(b) that to grant relief would not be in the public interest
15 The particulars to which I have referred contain a series of allegations about actions by a number of the Board members and the Chief Financial Officer concerning the sale of various shares in Washington H. Soul Pattinson Ltd and Brickworks Ltd which were part of the plaintiffs' investment portfolio. It then alleges breaches of duties by various Directors in respect of the sale of those shares. It should be noted that these particulars were formerly in the original Defence and have been given as particulars in basically the same form as they originally appeared.
16 The plaintiffs in their submissions suggested that, because of the manifold faults in the Defence, the whole Defence should be struck out rather than individual paragraphs and that the defendant should be ordered to replead. They relied upon well known statements in Trade Practices Commission v David Jones Aust Pty Ltd 7 FCR 109 at 115 and Turner v The Bulletin Newspaper Co Pty Ltd (1974) 131 CLR 69 at 97.
17 It is probably useful to deal with a number of matters of principle which appear in relation to some of the defences pleaded before descending into the detail of the criticisms of the actual pleading.
18 The first matter which I will address is the pleading which appears in paragraph 5.3(a)(b) and 6.2(a)(b) and (c). The thrust of the Defence is that the demutualisation process was contrary to the Memorandum and Articles of Association of each of the two plaintiffs and the general intention and common understanding of members of the basis upon which they have from time to time been admitted to membership, namely, that their respective businesses and undertakings would be conducted as mutual companies and associations together in accordance with the articles.
19 According to the plaintiffs' submissions these pleadings were based upon the unsound, implicit assumption that the plaintiffs are precluded from changing their articles in order to demutualise. The defendants rely upon the principle that equity will restrain conduct otherwise authorised where to engage in such conduct would be entirely outside what can fairly be regarded as having been within the general intention and common understanding of the members when they became members. This principle was referred to in an earlier case concerning the previous attempt at demutualisation, namely, Fraser v NRMA Holdings 55 FCR 452 at page 481. As was pointed out by the majority, conduct of that nature will give the court the power to wind up the company on the just and equitable ground and there was no reason in principle, according to the majority, why equity should not intervene at an earlier point to restrain that conduct.
20 It would be inappropriate on an application such as the present to decide whether in fact such a common understanding can be deduced from the terms of the Memorandum and Articles of each of the plaintiffs. The way in which it is alleged is set out in detail in paragraph 13 of the Defence. The comments of the Full Court in Fraser's case does lend support for at least there being an arguable case in respect of the second plaintiff. The submissions of the plaintiffs did not address what follows if such a common understanding is found to exist by the trial judge. The question would then be whether the existence of such common understanding may either detract from the confidentiality of the material or be a reason why Mr Yates may disclose the material to members being presented with a proposal which was the opposite of the common understanding. Given the absence of argument on the point and appreciating that the answer may well be different depending upon when the material was to be disclosed to members, I would be reluctant to say that the general thrust of the allegation by way of Defence should be struck out.
21 The next major area concerns the pleadings in 5.3(c)(d)and in paragraph 6.3. In general these plead that some or all of the President's team, being the majority of Board, conducted themselves in a manner which was wrongful and thus either no obligation of confidentiality arose or, alternatively as pleaded in 6.2, the Court would not in its discretion, enforce the obligation. The plaintiffs criticise these pleadings on three bases.
1. The actions to be incorporated by reference which are pleaded in paragraphs 34 to 75 do not deprive the information of its confidential quality.
2. The allegations are based upon defective material.
3. The allegations deal with individual conduct which is not attributed to the company. It is the plaintiffs' claim which is being resisted not a claim of individual directors.
22 The defendant relies in his submissions on what he says is the special defence of "public interest" which applies and which may incline a court either to find that the information is not confidential or to decline to enforce the confidentiality. He refers in submissions to the debate which appears in paragraph 4123 of Equity Doctrines and Remedies by Meagher, Gummow and Lehane, Third Edition. It is plain from that discussion that there is a substantial difference between what is said to be the law in England and that which may apply in Australia. In Attorney General v Observer Ltd (1990) 1 AC 109 at 268-269 and 282-283, Lord Griffith and Lord Gough accepted the recent extensions to the original formulation of the principle said to flow from Gartside v Outram (1857) 26 LJ Ch 113 where it was said there could be no confidence in an "iniquity". The extension was that this principle would include cases in which it is in the public interest that the confidential information should be disclosed. That approach involves a Judge balancing the public interest in upholding the right to confidence which is based on the moral principles of loyalty and fair dealing against some other public interest that will be served by the publication of the confidential material. In this country this proposition has been doubted and critically examined. In Castrol Australia Pty Ltd v Emtech Associates Pty Ltd (1980) 33 ALR 31, Mr Justice Rath held that a just cause for breaking a confidence must be more weighty and precise than a public interest in the truth being told. He followed Ungoed-Thomas J in Beloff v Pressdram Ltd (1973) 1 All ER 241 where His Honour said at 260:-
"The defence of public interest clearly covers and, in the authorities does not extend beyond disclosure…of matters carried out or contemplated, in breach of the country's security, or in breach of law, including statutory duty, fraud, or otherwise destructive of the country or its people, including matters medically dangerous to the public, and doubtless other misdeeds of similar gravity. Public interest as a defence in law, operates to over-ride the rights of the individual (including copyright) which would otherwise prevail and which the law is also concerned to protect. Such public interest, as now recognised by the law does not extend beyond misdeed of a serious nature and importance to the country and thus, in my view, clearly recognisable as such."
23 Rath J's view was approved by Brownie J in Bacich v Australian Broadcasting Corporation (1992) 29 NSWLR 1.
24 The matter was further considered by Mr Justice Gummow as a member of the Full Bench of the Federal Court in Corrs Pavey Whiting and Byrne v The Collector of Customs (1987) 14 FCR 434. His Honour's decision was a minority decision but because of the way in which he approached the construction of the relevant legislation he was the only one who had to consider the particular question with which we are now concerned. His Honour went back to an early starting point and considered Gartside v Outram to determine for what principle it was authority. He found that the case provided an insufficient basis for the present English public interest defence to which I have referred. The basic principle to come from the case he expressed in the following terms:-
"From this consideration of Gartside v Outram I conclude that that case provides insufficient basis for any 'public interest defence' of the kind that, in its name, has been developed in the recent English authorities. The truth as to what Gartside v Outram decided is less striking and more readily understood in terms of basic principle. It is that any court of law or equity would have been extremely unlikely to imply in a contract between master and servant an obligation that the servant's good faith to his master required him to keep secret details of his master's gross bad faith to his customers. Likewise, before any express contractual obligation of confidence is enforced at law or in equity the term relied on must be valid at law. A v Hayden provides one example. Cases where express terms, allegedly designed to protect trade secrets, have been struck down as being in restraint of trade provide further examples: Drake Personnel Ltd v Beddison (1979) VR 13 at 19-21; Pioneer Concrete Services Ltd v Galli (1985) VR 675. The case presented to us is not one of an express or implied contractual term as to confidence; it follows from what I have said as to Gartside v Outram that that case does not assist the
appellant in the way the appellant submitted."
25 His Honour went on to formulate an alternative basis, namely, that the case stood for the fact that even if the plaintiffs had valid legal rights they would have been denied equitable relief in accordance with the principle of unclean hands. He finally commented:-
"If there be some other principle of general application inspired by Gartside v Outram , it is in my view of narrower application than the 'public interest defence' expressed in the English cases. Such a narrow principle would not be concerned with contractual protection of confidence. Where the plaintiff asserts a contractual right, the law of contract, supplemented by equitable defences were equitable relief is sought, sufficiently deals with the situation. Any principle of the kind I am now considering will be applied in equity where there is no reliance on contractual confidence. That principle, in my view, is no wider than one that information will lack the necessary attribute of confidence if the subject matter is the existence or real likelihood of the existence of an iniquity in the sense of a crime, civil wrong or serious misdeed of public importance, and the confidence is relied upon to prevent disclosure to a third party with a real and direct interest in redressing such crime, wrong or misdeed."
26 It can be seen that Mr Justice Gummow's analysis, like that of Rath J, is substantially narrower than the formulation which now applies in England. The defendant conceded that he would need to rely upon the English formulation in order to support the pleading. The defendant submits that on a strike out basis such a pleading is permissible in order to allow him to argue the matter. I would have thought that if a trial judge in this division were clearly bound to follow the approach of Gummow J or Rath J then the pleadings should be confined to that law.
27 The principles have not finally been determined by an appellate court in this country. Some justices of the High Court discussed Gartside v Outram in A v Hayden (No 2) (1984) 156 CLR 532, the case which concerned the botched ASIS "practice" raid on the Sheraton Hotel in Melbourne in 1983. The ASIS operatives involved sought the enforcement of confidentiality terms in an employer/employee contract whilst the Commonwealth wished to reveal their names to the Victorian police for the purpose of investigating criminal prosecutions. Gibbs CJ at 545 and Wilson and Dawson JJ at 571-573 discussed a possible refusal to grant injunctive relief in terms of the public interest involved in the administration of justice, specifically the revelation that crimes had been committed.
28 Gibbs CJ (who was in the minority because he required more precise details of the alleged criminal offences) made some broader obiter comments on the scope of the rule noting the expansion of the concept of "iniquity" in Gartside v Outram to mean misconduct generally and disagreeing with the view of Sheppard J in Allied Mills Industries Pty Ltd v Trade Practices Commission (1980) 55 FLR 125 at 167 that the public interest in disclosure of iniquity will always outweigh the public interest in the preservation of private and confidential information. Gibbs CJ thought a weighing up of the nature of the offence and the public interest in disclosure was required. He also noted with caution the decision in Woodward v Hutchins (1977) 1WLR 760; (1977) 1 All ER 751 considered to be the high-water mark of the "public interest defence" in English law where the public interest in the disclosure of the truth was said to outweigh the interest in confidentiality even where there had been no misconduct. He refers to Rath J's disapproving judgment in Castrol Australia Pty Ltd v Emtech Associates Pty Ltd & Ors (1980) 33 ALR 31.
29 The matter appears to have been referred to in two cases in the New South Wales Court of Appeal. David Syme & Co Ltd v General Motors-Holden's Ltd (1984) 2 NSWLR 294 concerned an appeal from a decision granting interlocutory injunctive relief to GMH. An employee of GMH had leaked allegedly confidential technical and project information which was then published in a Japanese magazine and which the appellant now wanted to publish. The appellant had submitted that injunctive relief should be denied on the basis of the public's right to know and argued that where maintaining confidentiality would mislead the public about a subject in which the public has a legitimate interest in being informed, the court must balance the competing public interests. The Court of Appeal found no reason to interfere with the trial judge's rejection of this defence at the interlocutory stage. However, the court did consider its nature. Hutley JA at 306 said:
"The proprietary right in its confidential information of this kind is not to be weighed against other circumstances, except in cases where questions of iniquity are involved."
30 Samuels JA at 309 thought that cases of misconduct should be seen as representing a category of cases where the public interest to know should prevail over the public interest in maintaining confidentiality. He agreed with Lord Denning's view in Woodward v Hutchins (1977) 1 WLR 760 at 764; (1977) 2 All ER 751 at 754 that "it is a question of balancing the public interest in maintaining the confidence against the public interest in knowing the truth". This, of course, is contrary to the approach of Gummow J.
31 Attorney-General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86 was the Spycatcher case. Kirby P discussed a defence of public interest in relation to the disclosure of confidential information being the publication of a book about the activities of MI5, the British spy agency.
32 The majority of Kirby P and McHugh JA had different grounds for their decisions to dismiss the appeal. Kirby P had already determined that the New South Wales Court Appeal had no jurisdiction to hear an application to enforce a public foreign law but this view was not shared by McHugh JA, the other member of the majority. On that basis Kirby P went on to discuss his views on the respondent's defence of public interest. And so the application of the public interest defence was for him obiter dicta. Street CJ and McHugh JA did not make any findings on the defence but approached the question by making a government/private information distinction.
33 Kirby P at 170 adopted Megarry V-C's definition of "public interest" in British Steel Corporation v Granada Television Ltd (1981) AC 1096 at 1113: "something which is of serious concern and benefit to the public". His Honour went on to say that the word "iniquity" in Gartside v Outram did not express a principle but is "simply an instance of the wider category of the public interest in disclosure which may sometimes, even if rarely, outweigh the public interest in confidentiality and secrecy: cf Gibbs CJ in A v Hayden (No 2) (1984) 156 CLR 532 at 545f." The public interest in information about the behaviour of national security agencies and the defence of democratic institutions was determinative. (see 170).
34 His Honour also eschewed an approach to Gartside v Outram on the basis of the equitable principle of "clean hands" at (171).
35 The case went on appeal to the High Court who dealt with it without the need to consider the "public interest" defence. Given the dicta of Mr Justice Kirby in the Court of Appeal and the High Court dicta referred to above it could not be said that a judge at first instance would be bound to adopt the narrower view. Accordingly, I will assess the pleading on the basis that the broader English approach would be appropriate.
36 It is necessary to look at the allegations which are incorporated into the pleading in order to appreciate the nature of the public interest defence and in doing so it is worth bearing in mind the other attacks made upon these paragraphs by the plaintiffs, namely, that they lack material detail and are related only to conduct by individuals rather than conduct of the plaintiff companies themselves. I turn to the particular paragraphs in the defence.
Paragraph 34 Coordination of Demutualisation and Election
37 This paragraph in the pleading alleges that the demutualisation programme and the re-election of directors due in 1999 will be coordinated to occur at the same time to assist in the re-election of the persons who will support Mr Whitlam and the President's team at board meetings. Given the particulars it is likely to be a matter which is a board decision.
Paragraphs 35 to 37 The One Mutual Proposal
38 These recite some actions by some board members on an earlier demutualisation proposal which was abandoned in early 1998. The relevance to any possible defence is hard to see.
Paragraph 38 Project Outlook Engagement of Consultants
39 This is a reference to the resolutions for the consultants to do a scoping study in May 1998.
Paragraphs 39 to 40 Takeover Committee
40 These paragraphs are not contentious.
Paragraphs 41 to 45 Protocol for the Consultant's report.
41 These paragraphs plead the passing of resolutions by the boards which adopted a media spokesperson protocol whereby only Mr Whitlam and Mr Dodd were to speak or comment on the consultant's report. The relevance of paragraphs 41 and 42 is not apparent.
Paragraphs 46 to 51 Draft and Final "Confidential Reports".
42 These paragraphs plead the preparation of a draft report and make allegations about its contents.
43 Paragraph 50 makes allegations of failure of some of the directors to bring the report to the Board's attention, to make enquiry about matters in the report and to consider what are now alleged to be defects in the report.
44 Paragraph 51 then pleads that in so acting those directors committed various breaches of duty owed to the company. The particulars in respect of the alleged breaches of duty are inconsistent with the allegations in paragraph 50. See for instance the allegation that the report was propounded in the particulars provided under paragraph (d) of 51(C). Those particulars also contain an allegation that certain directors failed to act honestly in the interests of the plaintiffs but acted in their own interests. The circumstances particularised of failing to act honestly do not support such an allegation. It is a wholly deficient pleading in this regard.
45 More importantly, however, these paragraphs raise a matter of substance and that is what is the role of allegations of breach of duty by directors in the course of board processes. This one is a particularly stark example because it concerns a draft report and that draft report was not acted on by the company. The pleading is extremely confusing in its terminology but appears to address both the draft and the final report. It seems to me that these allegations have been made in order to add colour to what might be described in the words of Gartside v Outram as "an iniquity". If there is to be some public interest reason why the confidentiality which belongs to the company should not be protected or held to arise, such reason must come from actions of the company. In many cases these actions will be those of individuals whose actions can be attributed to the company. See for example the facts alleged in Gartside v Outram. In my view, individual actions, of which this is a good example, by directors in the processes leading up to a board decision could not be relevant to any such defence. Such actions may be a matter of complaint which the company may wish to take up with the directors. In short the actions do not show that the company has committed "an iniquity".