Hanneybel v Uniflex (Australia) Pty Ltd - [2002] WASCA 349

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION: HANNEYBEL -v- UNIFLEX (AUSTRALIA) PTY LTD [2002] WASCA 349

CORAM: MALCOLM CJ
STEYTLER J
MATHEWS AJ

HEARD: 25 JULY 2002

DELIVERED : 16 DECEMBER 2002

FILE NO/S: FUL 141 of 2001

BETWEEN: WARREN HANNEYBEL
Appellant (Defendant)
AND
UNIFLEX (AUSTRALIA) PTY LTD
Respondent (Plaintiff)

Catchwords:

Contract of employment - Confidential information used by former State Manager after termination of employment - Breach of implied term not to disclose confidential information - Whether such term applied after termination of employment

Legislation:

Building Code of Western Australia

Result:

Appeal dismissed
Cross-appeal allowed
Injunction varied

Category: A

Representation:

Counsel:

Appellant (Defendant) : Mr P G Clifford
Respondent (Plaintiff) : Mr J A Chaney SC

Solicitors:

Appellant (Defendant) : Paiker & Overmeire
Respondent (Plaintiff) : Karp Steedman Ross-Adjie

Case(s) referred to in judgment(s):

Alterskye v Scott (1948) 1 All ER 469
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1978) 52 ALJR 20
Butt v M'Donald (1896) 7 QLJ 68
Chakravarti v Advertiser Newspapers Ltd (1998) 193 CLR 519
Crampton v Nugawela (1996) 41 NSWLR 176
Distillers Co (Biochemicals) Ltd v Times Newspapers Ltd [1975] QB 613
Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10
Faccenda Chicken Ltd v Fowler (1987) 1 Ch 117
Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1
Hadzel v DeWaldorf (1970) 16 FLR 174
Home Office v Harman [1983] 1 AC 280
Kennett v Farmer [1988] VR 991
MacKay v Dick (1881) 6 App Cas 251
Polly Peck (Holdings) Plc v Trelford [1986] QB 1000
Prichard v Krantz (1984) 37 SASR 379
Reid Sigrist Ltd v Moss & Mechanism Ltd (1932) 49 RPC 461
Riddick v Thames Board Mills Ltd [1977] QB 881
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Slim v Daily Telegraph Ltd (1968) 2 QB 157
Sungravure Pty Ltd v Middle East Airlines Airliban SAL (1975) 134 CLR 1
Taylor v Jecks (1993) 10 WAR 309

Case(s) also cited:

Nil

MALCOLM CJ: This is an appeal against part of a judgment of Hasluck J on 12 June 2001 by which it was ordered that there be a permanent injunction restraining the appellant, his servants and agents from publishing or re‑publishing to any person, except to his solicitors or counsel, or under compulsion of law:
"That part of the allegations contained in paragraph 87 of the affidavit sworn by the [appellant] on 10 July 1998 in CIV 1541 of 1998 concerning the fire rating of any of the [respondent's] products referred to in the said paragraph, or any similar allegations that the said products were not in compliance with fire rating standards."
The appellant also appeals against the order of the trial Judge that the appellant pay three‑fourths of the respondent's costs of the action, including reserved costs, to be taxed, save for certain costs to which I shall refer later.
Par 15 of the Statement of claim alleged that on or about 25 September 1998 the appellant stated to a Mr Vuleta the following words of and concerning the respondent and its product:
"Uniflex's duct may not pass the fire rating tests but maybe they would."
"I have been trying to get the test reports for Uniflex's duct for a couple of years and I couldn't get them."
"I know where Uniflex's ducts have been installed and the ceilings would have to come down for the duct to be replaced. You should prepare for teams of installers to do the replacements because the claims against Uniflex will be massive. It will bring Uniflex to its knees."
"I know what Uniflex' financial situation is. I know what the business is worth."
"The test results may not relate to products that Air Conditioning Mart is purchasing from Uniflex or words to that effect ('the 25 September words')."
The respondent brought an action for damages for slander against the appellant based on the 25 September words and words spoken by the appellant to Mr Vuleta the previous day, namely:
"Uniflex's product may not pass fire rating tests."
And:
"Some of the test reports that Uniflex has may not be for the product which Air Conditioning Mart purchased from it." ("the 24 September words").
The respondent cross‑appeals seeking that the orders made by the trial Judge be varied by substituting for the reference to "that part of the allegations contained in par 87 of an affidavit sworn by the appellant … not in compliance with fire rating standards", the following, "the words set out in paragraph 15 of the Statement of claim filed in CIV 2103 of 1998 or any similar words."
The respondent also seeks leave, to the extent that it is necessary, to cross‑appeal against the order for costs and an order that, save for the costs the subject of par 3 of the order made by the learned trial Judge, the appellant pay the respondent's costs of the action.

Background

The appellant is the former State Manager for Western Australia of the business conducted by the respondent. The respondent is a manufacturer and distributor of air‑conditioning ducting and fittings. The headquarters of the company and its manufacturing plant are at West Heidelberg in Victoria. The respondent alleged that the appellant defamed the respondent following the termination of his employment and also claimed that he was in breach of certain confidentiality obligations concerning the affairs of the respondent.
In 1974 one Edward Sterling and his wife Elizabeth incorporated a company known as Westaflex (Australia) Pty Ltd to manufacture air‑conditioning ducting and fittings. In 1981 they set up the respondent, Uniflex (Australia) Pty Ltd to carry on business as the distributor of products manufactured by Westaflex. Between 1986 and 1992, branch offices were opened in Perth, Adelaide, Canberra and Brisbane to make the Westaflex/Uniflex group the largest supplier of air‑conditioning ducting and products in Australia.
Following the death of her husband, Mrs Elizabeth Sterling became managing director of both companies in 1992 when her son Michael also became a director of the two companies.
One of the products manufactured and marketed by the companies was a flexible air‑conditioning duct known as LP‑Flex. "LP" is an abbreviation for "laminated product". This is a reference to the inner core of the duct which is constructed of a laminated spun‑bonded, non‑woven polypropylene material. The inner core material was given its mechanical strength and cylindrical shape by either being mechanically locked into a copper‑coated spring steel wire by a Helical steel rib, or being ultrasonically welded around the copper‑coated spring steel wire.
LP-Flex manufactured with the Helical metal rib was within the company referred to as "LPS". The "S" referred to the steel rib. LP‑Flex manufactured with the ultrasonically‑welded inner core was within the company referred to as "LPU". The "U" referred to the ultrasonic welding. The inner core was then covered or encapsulated with polyfibre insulation. The core and the installation together were then "jacketed" by an outer sleeve or jacket.
In about 1992 it became necessary that air‑conditioning duct used in Western Australia complied with the Building Code of Western Australia, ("the Building Code"). Provision was made with respect to the fire rating of flexible duct for use in air‑conditioning and ventilation. The provisions covered all buildings from domestic residences to multi storey buildings, schools, hospitals, public buildings and the like. In order to comply with the relevant provisions of the Building Code, both the inner and outer core material had to be tested to Australian Standard ("AS"), AS 1530.1 and AS 1530.3, whilst the installation and duct in its composite form had to be tested to AS 1530.3.
The respondent's LP‑Flex manufactured with a polythene outer sleeve or jacket and its LPR-Flex manufactured with the ACI "vapastop 883" outer sleeve or jacket did not comply with these provisions. Consequently, the respondent set about developing a product known as "V‑Flex". However, V‑Flex was too expensive for domestic applications and, also, contractors preferred a duct for domestic applications with a black inner core, rather than the characteristic silver core of the flex, as the latter core could be seen when one looked into the air outlets of air‑conditioning systems. Steps were then taken by Westaflex and the respondent to develop a "LP" duct that complied with the relevant provisions of the Building Code tested to AS 1530.2 and AS 1530.3. The outer sleeve of LP‑Flex changed to the same outer sleeve as was used in the manufacture of V‑Flex. This sleeve, known as the "super sleeve" was constructed by gluing an ACI vapastop 892 material to clear polypropylene material with fire retardant glue, in between which cotton thread reinforcing was sandwiched. Super sleeve is also reflective silver, which led to LP‑Flex manufactured with the "super sleeve" and sold in Western Australia being referred to as the "new" LP‑Flex, which differentiated it from LP‑Flex manufactured with the polythene sleeve. LP‑Flex manufactured with outer sleeves other than the "super sleeve" continued to be sold in other states which did not have the same requirements as Western Australia.
The appellant commenced employment with Uniflex in 1991 as the State Manager of the branch office in Western Australia, having earlier been employed as a sales representative. There was no evidence of any formal contract in writing. The trial Judge concluded that the terms of the appellant's employment were to be inferred from the evidence of the duties he performed as State Manager. The evidence was that he was generally familiar with the range and constituents of the respondent's products and was accustomed to meet with purchasers, who were retailers and installers of air‑conditioning systems.
The appellant's employment with Uniflex was terminated on or about 25 March 1998. This followed Mrs Sterling, as managing director, having become concerned about certain transactions, and an alleged conflict of interest between the appellant's role as an employee of the respondent and a private business interest that he was pursuing.
In May 1998, the respondent commenced proceedings against the appellant in this Court in action CIV 1541 of 1998 for damages and other relief including a Mareva injunction. On 18 June 1998, Walsh J granted the respondent an injunction restraining the appellant from leaving the jurisdiction or selling, charging, mortgaging or otherwise dealing with or disposing of or causing to be sold, charged, mortgaged or otherwise dealt with or disposed of, all or any of his assets within Western Australia. It was apparent that there would be further argument about the grant of the injunction.
On 17 July 1998, the appellant filed a defence and counterclaim together with a lengthy affidavit sworn on 10 July 1998 in which he sought to address the various allegations made by the respondent. This affidavit was referred to in the proceedings below as "the Hanneybel affidavit".
In par 87 of the Hanneybel affidavit, allegations were made by the appellant concerning the respondent's capacity to meet its undertaking as to damages. The appellant said that even if the respondent did have net assets and total shareholder equity of approximately $6,000,000, it was "likely to become insolvent in the immediate future". He went on to say that the respondent would very soon be (if it was not already) facing enormous damages claims by reason of the various matters then referred to, which included the respondent's alleged failure or inability to comply with the fire rating requirements for flexible duct prescribed by the Building Code. In particular, the appellant alleged that, as at July 1992, the respondent manufactured V‑Flex that complied with the Building Code. The structure was adhesive‑based and similar to many other products, with the difference being that it was made from aluminium laminates, whereas products produced by the respondent's competitors were made from polyester or polypropylene laminates. He alleged that the Uniflex V‑Flex product was fundamentally flawed as its structure was unsound and was far more expensive to produce than the products made by its competitors.
The appellant also said that in or about July 1993, Michael Sterling suggested the withdrawal of V‑Flex from the Western Australian marketplace and its replacement with a product known as "LP‑Flex" using the same outer sleeving and insulation that had been used on V‑Flex. He said that contractors were given an assurance that the LP‑Flex product complied totally with the relevant standards. The appellant also said that he was told by Michael Sterling that Uniflex had never been able to get the LP‑Flex material to pass the necessary test. He asked for test results, but never received them. He went on to say that the respondent's products failed the tests carried out by a national Australia testing authority registered laboratory (the "Australian Wool Testing Authority") each time they were attempted. To reduce supply problems and to maintain or improve profitability, approximately five different types of material had been used to manufacture LP‑Flex. The respondent said, "To my knowledge none had passed the test and no product supplied has met the criteria of the BCA in Western Australia". He also said that when requested by contractors to supply proof of compliance, test reports relating to another product had been submitted. In addition, he said:
"For each commercial application of the material, the local council and fire brigade would be furnished with the same false test reports to maintain the illusion that the LP‑Flex product complied with the BCA in Western Australia."
He also said that the directors of the respondent were aware of the situation as he had discussed it with them on many occasions, including by fax and at managers' conferences. During the frequent discussions he had with Paul and Michael Sterling, they advised that they could not get a flame retardant added to the core laminate material and all attempts to get it to comply with test criteria had failed.
The respondent then filed an answering affidavit sworn by Mrs Sterling on 31 July 1998 which referred to the various allegations made by the appellant, including the allegation made in par 87 of the Hanneybel affidavit. In par 14 of what was referred to as "the Sterling affidavit", she denied that the respondent was likely to become insolvent and said there had been neither a claim or notice of a claim arising from the matters described by the appellant at any time since 1992. It was also pointed out that the respondent had substantial public liability insurance and a copy of the relevant insurance policy was exhibited. It was denied that "V‑Flex" was "fundamentally flawed" because of unsound construction or otherwise. It was also denied that the inner core of "LP‑Flex" as sold by the respondent in Western Australia had failed to pass Australian Standard 1530 Part 2. Four reports of tests of the inner core dating from 3 July 1987 to 10 September 1993 were exhibited. It was also asserted that the inner core had passed Australian Standard 1530 Part 3. So far as the inner core was concerned, inner core material had been produced by a number of different manufacturers, but it was all "spun‑bonded, non‑woven polypropylene" which in turn had been laminated the same way by the one laminator. Mrs Sterling denied that the appellant had discussed with her the allegations referred to when she and a Mr Dumic attended at the Perth branch on 19 February 1998 or at any other time.
The trial Judge concluded that, on their face, the test reports suggested that the items tested complied with the flammability index established by AS 1530.2 in each case, in that the figure attributed to each object was less than five. It was also noted from par 14(e) of Mrs Sterling's affidavit that "the inner core has also passed Australian Standard 1530 Part 3".
In the meantime, on 4 August 1998 the respondent's application for a continuation of the Mareva injunction granted against the appellant by Walsh J was heard by White J. His Honour had the affidavits which I have described before him. On 17 August 1998, White J delivered his reasons for the grant of a Mareva injunction, subject to appropriate conditions to meet the needs of the appellant pending the determination of the proceedings. His Honour noted that much of what the appellant said in par 87 of his affidavit was secondary evidence regarding the contents of the Building Code, with the result that the evidence was inadmissible. He did say, however, that there were allegations in par 87 of what was said to him by directors of the respondent, including the alleged admissions that the respondent never succeeded in getting the LP‑Flex material to pass the necessary tests, which would be treated as admissible evidence.

The 24 and 25 September words

The respondents claimed that on or about 24 and 25 September 1998, the appellant uttered to a Mr Vuleta, a principal of a firm known as Air Conditioning Mart, a substantial customer of the appellant, certain defamatory words, namely the 24 and 25 September words. By this time, the appellant was no longer employed by the respondent. As the learned trial Judge said at par 36 of his reasons:
"He was simply a former State Manager of the [respondent's] branch office in Western Australia who was now involved in litigation with the [respondent] company as to certain matters of alleged misconduct on his part."
Mr Vuleta's evidence was that in the financial year ended 30 June 1998, Air Conditioning Mart had purchased in excess of $1.2 million worth of ducting from the respondent. He knew that the appellant was the State Manager for Uniflex and he also knew that his employment with the company had ceased in about March 1998. Mr Vuleta's evidence was that in the course of a telephone conversation with the appellant on 24 September 1998, the appellant said that "Uniflex' products may not pass fire rating tests" and "some of the test reports that Uniflex may have may not have been for the product which Air Conditioning Mart purchased from Uniflex", or words to that effect. These words have been referred to throughout as the "24 September words".
Mr Vuleta was concerned and asked the appellant to come and see him. The appellant saw him the following morning on 25 September. There was a discussion about the Uniflex duct and fire rating test certificates. According to Mr Vuleta, the appellant said to him that "Uniflex duct may not pass the fire rating tests but maybe they would". He also said that:
"I have been trying to get test reports for Uniflex ducts for a couple of years but I could not get them."
The respondent further said that:
"… the tests on Uniflex duct should be done every two years. Paul Sterling handled everything to do with the tests and Elizabeth Sterling did not have anything to do with that side of Uniflex."
The appellant also said words to the effect that he had received a letter from Elizabeth Sterling that made him very suspicious. He did not, however, tell Mr Vuleta what was in the letter and did not show him a copy of it. He did not tell Mr Vuleta what in the letter had made him suspicious. According to Mr Vuleta, the appellant also said words to the effect that because Mr Vuleta's daughter was a solicitor, she should know what to do and that "I should contact Bob Doyle at AWTA Textile Testing and send some samples of Uniflex products in for testing".
The appellant went on to say to Mr Vuleta:
"I know where Uniflex' ducts had been installed. Ceilings will have to come down for the duct to be replaced. You should prepare for teams of installers to do the replacements because the claims against Uniflex will be massive."
The appellant also said that the claims against Uniflex would "bring it to its knees" and "I know what Uniflex' financial situation is, and I know what the business was worth".

Mr Vuleta also said that the appellant gave him copies of test results on which the letter "F" had been written in the top right‑hand corner of each, as well as a page with writing about V‑Flex and LP‑Flex. The appellant told Mr Vuleta that "the test results may not relate to products that Air Conditioning Mart is purchasing from Uniflex". He also told Mr Vuleta that he was the first person he had visited. He said that there were other people in the same situation. The learned Judge referred to the words said to have been spoken by the appellant on 25 September 1998 as the "25 September words".
After the meeting with the appellant, Mr Vuleta decided to call Uniflex. He spoke to the then State Manager, one Lloyd Hughes, and also spoke to the Managing Director, Mrs Sterling. He told Mrs Sterling what the appellant had told him. Mrs Sterling denied the allegations and reassured him that the products that Air Conditioning Mart purchased from Uniflex complied with the relevant Australian Standards.
Mr Vuleta's evidence was that he obtained air‑conditioning duct exclusively from Uniflex and over 99 per cent of the installations in which it was used were domestic installations.
Mr Vuleta was cross‑examined by counsel for the appellant. He agreed that a substantial part of the entire ducting he purchased from Uniflex was LP‑Flex. The learned Judge noted that Mr Vuleta was not cross‑examined at all regarding the accuracy or otherwise of his recollection of the words used by the appellant on 24 and 25 September 1998.
Mr Vuleta also confirmed in evidence that the documents given to him by the appellant on 25 September 1998 were the four test reports referred to in Mrs Sterling's affidavit. Evidence was given by Michael Sterling that at no time had he said to the appellant that LP‑Flex could not meet AS 1530.2 or AS 1530.3 because to say so would have been incorrect. He did, however, have a discussion with the appellant at the managers' conference held at the respondent's head office in 1997 about the attempts to have LP‑Flex tested as compliant with a different standard AS 4254. He told the appellant that those tests had been unsuccessful. He did not, however, say that LP‑Flex had failed to pass AS 1530.2 and AS1530.3.
The respondent pleaded in pars 14 to 17 of the statement of claim that the 24 September words and the 25 September words had defamed the respondent in its reputation in business and trade. The learned Judge rejected the defamatory imputations pleaded by the respondent. There is no cross‑appeal against that part of the decision.
The imputation pleaded in par 16(a) was that the words meant or would be understood to mean that the respondent had been covering up each of the risk that the respondent's product did not comply with relevant fire rating standards and/or regulations. Hasluck J was not persuaded that the pleaded imputation did arise from the words in question and concluded that the imputation pleaded in par 16(a) was not defamatory of the respondent. Similar considerations governed his Honour's approach to the second imputation pleaded in par 16(b). As his Honour put it:
"When the preparatory words are brought into play, the pleaded imputation is that the words meant that the plaintiff had been covering up the risk that it had substituted test reports to give the appearance that its product complied with the relevant fire rating standards and/or regulations when it did not. Again, I cannot find in the words actually used sufficient indicia of the [respondent] having allegedly acted in some clandestine or surreptitious manner amounting to the constitution of test reports or the covering up of the alleged risk."
In addition, his Honour concluded that by using the word "risk" the pleader recognised that the words used by the respondent did not amount to a straightforward assertion that there had been a lack of compliance. There is no cross‑appeal by the respondent in respect of that conclusion.
The imputation pleaded in par 16(c) was that the words in their natural and ordinary meaning meant that the respondent had been covering up the risk that there were or were likely to be claims against the respondent due to the alleged non‑compliance of the product with the relevant fire rating standards which would render the respondent insolvent. His Honour concluded that, having regard to the context in which the words were uttered, the ordinary, reasonable person would simply be left with an impression that further inquiries would have to be made whether the products complied with the prescribed standards or not. Further, his Honour said that, even if the imputation pleaded was upheld, he was not persuaded that the respondent was entitled to relief in respect of the slander relied on without proof of special damage.
In the result, the learned Judge concluded at par [138 – 139] that:
"138.Put shortly, as to this issue, I consider that in the absence of expert evidence as to the true state of affairs concerning the question of compliance, and in the absence of clear evidence as to what was the [respondent's] state of knowledge, the evidence as a whole was simply inconclusive. It follows from such a view of the matter that the [appellant] failed to discharge the burden of persuading the Court on the balance of probabilities that the imputations in question were true or substantially true.
139.In summary, then I am not prepared to uphold the [respondent's] claim in defamation on the grounds that the words complained of did not give rise to the imputations contended for by the [respondent] and were not defamatory. If (contrary to the finding) they were defamatory, they were not actionable as slander. In light of these findings, there is no need for me, in strict analysis, to rule upon the [appellant's] plea of justification, but if I were obliged to do so, I would rule against the [appellant]."
It was pleaded in par 3 of the statement of claim that it was an implied term of the contract of employment between the appellant and the respondent that the appellant would act towards the appellant in good faith and, in particular, would not:
"(a)engage in conduct which would destroy the good will of the [respondent];
(b)make at any time unauthorised use of or disclose confidential information obtained by him during the course of his employment with the [respondent] ('Fiduciary Obligations')."
There was a plea in par 18 of the Statement of claim that the conduct of the appellant in speaking the words complained of was in breach of his duty under "the Fiduciary Obligations" he owed to the respondent, in that information about the extent of and the nature of products supplied by the respondent, as to their testing and as to the respondent's financial situation was confidential. A further claim that the appellant was in breach of his duty to the respondent under the Corporations Law was abandoned.
It was pleaded in par 20 that, in breach of his duty not to use material produced in evidence in Court for collateral purposes, on or about 25 September 1998, in conjunction with speaking the 25 September words, the appellant handed to Mr Vuleta a copy of p7 and annexure F to the Sterling affidavit comprising par 14 subpars (c) to (g) and the four reports comprising annexure F to the affidavit. It was alleged by the respondent that the appellant threatened and intended, unless restrained by the Court, to make use of the affidavits filed in the proceedings CIV 1541 of 1998 for a purpose other than use in those proceedings, to continue to use the confidential information otherwise than for the purpose for which it was supplied, and to engage in conduct which defamed the respondent.
The respondent did not seek to claim damages against the appellant whether for defamation, breach of contract or otherwise. The only remedy sought was a permanent injunction restraining the appellant, whether by himself, his servants, agents or otherwise, from publishing or republishing to any person, except to his solicitors or counsel or under compulsion of law, the allegations contained in par 87 of the Hanneybel affidavit or any similar allegations and from using any affidavit (and any documents annexed thereto) filed in CIV 1541 of 1998 for any purpose other than those proceedings.
By his amended defence, the appellant denied that he was liable to the respondent in the manner alleged or at all. He pleaded that his employment with the respondent was wrongfully terminated by the respondent on 25 March 1998. He further pleaded that on or about 25 September 1998 he attended at the premises of Air Conditioning Mart for the purpose of gathering evidence about the respondent's conduct for use in the Mareva injunction application. One issue in the Mareva injunction proceedings concerned the fire rating approvals the respondent did or did not have for certain of the respondent's products. The appellant pleaded that he did not have, and had never had, access to the fire rating approvals of the respondent.
The appellant also pleaded that while he was at the premises of Air Conditioning Mart on 25 September 1998 he asked Mr Vuleta if he could assist in obtaining copies of the respondent's fire rating certificates. He sought this information to assist in protecting his rights against the respondent. The appellant did not give evidence at the trial to substantiate any of these allegations.
Finally, the appellant pleaded in par 8 of his defence that if (which was denied) he did speak the 24 September words or the 25 September words, the substance of those words were true.

Defamation

Mr Vuleta gave evidence at the trial concerning the 24 and 25 September words spoken by the appellant. No evidence was given by or on behalf of the appellant to contradict that evidence. The evidence of Mr Vuleta was that at the same time as the appellant spoke the 25 September words, the appellant passed to Mr Vuleta the relevant extract from the Sterling affidavit. However, no allegation of defamation was made in reliance upon that document. The sole issue in the defamation case related to the meaning and effect of the 24 and 25 September words as spoken by the appellant. There is no cross‑appeal by the respondent against the conclusion of the trial Judge rejecting the case in defamation.
In the context of defamation, the learned Judge noted at par 118 two discrete imputations were contended for by the respondent as set out in par 16 of the statement of claim which were said to arise from the totality of the words spoken by the appellant on 24 and 25 September. The allegation of covering up the risk was a preface to each of the imputations.
The imputation pleaded in par 16(a) was that the words meant or would be understood to mean that the respondent had been covering up the risk that the respondent's product did not comply with relevant fire rating standards and/or regulations. His Honour concluded that this imputation could not be said to arise from the words in question. The words did no more than suggest that the relevant product may or may not comply. A similar conclusion was reached in relation to the second imputation pleaded in par 16(b).
His Honour also went on to conclude that, properly construed, the third imputation in par 16(c) was a plea that the words in their natural and ordinary meaning meant that the respondent had been covering up the risk that there were or were likely to be claims against the respondent due to the alleged non‑compliance of the product with the relevant fire rating standards which would render the respondent insolvent. His Honour concluded that the words used, considered in their entirety:
"… amounted to a rather equivocal assertion that the [respondent's] products may or may not comply with the prescribed standards and if the latter turned out to be the case, then there was a possibility that those who used the [respondent's] products would be involved in sizeable replacement work. A mind avid for scandal might arguably be affected by fearmongering of this kind. However, in my view, having regard to the context in which the words were uttered, the ordinary, reasonable person would simply be left with an impression that further inquiries would have to be made as to whether the products complied with prescribed standards or not."
Even assuming that the imputation could be said to arise, his Honour was not persuaded that the respondent was entitled to relief in respect of the slander relied on without proof of special damage. This was because the imputation appeared to be concerned with consequences in civil law rather than amounting to an allegation of criminal conduct.
While these conclusions strictly made it unnecessary to do so, his Honour considered the plea of justification. His Honour noted that the form of pleading did not require the appellant to positively establish that there was a lack of compliance, but only a risk or possibility that the respondent had not complied with the prescribed standards. His Honour did say:
"It is true that in the course of cross-examination, counsel for the [appellant] made some progress in bringing to light various ambiguities and insufficiencies about the nature and applicability of the test reports in the [respondent's] possession. One has to keep in mind, however, that the imputations complained of are not confined to the installation of the [respondent's] product during a specified period. To my mind, it is not decisive that an assertion made by the deponent in the Sterling affidavit is questionable, because the affidavit was being used for a limited purpose."
His Honour went on to conclude in par 134 that the evidence at the trial was simply inconclusive on the question whether there was a lack of compliance or a risk of such a determination being made. In the absence of expert evidence adduced by the appellant, the Court was not provided with any clear or reliable guidance as to the proper application of the various codes and standards. In any event, the evidence was not sufficient to justify a finding that the respondent was aware of the true situation and had attempted to cover up or conceal it. Consequently, the appellant failed to discharge the burden of proof on the balance of probabilities that the imputations in question were true or substantially true.

Breach of Duty

In addition to the claim in defamation, the respondent claimed that in breach of the appellant's duty to the Court not to use material produced in evidence in compliance with Court requirements for collateral purposes, on or about 25 September 1998 in conjunction with speaking the 25 September words the appellant handed to Mr Vuleta a copy of page 7 of and annexure F to the Sterling affidavit. The claim of breach of duty was based upon the proposition that there is an implied undertaking by each party to litigation not to use any document disclosed by discovery for any purpose otherwise than in relation to the litigation in which it is disclosed: Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 32 per Mason CJ; and see Alterskye v Scott (1948) 1 All ER 469 at 471; Distillers Co (Biochemicals) Ltd v Times Newspapers Ltd [1975] QB 613 at 618 – 620 per Talbot J; Riddick v Thames Board Mills Ltd [1977] QB 881 at 895 – 896 per Lord Denning MR; Home Office v Harman [1983] 1 AC 280.
In this case the relevant documents, namely, the Sterling affidavit, par 87 and the relevant annexure were not produced in the course of discovery pursuant to a rule of Court or an order of the Court, but volunteered to the Court as evidence in support of its application for a Mareva injunction. As his Honour noted in par [149] what might otherwise have been regarded as confidential material, had been voluntarily exposed by the respondent as plaintiff for use in open Court. Accordingly, the rule concerning the implied undertaking not to disclose documents discovered did not apply. As Mason CJ made clear in Esso Australia Resources at 32, the implied undertaking not to use discovered documents for any collateral purpose is subject to the qualification that, once the material is adduced in evidence in court proceedings, it becomes part of the public domain, unless the Court restrains publication of it.
His Honour made it clear at par [155] that the Esso Australia Resources rule did not apply because the documents were not disclosed for the purposes of discovery, with the result that they were not subject to the implied undertaking. This ruling was confined to the extract from the Sterling affidavit and related exhibits actually handed over by the defendant. Consequently, the cause of action based upon the rule referred to in Esso Australia Resources was dismissed. There is no cross‑appeal against this decision.

Breach of Contract

As has been seen, the respondent also pleaded in par 3 of the amended statement of claim that it was an implied term of the appellant's contract of employment that the appellant would act towards the respondent in good faith and, in particular, would not (a) engage in conduct which would destroy the good will of the respondent; and (b) make at any time unauthorised use of or disclose confidential information obtained by him during the course of his employment with the respondent. These implied terms were defined for the purposes of the pleadings as "fiduciary obligations".
The test for the implication of a term in a contract was formulated in the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1978) 52 ALJR 20. Lord Simon, delivering the majority judgment which was joined in by Viscount Dilhorne and Lord Keith of Kinkel, said at 26:
"Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express. In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied:
(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."
It is trite law that each party to a contract agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract: Butt v M'Donald (1896) 7 QLJ 68 at 70 – 71 per Griffith CJ. That passage was cited with approval by Mason CJ in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607. His Honour also noted at 607 that a contract imposed an implied obligation on each party to do all that was reasonably necessary to secure performance of the contract. As Lord Blackburne said in MacKay v Dick (1881) 6 App Cas 251 at 263:
" … as a general rule … where in a written contract it appears that both parties have agreed that something shall be done which cannot effectually be done unless both concur in the doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect."
Mason CJ went on to say at 607 that this rule of construction was not confined to the imposition of an obligation on one contracted party to co‑operate in doing all that was necessary to be done for the performance of the other party of his obligations under the contract. It is in that context that the rule applies that each party agrees by implication to do whatever is necessary on his part to enable the other party to have the benefit of the contract.
Hasluck J, having reviewed a number of the authorities and texts, concluded at par 160:
"The employee is obliged to serve the employer with fidelity and in good faith. He must not disclose or make public any professional or trade secret or confidential information which he learns by reason of his employment. He impliedly undertakes that he will not use to the detriment of his employer any information which he has obtained in confidence in the course of his employment. The employee can be restrained by injunction from publishing or using any such information. The duty not to disclose confidential information becomes confined, once the employee's employment has ceased, to be a duty not to disclose the employer's trade secrets, and cannot be more widely invoked to place fetters on the ability of ex-employees to compete: Faccenda Chicken Ltd v Fowler [1987] 1 Ch 117.
The general rule is that where a term creates a substantive contractual duty, the term cannot be enforced after termination."

As an exception to the general rule, there may be clauses which have a post‑termination operation. These include terms prohibiting disclosure by an employee of confidential information. If the parties have expressed an intention that a term is to be enforced notwithstanding termination, or if such a term can be implied, it may be enforced by way of injunction: Carter: Breach of Contract (2^nd ed) pars 1227 and 1228.
Hasluck J, having reviewed the authorities concluded in par 164 that:
"I am persuaded by these authorities that the implied terms contracted for by the [respondent] in the circumstances of the present case should be regarded as terms of the contract of employment and that the obligation of confidentiality survived and could be enforced by the [respondent] after termination of the contract."
In Faccenda Chicken Ltd v Fowler (1987) 1 Ch 117, it was unanimously held by the Court of Appeal that an employee impliedly undertakes not to use to the detriment of his employer any information which he has obtained in confidence in the course of his employment, although the duty not to disclose becomes confined, once his employment has ceased, to a duty not to disclose the employer's trade secrets unless the relevant information is so confidential as to require the same protection as a trade secret, but can be more widely invoked to place fetters on the ability of ex-employees to compete: see per Neill LJ at 136.
It was also held in Faccenda Chicken per Neill LJ at 137 that in order to determine whether information was a trade secret or equivalent to a trade secret, it was necessary to have regard to:
(a)the nature of the employment, for example, whether the status of the employee was such that he regularly handled confidential information and recognised it as such, or whether the information was only handled by a restricted number of employees;
(b)the nature of the information itself; and
(c)whether the relevant information could easily be isolated from other non‑confidential information which was part of the same package of information.
In the present case, the appellant, in his capacity as the State Manager of the respondent had a status which was such that he regularly handled confidential information. In my opinion, this clearly included the test results of various products relating to conformity with relevant standards as well as information concerning the designs or special methods of construction of the respondent's products: cfReid Sigrist Ltd v Moss & Mechanism Ltd (1932) 49 RPC 461; or other information which was of a sufficiently high degree of confidentiality as to amount to a trade secret: Faccenda Chicken at 137 per Neill LJ.
Hasluck J referred to the decision of this Court in Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1. In that case, the first appellant, Mr Green, while the manager of the respondent's business, acquired a shelf company and submitted a tender for the installation of ceilings in respect of a certain project for which the respondent was also minded to tender. The Court held that while Mr Green was the manager of the respondent's business, a fiduciary relationship existed between him and the respondent, with the result that he was under an obligation not to place himself in a situation where his duty to the respondent and his own interest might possibly conflict. As a consequence, Mr Green was liable to account to the respondent for the benefit of the contract. The Court also held that the obligation to account survived the cessation of the relationship of employer and employee out of which the fiduciary relationship arose. It was irrelevant that the benefits of the relevant contract would not be realised by Mr Green until after he had left the employment of the respondent.
In my opinion, the fiduciary relationship which was found was such that whether by virtue of the consequential implication of terms or the value of the contractual relationship giving rise to a fiduciary duty or obligation, there was an obligation to account. As Kennedy J said at 16:
"… the first question to be asked is whether the relationship between [Mr Green] and the respondent had the requisite fiduciary character. In my opinion it does. [Mr Green] held a senior managerial post in the respondent, with substantial responsibilities.
…
To paraphrase the words of Laskin J (as he then was) in Canadian Aero Service Ltd v O'Malley [1974] SCR 592 at 605‑6, the first appellant's responsibilities verified his status as a senior officer. He was 'top management' and not a mere employee, whose duty to his employer, unless enlarged by contract, consists only of respect for trade secrets and the confidentiality of customer lists. His was a larger, more exacting duty which was similar to that owed to a corporate employer by its directors: see also Gower, Principles of Modern Company Law (3^rd ed, p 518; State Vacuum Stores of Canada Ltd v Phillips [1954] 3 DLR 621; American Restatement of Restitution 190; Reading v Attorney‑General [1951] AC 507; [1951] 1 All ER 617,and Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488.
The general rule in relation to a person standing in a fiduciary relationship to another is laid down in Bray v Ford [1896] AC 44 at 51‑2, where Lord Herschell said: 'It is an inflexible rule of a Court of Equity that a person in a fiduciary position, such as the respondent's, is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict. It does not appear to me that this rule is, as has been said, founded on principles of morality. I regard it rather as based on the consideration that, human nature being what it is, there is danger, in such circumstances, of the person holding a fiduciary position being swayed by interest rather than by duty, and thus prejudicing those whom he was bound to protect. It has, therefore, been deemed expedient to lay down this positive rule. But I am satisfied that it might be departed from in many cases, without any breach of morality, without any wrong being inflicted, and without consciousness of wrong‑doing."
On the basis of these authorities, Hasluck J concluded that the implied terms contended for by the respondent in the present case should be regarded as terms of the subject contract of employment so that the obligation of confidentiality survived and could be enforced by the respondent after termination of the contract.
His Honour said at par [169] that:
"When one has regard to the information conveyed by the spoken words, I conclude that the words, although not defamatory for the reasons previously given, were, and were intended to be, damaging to the [respondent]. When the words and documents are viewed together, I consider that the [appellant] acted in breach of his obligations under the contract. The effect of the [appellant's] actions was to divulge confidential information to one of the [respondent's] major customers concerning an alleged lack of compliance with safety standards. In this case, unlike the use of customer lists in the Faccenda Chicken case (supra), the information was in the nature of a trade secret because it was directed to a technical issue of some complexity and was information which would otherwise have remained confidential to the [respondent]. The [appellant's] actions may not have amounted to a breach of the procedural rule, but, in the absence of any evidence that the [appellant] was acting in good faith, I am satisfied that he acted in breach of his obligations under the contract. These were obligations which survived the termination of his employment."
In my opinion, Hasluck J was also right to conclude that the appellant, as the State Manager of the respondent's business, was in a position of trust so that a fiduciary relationship existed between him and the respondent with the result that he was under an obligation not to place himself in a situation where his duty to the respondent and his own interest might possibly conflict: cfGreen & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1 at 6 per Burt CJ and per Kennedy J at 16.
It was on this basis that the respondent was granted a permanent injunction restraining the appellant from publishing or republishing to any person the allegations contained in par 87 of his affidavit sworn on 10 July 1998 or any similar allegations.

Ground 1

Ground 1 of the appeal contends that the learned Judge erred in granting the injunction because:
(a)the relevant information was acquired by the appellant after termination of his contract and not disclosed in breach of any implied term to keep confidential information obtained in the course of his employment;
(b)insofar as the 'breadth of the injunction' is based upon a finding that the appellant may repeat the words spoken to Mr Vuleta, the finding was:
' … inconsistent with the unchallenged evidence of Mr Vuleta and the finding to the effect that the appellant (defendant) may speak only to other customers of the respondent (plaintiff) in a manner similar to the conversation with Mr Vuleta …';
and
(c)insofar as the injunction is based upon a conclusion that the appellant … engaged in conduct that would destroy the good will of the respondent … by speaking the words pleaded in paragraphs 14 and 15 in the statement of claim, the respondent … did not plead or run a case in evidence at trial based upon any alleged breach of the implied term of the contract to that effect or at all."
It was also contended that the respondent called no evidence of loss or damage at the trial.
Counsel for the appellant submitted that the ultimate question upon which the appeal turned was whether the words spoken by the appellant on 24 and 25 September 1998 taken in combination with the fire rating certificates produced at the time of the conversation with Mr Vuleta amounted to a breach of the implied term of the contract of employment.
While there was not an explicit separate cause of action pleaded in the statement of claim based upon breach of fiduciary duty, par 3(b) of the statement of claim pleaded that it was an implied term of the contract of employment between the appellant and the respondent that the appellant would act towards the respondent in good faith and would not:
(a)engage in conduct which would destroy the good will of the respondent;
(b)make at any time unauthorised use of or disclose confidential information obtained by him during the course of his employment with the respondent.
These were subsequently referred to compendiously in par 16 of the statement of claim as "fiduciary obligations". They were, of course, primarily contractual obligations.
The confidential information relied upon in par 4 of the statement of claim included information regarding the testing of the respondent's products to applicable standards including the Australian Standard Code and the Building Code of Australia. It was pleaded in par 6 that the information was communicated to the appellant for the sole purpose of enabling him to fulfill his obligations pursuant to his contract of employment and for no other purpose. Further, it was pleaded in par 7 that, at all material times, the appellant was and "remains" under "a duty of trust and confidence towards the [respondent] in respect of the Confidential Information and each part of it" and was not entitled to use it or any part of it without the prior consent of the respondent, "or for any purpose other than that for which it was supplied to him by the [respondent]."
In my opinion, the statements "Uniflex's product may not pass fire rating tests" and "Some of the test reports that Uniflex has may not be for the product which Air Conditioning Mart purchased from it" (ie, the 24 September words) clearly fell within the context of confidential information. The question is whether the contractual obligation of confidentiality applied to its disclosure, given that the relevant information was obtained in the course of the proceedings, rather than in the course of the appellant's employment. In this respect, counsel for the appellant relied on the conclusion by the learned trial Judge in the defamation context that:
"… the statements made by the [appellant to Mr Vuleta] would not tend to lower the [respondent] in the estimation of [its] fellows once the notion of covering up is removed from the equation … One is simply left with the rather equivocal assertion that a certain product may or may not conform to the required standard."
In my opinion, the statement that "Uniflex's product may not pass fire rating tests" implied that there existed information in the form of some material or reason to believe that the product may not pass fire rating tests. On that basis, it was submitted for the appellant that the relevant statement by the appellant was "an equivocal assertion" going to:
"… the question … that fire rating certificates may not exist for all or some parts of the product manufactured, supplied by the respondent."
Formulated that way, the pleading interprets the relevant statement as one of historical fact whereas it was a prediction of a future fact, namely, that Uniflex's products may not pass the fire rating tests. In other words, there was a prediction, implying that the appellant had reason to believe that "Uniflex's product may not pass fire rating tests." The further statement that "Some of the test reports that Uniflex has may not be for the product which Air Conditioning Mart purchase from it", taken together with the other statement, implied that there were reasons to suppose or suspect that some of the respondent's products may not pass the relevant tests; some of the products sold did not have the necessary fire rating certificates; and, in particular, LP‑Flex did not have them.
The 25 September words took the matter further because the appellant said to Mr Vuleta on 25 September that ceilings would have to come down for the duct to be replaced; the claims would be massive; and would "bring Uniflex to its knees." This was reinforced by the further statements by the appellant that:
"I know what Uniflex's financial situation is. I know what the business is worth."
And:
"It will bring Uniflex to its knees."
In my opinion, those statements, taken in the context, meant, and would be understood to mean, that Uniflex would not be able to meet the claims it was likely to face or, to the extent that it could, it would not be able to continue in business by reason of the extent of its liability.
So far as compliance is concerned, the learned trial Judge concluded that:
"The evidence of Michael Sterling suggested that the [respondent] believed it was in a state of compliance and even as to those products in which test reports did not exist, that did not necessarily mean that there had been a failure to comply."
It was established that one of the fire rating certificates relied on by Elizabeth Sterling as a fire rating certificate for LP‑Flex was in fact a certificate for Q‑Flex. The error was conceded by Michael Sterling. He agreed that there were no test certificates for one particular part of the Evolution fabric used to construct the inner core of LP‑Flex. To the best of Michael Sterling's knowledge, the other part of the Evolution fabric had not been tested after it had been laminated. At the same time, however, the learned Judge concluded at par 78 that:
"The tenor of Mr Sterling's evidence over a lengthy period of cross-examination, including reference to various documents, was that, as indicated in his evidence-in-chief, the plaintiff acquired the Evolution material from Kimberly-Clark upon the basis that it had been tested to AS 1530.2 and AS 1530.3 with certificates being provided by the supplier to that effect. However, once the Evolution fabric had been received by the plaintiff, it was then laminated by Southcorp Industrial Textiles. Mr Sterling agreed under cross-examination that, to the best of his knowledge, the Evolution fabric material was not submitted for testing after it had been laminated. He denied that he told the defendant this at some point in 1997. Mr Sterling agreed there was a conversation about Australian Standard 4254. His belief was that AS 4254 applied in Western Australia as from July 1997 for commercial buildings. He agreed he told the defendant at a managers' conference at some time 1997 held at the plaintiff's Melbourne office that LP-Flex had not been made compliant with AS 4254. Mr Sterling said in re-examination that prior to July 1999 on his understanding there were no requirements for domestic building so far as AS 4254 was concerned."
These findings of fact were not challenged on the appeal. On the basis of such findings, I consider that the learned trial Judge was entitled to find as he did at par 169 of his reasons that:
"When one has regard to the information conveyed by the spoken words, I conclude that the words, although not defamatory for the reasons previously given, were, and were intended to be, damaging to the plaintiff. When the words and documents are viewed together, I consider that the defendant acted in breach of his obligations under the contract. The effect of the defendant's actions was to divulge confidential information to one of the plaintiff's major customers concerning an alleged lack of compliance with safety standards. In this case, unlike the use of customer lists in the Faccenda Chicken case (supra), the information was in the nature of a trade secret because it was directed to a technical issue of some complexity and was information which would otherwise have remained confidential to the plaintiff. The defendant's actions may not have amounted to a breach of the procedural rule, but, in the absence of any evidence that the defendant was acting in good faith, I am satisfied that he acted in breach of his obligations under the contract. These were obligations which survived the termination of his employment."
It follows, in my opinion, that both on the basis of the implied term pleaded and in terms of the fiduciary obligations imposed by the law of equity on the appellant by virtue of his contractual relationship with the respondent, the respondent was entitled to relief by way of an injunction to restrain the repetition by the appellant of the allegations regarding non‑compliance with fire rating standards. It was contended on behalf of the appellant, however, that the injunction should be discharged because the statements about the relevant products were always qualified by "they may not or they may" comply. I am unable to accept that submission. In my opinion, the relevant statements must be looked at in the total context. The context included the further statements that:
"I know where Uniflex's ducts have been installed and the ceilings would have to come down for the duct to be replaced. You should prepare for teams of installers to do the replacements because the claims against Uniflex will be massive. It will bring Uniflex to its knees."
And:
"I know what Uniflex's financial situation is. I know what the business is worth."
The implication which flows from these statements is that Mr Vuleta's company could not rely on the respondent to carry out the rectification work required because the massive claims against it would "bring Uniflex to its knees". In my opinion, the statement also implied that the claims against Uniflex would be so great that it would be put out of business and would not be able to meet the claims against it or carry out the rectification work itself. This takes the "sting" of the imputation further than the appellant contended. Although the appellant's statement was to the effect that the products may not comply with rating standards, that must be looked at in a context where it was also being said that there was a need to prepare for teams of installers to take down the ceiling so that the existing ducting could be replaced "because the claims against Uniflex will be massive".

In my opinion, when each of the relevant statements by the appellant is looked at in the context of the others, it is clear that the meaning conveyed is that the appellant claimed to know where these ducts had been installed and that "they would have to come down for the duct to be replaced".
It was submitted by counsel for the appellant that, taken in the context, the statements by the appellant only conveyed to Mr Vuleta that he should prepare for teams of installers, but only "as a caution" and "only in the event that the fire rating certificates are not in existence". With all due respect to counsel, I do not find it possible to accept that submission. The statements must be seen in the context of par 87 of the appellant's affidavit sworn on 10 July 1998 which commences as follows:
"I verily believe that even if the [respondent] does indeed have net assets and total shareholder's funds of approximately $6,000,000 it is likely to become insolvent in the immediate future. The [respondent] will very soon be (if it is not already) facing enormous damages claims by reason of the following: …"
The appellant then described the suggested substitution of V‑Flex product with LP‑Flex for the inner core material which Mr Sterling would get tested to AS 1530.2. While the appellant said that he was delighted with this suggestion, he maintained that he was concerned about compliance with the Building Code of Australia. As previously stated, he also said that to:
"… reduce supply problems and to maintain or improve profitability, approximately 5 different types of material have been used to manufacture LP‑Flex. To my knowledge none have passed the test and no product supplied has met the criteria of the BCA in Western Australia."
The finding of the learned trial Judge was to the contrary. That finding was not challenged on the appeal. Further, the contention by the appellant in ground 1(a) of the grounds of appeal that the relevant information was only acquired by him after the termination of his employment with the respondent is inconsistent with his own evidence in subpars 87(d) and (f) of his affidavit sworn on 10 July 1998. In particular, he also says in par 87(e) that he was told by both Paul Sterling and Michael Sterling that the relevant tests had failed each time they had been attempted, although five different types of material had been used to manufacture LP‑Flex. He also says that:
"To my knowledge none have passed the test and no product supplied has met the criteria of the BCA in Western Australia."
For these reasons, I consider that ground 1(a) fails.
Ground 1(b) contended that, insofar as the breadth of the injunction was based upon a finding that the appellant may repeat the words spoken to Mr Vuleta, it was inconsistent with the unchallenged evidence of Mr Vuleta and the finding by the learned Judge to the effect that the appellant may speak to other customers of the respondent in a manner similar to the conversation with Mr Vuleta. Reference is made in ground 1(b) to par [70] of the reasons, but that paragraph only contains the following:
"As to certificate 7‑447299‑CV dated 10 September 1993, this related to the material with the polypropylene extruded coating or lamination used in the manufacture of the inner core of LP‑Flex."
No significant submissions were advanced in support of ground 1(b). It appears not to have been pressed. In any event, it appears to be quite devoid of merit.
Ground 1(c) contended that, insofar as the injunction was based upon a conclusion that the appellant engaged in conduct that would destroy the good will of the respondent by speaking the words pleaded in pars 14 and 15 of the statement of claim, the respondent did not plead or run a case in the evidence at trial based upon any alleged breach of the implied term to that effect or at all. It was also contended that the respondent called no evidence of loss or damage at the trial. No submissions were advanced on behalf of the appellant in support of this ground and I assume that it was abandoned. It follows that the appeal should be dismissed.

The Cross‑Appeal

By its notice of cross‑appeal dated 30 November 2001, the respondent contends that pars 1 and 2 of the judgment and orders of the learned trial Judge should be varied so that it is ordered that:
"1.There be a permanent injunction restraining the appellant (defendant) whether by himself, his servants, agents or otherwise from publishing or re‑publishing to any person, except to his solicitors or counsel, or under compulsion of law, the allegations contained in par 87 of the affidavit sworn by the [appellant] on 10 July 1998 in CIV 1541 of 1998 or any similar allegations.
2.The [appellant] do pay the [respondent's] costs of the action, including reserved costs, to be taxed save for the costs referred to in paragraph 3 hereof."
Paragraphs 1, 2 and 3 of the orders made on 24 August 2001 were:
"1.There be a permanent injunction restraining the [appellant], whether by himself, his servants, agents or otherwise from publishing or re‑publishing to any person, except to his solicitors or counsel, or under compulsion of law, that part of the allegations contained in paragraph 87 of the affidavit sworn by the [appellant] on 10 July 1998 in CIV 1541 of 1998 concerning the fire rating of any of the [respondent's] products referred to in the said paragraph, or any similar allegations to the effect that the said products were not in compliance with fire rating standards.
2.The [appellant] do pay three‑fourths of the [respondent's] costs of the action, including reserved costs, to be taxed save for the costs referred to in paragraph 3 hereof.
3.The [appellant] shall pay to the [respondent] the costs thrown away in respect of the [appellant's] application to adjourn the trial dated 19 January 2001."
The learned trial Judge concluded in par 100 of his reasons that:
"In the present case, although the words complained of contain references to fire rating tests and whether the Uniflex duct may or may not pass or be the subject of test reports, there is no explicit reference, on the face of the words, to Uniflex being involved in the covering up of a risk arising from the situation. Nonetheless, in par 16 of the claim, the [respondent] has pleaded that the words were defamatory of the [respondent] in that in their natural and ordinary meaning they meant and would be understood to mean that the [respondent] 'had been covering up the risk' and then follows three distinct propositions. Thus, upon a fair reading of par 16, the notion of 'covering up the risk' must be viewed as a preface to each proposition so that, for example, the first of the three imputations pleaded as a material fact by the [respondent] is that the words meant or would be understood to mean that the [respondent] had been covering up the risk that the [respondent's] product did not comply with relevant fire rating standards and/or regulations. In other words, the meaning in issue in each case is not simply whether the words meant that the [respondent's] product did or did not comply or that the [respondent] had taken some step to give the appearance of compliance. The suggestion is that, properly construed, the words meant in regard to each imputation that the [respondent] had been involved in a process of covering up the risk that was referable to the three areas of concern singled out in subpars (a) to (c) of par 16."
I have already earlier in these reasons set out par 16 of the statement of claim by which it was contended that the 24 September words and the 25 September words meant that the respondent had been covering up each of the risks that its product did not comply with the relevant fire rating standards and/or regulations, the fact that the respondent had substituted test reports to give the appearance that the product complied and the fact that there were likely to be claims against the respondent which would render it insolvent.
As is apparent, the learned trial Judge held that the 24 September words and the 25 September words meant that the respondent had been involved in the process of covering up the risk of the matters pleaded and that those words, in their natural and ordinary meaning, did not convey that the respondent had been involved in a cover up or concealment. The respondent does not challenge the conclusion that the words did not impute a cover up or concealment. It was submitted, however, that his Honour failed to properly construe the third and fourth sentences of the 25 September words in considering the imputation pleaded in subpar 16(c) of the statement of claim to the effect that there were or were likely to be claims against the respondent due to the alleged non‑compliance of its product which would render it insolvent. In this context, the learned Judge said at par 128 of his reasons:
"128.Properly construed, par 16(c) is a plea that the words in their natural and ordinary meaning meant that the [respondent] had been covering up the risk that there were or were likely to be claims against the [respondent] due to the alleged non‑compliance of the product with the relevant fire rating standards which would render the [respondent] insolvent."
His Honour went on to say in pars 129 – 130 that:
"129Again, I am not persuaded that the imputation pleaded can be said to arise from the words used. When I seek to determine whether the words used in fact conveyed a meaning defamatory of the [respondent], I am not persuaded that the ordinary, reasonable reader would understand them in a defamatory sense. To my mind, the words used, considered in their entirety, amounted to a rather equivocal assertion that the [respondent's] products may or may not comply with the prescribed standards and if the latter turned out to be the case, then there was a possibility that those who used the [respondent's] products would be involved in sizeable replacement work. A mind avid for scandal might arguably be affected by fearmongering of this kind. However, in my view, having regard to the context in which the words were uttered, the ordinary, reasonable person would simply be left with an impression that further inquiries would have to be made as to whether the products complied with prescribed standards or not.
130.Even if it be held that the imputation pleaded in par 16(c) of the claim can be said to arise from the words complained of and is defamatory, for the reasons previously given, I am not persuaded that the [respondent] is entitled to relief in respect of the slander relied on without proof of special damage. This imputation appears to be concerned with consequences in civil law rather than amounting to an allegation of criminal conduct. Accordingly, I am not persuaded that it falls within one of the four categories whereby slander is actionable without proof of special damage."
It was contended on behalf of the respondent that, in reaching this conclusion, the learned trial Judge failed properly to construe the third and fourth sentences of the 25 September words when considering the imputation pleaded in par 16(c) regarding the likelihood of claims which would render the respondent insolvent. It was submitted that the 25 September words conveyed more than a mere possibility that the respondent's products did not comply and that, as a consequence, persons who had used the relevant products would be involved in significant replacement work. The third and fourth sentences were respectively:
"I know where Uniflex's ducts have been installed and the ceilings would have to come down for the duct to be replaced. You should prepare for teams of installers to do the replacement because the claims against Uniflex will be massive. It will bring Uniflex to its knees."
And:
"I know what Uniflex's financial situation is. I know what the business is worth."
It was submitted that those statements clearly suggested that there was a substantial risk that those who used the respondent's products would be required to replace the ducting which had been installed, with the result that there would be claims against the respondent due to the alleged non‑compliance of its product with the relevant fire rating standards and regulations which would render the respondent insolvent, or expose it to a very substantial risk of insolvency.
Although the respondent had pleaded specific meanings, it was necessary for the learned Judge to decide what meanings were fairly open in the circumstances and in this context his Honour was not restricted by the specific imputations pleaded. In National Mutual Life Association of Australasia Ltd v GTV Corporation Pty Ltd [1989] VR 747 at 768, Fullagar, Hampel and McDonald JJ at 768 noted that the practice had developed of the parties pleading what they alleged the words used meant in their plain and ordinary meaning but went on to say that:
" … the practice did not, and in our opinion could not, alter the position at law that the meaning of the words was ultimately a question for the jury, and that the jury must be at large in finding the true meaning amongst such possible meanings as were left to them by the Judge, and that the Judge was not bound to confine the jury to the false innuendos asserted. …"
Their Honours also said at 768:
" … that practice did not and could not alter the position at law that the Judge was to decide what meanings were fairly open and was to leave to the jury all such meanings, and only such meanings, of the words as were fairly open. In our opinion, neither the Judge nor the jury were thereby confined to the meanings asserted by the parties."
Their Honours went on to consider at 768 – 769 the decision of the Court of Appeal in England in Polly Peck (Holdings) Plc v Trelford [1986] QB 1000 at 1032 – 1033:
"(1)there was an obligation upon the plaintiff and upon the defendant each to plead what he respectively contended were the false innuendos, and
(2)that it was open to the defendant to plead that the words were justified in the meaning(s) attributed to them by the defendant although not justified in the meaning(s) attributed to them by the plaintiff, and
(3)such pleadings were effective to 'define the issues'."
The learned primary Judge was invited by the plaintiff's counsel not to follow the Polly Peck case despite the fact that it had been followed in England and had been very recently followed in Victoria in the case of Kennett v Farmer [1988] VR 991.
In Slim v Daily Telegraph Ltd (1968) 2 QB 157 at 185, Salmon LJ said that a plaintiff was bound by his or her pleaded meaning. Diplock LJ said in Slim at 175 that a plaintiff could rely on any unpleaded meaning which was less injurious than the pleaded meaning. In Sungravure Pty Ltd v Middle East Airlines Airliban SAL (1975) 134 CLR 1 at 14, Stephen J referred to both views. In Chakravarti v Advertiser Newspapers Ltd (1998) 193 CLR 519, Brennan CJ and McHugh J said at [21] that the proposition advanced by Salmon LJ in Slim was too rigorous and appeared to sacrifice form to substance. Their Honours' view was that a less injurious meaning than the meaning pleaded is not always without significance as Diplock LJ seemed to imply. As their Honours said in Chakravarti at 533:
"A defendant who could not justify or otherwise defend a publication having the meaning pleaded by the plaintiff might have been able to justify or otherwise defend a defamatory publication having a less injurious meaning. But a different nuance of meaning from the meaning pleaded may go to, and be found by, the jury provided it is not unfair to the defendant to allow the plaintiff to so to depart from the meaning pleaded."
After referring to the comment by Fox J in Hadzel v DeWaldorf (1970) 16 FLR 174 at 182 where Fox J said that a Judge could find for the plaintiff "on a nuance of meaning not put by him", Brennan CJ and McHugh J said in Chakravarti at 533 that:
"The critical consideration is whether it is prejudicial, embarrassing or unfair to the defendant to allow a plaintiff to amend the statement of claim or otherwise raise an issue or to seek a verdict on the basis that the matter complained of bears a meaning different from the meaning previously pleaded or relied upon by the plaintiff."
Their Honours referred to similar statements made in Prichard v Krantz (1984) 37 SASR 379 at 386 per King CJ (with whom Millhouse and Prior JJ agreed); Taylor v Jecks (1993) 10 WAR 309 at 317 – 318 per Anderson J (with whom Kennedy and Franklyn JJ agreed); and Crampton v Nugawela (1996) 41 NSWLR 176 at 183 per Mahoney A‑CJ.
The Chief Justice and McHugh J also said at [24]:
"If the defendant is, or might reasonably be thought to be, prejudiced, embarrassed or unfairly disadvantaged by the departure – whether in pleading or preparing for trial, or adducing evidence of in conducting the case before a verdict – the plaintiff will be held to the meaning pleaded. If the meaning pleaded goes to the jury and is not found by the jury, the plaintiff fails. If there be no unfair disadvantage to the defendant by allowing another defamatory meaning to be relied on and to go and be considered by the jury – as where the plaintiff seeks to rely on a different nuance of meaning or, often times, merely a less serious defamation – the different defamatory meaning may be found by the jury."
Gaudron and Gummow JJ made comments to the same effect at 544 – 545.
Counsel for the appellant took the point, both at trial and on the appeal that an imputation of that kind had not been pleaded. The pleaded imputation was one of "covering up" of the risk that the respondent's product did not comply with the relevant fire rating standards; the respondent had substituted test reports to give the appearance that its product complied with fire rating standards when they did not, and there were likely to be claims against the respondent due to such non‑compliance which would render the respondent insolvent. It was these claims which were likely to render the respondent insolvent. In my opinion, the "covering up" of a risk of non‑compliance resulting in claims is substantially different from an imputation of a risk of impending insolvency. As a matter of fact, the trial Judge had not been invited to find such an imputation. In these circumstances, I consider that it was too late for the respondent to take the point regarding an imputation or insolvency for the first time in the context of the cross‑appeal.
In my opinion, while it is arguable that the relevant words contain an imputation of a significant risk of insolvency, I consider that the respondent should not be permitted to rely on the imputation of insolvency nor of the risk of insolvency because it would be unfair to the appellant to do so. While the suggested imputations are defamatory, they were not pleaded or relied upon at trial and are substantially different from that which was pleaded. The thrust or "sting" of the specifically pleaded imputation is one of "covering up" of the risk of non‑compliance, which is significantly different from that which was sought to be relied on, namely, impending insolvency as such.
For these reasons the cross‑appeal should be dismissed.

Costs

The learned Judge ordered that the appellant pay three‑fourths of the respondent's costs of the action, including reserved costs, to be taxed save for certain other costs. In the circumstances, I would be prepared to hear further submissions regarding the costs of the proceedings in the light of the appeal and the cross‑appeal being dismissed.

STEYTLER J: I have had the advantage of reading the reasons for decision of the Chief Justice. I agree with them and with his Honour's conclusion that each of the appeal and cross‑appeal should be dismissed. There is nothing I wish to add.
MATHEWS AJ: I have read the reasons of the Hon the Chief Justice. I am in agreement with those reasons and have nothing further to add.