McWILLIAM & ORS v PENTHOUSE PUBLICATIONS LTD & ORS [2001] NSWCA 237

New South Wales Court of Appeal

CITATION : McWILLIAM & ORS v PENTHOUSE PUBLICATIONS LTD & ORS [2001] NSWCA 237 FILE NUMBER(S) : CA 40506/98 HEARING DATE(S) : 3 and 4 July 2001 JUDGMENT DATE : 4 July 2001

PARTIES : BRUCE SCOTT McWILLIAM & ORS v PENTHOUSE PUBLICATIONS LTD & ORS JUDGMENT OF : Mason P at 1; Handley JA at 74; Hodgson JA at 75

LOWER COURT JURISDICTION : Supreme Court LOWER COURT CD 13527/88 FILE NUMBER(S) : LOWER COURT Maconachie AJ JUDICIAL OFFICER :

Appells: P R Graham QC/W Hodgekiss COUNSEL : 1,6 Resp: T D Blackburn/P Sibtain 2,3 Resp: M Oakes SC/ J Oakley 4,5 Resp: D M Loewenstein Appells: B M Salmon, Layton SOLICITORS : 1,6 Resp: Blake Dawson Waldron 2,3 Resp: Minter Ellison 4,5 Resp: John Fitzgerald & Associates CATCHWORDS : Tort - conspiracy to injure by unlawful means - solicitor acting on client's instructions to terminate contract for breach or repudiation - alleged variation of contract - promissory estoppel - standing to sue for wrongs done primarily to company (ND) DECISION : Appeal dismissed with costs

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40506/98 CD 13527/88 MASON P HANDLEY JA HODGSON JA

Wednesday 4 July 2001 Bruce Scott McWILLIAM & 2 Ors v PENTHOUSE PUBLICATIONS LTD & Ors

JUDGMENT

1 The claims that were litigated in these proceedings arise out of a written Contract made in May 1979 between Penthouse Publications Ltd (PPL) and ADM Franchise Pty Ltd (ADM). Under the Contract PPL licensed to ADM intellectual property and "know-how" to enable ADM to publish the Australian Penthouse Magazine in Australia and New Zealand. 2 After what were found in the court below to have been prolonged default and continuing repudiation by ADM, PPL purported on 30 August 1982 to terminate the Contract and to exercise contractual rights to demand the handing over of books, records and work in production pursuant to cl 14 (b) of the Contract. The material consisted mainly of copy for the November 1982 issue. 3 On Wednesday 1 September 1982 ADM applied ex parte to the Equity Division for leave to serve short notice of a summons seeking to restrain PPL from using or disposing of the material taken on 30 August. Holland J made the summons returnable the following Monday 6 September. On 2 September 1982 PPL countered with proceedings to wind up ADM, including an application for the appointment of a provisional liquidator. On 6 September 1982 a provisional liquidator was appointed and ADM's summons was stood over generally. Some time later ADM was ordered to be wound up. The company was by then hopelessly insolvent: only some priority creditors and one secured creditor received any dividend. 4 Three members of the McWilliam family commenced the subject proceedings in 1988 in the Common Law Division. They asserted standing to sue based on their status as directors and shareholders of ADM and as beneficiaries, sub-beneficiaries and representatives of beneficiaries of various family trusts including the Australian Penthouse Trust of which ADM was trustee. Some of them also asserted a relevant financial interest in ADM and related companies because they had given secured guarantees with respect to various loans. These guarantees were called up following the collapse of ADM. 5 The parties whom the plaintiffs sued were: (1) PPL; (2) Mr Jackson, a solicitor who was a consultant to Norton Smith and Co, solicitors; (3) the partners of Norton Smith and Co; (4) Mr Sinclair, an inquiry agent; (5) Mr Maitland, his employed process server; and (6) Mr Cowell, an ADM employee who edited Australian Penthouse. 6 The partners of Norton Smith & Co were sued on the basis of vicarious liability for the conduct of their consultant, Mr Jackson. 7 The proceedings were dismissed at trial. They failed for many reasons, including lack of any evidence on key issues or against particular defendants. 8 At the commencement of the hearing of the appeal the appellants abandoned their case against Mr Sinclair and Mr Maitland and they confined their claim to one of conspiracy to do an unlawful act. There had been additional causes of action pleaded and fought at trial. At about 3pm on the first day of the hearing of the appeal senior counsel for the appellants also conceded that there was no case against Mr Cowell. 9 By reason of these changes the continuing issues bear little resemblance to the claims as pleaded. Even the substance of the conspiracy and the wrongful motive of the remaining conspirators (PPL and Mr Jackson) have been recast somewhat. Senior counsel for the appellants, who has recently come into the matter, has striven to maintain the claim within the limits of the evidence and that which is properly arguable having regard to his professional responsibilities. 10 The only cause of action that is still pressed is conspiracy. It was pleaded in the further amended statement of claim as follows: 21. Before and during August 1982 the defendants conspired to and did engage in certain unlawful conduct with the predominant purpose of and with the inevitable consequence of causing injury to the plaintiffs.