b> CATCHWORDS Trade Practices - misleading or deceptive conduct - insurance - loss of insurance underwriting agency - inaccurate statements contained in telexes sent by disappointed insurance agent - whether permanent injunction should be granted - cross-claim alleging misleading or deceptive conduct - whether programme of deferral of insurance premiums by insurance broker misleading or deceptive - knowledge of officers of insurance agency company umputed to company - whether insureds misled or deceived - discretion to grant injunction when no toss sutfered by cross-claimants or the public as a result of misleading conduct. Tort - conspiracy and fraud - no evidence of combination or fraudulent conduct. Evidence - effect of failure of party to proceedings to give evidence. Contempt of Court - repetition of conduct in breach of interlocutory injunctions - penalty to be applied. Trade Practices Act 1974 ss.52, 75B AUSTRALIAN TRANSPORT INSURANCE PTY. LTD. and RAYMOND BERTRAM BARTLETT. and GRAEME PHILLIPS ROAD TRANSPORT INSURANCES PTY. LTD. and GRAEME PHILLIPS and GRAEME, PHILLIPS ROAD TRANSPORT INSURANCES PTY. LTD. and GRAEME PHILLIPS and AUSTRALIAN TRANSPORT INSURANCE PTY. LTD., RAYMOND BERTRAM BARTLETT, JOSEPH FRANCIS McNEANY, CHRISTOPHER FRANK ALDERTON, MARY ROGERS AND LES CLARKE No. VG 273 of 1984 Woodward J. Melbourne 20 December 1985 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No. VG 273 of 1984 GENERAL DIVISION BETWEEN ; AUSTRALIAN TRANSPORT INSURANCE PTY. LTD. and RAYMOND BERTRAM BARTLETT Applicants and GRAEME PHILLIPS ROAD TRANSPORT INSURANCES PTY. LTD. and GRAEME PHILLIPS Respondents and GRAEME PHILLIPS ROAD TRANSPORT INSURANCES PTY, LTD. and GRAEME PHILLIPS Cross-Claimants and AUSTRALIAN TRANSPORT INSURANCE PTY. LTD., RAYMOND BERTRAM BARTLETT, JOSEPH FRANCIS McNEANY, CHRISTOPHER FRANK ALDERTON, MARY ROGERS AND LES CLARKE Cross-Respondents MINUTES OF ORDER COURT: Woodward J. DATE: 20 December 1985 PLACE: Melbourne THE COURT ORDERS THAT: i, Both the first-named respondent, Graeme Phillips Road Transport Insurances Pty Ltd, whether by 1ts servants or agents or howsoever otherwise, and the second-named respondent, Graeme Phillips, whether by his servants or agents or howsoever otherwise, be restrained from making or causing to be made any statement, whether oral, by telex or letter or other writing, or otherwise making any communication in any way to any person (other than tor the express purpose of obtaining legal advice) to the effect that Australian Transport Insurance Pty Ltd, Raymond Bartlett, Joseph McNeany, Christopher Alderton, Mary Rogers and Leslie Clarke or any of them: (a) conspired to injure Graeme Phillips and/or Graeme Phillips Road Transport Insurances Pty Ltd in their business, (b) between the months of November 1983 and April 1984 fraudulently, or in any way unlawfully, withheld from Graeme Phillips Road Transport Insurances Pty Ltd insurance premiums received by the said Australian Transport Insurance Pty Ltd in respect of the Australian Heavy Vehicle Insurance Plan, (c) fraudulently, or in any way unlawfully, appropriated moneys belonging to Graeme Phillips and/or Graeme Phillips Road Transport Insurances Pty Ltd, any insureds, the underwriter or any other person connected with the said Australian Heavy Vehicle Insurance Plan, (d) fraudulently, or 1n any way unlawfully, issued or caused to be issued insurance policies or certificates of currency by or in the name of Graeme Phillips Road Transport Insurances Pty Ltd, (e) were in any way involved in the burglary of the offices of Graeme Phillips Road Transport Insurances Pty Ltd in July 1984, or (f) were in any way involved in the improper copying or use of documents or confidential information belonging to Graeme Phillips and/or Graeme Phillips Road Transport Insurances Pty Ltd. Liberty be reserved to all parties to apply to vary the form of the injunction contained in order 1 above. The cross-claim dated 30 January 1985 be dismissed. The second-named respondent, Graeme Phillips, be declared in contempt of the orders of this Court made by Jenkinson J on 2 November 1984 and by Woodward J on 6 February 1985, and be fined the sum of one thousand dollars ($1000). The notice of motion issued by the cross-claimants and dated 4 February 1985 be adjourned to a directions hearing on 24 February 1986 at 9.30 a.m. The question of costs of all proceedings be adjourned for further hearing on 24 February 1986 at 9.30 a.m. dealt with in 0.36 of 1s Settlement and entry of orders 3 (NOTE the Federal Court Rules.) section A Al A2 A3 A4 AS A6 A7 A8 AQ Alo All Al2 Al3 Al4 Al5 Al6é Al7 Al8 Al9g A20 A21 A22 A23 TABLE OF CONTENTS THE RELEVANT FACTS The Parties The Proceedings Insurance Underwriting Agents The First Underwriting Agreement Premium Funded Business The Second Underwriting Agreement Phillips' Lifestyle The South Melbourne Cricket Club Loan The Premium Deferral Programme Bartlett's Meeting with Leehane The Arthur Andersen Audit Report Cancellation of the Second Underwriting Agreement ATI's Attempts to Arrange Its Own Underwriting Agreement ATI's Meeting with Miro & Associates Delivery of the Letters of Authority ATI's Handling of Claims Run-oOff Transfer of the Computer Tapes The Burglary Phillips' Telexes The Court Proceedings Execution of the Anton Piller Order Applications to Discharge the Anton Piller Order The Contempt Proceedings Page Number oOo fF WwW NW 1317 2327303135 Section Page Number B THE CROSS-CLAIM 38 I THE SECTION 52 CLAIM Bl The Representations 39 B2 Processing of ATI Work 41 B3 Period for Closing 43 B4 Alderton's and Wood's Responsibilities in the GPRTI Office 44 BS The Deferral Programme 46 B6 BBMM's Involvement in the Deferral Programme 47 B7 The Motive for Introducing the Deferral Programme 48 B8 Wood's and Alderton's Knowledge of the Deferral Programme 50 B9 Relevance of Phillips' Failure to Give Evidence 52 B10 The Extent of Phillips' and GPRTI's Knowledge 54 Bil Allegations in Relation to Specific Insureds 56 Bl2 Issuing of Insurance Documents 57 B13 Payment of Claims 65 B14 Misleading of the Insureds 67 II THE CONSPIRACY CLAIM B1S Cause of Action 72 B16 Withholding of Premiums and Issuing of Policies and Certificates of Currency 75 B17 False Computer Entries 75 B18 The Incomplete Computer Records 76 B19 ATI's Attempts to Arrange its own Binder 77 B20 The Delivery of the Letters of Authority 79 Section Page Number B21 The Burglary 80 B22 Rogers' and Alderton's Removal ot Documents 81 ITI THE ADDITIONAL CLAIMS B23 Alteration of the Computer Tapes 82 B24 Alderton's Representations to Credit Reporters 86 B25 Interception of Phillips' Mail and Telephone Calls 86 B26 Alderton's and Rogers' Use of GPRTI Documents 88 B27 Decision on the Cross-Claim 94 THE APPLICATION 95 Cl The Telexes 95 C2 Allegations in the Telexes 96 C3 Accurate Statements 99 C4 Inaccurate Statements 100 cs The Remaining Statements 102 cé Remedies Sought 103 THE FORM OF THE INJUNCTION 105 CONTEMPT OF COURT 109 costs 114 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No. VG 273 of 1984 wee eww GENERAL DIVISION BETWEEN : AUSTRALIAN TRANSPORT INSURANCE PTY. LTD. and RAYMOND BERTRAM BARTLETT Applicants and GRAEME PHILLIPS ROAD TRANSPORT INSURANCES PTY. LTD. and GRAEME, PHILLIPS Respondents and GRAEME PHILLIPS ROAD TRANSPORT INSURANCES PTY. LTD. and GRAEME PHILLIPS Cross-Claimants and AUSTRALIAN TRANSPORT INSURANCE PTY. LTD., RAYMOND BERTRAM BARTLETT, JOSEPH FRANCIS McNEANY, CHRISTOPHER FRANK ALDERTON, MARY ROGERS AND LES CLARKE Cross-Respondents COURT: Woodward J. DATE: 20 December 1985 PLACE: Melbourne REASONS FOR JUDGMENT This application and cross-claim arise out of a long-running, and at times acrimonious, dispute between two insurance agents and between their respective companies. It has not been a simple matter to determine, because the relevant facts of the case are detailed and complex, many actors are involved, and the evidence of witnesses was frequently inconsistent, and at times directly contradictory. In addition, one of the principal protagonists, who might have been expected to throw light on many obscure aspects of the case, was not called to give evidence. I shall deal with the relevance of that factor at a later stage. A. RELEVANT FACTS Al. The Parties The first~named applicant (which is also the first-named cross-respondent) is a Victorian registered company, Australian Transport Insurance Pty. Ltd. ("ATI"). It operates largely as an insurance broker in the field of heavy motor vehicle and truck insurance. The second-named applicant, Raymond Bartlett, has been the Managing Director of ATI since 1980. Before that he operated his own heavy vehicle insurance brokerage firm under the name of Allrig Insurance. That company merged with ATI in 1980. The third-named cross-respondent, Joseph McNeany, was a founding director of ATI, and remains a co-director with Bartlett. The third and fourth cross-respondents, Christopher Alderton and Mary Rogers, were from May 1984 employed by ATI. Before that they had both worked for the first-named respondent (and first-named cross-claimant) Graeme Phillips Road Transport Insurances Pty. Ltd. ("GPRTI"). That company was incorporated in 1981 and carried on business as an underwriting agent or "underwriting manager", also in the field of heavy motor vehicle insurance. The second-named respondent (and second-named cross-claimant), Graeme Phillips, 15 a director of GPRTI and is its principal. Rogers worked as executive secretary/personal assistant to Phillips at GPRTI and then carried out similar duties for Bartlett at ATI. Alderton was the Operations Manager of each company in succession. Whilst working for GPRTI both were in fact employed by a_ separate company controlled by Phillips, Graeme Phillips Insurance Pty. Ltd., but that fact has no direct relevance to these proceedings. The fifth-named cross-respondent, Leslie Clarke, is a computer consultant who was engaged by GRPTI to design and install a computer system in 1983. He also trained GPRTI personnel in the use of the computer from time to time until July 1984. Unlike the other cross-respondents, he at no stage worked for ATI. A2. The Proceedings The substance of the original application brought by ATI in October 1984, seeking primarily injunctive relief, Dut also damages, is that GPRTI, through Phillips, had engaged in conduct that was misleading or deceptive and therefore in contravention of s.52 of the Trade Practices Act 1974 ("the Act"). The conduct alleged consisted of the sending by Phillips of telexes to various persons in the insurance industry. It was alleged those telexes contained a number of incorrect, misleading and damaging statements concerning ATI and Bartlett. Interlocutory injunctions were granted by the Court to prevent repetition of these statements, and there have been proceedings for contempt of court arising from alleged breaches of those injunctions. However, interest in the original application was largely overtaken by subsequent action of the respondents, who in January of this year issued a lengthy and detailed cross-claim alleging fraud by, and conspiracy between, the cross-respondents. They also obtained an ex parte Anton Piller order from a judge of this Court (see section A20 below). It would be accurate to say that, thereafter, the cross-claim took over as the most, although by no means the only, significant matter to be determined. It certainly occupied the great majority of the time spent in the hearing of the action before me. It will be necessary to set out in detail the fairly complex facts that gave rise to the proceedings. Although many of these facts either became common ground or were not' seriously contested, 1t will become evident that some of my findings on important matters are based either on one party's credible version of particular events, or on inferences to be drawn from indirect evidence. This has been unavoidable because Phillips chose not to give eviderice. A3. Insurance Underwriting Agents According to Bartlett, his and ATI's first contact with Phillips occurred in 1980. Phillips was then the Melbourne manager for an insurance agent, Kent Insurance Management Pty. Ltd., with which ATI placed heavy motor vehicle insurance for clients. Bartlett and Phillips and their respective companies dealt with each other fairly closely. At some stage after 1980, Phillips ended his relationship with Kent Insurance and began seeking an "insurance underwriting agreement" for heavy motor vehicle insurance with an overseas underwriter. As appears from the evidence, an insurance underwriting agreement, which was variously described as a "facility", "binder" or "underwriting agency", usually provides for an insurance agent or intermediary to quote premiums, accept business or "place risks" and accept, manage and meet claims, on behalf of its underwriting principal. The relationship is regulated by an agreement between the agent, often referred to as the "manager", and the underwriter. Although the terms of each agreement will depend upon the particular circumstances, most underwriting agreements have some common features. Usually the agent will be required to report premium income and claims expenditure, and remit funds to the underwriter, on a regular basis. Often premium funds received by the agent may be retained for the purpose of paying claims. The agent receives consideration through a commission, usually a fixed percentage of premium income received. Often, although not invariably, the underwriter will be an overseas insurance company, and the risk will usually be re-insured by that company to whatever extent it deems advisable. The agent may accept business for placement through another agent or broker, and may in fact only be organized to receive business in that way. It is thus not unusual to find a number of brokers or intermediaries interposed between the insured and the company that ultimately carries the risk, as will be seen in many instances in the present case. Each of these intermediaries is of course entitled to some commission, which can only come from the premium monies payable by the insured. There was evidence before me that the use of underwriting agreements, such as those described, 1s common in the heavy motor vehicle sector of the insurance industry. There was also evidence that the market was particularly volatile, and that underwriting agreement programmes in this area have had a history of financial failure. In view of the number of intermediaries involved in the business, and the evidence which has emerged of the dealings between the various parties in this matter, it is easy to see how difficulties can arise. A4. The First Underwriting Agreement In 1982 Phillips was actively engaged in seeking an underwriting agreement to be managed in Australia by GPRTI. Bartlett gave evidence of Phillips' attempts to obtain an underwriting agreement overseas. He said Phillips approached ATI for assistance in providing information and statistics about the heavy transport insurance market so that he could determine matters such as loss ratios and rates. In return, Bartlett claimed, ATI was to act as the "marketing arm" of the programme eventually obtained for GPRTI, attracting business to the programme directly from insureds and from other brokers and agents. In addition, ATI was to own 25% of GPRTI, whilst GPRTI would earn a commission from the business introduced by ATI. Phillips was successful in arranging an underwriting agreement with an American company, Transit Casualty Company ("Transit") through another American company called Miro & Associates. A one year renewable agreement, dated 29 September 1982 ("the first agreement"), was entered into and signed by the parties, and from 1 October 1982 GPRTI acted as the Australian manager for Transit, arranging and entering into contracts of insurance and settling and paying claims on its behalf. The insurance programme was known as the Australian Heavy Vehicle Insurance Plan (""AHVIP"). However, according to Bartlett, Phillips did not honour his commitment to ATI and, instead, appointed Baillieu Bowring Marsh and McLennan Pty. Ltd. ("BBMM"), an Australian broking firm associated with Marsh and McLennan, one of the world's largest insurance brokers, to act as marketing agent to the programme. Despite the alleged breach of the agreement between ATI and Phillips, ATI began to place business with the new programme in January 1983, as it considered the programme commercially viable and felt that it "really did not have a choice". It also continued to place some business with other programmes. AS. Premium Funded Business An unspecified, but apparently significant, proportion of GPRTI's business was "premium funded". In those cases, a finance company would pay the premium to GPRTI through BBMM. The insured would repay the amount of the premium, plus interest, to the finance company on terms. A broker would usually select the particular finance company, would prepare the application for funding, and then forward it to the finance company. The finance company would then forward the premium and, on occasions, a copy of the application for funding, to GPRTI through BBMM. On receipt of the premium the details of the insurance would be entered onto the GPRTI records in the normal way. In about August 1983, Bartlett and ATI developed doubts about Transit renewing the first agreement with GPRII after the expiration of the initial 12-month period. These doubts were subsequently confirmed when Transit did not renew the agreement. Bartlett claims this occurred because Transit discovered that GPRTI was merely an agent and not an insurer in its own right, which Transit had previously believed. Transit was only a re-insurer, and believed that it was re-insuring the risk carried by GPRTI. Bartlett's version was confirmed in substance by the evidence of Gerard Murphy, an employee of Miro & Associates, who was responsible for administration of the programme in America for Transit. He confirmed the basis of the cancellation, which had been conveyed to Phillips by a telex, dated 7 October 1983, from yet another intermediary, Donald F. Muldoon & Co., an insurance managing agent acting on behalf of Transit. The telex had included the allegation "... you were writing direct insurance whereas you had the authority only to arrange re-insurance". A6é. The Second Underwriting Agreement On becoming aware that the first agreement might not be renewed, Phillips attempted to negotiate another agreement with a different American insurer. He was again successful and an agreement was reached with a company called Lafayette Re-insurance Company Limited ("Lafayette"), which was controlled by Miro & Associates. Lafayette re-insured through the Omaha Indemnity Company ("Omaha") which was not part of the Miro group of companies. The interposing of Lafayette as an insurer into the arrangement overcame the difficulties experienced under the first agreement. It 1s perhaps worth noting that Miro & Associates were thus prepared to enter into a second arrangement notwithstanding the problems encountered with the first, and the evidence of Murphy that the first agreement had not run smoothly: "Information that we had requested and that had been agreed upon re the re-insurance contract was not being forwarded to the company. None of the information on the computer reports appeared to tie back into the funds received, nor was there any paper, any copies of the policies, available to add up to what the pre-report would indicate". The second agreement was to take effect from 1 October 1983 and, although different in form, was in substance intended to take over from the first agreement. A written agreement was not drawn up until a later stage and was executed by the parties in March and early April 1984. Murphy gave evidence that, as Miro & Associates understood the agreement, it provided for monthly accounting and remittance of premium funds to Lafayette. Claims would initially be paid from premium funds received and held for that monthly period by GPRTI. Any excess of funds received was to he remitted to Lafayette. In this way, GPRTI would hold a sufficient pool of funds to meet current claims for each month, but would not accumulate a large fund of premium monies. GPRTI, as underwriting manager, was entitled to withold its commission from the funds to be remitted to Lafayette. It was also responsible for payment of any Australian witholding tax which might be levied. BBMM continued to act as the "sole marketing agent" for the second agreement. Approximately 90% of business placed with the AHVIP was placed through BBMM. ATI was not required to deal through BBMM and, except for premium funded business, was placing ~ 10 - business directly with GPRTI. However, in Bartlett's opinion, BBMM was very important to the success of the programme in view of 1ts reputation in the industry, and because it was acting as a "watchdog" in overseeing the operation of the programme. He understood a representative of BBMM inspected GPRTI's books regularly "so they could keep an eye on the position". The second agreement operated in practice in substantially the same fashion as the first. Insureds, or more frequently brokers and agents acting on behalf of insureds, would contact ATI or BBMM seeking cover. ATI or BBMM (as the case may be) would telex GPRTI requesting cover with details of the particular insurance requirements. GPRII would open the file for that insured on receipt of the telex, and allocate a cover mumber to it. ATI or BBMM was then required to "close" cover within a limited period (as to which see section B3 below), by forwarding the premium, less agents' commissions, to GPRTI. If no monies were received within that period, GPRTI would usually telex the broker concerned giving seven days notice and, if there was no satisfactory response, would then cancel the cover. If the proposal and a cheque for the premium was received, GPRTI would place them on the underwriting file and process the proposal. It would then raise a policy and forward it to either BBMM or ATI. At the end of each month, all the proposals received during the month would be "batched" and the details would be entered by GPRTI personnel into thezr computer (after it was acquired in August 1983). - ll - The evidence was that, in the normal course of events, details would not be entered into the computer unless a proposal and the premium had been received. At the end of each month a print-out was produced listing all the business received during that month. From this print-out the remittance to the overseas insurer/underwriter was calculated - having regard also to the retention of some funds for the payment of claims. There was evidence that, towards the end of 1983, GPRTI was getting approximately $400,000 per month of premium income from sources other than ATI. ATI produced perhaps 10% of GPRTI's total business. The precise procedures within the GPRTI office, and each individual's responsibility for them, was the subject of contradictory evidence, especially from Alderton and Gordon Wood (another GPRTI employee). It will be necessary to return to this topic later (see section B4 below). A7. Phillips' Lifestyle In October 1983 Bartlett noticed that Phillips and his family had acquired a large number of expensive consumer items very quickly, and were generally living an extravagant lifestyle. In particular he gave evidence that Phillips purchased two houses in Hopetoun Road, Toorak, one for $1.1 million, and Rolls-Royce motor cars for himself and his wife. He said also that Phillips and his family were taking frequent overseas trips. He said he was concerned at that time that the earnings by way of commission from the AHVIP could not finance such a lifestyle, and he - 12 - suspected that Phillips was using premium funds for his own purposes, particularly as Phillips had approached him for a $50,000 loan shortly before entering into the first underwriting agreement, saying that his financial position was in a poor state. In cross-examination Bartlett was challenged as to the dates of the purchase of the houses and the cars. It became apparent that the second house was infact purchased in April 1982 with a view to selling the first, that the first Rolls-Royce was probably obtained in late 1982, and that both cars were on hire purchase. That evidence indicates that some of the trappings of Phillips' affluent lifestyle may have been acquired before the commencement of the first underwriting agreement, although I do not consider that is of great significance. The general nature of Phillips' lifestyle was confirmed by Alderton, who agreed that Phillips was living significantly better in the second half of 1983. He confirmed details of the purchase of the houses and acquisition of the vehicles, and added that he believed Phillips had used $60,000 from the premium fund in the refinancing of a mortgage, and $135,000 for the purchase of an interest in a travel agency, Superjet Travel Agency Pty Ltd, in Toorak. Phillips had also purchased a racehorse in 1983, substantially refurnished a house, maintained a high expense account, and discussed the purchase of a Hong Kong based insurance company with Alderton. Rogers also confirmed much of this in her evidence. - 13 - A8. The South Melbourne Cricket Club Loan Alderton also said that Phillips had arranged for the loan of some premium funds to the South Melbourne Cricket Club (SMCC), from about June 1983. Phillips was then president of that club. Alderton heard this from Phillips directly, but was told of the extent of the advances (he believed about $800,000) by Ray Johnson, an accountant from whom Alderton had sought advice on setting up books of account for GPRTI. It became apparent that a substantial sum had been advanced from the premium fund to the Australian Bank, which had in turn advanced the same amount to SMCC on a "back-to-back" loan. Rogers confirmed that advances commenced in the middle of 1983, and that she had drawn a series of cheques totalling about $700,000 or §750,000 for loans to SMCC. On hearing, from Johnson, the extent of the SMCC loans, Alderton approached Phillips and suggested to him that the use of the funds was imprudent, particularly in view of pressure that had been exerted on GPRTI by Lafayette to remit funds to the United States. He raised the question of these loans on a number of occasions, to be met with the response that, under the underwriting agreement, Phillips was entitled to invest funds as he saw fit. Alderton agreed that the loans were eventually secured in some way by a government guarantee, but said he was not personally satisfied with the nature of the security as he understood it. - 14 - GPRTI's offices were located onthe 6th floor of an office block at 3 Bowen Crescent, Melbourne. ATI's office was originally located in South Melbourne, but in January 1983 it was relocated to the 7th floor, 3 Bowen Crescent, Melbourne, directly above GPRTI's office. In view of their business relationship, the staff of GPRTI and ATI were in frequent personal contact. They were also encouraged to mix socially. Bartlett had frequent personal contact with Phillips both in relation to business and socially. He stated that, at a number of these meetings, he raised his doubts about Phillips' investments and his handling of the premium funds. Phillips' reply was that he was authorised to invest the funds and that "there was enough money in (the programme)". However Bartlett's doubts apparently came to a head at a meeting held in November 1983, called at Phillips' request and attended by Bartlett, Phillips and Alderton. There was a heated exchange during which Bartlett accused Phillips of stealing funds from the premium account. Phillips denied any illegality. Notwithstanding this argument, ATI continued to place business with the AHVIP through GPRTI. However Bartlett stated that, after that meeting, ATI became cautious and started to "slow down the process of covers placed" with GPRTI and "filtered off more to other insurers". In fact ATI went further than this and, in late November or December 1983, it commenced a "premium deferral programme" for GPRTI business. - 15 - A9. The Premium Deferral Programme This deferral programme provides the basis of many of the allegations in the cross-claim against the cross-respondents. There 1s conflicting evidence about the mechanics of the deferral programmme, ATI's intentions in implementing it, and GPRTI's officers' and employees' knowledge of it. Alderton gave evidence that he became aware that closures would be withheld in a discussion with Bartlett in late December 1983, when he was told that ATI would be deferring payment of premiums because of rumours about Phillips' dealings with premium monies. A reference in the transcript to something which Alderton became aware of in September is ambiguous. I do not believe he was referring to deferral of closures. Bartlett stated that ATI began 'deferring Payments in approximately January 1984, The evidence on the deferral programme will need to be examined in greater detail at a later stage. For the present it is sufficient to say that it involved ATI continuing to place cover for insureds with GPRTI, but then not closing the cover within the usual time by forwarding the premium on to GPRTI. Bartlett stated that this deferral programme was instituted "as a consequence of his concern with the security of the AHVIP in view of Phillips' handling of the premium funds". It appears that further pressure was placed on GPRTI to report and remit funds to Lafayette in the U.S. in the period from September or October 1983 to January 1984. On 5 January 1984 Murphy, of Miro & Associates, sent to GPRTI a telex reiterating these requests for accurate underwriting and claims data and remittance of premiums. He added that Omaha threatened to cancel - 16 - the programme if those reports were not received, and referred to difficulties that had been encountered in finalising the second underwriting agreement. Murphy stated that a contract along the lines of the first underwriting agreement had been sent to GPRTI in late November or early December 1983. Alderton gave evidence of receiving the telex of 5 January 1983 and speaking to Phillips about it that evening. Phillips said he would ring Miro and Associates, AlO. Bartlett''s Meeting with Leehane On the evening of Friday 13 January 1984, Bartlett had a social meeting with John Leehane, the General Manager of SMCC, over drinks at the ATI boardroom. He gave his acccount of their conversation, saying he was told by Leehane, "I hope you are not going to pay Phillips any more money because he will be in jail on Monday". Bartlett asked "What do you mean?". Leehane replied that large sums of money, between $700,000 and $800,000 had been advanced to SMCC from the GPRTI premium pool. Leehane was not called to give evidence to verify this account of the conversation, but nothing the respondents/cross-claimants have put forward challenges it. Bartlett was perturbed by Leehane's statements, which he said confirmed his existing doubts about the use of the premium fund, and strengthened his decision to defer premium payments to GPRTI. Following the meeting with Leehane, Bartlett called on Alderton at Alderton's home. Alderton was not asked about that meeting, but Bartlett said that, when confronted with the information about the advances to SMCC, Alderton answered "Yes - 17 - it's true. Thank goodness somebody else knows about it". Bartlett also told Alderton that he intended to speak to Nigel Lacey, the Chief Executive of BBMM, about these advances. Alderton then rang Lacey and, at lLacey's request, arranged a meeting between the three of them on the following Sunday. All. The Arthur Andersen Audit Report At that meeting Alderton advised Lacey that approximately $1 million had been removed from the premium account, some of it going to SMCC and other amounts to Phillips' personal companies. Lacey naturally expressed concern at this, and indicated that he would immediately commission an audit of the AHVIP. The firm of Arthur Andersen & Co., Chartered Accountants, conducted that audit over two working days in the following week and prepared an audit report, dated 20 January 1984, addressed to Mr Skingsley of BBMM. That document was admitted into evidence. It showed transfers from the GPRTI premium account of $711,000 to Graeme Phillips Insurances Pty Ltd for purposes unknown, $224,924 by way of loans to Phillips personally, and $908,790 to other sources, made up of $787,290, either directly or indirectly, to SMCC, and $121,500 for an interest-bearing bank deposit in the name of Graeme Phillips Superjet Travel Pty Ltd. Alderton gave evidence that, during the week the audit was conducted, BBMM had also stopped payment of premiums to GPRTI. Bartlett said he understood that BBMM had deferred payment "until the matter could be sorted out". He also believed that Clive - 18 - Sears of BBMM was appointed as co-signatory of the GPRTI premium and claims accounts, and that quarterly audits of GPRTI's accounts were to be conducted by BBMM. However he said that ATI was not totally satisfied by these moves and continued with its deferral plan after BBMM had received the audit report. Alderton stated that he monitored the ATI business closely after January, and confirmed Bartlett's evidence that, by April of 1984, ATI business to the value of some $300,000 had been opened but remained unclosed. Notwithstanding this, and the fact that a representative of BBMM was attending the GPRTI office on a regular basis in the period January 1984 to April 1984, GPRTI continued to operate the AHVIP in substantially the same fashion as before the receipt of the Arthur Andersen report. It continued to open business received from BBMM, ATI and some other brokers and agents. It continued to process claims, and the GPRTI staff were kept busy. There was a substantial back-log of paper work, although the extent of that back-log was disputed. From all accounts Phillips attended the office fairly regularly, but often for brief periods, apparently devoting the majority of his time to other business and sporting interests and to frequent overseas and interstate travel. He left the day-to-day operation of the GPRTI office to his staff, and in particular to Wood and Alderton. Al2. Cancellation of the Second Underwriting Agreement Murphy gave evidence that, during the same period, Miro & Associates were continuing to receive pressure from the re-insurer, Omaha, to remit the premiums and to provide ~ 19 - information. In turn, Miro & Associates placed pressure on GPRTI, both by telex and telephone calls. This was confirmed by the GPRTI staff at that time, Alderton, Wood and Rogers. After examining a number of typed telegraphic transfer application forms, Rogers agreed that substantial funds were remitted by GPRTI to the U.S. in March and April 1984. She believed these later remittances "would have been at the instigation of Sears of BBMM", although Wood said he had no knowledge of who was responsible. However Rogers did not accept the proposition that remittances were regular, particularly after October 1983. By a letter to Phillips dated 16 April 1984, Sears of BBMM complained that GPRTI had not remitted funds to the U.S. due at the beginning of April 1984 and that "a bank reconciliation ... suggests that you do not have sufficient funds to pay the underwriter nor to pay claims now due for settlement". It alsa requested that Phillips postpone a pending overseas trip. Phillips replied by letter dated 17 April 1984 disputing these allegations. Shortly after, he left on his overseas trip. It must have been very soon after his departure that Bartlett delivered to Alderton the request from Transit and Lafayette for documents which is referred to in sections Al4 and A15 below. Then at 10.10 a.m. oni19 April 1984, GPRTI's office received a telex from Lafayette. It read as follows "Please take notice that in consequence of material breach of your obligations and material non-performance of your duties, Lafayette Re-insurance Company Limited, hereby terminates any - 20 - acceptance of insurance or re-insurances in respect of coverage originated or marketed by physical damage and third party personal property damage programmes. This notice shall be effective 12.01 am on 20th April 1984. We expressly reserve all rights and remedies in respect of acts or omissions on your part, present and/or continuing". Al3. ATI's Attempts To Arrange Its Own Underwriting Agreement It is now clear that Lafayette's decision to cancel the second underwriting agreement was influenced in part by factors other than GPRTI's alleged failure to report and to remit premiums. Bartlett gave evidence that, in 1983, ATI was considering its role as a broker in the industry. It decided to move away from using the underwriting facilities then operating in the market, such as the AHVIP, and to arrange an underwriting facility of its own. To that purpose ATI approached a United Kingdom based insurance consultant, Mr Richard Barrett of Mitford Risk Planning Limited. A telex was sent from McNeany to Barrett on 20 June 1983 advising of ATI's interest, and requesting him to make enquiries on its behalf. Information was supplied to Barrett in a number of communications which followed, and a submission was prepared by ATI and sent to Barrett for him to submit to prospective insurers and underwriters in the United Kingdom. In September 1983, Barrett presented the submission to Lloyds of London, but by November 1983 no positive response had been received. ~ 21 - In January 1984, Bartlett and McNeany travelled to Montreal, Canada, to investigate another Australian-based underwriting facility with which ATI had been placing some business, run by Polden Risk Management ("Polden"). Poiden apparently operated as an underwriting agent for the New York Insurance Exchange ("NYIE") through a Canadian intermediary, Sykes International. ATI telexed Sykes indicating its interest in arranging an underwriting agreement with the NYIE which, according to Bartlett, would be either in lieu of, or parallel with, Polden. They met representatives of Sykes International, but no underwriting agreement eventuated from that meeting. They also flew to Florida tor discussions with a Mr Barlow, but again nothing came from that meeting. ATI then concentrated on its approaches through Barrett. In February 1984 Barrett advised that attempts to arrange a facility with Lloyds had proved unsuccessful. He raised the possibility of using a "fronting" insurance company in Australia to underwrite some of the risk while re-insuring the remainder overseas. ATI rejected this proposal and, in early March 1984, suggested that attempts should be made to arrange a facility in the American market, giving the names of possible companies' to approach. A submission was made in late March to the NYIE by Mr Fred James of Wigham Poland U.K. Limited, an international broking house used by Mitford Risk in the United States. On 2 April 1984, Barrett sent a telex to ATI advising "American brokers have come back saying New York Exchange doubtful ... by coincidence brokers seeing - 22 - underwriter Transit Casualty Thursday who indicated possibility of writing a binder directly to ATI rather than lose business. Seems an unusual approach but worth pursuing and will advise". ATI replied in the following terms; "With regard to the possibility of Transit Casualty arranging binder for ATI we would be more than pleased as Transit are completely acceptable to all finance houses and have an extremely good reputation in Australia. As you are aware they were on line with Graeme Phillips Road Transport but pulled out in October for an unknown reason to us. For your information I believe Transit Casualty was arranged through Miro & Associates. ».. this information may be of use to you but again we would be very happy to have Transit Casualty for the Australian Market." Barrett replied; "The person I mentioned (that) the brokers will see on Thursday is in fact Carlos Miro. According to American broker Transit Casualty are still writing for Graeme Phillips which is contrary to my intelligence. I'11 follow up nevertheless and let you know". ATI then replied; "Thank you for your comments and advices. We would like to also point out that it is to our knowledge that Transit Casualty cancelled the Phillips binder thru Carlos Miro due to Phillips not meeting contractual arrangements. I then believe Carlos Miro was able to arrange Omaha Indemnity to front so it is possible I suppose that Transit are still arranging RI but this seems unlikely due to Phillips not sticking to agreements. I can also tell you that the new contract presented to Miro has not yet come back to Australia signed. It could well be Miro is aware ATI know they are not particularly happy with the Phillips organisation, so this could give us avery good chance. Carlos Miro has a reputation of good business. We would definitely like a personal meeting with him if prospects look good". - 23 - Al4. ATI's Meeting with Miro & Associates As a consequence of the above communications, Barrett approached Murphy of Miro & Associates in early April with a view to arranging a meeting. Barrett explained he was acting on behalf of an Australian broker who was seeking an underwriting agreement in the heavy motor vehicle insurance market. He advised that ATI was already a significant broker to the AHVIP operated by GPRTI. He also explained that one of the reasons ATI was seeking a binder was because it was unhappy with the way GPRTI was operating the AHVIP, and that it suspected Phillips was misusing premium funds. This understandably aroused the interest of Murphy who, as I have already stated, was concerned about GPRTI's reporting and remittance of premiums. Murphy arranged a meeting between ATI and Miro & Associates for 12 April 1984 in Dallas, Texas. That meeting was attended by Bartlett and McNeany of ATI, Barrett, and Miro & Associates representatives including the Chairman, Carlos Miro, a Vice-President, Mr Sheldon Irion and, intermittently, Murphy. Murphy, Bartlett and McNeany all gave evidence about that meeting, which extended over two days. Murphy stated that Miro & Associates considered the main purpose for holding the meeting was to ascertain more about the allegations of Phillips' misuse of premium funds and his operation of the AHVIP. However he was aware that ATI was primarily interested in obtaining its own binder. McNeany and Bartlett told the Miro representatives of their belief that Phillips had a deficiency of over $1 million of premium moneys, due largely to the investment of funds of - 24 - approximately $800,000 1n SMCC. They advised them of the contents of the Arthur Andersen audit report, but apparently did not give them a copy of that report. According to Bartlett and McNeany, they also advised the Miro representatives of ATI's deferral programme. Murphy however could not recall hearing of the deferral programme at that meeting. The greater proportion of the first day of the meeting was taken up with discussions concerning GPRTI's running of the AHVIP, although Bartlett and McNeany were trying "to steer the conversation around" to the possibility of ATI's entering into a binder. The Miro representatives then confirmed, with BBMM in Melbourne, the details given to them. When discussions resumed, they expressed their dissatisfaction with the operation of the AHVIP and discussed its future. Their first reaction had been simply to cancel the programme completely and "walk away from it". This did not suit ATI's plans, and accordingly, on the second day, Bartlett and McNeany renewed their attempts to obtain a binder for themselves. They offered, or alternatively agreed toa suggestion from Miro & Associates, to obtain from GPRTI on their return to Australia, proper reports and records of the AHVIP. For that purpose two letters of authority addressed to Phillips of "Graeme Phillips Road Transportation Pty Ltd" (apparently an incorrect reference to GPRTI) were given to Bartlett and McNeany. They were on Miro & Associates letterhead and from Transit Casualty Co. and - 25 - Lafayette Insurance Co. respectively, and were both dated 13 April 1984, They requested "all books, records, and papers" of GPRTI and appointed ATI to act as their representative. (It is not clear from the evidence presented why Transit Casualty Co. still had authority to demand inspection of books, as their binder with GPRTI had terminated in October 1983. There was apparently a continuing relationship between Lafayette, Transit and Miro & Associates after that date, although none of the witnesses was able satisfactorily to explain details of that relationship. ) ATI also succeeded in persuading Miro & Associates that it should be given a binder for operations in Australia, through yet another intermediary, Wigham Poland. ATI obtained a "letter of intent" from Miro & Associates in the following form: "This signed memorandum should act as our letter 'of intent' to put together a programme for Australian Transport Insurance Pty through Wigham Poland acting on behalf of Miro & Associates Risk Management, Inc. as a Credit Risk Manager for the purpose of writing Physical Damage Insurance on vehicles in Australia. Obviously, the abovementioned programme between the named parties will be subject to mutually agreed upon terms, conditions and rates for the programme". That letter was dated 13 April 1984 and was signed by Irion on behalf of Miro & Associates, AlS. Delivery of the Letters of Authority Bartlett and McNeany returned to Melbourne on about 16 or 17 April 1984. Bartlett then handed the letters of authority personally to Alderton, Phillips being by then overseas. Bartlett then telexed GPRTI confirming "service" of the letters, and - 26 - received a telex in reply advising him that no documents would be made available until Phillips gave his authority. Phillips, who was then in Los Angeles, after hearing what had happened, telexed Miro requesting that the letters of authority be withdrawn and requesting a meeting. The next communication was the telex of 19 April from Lafayette to GPRTI cancelling the second underwriting agreement. ATI then received a telex from Miro & Associates requesting it to collect outstanding premiums and handle the claims run-off from the AHVIP, and confirming Miro's intention to enter into a separate underwriting agreement with ATI. ATI was, in effect, to stand in the shoes of GPRTI. A copy of that telex was forwarded to BBMM. The telex cancelling the second underwriting agreement was received with surprise by GPRTI staff, even though they had had some advance warning of serious developments with the delivery of the letters of authority. A copy of the telex was forwarded immediately by Rogers to Phillips in Los Angeles. He apparently telephoned his office on 25 April 1984 to discuss the matter with Alderton and Rogers. At the end of April, a meeting took place at GPRTI's office between Alderton, Mrs Phillips, Johnson (the accountant) and Mr Schetzer (the GPRTI company solicitor). Rogers also attended that meeting from time to time. (Alderton agreed with counsel that the meeting took place on 19 April 1984, the date the cancelling telex was received. Although it is of no particular relevance, it appears from other evidence that the meeting in fact occurred on 30 April 1984.) - 27 - At that meeting the financial circumstances of GPRTI were discussed in detail. Mrs Phillips was told that GPRTI was insolvent, with a net deficiency of over $1 million. She was advised that, to avoid the company's liquidation, it would be necessary to dispose immediately of most of their company and private assets and to dismiss the staff. A telex to that effect was sent to Phillips in London. Mrs Phillips telephoned her husband that evening, and he returned to Melbourne immediately. It is ATI's involvement in the cancellation of the second underwriting agreement that has caused much of the antipathy betwen the parties, and which forms the basis of a number of the allegations contained in the telexes sent by Phillips which initiated these proceedings. Al6é. ATI's Handling of Claims Run-Off After ATI had received confirmation that it was to handle the run-off of the AHVIP, Bartlett made arrangements with Phillips to take over physical possession of GPRTI's files. Phillips eventually agreed to hand over these files and negotiated for ATI to purchase the filing cabinets in which they were contained. The cabinets and boxes of files and other paper-work were then delivered upstairs to ATI's offices. Those files moved comprised both underwriting files and claims files. According to Wood, the documents handed over did not include telexes from ATI to GPRTI requesting cover under the AHVIP which had not been closed, These, he said, remained with GPRTI. - 28 - In accordance with the "letter of intent" handed to Bartlett and McNeany in the United States, a "binding authority" between ATI and Lafayette was eventually drawn up by Wigham Poland U.K. As a consequence of that, and more particularly of the receipt of the GPRTI files, ATI found it necessary to take on additional staff. Their initial task was to transfer the existing records into ATI's computer and to enter the back-log of paper work that had not been processed by GPRTI. A week or so after the cancellation of the second underwriting agreement, Bartlett was approached by Rogers for a job, which he gave to her. (Rogers confirmed this in evidence, but added that she had decided to resign from Phillips' company even before the cancellation of the agreement.) Bartlett also offered employment to two other GPRTI clerical employees, Tess Colero (she has since married and changed her name to Polidano) and Betty Smith. He was approached by Sears of BBMM to employ Wood also and, although he expressed a reluctance to do so, he appointed Wood as a claims manager. A few weeks later Alderton also requested, and was given, a position. Wood, however, only worked for ATI for six weeks, leaving after a dispute with Bartlett over the terms of his employment. He then returned to work for GPRTI as administration manager. ATI continued to administer the claims run-off from the AHVIP, and presumably it took new business for Lafayette under its new agreement. I was not informed in any detail of ATI's operations thereafter; nor do I consider that they are relevant to the present proceedings. I was also made aware of litigation ~ 29 - pending in other jurisdictions between ATI, Lafayette and GPRTI; but again those proceedings do not appear to have any particular relevance to the matters before me. Al7. Transfer of the Computer Tapes When the GPRTI staff left to join ATI after the cancellation of the second underwriting agreement, Mrs Phillips became involved in the day-to-day running of her husband's insurance business. Alderton and Ciarke both gave her instruction in the operation of the computer. On 10 May 1984 she was given four computer tapes by Alderton who, she said, told her they were complete computer records of all GPRTI's business. In tact these tapes were "back-up" or security tapes. They contained deta1rls of GPRTI records stored on the computer. That information had been transferred from the computer disc storage to the tapes an a process known as "dumping". Alderton confirmed that he was responsible for the "dumping" of the information on to the tapes, some of which he did on a daily basis and some at less frequent intervals. Two of the tapes were apparently daily back-up tapes from that day, the third from the day before, and the fourth was an additional security tape of the computer master file. It was incomplete because, Alderton said, due to his inexperience the tape ran out before the dump was complete. Mrs Phillips told the Court that she took the four tapes home for ""safe-keeping" on the advice of Alderton. She continued to assist in the GPRTI office and, in May 1984, apparently independently of the computer tapes given to her by Alderton, she gained access to the computer master file. On 24 May 1984 she - 30 - produced a full computer print-out of what was then contained in the master file. She and Wood then used that print-out to compile a number of notebooks comparing the information on the print-out with telexes and any other material still available to then. Al8. The Burglary On Thursday 26 July 1984 Phillips, his wife, and their five children left Australia for Los Angeles to attend the Olympic Games. Shortly after their departure, at some stage over the following weekend, the GPRTI offices in Bowen Crescent were burgled. Wood said all their records were stolen. Missing was "everything relating to the new facility Cobtained by Phillips from another source after the cancellation of the second underwriting agreementi, all previous records of the old facility, the telexes, mainly telexes, brokerage files ... all the underwriting files relating to the new facility, all personal files, all documents, all bank records, computer, everything. The place was virtually stripped". Phillips heard of the robbery on about 29 July 1984 when another GPRTI employee telephoned him in Los Angeles. He did not, however, return to Melbourne until about three and a half weeks later. The robbery was of some significance in these proceedings, and each side, either directly or indirectly, accused the other of engineering or being involved in it. ATI claims that suggestions to that effect were contained in telexes later sent by Phillips. - 31 - Al9. Phillips' Telexes The first of these telexes of which the applicants complain appears to have been sent on 28 June 1984 to Irion, Mu2iro and Doug Hale, all directors of Miro & Associates, and to Lafayette. A further telex was sent on that day to John Smith of Wigham Poland UK. Then followed a telex to BBMM on ll July 1984 and two further telexes on 26 July 1984. One of these referred to seventy telexes that Phillips "despatched around Australia" that day. Also on that same day the applicants issued proceedings in the Supreme Court of Victoria against Phillips and GPRTI seeking damages for defamation and an injunction restraining Phillips from publishing statements similar to those contained in the telexes. A20. The Court Proceedings The issuing of proceedings did not halt the flow of telexes from Phillips, as further telexes were sent on 5 September 1984 and 7 September 1984. On 18 October 1984 the applicants issued this application. On 2 November 1984 the application came before Jenkinson J, who made consent orders restraining the respondents "from making any statements alleging that the applicants ... have engaged in any of the conduct or conduct of a similar kind to any of the conduct alleged in any of the telex messages", The messages were incorporated in the order by reference and were annexed to it. On 30 January 1985, the respondents appeared, without notice to the applicants, before Gray J, and obtained a series of wide-ranging orders, the most significant being based on the order first given in Anton Piller AG v Manufacturing Process Ltd C1976] - 32 - Ch.55. This Anton Piller order allowed four nominated representatives of the respondents to enter and search ATI's premises and inspect and remove for copying a number of files, records, computer print-outs, computer records, computer tapes, computer programmes and other documents. An injunctive order restraining the applicants from destroying such records was also obtained. These orders were obtained on the strength of a detailed 59~page cross-claim issued by the respondents, and affidavits in support sworn by Phillips, Wood, Barbara Reeves and Albert Lilywhite (the last two being former employees of ATI and GPRTI respectively), Neil Anstey and Trevor Jarman, two brokers who had placed business with the AHVIP through ATI, and Ahmed Ajayoglu, a computer analyst. A21. Execution of the Anton Piller Order Shortly after midday on the day following the granting of the Anton Piller order, Wood, Ajayoglu and two solicitors acting for the respondents, accompanied by three Victoria Police officers, entered the applicants' premises at Bowen Crescent. They met Bartlett and explained their purpose, serving on him a copy of the order, cross-claim and supporting affidavits. He requested time to consider the documents and take advice on them, which was agreed to. The respondents' representatives waited in the reception area of the office. Shortly before 2.00 p.m. they again tried to execute the order, but were met with further requests for time from Bartlett. Approximately half an hour later they entered the main office area, and began opening filing ~ 33 - cabinets to examine files. They were approached by Bartlett. He allegedly threatened them, and they left the office shortly thereafter. Bartlett had been in contact with his solicitors, who had made an urgent application to Gray J for a discharge or variation of his orders. No additional material was put before his Honour, and the application failed. The respondents' solicitors then returned to ATI's office at about 4.40 p.m., accompanied by Wood and Ajayoglu (but without accompanying police officers). They found the doors locked. Shortly after 5.00 p.m., Bartlett opened the doors. Inside they spoke with Bartlett, and with the applicants' solicitor on the telephone. They requested permission to remove documents for photocopying that evening, but were refused, as the order only permitted the inspection and removal of documents between 9.00 a.m. and 5.00 p.m. ona week day. They again left the premises. That evening, in keeping with the spirit of mutual distrust which existed between the parties, ATI employed security guards to protect the entrance to their offices, whilst the respondents hired a private investigator to keep' watch on the premises. The latter subsequently filed an affidavit deposing to activity that occurred in and outside the ATI office on the night of 31 January 1985, including the apparent inspection and removal of documents throughout the evening by persons unknown, and observations of activity in the ATI office until 1.36 a.m. - 34 - At about 11.00 a.m. on the following day, Friday 1 February 1985, the four nominated representatives of the respondents returned to ATI's office and began removing documents for copying. This continued throughout that day. In accordance with the terms of the order those documents removed were apparently returned on the following day, Saturday 2 February 1985. A22. Applications to Discharge the Anton Piller Order On Monday 4 February 1985 the applicants made a_ second application to discharge the Anton Piller order, this time before me. The nature of the orders obtained created a difficult problem. The applicants were attempting to have the orders discharged on limited material and with fairly limited argument. £ took the view that I could not consider discharging or staying the order without going into the facts in some detail and hearing argument in full; but, by the time such a hearing would have finished, the process of removal and copying of documents would have been completed. Accordingly, I ordered that all copies of documents taken by the respondents be delivered into the custody of the Registrar of the Court until the matter of the order was resolved, and I adjourned the application until the following day. It was then further adjourned, and on 6 February 1985 I ordered, with the consent of both sides, that the section of Gray J's order giving leave to enter premises and remove and copy documents, be discharged, on the basis that the process of inspecting and copying the documents had been sufficiently completed, and as the documents copied by the respondents were now held by the Registrar. However the applicants reserved their right to press - 35 - to have this part of the order set aside retrospectively, which would affect the respondents' ultimate right of access to the documents held by the Registrar and, of course, questions of costs. On 7 February the hearing was further adjourned to 18 March 1985, and appropriate directions given. The hearing of the application to discharge the balance of Gray J's order ran for two days before me, on 18 and 19 March, before it became clear that many of the issues to be canvassed in that hearing would also be raised afresh at the substantive hearing of the action. Accordingly, both parties accepted that, in view of the events that had taken place since the granting of the order, and in particular the completion of the process of inspection and copying and the delivery of all copies to the Court (which could thus control access to particular documents by the respondents), and to avoid substantially duplicating evidence and wasting further time and costs, the remainder of the order of Gray J ought to be discharged ~- with the respondents reserving their right to maintain at the trial that it was properly made. In the event, it did not become necessary to return to this issue and, in my view, any costs related to the order which have not otherwise been determined, should be costs in the cause. A23. The Contempt Proceedings In addition to the above matters, it is also necessary for me to refer to four separate notices of motion for attachment for contempt of court. Three are directed against Phillips for statements contained in telexes sent, and telephone conversations held, by him after the making of Jenkinson J's order of 2 November - 36 - 1984 and allegedly in breach of that order and of Gray J's Anton Piller and related orders. In the case of the third notice, breach of an order of mine made on 6 February 15 also alleged. The first notice is dated 5 February 1985 and relates to two telephone conversations, between Phillips and two brokers, Brockhouse and Smith. At the conclusion of the day's hearing on 6 February 1985 I made an injunctive order by consent along the lines of that already in existence, but 1n more specific terms than that of Jenkinson J. It was also agreed that the notice of motion in relation to those contempt charges would be heard at a later stage together with the application for discharge of the Anton Piller order. These matters came back before me on 18 and 19 March 1985, when an affidavit of Phillips sworn 15 March was filed, accepting that he had contravened the order of Jenkinson J and apologizing to the Court. The question as to what penalty, if any, should be imposed was adjourned, and Phillips was ordered to pay Bartlett's and ATI's costs of the notice of motion. A fresh notice of motion dated 21 March 1985 was then issued, asking that Phillips be punished for these contempts and adding an allegation that Phillips also communicated with a broker, Sinclair, on 4 February 1985 in breach of Jenkinson J's order and that part of Gray J's order preventing the cross-Cclaimants using any information obtained through the Anton Piller order for purposes other than the conduct of the proceedings. Later, Phillips sent further telexes on 9 April 1985 to John Smith of Wigham Poland, John Regan, the president of Marsh and McLennan in New York, and to Mr Tickle, the Australian - 37 - Insurance Commissioner and the Hon Paul Keating, the Federal Treasurer. Those telexes repeated many of the allegations Phillips had made in previous telexes and referred to the present proceedings. The third notice of motion, dated 17 April 1985, sought Phillips' committal on these grounds and also on the basis of a telephone conversation held with Alderton on 9 April 1985. In addition, it was alleged that Phillips had acted in breach of court orders by handing to the Victoria Police Fraud Squad, through his solicitors, certain material including affidavit material in these proceedings. This motion came before me on 24 April, and after a hearing in which Phillips gave evidence, I reserved my decision. That decision will be given towards the conclusion of these reasons for judgment as will my decision on the question of punishment for the first contempt; see section E below. The fourth notice of motion for contempt was directed to Bartlett, the second-named cross-respondent. It alleged contempt of Gray J''s order of 30 January 1985, arising from Bartlett's conduct upon the initial attempts to execute the order, and on the evening following. That alleged conduct has already been briefly adverted to, but it is agreed between the parties that I should make no findings on that matter in these reasons. If the cross-claimants wish to pursue that notice of motion, they are free to do so after this judgment has been given. However in order that the matter may be finally resolved, I shall direct that the notice of motion be further considered at a directions hearing at 9.30 a.m. on Monday 24 February 1986. - 38 - B. THE CROSS-CLAIM As I have already stated, the allegations contained in the cross-claim against the various cross-respondents are both numerous and complex. In his closing address, senior counsel for the cross-claimants conceded that 1t contains many allegations about which evidence had not been led, and that much of what he termed "the periphery" had been "put to one side" or "trimmed off". He submitted that the evidence as presented clearly established the substance of the crosSs-claimants' case, based on the deferral programme. However, as no particular claim was expressly abandoned, and as a number of them are reflected in the telexes which are the subject of the original claim, it will still be necessary for me to deal separately with each allegation raised an the cross-claim, For convenience I have divided them into three groups: I - the Section 52 Claim II - the Conspiracy Claim and III - the Additional Claims. I THE SECTION 52 CLAIM Counsel for the cross-claimants conceded that the strongest part of their case was that based on contraventions of s.52 of the the Act. That section prohibits a corporation engaging in conduct that is misleading or deceptive, or likely to mislead or deceive. - 39 - Bl. The Representations ft was submitted by the cross-claimants that the course of dealings between ATI and GPRTI, and ATI's conduct in placing insurance with the AHVIP, involved representations to ATI's clients that: (a) the particular insurance requested by the client had been effected with GPRTI as underwriting agent, (b) ATI would forward the premium collected by it from the client to GPRTI and GPRTI as the underwriting agent would thereafter issue a policy of insurance in favour of the client, (c) premiums collected by ATI from the client had been forwarded by ATI to GPRTI as underwriting agent, (d) GPRTI as underwriting agent had accepted the client's proposal for insurance and had effected the insurance requested by the client, and (e) in respect of certain insurances effected before 20 April 1984, ATI itself was the underwriting agent through whom, or with whom, the insurance requested by the client had been effected. It was claimed that by reason of the withholding of the premium from GPRTI, each of the first four representations was false; and the fifth representation was also false since ATI only became the underwriting agent from 20 April 1984. - 40 - Similarly, it was further alleged that ATI (by itself or through Alderton and/or Rogers, acting as its agents) had represented to GPRTI that: (a) the premium, in relation to a particular request for insurance by the client, had been forwarded by ATI to GPRTI, (b) the premium, in relation to a particular request for insurance by the client, had been received by GPRTI, (c) the premium, in relation to a particular request for insurance by the client, had been received by GPRTI and the risk had been accepted by GPRTI, before GPRTI was notified that a claim had been received by ATI from the client, and (d) a particular contract of insurance had been made by the client with GPRTI as underwriting agent. It was alleged that each of these representations was false, and that they amounted to conduct that would, or was likely to, mislead or deceive clients and/or GPRTI, and therefore conduct in contravention of 5.52. It was further alleged that each representation was made fraudulently or recklessly. Relying on s.75B of the Act, it was also alleged that all or each of the individual cross-respondents had: (a) aided, abetted, counselled and/or procured, (b) induced, - 41 - (c) been directly or indirectly knowingly concerned in, or (d) conspired to effect the alleged contraventions of the Act, and therefore that they were persons "involved in" contraventions of the alleged breaches of s.52. It is necessary to look more closely at the operation of the AHVIP and ATI's deferral programme in the light of these allegations. B2. Processing of ATI Work I have already briefly outlined, in section A6 above, the procedure in GPRTI's office in relation to the processing of AHVIP paper work. The relationship between the "hard copy" data and the computer entries 1s of some importance. Alderton stated, and I accept, that the computer was ordered in April 1983 and was delivered on 23 August 1983. After that time, when the telex requesting cover was received by GPRTI, it was placed in a file awaiting receipt of the closing documents. No information was fed into the computer at that stage. When the completed proposal form and the cheque for the premium arrived, they were "batched" together and, at the end of the month, details of the batched proposals were entered into the computer. A print-out was produced at the end of each month showing the business received for that month. Wood categorically stated that the physical process of "batching" - involving the collecting or bundling together and receipting of new proposals and cheques - ~ 42 - after August 1983 was done by Alderton, who then told him orally whether or not payment had been received. Alderton denied that. He said that Wood was responsible for the checking of ATI payments against premiums due, and for passing the documents to the female staff for receipting, even after Alderton took over primary responsibility for ATI business in August 1983 in the circumstances described in section B4 below. The information was fed into the computer principally by Tess Colero or another of the GPRTI office staff, but occasionally by Alderton or Rogers. Wood also entered new business into the computer from time to time. The information transferred to the computer included the name of the insured, details of the vehicle insured, commencement and expiry dates of cover, and details of payment. The fact of payment was supposed to be recorded by entering the letter "¥Y" next to the appropriate entry 1f payment had been received. If no payment was received, there should be no "Y¥" recorded next to that policy entry. It was apparent that the procedure for recording whether or not payment had been received was not particularly effective. The physical handing of the batched proposals by either Alderton or Wood to the computer operator was usually interpreted by the computer operator as confirmation that the premium had been paid. Indeed the system only provided for proposals to be entered when - 43 - premiums had been paid; there seems to have been little point in the "Y" entry 1f the system was working properly - except where 1t related to policy amendments. B3. Period for Closing The precise period allowed for the closing of cover was in dispute. GPRTI's printed documentation referred to a 21-day period for closing. Wood's evidence was that the 21-day period generally applied, and that ATI were informed of this both orally and ina letter setting out the terms of cover. This letter was not introduced into evidence. The closing period was discussed between Wood and Mike Laracy and Elvie Tomasiello, both employees of ATI, when Wood reiterated "that the terms were 21 days and any extensions of that would have to be agreed to by Mr Phillips". He said in evidence that he had rigidly enforced the 21-day period, and if closings were not received, cover was then cancelled. After Alderton took over the direct dealings with ATI "he took a soft line approach" in Wood's view. Wood discussed this with Phillips, who said he would look into it. In Bartlett's evidence, he stated that GPRTI did not strictly enforce the 2l-day period, but allowed 30 days. After that period had elapsed, Alderton would decide whether to accept or reject the cover. Bartlett agreed that Wood stressed to him the period for closing was 21 days, but said that it was not adhered to. Alderton said that ATI worked "on the 30-day system". -~ 44 - On this aspect I accept Bartlett''s and Alderton's evidence, and do not accept that the closing period was as strictly adhered to as Wood's evidence would suggest. This was conrtirmed by evidence of late closings by BBMM also. B4,. Alderton's and Wood's Responsibilities in the GPRTI Office Alderton, Wood and Bartlett all described an incident that occurred in July 1983. Wood apparently sent a telex to ATI at about 7.00 p.m. in the evening, cancelling a number of covers for failure to close. That brought about a violent altercation between Wood and Bartlett, as a result of which Phillips directed that Alderton take over from Wood as the "up front" contact between ATI and GPRTI. That apparently involved assisting ATI with quotations for premiums, and "ensuring that the closings came in and the paperwork came in and whereupon it was passed to Mr Wood for processing". As I have stated, Wood denied having anything to do with ATI paper work from August 1983 onwards. Although he gave his evidence firmly and quite persuasively, he received no support on this, or some other related issues, from any of the other witnesses. The respective responsibilities of Wood and Aliderton are relevant to a number of aspects of the cross-claim, and in particular to the allegations that policies were fraudulently entered as "paid" on the computer listing, when in fact the premium had not been passed on by ATI. Both witnesses were concerned to play down the importance of their roles in the GPRTI - 45 - office, and each disowned responsibility for finally checking the payment for policies and providing the information to the computer operators for putting into the computer. The only other evidence directly relevant to this issue came trom Colero. She was a computer operator for GPRTI until she left to work for ATI after the cancellation of the second underwriting agreement. She gave evidence about the serious back-log of work at the GPRTI office. She also said that information that payment had been received for the premium ona particular policy came from Wood, and not Alderton. It appears the only evidence she had of payment was from the proposal, which was handed to her by Wood. It had the amount of premium noted on it. From this, and from the fact that she was handed the proposal for entry, she presumed the premium had been paid. Colero is perhaps the only witness who worked for either GPRTI or ATI whose evidence I feel I can accept with confidence. I find it difficult to accept fully the evidence of either Wood or Alderton. Alderton was, in my opinion, concerned to downplay the level of his responsibility and importance in relation to Wood. But 1t 1s clear that he received a higher salary package, drove a more expensive company car in the latter stages of his employment, and had an office of his own, whereas Wood shared his office with the computer operators and others. In my view Alderton had significantly more responsibility than Wood in the running of the office and the making of decisions. ~ 46 - Similarly Wood sought to distance himself from the ATI work, and would not accept that he had any role to play in the recording or receipting of that work after August 1983. This was directly contradictory to Colero's evidence, and is, in my view, inherently unlikely to be true. I think it is much more likely that, after receiving documents, including cheques, from ATI, Alderton would have passed to Wood all documentary iunformation necessary for him to record what payments had been received and on what account. Accordingly, I find that Wood had a much greater aunvolvement with the ATI paper work than he was prepared to admit, and that his responsibilities included the handling of closings from ATI, passed through Alderton, and batching closings for processing by the computer operators. In their respective capacities, both Wood and Alderton would have been aware that particular clasings had not been received. BS. The Deferral Programme I have already briefly outlined the basis of the premium deferral programme (see section AS above). Upon receipt of a request for cover from a client, ATI would send a telex to GPRTI requesting cover. However, on receiving the premium from the individual or broker client, ATI would generally not pass' the premium payment on to GPRTI, but would pay it into an ATI premium account and retain it. - 47 - There 183 some confusion about precisely when ATI began deferring premiums. Wood noticed the volume of ATI business "tapered off" from approximately August 1983, but increased again from December 1983 to April 1984. By the end of 1983, Wood said, the percentage of business placed but not closed had risen sharply. He gave contradictory evidence as to whether he first noticed this happening in October/November or in December. He gave evidence that as a consequence of the nature or the particular business insured, in the normal course of trading GPRTI experienced a relatively high proportion of non-closures, in the vicinity of 25-30%. This represented, in effect, potential insureds or brokers who had changed their minds. However, in the last month or so of 1983, the figure for non-closure of ATI business was, he said, 90%. Alderton's and Bartlett's evidence (section A9 above) tended to confirm that the deferral programme began 1n December. Bartlett's co-director, McNeany, was "officially" told by Bartlett of the intention to withhold premiums as late as January 1984, as was Tomasiello. There was, of course, no evidence from Phillips on these matters. B6. BBMM''s Involvement in the Deferral Programme No evidence was called from BBMM representatives concerning their perception of GPRTI's operation of the AHVIP, or any concerns that they may have had over Phillips' handling of premium funds and his accounting for funds received, or the extent - 48 - of BBMM's knowledge of ATI's deferral programme. There are, however, two aspects of BBMM's involvement in the deferral programme that merit consideration. First, on hearing from Bartlett and Alderton about the SMCC loan, BBMM's own initial reaction was to withhold the transfer of premiums to GPRITI. However this only continued for one week, whilst the Arthur Andersen audit report was being prepared. Secondly, in the latter part of January 1984, and into February and March 1984, Sears of BBMM was apparently asking ATI to stop the deferral programme and resume transferring premiums to GPRTI. This Bartlett refused to do, saying in evidence that he was still not satisfied that all would be well with the programme. B7. The Motive for Introducing the Deferral Programme The reasons given by Bartlett for ATI's deferral programme were that: ~ he was concerned about Phillips' rapid acquisition of the trappings of wealth and his "extravagant lifestyle" - he was therefore suspicious that Phillips' was Misappropriating premium funds, - he was concerned about the security of certain loans or investments made by Phillips, particularly after hearing of the SMCC loan, and - he was seeking to protect his clients' interests. - 49 - The cross-claimants sought to attack Bartlett's credit, and to challenge these motives. In particular, they pointed out that: - Bartlett's evidence about Phillips' accumulation ot wealth was inconsistent with the dates of purchase of certain property, - he did not investigate the security for the SMCC loan, - both he and McNeany agreed that clients were, to some extent, placed at risk by the deferral plan, and - he did not resume payment after being requested to do so by BBMM. They also pointed to evidence that ATI did not have sufficient funds in its premium account to pay all that it owed to GPRTI, even if it had wished to do so. This, and other evidence, particularly that of Bartlett's and McNeany's meeting with Miro and Associates in Dallas, 1s said to indicate that ATI's real motive for instituting the deferral programme was to undermine GPRTI's business with a view to taking over the AHVIP. The reasons for the deferral programme are of no particular relevance to the s.52 claim. It has been held on a number of occasions that an intention to mislead or deceive is not a necessary element of a claim based on misleading or deceptive conduct (see Hornsby Building Information Centre Pty Ltd v Sydney ~ 50 - Building Information Centre Pty Ltd (1978) 140 CLR 216 at 228, per Stephen J, Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197, per Gibbs Cd and Yorke v Lucas (1985) 61 ALR 307). It 1s the conduct of ATI that must be attacked as misleading or deceptive, not 1ts motives. However, ATI's motives are certainly relevant in relation to the conspiracy allegation, and will be taken up again in that context. B8. Wood's and Alderton's Knowledge of the Deferral Programme The s.52 claim is in part based on allegations that the deferral programme was misleading or deceptive in relation to GPRTI (section Bl above). The most significant aspect of this claim is the extent of the cross-claimants' knowledge of the deferral programme. The important witnesses to give evidence on this point were Wood and Alderton, both senior officers of GPRTI at the relevant time. Wood stated that after becoming aware of the higher percentage of non-closure of ATI business in late 1983, he approached Alderton and discussed it with him. He also discussed 1t with Phillips in November, and assumed that Phillips would take the matter up with Bartlett. Alderton said that Wood wags aware of the non-closures and confirmed that they discussed the matter. He also discussed it with Bartlett in late December, and was told that ATI would he - 51 - deferring payment because they had heard rumours and wanted to clarity them. Alderton suggested to Bartlett that he speak to Phillips about the matter. He also warned Bartlett that if payment was deferred outside normal terms, cover would only date from the receipt of the premium, and not from the date of the telex. Bartlett generally confirmed Alderton's evidence of their conversation. Alderton then repeated the tenor of his conversation with Bartlett to both Wood and Phillips. He was instructed by Phillips to press ATI for the deferred closings, but was not told to cancel cover. Bartlett did not tell Phillips directly of his decision. He said that Phillips would have heard it from Alderton, apart from making his own observations. Certainly, Alderton was the one who was dealing directly with ATI on behalf of GPRTI at that time, and it should be remembered that Phillips left a great deal of the running of GPRTI to Wood and Alderton, and that he had had a substantial altercation with Bartlett 1n November 1983. It is not really surprising that Bartlett did not seek him out. In my opinion, the evidence is conclusive that both Wood and Alderton were well aware of the general nature of the deferral programme soon after it began in December 1983. - 52 - B9. Relevance of Phillips' Failure to Give Evidence It has been urged on me by counsel for the cross-respondents that, as Phillips did not give evidence, it is open to me to inter that Phillips was aware of the deferral programme. The effect of the failure of a party to give evidence is considered in Cross on Evidence (2nd Australian Ed., 1979, at para 2.15) where 1t 1s stated that "the evidence against a man may be greatly strengthened by his failure to give an explanation ...". In Insurance Commissioner v Joyce (1948) 77 CLR 39 at 49, Rich J held that "When circumstances are proved indicating a conclusion and the only party who can given direct evidence of the matter prefers the well of court to the witness box, a court 1s entitled to be bold". In the leading High Court authority of Jones v Dunkel (1959) 101 CLR 298, Windeyer J. said, quoting from Wigmore on Evidence (3rd Ed., (1940), Vol 2, 8.285, p.162) "'The failure toa bring before the tribunal some circumstance, document or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so, and this fear is some evidence that the circumstance or the document or witness, if brought, would expose facts untavourable to the party. These inferences, to be sure, cannot fairly be made except upon certain conditions; and they are also open always to explanation by circumstances which made some hypothesis a more natural one than the party's fear of exposure. But the propriety of such an inference in general 1s not doubted'. This is plain common sense" (at 320-321). Windeyer J added (at the foot of 321) "Exactly the same principles apply when a party, who 15 capable of testitying, fails to give evidence as iin a 2s - 53 - case where any other available witness 1s not called. Unless a party's failure to give evidence is explained, 1t may lead rationally to an inference that his evidence would not help his case." He then cited a number of Australian authorities (see also the judgments of Kitto J at 308 and Menzies J at 312). The importance of applying the principle in Jones v Dunkel flexibly, in the circumstances of each particular case, has been stressed in a number of cases decided since (see Nuhic v Rail and Road Excavations (19721 1 NSWLR 204 and Payne v Parker [1976] 1 NSWLR 191 and the authorities referred to therein). The present circumstances do not call for the same detailed consideration required in a judge's direction to a jury on this question. I have simply to consider the significance of Phillips' absence from the witness box to the respective cases put by the parties. Senior counsel for the cross~claimants submitted that Phillips was not 1n a position to give any relevant evidence of significant objective facts. I disagree. In my opinion Phillips' evidence as to what he saw or was told of the deferral programme, and the reasons for his inaction in the face of it, would have been of considerable importance. It 1s reasonable to infer that, had he given evidence on these matters, his case would not have been much assisted. Counsel for the cross-respondents has suggested that Phillips' failure to do anything about the deferral programme, or even raise it with Bartlett, can be explained not by his ignorance of the facts, but by his circumstances at that time. It certainly - 54 - seems likely that he was short of ready money and was not in a position to satisfy his critics until he could recover the SMCC loans, He was aiso dependent on eventually receiving the ATI premiums. This is supported by Alderton's evidence that Phillips simply requested him to continue pressing for closings without threatening cancellations. In the absence of any alternative explanation from Phillips, this is the view which I take of the situation. B10. The Extent of Phillips' and GPRTI's Knowledge I cannot accept that Phillips, despite his frequent absences overseas and his often brief attendance at the office, would not have been aware that a significant proportion of GPRTI premium income was no longer coming in. Alderton's evidence was that that sum amounted to approximately $300,000 by April 1984. And Wood said that, when he did come in, Phillips regularly checked premium income - as one would expect. The knowledge of Alderton could clearly not be imputed to GPRTI if he was involved in, and partly responsible for, the misieading or deceptive conduct alleged. In the event, I am not persuaded that was the case; indeed I accept that Alderton was acting honestly and diligently on behalf of GPRTI in the months from December 1983 to April 1984, and that his dealings with ATI during that period were conducted at arm's length. Because of his responsible position, I have no doubt that his knowledge should be imputed to the company. However, it 1s not necessary to rely upon such a finding, because I am satisfied that Phillips, the Managing -~ 55 - Director of GPRTI, was aware of the general nature, the extent, and the effect of the deferral programme, and his knowledge must be imputed to the company. There can be argument on the question of whether conduct 1s actionable under s.52 if the relevant section of the public to which 1t 1s addressed was not 1n fact misled or deceived by it. As Fox J said in Brown v The Jam Factory Pty Ltd (1981) 53 FLR 340 at 349, the question is not simply whether they (or he) were (or was) misled. Whether the conduct was misleading or deceptive is a matter for the court (McWilliam's Wines Pty Ltd v McDonald's System of Australia Pty Ltd (1980) 49 FLR 455). Doubtless, the audience to be considered can be classified as 'consumers'. Conduct will not mislead or deceive a person having a conscious awareness of the true facts or correct information". It is possible to conceive of a corporation still engaging 1n misleading or deceptive conduct (or more particularly conduct likely to mislead or deceive), notwithstanding the fact that the party to whom 1t was directed became independently aware of the true position. However, this is not such a case. GPRTI's officers' knowledge of the deferral programme is a clear indication that that programme was not misleading or deceptive in respect of GPRTI. ATI did not misrepresent to GPRTI any of the matters claimed in paragraph 13 of the cross-claim (and set out in section Bl above). In any event, a party 1s not entitled to damages for breach of s.52 unless it can show that any loss sutfered resulted from the misleading or deceptive conduct: "for a person to - 56 - establish a claim tor loss or damage pursuant to s. 82 there must be some nexus between the misleading or deceptive conduct and the loss or damage" (per Lockhart J, in Jones v Acfold Investments Pty Ltd (1983) 52 ALR 365 at 376). In view of my findings in relation to Alderton's, Wood's and Phillips' knowledge of the deferral programme, even if Phillips and GPRTI could establish that the cross-respondents' conduct was likely to mislead or deceive, and if they could demonstrate that they had suffered some loss, they would be unable to establish a claim for damages under s.82. Accordingly, this aspect of the s.52 claim fails. Bll. Allegations in Relation to Specific Insureds Generally speaking, the operation of the deferral programme meant that business placed for insureds by ATI with GPRTI from December 1983 onwards was not closed; premiums and proposals were received by ATI but not forwarded on to GPRTI; there was no attempt by GPRTI to cancel cover; and most covers remained "open" as at 19 April 1984, when the second underwriting agreement was cancelled. Thereafter, the insurance was placed with Lafayette through ATI. However, there were certain variations on this theme. It was alleged in the cross-claim that a number of specitic transactions that took place in the period from November 1983 to - 57 - April 1984 involved improper or fraudulent conduct on Alderton's part. These, it was also alleged, supported the misleading or deceptive conduct and the conspiracy claims. The evidence in relation to these transactions occupied a considerable amount of the time spent in the hearing. However, as the case untolded, it became obvious that the importance of a large number of them was not as great as first appeared. Indeed none of the transactions were mentioned in the cross-claimant's written submissions, and they were only briefly touched on in counsel's closing address. The specific transactions fell into two categories; those where some form of documentation, either policies or certificates of currency, was 1ssued by GPRTI when no premium had been forwarded by ATI, and those where claims were allegedly paid by GPRTI when no premium had been forwarded by ATI. B12. Issuing of Insurance Documents I have held that the mere fa1lure to close cover was not misleading or deceptive in relation to GPRTI. However, in a number of cases either policies or certificates of currency were 1ssued by GPRTI when no premium had been passed on. If this was done deliberately by Alderton, 1t would tend to support the allegations of misleading or deceptive conduct, and possibly conspiracy. {ft was conceded by counsel for the cross-respondents that, "on the face of it, it is strange that any documentation was being given by Graeme Phillips to ATI, when ATI was being pretty ruthless in withholding its premiums." - 58 - Alderton stated that it was GPRTI's normal practice only to issue policies of insurance when the premium had in fact been received by GPRTI. The one exception to that practice arose when GPRTI was satisfied that BBMM had received the payment. Alderton also said that in the normal course of business, policies were frequently not issued for several months after receipt of a proposal, and that the majority of certificates of currency were issued by BBMM. When a certificate was issued by GPRTI, it was usually done by Wood. Alderton rarely issued them. From all the evidence presented, I am of the opinion that there are five specific instances where evidence was given of the issuing of documents, that require some explanation. Counsel for the cross-respondents dealt with each of these 1n some detail in written submissions, and I think it 1s necessary for me to cover each in turn. (a) Phillips Transport Pty Ltd (Paragraph 17 of the cross-claim) The insured Phillips Transport Pty Ltd was a client of a broker, Trevor Jarman. The cover was placed with GPRTI through ATI to commence on 27 June 1983. It was alleged that Alderton fraudulently issued a policy to Phillips Transport showing a 12-month period of insurance from 27 June 1983 to 27 June 1984, and that he altered effective dates on endorsements. - 59 - Bartlett gave evidence that he originally requested a 12-month cover, but that the original policy was issued by GPRTI (he believed by Wood) only until 27 October 1983. The full premium was apparently received from Jarman, but ATI only passed on an amount to cover this shorter period. ATI then tried to place cover with Polden Risk Management, but later again approached GPRTI, which granted the full cover sought. Alderton then issued a policy with the commencement date altered to 27 June 1984, which he stamped and initialled. Alderton stated that he was told by Bartlett that ATI wished to offset the balance of the premium for that particular policy against commissions which were owed to ATI for other business (presumably premium funded business). He discussed this generally with Phillips, and specifically with Wood who, according to Aliderton, agreed. In cross-examination, however, Alderton was unable to point to records showing the reconciliation of the set-off, but he did have @ positive recollection of sighting such a reconciliation. (b) It was not put to Alderton that he deliberately altered the policy date or issued the policy fraudulently, or with the objective of misleading Phillips or GRPTI. I accept his evidence on this point. Sheppard United Tankers Pty Ltd (Para.18) The insured Sheppard requested ATI to arrange 12-months cover from 31 December 1983. However, 1t was alleged in the cross-claim that ATI only requested GPRTI to arrange temporary insurance from 31 December 1983 to 5 January 1984, although it received a premium of approximately $58,000 from the insured. It was also alleged that Alderton had fraudulently altered GPRTI records to show a period of insurance from 27 February 1984 to 31 December 1984, and had forwarded a copy of a policy bearing that period to the insured. This cover was the subject of a dispute between Bartlett and Alderton in January 1984. GRPTI originally quoted a premium to ATI for insurance of the entire fleet of trucks in the United Transport group. When the insurance request ultimately came to GPRTI, it was for Sheppard's fleet only. It was nevertheless processed. When Alderton discovered this, he cancelled the cover (on 5 January 1984). - 61 - Bartiett tried unsuccessfully to arrange alternative cover, and then approached Alderton and Phillips directly in late January or early February. He came to Phillips' office waving the cheque ATI had received for the premium. No doubt this cheque was produced to re-inforce Bartlett's requests for Phillips to reconsider the cover, by demonstrating that ATI had received payment from the insured and therefore implying that payment to GPRTI would be facilitated. However, If accept that Bartlett did not specifically promise to pay the premium over to GPRTI if cover was granted. In the event, Phillips accepted the cover (against Alderton's advice), but the cheque was not endorsed to GPRTI nor was payment otherwise received. Bartlett stated that he believed this premium was also eventually accounted for by offsetting it against commission owed to ATI by GPRTITT. Alderton accepted that he subsequently signed the policy, but could not specifically recall doing so. He did not take any steps to ensure that the particular premium came in. However, 1t was not suggested that he deliberately issued the policy knowing that the money had not been received. It 1s understandable that (c) - 62 - Alderton did not specifically follow up. the Sheppard premium, as he felt the decision about that insured had been "taken out of his hands" by Phillips. In fact, Alderton's cancellation of the Sheppard United cover and his dispute with Bartlett adds weight to the fanding that Alderton was acting in GPRTI's best interests at all times (see section B10 above). Norman and Heath Pty Ltd (Para.19) This was another case where a certificate of currency and a policy were issued by GPRTI without the premium being passed on. Aliderton was shown the file relating to the insured, and confirmed that a request for insurance was made through ATI on 23 December 1983. He accepted that he signed a certificate of currency dated 7 March 1984, but could not recall the circumstances, nor checking whether payment had been received. He was shown a schedule to a policy which bore a handwritten alteration to the commencement date. He did not make the alteration, and could not say why the policy was entered into the computer without payment. It was alleged in the cross-claim that he issued the policy and certificate of currency fraudulentiy, but this was not put to him in cross-examination, (d) (e) From ATI's point of view, Bartlett denied any knowledge of the specific transaction. Cordoma (Para.20) The insured Cordoma gave evidence that he contacted Neville Orr of ATI in November i983 to arrange cover ona number ot trucks. He was quoted a premium, subsequently received a debit note trom ATI, and sent a cheque to them for the first instalment. Later, when his finance company required details of the insurance on the trucks, he requested, and ultimately received a certificate of currency dated 9 March 1984 issued by GPRTI. He also made a claim on the policy (see section B13 below). When Alderton was shown the certificate of currency, he denied signing it and could not say who did. It was not suggested to him that he deliberately arranged for the issuing of the certificate or entry of the details into the computer knowing that payment of the premium had not been received. Lewingtons' Transport Pty Ltd (Para.21) The final transaction that 1s relevant involved a renewal and endorsements placed through ATI in January 1984. It was alleged - 64 - that Alderton fraudulently altered the GPRTI computer records to show that the policy had been renewed and the premium paid. It was not suggested that documents had been issued in this case. Alderton recalled this insured, and explained that Neville Orr of ATI brought the proposal for the renewal to him, indicating that it was to be premium funded. Alderton then took the proposal to Wood, advising that it was to be premium funded, and requesting that he process it. He stated that it was Wood's responsibility to ensure that the premium came in, as Wood kept a separate file of business to be premium funded. ft transpired that the premium was not premium funded, but was received and retained by ATI. However, there was nothing to show that it was Alderton, rather than Wood, who caused the details to be entered into the computer, and again 1t was not put to Alderton that he deliberately entered the policy details knowing the premium had not been received. - 65 - I have already held that Alderton was at all relevant times acting honestly and conscientiously and in GPRTI's best interests. The evidence presented in relation to the above transactions 1n no way dissuades me from that finding. Alderton specifically denied issuing policies or signing certificates of currency, where premiums had not been received, in an attempt to deceive Phillips or GPRTI. It was not seriously suggested to him that the contrary was true. Alderton was not responsible for creating or sending all the documents referred to above, and the fact that documents were brought into existence when no premium had been passed on 1s wholly consistent with the evidence of the rather chaotic state of the GPRTI office, the lack of co-ordination, and the poor system of document control, at that time. B13. Payment of Claims The other aspect of the cross-claim that requires some @laboration relates to those cases where claims were paid by GPRTI. It was part of the cross-claimants' case that the records showed a pattern of closing of cover in cases where claims had arisen, and that certain claims had been paid by GPRTI when no premium had been forwarded by ATI. {In relation to the first category, 1t is clear that ina number of cases the premium was forwarded to GPRTI by ATI aftera claim arose, and that GPRTI met that claim. Bartlett conceded that, and obviously it was in the insured's (and no doubt ATI's) interests to close the cover when a claim had been made. A list of all covers placed with GPRTI and closed by ATI during the ~ 66 - period October 1983 to March 1984, prepared by ATI employees, showed that of 23 covers closed, claims were made on nine ot them, although not all claims pre-dated the closing ot cover. The balance ot closures were presumably cases such as those where a finance company required supporting documentation. It was not established that Bartlett, Alderton or anyone else conspired to ensure that claims were paid when they arose before the cover was closed and, in view of my findings on Alderton's conduct, [ accept that there was nothing misleading or deceptive about it. As Alderton explained in his evidence, ATI ran the risk that cover would be refused in such cases when the closure was outside the 30-day period. Phillips either chose to meet those claims because he was unwilling to create further trouble with ATI at that time or, quite possibly, they were met in the normal course of GPRTI's business because either Wood, Alderton or another member of GPRTI's staff failed to check properly the date of the claim against the date of the closing of the cover. The second aspect concerned cases where claims were allegedly paid when no premium had been forwarded by ATI. The cross-claimants pointed to eight examples where they say this eccurred. Ona closer analysis, the cross-respondents have been able to establish that in two cases, including that of the insured Cordoma (referred to in section B12 above), the claim arose in the period of the deferral programme, but was actually met by ATI in the process of handling the claims run-off of the AHVIP after i1t took over trom GPRTI. - 67 - In five cases, the cross-respondents claim that premiums were forwarded to GPRTI between 16 February 1982 and 14 June 1983. It 18 only 1n the case ot Lewingtons' Transport (see section 8512 above) that a claim was actually met by GPRTI. Alderton's explanation for this was his belief that the policy was to be premium-funded, and there is nothing to show that this belief was not genuinely held. B14. Misleading of the Insureds The s.52 claim is also put onthe basis that the deferral programme was misleading or deceptive with regard to the insureds. The particular misrepresentations alleged are set out in section Bl above. In summary, the argument is advanced that, by accepting a premium from an insured but not closing cover with GPRTI, ATI was misleading the insured into believing that 1t was covered by insurance, whereas infact there was a risk to the ansured that it was not. Both Bartlett and McNeany accepted there was a risk to ainsureds involved in the deferral programme, Particularly 1f the underwriter had decided not to grant cover because of the deferrals. Bartlett said he knew there was a risk, but "it was a commercial decision I had to make". There was evidence that, on other occasions in the past, when an insurance company had been rumoured to be ain tinancial difficulties, premiums had been withheld by ATI and other brokers until 1t became clear whether or not the company concerned was solvent. Several instances were given by McNeany in which premiums had been generally withheld tor periods of two or three months before, in each case, the company concerned collapsed. - 68 - It was submitted by counsel for the cross-respondents that the insureds' main concern was simply to effect insurance, and that in each case the insured was eventually covered tor the period of the deferral programme when ATI took over the AHVIP retrospectively from 19 April 1984. This was conceded by Wood, and no evidence was produced to show that in fact any insured was not covered, or suffered any loss, by reason of the deferral programme. In addition, it was argued that the insureds' (and brokers') particular concern was to place cover with the AHVIP and, in the event, that was done. This overlooks the fact that there was a significant risk at the time of the conduct that no cover would be available for that period. The insureds were not informed of this. The fact that, at a later stage, cover was secured, does not in my opinion overcome this difficulty. It seems to me that the deferral programme did involve a misleading of the insureds, and perhaps the brokers who endeavoured to place the cover with the AHVIP through ATI on their behalf. So much was conceded by Mr Hayes in his closing submission for ATI, where he said "There was an element of misleading of insureds involved in that, not such as to give rise to any liability, but clearly enough, insureds who paid thelr premiums had the right to believe they were covered... What can be said about that, ... is that in every case the insured was covered... There was a risk and Mr Bartlett and Mr McNeany both accepted it that there was an element of risk and £[ accept on their behalf that there was an element of misleading in not keeping the insureds fully acquainted with those facts So, yes, [I think we must accept that there was an element of misleading, not such as to constitute misleading conduct under the Trades Practices Act, not such as to give harm to anyone, and not such as to give harm to Graeme Phillips." The question which I have to decide 1s whether the cross-claimants are entitled to any remedy arising from the misleading of insureds which I have found. It is not necessary, 1n an action under s.52, for the person claiming loss or damage to have been the person to whom the misleading or deceptive conduct was directed. The typical Passing off case 15 one illustration of this, where the manufacturer of the copied product suffers damage through loss of sales by reason of prospective purchasers being misled. On the other hand, 1t 1s clear that an applicant under s.52 need not prove that he has suffered or is likely to sutfer any loss or damage to obtain a remedy by way of injunction under s.80 of the Act, (see Phelps v Western Mining Corp. Ltd (1978) 33 FLR 327, and World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181, per Brennan J at 199-200. The situation here is unusual. No insured has been shown to have suffered a loss from the misleading conduct constituted by the deferral programme. Nor has GPRTI or Phillips. At best it could be argued that GPRTI did not have the use of the premiums during the deferral period. But if that does amount toa loss, 1t has arisen from the decision to defer and not trom the misleading conduct which concealed that decision from insureds. In this case the cross-claimants seek by way of remedy, among other things: (a) a declaration against all the cross~respondents, (b) damages, and (c)} an accounting for profits. Although it 1s conceded that there has been misleading or deceptive conduct by ATI, I am satisfied that the cross-claimants have not surfered any loss as a result. So far as the declarations sought are concerned, I have carefully considered the desirability of making a declaration that the deferral programme amounted to conduct that was misleading and deceptive to insureds. Such a declaration, with an appropriate order as to costs, might serve the purpose of deterring insurance brokers from placing their clients in situations of unnecessary risk in the tuture. On balance, in the exercise of my discretion, I have decided to make no declaration. I have reached this conclusion tor the tollowing reasons: (a) un the event, no harm came to any insured; (b) ATI was, in my view, fully entitled to withhold premiums in December and early (c) (d) (e) (f) (g) January because ot the perceived likelihood that those premiums would be misused by Phillips; BBMM, a very reputable insurance broking firm, withheld premiums tor some days in January while 1t had an auditor investigate GPRTI's dealings with premium moneys, it then continued its association with the programme; although there was less excuse for ATI to continue its deferrals after BBMM resumed payments, there were still serious question marks against GPRTI's accounting for the use made or premium funds; GPRTI appeared willing to provide policy documents and meet claims in particular cases, and had not refused, or threatened to cancel, cover except in a few special cases unrelated to the deferral programme; in the period after January 1984 there was always a reasonable chance that Phillips would devote time to his business and set his house in order - particularly i1f pressure was applied to him; and although [ have doubts about the unselfish nature ot Bartlett's motives, I am not satistied on the evidence that his actions in this matter were either morally or commercially wrong. II. THE CONSPIRACY CLAIM The s.52 claims having fallen short ot their targets, the second string to the cross-claimants'' bow is that ATI, its principals and its employees, engaged in conduct that amounted to a conspiracy to defraud and injure GPRTI and Phillips in their business. This element of the cross-claim relies largely on the conduct involved in the deferral plan to provide evidence of the conspiracy, although it relies aiso upon other actions of the cross-respondents. B15. Cause of Action It has long been recognised that a combination of two or more persons wilfully to injure another person in his trade 1s unlawful, and if it results in damage to him, it is actionable (Sorrell v Smith £19257 AC 700). Conspiracy may arise either, (a) through a combination acting to injure another by unlawful means (Williams v Hursey (1959) 103 CLR 30 - it is perhaps arguable whether this head of civil conspiracy 1s still relevant, as it is now accepted that injuring another by unlawtul means is actionable against a sole tortfeasor, Rookes v Barnard £1964] AC 1129), or (b) by a combination acting with the purpose of intentionally injuring another in his business, whether by unlawful or lawful means (Quinn v Leathem £1901] AC 495). This cause of action 18 "too well established to be discarded however anomalous it may seem today" (Lonrho Ltd v Shell Petroleum (No 2) £1982] AC 173 at 189, per Lord Diplock). However, it should be confined within the narrow limits described above. There 1s little dispute about the substance ot the deferral programme; the main areas of debate relate to the cross-respondents' intention in implementing 1t and the extent of Phillips' knowledge of it. However, the cross-respondents say that the deferral programme involved nothing unlawful. They rely on recent authority that establishes the proposition that, in the absence of express stipulation, there 1s no obligation on an znsurance broker to pay to an insurer (or its agent) a premium in respect ot a policy issued at the request of that broker. This is so whether the broker has been paid by the insured client or not. It 1s based on the fact that the broker acts as agent tor the znsured, and not the insurer. (See Re Palmdale Insurance Limited C1982] VR 921 and Norwich Winterthur (Australia) Limited v Con-Stan Industries of Australia Pty Ltd (£19831 1 NSWLR 461.) Accepting the propositions contained in those authorities, 1t follows that 1n the absence of factors such as fraud, or misleading or deceptive conduct, the non-payment of premiums to GPRTI does not of itself give rise to an independent cause of action, in contract or otherwise, against ATI. (It should be noted that no breach of contract between ATI and GPRTI was pleaded. ) It is therefore essential tor the cross-claimants to establish that: (a) the cross-respondents combined to bring about injury to the cross-claimants, and (b) the "real or predominant purpose" of the cross-respondents was to injure Phillips and GPRTI in their business, and not to "forward or defend their own trade or business interests" (see Crofter Hand Woven Harris Tweed Co Ltd v Veitch £19421 AC 435 ). In relation to these matters, it should be noted in passing that, as a company must act through its responsible officers, 1t is difficult to argue that a company can conspire with its directors (O'Brien v Dawson (1942) 66 CLR 18). The evidence on which the cross-claimants seek to base their conspiracy claim is, in summary: (a) the withholding of premiums and the issuing of policies and certificates of currency when premiums were not paid, (b) the fact that Alderton was effectively in charge of the GPRTI office and that false "paid" entries were entered into the computer, (c) the computer records handed to Mrs Phillips were incomplete, (d) ATI was looking for its own binder, made misrepresentations to Miro and Associates, and eventually took over GPRTI's business, ~ 75 - (e@) officers or employees ot ATI were responsible for the burglary at the GPRTI premises, and (f) Rogers and Alderton removed GPRTI documents and handed them to ATI. I will deal with each in turn, Bl6é. Withholding of Premiums and Issuing of Policies and Certificates of Currency I have dealt with these matters in detail in relation to the s.52 claims. I have already held that the deferral programme and the specific instances ot the issuing of policies and certificates of currency did not amount to misleading or deceptive conduct. The evidence concerning them does not support the conspiracy claim, and there is no evidence of a conspiracy between the cross-respondents or any of them regarding those matters. [I need add nothing turther. B17. False Computer Entries I have already discussed in detail the processing of ATI business and the circumstances of entry of details into the GPRTI computer (see section B2 above). The allegation 1S made that Alderton was responsible for creating false ""Y" entries indicating that a premium had been paid to GPRTI by ATI when it had not. Although Alderton did have access to the computer, and was responsible tor entering details on occasions, the primary responsibility for that rested on Colero and the other computer operators. In addition, both Rogers and Wood entered details into the computer trom time to time. - 76 - It 1s clear from Colero's evidence that the "Y" entries were made by the operator on the basis ot batches of proposals handed to her, and details of the amount of the premium written on the proposal. Colero's evidence was that Wood was primarily responsible ror handing batches of proposals for processing to the computer operators, although [I accept that on occasions Alderton did also. The cross-claimants have produced no evidence to show that Alderton deliberately entered false details into the computer. There is no evidence that Alderton deliberately handed to Wood, or anyone else, batches of proposals for processing, which included some that had not been paid for, with the intention that unclosed business be entered into the computer as "paid". There 1s no evidence that Alderton combined with anyone in relation to entry or details into the computer. There was evidence that the paper work at the GPRTI office was disorganised, a considerable backlog had built up, and staff were working under pressure. In those circumstances, it 1s impossible to infer evidence of a conspiracy. B18. The Incomplete Computer Records In addition to providing evidence of the conspiracy claim, the cross-claimants made separate allegations in relation to the computer records (see section B23 below). There 1s nothing 1n the evidence produced to show that anyone other than Alderton was involved in the production of the incomplete security tapes. There 1s no evidence that Alderton deliberately dumped only portions ot the computer files. There is no evidence that he otherwise interfered with the computer tapes. There 1s thus nothing in the circumstances surrounding the security tapes that, in my opinion, supports the conspiracy claim. XN B19. ATI''s Attempts to Arrange its own Binder It is alleged that Bartlett and McNeany conspired to have GPRTI's binder cancelled and to take it over themselves. At tirst blush, the events in April 1984 in Dallas seem to provide some evidence to support that inference. ATI was looking for its own binder. McNeany and Bartlett met Carlos Miro and others and Bartlett presented to the meeting "the facts which were contained in the Arthur Andersen report of 20 January". He also told the meeting that there was a deficiency i1n Phillips' company of "in excess of $1,000.000". Much was made, by counsel for the cross-claimants, of that latter statement. It was put that on no view of the evidence could it have been said that there was a "deficiency of $1,000,000" at the time. I do not accept that submission. There 1s room tor argument as to the literal meaning of the words used and the impression they conveyed. But the Arthur Anderson report had clearly shown that Phillips had used over $lm of premium funds for the benefit of himself and companies and organizations with which he was concerned. These moneys may have been recoverable - certainly most of them were - but they were missing from the premium fund over a period when Lafayette had, for some time, been demanding an account. In speaking of a S$lm deficiency, Bartlett related the statement to the Arthur Andersen report. - 78 - Nevertheless, it was submitted that Bartlett's statement was "clearly calculated to inflame CMiro and Associates] to a position of wishing to get rid of GPRTI from the binder". There was some discussion in the course of the trial about whether those statements could have been actionable as misleading or deceptive if it were shown that they had created a false impression of insolvency. That was not pleaded in the cross-claim, and the reference to a S$lm deficiency can at its highest, I think, amount to evidence supporting the theory that ATI deliberately conspired and plotted to bring about the loss of GPRTI's binder. The evidence clearly indicates that ATI was actively pursuing its own binder from as early as January 1983. I accept that Bartlett and McNeany came across Miro by chance, through the agency of Barrett, as the telex of 3 April 1984 from Barrett to Bartlett shows. The evidence also indicates that ATI did not set out to persuade Miro and Associates to give them the GPRTI binder. They were looking for their own new arrangement, unrelated to GPRTI and BBMM; but when Miro indicated his initial reaction was to terminate the AHVIP "ab initio", taking over the run-off of the binder appeared to be the lesser of two evils. I accept that Bartlett would not have minimized, and may have exaggerated, the financial problems of GPRTI to the underwriters. He certainly had no interest in advancing Phillips' cause to his underwriter. As much was admitted by his counsel in his final address, when he said, "there was nothing angelic about what ATI did in passing the information on". However, as [ have stated, the desire ot Bartlett and McNeany to obtain a binder from Miro, and the possible tarnishing of Phillips' image in the process, 1S not actionable. There was simply no direct evidence to support the theory that Bartlett and McNeany had conspired, either together or with others, with the principal purpose of damaging GPRTI's relationship with Miro or bringing about' the termination of the binder. Nor is 1t open to me to infer such a conspiracy from the evidence presented. Indeed if the binder had been terminated "ab initio", ATI would have been in great difficulties with clients who had claims to make. In my view, Bartlett and McNeany merely took advantage of an opportunity that presented itself to advance their own business interests at the expense ort Phillips'. Their actions were not unlawful. B20. The Detivery of the Letters of Authority The claim that Bartlett deliberately used the letters of authority given to him by Miro in a manner designed to bring about the Loss of GPRTI's binder, was also put forward as evidence of the conspiracy. The letters were delivered in Phillips' absence, which 1t is said provides "a clear illustration of Mr Bartlett's willingness to achieve his aim of pushing GPRTI out of the way". The validity of the purported termination of the second underwriting agreement is not a matter that I need to consider. However, ATI's role init, and Bartlett's actions in delivering the letters of authority (acting as he was on specific - 80 - instructions trom Miro) do not, in my opinion, add any support to the cross-claimants' allegations. It was not Bartlett's fault that Phillips had gone overseas (contrary to advice from BBMM). B21. The Burglary The cross-claimants allege that further support for the conspiracy allegations comes from the circumstances of the burglary of the GPRTI offices in July 1984. It was suggested by counsel for the cross-claimants that the most likely explanation for the burglary was that ATI interests were responsible for it. The computer and the computer tapes were removed in the burglary. Clarke gave evidence that the computer itself would be of little use to the burglars, as 1t could be easily traced, andas every computer bears a serial number and must be serviced by the manufacturer or one of a limited number of dealers. It was suggested that the burglars were in fact after the information stored on the computer, and not the computer itself. It was further suggested that not only would ATI benefit from having the information on the computer, but also 1t would deprive Phillips of the information that was missing from the back-up security tapes. On the other hand, the cross~repondents suggest that Phillips had a strong motive for removing all records from his office. It would hinder further accounting investigations into his handling of the AHVIP, and could frustrate his creditors, who were pressing at that time. - Bl - The allegations relating to the burglary are very serious. Although these are civil proceedings, the evidence produced to satisfy me that e1ther Phillips or ATI was responsible for the burglary must be very persuasive. Here there was a dearth of direct evidence relating to the burglary. Each party may have had both motives and opportunities (although Phillips himself was overseas at the time); but 1t is also quite possible that a third party was responsible. All cross-respondents denied involvement in the burglary, and those denials were not challenged in cross-examination. There is very little in the evidence or the surrounding circumstances from which I could draw inferences either way. I find that there nothing in the evidence before me relating to the burglary that supports the allegation of conspiracy. B22. Rogers' and Alderton's Removal of Documents This aspect is discussed fully in relation to a separate claim against these cross-respondents (see section B26 below). I need add nothing to my discussion set out there, save to say that the evidence does not support the allegation that either Aliderton or Rogers combined with anyone in relation to those documents, or that they were taken for the purpose ot harming Phillips or GPRTI. - 82 - The allegations relating to the conspiracy were lengthy and complex. Some aspects of the circumstances surrounding the transfer of the AHVIP from GPRTI to ATI may well have suggested to Phillips the existence of an elaborate conspiracy between ATI and Phillips' employees. However, when the evidence 1s closely scrutinized, 1t 1s clear to me that none of the cross-respondents combined together to bring about that result. Accordingly, this aspect of the cross-claim must also be dismissed. III THE ADDITIONAL CLAIMS B23. Alteration of the Computer Tapes The next allegation in the cross-claim was that, in breach of their respective contracts of employment with GPRTI, and in breach of fiduciary duties owed by them to GPRTI, Alderton and Clarke deliberately altered, defaced and/or interfered with the computer tapes handed by Alderton to Mrs Phillips in May 1984, "with the intention, and in order that, such tapes would be rendered indecipherable and altogether unusable by GPRTI". In his opening, senior counsel for the cross-~-claimants referred to the tapes having heen "carefully doctored". The support for these allegations is derived from the evidence of Ahmed Ajayoglu, a computer systems analyst and the computer expert nominated by the cross-claimants to enter ATI's offices and inspect records pursuant to the Anton Piller order. He swore an affidavit in support of the application for the Anton Piller order which was admitted into evidence. He there deposed that he was retained by Wood in October 1984 to examine the computer "back-up" tapes. He also stated that, shortly after, he - 83 - was contacted by Clarke, who "tried to dissuade me from dealing with ... Phillips". From the tapes Ajayoglu was able, with difficulty, to print the insurance master file and an alphabetical listing ot policies. However, from his examination of the tapes, he also drew the following conclusions: "(a) The tapes were not representative of the computer system of GPRTI in or about April 1984. Tape 4 contained only the data portion of the insurance information files but not the index portions. Specific data such as the financial information of the General Ledger file is missing; only the General Ledger Index remains, which by 1tself is of no use. (b) I am of the opinion that data has been deliberately removed from the tapes. It is very unlikely that this has happened by accident because at least some portion of the missing files would have remained. The omission of all the General Ledger history files from the tapes is highly suspicious since one would expect these files to be present on the system at all times because they are vital to the day to day operation of the business. (c) It would appear that the data on the tapes has been taken off a disk and dumped in full on a tape. The disk was then purged to eliminate key data files and the purged disk was dumped on to the tapes which I examined. It may well be that the insurance masterfile was dumped by mistake instead of the masterfile index. (d) In my opinion, the person who created the back-up tapes with these selective files would have required greater knowledge of the computer system and its file structure than that possessed by a computer operator and would have required the experience or advice of the application programmer who had worked on the system." Ajayoglu's oral evidence, however, greatly reduced the strength of these conclusions. He agreed that the first three tapes contained no particularly valuable information, and conceded in cross~-examination that his reference to data being - B4 - "deliberately removed" from the tape should have been expressed in terms such as, "data had been deliberately not dumped on to the tapes". He also conceded that no-one had, deliberately or otherwise, removed or scrambled information on the tapes. It appears common ground that only the file data portions of the insurance masterfile had been "dumped" on to tape 4, and not the index portions. Ajayoglu was of the view that the data portions or the tape alone were of no immediate assistance to someone without the appropriate computing expertise to rebuild the full file, and therefore that the tape could not be accurately described as a "back-up security" tape. Clarke, who had worked as a computer consultant since 1968, gave evidence of his initial contact with, and work for, GPRTI and his training of their staff in the operation of the computer. He also described a system of security dumping on to "dump format tapes", whereby the data on a computer disc was dumped on to a tape without the index portion. Using this method, the complete file can be reconstructed by running the tape through the same or a similar computer. That process recreates the file index. In relation to that procedure, Clarke stated; "to me 1t is the most sensible way of doing 1t ona perlodic basis as it saves alot of time at' the time of taking the security. It 1s only a once a month task probably in that it 1s only for the extreme circumstance that you take that style of security. The extreme circumstance would be a fire or something of that nature. There is no reason to dump the index, it is just taking up tape that you cannot afford, in that 1t may not fit". Clarke said that he instructed Alderton to use this - g5 - method of dumping, and wrote instructions down for him. Alderton agreed that he took security tapes daily as suggested and instructed by Clarke, and recalled doing a master file dump for security purposes at some stage prior to the cancellation of the second underwriting agreement. This apparently constituted the fourth tape that was handed to Mrs Phillips. However, according to Alderton, the tape was not complete because it ran out before the dump from the disc to the tape had finished. He probably did not tell Mrs Phillips of this when handing the tape over, but did apparently tell Clarke and seek instructions. That conversation was not put to Clarke, and his evidence appeared to contradict Alderton's when he said that it was the first two tapes that had run out. However the question whether the fourth tape had run out was never put to him directly. The cross-claimants submitted that the explanation given by Clarke was inconsistent with affidavit material filed in response to Ajayoglu's original affidavit. To some extent it does appear that his explanation of the dumping procedure was not advanced earlier. However, notwithstanding that, I am satisfied that the cross-claimants' allegations are not supported by the evidence taken as a whole. It was not put to Clarke that he was in any way involved with the production of the four security tapes, or that he had interfered with the tapes after their production. Alderton had no particular expertise with computers, and 1t was not put to him that he had deliberately dumped only the data portions of the file on to the security tapes. His handing of the tapes to Mrs Phillips was a voluntary act, and one of them did, in the long run, prove useful. Evidence of Clarke's - 86 - conversations with Ajayoglu do not support the proposition that he attempted to dissuade Ajayoglu from reconstructing the data on the tapes. Indeed that claim is directly contrary to the fact that Wood was directed to Ajayoglu, for help in reproducing the master file, by Clarke himself. To my mind, Clarke's behaviour in thus assisting GPRTI to recover the information on the tapes 1s quite inconsistent with any deliberate wrong-doing on his part. Nor did he have any motive for seeking to harm or hamper GPRTI. B24. Alderton's Representations to Credit Reporters The next allegation in the cross-claim can be briefly disposed of. Paragraph 44(a) alleges that Alderton, in breach of both his contract of employment with GPRTI and his fiduciary duties, and in breach of confidence, falsely, maliciously and with intent to injure GPRTI and/or Phillips, represented to a mercantile agency, Credit Reporters of Australia (Vic) Pty Ltd, that Phillips was "in diabolical financial trouble, that his house had been sold from under him by the bank, and that he misappropriated money due to Omaha". This claim was not put to Alderton in cross-examination, and no-one from Credit Reporters was called to give evidence. This aspect of the cross-claimants' case also fails. B25. Interception of Phillips' Mail and Telephone Calls Paragraph 46 of the cross-claim alleges that: "ATI and Bartlett have, wrongfully and unlawfully, obtained confidential intormation concerning the business and affairs of GPRTI and/or Phillips by - - 87 - (a) intercepting mail addressed to GPRTI and/or Phillips; and (b) auntercepting, by means of a radio scanner, and recording telephone calls made by Phillips from the telephone in his motor vehicle - and have made use of such information with the intention of injuring Phillips, GPRTI and GPRTI's said business." The only evidence adduced by the cross-claimants that bore any relevance to these claims was that of Barbara Reeves, an insurance claims manager who worked for ATI from early July 1984 until November 1984. She stated that, on occasions, she overheard voices coming from what she believed to be a radio-scanning machine in one of ATI's offices. She walked into the office on one occasion when the machine was in use, and was told by Bartlett "whatever [ heard was to be kept very quiet and they advised me that 1t was Graeme Phillips' voice on the scanner". Bartlett indicated to her that the scanner "was to keep a track on what was happening with Mr Phillips". Although 1t was sought in cross-examination to challenge Reeves' credit on another aspect of her evidence, no questions were put to her about the scanner by counsel for the cross- respondents. Nor was Bartlett questioned about it. In those circumstances £ think I should accept that such a scanner was used 1n the ATI office, as described by Reeves, and that in part 1t was used to pick up conversations on Phillips' car telephone. The use of that scanner 1s indicative of the state of the relationship between Phillips and Bartlett after April 1984. It also, of course, reflects most unfavourably on Bartlett's and ATI's business practices. However, the evidence fails to establish that Bartlett, or any of the other cross-respondents, obtained any relevant information by use of the scanner, or that they intended to use or did use such information with the intention of injuring Phillips or his business. It 18 equally consistent with their conduct that they were seeking advance warning of legal moves which Phillips might be planning against them, or perhaps just indulging their idle curiosity. I find that neither this claim, nor the allegations of interception of Phillips' or GPRTI's mail (on which there was no evidence adduced at all) has been established. B26. Alderton's and Rogers' Use of GPRTI Documents. A number of allegations are made against Alderton, Rogers and Clarke that relate to their unauthorised provision of confidential documents to ATI. In particular, Paragraph 42 alleges that Alderton, Rogers and/or Clarke provided documents to ATI that included: "(a) GPRTI's computer master file listings; (b) computer print-outs of all GPRTI's business records including, 1n respect of each person insured with GPRTI, his name, the details of his fleet of vehicles, the name of his broker, the sum insured, the premium and his claims history; (c) confidential documents and information relating to the Transit Underwriting Facility and the Second Underwriting Facility; (ad) the names and addresses of all GPRTI's overseas business contacts; - g9 - (e) GPRTI's computer programme and computer system which had been developed specifically for the Transit Underwriting Facility and the Second Underwriting Facility." Paragraph 44(b) alleges that: "Rogers provided ATI, Bartlett, Alderton and one John Leehane with confidential information concerning the business interests and personal affairs of Phillips, which information came into her possession in the course of her employment with GPRTI as Phillips' personal secretary." Paragraph 45 states: "Wrongfully, in breach of his contract of employment with GPRTI, in breach of the fiduciary duties which he owed to GPRTI and in breach of confidence, Alderton provided ATI with various documents and stationery belonging to GPRTI, including a blank set of GPRTI's Certificates of Currency of Insurance," and Paragraph 47 states; "With the intention of advancing their own interests and injuring GPRTI and Phillips, ATI, Bartlett and McNeany have made use of documents and information belonging to GPRTI which were provided to them by Alderton and/or Rogers, well knowing that the same were provided to them by Alderton and/or Rogers in breach of confidence, in breach of their respective contracts of employment and in breach of the fiduciary duties which they owed to GPRTI." It is convenient to deal with these allegations together. The High Court has recently accepted that there is a general equitable jurisdiction to grant relief against an abuse of confidentiality in certain circumstances, even where no contractual, tortious or fiduciary duty exists (see Moorgate Tobacco Co Ltd v Phillip Morris Ltd & Anor (No.2) (1985) 59 ALJR 77 at 85). However, in this case I am satisfied that no such abuse has occurred. - B89 - (e) GPRTI's computer programme and computer system which had been developed specifically for the Transit Underwriting Facility and the Second Underwriting Facility." Paragraph 44(b) alleges that: "Rogers provided ATI, Bartlett, Aiderton and one John Leehane with confidential information concerning the business interests and personal affairs of Phillips, which information came into her possession in the course of her employment with GPRTI as Phillips' personal secretary." Paragraph 45 states: "Wrongfully, in breach of his contract of employment with GPRTI, in breach of the fiduciary duties which he owed to GPRTI and in breach of confidence, Alderton provided ATI with various documents and stationery belonging to GPRTI, including a blank set of GPRTI's Certificates of Currency of Insurance," and Paragraph 47 states; "With the intention of advancing their own interests and injuring GPRTI and Phillips, ATI, Bartlett and McNeany have made use of documents and information belonging to GPRTI which were provided to them by Alderton and/or Rogers, well knowing that the same were provided to them by Alderton and/or Rogers in breach of confidence, in breach of their respective contracts of employment and in breach of the fiduciary duties which they owed to GPRTI." It is convenient to deal with these allegations together. The High Court has recently accepted that there is a general equitable jurisdiction to grant relief against an abuse of confidentiality in certain circumstances, even where no contractual, tortious or fiduciary duty exists (see Moorgate Tobacco Co Ltd v Phillip Morris Ltd & Anor (No.2) (1985) 59 ALJR 77 at 85). However, in this case I am satisfied that no such abuse has occurred. - 90 - The claim against Clarke can be dismissed quickly. Nothing was put to Clarke that supports the allegations against him. Indeed the evidence is all to the contrary. He continued to assist GPRTI after the second underwriting agreement was cancelled, and trained Wood and Mrs Phillips in the use of the computer. It was not suggested that he passed confidential documents or information. He denied that he was in any way aunvolved in a conspiracy or fraud against Phillips, and the evidence did not indicate that he was infact employed by ATI after working with GPRTI, as claimed in paragraph Sl(c) of the cross-claim, Alderton was directly cross-examined about a number of documents he exhibited to an affidavit he swore in the proceedings on 5 February 1985. The first two were telexes passing between the Dallas and London offices of Miro & Associates on 21 March 1984. Alderton stated that he had obtained possession of those documents from the ATI office after joining ATI. The remaining telexes were the telex of 19 April 1984 to GPRTI notifying of the cancellation of the second underwriting agreement, and a telex of 5 January 1984 (incorrectly described in the transcript as 1985) from Murphy to Phillips concerning GPRTI's requirement to report to Lafayette. Alderton was questioned about these latter documents in the following terms: "When did you first come into possession of those documents? ---f£ had copies in my files when [I left Graeme Phillips. - 91 - You maintained your own file within the office? ---I have personal files. What sort of documents did you complete Ckeep] in those files? ---Mostly my own personal papers. But in addition to your own personal papers you collected some business documents? ---QOnly one or two, yes that is correct. The last two we have looked at were two of them? ---That 15 correct. Are you able to say which other Graeme Phillips documents you kept in your personal files? ---Not offhand. No, there was very few, I think only a couple of telexes, that was about it." Alderton later qualified this evidence, stating that he believed that the telex of 19 April 1984 was, in fact, handed to him by someone at ATI after he joined that company. His reason for copying the 5 January 1984 telex was that "prior to my leaving the Phillips organisation I was concerned that ultimately this matter may end in litigation and, for my own personal protection, kept a copy". This explanation was proffered despite the fact that the telex was copied before 19 April 1985, and therefore before he became aware of the cancellation of the second underwriting agreement, and before there was any suggestion that he might be leaving the Phillips organisation. It 1s clear that there was disquiet and unrest in the Phillips camp in the latter stages of 1983 and the first few months of 1984. The rivalry between Phillips and Bartlett was obvious well before ATI took over the underwriting agreement. It was also suggested that there was some tension between Wood and Alderton, particularly over their respective responsibilities in - 92 - the GPRTI office. Phillips was only infrequently present in the office, and left much of the day-to-day running of the GPRTI operation to his deputies, Wood and Alderton. Alderton sought guidance from Phillips on many occasions without much success. He also challenged Phillips in December 1983 about the latter's use of premium funds in the SMCC loans. In addition, Alderton had taken over the role of contact between ATI and GPRTI in August 1983, after the altercation between Bartlett and Wood over the cancelling of some covers. This involved him in close dealings with Bartlett and other ATI staff. Indeed the inter-relationship between the ATI and GPRTI staffs was generally fairly close, in spite of differences between the principals. In light of these factors, Alderton's explanation for taking the photocopies, that he sought "to protect himself" is reasonably credible. I am unable to draw the inference that Aliderton acted 1n breach of any duty he owed to GPRTI, or that he took those documents for the purpose of somehow damaging Phillips' business, or indeed that the documents were in fact provided to Bartlett or ATI. That was not put to either Alderton or Bartlett. The documents were used by Alderton in an affidavit filed in answer to the claims made against him in the cross-claim. In my view, none ot these claims against Alderton 1s established. Further, there was no evidence at all about Alderton providing ATI with blank GPRTI certificates of currency, as alleged in paragraph 45 of the cross-claim. - 93 - The evidence relating to Rogers' copying ot documents 1s contained in the following passage of her examination-in-chief. "You are aware of the affidavit that you swore in these proceedings on 4 March 1985? -~~Yes, You produced, as an exhibit to that affidavit, the telex from Donald F. Muldoon of Miro and Associates of October 1983?---Yes. Where did you get that document from?---I kept a copy of the original. From the days of your employment?---Yes. Were there other documents that you kept copies of? -~-Yes, the insurance commissioner's letter. That 1s the letter or 17 August?---Yes. Yes?---There were two letters from that office and a letter from Mr Sears, Baillieu Bowring to Graeme Phillips and his reply, and the telex of 5 January. Why did you keep copies of those documents?---I was involved particularly with the meeting of the insurance - the gentieman from the insurance commissioner's office. I was concerned. I did not fully understand what I was doing, to be honest, and { just kept it, basically to protect myself in case anything ever arose." In cross-examination, counsel for the cross-claimants challenged Rogers' motives for copying and retaining various documents, and particularly those received from the Insurance Commissioner and the correspondence passing between Phillips and BBMM referred to in section Al2 above. It was submitted by counsel for the cross-claimants that Rogers was inconsistent in her selection of the documents she chose to copy, and that matters ot at least equal concern, such as the SMCC loan, did not provoke her to copy documents. Also, her concern about GPRTI's - 94 - arrangements with the Insurance Commissioner, which was alleged to be her original motive for copying the documents of October 1983, would not have been very relevant in April 1984, However, Rogers also gave evidence that, at least by April 1984, not only was she concerned about the state of Phillips' business and his lack of attendance at the office, but she had in any event made up her mind to resign from his employment. This decision was reached well before she left to work for ATI. She had offered her resignation more than once in late 1983. She denied discussing her concerns with Bartlett, and although she may have shown to Alderton at least one copy of the documents she took, it was not suggested that she handed documents to ATI or in any other way used the documents to damage Phillips or GPRTI. She also denied discussing in any detail the affairs of GPRTI with Leehane, with whom she had a close personal relationship. It was not suggested to her that she provided the information about the SMCC loan Which was passed through Leehane to Bartlett. I find that none of the claims against Rogers are made out. B27. Decision on the Cross-Claim Thus all the cross-claims have failed and there must be judgment on them for the cross-respondents. - 95 ~ c. THE APPLICATION I now turn to consider ATI's application. Cl. The Telexes Details of the telexes sent by Phillips that prompted the issuing of these proceedings are set out briefly in section Al9 above. In all, seven telexes were complained of in the application and were considered by Jenkinson J when he granted the interlocutery injunction on 2 November 1984. Copies of the telexes were annexed to his Honour's order. Some bore Phillips' name alone as sender. The others carried both Phillips' and GPRTI's names. The original telexes were from: 1. Phillips to Irion, Miro, and Hale of Lafayette dated 28 June 1984, 2. Phillips and GPRTI to John Smith dated 28 June 1984, sending a copy of a telex sent to Marsh & McLennan and Lafayette, 3. Phillips and GPRTI to Regan, Newhouse and Kline of Marsh & McLennan dated 11 July 1964, 4. Phillips and GPRTI to Regan of Marsh & McLennan dated 26 July 1984, sending a copy of a telex to Irion, 5. Phillips and GPRTI to (apparentiy) BBMM dated 26 July 1984, 6. Phillips to Irion dated 5 September 1984, 7. Phillips and GPRTI to Irion dated 7 September 1984. - 96 - Further allegations were made by Phillips in the telephone conversations that led to the first and second contempt applications and the further interlocutory injunction I made on 6 February 1985. Additional allegations were made in the telexes sent on 9 April 1985. However, as these allegations were not part of the original application, and as the application has not been amended since, I do not consider them in detail here. They do, however, indicate a propensity to continue the conduct originally complained of, which is relevant to questions of discretion and remedy. C2. Allegations in the Telexes There were many statements made in the original telexes. Not all concerned the applicants. I do not believe it is necessary to go into the telexes in any great detail, nor to set out their texts. I have therefore extracted below the principal allegations made which I consider are relevant to the application. These are: 1. That approximately 800 covers were placed with GPRTI by ATI but not completed, closed or paid (statements contained in telexes 1, 2, 3 and 5), 2. Policies were issued without payment (3, 5), 3. Claims were settled for risks not covered (3, 5), 4. Covers were backdated to cover claims (3, 5), 5. GPRTI documents were photocopied (3, 5), 6. Mrs Phillips' Rolls-Royce had been vandalised twice whilst parked outside the GPRTI office (7), 10. il. 12. 13. 14. 15. 16. 17. - 97 - Between 16 December 1983 and 19 April 1984, ATI paid seven premium cheques to GPRTI (different totals were referred to in telexes 3 and 5). Claims were made on each policy (3), GPRTI staff played a significant role in the "shortfall of closings" (1), Bartlett conspired with Alderton and Rogers to have GPRTI's underwriting agency transferred to ATI (3, 5), ATI "manipulated Alderton from" GPRTI (7), GPRTI's office was broken into after Phillips left for Los Angeles andall records were stolen (7), GPRTI had overpaid Lafayette (4) and money was owing to Phillips (1), The police were investigating and would almost certainly take action (2, 3), Phillips refused an offer to exchange 50% of GPRTI for 50% of ATI (5), The discrepancies in the ATI business were to be investigated by an employee of Wigham Poland's London office (5), Phillips had been advised to liquidate GPRTI and recover overpayments and any uncompleted covers (6), Constant requests for an indemnity for GPRTI from each party to the ATI contract have failed (6), - 98 - 18. A private detective employed by Bartlett had distorted the truth (6), 19. Phillips had received three death threats from Bartlett (7), 20. Two motor repair assessors were owed money by ATI (6, 7), 21. A GPRTI employee, Noel Brown, received a death threat from Bartlett (7), 22. Phillips' and Brown's families had sought police protection (7), 23. Bartlett intercepted Phillips' mail twice (7), 24. Bartlett boasted that he would see Phillips and his family in the gutter (7), and 25. Bartlett ran a smash repair business, which was involved in certain questionable practices, and which put him in a_ unique position to "play around with premiums". The applicants contend that many of these statements are untruthful, or at least not supported by the evidence. The result, they say, is that the sending of that information by telex amounts to misleading or deceptive conduct. The question arises as to how the truth, or otherwise, of the statements should be established and, in particular, whether the applicants must prove the statements are untrue to make out their claim, or whether Phillips must 1n some way demonstrate their accuracy. I would be reluctant to decide matters such as_' these simply on the burden of proof. However, the applicants clearly bear the burden of establishing their case. In my opinion, it is - 99 - necessary for them to establish, on the balance of probabilities, that any statements upon which they seek to base their case were not true. I do not believe it is necessary to take each allegation separately, and test its literal truthfulness; I think a broader approach should be taken. If the applicants can establish that the telexes contain a number of misleading statements, which convey a generally misleading impression having commercial relevance, that would be sufficient to make out the claim under s.52 for an injunction restraining the making of further such statements. Discretionary questions would then have to be considered. C3. Accurate Statements The statements I have extracted can be broadly divided into three categories. Statements numbered 1 to 7 are matters which can, generally speaking, be supported by the evidence presented. It is clear that the deferral programme did result in a number of covers being placed with GPRTI, which were not closed by ATI, whereas in the ordinary course of business, they would have been. The figure of 800 mentioned in the telexes is not an accurate one. The only direct evidence on the correct figure came from Alderton. At the time of leaving GPRTI to work for ATI, he handed to Phillips a bundle of 147 telexes from ATI, representing cover opened for new business, renewals and endorsements, but not closed. Although the difference in the figures is considerable, I do not consider it is significant for present purposes. The fact is that a large number of covers were not closed. ~ 100 - I am also prepared to accept that, ina few cases, policies were issued without payment of the premium; claims were settled by GPRTI when cover had not been closed; and cover was closed after claims had arisen. Mrs Phillips gave evidence of minor damage caused to her Rolls-Royce on two occasions whilst it was parked outside the ATI/GPRTI office block. The statement in the telex does not claim that anyone connected with ATI was responsible for the damage, although it would seem that Phillips wished that inference to be drawn. There is certainly no evidence that any ATI person was responsible. However, on its face the statement is accurate, and the matter is of little significance. Finally, both Alderton and Rogers admitted to photocopying documents in the circumstances set out in section B26 above. Were the telexes limited to these statements alone, I would have little hesitation in refusing the application. C4. Inaccurate Statements Statements 8 to 11 above relate to matters which I have already dealt with in some detail in considering the cross-~ claimants' case. The allegations that Bartlett conspired with Alderton and Rogers I have held to be untrue; similarly, the allegations that ATI manipulated Alderton away from GPRTI, and that the former GPRTI staff played a "significant role" in the "shortfall"; have been shown on the clear balance of probabilities - 101 - not to be true. The latter statement could only be truthful if interpreted in the sense that the staff accepted the fact of the deferral plan by the opening of covers, and did not cancel covers 1f payment was not received within the requisite period. However, the statement in the fifth telex about the role of GPRTI referred to "funny games occurring leaving a large shortfall from ATI to GPRTI". I have found that Alderton and Rogers were not involved in any activity that was illegal or in any other way actionable at the suit of Phillips. They were doing their best to keep him informed and carry out his instructions; they had not been suborned by ATI. The statement about their involvement is therefore inaccurate and misleading. As the respondents' counsel correctly pointed out, the statements concerning the burglary and theft of documents do not expressly attribute the responsibility of the burglary to anyone acting on behalf of ATI. However, in the context of the telex in which the statements appear, it is clearly an implication that Phillips hoped would be drawn. Telex number 7 referred to his surprise at being "robbed from a office on the sixth floor of an office building that you require security cards to operate the outside doors of the building and the lift. There were no signs of forceable entry except the computer room which was separately secured". He goes on to say "ATI occupy the first floor above me". He also refers to the "co-incidence Cthatd the robbery took place just prior to Peter Hicks of Wigham Poland visiting Australia to investigate my allegations against ATI". - 102 - This aspect of the case is somewhat analagous to defamation proceedings. If this were a libel action, I would have no difficulty in drawing the necessary implication that the statement was intended to convey the meaning that ATI, or some persons connected with it, bore responsibility for the burglary. I have already held that the respondents have not attempted to substantiate their claim that anyone at ATI was responsible for the burglary. Two other hypotheses are, in my view, equally likely. I am therefore prepared to hold, on the balance of probabilities, that the statement conveys a misleading or deceptive impression, and amounts to conduct in breach of s.52 of the Act. C5. The Remaining Statements Statements numbered 12 to 25 were either statements on which there was no evidence led by either side, or statements which were specifically denied by Bartlett. In some cases, he was cross~examined on his evidence, but in many cases he was not. The applicants argue that it 15 open to me to draw the inference from Phillips' failure to give evidence, and his counsel's substantial failure to cross-examine Bartlett, that these statements are not true. Certainly if Phillips had given evidence I would have expected him to attempt to support the allegations. - 103 - There was some evidence from Bartlett that there was a dispute with two assessors over payments of about $30,000. The police had certainly had some interest in the matter generally, and were briefly involved at one stage of the proceedings relating to subpoenas. Whether their involvement was at the behest of GPRTI or ATI I am unable to say. Both Wood and the broker Jarman gave evidence of being threatened by Bartlett at different times. However Bartlett denied both these allegations and the other allegations of threats which were contained in the telexes. It may be that some of the allegations are in fact true, and that others are untruthful. There is simply insufficient evidence for me to decide either way. In any event I do not consider there is any need to reach such a decision, in view of my findings in relation to the crucial statements numbered 8 to 11. C6. Remedies Sought This matter was instituted by the filing of an application and an affidavit in support sworn by Bartlett. No statement of claim has been filed. The application sought an injunction restraining the respondents from both, (a) making statements to members of the public which are misleading or deceptive or likely to mislead or deceive as alleged in the affidavit, and - 104 - (b) making statements, writing letters, or sending telexes in the form of, or to the effect of, the seven telexes referred to. The application also sought damages. However, in his closing submission, junior counsel for the applicants abandoned the claim for damages and pressed the claim for a permanent injunction only. Iam satisfied that the sending of the telexes did constitute conduct that was both misleading and deceptive and was therefore in breach of s.52 of the Act, and that a permanent injunction ought to be granted restraining Phillips and GPRTI from making similar statements. In considering whether I should exercise my discretion to grant such an injunction, I have been influenced by the serious nature of the allegations made, and the later conduct of Phillips in repeating similar allegations in spite of the pending litigation and court orders made by consent. - 105 - D. THE FORM OF THE INJUNCTION Mr Hayes for the applicants urged me to grant an injunction restraining Phillips and GPRTI in the widest possible terms. This was necessary, 1n his submission, because the sending of the telexes demonstrated that Phillips had engaged in a deliberate and sustained campaign to denigrate ATI, and that Phillips was likely, unless restrained in broad terms, to continue what counsel rather colourfully described as a "campaign of telex terror around the market place against ATI." As an alternative submission, the applicants sought a narrower form of injunction, restraining the respondents from making or sending selected statements to the effect of those contained in the telexes. In that connexion I was assisted by a written submission from counsel for the applicants. The respondents have conceded that, in the event of my finding that certain statements 1n the telexes were inaccurate, the applicants would be entitled to a permanent injunction. They submit that any injunction should be restricted to preventing repetition of those statements that have been shown to he inaccurate. The terms of the interlocutory injunctions, granted originally by Jenkinson J and then subsequently by myself, were wide, and incorporated by reference the telexes referred to in the application. Although they were appropriate in the circumstances, - 106 - I would be reluctant to grant a permanent injunction which depended for its meaning and efficacy upon the terms of such documents. It is essential that the terms of any permanent injunction are expressed as precisely as possible. It has been said in relation to mandatory injunctions that "the court must be careful to see that the detendant knows exactly in fact what he has to do and this means not as amatter of law but as a matter of fact" (per Lord Upjohn in Redland Bricks Ltd v Morris £19703 AC 652 at 666). Whilst that reminder is particularly apt in the case of mandatory injunctions, 1t is I think generally applicable to the granting of all injunctions, in view of the substantial penalties which may follow any breach. Thus, while bearing in mind the contents of the particular statements complained of, I propose to keep the terms of the order as general and as simple as possible. Although ATI and Bartlett are the only applicants named in the original application, the statements in the telexes also referred to the involvement of Alderton and Rogers. I see no reason for restricting the terms of the injunction to statements relating to ATI and Bartlett, nor for excluding the general allegations made in the unsuccessful cross-claim from the scope of the injunction. In the circumstances, and in view of my findings in relation to the statements made in the telexes, I am of the opinion that the appropriate form of order is as follows: a, - 107 - that both the first-named respondent, Graeme Phillips Road Transport Insurances Pty Ltd, whether by its servants or agents or howsoever otherwise, and the second-named respondent, Graeme Phillips, whether by his servants or agents or howsoever otherwise, be restrained from making or causing to be made any statement, whether oral, by telex or letter or other writing, or otherwise making any communication in any way to any person (other than for the express purpose of obtaining legal advice) to the effect that Australian Transport Insurance Pty Ltd, Raymond Bartlett, Joseph McNeany, Christopher Alderton, Mary Rogers and Leslie Clarke or any of them: (a) conspired to injure Graeme Phillips and/or Graeme Phillips Road Transport Insurances Pty Ltd in their business, (b) between the months of November 1983 and April 1984 fraudulently, or in any way unlawfully, withheld from Graeme Phillips Road Transport Insurances Pty Ltd iaunsurance premiums received by the said Australian Transport Insurance Pty Ltd in respect of the Australian Heavy Vehicle Insurance Plan, (c) fraudulently, or in any way unlawfully, appropriated moneys belonging to Graeme Phillips and/or Graeme Phillips Road Transport Insurances Pty Ltd, any insureds, the underwriter or any other person connected with the said Australian Heavy Vehicle Insurance Plan, tt et (d) (e) (f) - 108 - fraudulently, or in any way unlawfully, issued or caused to be issued insurance policies or certificates of currency by or in the name of Graeme Phillips Road Transport Insurances Pty Ltd, were in any way involved inthe burglary of the offices of Graeme Phillips Road Transport Insurances Pty Ltd in July 1984, or were in any way involved in the improper copying or use of documents or confidential information belonging to Graeme Phillips and/or Graeme Phillips Road Transport Insurances Pty Ltd. the form of the said injunction in case 1t should prove at future time to be either inadequate or oppressive. I shail, however, reserve to all parties liberty to apply to vary some - 109 - E. CONTEMPT OF COURT It only remains for me to deal with the three motions alleging contempt of court against Phillips; see section A23 above. With regard to the first, dated 5 February 1985, referring to telexes and other communications which occurred afew days earlier, I have already referred to Phillips' affidavit of explanation and apology and to my order that he pay the costs of that notice of motion. In my view that 1s sufficient punishment for the transgressions involved. He was smarting under the loss of his business to a former associate and the apparent defection of most of his former employees. Because of that I was, at the time, prepared to accept his apology and impose no penaity. I do not believe that his subsequent conduct requires me to change my mind and, in the exercise of my discretion, I have decided to record a formal finding of contempt of court and to take no further action. The second notice of motion, dated 21 March, covered much of the same ground (see section A23 above) and was never proceeded with. I make no order in relation to it. However, it is still necessary to say something about the circumstances of the first contempt because of its bearing on later events. In those proceedings it was alleged that Phillips had taken advantage of the Anton Piller order granted by Gray J to make telephone calls to two insurance brokers and allege, in effect, that ATI had been ordered by the Court to hand over all its records to Phillips; that fraud charges would be laid against Bartlett or ATI and that Phillips would win the coming legal battle and Bartlett would be finished. - 110 - The precise nature of the statements made did not need to be determined because there was an admission that the orders of Jenkinson J had been transgressed and, even before that admission was made, counsel for Phillips consented to an order intended to govern his future conduct. The relevant part of that order read as follows: ».. and the second-named Respondent be restrained from making any statements, writing any letters, sending any telex messages or making any other communications to any person other than for the purposes of obtaining legal advice, relating to or in any way concerning the making of the Order by the Honourable Mr. Justice Gray on 30th January, 1985 or the proceedings herein or any of the matters alleged in the Cross Claim herein ..." On 9 April Phillips sent telexes to Marsh and McLennan zn New York and Wigham Poland in London, with copies to the Federal Treasurer and the Australian Insurance Commissioner, saying among other things, to Marsh and McLennan, "On 19 April 1984 when this contract was transferred from my company to Australian Transport Insurance Pty Ltd, your company refused to listen to my allegations. My allegations fraud, conspiracy, breach ot confidence, breach of fiduciary duty are now the subject of an action in the Federal Court of Australia No VG 273. Fixed for trial 21st May 1985." There was other material in the same telex which was alleged to be in contempt of the previous order of Jenkinson J, but I do not need to consider those matters because, in my view, the words quoted are a clear breach of both the spirit and the letter of my order set out above. The reference to the allegations made in Phillips' cross-claim clearly constituted a - lll - telex message, other than for the purposes of obtaining legal advice, concerning "the proceedings herein or any of the matters alleged in the Cross Claim...". It stated the gist of the claim in such a context as_ to suggest confidence in the outcome of the trial. It was not logically necessary, in relation to the other matters in the telex, to refer to the action at all, let alone to repeat the allegations which were to be litigated. The basic purpose of the order made by consent on 6 February was to stop Phillips muddying the waters of litigation by repeating his allegations against Bartlett and ATI to persons who would be disturbed by the allegations and might react in ways unfavourable to those parties. The Treasurer and Insurance Commissioner clearly fall within the broad category of persons contemplated when the order was made. Counsel for Phillips conceded on his behalf that his conduct of 9 April (which in addition to the telexes referred to included a most unwise telephone call to Alderton) was "foolish, inexcuseable and should not have taken place", but he did not formally admit any contempt, and invited me to accept an unconditional undertaking that there would be no further communications of any sort by Phillips, and to take no further action. - 112 - However, the repetition of behaviour in breach of successive orders of the Court is a serious matter. The significance of the original orders should have been brought home to Phillips in the first contempt proceedings. When he deliberately engaged in very similar conduct a few weeks after having to file an affidavit of apology, he was behaving either in direct defiance of the Court or, as I prefer to believe, quite recklessly. I put to one side the question whether supplying copy affidavits to the police amounted to a contempt of the Court's orders in all the circumstances of this case. The other conduct complained of was so completely lacking in justification that the dealings with the police could add nothing of substance to the gravity of the total offence. The main purpose of the Court's orders was to stop Phillips denigrating ATI and Bartlett in communications with other persons in, or interested in, the heavy vehicle insurance industry. The telex to the Insurance Commissioner, dated 9 April 1985, is perhaps the best example of how Phillips infringed these orders. In my view this, and other telexes sent at the same time, were in clear and reckless breach of the Court's orders and cannot be allowed to go unpunished - particularly having regard to his earlier admitted infringements. In determining an appropriate penalty, I take into account the heavy losses which Phillips has already incurred in this sorry affair (which, however, were largely brought about by - 113 - his neglect of his business and use of premium moneys for other schemes) and the heavy costs he will have to bear as a result of my decisions in this matter. In all the circumstances I think that a fine of $1000 will sufficiently reflect the serious view which the Court must take of such a deliberate defiance of its orders as occurred in this case. ~ 114 - ? F costs The final matter is that of costs. Although the behaviour of Bartlett (and, through him, ATI) throughout' the matters deait with in these reasons for judgment has been that of a hard~headed business man who has taken advantage of opportunities to advance his own interests at the expense of Phillips and GPRTI, all the allegations against him and others of fraud, conspiracy and deceptive conduct have failed. I can see no reason why costs should not follow the event in both claim and cross-claim. However, since counsel for the cross-respondents has foreshadowed an application that costs should be awarded on a solicitor and client basis, I shall adjourn all questions of costs to 9.30 a.m. on 24 February 1986. I certify that this and the one-hundred and thirteen (113) preceding pages are a true and accurate copy of the Reasons for Judgment herein of The Hon Mr Justice Woodward CASS pe Associate Dated: 20 December 1985 Counsel for the applicants/cross-respondents: Mr A.C. Archibald QC & Mr P.R. Hayes Counsel for the respondents/cross-claimants: Mr J.W.K. Burnside & Mr M Settle Solicitors for the applicants/cross-respondents: Gillotts Counsel for the respondents/cross-claimants: Cornwall, Stodart & Co.