The plaintiffs are companies formed in the United Kingdom. The first plaintiff (RIUK) has been in business since 12 October 1976. Its leading spirit is Mr Robin Evelegh, who served in the British Regular Army for about 22 years, gained much experience in ammunition design and safety and in military logistics, and established an international transport business when he retired from the Army. Since 1978 the business has specialised in international movement of explosives, ammunition and armaments. RIUK operated in Australia from about 1990, and in 1992 it employed a branch manager for its Sydney office. RIUK is the only shareholder in the second plaintiff (RIAL) which was formed in the United Kingdom on 17 August 1993 and took over the Australian operations of RIUK and its Sydney office on 1 October 1993. At the time of the relevant events the same persons were directors of RIUK and RIAL, and were directors (forming a majority) and in one case Secretary of Ridgeway North America Limited, in which RIUK is the majority shareholder. Operations were characterised by close and detailed control exercised by directors in the United Kingdom, with frequent communications, often daily, between the General Manager of RIAL and a director, by telephone and fax messages. Directors often attended in Australia.

International transportation of explosives and armaments is a highly complex business, and movement of goods must be accommodated to regulation, characteristically complex, by countries of export, transit and import in the interests of public safety and of control of the trade in armaments. Sea transportation must be accommodated to the requirements of the owners of shipping and of port authorities, which limit quantities which may be carried on particular ships, the other cargo with which carriage may be associated, the use of wharves, berths and storage in ports of loading, discharge and transit, and control many other matters. A comprehensive knowledge of all these controlling factors is necessary when planning shipments so as to find means which are practicable and economic. Consignments are not characteristically large in relation to the total freight carried by a ship, but the presence of armaments or explosives in cargo imposes special requirements for the order of loading and discharge and the use of particular berths in ports; sometimes movement within port from berth to berth is required. Great losses can arise if it is found that a ship cannot enter a port to discharge cargo or that an unexpected delay or diversion is dictated by the presence of explosives. RIUK has, in part, dealt with these complex needs by chartering vessels to carry no other cargo, but those vessels can reach Australia only two or three times a year. The business is highly complex and a person engaged in it as a director or general manager must have a large amount of knowledge and information which can only be built up by years of experience; and working within the plaintiffs' organisation gives access to this information.

The information brought to bear on conduct of the business can be separated into information which is known and ascertainable only within the organisation, consisting of the organisation's pricing policies and the bases for decisions affecting its prices, and a large mass of material which could, at least in theory, be accumulated from sources publicly available, by inquiries of departments and agencies of many governments, port authorities, shipping lines and organisations.

The operations and the practical exigencies were described in a message written by Mr Robin Evelegh to Mr McCullum on 25 May 1995. This message related to the employment of Mr Leon Smith as Operations Manager but states much of what was expected of Mr McCullum including the following:

"10. The General Manager (Lloyd) is to set up within the office a coherent system of paper and information flow so that both Lloyd and Leon may be confident that they know what each other is doing and so that if one is absent the other can find the `story' in the files to respond to phone calls or problems. Failure to set up and operate such a system in a disciplined manner is the most likely cause of dissension, irritation and inefficiency in the RIAL office. Leon is likely in future to be more office bound than Lloyd. This will give him a central point role in information gathering. Leon must tell Lloyd this news and Lloyd must read promptly or listen to what Leon has to tell him.

11. Long lead times to obtain licences, clearance etc are an inherent problem of our trade. To get round this lead time problem, it is the policy of RIAL to pursue parallel action on all likely routes rather than successive action ie waiting to start clearance on a route only when the previous hope has failed. It is also the policy of RIAL to expend money on obtaining such clearances as transit licences etc when there is only a likelihood that they may be needed rather than a certainty. We do not regard such `on spec' expenditure as a waste but rather as a prudent precaution.

12. It is the policy of RIAL that all company activities are team activities and that there are no areas of activity, information, or personal contact exclusive to any one member of RIAL. Thus while a member of RIAL may be given the responsibility for taking the lead on a particular activity or customer, he is doing this on behalf of the RIAL team. All successes, failures, profits, losses, knowledge, personal contacts etc. belong to RIAL and not to any individual member of it.

16. Our activity is one of exceptionally high management input to each job. The size of the files for most of our jobs underlines this. Thus RIAL cannot survive by pricing to our customers on the same basis as a normal freight forwarder would dealing with a high volume of simple low management input jobs each with a low individual mark up. In the end, the best guide to price is to charge the most the market will bear tempered by RIAL's long term relationships with its customers and its long term reputation in the market place. However, RIAL's managers must always bear in mind that the company cannot survive unless it can recover its overheads, which are mainly the costs of intensive management, and make a profit on top of those overheads."

The defendant Mr Lloyd McCullum had a commercial career before he was employed by RIUK as its General Manager in Sydney. This included a period as Supply and Traffic Manager for Australian General Electric Limited and about 11 years as Managing Director of Burlington Air Express (Aust.) Pty Ltd, and later in other companies handling air and sea freight. He had a concurrent career of about 24 years in the Royal Australian Air Force Reserve, mostly as a commissioned officer and with much experience in maritime and transport operations. After some negotiations he was offered employment as General Manager of RIUK's Australian branch by a letter dated 9 February 1993 from Mr Edward John Evelegh, a director (who is the son of Mr Robin Evelegh), which set out the terms of employment extensively, including the following.

"Termination will consist of four weeks notice, in writing, from either party, with the option of immediate termination with one months salary in lieu of notice.

It is a condition of accepting this offer that you will not solicit business for the movement of explosives or ammunition for any party other than Ridgeway either during your employment with us or for two years after termination of your employment by either party."

The latter paragraph is the condition restraining competition. It is not limited as to its area of operation. The defendant's counsel did not rely on the excessive extent of the restraint because, as he told me, he anticipated that the Restraints of Trade Act 1976 would allow the clause to be read down to cover conduct within Australia within one month of termination. This may well be right.

The job specification accompanying this letter set out at length the duties and experience required, and only a person with extensive management experience in international transportation could have met it.

Mr McCullum replied to the offer on 10 February 1993 making several comments but accepting the offer, and embarked on duties soon after. Mr E.J. Evelegh gave him an elaborate period of training of some weeks, including written examination, and remained in Australia until this training was complete. The initial appointment was probationary for three months after which a permanent appointment was to be confirmed.

When first employed Mr McCullum was actually engaged in another transport business, which he controlled and which was, at least in principle, a competing business, although its competition with RIUK did not have much practical significance. Mr McCullum had other business in hand to complete in his own interest after he was appointed General Manager of RIUK, although there was very little of this.

Mr Christopher Hawker, a Director of RIUK sent letters to Mr McCullum confirming his appointment on 25 May 1993 and on 16 August 1993, the day before RIAL was formed. Mr Hawker said "I am writing, very belatedly I fear, to confirm you in your position as General Manager, Ridgeway International Ltd. Australian Branch (in the process of metamorphosis to Ridgeway International (Australia) Ltd.)

We have been very impressed by the effort you have put into your work over the past six months and gratified by the successes you have achieved. Well done!".

On and from 1 October 1993 the business of the Australian branch was conducted by and in the name of RIAL. There is no evidence of any assignments or purported assignments by RIUK to RIAL of the Australian business or of the employment contract of Mr McCullum, and I infer that there were none. There was no express arrangement between RIAL and Mr McCullum that it would employ him, or between RIUK and Mr McCullum that it would cease to employ him, but it is plain on the evidence of the parties' behaviour and from the manner in which the case was conducted that those things happened.

In the Statement of Claim it is alleged (SC15) "As and from 1 October 1993 the Second Plaintiff as the wholly owned subsidiary of the First Plaintiff took over the business of the Sydney office of the First Plaintiff and the Second Plaintiff thereafter employed the defendant on the same terms as are pleaded in paras 9, 10 and 11 hereof." (Those paragraphs included the condition restraining competition). It is unmistakably to be implied from the parties' behaviour, in which Mr McCullum acted as RIAL's General Manager and was so treated for almost two years, that there was an agreement for him to be employed by RIAL: that is not disputed, but the plaintiffs' case would require that it be implied from that conduct that all the terms of the employment agreement between Mr McCullum and RIUK which had been terminated should have effect in the new employment, with some adaptation so that they were operable with the change of the employer's identity.

The condition restraining competition related to the employment contract with RIUK, and not to employment by anyone else. There was no condition making Mr McCullum's contract of employment assignable, or making the condition restraining competition assignable; such contracts and conditions are not assignable unless expressly so agreed and there was on the evidence no assignment or purported assignment. The condition restraining competition actually took effect and bound Mr McCullum for the two years to which it referred, expiring on 30 September 1995, and no conduct after that date could be in breach of the condition as between the original parties.

If an implication were to be made that a condition to a similar effect applied in Mr McCullum's later employment, the condition would have to be modified in some way, so as to refer to RIAL as the employer, and the circumstances affecting the reasonableness and validity of the condition under the law relating to restraints of trade would be significantly different, because when Mr McCullum was employed by RIUK that company had a long-established and successful business with an accumulation of knowledge in which Mr McCullum was to receive instruction, whereas when he was employed by RIAL that company had no business whatever and no information to impart, and Mr McCullum already had the information he had received from RIUK and had gained while its General Manager. More would be required than simple transposition of the name of one employer for another. The plaintiffs can point to no circumstances which support an inference that there was a novation of the agreement to be bound by the condition with necessary modification. The plaintiffs' case would require that it should be implied from a course of conduct that one party agreed to undertake an onerous burden for the benefit of the other even though that burden was not explicitly mentioned, and its being undertaken was not recognised in any way however indirect.

Conditions restraining competition are not implied by law. There is no real or useful analogy with implications that might be made where employment by the same employer is continued after the expiry of a fixed period of employment, or with other situations such as holding-over under a lease which has expired, or holding under an invalid lease. A change in the identity of the employer is an interruption and a new beginning, and cannot be smoothed over with some observation to the effect that it is obvious and should be implied that except for the change of identity the relationship continued as before. Quite to the contrary, the relationship was entirely ended.

It is a striking circumstance that RIAL did not ask Mr McCullum whether or not he would confirm that the condition continued to apply, or offer him any opportunity to deal with the subject. He was not even asked whether he agreed to be employed by RIAL. I see no evidence that RIAL (as distinct from RIUK) made any communication about his agreeing to be employed by it; all communications in evidence which allude to the subject in any way appear to come from RIUK, as if RIAL had no separate existence and could not speak for itself. There is nothing in the circumstances to suggest that Mr McCullum was offered an opportunity to say whether or not he accepted the restraint in his new employment, and let the opportunity pass.

The supposed implication does not, in my opinion, meet the tests for implication of contractual terms stated in BP Refinery (Westernport Pty Ltd v. Hastings Shire Council (1977) 180 CLR 266 at 282-283 by the majority in the Privy Council and adopted in judgments in the High Court in Codelfa Construction Pty Ltd v. State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337; see Mason J at 347. These are: "(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that `it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."

The requirement that the implication of a term must be reasonable and equitable is not met because the term implied would be entirely for the benefit of RIAL, could confer no advantage on Mr McCullum who had already received the countervailing advantage of imparted knowledge under another employment contract, and would relate to restraint of a kind which could not ever be implied in an original employment agreement and could not exist unless it had been explicitly agreed to. The term would in no way be necessary to give business efficacy to a contract for Mr McCullum's employment as general manager, which would be entirely effective without the implication. The term would not be so obvious that it went without saying; quite to the contrary, if a person is not explicitly asked to accept a condition restraining competition it goes without saying that he is not restrained. The term is not altogether capable of clear expression as there must be some modification to identify the party excepted from restraint; is it to be RIAL, and is it to be permissible to solicit business for RIUK?

The tests referred to in Codelfa and BP Refinery (Westernport) v. Shire of Hastings, when applied in the High Court of Australia have been applied in cases in which there was a formal contract, complete on its face; Deane J stated to this effect in Hospital Products Ltd v. United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 121, and this observation was approved by Brennan CJ, Dawson and Toohey JJ in Byrne v. Australian Airlines Limited (1995) 185 CLR 410 at 422. Their Honours also approved a statement by Deane J to the effect that a rigid approach should be avoided in cases where there is no formal contract, and said: "In those cases the actual terms of the contract must first be inferred before any question of implication arises. That is to say, it is necessary to arrive at some conclusion as to the actual intention of the parties before considering any presumed or imputed intention. And the test to be then applied was in a later case formulated by Deane J in these terms: (See Hawkins v. Clayton (1988) 164 CLR 539 at 573): `The most that can be said consistently with the need for some degree of flexibility is that, in a case where it is apparent that the parties have not attempted to spell out the full terms of their contract, a court should imply a term by reference to the imputed intention of the parties if, but only if, it can be seen that the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case. That general statement of principle is subject to the qualification that a term may be implied in a contract by established mercantile usage or professional practice or by a past course of dealing between the parties.'"

Observations of McHugh and Gummow JJ at 442 are to a similar general effect. Their Honours' observations appear to treat the operation of a term in a partisan fashion as a demonstration that its implication is not necessary for the reasonable and effective operation of the contract.

In Breen v. Williams (1995-6) 186 CLR 71 at 80 Brennan CJ, speaking more shortly, said "Leaving aside cases where a term is implied in a contract by established mercantile usage or by professional practice or by a past course of dealing between the parties (Hawkins v. Clayton (1988) 164 CLR 539 at 573, per Deane J), a term is not implied in a contract if the contract is effective without it: BP Refinery (Westernport) Pty Ltd v Shire of Hasting (1977) 180 CLR 266 at 283; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 605-606; Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 346; Heimann v The Commonwealth [1938] NSWStRp 47; (1938) 38 SR (NSW) 691 at 695." See too Dawson and Toohey JJ at 90-91, Gaudron and McHugh JJ at 102 and Gummow J at 123-124.

In the present case there was no express arrangement whatever and none of the terms of the contract were spelt out. The qualifications relating to terms which may be implied by established mercantile usage or professional practice or by a past course of dealing between the parties are not applicable, as there is and could be no evidence of any established usage or practice, and the single instance of Mr McCullum's employment by RIUK could not be said to constitute a course of dealing and did not take place between the same parties. Asking the question whether the implication of the term for which the plaintiffs contend is necessary for the reasonable or effective operation of a contract of the nature of a contract for the employment of the General Manager of an international transport business in the circumstances of this case produces the same results as would be produced by application of the Codelfa tests.

In the application of the test of reasonableness to the implication it is significant that RIAL was the new employer and that unlike RIUK it did not have a world-wide business in international transport; it did not have any business at all and would not do any business except whatever RIUK wished it to do. It was in an altogether different position to RIUK with respect to any need to have the benefit of a restriction on its General Manager's post-employment dealings, operating to restrict dealings at any place in the world and whether or not with established customers.

The test of reasonableness is to be applied to the proposed term without modifying it in any way which could be expected to result from a decision of a court under the Restraints of Trade Act 1976.

In my opinion it clearly was not necessary in the circumstances for the reasonable or effective operation of the contract for Mr McCullum to be employed by RIAL that he should accept a restraint on competition after termination of the employment. The overwhelming majority of employment contracts operate perfectly well without such a restraint. The implication was neither necessary nor reasonable.

The plaintiffs' solicitor contended that a number of matters in evidence supported the implication. He pointed to the terms of the Letter of Acceptance of 10 February 1993 and the fact that the appointment was to the Australian branch. To my mind this serves only to emphasise that there was a new and different employment contract between Mr McCullum and RIAL. The plaintiffs' solicitor also pointed to the continuation of the previous terms and conditions as to salary, bonus and leave, which in fact were handled as if there had been one continuous employment without interruption, not as if there had been two employments. These circumstances have no significance for showing in detail the implied terms of the second employment; they suggest that rights as to those matters were not altered in the view of the parties, but it would be an impossible conclusion that there was no new employment relationship.

Some reliance was placed on discussion about the calculation of leave entitlement on resignation between Mr McCullum and Mr Sellars, RIAL's Chartered Accountant, but these discussions did not refer to the supposed implied condition in any way. There was no discussion between Mr McCullum and Mr Sellars directed to what terms had been agreed on in 1993, and the subject was dealt with in a very indirect way by discussing what payments on termination were acceptable. No discussion touched in any way on whether there had been agreement on a restraint clause. What was done did not represent any possible view of the agreement, as rights on termination of the first employment and of the second employment were conflated and paid out by the second plaintiff; no doubt this was a satisfactory arrangement, but it did not represent establishing the exact terms of contractual rights. (Indeed Mr McCullum claimed that he made a small concession.) Nothing was said between Mr Sellars and Mr McCullum about adopting the restraint clause, or about adopting all terms previously in effect, or about adapting them to the change. Mr McCullum's dealings with Mr Sellars are of no assistance in finding the relevant facts.

It was also submitted that "the defendant's assertion through his then solicitors concerning the obligations upon him as of October 1995 were disingenuous" which is an observation of no force, and that "there was no discussion relating to any change in conditions" the force of which is contrary to RIAL's case. The plaintiffs' solicitor also relied on Clothing and Allied Trades Union of Australia v. Sixty-Third Debate Pty Ltd [1987] 21 IR 325 in which there was no onerous condition; I see no assistance in that decision. I was also referred to Halsbury's Laws of Australia Vol.10, para.165-590.

When Notice of Termination was given it was in fact of one month and not of the four weeks specified in RIUK's letter offering employment.

While it is perhaps obvious that RIAL would have wished to include a restraint clause in its employment agreement, if the subject had been thought of at all, it is far from obvious that Mr McCullum would have agreed; the circumstances were different, the company was different and the business methods and information special to the business had already been imparted to Mr McCullum by RIUK, so that he no longer stood to gain what he stood to gain in February.

My finding is that in fact no condition restraining competition was implied in Mr McCullum's employment by RIAL.

Mr McCullum brought his employment by RIAL to an end by transmitting a letter of 24 August 1995 to Mr Robin Evelegh giving one month's notice of his resignation so that his last day at work was to be 24 September 1995. In this letter he said "I can assure you that any outstanding matters would be taken care of prior to my departure from the company and that all matters pertaining to the m/v `Joergen Vesta' sailing will be finalised. Similarly, after my departure, I will be available to assist Leon in any matters that he may require assistance with." "Leon" refers to Mr Leon Smith, then Operations Manager and later General Manager. This resignation was accepted by a communication in the name of RIUK. 24 September 1995 was a Sunday, and Mr McCullum's last day of attendance at RIAL's office in Sydney was Friday 22 September 1995. The business sometimes required attention on Saturdays, Sundays or public holidays, not necessarily at the office.

At the hearing the claim presented by RIAL was that the restriction was in effect for two years from 25 September 1995. No case of breach of the condition restraining competition was made by RIUK.

In the circumstances it is not necessary to decide whether Mr McCullum did solicit business in breach of the condition, but I will express my view. After termination of his employment by RIAL Mr McCullum returned to the kind of activity in which he engaged earlier. He obtained control of DefLog International Pty Ltd, which had been a shelf company with a different name, and immediately went back into international freight business, handling among other things shipments of explosives. In fact, he used the name DefLog International Pty Ltd before the company had that name, and before he controlled the company. DefLog was wholly owned and controlled by Mr McCullum. DefLog received an invitation dated 3 October 1995 from ADI Ordinance, a division of Australian Defence Industries Ltd, to submit proposals for movement of exports of explosive to the United States. The proposed consignments were of smokeless powder, referred to as propellant, which ADI wished to supply to Hodgdon Powder Inc., which had a magazine at Shawnee Mission, Kansas. On 20 October 1995 Mr McCullum on behalf of DefLog responded and submitted proposals for four different variations of the means of transport and place of delivery. This led to DefLog's being awarded work by ADI in transporting smokeless powder to Hodgdon Powder Inc; DefLog continued to get such work and during two years from 25 September 1995 neither of the plaintiffs received any further work from ADI. It is an agreed fact that the net profit which RIAL would have derived during that period from work for ADI if it had not been awarded to DefLog was $290,000 made up of $210,000 in respect of Hodgdon Powder Inc. and $80,000 in respect of other jobs.

The plaintiffs' solicitor referred me to observations of Young J in Ecco Personnel Pty Ltd v. Barrett (unreported) 2 September 1996 on the meaning of "solicit" in a covenant restraining competition. Young J referred to Jitjarden v. Thompson (1995) 38 NSWLR 611 where the word was used in a statute in an altogether different context. Young J said "It seems to me that in the expression `canvass, solicit, interfere with or entice away' the rule noscitur sociis shows that the word `solicit' has within it the conception of a person being the mover for the action happening." In the present case there is no corresponding context. I was also referred to Sweeney v. Astle [1923] NZLR 1198, which related to a liquor-licensing law under which it was unlawful "to solicit or receive any order for any liquor within such a district," that is, a no-licence district. Stout CJ said at 1202 "the word `solicit' is a common English word, and it means, in its simplified form, `to ask'. In various English dictionaries this simple meaning is given, but other similar words are also used to explain other meanings it possesses, such as `to call for' `to make request,' `to petition', `to entreat', to persuade', `to prefer a request', when a businessman or firm or company advertises his or its wares we say he is soliciting custom. He wants to sell his goods, and he solicits people to buy." See too Hosking J at 1204. I was also shown some entries in dictionaries which cover a wide range of meanings. The difficulty of the present case is that ADI approached Mr McCullum and asked him to submit a proposal. When I consider the meaning of the word in its context I see nothing to support a view that to propose to do business is any less to solicit business because the recipient invited the proposal.

It is my opinion that by submitting the proposal of 20 October 1995 Mr McCullum solicited business for the movement of explosives or ammunition for DefLog, and if there had been a condition as the plaintiffs allege he would have been in breach of it. To submit the proposal was clearly to solicit business, and no less so because the proposal was submitted in response to an invitation to submit it. The concept of soliciting business, in the ordinary meaning of those words, does not necessarily involve that the solicitation should initiate contact. The probabilities are that if DefLog had not obtained the Hodgdon Powder contract RIAL would have obtained it and would have derived a profit of $210,000 over two years from that business. However there is no basis for finding that solicitation by Mr McCullum and DefLog of the Hodgdon Powder business was a cause of ADI's withholding any other work from RIAL.

With respect to Singapore Technologies' work the plaintiffs' case seemed to be to the effect that the fact that DefLog obtained work from Singapore Technologies demonstrated that the work had been solicited; there is no force in this. The suggestion that there was some solicitation or breach of a duty of fidelity was supported by pointing to the fact that Mr McCullum on behalf of RIAL had attended in Singapore on 18 August 1995 on RIAL's business, and that there had been a small consignment of armaments for the Republic of Singapore Air Force. It was contended that it should be inferred that Singapore Technology changed camps because of something that Mr McCullum had done; but there is no substantial basis for this contention.

The plaintiff's solicitor also contended that what he said was evidence that Mr McCullum engaged in a course of conduct from the beginning of August 1995 for the purpose of inducing ADI to transfer its work to him after his resignation showed that he had solicited the work, and also contended that evidence which he said showed that Mr McCullum concealed from RIAL information he had about a proposed shipment of propellant to the Royal Ordinance Division of British Aerospace in some way supported the same conclusion. It was said that a number of events showed concealment and disloyalty during employment and supported a finding that Mr McCullum had solicited business from ADI. In my view any relevant conclusion must be based on evaluation of the evidence of Mr McCullum's communications with ADI.

In the course of the submissions I was asked to find that Mr McCullum concealed from RIAL important information he knew about a proposed shipment of propellant to a Royal Ordinance factory in Gwent, South Wales, owned by British Aerospace. The prospect that this business would come RIAL's way was not recorded in Status Reports where according to practice and the directors' requirements it should have been recorded. The shipment was one in a series earlier shipments in which RIAL had handled, and the earlier shipments had appeared in Status Reports. One of these, the Clydebank shipment of 2 June 1995, was arranged by Mr Robin Evelegh during a period when he was managing the Australian office in Mr McCullum's temporary absence. The prospect that there would be further shipments in the series could well have been obvious to directors and, when the Operations Manager Mr Leon Smith arrived to work in RIAL's office, it could well have been obvious to him. It could be seen from documents including the Export licence handled for earlier shipments that the permitted quantity for export had not been reached. At Mr McCullum's direction Mr Smith made some anticipatory inquiries of the Bank Line about 10 August about the availability of shipping from Darwin to the United Kingdom for the consignment; these inquiries did not prosper for several reasons including the inability of ADI to proceed at the time required. Mr McCullum left some papers and notes for Mr Smith's attention on Mr McCullum's last day in the office; the notes were sketchy but they should have been quite enough to indicate that a commercial opportunity existed. Mr McCullum's making and leaving the notes for Mr Smith demonstrate convincingly that Mr McCullum was not engaged in any scheme of concealment. While it was a matter for commercial initiative and judgment of Mr Smith as Operations Manager and succeeding General Manager, the notes could well have prompted Mr Smith to make an approach or inquiry to ADI, and Mr Smith's suggestion that the concluding statement in the note that Mr Smith should "keep it all together" just meant that the paper work should be filed together has no substance.

The memorandum concluding "Keep it all together" should have prompted activity by Mr Smith such as an inquiry by him of ADI about progress and the availability of the documents which Mr McCullum said in the memorandum had not been received, namely a request to ship the goods, a commercial invoice and a proposed packing slip. By leaving this memorandum for Mr Smith, Mr McCullum indicated that there was an opportunity to act in those ways, and his conduct appears to me to show that it would be wrong to conclude that he was concealing the opportunity from RIAL and Mr Smith, or that he was attempting to divert it to himself. Mr Smith was given some information, it is not clear what, about the prospective work in a conversation with Mr Kilpatrick of ADI on Wednesday 27 September, but he was set in motion by a conversation with Mr Wakeford on Friday 29 September. ADI's invoice date was 29 September. Mr Smith could well have been more active before then in pursuit of the commercial opportunity. The ship sailed on Wednesday 4 October.

I am satisfied that an ADI officer approached Mr McCullum and asked him to give his assistance at about the time Mr McCullum's employment ceased, that Mr McCullum gave that assistance, brought his expert knowledge to bear on instructing an agent of ADI in the United States to obtain an authorisation for transit of the material through the United States, and gave other assistance which ADI required; but he did so at ADI's request and in the character attributed to him by ADI as a consultant assisting in transportation being arranged by RIAL for ADI. In what he did he fulfilled the assurance of assistance in his letter of resignation, and acted in the interests of ADI and RIAL, but not single-heartedly as he had every motivation to make a good impression on ADI and its officers, and he hoped to be paid for his consultancy, a hope which was disappointed. I am satisfied that there was nothing underhand and no subterfuge in Mr McCullum's behaviour in getting the Royal Ordinance consignment off on the Direct Kea on 4 October 1995, in co-operation with Mr Smith, to the satisfaction of ADI and the profit of RIAL, when ADI decided at a very late stage that it could make the shipment.

It must be kept in mind that the work of shipping propellant to the Royal Ordinance in South Wales on the ship Direct Kea on 4 October 1995, in which Mr McCullum participated after the termination of his employment, was carried out in the interest and to the profit of RIAL, and that Mr McCullum's participation was directed to bringing this about, with success. Attempts to represent his participation as a grievance to RIAL and as showing disloyalty on the part of Mr McCullum are dissociated from the facts.

Mr Page asked Mr McCullum's assistance with obtaining a DSP61 on Monday 25 September, Mr McCullum agreed and set about obtaining one. At this time Mr Page asked Mr McCullum whether, "if everything went bad" Mr McCullum was in a position to get the propellant for the Royal Ordinance to the UK and Mr McCullum said he was. Mr Page and ADI did not ever actually give Mr McCullum a commission to do that, but Mr McCullum was prompted by this incidental inquiry by Mr Page to set himself in motion on 28 September to contact the shipping company handling the Direct Kea (which was expected to leave Sydney on Wednesday 4 October) and make inquiries about the availability of shipping space. The answer was negative in that other consignments of explosives had been booked for carriage on the ship and no more would be acceptable. Mr McCullum gained some information about the other consignments, which were for New Zealand only, which could perhaps make it attractive to the shipping company to accept the ADI cargo for North America and carry the other cargo on a later ship.

Mr McCullum contacted Mr Wakeford on 28 September. The conversation was inconclusive because his telephone battery went flat. The main subject was the DSP61 which he had been commissioned to obtain. It seems that he said or wished to say something about the proposed Direct Kea shipment. Significant communication between him and ADI on that subject commenced on Friday 29 September, and Mr McCullum attended RIAL's office and spoke to Mr Smith about the shipment on that day and made arrangements in co-operation with Mr Smith.

It was to RIAL's advantage that, even before RIAL's involvement, Mr McCullum at the request of an ADI officer set ADI's United States agent in motion to obtain an import permit called a DSP 61, and that he made inquiries and communications of shipping agents and attended to some of the practical steps involved in ensuring that explosive which was in store in Helidon, Queensland, on 28 September was transported to Sydney and laden on a ship which departed on 4 October, after a three-day holiday week-end. It was said of this by the plaintiffs' solicitor that "all the circumstances surrounding the British Aerospace propellant shipments smack of a breach of fiduciary duty which occurred before the defendant left his employment. Mr McCullum set about a concerted course of action to ensure that upon his departure from Ridgeway International he secured the ADI work." This piece of advocacy inverted the reality of the events.

An ADI document said that the Direct Kea shipment followed three abortive attempts to ship the propellant, but it did not attribute the lack of success of the earlier attempts to any failures of RIAL or of Mr McCullum. The plaintiffs' solicitor contended that the fact that difficulties were being experienced with the shipment ought to have been reported by Mr McCullum to the directors and that his not having done so was of great significance. As a matter or routine, the prospect of an order for this work ought to have appeared in the Status Reports and to have been reported, and there clearly was an omission to observe the ordinary routine which was followed with many other instances where work was in prospect.

The information available about prospective work and the action taken were not appropriately recorded. This is a significant anomaly in Mr McCullum's behaviour, given the instructions which he had and the practices of the organisation which required complete files. The standard of recording and reporting was uneven, and some prospects which appear to have been practically defunct continued to appear in reports. It is surprising that this prospect did not, but the probabilities do not seem to me to favour a sinister interpretation. I find that the prospective Royal Ordinance work which became the Direct Kea consignment did not appear in reports through inattention, and information about it was not deliberately withheld from RIUK and Mr Smith.

The plaintiffs' solicitor made submissions on the assumption that the difficulties in consigning what became the Direct Kea shipment of 4 October 1995 were difficulties of Mr McCullum and RIAL finding a ship and a route for the shipment to take. There were difficulties of this kind, but they stood in the way of preliminary inquiries, which it was a policy of RIAL to make well in advance; evidence does not show that the inquiries were made with the benefit of a definite instruction from ADI to undertake the consignment or of a clear indication of when the goods would be available. The Direct Kea shipment was unusually large. The plaintiffs' solicitor submitted that the inference should be drawn from the fact that the prospective shipment was not entered in Status Reports or otherwise reported to RIUK that Mr McCullum withheld the information from RIUK, and from Mr Smith, for the purpose of preventing RIUK from assisting with the cargo, so that Mr McCullum could ingratiate himself with ADI by resolving the problem after he left his employment. I am not willing to draw that inference. In my view there is no reasonable basis for it, and a rational person would not mishandle a cargo in August with the object of gaining kudos by righting the problem in October. Mr McCullum should have done more to record and report the prospective work, but his explanation in terms of having other things to attend to which seemed to have higher priority is altogether credible and accords with the scale of priorities observed within the organisation. I am satisfied that Mr McCullum took no step to conceal the prospect of this work. Mr McCullum did not divert the work relating to the Royal Ordinance consignment to DefLog or to himself, and did not attempt to do so. He responded very readily and very fully when asked to assist and to act as a consultant; he had every commercial motivation to act in that way with a view to creating a future relationship with ADI and, indeed, with the plaintiffs. He made special attendances at RIAL's Sydney office and at the port, and he was available at times when Mr Smith was not available. On no fair view was this conduct disloyal to his former employer.

The plaintiffs' solicitor also contended that Mr McCullum has incurred liability for breach of an implied contractual promise of fidelity or alternatively a fiduciary duty to ADI as his employer in ways which related to DefLog's obtaining work on consignments to Hodgdon Powder.

Mr McCullum was given by telephone, probably on 2 October but certainly after 25 September, an indication that ADI would ask him to submit a proposal for transporting propellant to Hodgdon Powder. RIAL had handled earlier consignments of propellant to Hodgdon Powder, as Mr McCullum knew because that he had been involved in the work. These were one-off shipments and were discrete from each other, with no arrangement for continuity. Mr McCullum had met Mr Hodgdon a couple of times during the two years he had worked for RIAL. What he knew however amounted to no more than knowledge that Hodgdon Powder was a customer of ADI to whom consignments were sent from time to time, from which it was obvious enough that there could well be more consignments. There is no evidence that he knew of the impending invitation to the market, including RIAL, to submit proposals for an arrangement to cover shipments for a long term, or that anyone outside ADI knew of it. There is no basis for regarding the invitations of 3 October as a stage in a maturing business opportunity which Mr McCullum knew of or managed while employed by RIAL. On 5 October Mr McCullum was asked by an ADI officer to quote for a one-off shipment to Hodgdon Powder; he did make a quote and in fact handled a one-off shipment before the longer-term arrangements came into effect. This too cannot be seen as a maturing business opportunity in existence while he was employed by RIAL.

The presence of another competitor in this field was probably very welcome to ADI, which identified only four tenderers whose proposals merited analysis, and only two, RIAL and DefLog, which tendered for all four methods called for. This is a quite adequate explanation of the speed of ADI's approach to Mr McCullum within a few days of his leaving RIAL.

One circumstance which is said to show breach of fidelity was that Mr McCullum made known to ADI that there had been a cost saving in a shipment of 26,424 kilograms of smokeless powder, one of the series of shipments from ADI Ordinance to Royal Ordinance Division in Gwent, South Wales, which was forwarded on the "Clydebank" from Darwin on 2 June 1995. See Exhibit B. When submitting its price RIAL had expected that costs would be incurred for discharging cargo at Antwerp, then transporting it by barge to Hull, thence by vehicle to Wales; whereas the ship had called at Hull first, eliminating the need for barge transport. After negotiation between Mr McCullum and ADI officers RIAL, which had charged $90,821 for export forwarding services in accordance with its entitlement, later forwarded ADI a credit note for $18,049. The credit was granted in a decision reached by Mr Robin Evelegh and Mr McCullum. As the barge transport from Antwerp to Hull was expressly mentioned in the invoice among the services for which charges were made it is in no way surprising that a commercial decision was made to allow the concession, although it was not contractually required. The contention seemed to be to the effect that Mr McCullum made the cost savings known to ADI for the purpose of injuring RIAL and advantaging himself in a business which he was thinking of setting up in the future. The suggestion that his communications show a lack of fidelity is without substance and fanciful; it would be no more than common prudence to avoid leaving an important customer with the feeling that it had paid for barge transport that had not happened.

The evidence of Mr Page shows that the process of calling for and considering proposals was genuinely undertaken on behalf of ADI. There is no reason to think that this exercise was a sham or that diversion to Mr McCullum and his new company of work which the plaintiffs expected to receive was preconcerted before Mr McCullum left his employment, or before the proposals were considered by ADI's officers. A record of internal consideration within ADI referring to dissatisfaction with RIAL's treatment of cost savings states (Exhibit G p.5): "However, we are unofficially aware that under instruction from the U.K, cost savings made on particular shipments were not passed on to ADI." Mr McCullum had told RIAL about passing on information about costs savings at an earlier stage. See t104, l.36. ADI's internal consideration did not refer to the source of the information or to Mr McCullum as the source; it referred to cost savings on a plurality of shipments and did not refer to the cost saving on the Clydebank shipment. The experience with the Clydebank would not have justified the comment because that was an instance where a cost saving was passed on. This passage does not support suggestions to the effect that Mr McCullum sought, while still employed by RIAL, to assist his own future position by breaching confidences. Exhibit G contains material commendatory of RIAL and its proposal.

The standard of accountability imposed on fiduciaries is stricter than that observed in ordinary relationships in life and commerce, that is, stricter than that ordinarily undertaken contractually. This results from the workings of a policy of protection of beneficiaries whose interests are in the control of fiduciaries, as Courts have believed that their interests would not have effective protection unless an unusual and strict standard were imposed. Keech v Sandford (1726) Select Cases temp King 61[1726] EngR 954; , 25 ER 223 is an early and striking example. Where the fiduciary is an employee and the employment has ended there are, in my opinion, other policies at work. Restrictions on the conduct of a former employee can operate as restraints on trade, and the liberty of economic action of the former employee and of the former employer both have the same high value after the employment has ended. Where the relationship between a fiduciary and a beneficiary is contractual the contract usually draws a boundary around the activities to which fiduciary duties extend, and some element of abuse of an opportunity created by the employment would usually be necessary before a judgment that an exercise of economic liberty after the employment had ended was unconscionable should be made.

The accountability of a director of a company, or of an employee holding a senior position such as Mr McCullum held, for profits arising from diverting to himself a commercial opportunity which came the company's way during the directorship or employment is clear in most circumstances; accountability usually arises out of contractual and fiduciary duties related to the directorship or employment. Where the profit or advantage is derived after a relationship has ended an examination in detail of the relevant facts and a judgment on them is required, and generalisations are of little value. The judgment of Laskin J of the Supreme Court of Canada in Canadian Aero Services Ltd v O'Malley (1973) 40 DLR (3d) 371 has frequently been referred to, without the reservations sometimes expressed for Canadian decisions on fiduciary duties; Laskin J made a wide and, in my respectful view, orthodox survey and application of the authorities in this field to that date. That case related to executive directors. Laskin J said, at 381-2, "It follows that O'Malley and Zarzycki stood in a fiduciary relationship to Canaero, which in its generality betokens loyalty, good faith and avoidance of a conflict of duty and self-interest. Descending from the generality, the fiduciary relationship goes at least this far: a director or a senior officer like O'Malley or Zarzycki is precluded from obtaining for himself, either secretly or without the approval of the company (which would have to be properly manifested upon full disclosure of the facts), any property or business advantage either belonging to the company or for which it has been negotiating; and especially is this so where the director or officer is a participant in the negotiations on behalf of the company." Laskin J went on to demonstrate the pervasiveness of a strict ethic in this area of the law, drawing upon judgments which show its strictness including Regal (Hastings) Ltd v Gulliver [1942] UKHL 1; [1942] 1 All ER 378, [1967] 2 AC 134, Boardman & Anor v Phipps [1966] UKHL 2; [1967] 2 AC 46, Furs Ltd v Tomkies [1936] HCA 3; (1936) 54 CLR 583 and many other authorities. In concluding passages Laskin J said (at 390) "It is a mistake, in my opinion, to seek to encase the principles ... in the straight-jacket of special knowledge acquired while acting as directors or senior officers, let alone limiting it to benefits acquired by reason and during the holding of those offices. As in other cases in this developing branch of the law, the particular facts may determine the shape of the principle of decision without setting fixed limits to it." And at 391, "The general standards of loyalty, good faith and avoidance of a conflict of duty and self-interest to which the conduct of a director or senior officer must conform, must be tested in each case by many factors which it would be reckless to attempt to enumerate exhaustively. Among them are the factor of position or office held, the nature of the corporate opportunity, its ripeness, its specificness and the director's or managerial officer's relation to it, the amount of knowledge possessed, the circumstances in which it was obtained and whether it was special or, indeed, even private, the factor of time in the continuation of fiduciary duty where the alleged breach occurs after termination of the relationship with the company, and the circumstances under which the relationship was terminated, that is whether by retirement or resignation or discharge."

In the cases in which obligations of these kinds have been claimed, any scheme or intention formed during the directorship or employment to pursue the business opportunity and gain the advantage after its termination has weighed heavily towards accountability. The Canadian Aero Service case has been applied in Green & Anor v Bestobell Industries [1982] WAR 1, Natural Extracts Pty Ltd & Anor v Stotter & Ors [1997] FCA 471; (1997) 24 ACSR 110, Addstead Pty Ltd & Ors v Liddan Pty Ltd & Ors [1997] SASC 6727; (1997) 25 ACSR 175; see also Colour Control Centre Pty Ltd & Anor v Ty & Ors (Santow J, 24 July 1995) and Joseph & Co Pty Ltd v Robertson (Windeyer J, 18 September 1987).

In the present case no specific commercial opportunity relating to the consignments to Hodgdon Powder was in existence during Mr McCullum's employment. Although it was probably foreseeable to Mr McCullum during his employment that some such work would become available, the prospect was nebulous and cannot be seen as a maturing business opportunity which he learnt of or managed during his employment. In my finding the business opportunity opened, in the sense that commercial activity could influence its maturing into a profit, when ADI by separate letters asked both RIAL and DefLog to submit proposals on 3 October 1995. It could be said that ADI had sent smokeless powder to Hodgdon Powder earlier and that RIAL had handled the shipment, and that there were prospects that ADI would sell Hodgdon Powder some more of the product, but I do not think that these facts and Mr McCullum's knowledge of them during his employment constitute a maturing business opportunity, or make it a breach of fidelity for him to have responded in DefLog's interest to an invitation to submit a proposal which ADI issued after his employment ended.

There is no basis in the facts for treating Mr McCullum's leaving his employment as part of a scheme to divert a business opportunity to himself, no reason to find that he had any communication with ADI officers about the possibility of a Hodgdon Power contract being available or about any details of it, or that he had any influence over ADI's decisions or foreknowledge of them. There is no basis for a finding that Mr McCullum opened communications with ADI on the subject; on the evidence all approaches were made on behalf of ADI. It could not be said that he had any special knowledge, or took any special knowledge with him which gave him an advantage over RIAL in obtaining the Hodgdon Powder contract. His position and responsibilities stood high, the top of RIAL's Australian organisation, and the opportunity followed almost immediately after his leaving.

If it were found that Mr McCullum's leaving his employment was part of a scheme to divert the Hodgdon Powder work to himself I would think that he should be accountable for the profits, even though the opportunity was in no way specific when he left, but in my view there should not be such a finding. In relation to the Royal Ordinance Consignment on the Direct Kea of 4 October there could be little doubt that Mr McCullum would have incurred fiduciary obligations to RIAL if he had diverted the work to DefLog; but he did not.

In my judgment, Mr McCullum was not under a fiduciary obligation to account for profits derived from his dealings with ADI over the Hodgson Powder consignments.

The plaintiffs' solicitor contended that Mr McCullum acted in breach of a duty to preserve confidentiality by using information relating to the plaintiffs prices and cost structure in offering and obtaining work relating to consignments by ADI to Hodgdon Powder Inc.

I would think that, as with customer lists, an employee, even a senior employee is entitled after his employment has ended to use the general knowledge in his mind about levels of prices and costs, even though that knowledge would have been treated as confidential and not communicated, except within the organisation, during the employment; he would not however be entitled to remove or deliberately memorise rate schedules or other records, or documents such as standard calculation sheets for preparing quotes. The observations of Harvey CJ in Eq. in Ormonoid Roofing & Asphalts Limited v. Bitumenoids Limited & Ors [1930] NSWStRp 88; (1930) 31 SRNSW 347 at 354 to 356 are applicable to costing information. See too the observations of McLelland J in Riteway Express Pty Ltd v. Clayton & Ors (1987) 10 NSWLR 238 at 239G to 240E on the boundary between information which an ex-employee may use and information which he may not. The boundary is not easy to see, and an employer who is seeking to restrain an ex-employee's conduct must establish the facts relating to his confidential information in sufficient detail to enable the court to see that there was confidential information of a kind which went beyond the range of the employee's skill, judgment and general knowledge of the industry, and also to see that the employee is making use of information of that kind.

There is no evidence that Mr McCullum took with him any pricing information or rate schedules, or deliberately memorised such material, but he must have had knowledge in his mind of the prices which RIAL had been charging, and the costs which had been incurred. It is not possible to see a clear line between knowledge of conditions in the industry which was part of Mr McCullum's skills which he was entitled to take with him, and a body of confidential information and knowledge about costs and prices, the existence and terms of which the plaintiffs bore the burden of establishing. The pricing policy expressed in para 16 of the letter of 25 May 1995 is simple enough and there would be no trouble in remembering it, nor any claim for its protection.

Although there was no express contractual provision establishing the confidential character of RIAL's internal pricing and costing information, it has long been recognised that prices and the basis on which prices are calculated can be trade secrets and confidential information, see W.C. Leng & Co. v. Andrews [1909] 1 Ch 763 at 773 cited by Lord Atkinson in Herbert Morris Limited v. Saxelby [1916] 1 AC 688 at 704-5. In the expression used by the Court of Appeal in Faccenda Chicken Ltd v. Fowler [1987] Ch 117 at 137, pricing information is characteristically, in commerce, ".." in all the circumstances of such a highly confidential nature as to require the same protection as a trade secret." In expressions used in Wright v. Gasweld Pty Ltd (1991) 22 NSWLR 317 pricing information is "valuable commercial information." Where a business is complex and competitive there probably is a core of information about pricing and costing which should be regarded as confidential; this conclusion is readily drawn where a manager or other senior employee has and uses pricing and costing information. An obligation to respect confidentiality incurred during employment is not brought to an end when the employment ends; see cases collected by Windeyer J and his Honour's observations in Joseph & Co. Pty Ltd v. Robertson, 18 September 1997 pp6 & 7. If there is to be an equitable remedy for misuse the plaintiff must identify the information at the core, prove its existence and confidential character and do so in a way which enables the Court to avoid invading the area in which the employee is at liberty.

The possession of confidential information of this kind would not disable Mr McCullum and DefLog from tendering in competition with the plaintiffs; any equitable remedy would redress use of the confidential information for Mr McCullum's own benefit.

I turn to address the evidence bearing on whether Mr McCullum in fact used confidential information relating to pricing and costs when submitting his proposal to ADI.

Mr McCullum said that he established his price in the proposal by knowing the ocean freight rate and "I put in what I considered was a fair figure."

When ADI asked RIAL, by letter of 3 October 1995, to submit a proposal relating to shipments to Hodgdon Powder the proposal was to form the basis for a one or two year agreement on shipping costs. ADI said that they were looking for cost reductions and that shipment cost was one of their major costs, and what they said showed that they were not looking to a continuation of the prices of the last couple of years. In effect ADI asked for a change and reduction in the existing pricing.

ADI also asked DefLog, on 3 October 1995, to submit a proposal, and that was done. No evidence shows in a direct way that Mr McCullum brought knowledge of RIAL's pricing and cost structure to bear on his proposal for the Hodgdon Powder work. He explained the basis of his pricing proposal in very simple terms I have set out. His counsel pointed to material in evidence which to my mind assists to some extent appraisal of the probabilities of his having used confidential information. RIAL charged ADI $13,741 for export forwarding services in each of two consignments for Hodgdon Powder in July and August 1995. The first was invoice 000325 of 31 July 1995 which related to a consignment of 10723.5 kg on the Alpha Jupiter and the second Invoice 000333 of 24 August 1995 related to a consignment of 11651 kg on the Direct Falcon. RIAL's proposal to ADI of 18 October 1995 for a comparable movement from an Australian port to a US port, with a maximum weight of 15,000 kg in one container, was $11,152 while Mr McCullum's comparable proposal on behalf of DefLog was $10,400. An internal appreciation of these proposals by Mr Whitty, Manager Commercial ADI Operations (Ordinance) of 10 November 1995 (Exhibit G) sets out a different price, $13,486 as that quoted by RIAL and says (para.5) that updated pricing was received following a change in routing of shipping. The quote given for DefLog in Mr Whitty's appreciation continued to be $10,400. A weighting was given to various factors in Mr Whitty's appreciation and the weighting given to the significance of pricing was 33 in 100. Other factors were taken into account and weighting attributed to them, and these were based on Mr Whitty's subjective judgment. The other factors were reliability, service/systems, experience, industry knowledge, company infrastructure, creativity and ADI knowledge. Price was important but not decisive for the outcome.

Turning to the proposals which were not accepted, Ridgeway International proposed $17,950 for a shipment ex Australian port to Shawnee Mission, Kansas, and DefLog proposed $15,800, RIAL proposed $16,080 for shipment ex ADI in Mulwala to a US port and DefLog proposed $16,000 and RIAL proposed $22,663 for shipment ex ADI Mulwala to Shawnee Mission, Kansas, while Mr McCullum proposed $22,200. There is no constant relation and no pattern of narrow undercutting.

Overall this review makes it unlikely that confidential information relating to the plaintiffs' pricing and costs was used by Mr McCullum in his proposal for the Hodgdon Powder work, and also makes it unlikely that, if it was used, its use had any influence on the award of the work.

In my view I should accept Mr McCullum's explanation in his evidence and find that no use was made by him of confidential information relating to the plaintiffs' prices and costs in obtaining the Hodgdon Powder work.