derived by the appellants from that misuse.

[142]

I digress slightly to add that, in my view, the fact that some or all
    of the client records could have been copied and removed electronically is
    irrelevant to the question of whether such copying would constitute a breach
    of an implied duty of good faith in a contract of employment and is irrelevant
    to the issue of whether injunctive relief or damages would be available.
    Without doubt, the ability to move and process information has changed dramatically
    over the past 25 years but no one would suggest that a breach of copyright
    or a trade secret, for example, would be any less so because it could be accomplished
    electronically.

[143]

While the use of the phrases to compete fairly or not to compete
    fairly is unfortunate, I am of the view that the trial judge was not in error
    in her understanding of the law or in her application of the law to the facts
    as she found them in relation to the Investment Advisors and the Assistants.

[144]

The claim against Mr. Delamont, however, was based on the breach of
    his implied duty of good faith while still employed as DS's branch manager.

III.  The pleadings

[145]

Madam Justice Southin has concluded that the damage award against Mr. Delamont
    must be set aside "save to the extent that the amounts awarded are for
    loss of profits during the notice period ...."  Much of the foundation
    for my colleagues conclusion is that the pleadings were inadequate to treat
    Mr. Delamont differently from the other Investment Advisors.  I respectfully
    disagree with that conclusion.

[146]

In my opinion, a review of the Further Amended Statement of Claim (amended
    25 April 2003 by consent) demonstrates that the claim against Mr. Delamont
    was advanced on a broader foundation than the claim against the Investment
    Advisors.

[147]

In the Further Amended Statement of Claim, DS alleged that Mr. Delamont
    was the branch manager and that as the branch manager he had certain duties,
    knowledge and responsibilities which were distinct to him.  The allegations
    in which reference was made to Mr. Delamont include the following:

·

At para. 4:
    "... The Defendant Delamont is a former Vice-President and Branch Manager
    of DS and was solely responsible for the management of the day-to-day operation
    of the Cranbrook branch of DS until his resignation on November 20, 2000.

·

At para. 20:
    Each branch is managed by a Branch Manager who has responsibility for running
    the day-to-day operations of the branch, hiring, coaching, counselling and
    supervising employees, ensuring compliance with regulatory requirements, representing
    the firm in the local community, arranging local advertising and setting the
    budget for each branch. The Branch Managers also develop, service and maintain
    clients for DS in the same manner as Investment Advisors.

·

At para. 21:  In
    addition to the confidential information to which Investment Advisors are
    privy, as described below in paragraph 25, Branch Managers are privy to additional
    confidential information of DS, including:

a.
        the identity of all clients of the branch in question and the investment
    portfolios, objectives and preferences of those clients;

b.
    daily revenue information on all branches;

c.
    specific monthly targets and totals of objectives of all branches;

d.
    daily trading summaries which show all transactions by account within the
    branch in question; and

e.
    controllable cost reports on all branches.

[148]

In paragraph 33, DS alleges that a fiduciary duty was owed by Mr. Delamont
    because he was a Vice-President and Branch Manager of DS.

[149]

In my opinion, the pleadings were such that the claim made against
    Mr. Delamont in his role as the branch manager could readily be distinguished
    from the claim being made against the Investment Advisors in that Mr. Delamonts
    implied duty of good faith encompassed obligations distinct from those of
    the Investment Advisors.

IV.
    The trial judges reasons for finding that Mr. Delamont had breached his implied
    duty of good faith

[150]

The trial judge concluded in her reasons on liability that Mr. Delamonts
    position as branch manager was not that of a fiduciary but that, as branch
    manager, he had a duty of good faith to perform the functions necessarily
    inherent to the role.  In that regard the trial judge said:

[119]
In his role as branch manager,
    Mr. Delamont carried a duty, derived from the duty of good faith, to perform
    the functions necessarily inherent to the role.  DS submits that by promoting
    and coordinating the mass defection to Merrill Lynch, Mr. Delamont seriously
    breached that duty.

[120]
     The evidence differed as to the extent of Mr. Delamont's role in promoting
    or coordinating the departures.  The testimony of numerous witnesses indicated
    him to have taken a key role in coordinating the mass move.  His own testimony,
    and that of Mr. Michaud, in particular, denied or downplayed any such role.
    I am unable to accept the evidence that minimized his involvement.

[121]
     Mr. Delamont's demeanour indicated discomfort during his testimony minimizing
    the extent of his role in relation to the departures.  His testimony failed
    to adequately account for the undisputed facts that he was the first of all
    the IAs to take the trip to see Merrill Lynch personnel and facilities in
    Vancouver and Bellingham, and that he hosted meetings at his home for the
    IAs contemplating departure, including one, on November 14, 2000, with representatives
    of Merrill Lynch.  It failed also to account for the fact, as he and others
    described it, that the IAs contemplating a move evidently discussed their
    intentions openly with him, their branch manager, without apparent expectation
    of either adverse consequences at DS, or that Mr. Delamont would assist
    them in attempting to negotiate more attractive terms for remaining at DS.

[122]
     I find that, in the drive to Castlegar with Mr. Milligan, Mr. Delamont
    made only vague and understated reference to discussions between a few IAs
    and another firm.  The information he provided to Mr. Milligan was wholly
    inadequate to alert Mr. Milligan to the enormity of the potential consequences
    to the branch at that time.

[123]
     Even when confronted by Mr. Milligan on Thursday November 16, 2000,
    with the rumour of three IAs' planned departure, Mr. Delamont confirmed only
    that the three would be leaving.  He failed to mention that most of the rest
    of the branch, including himself, also planned to leave.  He told Mr. Milligan
    this only at the end of the Calgary meeting on Friday November 17.  It is
    to be noted that this disclosure coincided with Mr. Delamont's apparent change
    of heart about leaving, and accorded with his personal interest in having
    a viable branch with which to remain.

[124]
     By his own evidence, Mr. Delamont either coordinated or endorsed the surreptitious
    process of sending copies of DS's client records to Merrill Lynch.  Certainly
    by the end of October 2000, Mr. Delamont had determined to leave DS along
    with most of the other IAs in the branch, and knowingly allowed the records
    to be surreptitiously copied and sent to Merrill Lynch in anticipation of
    the mass move.

[125]
     Mr. Delamont was generously compensated for acting as branch manager.  Unlike
    non-managerial IAs, Mr. Delamont received no bonuses for recruiting because,
    as he testified, it was part of his job description.  It follows that equally
    part of his job description was to attempt to retain IAs within DS, and certainly
    not to promote or coordinate their departure and the departure of the clients
    they serviced.

[126]  His duty of good faith as branch manager also required him to keep
    his regional manager fully and promptly advised of all significant information
    relating to the operation of the branch, particularly as to events with the
    obvious potential of damaging or destroying the very viability of the branch.
    He was in serious breach of that duty from, at the latest, June, 2000, when
    he personally visited Merrill Lynch's operations and arranged for others to
    do likewise, and encouraged or acquiesced in Mr. Michaud's mass recruiting
    efforts.

V.  Pleading on causation

[151]

The appellants argue that no facts were alleged that would show how
    Mr. Delamonts breach of duty caused loss to the respondent.  I am unable
    to agree with that submission.

[152]

As noted above, the pleadings referred to the nature and extent of
    Mr. Delamonts duties as branch manager and those duties were readily distinguishable
    from those of an investment advisor.  I am of the view that it was not fatal
    to DSs claim that there was no specific pleading that a failure on Mr. Delamonts
    part to keep DS informed of MLs recruiting and the pending departures of
    the Investment Advisors and Assistants caused a loss to DS.

[153]

The trial judge, in her reasons for judgment on liability, specifically
    addressed the appellants argument that Mr. Delamonts breaches of his
    employment obligations as branch manager had not been adequately pleaded.
    As to the submission made by counsel for ML concerning the pleadings in relation
    to Mr. Delamonts failure to keep DS informed of the recruiting and impending
    departure of the Investment Advisors, the trial judge said:

[127]
     Mr. Gudmundseth [counsel for ML] objected to DS's reliance in submissions
    on Mr. Delamont's failure to keep DS properly informed of the Merrill Lynch
    recruiting and the pending departures,
on the basis that it was not specifically
    pleaded.  In my view, that failure in his duty as branch manager is comprehended
    within the general pleading that he failed in his duty to DS, and is incidental
    to the allegation that he encouraged the IAs to leave and failed to try to
    persuade them to stay.  Mr. Delamont kept DS in the dark because he knew
    that he was working contrary to DS's interests.

[128]
     In all these circumstances, it is difficult to conceive of a more fundamental
    breach of the duty of good faith as branch manager.

[Underlining added.]

[154]

In my opinion, the trial judges reasons for rejecting MLs objection
    to the pleadings should not be disturbed.

[155]

I would add that this is not a case in which the appellants can complain
    about being caught by surprise about a matter not pleaded.  Before the trial,
    counsel agreed that the issues of liability and damages ought to be tried
    separately.  In her reasons for judgment on the issue of damages, the trial
    judge summarized the findings she had made in her earlier reasons on the breaches
    of duty of the various defendants, as follows:

[3]  I found the following breaches of duties to DS:

·

The DS employees (namely
    Mr. Delamont, the IAs, and the assistants) each breached the implied
    term in their employment contracts with DS to provide reasonable notice of
    the termination of their employment.

·

The DS employees also
    breached their larger contractual duty not to compete unfairly with DS by:

o

failing to provide
    reasonable notice of termination (which itself breached an implied contractual
    duty, as noted above)

o

engaging in concerted
    and vigorous efforts to move clients to Merrill Lynch well before DS was in
    a position to try to protect its relationship with those clients, and

o

removing all DS's
    confidential client records several weeks before the move in order to facilitate
    the transfer of DS clients to Merrill Lynch (actions which also constituted
    the tort of conversion, as noted below).

·

Mr. Delamont
    also
breached his contractual duty to faithfully perform the functions
    of his role as branch manager
.
Although he was specifically remunerated
    (over and above his earnings as an IA) for this role, over a period of months
    (beginning June 2000 at the latest) he promoted and coordinated the departure
    of virtually all of the sales staff of the DS branch
.

·

As was acknowledged
    at the trial, Mr. Delamont, the IAs, and the assistants bear liability
    for the tortious conversion of DS's confidential client records. Merrill Lynch
    and Mr. Michaud also bear liability for that conversion.

·

Merrill Lynch and
    Mr. Michaud tortiously induced the DS employees' breaches of their duty not
    to compete unfairly with DS after they left DS.

[Underlining added.]

[156]

During oral argument, appellants counsel agreed that the summary was
    accurate.  A review of the expert reports shows that the appellants were well
    aware of the nature of DSs damage claim against Mr. Delamont and responded
    to it through their own expert.

VI.  Causation and the assessment of damages

[157]

The law implies a duty of good faith in an employment contract.  The
    damages flow from the breach of that duty.  The classic tests for causation
    in contract are that there must be a causal connection between the defendant's
    breach of contract and the claimant's loss.  On the appeal from the damage
    award against Mr. Delamont, the appellants contend that the trial judge erred
    by failing to apply the proper test for causation in contract.

[158]

At trial, DS argued that the virtual collapse of the branch was a
    direct and almost inevitable consequence of Mr. Delamont's breach of his duty
    of fidelity as branch manager, in promoting and coordinating the defection
    to the competition of almost all the sales staff (Reasons on damages at para.
    15).  DS further argued that the nature of Mr. Delamont's breach allowed
    the court to presume that it caused the virtual collapse of the branch that
    undeniably followed (Reasons on damages at para. 15).  In making that submission,
    DS relied on the proposition that where a defendant's own wrong prevents the
    proof of whether the wrong caused a loss, the court may presume a loss unless
    the defendant proves the contrary:
Roe, McNeill & Co. v. McNeill
,
    [1994] B.C.J. No. 1187 (S.C.), per Boyd J. at ¶ 63 whose approach in that
    regard was upheld by this Court, (1998) 45 B.C.L.R. (3d) 35.

[159]

The appellants submitted that the legal test for causation involves
    an assessment of whether the breach of contract was the "effective"
    or "dominant" cause of the loss.  It was the appellants submission
    that the Investment Advisors were discontented at DS and would have left in
    any event and, as a result, Mr. Delamont's facilitating role in relation
    to their departures did not rise to the level of causation at law.

[160]

The trial judge did not disagree with the appellants proposition that
    the breach had to be the effective or dominant cause of the loss.  The appellants
    argument failed at trial because of the view that the trial judge took of
    the evidence.

[161]

A review of the arguments on appeal shows that the appellants real
    complaints concern the trial judges findings of fact.  The appellants contend
    that the judges findings are inconsistent and are not in accord with the
    evidence.

[162]

Mr. Delamont was DSs branch manager for both the Cranbrook and
    Nelson offices and as the manager he received an annual salary of $187,000.
    The trial judge found that between June and November 2000, Mr. Delamont
    was in breach of his contract of employment as DSs branch manager.  That
    he was in breach of his obligations as branch manager was acknowledged by
    Mr. Delamont in the following testimony he gave at trial:

Q         So by this stage in early November,
    a meeting at your house, it's decided, we are going to go and we're going
    to go together?

A          There's a very high probability at that stage
    we were going to go, that's correct.

Q         And whatever else may be said, sir, you will
    surely concede that at that point you owed a clear, unequivocal duty to get
    a hold of Milligan right away and tell him about it?

A          Yes.  I failed to do that in protecting my
    own interests.  I would agree with that.

Q         And you, to put it more clearly, sir, put your
    own financial and other interests ahead of those of your employer to whom
    you owed the duty of good faith we've talked about earlier?

A          Yes, I would have to say that's true.

Q         And you were in clear breach of that duty of
    good faith and knew you were?

A          Yes, I'd have to say I agree with that.

Q         Because you decided to put your own self-interests
    ahead of that of the person or entity to whom you owed that duty of good faith?

A          Yes, I would have to agree.

Q         And certainly there was no doubt in your mind
    at that stage, early November, that you had a clear duty, A, to report to
    Milligan; right?

A          Yes.

Q         And B, you still owed a duty, sir, to try to
    stop this thing, didn't you, as branch manager?

A          Yes, I would suppose I did, yeah.

[163]

In determining whether he had breached his employment obligations,
    the trial judge outlined in her reasons for judgment on liability, the functions
    that Mr. Delamont was expected to perform in his role as branch manager.
    The trial judge went on to find that Mr. Delamonts role as branch manager
    with DS carried a duty, derived from the duty of good faith, to perform the
    functions necessarily inherent to the role (para. 119) and that he had breached
    that duty, to which I have already referred in para. 150 of these reasons.

[164]

The trial judge specifically addressed the question of whether the
    necessary causal connection had been shown and concluded on the evidence that
    it had.  In that regard, the trial judge said, in part, in the reasons on
    damages:

[22]  It is true that each IA made an autonomous decision to leave, based
    on the state of affairs as he or she saw it at the time.  However, the state
    of affairs at the time was in large part a function of Mr. Delamont's breach.

[23]  From early on (though not at the outset of Mr. Michaud's recruiting
    campaign), Mr. Delamont presented the potential move as a coordinated group
    undertaking involving all of the DS sales staff except the two most junior
    rookies, subject always to the option of any individual to remain with DS.
    Over a period of almost six months, he encouraged IAs to consider a move to
    Merrill Lynch, arranged or hosted meetings with Merrill Lynch representatives,
    assisted some of the IAs in their contractual negotiations with Merrill Lynch,
    helped coordinate the transfer of DS client records to Merrill Lynch in the
    weeks before the expected move, and did so with nary a hint to more senior
    DS management who would undoubtedly have tried to prevent the mass departure.
    It was in these unique circumstances flowing from Mr. Delamont's fundamental
    and extended breach of his duties to DS that momentum for the move developed
    and reached its climax in the mass departure.

[24]  This is not to say that in no circumstances other than those that
    arose would one or more of the IAs have left DS for Merrill Lynch.  As I discussed
    in my reasons as to liability, recruiting within the industry at the time
    was aggressive and moves were sudden and not infrequent.  IAs, especially
    those with a client base developed through personal contact and service, enjoyed
    a relatively strong bargaining position.  A certain turnover in the branch's
    sales staff, and consequent rises and falls in the branch's profits, could
    be expected as normal contingencies of operation.  The coordinated mass departure
    here, however, was of an entirely different nature and scale.

[25]  I found that by the end of October 2000, and possibly long before,
    the exodus was contemplated as a coordinated group departure, but was not
    inevitably destined as all-or-none:  it was open to any individual IA or IAs
    to determine to stay at any time.  However, once the move was conceived as
    a group move, certain distinct pressures applied.  In particular, IAs giving
    thought to remaining would need to be confident that a viable DS branch would
    survive to support them.  Junior IAs, or those working in association with
    particular senior IAs, would almost inevitably follow the senior IAs with
    established client books.

[165]

The standard to be applied on appellate review does not leave room
    for this Court to interfere with findings of fact made by the trial judge,
    absent palpable and overriding error.  In my opinion, the appellants complaints
    of inconsistency in the findings are overstated and, in any event, do not
    undermine the findings of fact that are material to her conclusions.  As a
    result, I am of the view that the trial judges findings of fact concerning
    the nature and extent of Mr. Delamonts breach of his duty of good faith and
    the effect that it had in encouraging and facilitating the mass departure
    of the Investment Advisors must stand.

VII.
    Application of the doctrine of minimum performance and the adequacy of the
    reduction for contingencies

[166]

I would not give effect to the last two grounds of appeal.

[167]

In her reasons for judgment on damages, at paragraphs 88 through 99,
    the trial judge set out the competing opinions of the expert witnesses as
    to the method of valuing the near-collapse of the Cranbrook branch, that is,
    the business valuation approach or the loss of profits approach.  The trial
    judge preferred the loss of profits approach, as the appellants had urged,
    as the appropriate method for the calculation of the loss.  Consideration
    was then given to the question of what equivalent business or group of businesses
    could appropriately be used as a guide to how DSs branch profits would have
    continued had the breaches not occurred.  After making that determination,
    the trial judge then made adjustments to take into account her finding that
    Mr. Delamonts breach did not cause the departure of two of the Investment
    Advisors and her conclusion that the loss of profits could not be projected
    into the indefinite future.

[168]

The trial judge took into account the highly competitive nature of
    the securities industry, the mobility that Investment Advisors within it enjoy,
    and the fact that the careers of Investment Advisors, even when successful,
    are relatively short-lived.  She also considered the difficulties of recruiting
    senior Investment Advisors for the Cranbrook branch and the process and prospects
    for re-growth of the branch.  The trial judge concluded that the appropriate
    period over which to project the loss was five years, but also concluded that
    the projection had to be subject to an appreciable discount for contingencies
    (Reasons on damages at para. 118).  The discount for contingencies was made
    on the increasing percentage rate over the five-year period.

[169]

There was evidence before the trial judge from which she could draw
    to arrive at both the length of time over which to project the loss and the
    extent of the discount.  In my view, no error in principle has been shown.

VIII.  Summary and Conclusion

[170]

For the reasons stated I would dismiss the appeal against the award
    made against Mr. Delamont.

[171]

With respect to the damage awards against the Investment Advisors,
    the trial judge found that, by engaging in unfair competition with their former
    employer when they used DSs customer lists, they had breached the implied
    term of their employment contract that they owed their employer a duty of
    good faith.  To support her conclusion, the trial judge referred to
Barton
and
Delta Play Company v. International Play Company Inc.
(4 May
    1999), Vancouver C991871 (B.C.S.C.), for the general proposition that the
    duty of fidelity or good faith, which all employees owe to their employer,
    includes a duty not to compete unfairly against the employer during or after
    the employment arrangement, and in turn a duty not to make use of the employer's
    confidential information and material to compete with the employer (Reasons
    on liability at para. 35).

[172]

In my view, the trial judge did not err in principle in concluding
    that an award of damages could be made against the Investment Advisors and
    their Assistants for the breach of their duty of good faith in copying the
    records before their departure and in using them in order to be in a position
    to open new accounts for clients at ML.  However, I am also of the view that
    the trial judge, when assessing the damages against the Investment Advisors
    and their Assistants, did not give effect to the principle that those employees
    were not constrained from competing with DS after their departure.  Instead,
    what they were constrained from doing was using the records from DS which
    they had improperly copied.  As noted earlier, the records were returned within
    a few days of the departure on the advice of counsel.

[173]

In the circumstances, I would not dissent from the result my colleague
    reached in restricting the damage awards against the Investment Advisors and
    the Assistants in the manner she has stated.

[174]

I would dismiss the cross-appeal for the reasons stated by Madam Justice
    Southin.

The
    Honourable Madam Justice Rowles

Corrigendum
    to the Written Reasons of Madam Justice Southin:

5 April 2007

The Honourable Madam Justice Southin:

[1] The second sentence of paragraph 112 of my reasons
    for judgment released 12
th
January, 2007, is corrected to read,
    I would order that the costs in the Supreme Court of British Columbia be
    remitted to the trial judge.

The Honourable Madam Justice Southin