Federal Court of Australia|1989-08-10|Before: Pincus J

Re Schindler Lifts Australia Pty Limited and Precision Elevators Pty Limited v Milan Debelak; Kevin Addison; Liftronic Pty Limited; Vladimir Debelak and Ravila Pty Limited [1989] FCA 311 (10 August 1989)

Re: SCHINDLER LIFTS AUSTRALIA PTY LIMITED AND PRECISION ELEVATORS

And: MILAN DEBELAK; KEVIN ADDISON; LIFTRONIC PTY LIMITED; VLADIMIR

Contract-Confidential Information-Injunction-Damages-Costs

Trade Practices - misleading or deceptive conduct - denigration of services available from competitor - application of s.53 - test applicable where criticism of competitor.

Practice - pleadings - large complex action - many representations pleaded - issues litigated but not pleaded - whether representations should be considered that are not pleaded.

Defamation - imputations that competitor not well regarded and incompetent - negative equivalent of puffery - whether results in loss of reputation.

Tort - injurious falsehood - criticism of competitor - whether malicious although made with intention of getting business - whether lack of belief in truth of statements about competitor shows malice.

Tort - inducing breach of contract - customers of competitor induced to terminate or not enter maintenance contracts - what degree of knowledge of contract required - intention - whether knowledge of work done implies knowledge of continuing contract - whether general soliciting of business unlawful.

Tort - inducing breach of contract - "agent" for overseas companies - no written agreement - course of dealings - whether contract.

Master and Servant - employee caused overseas supplier to change allegiance - whether breach of implied obligation to employer.

Trusts - constructive trust - breach of obligation by employees - overseas supplier induced to give agency to newly formed company - working against interest of employer - conflict of interest and duty - account of profits - what benefits flowed from breach.

Master and Servant - duty to employer - working part-time for competitor - relevance of reciprocal duties of employer.

Contract - restrictive covenant - overlapping promises - whether uncertain.

Contract - restrictive covenant - covenant by vendor of minority interest in company - "engaged in any business" - whether provision of finance constituted being engaged in the business - whether term should be implied not to derogate from performance of the sale contract.

Confidential Information - use of customer lists after leaving employment - whether implied term in employment contract not to use information after termination of employment - factors to determine if information confidential.

Injunction - specific illegalities - whether injunction of practical value - whether desirable to frame uncertain injunction.

Damages - elaborate case successful on few heads - exaggerated claims - no rational foundation for accurate estimate of damages - whether Court should award any damages.

Costs - elaborate case successful on few heads - serious injustice if costs follow the event - discretion - method of assessment.

Counsel for the applicants: Mr R. Stitt Q.C. with Mr Lewisohn

Solicitors for the applicants: Madden Butler Elder Graham

Counsel for the respondents: Mr G.A. Palmer Q.C. with Mr B.W. Walker

Solicitors for the respondents: Michael Dunkel & Co.

Judgment for the applicants against the first three respondents in the sum of $31,000.

That the respondents pay to the applicants costs fixed at $20,000.

That if any party notifies the Court in writing on or before 17 August 1989 that he or it wishes to be heard on costs, a date for hearing of argument on that question shall be fixed.

This judgment shall not be perfected until further order.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

In 1984, when this dispute had its genesis, the second applicant (Precision) was a small but prosperous company engaged in the business of installing and maintaining lifts. Its managing director, the fourth respondent (Vladimir), who had established the business and built it up with great ability, had considerable standing in the lift industry. He also had a substantial shareholding in Precision, as did his family company; however, others had the majority shareholding. Vladimir's interest in the business was not merely financial; he was proud of what he had wrought and of Precision's reputation. His brother Serge and his son, the first respondent (Milan), worked in the business and the latter, I think, expected to make his career with Precision, as his father had.

2. A substantial Swiss-based lift group, by its Australian subsidiary (Schindler), decided to take over Precision. Vladimir did not want to sell, but the majority shareholders wished to do so, so that in a practical sense his hand was forced. A takeover eventuated but did not go well. It was necessary to mesh the operations of the two companies. There was personal friction and some of the Precision employees resented the change which had taken place, and the new authority which Schindler executives had the right to exert. Personal relations between Schindler's general manager, D.J. Reilly, and Vladimir were, however, good.

3. Milan decided to leave Precision and commence a competing company. The second respondent (Addison) went with him and later other Precision employees followed. Milan set up a company in which he had the major shareholding and Addison a minor shareholding: the third respondent (Liftronic).

4. Liftronic attempted to attract business from Precision customers by comparing the service available from Precision unfavourably with that which Liftronic could provide. These approaches were resented by Precision's new owner (Schindler), both because some of what was said to the customers was thought to be untruthful, and because Schindler believed that Liftronic personnel had used confidential information, which they had obtained as Precision employees, in their attempts to get business. Another and separate cause of discontent was that foreign lift companies which had formerly used Precision as their Australian agent ceased to do business with Precision and went over to Liftronic. For these and other reasons, Schindler's purchase of Precision was seen by it as a very unsatisfactory venture; the fact that Liftronic had been formed with some ex-Precision employees working for it and actively soliciting business from Precision customers was seen as a major cause of the trouble, but there were undoubtedly other causes.

5. After some time Vladimir decided to leave Precision and he became a part-time employee of Liftronic. He had entered into a contract restraining his activities, as part of the takeover arrangements; Schindler believed he had acted unlawfully in assisting Liftronic and working for it.

6. Precision went to its solicitors, and with the assistance of a great deal of advice from them, attempted to combat what it saw as the malign influence of Liftronic on its business. One of the major weapons, in the end, was the institution of proceedings in this Court. Precision, through its solicitors, went to an immense amount of trouble to gather evidence against Liftronic and those associated with Liftronic in an attempt to show illegalities of various sorts - misleading statements, defamation, inducement of breach of contract and so forth.

7. I think the takeover was less successful than was hoped for a number of reasons: because, quite apart from any legal considerations, some of the Precision personnel did not work in well with Schindler after the takeover; because Liftronic was formed (a step Milan and Addison were entitled to take) and provided competition directly attacking Precision's business; because Schindler was greatly distracted by the problem of Liftronic and its executives devoted an enormous amount of effort to combatting the Liftronic threat - more, I suspect, than it was worth; and because of what I believe were some illegal activities on the part of Liftronic and those associated with it.

8. In my opinion, however, the last group of causes (illegal activities on the part of the respondents) did not directly cause any great damage to the applicants. Schindler, which has, or has at least acted as if it has, considerable financial resources, has left no stone unturned in pursuing the respondents. Every conceivable cause of action which its lawyers thought arguable has been put forward and the evidence adduced on the issue of damages shows that Schindler spent large sums on legal costs. The legal costs of this dispute will substantially exceed the damages awarded. A considerable proportion of the legal costs was expended in activities which had, in the end, some connection with the pursuit of this litigation, but were principally related to Schindler's view that a suitable fighting post in this commercial battle with Liftronic was its lawyer's office.

9. The pleadings set up, and the evidence shows, that there were two relevant agreements. The first was made on 29 June 1984, and under it Schindler bought the shares in Precision from the then shareholders (Vladimir and others) for $6,046,000. The second agreement, whose date is precisely defined neither by the pleadings nor by the evidence, was made between Schindler and Vladimir as part of the arrangements for the takeover. Under the second agreement, Vladimir undertook to work for Schindler full-time until the end of 1984 and to work as a consultant until 30 June 1989.

10. The statement of claim, although not divided into sections, raises a number of distinct causes of action. In setting them out, I shall use the numbering of the paragraphs in the pleading.

11. Paragraphs 9-12. In this part of the pleading, the applicants set up that Milan, Addison and Liftronic made representations to potential customers, orally and in writing, which denigrated the services available from the applicants and praised those given by Liftronic. By this means, it was said, people were induced not to engage the applicants, or to terminate maintenance contracts with them. These representations were said to be contrary to s.52 of the Trade Practices Act 1974 - i.e. likely to mislead or deceive - and also contrary to s.55 of the Act. There are difficulties about the allegations in the pleading giving particulars of the falsity of these representations, but they are more conveniently discussed below.

12. Paragraph 13 says that Milan, Addison and Liftronic induced employees of Schindler to leave it and come to work for Liftronic and to provide confidential information to Milan, Addison and Liftronic, for use against the applicants.

13. Paragraph 14 alleges that Milan, Addison and Vladimir wrongly induced suppliers to the applicants, namely "Daldoss Elevetronic and Express Lifts U.K. Pty Ltd" to replace the applicants by Liftronic as agents in Australia and to stop supplying the applicants with their products.

14. Paragraphs 15, 16 and 17 say that Milan and Addison breached their obligations as employees of Precision to act faithfully and the like by causing the termination of the arrangements with the overseas suppliers just referred to (resulting in disruption and delay in deliveries by the overseas suppliers) deliberately causing equipment failures and neglecting their duties as regards customer maintenance, using (after leaving their employment) confidential information acquired during their employment and engaging in other contractual breaches of the same general kind.

15. Paragraph 18 alleges that Vladimir, or a company associated with him (the fifth respondent Ravila), had obligations to the applicants similar to those of Milan and Addison. It is said that they breached their obligations by, for example, making improper use of information, working for Liftronic and refusing to do work which Vladimir should have done for Precision. The pleading sets up that by the conduct complained of Vladimir or Ravila has breached the consultancy agreement and thereby repudiated it. The applicants seek repayment of remuneration paid under the consultancy agreement.

16. Paragraphs 22 and 23 say that the respondents conspired together to injure the applicants in their business affairs and commercial reputations, in that Vladimir provided Milan with capital to establish Liftronic and advised him how to do so, and in that Milan and Vladimir did other wrongful acts complained of in earlier passages in the pleading.

17. Paragraphs 24, 25 and 26 allege against Milan, Addison and Liftronic that they defamed the applicants by telling people that the first applicant was not of good commercial standing and the second applicant was not well regarded and other similar statements.

18. Paragraph 27 relies upon the statements just referred to as fraud and also as slander of goods.

19. Paragraphs 28, 29, 30 and 31 set up breaches by Vladimir of the agreements made by him in restraint of trade, express and implicit.

20. Paragraph 32 says that the applicants suffered loss of profit and other damage and paragraph 33 asserts that the respondents are chargeable as trustees for profits and gains made by them.

21. Further details of the allegations contained in the applicants' pleading and the answers on behalf of the respondents appear in the various sections of these reasons. Vladimir and Ravila have cross-claims for damages on the basis that Schindler failed to pay them amounts due under the consultancy agreement, and by repudiating that agreement caused Vladimir and Ravila a loss.

22. The statement of claim, in its original form, alleged nine misrepresentations in paragraphs 9(a) to (i), the particulars of the respects in which they were misleading being in paragraph 11. By amendment, two further misrepresentations were put forward, paragraphs (ea) and (eb); later some language was deleted from paragraph 11. It is, in the circumstances, desirable to set out the relevant allegations in their final form:

"9. The First to Third Respondents from February 1985 have

made representations to customers and potential

customers of the Applicants that (contrary to the true

facts):

(a) because of its acquisition by the First Applicant

the Second Applicant was no longer a well regarded

company or of good commercial standing;

(b) the First Applicant was not of good commercial

standing;

(c) since the acquisition customers' lift maintenance

and other requirements had been neglected and not

satisfied by the Applicants, in breach of

maintenance contracts;

(d) the Applicants did not have the technical

expertise, proficiency and resources to maintain

and service lifts that had been installed by the

Second Applicant;

(e) replacement parts and materials required for proper

lift maintenance could only be obtained from the

Third Respondent and/or under a maintenance

contract with it;

(ea) The Third Respondent had acquired the sole

distribution rights for Gebauer A.G. of Switzerland

for lift equipment and parts.

(eb) The Third Respondent by agreement with Express Lift

Co. Limited of England had:

(i) been appointed its sole agent or

alternatively its agent for supply in

Australia of all lift equipment and, further

or alternatively, spare parts manufactured by

it;

(ii) had acquired the right of direct supply of

all spare parts for equipment marketed by it.

(f) the Applicants did not, and would never have, the

capacity to satisfy customers' lift maintenance and

other service requirements;

(g) the Applicants did not, and would never have, the

capacity properly to carry out maintenance

contracts;

(h) the Third Respondent could supply lift maintenance

services of a kind, standard, quality and price

that the Applicants did not and could not supply;

(i) the Applicants' maintenance contracts and other

services were unsuitable for customers and less

suitable than the Third Respondent's.

PARTICULARS

Oral, written and to be implied.

A. To the extent oral, to the effect alleged and

stated in conversation between the First and Second

Respondents with customers and potential customers,

including those specified under paragraph 10.

B. To the extent written, constituted by:

.1 letters in the terms of a letter of 7 March

1985 to the Secretary, Strata Plan 13365 from

the Third Respondent to customers and

potential customers, including those specified

under paragraph 10, and more than 50 others,

including Montana Nursing Home; Departments of

Industrial Relations, Public Works and Housing

and Construction; Julius Poole & Gibson; Anka

Builders Pty. Ltd.;

.2 letter of 24 July 1985 to Southern

International Constructions Pty. Ltd. from

Third Respondent and similar letters to

others.

C. Otherwise to be implied from all the circumstances

of the case and operation of law."

"11. By reason of the misrepresentations in paragraph 9 (in

the circumstances particularized) the First to Third

Respondents did (and unless restrained will continue to)

engage in conduct in trade and commerce that:

(a) was misleading or deceptive or likely to mislead or

deceive;

(b) thereby contravened section 52 of Trade Practices

Act 1974 ('the Act');

(c) was liable to mislead the public as to the nature,

characteristics and suitability for their purpose

of services provided by the Applicants and the

Third Respondent;

(d) thereby contravened section 55 of the Act.

PARTICULARS

B. It was not disclosed that the services, terms and

any apparent advantages offered to representees by

the Third Respondent had arisen from or been

facilitated by the First to Third Respondents'

breaches of duty and wrongful conduct (as alleged

in the Statement of Claim) towards the Applicants."

23. The respondents did not deal, in their submissions, with those of the pleaded misrepresentations which were not dealt with in the applicants' submissions; I propose to follow the same course. The respondents further contended that certain of the representations alleged in the applicants' submissions to have been made did not correspond with anything to be found in the statement of claim.

24. As to that point, it is my opinion that, in a case of this sort, the Court should ordinarily insist upon reasonably precise pleading and that any contention that a representation should be found in terms substantially different from those pleaded should be rejected. This strictness is justified because the hearing was conducted over two distinct periods, with a gap of months in between; there was ample opportunity to consider the necessity or desirability of any amendments to the statement of claim. The only misrepresentations to be considered, then, are those which are both pressed in the applicants' written submissions and covered by the pleading.

25. Different considerations apply to the particulars in para.11, which appears to have been ignored by the parties in conducting their cases. It will be noted from the terms of para.11, fully set out above, that statements are said to have been misleading only by reason of non-disclosure.

26. However, the written submissions made by the respondents (p 49-55) deal fully with the question of falsity; no doubt the submissions do so because of the way the hearing was conducted. I am driven to the conclusion that it is necessary to deal with the allegations of falsity advanced in argument, as opposed to the incongruous particulars; this point is discussed further, below.

27. The allegations of misrepresentation rely upon, inter alia, s.52 of the Trade Practices Act and s.55. The terms of the former are familiar enough; the latter reads:

"A person shall not, in trade or commerce, engage in

conduct that is liable to mislead the public as to

the nature, the manufacturing process, the

characteristics, the suitability for their purpose

or the quantity of any goods."

28. Although flowing from the Paris Convention for the Protection of Industrial Property (see Donald and Heydon Trade Practices Law Vol.2 at p 618), s.55 is not in terms confined to misleading conduct connected with patents or the like.

29. The question arises whether s.55, read with s.82, gives an individual who can prove that the public has been misled a right to damages. I do not propose to go into that point, nor to deal with the question whether any misleading conduct relied on misled the public, as opposed to misleading certain individuals. The reason is that the terms of s.52 are such (with one possible reservation) as to catch any representation caught by s.55.

30. The possible reservation is that s.52 speaks of conduct that is "misleading or deceptive or is likely to mislead or deceive" whereas s.55 speaks of "conduct that is liable to mislead the public". It is I suppose conceivable that the word "liable" connotes a different degree of probability from the word "likely", but if so the difference is not sufficiently great to warrant s.55's being given separate treatment.

31. The applicants also set up (by para.12 of the statement of claim) a case of breaches of s.53, and in particular of paragraphs (a), (aa), (e), (f) and (g) of that section. Most of these appear to me to be inapposite. Those which are most relevant are (aa) and (f). The relevant part of s.53 read as follows:

"A corporation shall not, in trade or commerce, in

connexion with the supply or possible supply of

goods or services or in connexion with the

promotion by any means of the supply or use of

goods or services -

...

(aa) falsely represent that services are of a

particular standard, quality or grade;

...

(f) make a false or misleading representation

concerning the need for any goods or

services; ...

..."

32. It may be that in some respects s.53 goes beyond what is proscribed by s.52. Although s.52(2) prevents one from using s.53 to limit the generality of s.52(1), in the circumstances of this case it does not appear to me that the applicants gain from s.53 anything which they may not obtain from s.52(1). To put that more particularly, insofar as the applicants are able to show that the respondents misleadingly or deceptively put before the customers assertions designed to convince them that they would be better off using Liftronic to maintain their lifts, that is caught by s.52(1) and it is of no consequence whether it is also caught by s.53.

33. The representations relied on, so far as set out in writing in the applicants' submissions, are as follows:

(a) because of its acquisition by Schindler, Precision was no

longer a well-regarded company or of good commercial

standing;

(b) Schindler was not of good commercial standing;

(c) replacement parts and materials required for proper lift

maintenance could only be obtained from Liftronic and/or

under a maintenance contract with it;

(d) Liftronic had sole rights of distribution for Gebauer A.G. of

Switzerland for lift equipment and parts.

34. These representations, which correspond with those in subparas.(a), (b), (e) and (ea) of para.9 of the statement of claim, are said to be able to be derived from letters sent to customers; they took two basic forms.

35. The first was a "letter of introduction" which was sent to at least 500 prospective customers between 21 February 1985 and 10 April 1985. The relevant part of a typical letter read as follows:

"It is with pleasure that I draw your attention to

the fact that a new elevator Company, LIFTRONIC

PTY. LIMITED has now opened for business.

My partner, Mr Kevin Addison and I have had many

years experience holding supervisory and management

positions in Sales, Installation and Maintenance in

the lift industry.

We were formerly with Precision Elevators Pty.

Limited which was always very highly regarded,

until the sale of the company to a large overseas

Multi-National in June 1984.

LIFTRONIC PTY. LIMITED is a wholly Australian owned

company and we have acquired the sole distribution

rights for:-

1. DALDOSS ELEVTRONIC - ITALY

For the standard microlift range of electronic

service lifts and document lifts.

2. GEBAUER AG - SWITZERLAND

For high quality equipment for passenger and

goods lifts.

We have also negotiated and acquired from The

Express Lift Company the direct supply of all

Express parts ..."

36. The letters of introduction on this pattern sent at various times were not in precisely the same form, but the variations do not seem to me great enough to warrant detailed analysis. It should be mentioned, however, that in exhibit 70 (sent to the Property Manager, Manufacturer's Mutual Insurance Ltd, on 20 May 1985), there is no mention of Precision Elevators Pty Limited having been "always very highly regarded". It appears that the later form of letter of introduction was toned down, in response to complaints by the applicants; but the letter from which I have quoted is representative of the bulk of the correspondence of which complaint is made.

37. As to representation (a), set out above from the applicants' submissions, there is a clear implication in the third paragraph of the quoted letter that Precision Elevators Pty Limited was not, at the time of writing, very highly regarded. I reject the notion that the words "until the sale ..." are merely descriptive of the history of Milan and Addison.

38. But suppose the assertion that Precision Elevators Pty Limited "is not very highly regarded" were made expressly - would that be unlawful? The question is not to be considered in the abstract, but in its context, namely that the reader is aware that the assertion comes from a competitor and is made in the same sentence as that which conveys the information that Precision has been sold to a large overseas multinational.

39. In De Beers Abrasive Products Ltd. v. International General Electric Co. of New York Ltd. (1975) 1 WLR 972, the plaintiffs complained of, inter alia, slander of goods. The material complained of compared the plaintiff's product with that of the defendant. In his judgment Walton J., at p 978, suggested that the trader's entitlement to puff his own goods "extends to other vague commendatory statements about goods or services on offer". The judge was of opinion that:

"Where ... the situation is not that the trader is

puffing his own goods, but turns to denigrate those

of his rival, then, in my opinion, the situation is

not so clear cut."

The test suggested was "whether a reasonable man would take the claim being made as a serious claim or not". If by "serious" is meant "likely to cause a person who is seriously interested to change his view", I would agree.

40. A claim by a trader that his goods or services are "highly regarded" would ordinarily be taken to be mere puffery. A statement to contrary effect about a rival's goods should not be held to overstep the permissible limits of denigration, to adapt the language of Walton J. in the De Beers case. It has to be conceded that a statement by a rival about a trader which is universally acknowledged as pre-eminent in its field that it is "not highly regarded" might be a breach of s.52, as being simply a lie. In my opinion, however, in the circumstances of this case, to treat statements such as that in which the words complained of are contained as within the prohibition in s.52 would be to place unreasonable legal inhibition on ordinary communication in Australian business. I hold that the relevant sentence is not caught by the section.

41. It is also submitted by the applicant the letter conveys that Precision is "no longer ... of good commercial standing". It does not say that, nor necessarily imply it.

42. The next assertion, (b), also fails. I am unable to derive from the letter a statement that Schindler is not of good commercial standing. The sentence in question says that Precision has been sold "to a large overseas multinational", a description probably not intended to be flattering, but one far from conveying the meaning that the company to which it has been applied is of bad commercial standing.

43. The next submission relates to the question of lift maintenance. It is true that some readers of the letter, who knew or believed that the lift in their building depended for its maintenance on parts from one of the three foreign entities mentioned, might become concerned about the availability of parts. But the submission made is correct only if one can rationally derive from the letter that maintenance parts cannot be obtained otherwise than from Liftronic. In my opinion, although some might possibly take this from the letter, that is not its proper meaning. To say that one has the "sole distribution rights" means of course that one is the distributor - i.e. a vendor to others - but does not imply that those to whom the distributor sells must necessarily be members of the public, rather than companies which maintain lifts.

44. The remaining submission, (d), about the letter from which I have quoted appears to me to be made out. As to that, the only question is whether the representation was true; was it true to say that Liftronic had sole rights of distribution from Gebauer A.G.? It is my view that the statement was not proved to be, in substance, untrue.

45. The second complaint of misrepresentation requiring consideration relates to a letter of a different kind. It is one dated 24 July 1985 from Liftronic to a potential client, Southern International Constructions Pty Ltd, the relevant parts of which read as follows:

"...

As you are aware the lifts installed at 100

Christie St, were manufactured by the 'Express Lift

Company' (sic) England and installed by Precision

Elevators. When Precision Elevators was sold in

June 1984, the Express Lift Company withdrew the

agency from Precision Elevators and its purchaser.

Liftronic Pty. Limited is now the agent for Express

equipment in Australia.

After discussions with the Managing Director of

Express earlier this year in Sydney, he reassured

us that Express will support us in every way

possible to resolve the problems at Christie St.,

as you can see this has been reconfirmed as per the

enclosed letter and telexes.

Liftronic have the employees and technical backup

to repair the lifts so that they may operate as

intended. Since the control system of these lifts

is programmed and microprocessor controlled any

alterations made to the system without the

technical back-up and direct access to spare parts

(only available from Express) can compound the

problems already encountered. The longer these

problems are left unattended, the worse they will

become.

..."

46. As to this letter, it is unnecessary to discuss (a), (b) and (d) in the submissions, but some attention requires to be paid to (c). It is true that the letter does not expressly state what is set out in (c), but that is not the end of the matter; the impression the letter gives is that lifts made by the Express Lift Company cannot be properly maintained except by using the services of Liftronic. The respondents have submitted that the letter "simply states truthfully the position as between Liftronic and its overseas suppliers". That may be so literally, but the truth was that Precision could still obtain parts for Express Lifts, so in my opinion the letter was designed to mislead and probably did do so.

47. In my opinion, in the respect just mentioned, there is a breach of s.52 of the Act.

48. Third and last, the group of submissions based on s.52 has to do with alleged oral representations. There are said to be four misleading statements:

(a) Schindler was technically incompetent and would have problems

with the supply of spare parts and equipment;

(b) Schindler would run out of parts and equipment for the lifts;

(c) Schindler would not have the expertise to service the lifts;

(d) Schindler would not have the technical competence to fulfil

its contract but Liftronic did have such competence.

49. There was a considerable quantity of evidence concerning these oral representations. Its effect is difficult to summarize, but some samples must be set out.

50. Mr David Kenny of Southern International Constructions Pty Limited (the party to which the letter dated 24 July 1985 dealt with above was addressed) made an affidavit saying that he received a telephone call from Milan about the end of 1985 asking that Liftronic be allowed to quote to maintain lifts at 100 Christie Street. According to the affidavit, Milan said that Schindler was not able properly to service the lift because of lack of technical know-how to maintain the particular micro-processor in question. In his oral evidence, Kenny added that Milan said that "the people that were currently trying to fix it ... would probably cause further damage through their lack of knowledge and incompetence". The conversation and the letter alarmed Kenny. B.C. Simmonds of S.P. Hilton and Co. Pty Limited received correspondence from Liftronic in much the usual form soliciting business and was later approached by Addison. Simmonds swore that Addison told him that within twelve months Schindler's reserve of spare parts would run out as a result of the acquisition by Liftronic of the sole agency from Express. In his oral evidence Simmonds said that Addison's statements caused him a great deal of concern. However, in the result, Liftronic obtained no business by these approaches.

51. Mr P. Arthur of R.B. Kerr (Group) Pty Ltd also gave evidence of an approach by Milan concerning 100 Christie Street. Milan claimed, according to Arthur, that Liftronic as the agents for Express in Australia, were "the only people who can get the bugs out of the lifts" and that Schindler would have great difficulties in doing so.

52. R.J. Coutts of the same company had a rather similar approach, from Addison. Coutts' evidence was to the effect that there were said to be two problems: the fact that the Schindler people lacked experience with Express equipment and that Schindler would have difficulty in obtaining spare parts. Miss J.R. Alexander, a body corporate secretary, attributed to an unidentified gentleman from Precision Elevators statements of a similar character.

53. It appears to me that the customers' responses to Liftronic's approaches are illustrated by a letter from Southern International Constructions Pty Ltd to Schindler dated 8 August 1985 to the effect that Liftronic suggested that Schindler "may not have the expertise to properly carry out maintenance and repairs to the Express lifts and may not even be able to obtain spare parts". It expressed concern and asked for assurances.

54. The principal evidence advanced by way of refutation of the applicants' case on this aspect was that of Milan and Addison. Of the two, Addison was by far the more impressive witness, but there is no sound reason for accepting either of them as to this aspect of the case against the evidence of disinterested persons, some of whom I have mentioned.

55. That is, I am satisfied that oral representations were made to customers along the lines set out in (a), (b), (c) and (d), above.

56. It is necessary at this point to make some reference to the course which the process of pleading took. The statement of claim originally filed in November 1986, after pleading the representations, alleged (in para.11) that they were misleading or deceptive under s.52 and also misleading under s.55. It particularised this allegation by saying, in effect, that supply of equipment and parts was withheld except after deliberate undue delay and at unprofitable prices and also alleging that it was not disclosed that -

"... the services, terms and any apparent advantages

offered to representees by the Third Respondent

(Liftronic) had arisen from or been facilitated by

the First to Third Respondents' breaches of duty

and wrongful conduct (as alleged in the Statement

of Claim) towards the Applicants."

57. By amendment made during the trial, the reference to particular 10B was deleted, as was that paragraph itself.

58. At that point then, the statement of claim took on a curious shape: it alleged that misleading statements were made about (to put it shortly) the advantages to be gained from using Liftronic for maintenance and the disadvantages likely to be incurred from using the applicants for maintenance, but the only particular respect in which, according to the pleading, those statements were misleading or deceptive was that just quoted - i.e. in summary, that any problems the applicants had as to maintenance were due to the respondents' misdeeds. The pleading did not assert that it was untrue that the applicants had difficulties with maintenance.

59. What I think the applicants meant to plead was that the assertions about their problems in maintaining lifts were, in any event, overstated - not that they were merely misleading in attributing a wrong cause to the applicants' problems. I have no hesitation in rejecting the applicants' case as pleaded in para.11. It seems to me fanciful to suggest that (if the representations were otherwise correct) they would have become misleading as failing to point out to customers that Liftronic had so arranged matters that the applicants could not do their maintenance work properly, but the matter does not stop there. With some regret, I feel obliged to hold that the question of the factual accuracy of the oral representations I have found to have been made was litigated, although not raised by the pleadings. For example, in para.6.5.2 (p 53) of the respondents' written submissions it is said:

"No evidence has been adduced to the effect that SLA

in fact had sufficient familiarity with the new

types of lifts in Christie Street to fix them. The

whole history of that job demonstrates the truth of

the assertion that SLA might have technical

difficulties in solving the problems ..."

60. Then it is submitted (p 54) that such statements as to parts as were made were true.

61. I am further of the opinion that, on that issue, the applicants should succeed. That is, I find that the oral statements made whose effect is summarised in paras.(a), (b), (c) and (d) above were misleading. In particular, they tended to convey to customers, contrary to the truth, not merely that there might be some delay obtaining spare parts, but that they might simply be never available to the applicants; further, they tended to convey that the applicants would be technically incapable of performing lift maintenance properly; I find that not to be so.

62. The question of the losses suffered by the applicants as a result of the misleading statements I have found to have been made is dealt with separately.

63. The applicants' submissions rely upon the letters referred to above and the oral statements as constituting actionable defamation. However, the relevant paragraphs of the statement of claim rely, in this connection, only upon the letters of introduction. The relevant allegation of publication is as follows:

"In and after March 1985 the First to Third

Respondents in Sydney, by letters to installation

and maintenance customers of the Applicants,

published of and concerning the Applicants the

following 'the relevant words':

'Dear Sir,

... a new elevator company, Liftronic Pty. Ltd. has

now opened for business.

My partner, Mr Kevin Addison and I have had many

years experience holding supervisory and management

positions in Sales, Installation and Maintenance in

the lift industry. We were formerly with Precision

Elevators Pty. Limited which was always very highly

regarded, until the sale of the company to a large

overseas Multi-National in June 1984.

Liftronic Pty. Limited is a wholly Australian owned

company ....

Yours faithfully,

Liftronic Pty. Limited

(signed)

Milan Debelak

Managing Director'"

64. The pleading alleges that persons to whom these words were published were aware of certain facts (set out in para.25) and that certain imputations defamatory of the applicants were conveyed by the words. These were, in substance, that the applicants were neither well-regarded, nor of good commercial standing, nor competent to carry out lift installation and maintenance.

65. The respondents have, in their submissions, taken the point that the oral statements relied on in connection with the Trade Practices Act are not pleaded as being defamatory.

66. I can see no reason, as to this cause of action, for permitting the applicants to go beyond the ambit of the statement of claim, and I hold that the respondents' submission on the point is correct. One reason for doing so is that the applicants' strategy has been to plead every possible cause of action in pursuit of their aim to obtain satisfaction from the respondents. While their entitlement to do so must be admitted, it does not appear to be a sound policy to allow distinct grounds of complaint to be raised by way of submission at the conclusion of the hearing.

67. The respondents further contended that the words complained of by the applicants should not be read as implying that Precision is no longer highly regarded. I do not accept this contention.

68. The respondents would have me hold that the true bearing of the letter is merely to suggest that Precision ceased to exist as a separate business when it was sold. The matter is largely one of impression, and I do not think that the matters pleaded to support the innuendos set up add anything, nor do I find it necessary to set them out. The question is whether the letter is defamatory of the second applicant, Precision, as implying that Precision is no longer very highly regarded.

69. Lord Blackburn said in The Capital and Counties Bank, Limited v. George Henty & Sons (1882) 7 App Cas 741 at 771:

"A libel for which an action will lie, is defined to

be a written statement published without lawful

justification, or excuse, calculated to convey to

those to whom it is published an imputation on the

plaintiffs, injurious to them in their trade, or

holding them up to hatred, contempt, or ridicule."

70. The statement in question is, if defamatory, in the former category - i.e. while there would be no question of the statement engendering hatred, contempt or ridicule, it is arguably of a kind calculated to be injurious to Precision in its trade; it reflects to some extent on the reputation of Precision although not in a particularly effective way.

71. Justification is not pleaded, nor is it suggested that any issue as to privilege arises for consideration. As a matter of practicality, it seems odd to sue on such a letter as being, in this respect, defamatory. For a competitor openly seeking business to write that a rival company is not "highly regarded" - the implication I have taken from the letter - is, if a libel, about as slight a libel as one could postulate. In my opinion, it is not one; it is the negative equivalent of puffery. In my view, it is not likely to have resulted in any loss of reputation: cf. Sim v. Stretch (1936) 52 TLR 669 at 672 (Lord Atkin).

72. For reasons which are not clear to me, while the applicants' pleading relies, as to defamation, only upon the letter from which I have quoted above, their injurious falsehood case depends on all the same statements as have been pleaded in the causes of action under the Trade Practices Act. That is, the applicants say that those statements were published falsely and maliciously.

73. The particulars as to falsity are that paragraph 9 is incorporated. In fact, paragraph 9 gives no particulars of falsity and makes no allegation of falsity. Probably what the pleader meant to incorporate was para.11, whose incompleteness in this respect is discussed above. Without going over the same ground, I conclude that I should overlook the absence of any sensible particulars of falsity, as I consider that the question of falsity was, in a practical sense, placed in issue.

74. The applicants submitted that there was malice consisting in three elements, which may be summarised as follows: firstly, there was an attempt to attract business; secondly, there was a purpose of damaging the applicants commercially; thirdly, Milan and Addison both knew that their disparagement of the applicants was false. The respondents assert that since damage is not a consequential matter, but the gist of the action, it must also be proved. In my opinion, it is convenient to leave the question of damage to be discussed under a separate heading.

75. The respondents' principal contention in answer to this part of the applicants' claim is that there was no malice. That is so, the respondents say, because Milan and Addison had a reasonable basis for believing the truth of the statements, whose making was motivated purely by a desire to get business.

76. The decision in De Beers Abrasive Products Ltd v. International General Electric Co of New York Ltd (1975) 1 WLR 972, to which reference is made above, was given on an application to strike out a pleading. It contains, however, a useful review of English authority to that date concerning statements of the kind here in issue. It is unnecessary to summarize Walton J.'s account of the cases. What it demonstrates is that the respondents' assertion that they merely wished to get business is no defence. An intention to do so appears to have been at the root of the trouble in practically all the cases Walton J. mentions. A clear example, whose facts are comparable with the present, is the decision of Vaisey J. in The London Ferrogh-Concrete Co Ltd v. Justicz (1951) 68 RPC 65 (affirmed (1951) 68 RPC 261). The parties there were competing building contractors and one told a prospective customer that construction in accordance with the method proposed by the other would produce an "inadequately designed construction". More specifically, the defendant said that a certain joint was not adequate in respect of a stipulated load.

77. It was held that the statements just mentioned were false and that they were "malicious" although made with the intention of getting work - indeed, apparently because of that intention (see p 68 .25).

78. It was found that although the defendant thought his method superior, he did not believe his competitor's to be "inadequate".

79. In the case just discussed, the Court did not determine whether a lack of belief in the truth of what was said was necessary in order to show malice. The decision of the Court of Appeal in Shapiro v. La Morta (1923) 40 TLR 201 bears on that point. There, Scrutton LJ. referred to authorities which -

"... suggest that if the defendant is speaking in

furtherance of his own business or interest and

honestly believes what he says to be true, in

contrast with deliberate intention to injure the

plaintiff, either with knowledge that the statement

is untrue or with reckless indifference to whether

it is true or false, then either there is no cause

of action or the defendant has a 'just cause or

excuse'" (p 203).

Scrutton L.J. appeared to act on the view just mentioned, but Atkin L.J. merely assumed, without deciding, that the necessary element is either knowledge of falsity or recklessness.

80. The applicants in their submissions accepted that the law is as stated by Scrutton L.J. and assumed by Atkin L.J. in the case just mentioned. It appears to me improbable that a businessman, in comparing his services with those of a rival, is guilty of the tort of injurious falsehood if (in order to persuade a customer of the advantages of the former and disadvantages of the latter) he makes erroneous but not reckless assertions which he positively believes to be true. I therefore accept that the necessary mental element is as contended for by the applicants - i.e. knowledge of falsity or recklessness.

81. It follows from what I have said earlier, in the discussion of the misleading quality of the oral representations, that that element is satisfied here. The case is an unusual one, in that what was stated orally was not totally without truth; it nevertheless involved falsehood, in the sense that the problems about supply of spare parts had to do only with possible delays in supply. I reiterate that in my opinion the statements made to customers by Addison, and even more so those made by Milan, wrongly gave the impression that the applicants lacked the technical capacity to service the lifts in question and might well be unable to obtain parts for them.

82. It may seem to some surprising that the law exacts such a standard, as to disparagements of competitors; no doubt exaggerations of the demerits of other goods or services are common enough in business. In the present case it appears to me that the respondents went beyond mere generalisation and committed the alleged tort.

83. It should be added that in arriving at the conclusion just mentioned, I have taken into account some suggestion from the respondents' side that the disparaging statements were in substance true. There was a considerable amount of evidence about the state of the lifts at 100 Christie Street and problems associated with them. The respondents submitted that -

"... the whole history of that job demonstrates the

truth of the assertion that SLA might have

technical difficulties in solving the problems."

In that connection, reference was made to some evidence of Mr H. Wulz, Schindler's New South Wales manager, to the effect that there "were considerable problems with these lifts at St. Leonards". That problems were encountered does not show that those responsible for the lifts' maintenance were incompetent.

84. It is unnecessary to attempt to reach a conclusion as to whether and if so, to what extent, the problems just referred to were the fault of the applicants, for I am satisfied that there is no basis in the evidence for holding that the applicant lacked the technical capacity to correct difficulties such as those at 100 Christie Street - whether or not errors of diagnosis or otherwise were made. I accept the evidence of D.J. Reilly, who was in my opinion generally a fairly reliable witness, that the applicants have personnel with a great deal of specialised experience in working on Express equipment. Milan stressed in his affidavit that Express is a "world wide competitor to Schindler", but there is no good reasons to think that it would take the extraordinary course - no doubt damaging to itself - of causing or permitting Express lifts maintained by the applicants to become unserviceable for want of spare parts.

85. The statement of claim alleges that the respondents induced termination and/or breach of contracts by three categories of persons: firstly, the applicants' customers; secondly, European suppliers; and thirdly, Precision employees.

86. It is convenient to discuss these three points separately. The question of European suppliers will be dealt with more broadly - i.e. not merely under the heading of inducing breach of contract.

87. As to the customers, the applicants' case is based upon the representations set out in para.9 of the statement of claim and mentioned above in other connections. Paragraph 10 says that by those representations Milan, Addison and Liftronic:

"(a) induced the Applicants' customers and

prospective customers to terminate and breach,

not renew or not enter into, maintenance

contracts with one or other of the Applicants

but to enter into such contracts with the

Third Respondent;

(b) otherwise prevented or hindered and interfered

with the Applicants' performance of their

contractual obligations;

(c) attempted so to do; and unless restrained will

continue so to do."

88. The pleading then gives a list of maintenance contracts claimed to have been lost, sixteen in number.

89. The applicants' contention is that by making their customers worry about the applicants' ability to do maintenance work, they caused the termination of these contracts.

90. The applicants' submissions on this point were as follows. They said that the representations complained of were made to induce customers to terminate their contracts with the applicants and enter into fresh maintenance contracts with Liftronic. They added that there was widespread concern among customers in consequence of the representations and that Schindler had many calls, inquiries and the like from customers coinciding with the making of the representations.

91. The applicants submitted that there were "misconception and concern" on the part of customers as to the applicants' capacity to service lifts, that price was not the only material consideration to customers, and that Milan and Addison presented themselves as having first hand knowledge of the matters on which the misrepresentations were based. The applicants said that as part of a campaign to obtain existing maintenance contracts, false statements were made with, in some instances, success.

92. The respondents submitted (to put it in a very summary way) that loss of any maintenance contracts is a matter which must be specifically proved by establishing the cause of the change of allegiance of each customer relied on; they added, of course, that no adequate proof was advanced.

93. Two distinct additional aspects of this part of the case were that, according to the applicants, the respondents interfered with the performance of an existing contract, thus preventing or hindering the applicants from carrying out their contractual obligations.

94. Resolution of the problems raised by these opposing contentions requires some analysis of the evidence, but I will firstly attempt to deal with the legal principles, so far as relevant to the issues I have to decide under this heading and with respect to the other two allegations of inducing a breach of contract.

95. As to the degree of knowledge of the existing contractual obligation which must be shown, Fleming says (The Law of Torts 7th ed. pp 656-7):

"But although the defendant must have plotted to

interfere with the contract, he need not have

actually known the precise terms of it nor that his

object could be accomplished only through its

breach. If - turning a blind eye - he went about

it regardless of whether it would involve a breach,

he will be treated just as if he had knowingly

procured it. Indifference is homologated with

intent."

In Carlton & United Breweries Ltd v. Tooth & Co. Ltd (1986) 7 IPR 581 at p 625 Young J. held that knowledge of the actual terms of the contract on the part of the defence is unnecessary; see also Delphic Wholesalers Pty Ltd v. Elco Food Co Pty Ltd (1987) 8 IPR 545 at pp 552, 553 per McGarvie J. The World Series Cricket case, Greig v. Insole (1978) 1 WLR 302 is also authority for the proposition that the defendant need not be proved to have known the terms of the contract of which he intends to induce a breach: see pp 335-336. The highwater mark of this line of authority is the suggestion in D.C. Thomson & Co. Ld. v. Deakin (1952) Ch 646 at p 687 that "common knowledge about the way business is conducted" might be enough to establish knowledge.

96. Next, there must be an intention to produce a breach or other unlawful intention; negligence does not appear to be enough: the cases are collected in Clark and Lindsell on Torts, 15th ed. p 702. The requirement of intention seems to have been watered down somewhat in Greig v. Insole (see at p 344), which is one of the cases relied on in the second sentence from Fleming quoted above and is the authority relied on by Lord Denning M.R. in Torquay Hotel Co. Ltd. v. Cousins (1969) 2 Ch 106 at 138 for a similar proposition. In that case Winn LJ. said at p 148 that:

"... once it is established that an individual or

company which can only keep going by receiving,

periodically, certain essential commodities,

habitually receives them from a certain supplier,

and this fact is well known, it is an unreal

exercise to trouble to investigate how much any

person knew about the precise contractual terms on

which such supplies were obtained."

This begs the question: there may be no continuing contract at all, but only a series of ad hoc arrangements. If the mere fact that customers are apparently having their lifts maintained by a particular person supplies proof of the reckless intention, the applicants here are considerably advanced. But it is my opinion that that is not enough; an alternative supplier of maintenance services is not obliged to infer, from the mere fact that a potential customer is already having its lifts serviced, that there is a continuing contract whose breach he must be careful not to induce.

"We did not know at the relevant times the actual

legal status of contractual relations between the

applicants on the one hand and the customer on the

other hand, except where, in some cases, the

customer referred to the proposed termination or

past expiry of a maintenance contract with one or

other of the applicants."

98. Addison adhered to that in cross-examination, as did Milan. However, Milan did not deny that more than 90% of the people Liftronic initially approached were Schindler clients.

99. In submissions in reply, the applicants advanced an argument as follows. They said (and it is the fact) that the evidence disclosed that ordinarily, after a period of free maintenance, customers who had lifts installed entered into a lift maintenance contract with the installer. They argued that by use of confidential information, the respondents', being able to determine the date of expiry of the free maintenance, undercut the applicants' prices, and thereby "denied the applicants of obtaining contracts out of the free maintenance period".

100. Whether or not the behaviour just mentioned occurred, it does not constitute the tort of inducing a breach of contract, despite the dictum of Winn L.J. which I have already quoted. It seems to me that a lift maintenance company is entitled to try to persuade people not to contract with other companies (whether or not the others installed the lifts in question), and the idea that there is some sort of property in such customers appears to me to have no legal foundation.

101. What the applicants have to show, in order to suceed under this heading, is that, knowing or believing that customers approached had subsisting maintenance contracts with the applicants, the respondents tried to induce them to repudiate such contracts. I agree with the respondents' submissions that, insofar as Liftronic persuaded customers to contract with it when they had no lift maintenance contract with Schindler, the relevant tort was not committed.

102. As to existing lift contracts, the principal submission for the respondents is that:

"For all the Respondents knew, the customers in

Table 1 may have had no contracts with PE at all,

either because they were in a free maintenance

period or because, having come out of a free

maintenance period, the customers subsequently

never signed a maintenance contract."

103. That is literally correct; as appears from what is said below under the heading "Customer Lists", I have not accepted the applicants' submissions that certain "master lists" were in the possession of Milan or Addison; it follows that they had no detailed knowledge of the contractual arrangements between the customers whom they approached and Precision. On the other hand, it must have been clear to them that at least some of the customers to whom they wrote had current maintenance contracts and that their approach would, if successful, be likely to induce those customers to rescind their subsisting maintenance contract. This is illustrated by a passage in the evidence of Addison:

MR. STITT: "Does that refer to a conversation with

Mr Varga where the sending of a letter of

cancellation to Schindler was discussed?---Well, I

do not know. I think he did send a letter of

cancellation, yes.

You say that is the only one there ever

was?---Well, I cannot recall. I recall, as I said

to your Honour, that Mr. Varga did ask me - - -

HIS HONOUR: Did you encourage him to cancel?---No.

He asked me whether he could break - - -

Did you encourage him in any way to cancel the

contract?---No.

Why did you not?---No.

Why did you not?---Well, it is his decision. If he

thought I was going to do the job better or

whatever, it is a decision that he has to make. I

cannot force a man to cancel the contract. It is a

decision he has to make himself."

104. In my opinion, neither Milan nor Addison specifically desired the applicants' customers to cancel their maintenance contracts, thereby breaching them. What they wanted was their business.

105. It seems to me that a problem which is indistinguisable in principle would arise if a new lift maintenance company simply sent out letters soliciting the business of all the lift proprietors in a city. It would be known to a new company that many - perhaps most - would have existing maintenance contracts. If the attractiveness of the new contract offered were great enough, obviously some would be likely to cancel their existing contracts or attempt to do so, and sign up with the new company.

106. In my opinion, although some of the more recent English authorities might suggest that such a general solicitation would be unlawful, the better view is that it would not be. Surely a new maintenance company, attempting to break in, is not obliged when seeking business to warn each prospective customer that it may be unlawful to rescind an existing maintenance contract.

107. This case differs from the general solicitation just postulated, in that what is complained of is an attempt to get the applicants' existing customers - in particular, to engage Liftronic instead of the applicants. I cannot see that that makes much difference; any lift owner is likely to have some sort of existing maintenance arrangement, whether under a continuing contract or otherwise.

108. My conclusion, then, is that there was established no solicitation of existing customers of such a kind as to constitute the tort of inducement of breach of contract. Some of the people Liftronic sought had no maintenance contract and some were able to terminate their existing contract lawfully; the risk that some unable to do so might nevertheless have repudiated their existing maintenance obligations does not, in my opinion, make Liftronic's approach unlawful.

109. It is necessary to deal, in addition, with a separate category of matters under this heading, namely the lifts at 100 Christie Street, St. Leonards, and at Wilson's Car Park.

110. The lifts in question were installed in 1984 and, as I find, were at the times of the events alleged against the respondents in free maintenance periods.

111. Although the word "sabotage" is not used in the applicants' submissions, that is in substance what they allege. That is, the substance of the applicants' case as to these lifts is that Liftronic conspired with Express to ensure that the lifts did not perform well, in the hope of inducing the proprietors to engage Liftronic to maintain them.

112. As to 100 Christie Street, the essence of the applicants' factual case was that the lifts performed very badly until the locks on the motor room were changed, in October 1985. As to Wilson Car Park, the same pattern is relied on, and it is added that Liftronic personnel were seen near the premises.

113. I can understand the applicants' suspicions, but it appears to me clear that the sabotage case is unproved. Its central point as to both premises is the alleged sharp drop in service calls after lock changes, illustrated by elaborate graphs placed before me. These give averages of numbers of service calls in three ways - per month, per quarter and lastly, over the whole period before and after the lock change.

114. As, on the evidence, one would expect there to be fewer service calls as time went on, one cannot derive from the graphs any convincing evidence that the lock changes were critical events. For example, as to Wilson Car Park, there were substantially more service calls in each month from November 1986 to February 1987 (after the lock change) than there were in January to August 1985 (before the lock change). With respect to 100 Christie Street, there were certainly many calls in the month up to and including June 1985; then there was a sharp drop about the time of the lock change (October 1985), followed by a rise: there were twice as many calls in February 1986 as in October 1985 and more again in April 1986. There was still a substantial number of calls (ten) in each of February and March 1987 - more than there had been in July 1985 before the lock change (six).

115. Since Rejfek v. McElroy [1965] HCA 46; (1965) 112 CLR 517, it has become clear that the difference between the criminal standard and civil standard of proof is "no mere matter of words: it is a matter of critical substance" (at p 521). Nevertheless, as that case makes clear, one has to take into account the gravity of the allegation. I am not satisfied that the problems experienced at 100 Christie Street and Wilsons Car Park were due to interference by the respondents or anyone on their behalf.

116. It follows that the applicants' case under this heading fails completely.

117. The inducement of breach of contract case under this heading is pleaded as follows:

"The First, Second and Fourth Respondents

deliberately and wrongfully induced and produced

the Applicants' suppliers, namely Daldoss

Elevetronic and Express Lifts U.K. Pty. Ltd. ('the

overseas suppliers') or one or more of them:

(a) to terminate without notice the Applicants'

exclusive agencies for Australia;

(b) to refuse the Applicants further supply of

their products;

(c) to constitute the Third Respondent exclusive

agent and supplier of their products in

Australia;

(d) to require the Applicants to obtain their

products from the Third Respondent, if at all;

(e) and thereby interfere with, breach and

repudiate contractual arrangements with the

Applicants.

PARTICULARS

These arrangements were developed in discussions in

Europe between representatives of the overseas

suppliers and the First and Fourth Respondents in

and about September-October 1984 and confirmed

thereafter in communications between them from time

to time."

118. The respondents submit, and it seems to me correct, that the particulars just quoted are vague in that "(t)here is no pleading or particulars of any supply agreements with one or both of the applicant companies ..." In their submissions, the applicants tended to evade this issue.

119. It was not suggested - nor could it be - that after termination of their respective employments, Milan or Addison could not lawfully attempt to have overseas suppliers use Liftronic as their "agent" in Australia in lieu of Precision, absent any binding contracts between Precision and the overseas suppliers.

120. The question of overseas suppliers' arrangements arises in the case in two other contexts. Firstly, the applicants say in effect that Vladimir, in breach of his personal obligations, interceded on behalf of Liftronic to establish a relationship between Liftronic on the one hand and Daldoss and Gebauer respectively on the other. Secondly, the submission is that Milan and Addison, in breach of their contracts of employment, took steps during their employment to establish relations with Precision's overseas suppliers. Neither of these two contentions depends upon showing the existence of a pre-existing binding contract between Precision and any of the overseas suppliers.

121. It does not appear to me that there is any evidence on which it could reasonably be held that at the date of takeover there was a binding agency agreement with any of these three entities. Reilly said, in effect, that on 1 July 1984 he was aware that there was no formal agency agreement between Daldoss and Precision and that subsequent discussions confirmed "that there had never been a formal written arrangement between the two companies, or three companies or whatever". Vladimir said that he told Reilly before the takeover that there was a "gentlemen's agreement with all of them", meaning the overseas suppliers. He went on to explain that Precision had a "very good relationship with Daldoss and Gebauer", but not with Express Lifts.

122. An illustration of the position is provided by exhibit "M" to Vladimir's affidavit of 11 December 1985. That is a letter from Express to Vladimir urging the advantages of "some sort of formal agreement, even if to begin with it covered only the technical side".

123. The absence of any binding agreement with Express seems clear enough, but it is necessary to say more about the other two entities.

124. At the time of the takeover, Vladimir had developed a personal relationship with members of the Daldoss and Gebauer families, who, it appeared, respectively controlled an Italian entity, Elevtronic S.P.A. and Gebauer & Son of Zurich. There was much evidence as to the nature of the legal connection between Daldoss and Gebauer, on one hand, and Precision, on the other, prior to the takeover. On 11 July 1984, Vladimir sent Daldoss a telex referring to Schindler's agreement to buy the shares in Precision, and saying:

"Schindler have advised they are very keen to

represent you in Australia and they hope there is

no change in the agreement."

125. The applicants relied upon the reference to "the agreement" as tending to show that there was a legally binding contract between Daldoss (at least) and Precision before the takeover. The applicants contended that the contract was one which could not be terminated except on reasonable notice.

126. No written agreement between any of these three suppliers and Precision was tendered. A document dated 30 September 1975 evidencing an agreement between Elevtronic S.P.A. and Precision Elevators Maintenance Pty Ltd (not the second applicant) is in evidence (DR19) and the applicants relied upon that as being the origin of the contract between Daldoss and Precision.

127. Precision Elevators Maintenance Pty Ltd, as the document just referred to shows, certainly had a contract with Elevtronic S.P.A. and it may be that by some process, Precision - i.e. the second applicant - made a similar contract, but there is no evidence on which one could safely base a finding that that occurred. The document of 30 September 1975, however, exemplifies the range of matters which would be likely to have been agreed if a contract binding according to Australian legal principle were to have been concluded. There was provision as to the length of the contract, its mode of termination, the required level of purchases by Precision Elevators Maintenance Pty Ltd, Elevtronic S.P.A.'s obligations to supply, price and mode of payment, and a promise by Precision Elevators Maintenance Pty Ltd not to sell certain competing articles on the Australian market.

128. It may be that by a course of conduct Precision made agreements with some or all of these three suppliers of a character similar to that of 30 September 1975. However, that was not proved. Vladimir said, speaking of the "gentlemen's agreement" with overseas suppliers, that:

"I do not think it was in writing. It was just an

agreement that if we keep on buying from them they

will not sell to anyone else in Australia. There

was no contractual agreement."

I have interpreted this as meaning that neither side was bound in any absolute sense. I am not prepared to find that there was a legally binding agreement preventing the overseas suppliers from selling to anyone else here, as long as Precision "kept on" buying some unspecified quantity of goods.

129. I thought Vladimir was, in many, but not in all respects, a reliable witness. I see no reason to reject the evidence just quoted.

130. I find it difficult to understand why, if there was a definite, legally binding, agreement with any of these suppliers, Reilly would not have been made aware of that in 1984, when the parties were not in dispute. It is, I think, not uncommon for business entities to have long-standing relationships whose spirit is perfectly well understood, but which are not able to be formulated as legally binding contracts.

131. If there were any such contracts as the applicants allege, they would have been contracts for sale of goods. It was argued, on the foundation of some references in the oral evidence, that sales were made by Precision before the takeover as an agent, properly speaking, for overseas suppliers; but the weight of the evidence was in favour of the view that there was an agency only in the commercial sense. It appears that Precision's practice had been simply to purchase equipment from the suppliers outright. If there was a contract with, say, Daldoss under which it undertook to sell goods to Precision, there must have been agreement as to the parties' obligations to buy and sell. It might have been agreed, for example, that Daldoss would be required to supply such equipment as Precision needed to fulfil its contracts at its standard prices, but one could not say that that would have been sufficiently certain, nor that Daldoss would necessarily have accepted such an obligation.

132. I decline to find that there was an enforceable contract with any of the three suppliers other than such separate contracts of sale as were made from time to time. There was, however, a working commercial relationship which, in a practical sense, was an asset of the Precision business.

133. In my view, Milan and Addison had no right to seek to undermine that relationship while they remained employees. The applicants argued that they did so and that they received assistance from Vladimir.

134. Vladimir travelled overseas at Precision's expense in August and September 1984. There is no evidence that on that occasion he did anything to induce the overseas suppliers to change the nature of their relationships with Precision. The applicants, however, argued that Vladimir must have interceded on behalf of Liftronic. The written submissions went on to inquire rhetorically:

"Why would the agency be taken from (Schindler) ...

and given to Liftronic, an entirely unknown and

untried company, unless Daldoss and Gebauer were

convinced that (Vladimir) was backing the company

with expertise and finance?"

135. The extent to which Vladimir was backing Liftronic is dealt with elsewhere and need not be recounted here in full. There is no evidence that the prospect of Vladimir's connection with Liftronic was the cause, or even a cause, of the overseas suppliers' changing their allegiance. There is an uncertain dividing line between guesswork and inference; were one entitled to engage in the former, one might well speculate that Vladimir let Daldoss and Gebauer know in January 1985 that he was going to throw in his lot, at least to some extent, with Liftronic. It is also possible that he actively persuaded them to sell to Liftronic, rather than Precision, but there is no evidence on which that could safely be concluded. The core of the applicant's argument is that, in the absence of clear indications of support from Vladimir, Milan would never have been able to induce Daldoss and Gebauer to break the arrangement with Precision, but that is not necessarily so; there was no evidence from any representative of Daldoss or Gebauer as to the reasons for the change. It is at least conceivable that one or more of the overseas suppliers was influenced by a disinclination to use Precision as "agent" once it became a subsidiary of Schindler, a member of a group much bigger than and quite different in character from the company with which the suppliers had been dealing, and also by a desire to continue a connection with the Debelak family.

136. While being of the view there is no evidence against Vladimir which could support a finding with respect to the overseas suppliers, I am of opinion that Milan breached his contract of employment in taking steps to wean the suppliers away from Precision. Milan claimed not to remember whether he had discussed supply with Daldoss and Gebauer prior to leaving Precision. Addison said he knew Milan rang one Luca Daldoss, a member of the family, in late January 1985, but did not know who Luca Daldoss was. He also gave evidence that it was not until after he had left Precision that he ascertained that Milan had arranged for the supply of Daldoss and Gebauer equipment.

137. Addison was, in my opinion, aware when he left Precision's employment (on 13 February 1985) that Milan had, as a telex of 5 February 1985 reveals, reached agreement with Gebauer and Daldoss to represent them in Australia. Addison impressed me as a generally reliable witness, and I doubt that he consciously tried to mislead me about the matter. Nevertheless, it seems to me that Addison must have been aware of at least the general character of discussions Milan obviously had with Gebauer and Daldoss in late January and early February; I find that he knew and approved of them. He admitted, in answers to interrogatories, that he was told in January 1985 that Milan would seek to secure overseas suppliers, and that he agreed with Milan that steps would be taken to obtain the right to supply Gebauer equipment.

138. The applicants argue that it should be found that Milan, before 4 February 1985 (when his employment was terminated), unlawfully attempted to seduce away important suppliers to his employer. On the whole of the evidence I am satisfied that is so. The respondents contended, in effect, that Milan might have commenced his campaign to secure the "agencies" between the time he left employment (4 February 1985) and the time he sent a telex of 5 February 1985 telling Express that he had reached agreement with Gebauer and Daldoss. I think that to be highly unlikely.

139. On those findings, it must follow that both Addison and Milan breached their obligations to Precision. Whatever the extent of the employee's implied obligation to an employer, it cannot be consistent with them to try to persuade persons having valuable commercial connections with the employer to break those connections. The "good faith and fidelity" mentioned in Robb v. Green (1895) 2 QB 315 at p 320, implicit in every contract of employment, required that in this matter, Milan and Addison attempt to preserve the employer's interest, not to destroy it for the benefit of a potential competitor, Liftronic.

1. It was not established that Vladimir took part in persuading

overseas suppliers to go over to Liftronic.

2. Milan did so on behalf of himself and Addison.

3. That was a breach of contract.

Re Schindler Lifts Australia Pty Limited and Precision Elevators Pty Limited v Milan Debelak; Kevin Addison; Liftronic Pty Limited; Vladimir Debelak and Ravila Pty Limited [1989] FCA 311

At a glance

Court

Decision date

Before

Source

Judgment (330 paragraphs)

Re Schindler Lifts Australia Pty Limited and Precision Elevators Pty Limited v Milan Debelak; Kevin Addison; Liftronic Pty Limited; Vladimir Debelak and Ravila Pty Limited [1989] FCA 311 (10 August 1989)

Parties

Legislation Cited (6)

Cases Cited (12)