Hadid, Albert v Lenfest Communications Inc

[1998] FCA 90

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 36 of 1995

BETWEEN:

ALBERT HADID
APPLICANT

AND:

LENFEST COMMUNICATIONS INC.
FIRST RESPONDENT

GERRY LENFEST
SECOND RESPONDENT

BAIN CAPITAL MARKETS LIMITED
THIRD RESPONDENT

WAYNE BURT
FOURTH RESPONDENT

AUSTRALIS MEDIA LIMITED
FIFTH RESPONDENT

RODNEY PRICE
SIXTH RESPONDENT

LENFEST COMMUNICATIONS INC.
CROSS CLAIMANT

ALBERT HADID
CROSS RESPONDENT

JUDGE:	LEHANE J
DATE:	10 FEBRUARY 1998
PLACE:	SYDNEY

EX TEMPORE REASONS FOR JUDGMENT

The applicant tenders, as evidence in its case against all respondents, a letter dated 4 November 1993 signed by an officer of the first respondent and addressed to the applicant.  The first and second respondents do not object to the tender.  Each of the other respondents, however, objects on the footing that the letter is not evidence relevant to any aspect of the applicant's case against any of them. 

For present purposes, the allegations in the further amended statement of claim may, I think, be sufficiently stated in brief summary.  The applicant was the principal shareholder and controller of two companies which were the successful bidders for satellite pay television licences.  The terms of that success required, if the two companies were to maintain their position as successful bidders, the payment of a substantial deposit for each of the two licences concerned within a very short period.  The applicant, and through his agency the two companies, entered into arrangements with the first respondent under which the first respondent provided the funds necessary to pay the deposits.  The terms on which the licences were awarded required also, after a further period, a substantial further payment to the relevant Australian governmental authority.  The arrangement between the applicant and the first respondent contemplated that action be taken to seek investors by whom funds would be provided, to permit the final payment, in respect of at least one or possibly both of the licences, to be made.

The detail of what is alleged by the applicant in relation to those arrangements requires, I think, no further elaboration at this stage.  The applicant then alleges various dealings between the applicant, the first respondent and certain of its officers and the third and fourth respondents and subsequently a proposal, initiated by the third and fourth respondents to the first and second respondents and also involving the fifth and sixth respondents: a proposal, going initially under the codename “Project Midsummer”, which was ultimately carried into effect.  In broad terms, the allegations run, the proposal as made and as carried into effect included that the first respondent would acquire from the applicant and other shareholders the shares in the company holding one of the two licences, or entitled to take it up, and would then sell the shares for a substantially greater amount to the fifth respondent.  The proposal involved also the subscription by the first respondent for shares in the fifth respondent. 

The applicant alleges that in carrying out that proposal, in the way in which it was carried out, each respondent breached a number of duties to the applicant.  There are allegations of breach of fiduciary duty on the part of particular respondents.  There is alleged against each respondent, breaches of the Trade Practices Act 1974 (Cth), particularly s 52 of that Act and breaches of the corresponding provisions of the Fair Trading Act 1987 (NSW). Breaches of the Corporations Law are also alleged.

Particularly, however, the applicant alleges against the respondents breaches of duty involving co-operation, acting in concert or combination.  That arises in relation to certain alleged breaches of the Corporations Law but it arises particularly in allegations made that each respondent engaged in unlawful conspiracies with each other respondent. It is alleged that the respondents conspired to contravene the Trade Practices Act and the Fair Trading Act; it is alleged that four of the respondents conspired to bring about breaches of fiduciary duty by various of the respondents; and, thirdly and particularly, it is alleged that the respondents conspired with each other to cheat and defraud the applicant so as to cause him to dispose of his interest in the licence-holding company by selling his shares to the first respondent.

There is in evidence a copy of what is said to be a document prepared by the third and fourth respondents, outlining the proposal (then described as Project Midsummer).  There is also in evidence, as against the first four respondents, a document described as “Australian Pay TV Action Plan”.  That document apparently sets out various steps proposed for the carrying out of Project Midsummer, allocates responsibility for the various steps and states a time, in many cases “ASAP”, by which the step is to occur.  There is then a column headed “status”, which sets out in rather more detail relevant matters which had occurred and steps still to be taken

The first item in the Action Plan is described as “Resolve Hadid Deal”.  Under the heading “status” it is said, among other things, “letter sent on 11/4”.  The applicant tenders the letter to which I have referred on the footing that I will be asked to infer that the letter is that said in the action plan to have been sent on 11/4.  There is at this stage no evidence that any respondent other than the first two received the letter or a copy of it, or knew of its existence.

The letter refers to correspondence between the applicant and the first respondent and its officers, expresses disappointment about certain matters which had appeared in the press and proceeds to state certain views or requirements of the first respondent, particularly that neither the licences nor the companies holding them were to be disposed of without approval of the first respondent and, secondly, to state that the first respondent chose one of the two licences (which it specifies) as being the one in which it wished to take up a substantial interest.  Clearly, as is conceded by the first and second respondents, the letter is admissible as evidence against them.

The applicant argues that it is admissible against the other respondents as evidence in relation to its case on combination, acting in concert or conspiracy.  Plainly the letter contains on its face, as Mr Hughes QC for the third and fourth respondents submitted, nothing by way of an admission which could be attributed to any respondent other than the first or second.  If it is to be admitted against the other respondents it must be by reason of particular principles which the courts have laid down in relation to the admissibility of evidence where a combination or conspiracy or, perhaps more generally, acting in concert is alleged.

I was referred in the course of argument to a number of the leading authorities.  It is not necessary, I think, that I refer to the authorities in very great detail.  I was taken to a number of relevant passages, particularly in judgments of the High Court, during the course of argument.  It is perhaps sufficient to record the authorities to which I was referred and then to state, by reference to them and rather briefly, the principles which seem to me to emerge relevant to this case.  I was referred first to the “Coal Vend case”, that is The King and the Attorney General of the Commonwealth v The Associated Northern Collieries (1912) 14 CLR 387. I was referred also to well known and more recent decisions of the High Court, Tripodi v R (1961) 104 CLR 1 and Ahern v R (1988) 165 CLR 87. I was referred also to authorities in this Court, and I shall refer specifically to one of those authorities shortly. It was suggested that the High Court authorities, particularly Tripodi, suggested a distinction between the principles applicable where there is, on the one hand, an allegation of conspiracy and on the other, an allegation of a wrong involving acting in concert or combination but not amounting to conspiracy.  It was said, correctly, that Tripodi itself was an example of the latter category and that it was that category also to which the judgment of Isaacs J in Coal Vend was particularly directed.

For reasons which I hope will appear I am not sure that in this case, where in any event conspiracy is alleged, the difference - if there is one - is likely to be of very great significance.  What does emerge clearly from the authorities is a series of propositions.  First, and I think quite uncontroversially, where a conspiracy (or a combination of some other kind) is alleged, evidence of the acts of one person or of the declarations of one person, whether or not in the presence or hearing of another of the alleged participants, may be evidence against all participants of the existence of the alleged conspiracy or combination.

Secondly, it appears clearly to emerge (at least if the case is not one of conspiracy, but I think possibly even if it is) that the acts of A, a person said to be involved in the combination or conspiracy, are admissible to prove the participation of B only if there is other reasonable evidence of B’s participation.

The interrelationship between those two propositions can, I think, be simply if rather obviously illustrated by adapting the circumstances of the Super League case, News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410, particularly the passage in the joint judgment commencing at page 573. If one finds, in the absence of other proof of agreement or co-operation between a number of clubs, that those clubs all enter into agreements with a third party in substantially identical terms, one may readily conclude that there is a common purpose agreed between the clubs effected by their entering into the agreements to produce a result which the agreements contemplate. The execution of such an agreement by any one club is, as against the other clubs, evidence of co-operation to achieve a common purpose. But the execution of such an agreement by Club A does not, of course, assist in taking the next step, that of establishing that Club B is a participant in the arrangements. In this very simple example, that will no doubt be established by the circumstance that Club B has itself executed such an agreement.

The third step is that, once the agreement to achieve a common purpose is established and the identity of the participants proved, then a step taken by one in effecting the common purpose is, by virtue of a doctrine akin to agency or partnership, attributed to each of the other participants as well.

If one then turns from those principles, which seem to me clearly enough to be established by the authorities to which I was referred, to the document which I am asked to receive in evidence, it seems to me reasonably clear, first, that if the applicant were to make good the first two of the steps to which I have referred then the letter would, I should think almost necessarily (but perhaps there is no need to reach a final conclusion on that), be admissible against each respondent in relation to the third step: that is, the first two steps being taken, the letter evidencing the carrying out of a step in effectuating the common purpose would be attributable to all.

As to the first two steps, the position is, I think, slightly more complicated and, of course, the first two steps must be taken before the third is reached. The suggestion made by Mr Gyles QC for the applicant, that the authorities contemplate the making of a mosaic is, I think, in this context, of considerable force.  The difficulty (and it is recognised in the cases, particularly Ahern) about the first step, and I think equally the second, is that one cannot know until a much later stage in the case is reached than we have reached now to what extent a particular act by one alleged participant in an alleged conspiracy evidences either the existence of a conspiracy or combination or of the participation in it of others: it is likely that one will know only when evidence of other acts or declarations is in.  The example given by the High Court in Ahern, of the two bank robbers, may illustrate again in the most obvious and simple way why this must be so.  The evidence of the activities of one of the persons concerned does not take the Court very far without evidence of the activities of the other.

The conclusion follows, I think, that the letter which the applicant tenders should be received as evidence not only in the applicant's case against the first two respondents but also as evidence relevant to the allegations that there was a combination or a conspiracy and, at least potentially, as evidence of the participation of particular respondents in it.

Additionally, if the applicant were ultimately successful in persuading the Court that it should conclude that there was a conspiracy or a combination and that particular respondents were participants in it, the letter would be relevant as evidence of the taking of a step towards effectuating the relevant common purpose. 

I shall admit the letter on that basis.

I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane

Associate:

Dated:            10 February 1998

Counsel for the Applicant:	R.V.  Gyles QC N.A. Cotman SC D.A. Caspersonn
Solicitor for the Applicant:	Garrett & Walmsley
Counsel for the First and Second Respondents:	P.G. Hely QC R.M. Smith
Solicitor for the First and Second Respondents:	Clayton Utz
Counsel for the Third and Fourth Respondents:	T.E.F. Hughes QC L.G. Foster SC J.V. Nicholas
Solicitor for the Third and Fourth Respondents:	Phillips Fox
Counsel for the Fifth and Sixth Respondents:	M.J.  Slattery QC T.D. Castle
Solicitor for the Fifth and Sixth Respondents:	Freehill Hollingdale & Page
Date of Hearing:	10 February 1998
Date of Judgment:	10 February 1988