The conversation in issue included in part a statement by Matthews that "knowledge had come to my hand which convinced me that the company was involved in a pricing arrangement which amounted to a breach of the Trade Practices Act" to which Cadwallader was alleged to have replied: "I knew they were planning it, I did not know they had put it into effect, they have not been clever about it have they? How did you find out about it?"

Upon objection as to the admissibility of this evidence by the first respondent,

Held: (1) The evidence was admissible as: (a) Mr. Cadwallader had executive duties in relation to the group and not merely in relation to the parent or holding company Allied Mills Ltd. (b) The statements were made by both parties acting in the course of their employment. (c) It established that in the capacity of a director of both the first respondent and the parent company Cadwallader had at least knowledge of a proposal to enter into an arrangement of the kind alleged in the case. Ex parte Gerard & Co. Pty. Ltd.; Re Craig [1944] NSWStRp 30; (1944), 44 SR (NSW) 370, distinguished.

(2) The word "they" in Cadwallader's alleged statement referred to executives within the Allied Mills group and not to other flour milling companies or to other persons outside the group.

In the course of the trial a ruling was given as to the admissibility of evidence of a conversation between an employee and a director of the first respondent.

K.R. Handley Q.C. and J.O. North, for the applicant and for the Attorney-General for the Commonwealth (intervening).

R. V. Gyles Q.C. and W. W. Caldwell, for the first respondent, C. G. Schrader and R. M. Street.

A. M. Gleeson Q.C. and R. Macfarlan, for Fielders Gillespie Ltd. and G. P. Ksoll.

M. H. McHugh Q.C. and J. A. Strahan, for George Weston Foods Ltd.

B. A. BEAUMONT Q.C. and G. Q. Taperell, for Hooker Milk Products Pty. Ltd.

A. C. Archibald, for Pacific Glucose (Australia) Pty. Ltd.

Cur. adv. vult.

Solicitor for the applicant: B. J. O'Donovan, Commonwealth Crown Solicitor.

Solicitors for the first respondent, C. G. Schrader and R. M. Street: Sly &

Solicitors for Fielders Gillespie Ltd. and G. P. Ksoll: Dawson Waldron.

Solicitors for George Weston Foods Ltd. Stephen Jaques & Stephen.

Solicitors for Hooker Milk Products Pty. Ltd.: Baker & McKenzie.

Solicitors for Pacific Glucose (Australia) Pty. Ltd.: Middletons, Oswald Burt & Co.

SHEPPARD J. delivered the following ruling.

I propose to give a decision on the outstanding question of the

admissibility of evidence. I say at the outset that I have not found the question easy to resolve and, although I have reached a fairly firm conclusion as to what the outcome of the argument should be. I would have preferred to take some more time, not so much, however, to reflect on my decision, but in order to express my reasons in a more satisfactory form. (at p175)

2. The evidence in question appears at pp. 2673a and 2674 of the transcript. It was subsequently treated as having been given on the voire dire for reason which appear in the transcript, and to which I need not now refer. The evidence is as follows. The witness, of course, is Mr. Matthews. (at p175)

3. "Q. Would you tell us, as best you can recall, what you said to Mr. Cadwallader when you were reading from your note? . . . Did you say anything to that? A. Yes, I said 'Yes, did you know about that?'" (at p175)

4. There was then an interruption whilst an objection was made and the evidence continued: (at p175)

5. "Q. You may give the evidence? A. Mr. Cadwallader said words to this effect, 'I knew they were planning it; I did not know they had put it into effect; they have not been very clever about it, have they? How did you (that is Mr. Matthews) find out about it?'" (at p175)

6. "Q. What did you say, if anything, at that point? A. I then talked at great length about being the Victorian manager . . . . I related my discussions with Campbell which had finally convinced me of it." (Mr. Campbell is an executive of the Cadbury company.) (at p175)

7. "Q. After you had finished answering his question, how did you find out about it, what did he say, if anything, then? A. . . . he said he would try to telephone me in the morning on Monday." (at p175)

8. Mr. Matthews said that he did not hear from Mr. Cadwallader, either on the Monday or thereafter. (at p176)

9. Mr. Cadwallader is a director of the respondent Allied Mills Industries Ltd; so much was admitted by counsel for that company. Counsel also made the admission that Mr. Cadwallader was a director of the parent company, Allied Mills Ltd., of which the respondent is a wholly-owned subsidiary, and that Mr. Cadwallader was, in addition to being a director of the parent company, an executive director of that company. But the admission, and I should say that the admission was accepted by counsel for the applicant, made it clear that Mr. Cadwallader's executive duties did not involve him in matters relating to glucose. (at p176)

10. Additional information about Mr. Cadwallader's position in the company is to be gleaned from two annual reports of the group, of which the respondent forms part. These are for the years 1976 and 1977. These show that there were, at the relevant time, some seven directors, of whom three held executive positions. They were Sir John Cadwallader, who was the managing director, Mr. J. R. Cadwallader, who was described as an executive director, he being the Mr. Cadwallader with whom Mr. Matthews had his conversation, and Mr. C. J. Schrader, who was also an executive director. (at p176)

11. The report for each year suggests that the group, that is to say the Allied Mills Ltd. group, is run in divisions and groups, not necessarily with regard to the various subsidiary companies which make it up. Thus, under the heading "Management" there is reference to the executive directors, to whom I have referred, then a reference to what are described as senior staff function, and then comes the heading "Operating Divisions and Groups". There are various of these, including bakery division, flour milling division, primary products division, and eventually one comes to starch and gluten division, the general manager of which is said to be Mr. Street. (at p176)

12. Under a heading "Business Names and Trade Marks" appears the name Andraker Maize, which is beside the starch and gluten group, and would suggest that that division is carried on under that business name. That would accord with a great deal of evidence that has been given in the case, where persons taking glucose from the respondent have described themselves as dealing with Andraker Maize. (at p176)

13. In those circumstances, I propose to accept the submission made by senior counsel for the applicant that Mr. J. R. Cadwallader should be regarded as having executive duties in relation to the group and not merely in relation to the parent or holding company, Allied Mills Ltd. To do so is not, in my opinion, to pierce the corporate veil but simply to bring to bear a realistic appreciation of what the situation really was in relation to the management, not only of the parent company but of the other companies of the group, particularly the respondent in question. (at p177)

14. The case is not one therefore to be looked at upon the basis that in relation to the first respondent, Mr. Cadwallader was a director merely with no executive capacity or duties. The evidence discloses that Mr. Matthews, who was the Victorian manager of the first respondent, reported to Mr. Street who, as I have mentioned, was said to be the general manager of the starch and gluten division. The evidence would also indicate that Mr. Street in turn was responsible to Mr. Schrader whom I have mentioned is the other executive director of the group. There is some evidence which shows that from time to time Mr. Schrader dealt directly with Mr. Matthews in relation to his duties as Victorian manager. (at p177)

15. It is next necessary to say something of the meaning or effect of the conversation which it is sought to place into evidence. There is a difficulty about who Mr. Cadwallader meant when he referred in his answer to "they". He said: "I know they were planning it, I did not know they had put it into effect." In the light of Mr. Matthews' evidence that knowledge had come to his hand, that is to say Mr. Matthews' evidence that he told Mr. Cadwallader that knowledge had come to his hand, which convinced him that the company was involved in a pricing arrangement, it would seem to me that the natural meaning of the word "they", in the context in which it is used, is that it points to executives within the Allied Mills group and not to other flour milling companies, or to other persons outside the group. (at p177)

16. It would seem clear to me that the persons must have included Mr. Schrader. I say that upon the basis of Mr. Matthews' earlier evidence which commenced at p. 2662. He there deposes to a conversation earlier than the one he had with Mr. Cadwallader, in which he was told by Mr. Schrader of a complaint. Mr. Schrader said to him: "Mr. Russell asked me when I was going to put my glucose prices up." Mr. Matthews asked Mr. Schrader who Mr. Russell was, and Mr. Schrader told him Russell of Bunge. (at p177)

17. The conversation continued with Mr. Matthews saying: "You would not tell him that, would you Tony?", and Mr. Schrader replied: "I have given them my word." Mr. Matthews said: "To whom have you given your word?" Mr. Schrader said: "To all the other glucose manufacturers." There then transpired some further discussions. (at p177)

18. It seems to me to be impossible to look at this conversation, which is objected to, in isolation from the other evidence which there is in the case. The evidence in the case, if accepted, would establish or tend to establish that two of the three executive directors of the company knew at least of a proposal whereby the compnay was to join with others in an arrangment to fix the price of glucose. (at p177)

19. The conversation which Mr. Matthews had, although it occurred on a Sunday morning, was plainly a conversation in the course of his employment. He was reporting to an executive director of the parent company in the course of his duties as Victorian manager. There can be no basis for a suggestion that it was some personal exercise on the part of Mr. Matthews which led him to speak to Mr. Cadwallader as he did. (at p178)

20. In my opinion Mr. Cadwallader should also be seen to be acting in the course of his employment and his duties as director of both companies. The statements attributed to him suggest that he in these capacities had knowledge of a least a proposal ot enter into an arrangment of the kind which is alleged in this case. It is true that he was not in his executive capacity concerned with glucose, but he was plainly concerned in the overall management of a group of companies of which the respondent was one. In those circumstances I have reached the conclusion that the evidence should be admitted. (at p178)

21. Counsel for the first respondent relied strongly upon the decision of the Full Court of New South Wales in Ex parte Gerard & Co. Pty. Ltd.; Re Craig [1944] NSWStRp 30; (1944) 44 SR (NSW) 370. That case is referred to in the judgment of the Chief Justice, Sir John Latham, in Fraser Henleins Pty. Ltd. v. Cody [1945] HCA 49; (1945) 70 CLR 100 where his Honour said: "In Ex parte Gerard & Co. Pty. Ltd.; Re Craig; upon which the appellant company relied, it was held that when a director was answering questions under compulsion he was not acting in the usual course of business of the company or in the course of a business transaction of the company. In the present case, the questions were not answered on compulsion and the director was also the manager of the whole business of the company" (1945) 70 CLR, at p 113. (at p178)

22. The present case differs from Gerard's case, because Mr. Cadwallader was not the manager of the whole business of the company; but he was one of three who formed the executive, so to speak, of the company, at least according to its accounts, and in his capacity as a director, particularly an executive director, he must be expected to have taken a substantial interest and part in the overall management of the company. I would therefore distinguish this case from Gerard's case. The Henleins case is not against the view which I have taken. (at p178)

23. As an alternative, counsel for the respondent relied upon Re Devala Provident Gold Mining Company (1883) 22 Ch D 593. That case is authority for the proposition that a confidential statement made by an agent to a company is not admissible against the company unless it is adopted by it. The statement in question was made at a shareholders' meeting by the company's chairman. (at p178)

24. The decision was doubted by Owen J. in Finance & Guarantee Co. Ltd. v. Federal Commissioner of Taxation (1970) 44 A.L.J.R. 368, at p. 370. His Honour's doubt arose because the statement was made by the chairman of the company, not because he had any doubt about the principle for which Devala's case is authority. I would respectfully share his Honour's doubts. (at p179)

25. Counsel also relied on a decision of Gowans J. of the Victorian Supreme Court which applied Devala's case in Guarnaccia v. Rocla Concrete Pipes Ltd. [1976] VicRp 25; (1976) V.R. 302. In my opinion that is a plain case for the application of the principle and a very different case from either Devala's case itself or the present case. (at p179)

26. I am therefore of opinion that the authorities upon which counsel relied are not such as to warrant my reaching a conclusion different from the one which, upon ordinary principles, I think should be arrived at. For the reasons I have given the evidence, as I have said, will be admitted. (at p179)