McWILLIAM & ORS v PENTHOUSE PUBLICATIONS LTD & ORS

Court of Appeal (NSW)|2001-07-04|Before: Mason P, Handley JA, Hodgson JA, Maconachie AJ, Holland J

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 :

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

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.

That pleading contains 12 particulars of overt acts. 11 The alleged conspiracy in the form in which it is still pressed is said to have been an agreement between PPL and Mr Jackson. It was an agreement to commit an unlawful act with intention to injure the plaintiffs where the unlawful act was carried out and the intention was achieved, thereby causing pecuniary loss to the plaintiffs. 12 An agreement to do an unlawful act, such as a tort or breach of contract, will be an actionable conspiracy if carried into effect and causative of damage. It is no defence that the agreement was for the primary or predominant purpose of furthering or protecting the defendants' own legitimate interests if the plaintiff proves that each defendant in such a conspiracy acted with intent to injure the plaintiff. These propositions are taken from Lonrho plc v Fayed [1992] 1 AC 448. Legal commentators agree that this brought English law into line with that in Australia (see eg Fleming, The Law of Torts 9th ed p777. See also Ansett Transport Industries (Operations) Pty Ltd v Australian Federation of Air Pilots [1991] 1 VR 637). I do not understand anything established in Williams v Hursey (1959) 103 CLR 30 to be to the contrary of these propositions. 13 These principles emphasise that a plaintiff in a case such as the present must establish intent to injure the plaintiff. It is not enough to establish that the acts of the conspirators necessarily involved injury to the plaintiff or that the plaintiff was a person reasonably within the contemplation of the conspirators as a person likely to suffer damage (see also Crofter Hand Woven Harris Tweed Co Ltd v Veitch [1942] AC 435 at 444-5. McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 at 437-9). 14 The unlawful act said to be the subject of the agreement between PPL and Mr Jackson was the taking of ADM's goods on 30 August 1982 in circumstances constituting conversion. The removal was said to be unauthorised and therefore conversion because the notice pursuant to which it occurred which purported to terminate the Contract was invalid for various reasons based on the law of contract. 15 Implicit in this formulation is acceptance by the appellants that it must be shown that the two actors agreed to procure the seizure of ADM's goods knowing that they lacked a contractually based claim of right to do so, or at least reckless as to the same. Anything less would not constitute an agreement to do an unlawful act. Were it otherwise, joint contractors who honestly but wrongfully terminated a contract would be exposed automatically to a claim for conspiracy. 16 There was no direct evidence of any conspiracy. Rather, the plaintiffs at trial relied upon various overt acts as particularised in par 21 and the inferences to be drawn from those matters which they proved. The remaining appellants take the same approach against the remaining respondents, although the rolling maul that represents what is left of the conspiracy allegation has fewer participants and lesser content than that contended for at trial. 17 None of the defendants gave evidence at trial, so Jones v Dunkel (1959) 101 CLR 298 was and is called in aid. Of course, the reasoning process sanctioned in that case will not assist if there is an evidentiary gap. Furthermore, defendants charged with the serious misconduct involved in a conspiracy are entitled to insist upon firm scrutiny of the evidence in light of the gravity of the matters alleged (see Evidence Act 1995, s140(2)(c)). 18 The pleader recognised that the interests and rights of the three Messieurs McWilliam and that of ADM were not coincident. As indicated, it was pleaded that the defendants acted with the purpose of damaging the plaintiffs. As now pressed, the case is said to be one where the plaintiffs proved that PPL and Mr Jackson intended, on 30 August 1982, to injure the plaintiffs. In various ways conduct directed against ADM and intention to injure ADM were said to be conduct or intention directed at the three shareholder directors (see Red 17, 116). 19 Damage is the gist of the cause of action. At trial the plaintiffs contended that the defendants' conduct was the effective cause of the collapse of ADM and the loss thereby stemming to its shareholders, the beneficiaries and sub-beneficiaries of its family trusts and the guarantors of its loans. At that stage the claims against the defendants extended to claims of abuse of legal process and they included focus on the events of early September 1982 culminating in the appointment of the provisional liquidator. As the claim is now pressed on appeal 30 August 1982 is the critical date, although later events might cast useful light. This shift of focus on appeal is reflected in a shift as regards proof of damages: the appellants now contend for damages based upon loss of a chance to earn profits, have loans repaid etc which chance was in existence prior to the liquidation of ADM and independent of it. 20 I have already indicated that the plaintiffs failed comprehensively at trial. ADM was found to be in substantial and longstanding breach of the Contract and to have repudiated its obligations under the same; the Contract was held to have been duly terminated on 30 August 1982, prior to the taking of the goods; the claims of conversion and other unlawful conduct that underpinned the conspiracy allegations were rejected; nothing in the matrix of facts led to the inference of an agreement to do any unlawful act; there was found to be no causal link between the conduct complained of and the demise of ADM. And one of the defendants (PPL) was held entitled to the benefit of a release by deed. 21 Many of these conclusions turned in significant part upon the trial judge's unfavourable assessment of the credibility of witnesses called for the plaintiffs. This presents well known difficulties to the appellants, who are the two McWilliam brothers. (The third plaintiff, their father, died between judgment below and the institution of the appeal. He was initially named as an appellant, but the Court was informed that his name was removed by order of the Registrar some time prior to the hearing of the appeal.) 22 Some findings adverse to the plaintiffs were based upon lack of evidence. This Court is in as good a position as the trial judge to determine the validity of the appellants' challenge to those findings. 23 No notice of contention has been filed in relation to the issue whether the appellants have standing in effect to complain about wrongs which, if they occurred, were primarily suffered by ADM and, if they caused the plaintiffs loss, did so by virtue of their interest as shareholders in ADM or beneficiaries, sub-beneficiaries or actual or contingent creditors of that company (cf Gould v Vaggelas (1984) 157 CLR 215, Johnson v Gore Wood & Co [2001] 2 WLR 72). The point was noted in the judgment below (Red 136) but it was not one of the grounds on which the decision turned. I think that the point presents real difficulties for the appellants, but do not have to grapple with it as events turn out. 24 The appellants' challenges to the judgment can be grouped. They focus around the following six questions:

(1) Was the Contract varied in June 1980 or any time thereafter? (2) Was ADM in continuous default under the Contract from January 1982 (when a demand was served) until 30 August 1982? (3) Was PPL entitled on 30 August 1982 to treat such default as the basis of terminating the contract either by reference to cl 23 of the Contract or the doctrine of repudiation? (4) Did the appellants establish against the two identified respondents the elements of agreement to do an unlawful act and intention to injure that are necessary to establish the claim of actionable conspiracy? (5) Did the appellants prove damage and causation? (6) Was the first respondent released by deed on 28 October 1982? 25 (1) Was the Contract ever varied? The challenges to the findings of breach and repudiation as at 30 August 1982 depend largely on the appellants making good their challenge to the trial judge's rejection of their pleaded claim that the Contract was varied at various times in 1980 (Red 14-15). The alleged variations substantially reduced the licence fees payable by ADM to PPL and/or extended "30 days terms" to "60 days terms". Without proof of any such variation or some estoppel precluding reliance upon the terms of the original Contract the appellants accept that ADM was hopelessly in breach as at 30 August 1982. 26 The Contract of May 1979 was a formal document containing 33 clauses. PPL licensed to ADM certain intellectual property and know-how which, by the Contract, was acknowledged to be the property of PPL. The initial term was 5 years. 27 Clause 14(b) relevantly provided: If cessation of publication by licensee of Australian Penthouse shall take effect for whatever reason the licensor or its nominees shall have a right to continue publishing and distributing Australian Penthouse and the licensee shall forthwith provide to the licensor all books documents and information necessary for that purpose including (but without limitation to) letters, mailing lists, distribution lists, articles in preparation, completed articles awaiting publication, photographs and all documents of whatever nature the licensee may be by the licensor called upon to provide…. 28 Clause 23 provided: If either party shall fail to observe or perform any of the promises agreements or undertakings herein contained and on its part to be observed and performed and fails to remedy any breach within a reasonable time or within sixty (60) days of a notice from the other party so to do (whichever shall last occur) then the party that has given such notice may on the expiry unremedied give further written notice declaring that this agreement is terminated forthwith or on such future date as it may designate. Any termination of this agreement shall be without prejudice to the rights of any party against the other hereunder which may have accrued up to the date of termination. 29 Clause 25a set out the formula for calculating the licence fee which was payable to PPL's account with Barclays Bank Ltd in London. Commencing with the fourth issue (which was published in early 1980), the minimum amount payable for each issue was US$150,000. The sum was due to be paid monthly within 10 days of the close of the month in which each issue went on sale (cl 26). 30 As recorded in the judgment below, ADM encountered problems almost from the outset. As early as September 1979 it was complaining of unexpected costs and the "extremely harsh" nature of the contractual terms of payment. Thereafter followed repeated attempts to negotiate revised terms in favour of ADM, usually conducted by Mr Bruce McWilliam jnr, the managing director. These were accompanied by statements that ADM's revenue stream could not support the minimum licence fee of US$150,000 stipulated as due from the fourth issue onwards. These statements are relevant to both the contract variation and the breach/repudiation issues. 31 By April 1980 ADM was in substantial default. No licence fees had been paid in respect of any issue except the first two. Maconachie AJ held that ADM was grossly outside the terms provided by cl 26 of the Contract and that the same position obtained in July 1980 (Red 84). 32 A meeting was arranged in London on 14 June 1980. Present were Mr Bruce McWilliam jnr and representatives of PPL, Mr Guccione, Mr Evans and Mr Kreditor. Mr McWilliam said in evidence that a substantial reduction in the licence fee was agreed orally then and there. Maconachie AJ did not accept this evidence in light of Mr McWilliam's poor showing under cross examination and the stream of inconsistent correspondence which followed (see Red 84-91). 33 I detect no error in this reasoning or in his Honour's summation at Red 117. Most of the letters from ADM were expressed in the language of proposed revision as distinct from proceeding on the basis of a done deal (see esp the exchanges of 28 July 1980 and 21 August 1980); and the responses from PPL were definitely non-committal or worse (see esp the letters or telexes of 27 March 1981, 1 April, 1981, 12 January 1981, 16 July 1982). The communications also show clearly that whatever was being discussed was subject to the execution of a formal document. No such document was ever finalised, engrossed, executed or exchanged. 34 The 1982 communications reveal a clear stand-off in the sense that PPL was holding back from finalising any amendment under discussion until arrears were brought into line; and ADM through Mr Bruce McWilliam jnr was holding back from paying the arrears until PPL confirmed its willingness to accept a substantial reduction in licence fees. At least that was the stance he was professing. 35 In January 1981 Mr McWilliam jnr met Mr Geoffrey Robertson QC in Melbourne. Again there were negotiations to vary the Contract which did not culminate in any variation, for the reasons given at Red 91-96 which I find wholly convincing. Again the adverse decision turned in part upon the judge being "unimpressed" with Mr McWilliam's "unconvincing" oral evidence. On one point the judge held that Mr McWilliam was being untruthful in his evidence (Red 95). 36 The submission of senior counsel for the appellants that in January 1981 Mr Robertson and Mr McWilliam were documenting a concluded agreement effected in June 1980 is wholly unconvincing given (a) the fact that Mr McWilliam's letter of 9 January 1981 (Blue 50) on which the appellants rely contains terms clearly inconsistent with what was being discussed in June 1980 and (b) the terms of Mr Kreditor's letter of 12 January 1981 (Blue 102), and (c) the evidence concerning Mr Robertson's lack of authority to conclude a contract variation (Black 136-7). 37 Disregarding the pleadings and the way the case was fought at trial (as reflected in the reasons of Maconachie AJ) and unsupported by any ground of appeal, the appellants sought at the hearing of the appeal to recast their case in this regard also. They submit that, if the Contract was not varied, then at least there was conduct that engaged the principles of promissory estoppel sufficient to mean that as at 30 August 1982 PPL was disentitled to treat ADM as owing money as per the original Contract; and (a big additional step) sufficient to fix both PPL and Mr Jackson with knowledge thereof adequate to mean that the two alleged conspirators were privy to an arrangement to seize ADM's goods without claim of right. 38 I would decline to permit this issue to be argued having regard to the history of the litigation until yesterday. A promissory estoppel case was not pleaded or raised at trial. Had it been, then the respondents would have had the opportunity to meet it by evidence, cross examination or submissions. I would add that the material before us does not establish that conditions subject to which the alleged estoppel is said to have been based were complied with and it indicates that PPL appears to have made it clear that it wished to stand by its original Contract. 39 Question 1 must be answered "No". The Contract was not varied in its essential terms relating to payment of licence fees.

(2) Was ADM in continuous default in 1982? 40 The answer to Question 1 is quite devastating to most of what remains in the appeal, because it leaves unchallenged and unchallengeable the primary judge's conclusion that by April 1980 "ADM was grossly outside the terms provided by clause 26 of the agreement. The same position obtained in July 1980" (Red 84). Events of 1981 demonstrated "continued delinquency in paying licence fees" (Red 96). 41 Picking up the history from that starting point, one observes that on 2 December 1981 Mr McWilliam jnr telexed PPL's Mr Evans in New York (Blue 1495). He told him that cash flow problems would delay the licence fee for the September 1981 issue, which he said would "normally" have been sent on 1 December 1981 (in fact it was due in October 1981, according to cl 26). 42 On 20 January 1982 Mr Evans sent a cablegram to Peter McWilliam (Blue 974). This is the document upon which the respondents rely as constituting a notice to remedy breaches as required by cl 23 of the Contract. Whatever the effect of that document, it certainly put ADM on notice that PPL was very concerned about the state of affairs and was insistent upon due and timeous performance of the Contract. 43 Two days later ADM remitted by telegraphic transfer to PPL $47,367.35 being licence fees for the September and October 1981 issues. This was the last money proved to have been paid by ADM before contract termination by PPL in August of that year, after several more issues had been published. 44 The upshot was summarised by the trial judge in the following terms: On 22 January 1982 it seems, a phonogram was sent to Evans referring to the telegraphic transfer that day of a sum of money said to relate to the September and October 1981 issues. There was no demur in that communication to Evans' assertion that payments were almost 120 days behind nor was there any assertion that the payments telegraphed on 22 January 1982 brought ADM within terms, whatever they might have been. The inference is unavoidable: ADM was grossly in arrears and probably almost 120 days in arrears.

It was submitted by Mr Hodgekiss that, if the agreement as varied in London allowed 60 days terms , the payment on 22 January 1982 put ADM within terms and the demand of 20 January 1982 was satisfied and its contractual effect, if any, was spent. He accepted that if the agreement required payment in accordance with clause 26, or otherwise terms were 30 days, despite the payment on 22 January 1982 ADM remained in default. As will appear, I find that ADM remained in default.

45 The fees from November 1981 onwards were still outstanding on 4 May 1982 when Mr McWilliam jnr wrote to Mr Evans asking for "just a little more patience with us" (Blue 62). Earlier in that missive Mr McWilliam said: "The current license (sic) fees which began with Feb 81 issue will be up-to-date by June 30th. I can send only the Nov issue fee tomorrow. The Dec and January fee on 28th May and Feb and March fee on 30th June". 46 Mr Evans' response on 11 May 1982 was: I was dismayed to receive your telex of May 4. Once again, you have asked us to, in the midst of a new understanding and agreement, accept late payment. Let me repeat that until you get current, which you should have been by 30th April, we will not enter into a new contract with you. In addition, when the new contract is in effect, payment must be made promptly and if there is any delinquency, the claims against the previous agreement take effect.

Bruce, I cannot believe that we are still in this situation. You must put matters right immediately. It is now reaching the point where nothing you tell us can be taken seriously and I want this to stop.

47 Further demands and excuses were exchanged as the delinquency in timely payment of licence fees continued through June, July and August 1982. ADM's responses were repudiatory in everything except perhaps expressed motive. ADM through its managing director was saying in effect that it could not honour the existing Contract in its financial terms (see Red 99-101). Its proffered solution was renegotiation of the Contract. For example, Mr McWilliam telexed Mr Evans on 16 July 1982 as follows (Blue 986): You no doubt realise from previous telexes that we are relying on the sale of the printing business and the sale of Palm Beach property to inject funds into the business to cover losses made in January, February, March and April this year and to also bring our license fees up to date so that we can commence with a clear slate with a new contract. However, the tight liquidity problem continues without relief which has not caused concern with out major financial supporter, Australian Guarantee Company, who are owned by the Bank of New South Wales, making the largest financial organisation in Australia. They have checked our financial affairs with regard to the deteriorating economic climate in Australia caused by world situation, high interest rates, 35 hour week, increasing wage push, inflation and much balance of payment problems. They inform us that we need to restructure our affairs if their support is to continue. They can see that it is not viable to pay back old fees via New Zealand and pay current fees as well. They wish to cite a new contract which commences without back liability. New Zealand sales revenue must come to Australia. The taxation retention must be paid with our monthly remittance. They will monitor our affairs each month. John, we must commence a new contract. We have to forget the one million plus launch and establishment losses and you need to totally waive any more license fees, even from New Zealand, up to the July 1982 issue. The new contract would commence with the August issue currently on sale. We must immediately put our house in good order and balance so that we not merely survive the difficult economic future facing this country, but also maintain the standard and success of Australian Penthouse Magazine. Please communicate with me by Telegram to 56 Mitchell Road, Alexandria. Regards, Bruce. 48 It is convenient at this stage to address the ground of appeal related to the rejection of what became MFI 1 at the trial. It purports to be a record of total remittances by ADM to PPL up to June 1982. When tendered it was rejected (Black 219). Mr Bruce McWilliam gave evidence that it was a document produced by him after examining past telex records. One can therefore understand difficulties with the document being accepted as a business record. 49 Some of the figures in the document are supported by evidence in the record of evidence tendered at the trial, and this Court was taken to various documents. However, the key items which purport to show payments via Curtis New Zealand with reference to the period November 1981 to June 1982 are not otherwise established in the trial record. Somewhat at variance with Mr Bruce McWilliam's evidence at Black 218-19 these items are now said to be based upon a document entitled Schedule of Payments Made on Behalf of ADM Franchise Pty Limited. 50 Evidence tendered on the voir dire in the appeal shows that that document was sent under cover of a fax from Blake Dawson Waldron, PPL's solicitors, to Mr William Hodgekiss the plaintiff's counsel at trial. The fax was sent on the Friday before the commencement of the trial on Monday 15 May 1998. The fax refers to a telephone conversation between Mr Hodgekiss and Mr Blackburn of counsel and simply attaches a copy of the document I have referred to. 51 As I understand the submission of Senior Counsel for the appellants it is only if this enclosure gets into evidence in the appeal that any basis is laid to challenge the rejection of MFI 1 or alternatively and more directly to challenge the trial judge's findings about absence of any payments from ADM to PPL between February and August 1982. 52 I would reject the proffered tender of the fax of 15 May 1998 and accordingly would find no error or basis of questioning the trial judge's decision to reject the document which was MFI 1 at trial. My reasons are that there has not been adequate explanation sufficient to indicate a miscarriage of justice as to why no forensic use was made of the document sent by PPL's solicitors to the plaintiff's barrister on the eve of trial. 53 The Court today was given differing versions of recollection by Mr Blackburn and Mr Hodgekiss. I am sure that each barrister was doing his best to remember what did pass between them in May of 1998. Had the fax of 15 May 1998 been produced before this morning then each of them perhaps might have been able to have done even better than they managed to do, but what remained was a conflict of recollection which remains unresolved. What is clear is that the plaintiffs' barrister had the document on the eve of the trial and did not seek to tender it. 54 In any event the relevant information in the Blake Dawson Waldron fax or MFI 1 at trial does not really get the appellants home on the critical issue. The document does not indicate when what it described as "payments via Curtis" were in fact paid. 55 We were informed that Curtis is an international distributor of books and magazines and that in some way an arrangement between ADM's representative in New Zealand concerning release of the proceeds of sale in New Zealand of Australian Penthouse were intended to be channelled back to PPL via Curtis. I am not sure whether any such evidence to that effect was given at trial but I am certainly prepared to accept it for present purposes. But it doesn't really establish when the money got back. In particular it doesn't establish whether it got back before 30 August, it doesn't establish (nor does anything else we have been taken to establish) that those remittances would have put the account in credit even according to what I shall call the alleged Robertson variations. It certainly doesn't establish that the account was ever remotely in credit according to the contract as I have found it remained. 56 In the end this issue concerning rejection of evidence or admission of fresh evidence in the Court of Appeal goes nowhere because of my conclusions about the variation and estoppel issues. But in any event I would refuse the necessary leave to receive fresh evidence on appeal. 57 The evidence at trial showed that ADM was on the ropes financially by August 1982 (see Red 102-3). Quite apart from the sorry history of default under the Contract there were judgments, unsatisfied returns of writs of execution and the winding up of companies in the group. In August 1982 an order was made for possession of the Riley Street premises from which ADM operated. The later investigations of the provisional liquidator and liquidator showed that ADM was hopelessly insolvent by September 1982 and, I would infer, for some time before that. 58 These matters are relevant to the issue of causation of damage but they are also pertinent to what I think can by now be described as the extraordinary claim persisted in to this day that PPL and Mr Jackson were motivated by intent to harm ADM and through it the plaintiffs. Everything points to their motive being protecting PPL'S legitimate commercial interests. Nothing in the evidence suggests the contrary. 59 For the moment it is sufficient to give my answer to the second question I posed: ADM remained in default under its contract throughout 1982.

(3) Was PPL entitled to terminate on 30 August 1982? 60 The nature and extent of that default and the intimations and the telex of 16 July 1982 justified the trial judge's conclusion that PPL was entitled to treat ADM as guilty of repudiation of its obligations as at 30 August without the need of recourse to the express contractual remedy under clause 23. As at August 1982 there had been no payment of licence fees since a fee in respect of the October 1981 issue. 61 His Honour said this: In my opinion, almost from the inception of the contract, ADM had conducted itself in such a way as to show that it intended to fulfil the contract only in a manner substantially inconsistent with its obligations and not in any other way.

Its chronic tardiness in paying, and as at mid 1982, its failure to have paid any fee beyond the October 1981 issue, particularly in the circumstances of the continuous complaints from PPL, demonstrates to my mind the requisite intention.

If more were needed, and I do not think it was, the telex of 16 July 1982 demonstrates the matter beyond argument.

Indeed, that telex indicates, I think, that ADM could not, and would not, honour its obligations under the 1979 licence agreement.

I think it was shown by the evidence as a whole, and by the telex of 16 July 1982, that, in July 1982, ADM no longer intended to be bound by the 1979 licence agreement or intended to fulfil the contract only in a manner inconsistent with it, and not otherwise.

See Shevill v Builders Licensing Board (1982) 149 CLR 620 at 625, Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited (1989) 63 ALJR 372 at 376.

Gross and protracted delay can be such as to demonstrate that a party must have repudiated the contract even when stipulations as to time have not been made of the essence (see Barwick CJ and Jacobs J obiter in Neeta (Epping) Pty Limited v Phillips (1974) 131 CLR 286 at 302). The facts of this case, detailed above, in my view constitute such delay.

In my opinion PPL was entitled to rely on repudiatory conduct by ADM in its 30 August 1982 notice. The submission by the plaintiffs to the effect that clause 23 provided an exclusive mechanism for termination is not made out by the clause itself, other clauses of the contract dealing with termination in other circumstances, nor by the decisions in Laurinda and Neeta. 62 I agree. 63 In my view it is unnecessary to resolve the alternative ground for determination based upon a clause 23 notice. At trial the plaintiffs argued that the telex of 20 January 1982 did not satisfy the formal requirements of clause 23 because it did not specify the sum demanded or the consequences of non-compliance. The submission is repeated in ground two of the notice of appeal. No written submissions were offered in support of this ground but the point was developed orally by senior counsel. As presently advised I would be inclined to agree with the trial judge's reasons for rejecting the point (see Red 118-121). However, my conclusions on the alternative repudiation issue are sufficient to dispose of this point. 64 My question (3) should be answered: On 30 August 1982 PPL was entitled to terminate the contract as it purported to do by notice and conduct.

(4) Did the appellants establish agreement to do an unlawful act and intention to injure? 65 The appellants accept that if this was the case then there was no conversion of goods on 30 August 1982. Having regard to the absence of any direct evidence of conspiratorial intent it must also follow a fortiori that there was no agreement to commit such an unlawful act between the alleged conspirators. 66 As the claim was pleaded and fought at trial the issues about the terms of the contract, breach, termination and seizure of goods were all in a sense preludes to the main game. The case was not a claim by ADM for conversion of goods, breach of contract or any other wrong. ADM was in liquidation. For reasons of necessity or convenience the plaintiffs sued for wrongs which they said were done to them personally. 67 As to proof of conspiracy referable to the remaining defendants at risk Maconachie AJ said this: I cannot recognise any matrix of facts (even in the circumstances of witnesses not being called that one might expect would have something to offer) which enables me to draw any inferences about an agreement that might have been entered into between any of the defendants, except for the conventional relationship of solicitor and client and, perhaps, an engagement of Mr Sinclair to serve a notice and recover some goods. I think I can also infer that the solicitor/client agreement was successfully carried into effect, to some extent at least, and find that Mr Maitland, on Mr Sinclair's instructions, served a notice on 30 August 1982 at Alexandria but the evidence does not permit me to go any further than that.

68 I agree. 69 The appellants maintain their claim of proven conspiracy. They rely on the notice of 30 August 1982, pointing out that it was signed by Mr Jackson. At its highest this infers no more than that Mr Jackson organised for the process servers to serve the notices and take possession of the goods. 70 The appellants further submit that the overt acts alleged in paragraph 21 of the further amended statement of claim were established by uncontradicted evidence led at trial. In truth the appellants did not prove all of the alleged overt acts, and such as were proved fell way short of what was necessary to establish the serious tort alleged. It bears repeating that the allegations need to be viewed against the background of matters established in the respondents' favour by findings already adverted to. In particular ADM was in significant, longstanding and repudiatory breach, the Contract was brought to an end by notice on 30 August 1982, a large amount of money was owing to PPL, and ADM was in fact insolvent and tottering on the brink of liquidation. 71 My fourth question asks whether the appellants established against the two identified respondents the elements of agreement to do an unlawful act and intention to injure that are necessary to establish the claim of actionable conspiracy. The answer is clearly no. Here there was simply no evidence of a combination between the solicitor and his client for the purpose of achieving a breach of contract or conversion of ADM's goods without claim of right. In fact PPL was within its rights as I have indicated. Nothing in the material shown to have been known to PPL and Mr Jackson as at 30 August 1982 suggests any basis for them having any belief other than a belief as to the entitlement of PPL to terminate the contract and to put in train the steps for protecting PPL's ongoing rights in accordance with clause 14(b). A fortiori, there was not a scrap of evidence of the requisite intention to injure ADM let alone the appellants. 72 In my view it is unnecessary to consider the remaining issues of damage, causation or release by deed. 73 In my view the appeal should be dismissed with costs. 74 HANDLEY JA: I agree. 75 HODGSON JA: I agree with the presiding judge and with his reasons. I would just add a little more on the document MFI 1. 76 The primary judge's rejection of MFI 1 was plainly correct on the material before him. The challenge before us was essentially on the basis that it should not have been objected to, because it was not seriously in dispute; and that in turn depended upon a contention that the communication from Blake Dawson Waldron, referred to by the presiding judge, amounted to an admission. The communication was in such terms that an admission might possibly have been inferred, in the absence of any knowledge of circumstances; but it was common ground before us that this communication was prepared in the course of efforts to reach agreement as to what payments had been made, and that such agreement was not finally reached. In those circumstances, it would not be possible to regard this document as an admission; in the absence of further evidence about it; and no such further evidence was presented to us. 77 I also agree with the presiding judge that the admission of this document would make no difference to the result, quite apart from the presiding judge's view on the questions of variation and estoppel, with which I agree. The document does not establish dates on which the alleged payments from New Zealand were made. There are indications that the payments were in fact made very much later than the months to which they are attributed: in particular, there is in evidence a communication dated 4 May 1982 from Bruce McWilliam, acknowledging that even at that time payment from New Zealand concerning the issues of June to August 1981 had not yet been made. 78 So for those reasons, in addition to those given by the presiding judge, I agree with the result. 79 MASON P: The appeal is dismissed with costs.

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