NRMA v John Fairfax - [2002] NSWSC 563

No judgment structure available for this case.

CITATION: NRMA v John Fairfax [2002] NSWSC 563

CURRENT JURISDICTION: Equity Division

FILE NUMBER(S): SC 4454/2001

HEARING DATE(S): 11, 12, 25, 27, 28 March 2002;
8, 12 April 2002

JUDGMENT DATE: 26 June 2002

PARTIES :

NRMA v John Fairfax Publications Pty Limited & 4 Ors

JUDGMENT OF: Master Macready at 1

COUNSEL : Ms R McColl SC with Mr Blackburn for plaintiff
Mr G O'L Reynolds SC with Mr M Leeming for 1st to 3rd defendants
Mr J Gleeson with Mr R Dick for 4th and 5th defendants
Mr MG Sexton SC, Solicitor-General with Ms BK Baker for Attorney-General of NSW

SOLICITORS: Corrs Chambers Westgarth for plaintiff
Freehills for 1st to 3rd defendant
Mallesons Stephen Jaques for 4th and 5th defendants
Crown Solicitor for Attorney-General of NSW

CATCHWORDS: Practice. Application for preliminary discovery against newspaper publisher and journalists who received information concerning allegedly confidential discussions in board room of the plaintiff in order to establish the name of the person disclosing the information. Orders made for examination and production of documents. Constitutional law. Whether Part 3 r 1 of the Supreme Court Rules is compatible with the implied constitutional freedom of discussion of political and governmental matters. The newspaper articles which were said to be the relevant discussions were not a discussion of political or government matters and thus the question does not arise. Evidence. Discretion under s 126B of the Evidence Act. Held that the section applies to a journalist but in the circumstances of the case the interests of justice require the disclosure of the journalists' sources.

CASES CITED: Taylor v Osbourne (1973) 1 NSWLR 52
National Education Advancement Programs (NEAP) Pty Ltd v Ashton (1995) 33 IPR 281
Jones v Dunkel (1959) 101 CLR 298
Briginshaw v Briginshaw (1938) 60 CLR 336
Williams v Minister Aboriginal Land Rights Act 1983 ALRA [2000] NSWCA 255
Stewart v Miller (1979) 2 NSWLR 128
Exley v Wyong Shire Council (9 December 1976 unreported)
Harkness v Commonwealth Bank Of Australia Ltd (1993) 32 NSWLR 543
NRMA v Geeson & Ors (2001) 39 ACSR 401
Coco v A.N. Clark (Engineers) Limited [1969] RPC 41 A-G (UK) v Heinemann Publishers Australia Pty Limited (1987) 10 NSWLR 86
Smith Kline & French Laboratories (Aust) Limited v Secretary, Department of Commonwealth Services (1990) 22 FCR 73
Church of Scientology v Kaufman (1973) RPC 636
Moorgate Tobacco Co Limited v Philip Morris Ltd ( No 2) (1984) 156 CLR 414
Johns v ASC (1993) 178 CLR 408
Attorney General v Observer Limited (1990) 1 AC 109
NRMA v Yates [1999] NSWSC 701
AG Australian Holdings Ltd v Burton [2002] NSWSC 170
Smith Kline & French Laboratories (Aust) Limited v
Department of Community Services and Health (1990) 22 FCR 73
A v Hayden (1984) 156 CLR 532
AG Australian Holdings Ltd v Burton Johns v ASC (1993) 178 CLR
Attorney General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109
Attorney General v Punch Ltd [2001] 2 WLR 1713
ABC v Lenah Game Meats (2001) 185 ALR 1
John Fairfax & Sons Limited v Cojuangco (1988) 165 CLR 346
Lange v Australian Broadcasting Corporation (1997) 189 CLR 520
Cunliffe v The Commonwealth (1994) 182 CLR 272
Levy v Victoria (1997) 189 CLR 579
John Fairfax Publications Pty Ltd v Attorney General (NSW) (2000) 181 ALR 694
Prestia v Aknar (1996) 40 NSWLR 165
Attorney-General (NT) v Kearney (1985) 158 CLR 500
Ashworth Hospital Authority v MGN Ltd [2001] 1 WLR 515

DECISION: Paragraph 170

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

MASTER MACREADY

Wednesday 26 June 2002

4454/01 NATIONAL ROADS AND MOTORISTS’ ASSOCIATION LIMITED v JOHN FAIRFAX PUBLICATIONS PTY LIMITED & 4 ORS

Paras.

1

18

Inability to ascertain the identity of the defendant 37

Purpose of commencing proceedings 38

The strength of the proposed causes of action 55

57

94

The Directors’ Code of Conduct 94
Breach of confidence 95
Not matters of confidence 98
An ambit claim 100
Trivial Matters 101
The matters are public 102
Discretionary reasons 103
Lack of detriment 104
Conclusion in respect of breach of confidence 105
Breach of fiduciary duty 106
S 182 & 183 of the Corporations Act 107
Summary as to the strengths of the causes of action 108

Public policy precludes preliminary discovery 111
Necessity, an effective cause of action against others 112

The implied constitutional freedom 119
Applicability to the affairs of the NRMA 135
The role of sections 126A and 126B of the Evidence Act 145
Other factors to be taken into account 165

Orders of the court 170

Nature of the application

1 The application is brought under Part 3 r 1 of the Supreme Court Rules. That rule is in the following terms: --

2 At present I am engaged upon the first stage of the process namely whether I should make orders sought by the plaintiff for the production of documents and examination of persons.

Parties

3 The plaintiff is a public company without a share capital. It offers various road, motoring and travel services to customers in New South Wales and the ACT. The first defendant is a newspaper publisher who publishes inter alia the Sydney Morning Herald that contains a column known as the "CBD". The second and third defendants are journalists employed by the first defendant who prepare and write articles for insertion in the first defendant's newspapers. The fourth defendant operates a press service including distribution of articles for publication in newspapers. The fifth defendant is a journalist in the employ of the fourth defendant

Orders sought by the plaintiff

4 The plaintiff seeks orders under Part 3 of the Supreme Court Rules requiring each of the defendants to produce documents and the personal attendance of the second, third and fifth defendants for examination in order to ascertain the identity and/or description of the person or persons who provided information as to three matters discussed in meetings of the plaintiff's board held on 28 June 2001 and 30 August 2001.

The background facts to the application

The Plaintiff and its board

5 The board of the plaintiff consists of 16 elected directors with provision for retirement and rotation of directors from time to time. Pursuant to rule 54A of the plaintiff’s constitution the plaintiff adopted a director’s code of conduct which provided for, inter alia, confidentiality to be maintained with respect to discussions at meetings of directors subject to certain exceptions. The relevant paragraphs of the code of conduct are as follows:-

(including

6 An important matter also contained within the code relates to sanctions for breach of the code. The relevant portions are as follows:-

“Sanctions

If the Directors' Code of Conduct is to be adhered to, there must be sanctions which can be imposed in respect of breaches. Such breaches may be relatively minor and warrant only a caution or reprimand, or they may be serious, or engaged in repeatedly, or as part of a course of conduct which is a serious threat to the interests of NRMA, including where Directors are hampered in or deflected from performing their duties.

Sanctions which may be imposed by the Board

If there has been a complaint about an alleged breach of the Directors' Code of Conduct and:

(a) the Board, the President or the Deputy President believe that mediation is not appropriate or is unlikely to resolve the matter, having regard to the circumstances of the complaint and the nature and seriousness of the allegations involved; or

(b) the complaint has been referred to mediation but has not been able to be resolved by mediation; or

(c) the Board does not believe that the outcome of the mediation is satisfactory having regard to the circumstances of the complaint and the nature and seriousness of the allegations involved, the Board (or its duly appointed delegate) will investigate the complaint to determine whether or not a breach of the Directors’ Code of Conduct has occurred and, if so, the appropriate sanctions to be applied in the circumstances.

When the Board (or its delegate) is considering whether there has been a breach of the Directors' Code of Conduct or the sanctions which are appropriate, the Board (or its delegate) will notify the Director whose conduct is in question and give him or her a right to be heard by the Board (or its delegate). However, the Board is not obliged to allow legal representation before it. If a breach has been alleged, the Board (or its delegate) will:

(a) give consideration to the serious consequences of a finding that there has been a breach of the Directors' Code of Conduct by a Director; and

(b) make a finding that a breach has occurred on the basis of the balance of probabilities.

The Board should consider how serious the contravention of the Directors' Code of Conduct is and may then impose such sanctions as it considers warranted. The sanctions which may be imposed include (but are not limited to) the following:

(i) suspension of the guilty Director from membership of any Committee or Committees of which he or she is a member and termination of payment of fees to that Director in respect of services on the Committee or Committees for the period of suspension;

(ii) removal of the guilty Director from such Committee or Committees of which he or she is a member as the Board considers appropriate and termination of payment of fees payable in respect of the services involved;

(iii) removal of the guilty Director from all or any of the Boards of the subsidiaries of the Association and termination of any fees payable for services in respect of the position or positions;

(iv) referral to the ASIC or any other appropriate regulatory authority of a complaint in respect of the conduct where the conduct may have involved a breach of the Director's general law or statutory duties or the matter requires further investigation;

(v) Court action in respect of alleged breaches of any of the general law or statutory duties owed by the Director;

(vi) giving notice of intention, in accordance with section 203D of the Corporations Law, to move a motion for the removal of the Director from his or her office as Director of the Association and calling a meeting of members for consideration of such a motion;

7 In addition there is a “Deed of Indemnity Insurance and Access” which has been signed by each director present at the board meetings held on 28 June and 30 August except for Mr George Paciullo, Ms Kate Carmell, Mr Chris Mowle and Mr Sanchez. Such deeds also contain obligations of confidentiality in respect of information which is defined as:-

“Information means all or any part of information contained in or related to any NRMA Group Company, a Board Document or any discussion at a meeting of the board of any NRMA Group Company.”

8 The relevant clauses of the deed are as follows:-

5 Confidentiality

5.1 Obligation of Confidentiality

Without limiting the Officer's duties to any NRMA Group Company, the Officer must keep all Information in strict confidence and must not disclose, cause or permit any disclosure of the Information.

The obligation of Confidentiality in clause 5.1 will continue to apply after cessation of the Officer's office or termination of this deed, but will not apply to any Information :

(2) disclosure will not cause a loss or waiver of any NRMA Group Company's right to claim client legal privilege in respect of any other Information.

5.3 Limitation

5.4 Acknowledgment

9 It is to be noted that this is a somewhat stricter liability than in the code of conduct and that it also includes non-disclosure of board discussions.

10 On 28 June 2001 the board of the plaintiff met and amongst the business transacted at that meeting was debate, discussion about and the adoption of a non-executive directors expense policy. As is common with the plaintiff it notified the press of a number of matters decided by the board. Its press release was issued about 5 pm on 28 June and it made no mention of the expense policy. The press release was sent to the third defendant Ms Lampe by fax. At about 5:24 pm Ms Collins the plaintiff's general manager, corporate affairs and publications, received an e-mail from Ms Lampe asking a number of questions. The e-mail contained the following question: --

“6. Has the non-executive directors expense policy been modified today to make provision for directors “to be granted indemnity against certain liability incurred as directors"?

11 The words "to be granted indemnity against certain liability incurred as directors” are contained in Ms Lampe’s e-mail. Those words, which were in inverted commas in the e-mail, do not appear in the expense policy or the press release. They do however appear in a confidential board paper prepared by Ms Kelly in respect of that policy. Ms Kelly is the Group General Counsel and Company Secretary of the Plaintiff. There is a clear inference available that the whole or part of the contents of Ms Kelly's confidential board paper were made available to Ms Lampe.

12 On 29 June 2001 the first defendant published an article written by Ms Lampe in the Sydney Morning Herald. Apart from references to matters contained in the press release it also dealt with the non-executive directors expense policy and contained the passage quoted in Ms Lampe’s email.

13 Correspondence between the solicitors for the plaintiff, the first defendant and the relevant journalists produced no identification of the source of information to Ms Lampe.

14 The plaintiff's board met on 30 August 2001 and the board papers included a paper prepared by Ms Kelly entitled “Recent Legal Developments”. The paper was provided at the meeting to each director and to three executives of the plaintiff. At the board meeting Ms Kelly spoke about a defamation action brought by the plaintiff against Channel 9 and the first defendant.

15 Later that day the first defendant Ms Tasker called the plaintiff to speak to Ms Kelly. Ms Kelly returned Ms Tasker’s call and the following conversation took place.

16 On Friday 31 August the first defendant published in the Sydney Morning Herald a report of the board meeting of the previous day written by the second defendant Ms Askew. That article contained the following: --

17 Correspondence with the relevant defendants once again failed to provide identification of who disclosed either of these items outside the board meeting.

Conditions precedent to the making of orders

18 Before the discretion in Part 3 Rule 1 is enlivened the plaintiff must establish four matters.

19 First, the plaintiff must establish that it has made reasonable inquiries in order to ascertain the identity of the prospective in defendant.

20 Second, the plaintiff must establish that it is unable to ascertain the identity of that person sufficiently to commence proceedings against the person.

21 Third, the plaintiff must establish that the purpose of its application is to commence proceedings against that prospective defendant.

22 Fourth, the plaintiff must establish that the defendants have or may have knowledge of facts or have or may have in their possession custody or power a document or thing tending to assist in the ascertainment of the identity of the prospective defendant.

23 There is no dispute in this matter that the fourth element has been made out. However there is a dispute as to the first three conditions. I turn to the first of these conditions.

Reasonable enquiries

24 The affidavit evidence read on the part of the plaintiff included information as to the steps that have been taken by the company secretary to ascertain the source of the information that was disclosed to the journalists. The actions included employing a specialist to sweep the boardroom for listening devices. In addition the offices of the President, his personal assistant and other senior members of the executive of the plaintiff were also swept. No illicit signals or devices were located as a result of this procedure. In addition the telephone records of company provided mobiles to directors were also searched to see if they might disclose calls by directors to the relevant journalists. The evidence as to custody of the board papers and their passing to directors shows the unlikelihood of any inadvertent disclosure. In addition to writing to directors to ask them whether they were the source of the disclosure the Company Secretary also sent to them statutory declarations for completion and return. The form of those statutory declarations was the subject of much criticism in submissions. In addition there were three other matters where it was said that reasonable inquiries had not been made. I turn to the first of these.

The plaintiff has not sought preliminary discovery against the directors

25 It was pointed out that Ms Kelly had failed to apply her mind to whether there were a small number of directors who might have been the source of the information to the journalists. The various precautions, which were taken in respect of the board papers indicated that the relevant source was likely to be a director rather than an employee. It was submitted that having regard to the likelihood of only two or three directors being the suspects that it would have been appropriate to bring preliminary discovery proceedings against those directors before bringing the present proceedings which involve the journalists disclosing their sources. It was submitted that the directors “may have” the relevant knowledge.

26 The difficulty with the submission is that an action for preliminary discovery against a number of directors, based upon what could be no more than Ms Kelly’s suspicion that they were the ones responsible, would be unlikely to demonstrate the fourth condition precedent to the exercise of the jurisdiction to which I referred above. An expressed interest of a director in the subject matter which was disclosed would not be sufficient to infer that he or she might know who made the disclosure. To express an interest at a board meeting in a topic without more is neutral as to disclosure which may well have been by another director who, after further enquiry or thought, decided to make the disclosure. If, however, there was something more in the discussion such as a threat to publish then one could form a view that the director may have the relevant knowledge. Those circumstances do not arise in this case. Any action under Part 3 against all directors would similarly be bound to fail. In my view there is no basis for this submission and I do not regard the failure to bring such an application as a bar to the present proceedings. I would mention that commencing an action, not under Part 3, against some or all of the directors would not be a form of reasonable enquiry as it would be no more than speculative proceedings.

Failure to request directors’ documents

27 It was suggested that there had been no attempt to obtain from the directors copies of their own personal telephone accounts, e-mails or personal diaries. There would be no obligation upon a director to supply such information and accordingly I do not regard this as an appropriate inquiry.

Failure to ventilate the matters at a directors’ meeting

28 It was suggested that in accordance with advice given to the company that one of the matters that should have been done was to have discussed the whole problem at a meeting of the board in an endeavour to resolve it. It seems to me that such a procedure could well be fruitless in the circumstances that had occurred immediately after the August board meeting. The Company Secretary had invited the directors to identify themselves and they had failed to do so. The directors concerned no doubt well knew the requirements of the code of conduct and had not taken the steps necessary under that code before disclosing information. In the circumstances it seems to me that the company was faced with a deliberate breach of the code and it could not be anticipated that further discussion by the board would disclose the identity of the person breaching the code. I do not regard this matter as a necessary inquiry, which the company should have undertaken before commencing proceedings.

The statutory declaration procedure

29 On 30 August 2001 Ms Kelly sent a letter to the directors enclosing a copy of a letter that she had sent on the same day to Ms Tasker asking any director who might have made a disclosure to Ms Tasker to identify themselves. She received no response to this letter.

30 On 3 September 2001 Ms Kelly forwarded to the directors a statutory declaration and asked the directors to sign and return that declaration. Her letter drew attention to the consequences of unauthorised disclosure. In response she received statutory declarations from all relevant directors except Ms Jane Singleton who wrote and said, "I believe the various laws and code surrounding this matter more than adequately bind me and a statutory declaration is simply not necessary. However for your information Belinda Tasker rang and left a message. I did not return her call.”

31 The form of the statutory declaration which the directors were asked to sign was as follows: --

32 Attached to the declaration was the copy of the article in the Sydney Morning Herald of the 31st August 2001 which referred to the NRMA's meeting of 30 August 2001. The responses were all to the effect that the director was not a source.

33 On 5 September 2001 Ms Kelly sent a further facsimile and a statutory declaration to directors for signature. She received back executed statutory declarations from all relevant directors indicating that they were not the source except from Ms Singleton who responded: --

"I faxed my answer to you yesterday as requested it is the same. Jane Singleton. However Ms Lampe did not ring me nor I her."

34 The form of that statutory declaration was designed to cover the matters that had been discussed in the board meeting of 28 June 2001. The form of the statutory declaration was as follows: --

35 There were a number of criticisms of the form of the statutory declaration. The most important of these was that a director could answer the form of the statutory declaration correctly to indicate that he or she had not been the source even if he or she had passed on the information to some intermediary who had then passed the information to the journalist. Although the criticisms in some part are valid I do not regard the statutory declarations and their form as matters of importance in this area. There is of course no obligation on a director to comply with the company's request and accordingly if the request is less than perfect then nothing flows from this failure. Importantly the directors had adopted a code of conduct, which provided a mechanism whereby in appropriate circumstances a director could disclose matters, which had been discussed at the board meeting. The evidence before me made it clear that none of the conditions precedent to such disclosure, namely, discussion with the President and notice to the board, had occurred. There were the requests made by Ms Kelly clearly asking the director who was responsible for giving information to Ms Tasker to identify him or herself. The requests, which forwarded the statutory declarations, gave an adequate opportunity for the director to identify himself. In the light of these matters I am satisfied that there has been adequate inquiry of directors.

36 In my view the company has made all reasonable inquiries in order to try and determine the identity of the source of the leak of information from the company’ board. I turn to the next condition precedent to the exercise of my discretion.

Inability to ascertain the identity of the defendant

37 A submission was made on behalf of the fourth and fifth defendants that the course of the discussions which occurred at the 30 August board meeting would indicate the names of two or three directors who were concerned with the policy for advertising in The Open Road. The first second and third defendants also submitted that the plaintiff would no doubt be certain of which directors are likely to be the relevant source. That submission did not identify the matters that would lead one to that conclusion. It was submitted that the provisions of Part 3 cannot be used "in order to determine which one or more the number of possible defendants is the right defendant". This is a reference to what was said in Taylor v Osbourne (1973) 1 NSWLR 52 at page 56E. Taking the example postulated by the fourth and fifth defendants the suggestion that two or three directors who took part in the discussions on the matter were the likely source is not necessarily convincing. Other directors present at the discussions may well have considered the matter again after the meeting and thought further on it. In any event the submissions are based on pure supposition. There is some evidence, which shows the name of one director who has given information to the first defendant. However that evidence made it plain that other directors have done that as well and the information given by the named director was not identified. I am satisfied that the plaintiff has not been able to identify the source of the leaked information.

Purpose of commencing proceedings

38 There was much debate on the purpose of the plaintiff in commencing these proceedings. This debate focused on two particular areas. The first concerned evidence given by Ms Kelly who had been authorised by the board to bring the proceedings. There was no evidence from any board member as to the purpose of bringing the proceedings. The debate on this aspect I have already dealt with in part in a ruling that I gave during the case. The second main focus of the debate concerned what steps the company would be likely to take if it ascertained the source of the leaks. It was submitted that the company wished to obtain the identity of the director so that it may deal with the matter as a breach of the code of conduct, use the material in electioneering against a director or use the proceedings as a warning to journalists that discovery of sources will be sought if there is criticism of the NRMA or its directors.

39 On the first matter I have already in my judgment given on 12 March 2002 dealt with the admissibility of the evidence given by Ms Kelly as to her reason for bringing the proceedings. In that judgement I set out the provisions of the plaintiff’s constitution and also the terms of the delegation to Ms Kelly. That delegation was in the following form.

"IT WAS RESOLVED that Ms J Kelly, Group Secretary and General Counsel of the Company, be and is hereby authorised in the name and on behalf of the Company to commence, conduct, compromise and settle any legal proceedings in any Court or Tribunal relating to any statements made in respect of the Company which may injuriously affect the Company including, or without limitation, any made in recent newspaper, other print media, radio and television programmes which, in the light of legal advice, provided to the Company or otherwise, she considers appropriate SUBJECT ALWAYS to any directions or instructions which may from time to time be given to her by the Board in relation to the commencement, conduct, compromise or settlement of any such proceedings or proposed proceedings, either generally or in respect of any particular aspect thereof and the Board being provided with regular and timely information regarding the use of this authorisation."

40 For the reasons which I gave on 12 March I am of the view that there is power for there to be a delegation to Ms Kelly. I also take the view that her purpose in commencing proceedings would be relevant. I indicated in my judgment that there may be many other areas of evidence that might be relevant to the question. Ultimately the plaintiff put forward no further evidence of purpose other than that advanced by Ms Kelly in her evidence in chief which was as follows.

“McCOLL: Q. Could you make these assumptions, that Master Macready made the orders sought, that the documents are produced, or evidence is given by one or other of the defendants who have been asked to attend for oral examination which enables you to identify the person or persons who have given information in relation to the board proceedings, can you make those assumptions?
A. Yes.

Q. Making those assumptions, if you received that information do you have an intention as to what you would do in relation to that information?
A. Yes.

Q. What is that intention?
A. My intention is that in the event of unauthorised disclosure, to take whatever action is legally advised such as is available.

41 Other relevant evidence of Ms Kelly given in cross-examination by counsel for the fourth and fifth defendant was accurately summarised in submissions in the following terms:-.

(a) the decision to commence these proceedings was made by her, together with Mr Carter, without consultation with any director (T34.42 – 35.9);

(b) she had no evidence that any board paper, board minutes, trade secrets, secret financial information, or board resolutions had been disclosed by any director to AAP (T35.10 – 36);

(c) her sole information of the content of the disclosure to AAP was what was set out in para 24 of her first affidavit (T36.5 – 10);

(d) if orders were made permitting examination, her intention would be to ask questions which would uncover more information about the content or substance of the disclosures made by the director to AAP; and to assess the strength of the cause of action in the light of that information (T40.36 – 47);

(e) she claimed that she had legal advice already on the strength of the cause of action against the director who made the disclosures (T40.55 – 41.10), but such advice was not produced in evidence;

(f) she said it was her intention to commence proceedings if they were available (T41.35 – 49);

(g) when directed to the Code of Conduct which she had placed into evidence and on which the NRMA relied upon heavily in the proceedings before Bryson J (NRMA v Geeson & Ors (unreported, 21/9/01)), she agreed that before bringing any proceedings she would need — in the light of Clause 13 — to know the content of the communication, the identity of the discloser and need to seek legal advice. More information would be required under Clause 15 (T42.51 – 43.1);

(h) she then took a position that when these proceedings were commenced she regarded the Code of Conduct as irrelevant (T44.1 – 11). She denied that she would seek legal advice on whether the matter should be dealt with under the Code of Conduct (T45.38 – 45);

(i) however, she then agreed that if she obtained the information she would provide it to the entire board (T46.14) although she said her inclination would be to commence proceedings and not make a complaint under the Code of Conduct (T46.44 – 47);

(j) when pressed further about the various options available under the Code of Conduct, her ultimate position was as follows:

(i) it would not be part of her authorisation from the board to consider issues under the Code of Conduct;

(ii) she would disclose the information obtained through preliminary discovery to the full board;

(iii) whether the full board decided to lay a complaint and proceed under the sanction provisions of the Code would be a matter for them and not her;

(iv) because of the nature of her delegation as Secretary she could not control whether or not the board decided to use the information or impose any of the sanctions (T48).

42 One of the criticisms of this evidence given by Ms Kelly was that she was acting under a mistaken belief that she could use the preliminary discovery proceedings to find out more information about the content of the disclosure that she will need to factor into any assessment of proceedings. It is clear that the examination cannot be used for purposes other than ascertaining the identity of the relevant defendant. See Taylor v Osbourne (1973) 1 NSWLR 52 at 56E and National Education Advancement Programs (NEAP) Pty Ltd v Ashton (1995) 33 IPR 281 128 FLR 334. Clearly such additional information will not become available as a result of any examination if it is ordered. In any event such further information is not likely to be needed in respect of proceedings to be based upon unauthorised disclosure of board discussions. All the information, except the source, is known.

43 I would think that it is natural that there be an assessment before the actual proceedings are commenced. Apart from anything else the procedure might disclose documents which may or may not add substance to a claim against the source. Ms Kelly’s cautious approach is not to be criticised for having what was said to be a contingent intention to commence proceedings.

44 The more difficult question is what conclusions I should draw from any failure of the plaintiff to adduce any evidence from any of the directors of the company as to what was proposed to be done if the source was identified in these proceedings. As was pointed out in submissions by the first defendant the question was raised squarely early in the proceedings and a decision has been made not to call any further evidence. It was submitted that I could infer in accordance with Jones v Dunkel (1959) 101 CLR 298 that no evidence that they could give would assist the NRMA's cause. This is probably so and is consistent with Ms Kelly’s evidence that she did not inform the board before commencing these proceedings.

45 One of the matters that was emphasised in submissions on the defendants’ part was the evidence given by Ms Kelly that she may, once these proceedings are concluded and an examination has disclosed the name of a director as the source, take proceedings without referring the matter back to the board. It was submitted that her evidence on this issue was not credible and that she should not be accepted. It is interesting to note that when she was pressed on this issue in cross-examination she referred to the fact that given the number of discussions she had heard at board meetings she well knew what the board's attitude was on the matter. The board now knows of these proceedings and it can be assumed that Ms Kelly has informed it from time to time of their progress. Even if this is the case that does not stop her authority to commence proceedings unless the board gives her an appropriate direction.

46 An obvious course for the board to adopt if the source turns out to be a director is to take action under the code of conduct.

47 It was submitted that on this issue I should not be persuaded on this question of purpose because of the inadequacy of the evidence on the issue. A reference was made to the statements of Dixon J. in Briginshaw v Briginshaw (1938) 60 CLR 336.

48 At page 361 Dixon J stated:

“The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality.”

49 At page 362 Dixon J added:

“But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must effect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters “reasonable satisfaction” should not be produced by inexact proof, indefinite testimony, or indirect inferences.” (emphasis added)

50 This statement of principle has been adopted by the New South Wales Court of Appeal in Williams v Minister Aboriginal Land Rights Act 1983 ALRA [2000] NSWCA 255 at paragraph [98]. The submissions went on to say that to force a journalist to disgorge confidential sources is a “grave consequence” which may flow from a finding that the NRMA has the requisite purpose.

51 In the circumstances, it was submitted that even if there is evidence, which is capable of proving this issue mechanically on the balance of probabilities, the court should not find that it is “reasonably satisfied” on this issue given the inadequate nature of Ms Kelly’s evidence and the failure of the NRMA to adduce any evidence of the board’s purpose.

52 As I had earlier indicated, Ms Kelly’s evidence is capable of being the evidence of the board's intention given her delegation. Although I think it is likely that she will inform the board of the result of the examination before commencing proceedings she has given evidence that she intends to commence proceedings. Her reference to the attitude of the board is indicative and supportive of her purpose and her evidence. Importantly it is the present purpose of the NRMA which is relevant to my decision to order the attendance of a person on the production of documents. The fact that after the examination has disclosed the source some different course might be taken does not by itself mean that the present purpose does not exist.

53 I would not infer on the materials before me that the board's present purpose in bringing the proceedings is to enable it to take proceedings within the board under the code. The delegation was given before the leaks occurred and Ms Kelly did not consult nor see the need to consult the board before bringing these proceedings. The failure to call evidence from the board is equally likely to be because the board has not considered the matter. Still less would I infer that the purpose was one of the improper purposes postulated in submissions. There is just no evidence of facts from which I could infer such conclusions.

54 Even if this finding would lead to a grave consequence as described above I am satisfied that the purpose of bringing these proceedings by the plaintiff is to ascertain the identity of the source so that proceedings may be brought against the source.

The strength of the proposed causes of action

55 The rule was amended in 1974 to make it clear that is not necessary for the plaintiff to establish a "prima facie case" against the person whose identity is sought to be established. The existence of at least an arguable case against the party sought to be identified and an intention to prosecute the cause of action are clearly relevant to the exercise of the court's discretion. In Stewart v Miller (1979) 2 NSWLR 128 Mr Justice Sheppard adopted the words used by Master Allen in Exley v Wyong Shire Council (9 December 1976 unreported) who had the following to say about the procedure: --

"Preliminary discovery is a valuable aid to justice. But its objective would be perverted if it were to be permitted to be turned into an instrument of oppression. In my opinion it would be turned into an instrument of oppression if it became a procedure in aid of speculative claims. It is one thing to require the name of a wrongdoer to be disclosed to the person wronged. It is a very different thing to require his name to be disclosed so that someone supposing himself to have a grievance against him may commence merely speculative proceedings against him. This does not mean that an applicant for preliminary discovery will never be granted that relief unless he establishes that he has a prime facie case against the person whose name he wishes to ascertain. The evidence, although falling short of establishing all the ingredients of a prime facie case, may point sufficiently to the existence of a case for relief as to make it proper, in the interests of justice, that preliminary discovery be ordered so that proceedings for that relief can be brought."

56 The plaintiff relied upon the above statement of principle to express the proposed causes of action in the most general terms. This was the subject of much complaint by the defendants in their submissions. I will look at each of the proposed causes of action which are identified by the plaintiff as ones which it would rely upon in the action against the source of information given to each of the journalists.

The fourth and fifth defendants’ information

57 Because it seems to be a clearer matter I will first deal with the breach of the directors’ code of conduct.

The directors’ code of conduct

58 I have already in these reasons set out a substantial part of the terms of the code of conduct. There are also confidentiality agreements (which are deeds) that have been signed by a number of the board members. They could give rise to a cause of action for damages or an injunction. However not all board members who were present at the meetings have signed them. I will thus confine my consideration to the terms of the code of conduct.

59 It was submitted that prima facie, there is a duty on directors of a company, and a fortiori its employees, to respect the confidential nature of board affairs where the interests of the board and the company require it.

60 In Harkness v Commonwealth Bank Of Australia Ltd (1993) 32 NSWLR 543 at 552 Mr Justice Young had the following to say in respect of the confidential nature of board discussions at page 522:-

"... Nomination of the individual members and their election to membership by interested groups ensures that the board as a whole has access to a wide range of views, and it is to be expected within this wide range of views that inevitably there will be differences in the opinions, approaches and philosophies of the board members. But the predominating element which each individual must constantly bear in mind is the promotion of the interests of the board itself. In particular, a board member must not allow himself to be compromised by looking to the interests of the group which appointed him rather than to the interests for which the board exists. He is most certainly not a mere channel of communication or listening post on behalf of the group which elected him. There is cast upon him the ordinary obligation of respecting the confidential nature of board affairs where the interests of the board itself so require."

(No 2)

61 In NRMA v Geeson & Ors (2001) 39 ACSR 401; [2001] NSWSC 832 Bryson J had this to say about the directors’ code of conduct:-

“3 Various circumstances operate to show that, as a general proposition, events and discussions at meetings of the Board of Directors of NRMA, and papers before the Board are confidential in character. A prominent consideration is the nature of the business of the Board of a corporation and the responsibilities of its directors; ordinary good sense would show directors and officers that confidence should be observed with respect to matters discussed at a board meeting, unless there was a specific decision to make them public. Similarly other persons receiving information about boardroom discussions understand their confidential nature without any particular explanation.

4 More specifically, the NRMA board on 28 June 2001 approved the Directors' Code of Conduct which spells out the conduct of directors in a number of respects including confidentiality. The Code is not a contractual arrangement but it is basic for establishing what NRMA requires of its directors and hence for establishing what they as fiduciaries may and may not do.”

62 The terms of clause 14 of the code of conduct are quite clear. There is no suggestion that any of the exceptions apply, as there has not been compliance with the conditions for disclosure in exceptional circumstances, which are referred to in clause 15.

63 No doubt the extent of any damage that the company might suffer would be relevant. There is evidence before me admitted on a confidential basis of the damage that may be suffered by the publication of board discussions. Without going to the detail of that evidence I note that its purport is already published in NRMA v Geeson at para 35 where his Honour said:-

“35 The considerations adverse to publishing information relating to conflict on the Board were collected and stated very fully and forcefully by Mr Carter the Chief Executive Officer in his statement to the Board; they were to the effect that the reputation of NRMA is very important for its affairs, and is very greatly injured by publicity about board turmoil; he produced information suggesting that there actually had been injury to NRMA's reputation and to perception of NRMA by employees and members, and to what he referred to as "perceived values of the brand" and that this injury was closely related to publicity about conflict and turmoil within the Board.”

64 I regard the evidence as sufficient to demonstrate an ability to prove damage as a result of the publication of board discussion.

65 One has to remember when dealing with this aspect of the code of conduct that what I am focusing on in these submissions is the disclosure of board deliberations. What is actually prohibited by clause 14 is the disclosure of "the content of discussion at board meetings”. I am not concerned at the moment about confidential information which is dealt with in paragraph 13 of the code of conduct. There is another area of evidence which concerns the information made available to the second and third defendants. I refer to that later but it is clear that one of these also is a disclosure of discussions at board meetings. The fact that there are not one but two occasions in which discussions of board meetings have been disclosed would add strength to any claim to restrain a director from breaching the code if it turned out that the same director was involved in each breach. In the case of a breach of clause 13 by the disclosure of confidential information that may or may not add substance to a claim for an injunction to prevent a further breach of the code. I will consider these aspects when dealing with the breach of confidence claim, which was articulated by the plaintiff in a general way in submissions. Such discussion will involve the consideration of any public interest defence. Paragraph 15 of the code of conduct seems to recognise some similar matter where it refers to disclosure "in the interests of the company as a whole". However as I have pointed out before, any such action under the code is subject to prior discussions with the President and notification to the board, which did not occur in this case.

66 As was pointed out by Bryson J the code is not a contract between the directors or the directors and the company but gives content to their fiduciary duty to act bona fide in the best interests of the company. It seems to me that an injunction to restrain a director from committing further breaches of the code of conduct may well be available.

Breach of confidence

67 The plaintiff’s submissions were that the ingredients for a claim for breach of confidence were that the information had the necessary quality of confidence and was imparted in circumstances giving rise to an obligation of confidence. The submissions also addressed whether there was a necessity to show detriment. The submissions did not make it plain whether these causes of action would be utilised to obtain an injunction or equitable compensation. In addition they did not identify what was said to be the confidential information in question.

68 Insofar as they so as the fourth and fifth defendants are concerned the evidence before me did not disclose the release of any document which might be described as confidential. All that was disclosed in the evidence before me was that “there was a tremendous brawl at the board meeting about the election advertising policy for Open Road and that the policy has been changed to advantage one group in the current directors elections". The actual disclosure of the board’s deliberations I have already dealt with above. The particular piece of information that might be said to be confidential would be the election advertising policy and its change.

69 The submissions of the fourth and fifth defendants suggested that there were six reasons why the cause of action was not fairly arguable. The first was that the material was not intrinsically confidential. Second, that no detriment has been shown as a result of a disclosure of information communicated in the 30 August board meeting. Third, there is no evidence of any misuse of confidential information communicated in the 30 August board meeting. Fourth, such information as has been identified is trivial and is not afforded the protection of equity. Fifth, it was submitted that there is a strong public interest in the disclosure of the topic of advertising in the 2001 board election. Sixth, it was submitted that the rules for election were already in the public domain.

Information not intrinsically confidential

70 The reported conversation is plainly capable of being read simply as an expression of a director’s view of what happened at the meeting rather than a disclosure of what actually happened at the meeting. It is also capable of being read as a report of what happened at the meeting. The subject matter was the election advertising policy and its change. Because the question of whether the subject matter is confidential may be affected by matters of public interest, I will consider it with the public interest matters which I will discuss shortly.

Requirement to show detriment

71 It was submitted that there is uncertainty as to whether there is a necessity to show detriment; see Coco v A.N. Clark (Engineers) Limited [1969] RPC 41 at 47 per Megarry J, A-G (UK) v Heinemann Publishers Australia Pty Limited (1987) 10 NSWLR 86 at 190; Smith Kline & French Laboratories (Aust) Limited v Secretary, Department of Commonwealth Services (1990) 22 FCR 73 at 111-112; Meagher, Gummow & Lehane 3rd ed. at 872. In NRMA v. Geeson & Ors [2001] NSWCA 343 at [58], the Court (Ipp AJA, Mason P. and Giles JA concurring) accepted that an injunction might arguably be granted to restrain a breach of confidence without proof of detriment. They did however point out in that case which concerned an injunction that detriment was relevant. In the present case the absence of any detriment will be a fact, which must be factored into the strength of any claim for an injunction against a director.

72 In respect of this particular disclosure there is evidence of detriment caused by the disclosure of disputes in the boardroom. This is referred to earlier in my reasons at Para [63]. However I am here concerned with the disclosure of the allegedly confidential subject matter and there is no evidence of damage relating to that subject matter.

No evidence of any misuse of confidential information

73 If the information is to be regarded as confidential then the publication to a journalist well knowing it might be published would I have thought been an arguable misuse of the information.

The information is trivial

74 It seems clear that if the information is trivial it is not afforded the protection of equity: see Coco v AN Clark (Engineers) Ltd, Church of Scientology v Kaufman (1973) RPC 636 at 658; Moorgate Tobacco Co Limited v Philip Morris Ltd ( No 2) (1984) 156 CLR 414 at 438; Johns v ASC (1993) 178 CLR 408 at 461 to 462. It seems to me that the information given is quite non-specific. Parties are not identified and it is plainly the most basic of descriptions of what happened. I would not have thought that the information was trivial as it concerned a topic of interest to members, with whom a director can only communicate via the press, namely, the coming election of directors.

Public interest in the disclosure

75 The question of any “public interest” defence when one is dealing with private individuals rather than the government has caused some discussion in the authorities to which I was not referred. The debate is referred to in “Equity Doctrines and Remedies” by Meagher, Gummow and Lehane at paragraph 4123. English law now accepts that a defendant cannot be prevented from breaking confidence where there is "just excuse" or it is in the public interest to do so. See Attorney General v Observer Limited (1990) 1 AC 109 at 268-9, 282-3. Whether the English position should be accepted in Australia is a matter on which different opinions have been expressed in a number of cases without any clearly binding decision at appellate level. I discussed the debate in NRMA v Yates [1999] NSWSC 701 at paras 22-35 and recently Campbell J has also referred to the debate in AG Australian holdings Ltd v Burton [2002] NSWSC 170.

76 In respect of confidences with which I am presently concerned which are protected in the exclusive jurisdiction of the court the position in Australia appears to be that there is no "public interest" defence but rather such matter is relevant to the content of any such obligation in its inception. See Smith Kline & French Laboratories (Aust) Limited v Secretary, Department of Community Services and Health (1990) 22 FCR 73 at 110-111. cf A v Hayden (1984) 156 CLR 532 at 545, 571-3. In AG Australian Holdings Ltd v Burton Campbell J expressed it in these terms:-

"It is unnecessary, for the purposes of the present appeal, to attempt to define the precise scope of the equitable jurisdiction to grant relief against an actual or threatened abuse of confidential information not involving any tort or breach of some express or implied contractual provision, so wider fiduciary duty or some copyright or trade mark right. A general equitable jurisdiction to grant such relief has long been asserted and should, in my view, now be accepted: see The Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 50-52. Like most heads of exclusive equitable jurisdiction, its rational basis does not lie in proprietary right. It lies in the notion of an obligation of confidence arising from the circumstances in or through which the information was communicated or obtained."

194 Concerning an obligation of confidence of that type, the fact that the subject matter of the confidence is some form of wickedness can be relevant in two ways. The first concerns whether the obligation of confidence exists at all. Concerning some types of information, communicated in circumstances which might ordinarily give rise to an obligation of confidence, the recipient of the information is entitled to say, "I am not, in conscience, obliged to keep quiet about conduct like that." The second way in which the wickedness of the conduct might be relevant, in equity's exclusive jurisdiction, is if the person seeking to enforce an obligation of confidence has himself engaged in conduct which gives rise to an equitable defence of unclean hands ( Dewhirst v Edwards [1983] 1 NSWLR 34 at 51; FAI Insurances Ltd v Pioneer Concrete Services Ltd (1987) 15 NSWLR 552 at 561, A-G (UK v Heinemann Publishers Aust (1987) 8 NSWLR 341 at 383-384; Corrs Pavey Whiting & Byrne v Collector of Customs (1987) 14 FCR 434 at 456-457.

77 It was submitted in this case that there was a strong public interest in the disclosure to the members of the NRMA on the topic of advertising for the 2001 board elections for the following reasons: --

i. of the advertising protocol formulated by the Company Secretary;

ii. that there was the gravest doubt about the validity of the advertising protocol devised by Ms Kelly by reason that the protocol was not authorised by Article 16 of the Constitution;

iii. that the consents given to Mr Sanchez and his team pursuant to the protocol were therefore invalid or of doubtful invalidity;

(i) election advertisements could be placed in The Open Road and that appropriate consents could be given under Article 16 to such advertisements;

78 In order to understand these submissions it is necessary to appreciate a number of the matters which are referred to in the submissions. There are at least three separate matters which are involved in this area and they are:--

79 As to the first of these there were election rules published by the board which dealt with the election of directors for the election to be held in 2001. These contained information on nomination provisions with protocols and rules for candidates’ and groups’ biographical information which would be inserted in the election sendouts to members for the purposes of the election. It did not concern itself with any of the matters referred to in (b) or (c) above.

80 Article 16 of the Constitution of NRMA provided that no member shall without consent in writing of the association publish, inter alia by way of advertising to the public using the letters "NRMA" or the name "National Roads and Motorists’ Association". During July Ms Kelly had had some requests for use of those names. One she received in connection with the election was from Mr Sanchez. She made inquiries and was informed that consents under the article had been given in the past by her predecessor. She then drafted a protocol for granting consents under the article and advised those in charge of the election of the details. The protocol set out the substance of the provisions of the article and that consent was required from the Company Secretary. It also provided that candidates were not able to pass themselves off as endorsed by the NRMA. All advertisements which required consent pursuant to article 16 were required to be factually correct, not defamatory and not likely to mislead or deceive any member. On 3 August 2001 she gave a consent to Mr Sanchez under the protocol. She noted that it was in order for his group to place an ad in the next edition of The Open Road for publication on the basis of agreed text. His group placed an advertisement in The Open Road for September/October 2001. Another group being “Members Voice” also inserted an advertisement in that issue without consent under article 16, which was required, as the advertisement used the name of the plaintiff.

81 There was no documentary evidence tendered in this case that in any way suggested that there was ever any policy governing election advertising in The Open Road prior to the 2001 elections. Ms Kelly was cross-examined on the matter and it is apparent that she had no knowledge of such a policy. She had been Secretary for 18 months and had made no inquiries as to whether there had previously been a policy in place. Ms Kelly had an inquiry about the matter from Mr Geeson, a director, and she responded to him on 24 August 2001 in these terms: --

“I had discussed this issue with Ms B. Collins who is in charge of The Open Road, the response is that advertisements will be able to be placed in T. O. R. for commercial rates subject to such advertisements not being misleading and deceptive, defamatory, in breach of any requirements under the Constitution of the company or objectionable from the public policy perspective. Mr Mick Gallagher and his Members Voice group have indicated they will be placing an advertisement in the next edition of Open Road, however it is a level playing field. Any other group or candidate has the same opportunity.”

82 Given Ms Kelly’s knowledge and in particular the lack of any inquiry that she had made as to whether any such policy did exist in the past there is no basis for suggesting that there was such a policy. Certainly there is nothing to suggest that Ms Kelly knew that there had been such a policy in the past.

83 The piece of confidential information with which I am concerned is that the election advertising policy for The Open Road had been changed to disadvantage one group in the current election. These submissions suggest there was a strong public interest based upon a hindsight consideration of the steps taken in relation to creation of the protocol, its publication or lack thereof against a background which presupposed some past electoral rules about election advertising in The Open Road. Another way of looking at it is to consider whether confidentiality would attach to the subject matter in any event in the circumstances that existed at the time.

84 I have earlier referred to the substantial part that the NRMA plays in public affairs in New South Wales. It seems to me that the topic of election to office as a director of the NRMA is a matter of great interest to the members. Accordingly, any matter concerning the way in which the elections for the office were conducted will also, I would have thought, be a matter of great interest to the members. In my view, a change in the policy which disadvantaged one group, standing for the then current elections, is a matter of considerable importance. There was a procedure for election mail outs giving biographical information on candidates and the members had received this information. Election advertisements were about to appear in The Open Road magazine. All these matters are not confidential. In these circumstances it seems to me that any suggestion that a change to the policy for advertising in The Open Road of itself is confidential is not likely to be accepted. Matters of public interest do not, in these circumstances, have to be considered.

The rules regarding elections are already in the public domain

85 It was submitted that because of disclosures, the matter was already in the public domain. See Johns v ASC (1993) 178 CLR 408 at 461; Attorney General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109 at 124; Attorney General v Punch Ltd [2001] 2 WLR 1713 at 1726. Given my conclusion above it is not necessary to pursue this matter.

Conclusion on the strength of the case for breach of confidence in respect of information given to the fifth defendant

86 For the reasons I have expressed I think that there is very little likelihood of obtaining an injunction or damages in respect of the disclosure of a possible change to the election rules of The Open Road.

Breach of fiduciary duty

87 This is the foundation for the proceedings, based upon a breach of the code of conduct, to which I have already referred.

Sections 182 and 183 of the Corporations Act

88 Section 182 provides that a director, secretary, other officer or employee of a corporation must not make improper use of their position to

(a) gain an advantage for themselves or someone else; or

(b) cause detriment to the Corporation.

89 There was a submission that there might be some advantage to be gained from currying favour with a journalist. I doubt this and think that the relevant subsection is the latter, namely, causing detriment to the Corporation. Section 183 provides that a person who obtains information because they are, or have been, a director, officer or employee of the Corporation must not make improper use the information to:

90 Once again it is detriment which is important if these cause of action are to be pursued. The evidence of damage caused by the leakage of board discussions arguably would support a breach of s183 (b).

The emerging tort of invasion of privacy

91 It was suggested that as a result of the decision of the High Court in ABC v Lenah Game Meats (2001) 185 ALR 1 that this cause of action might be available. The submissions were that it raises the possibility of relief of an additional kind, namely:

92 As to the latter question, it was submitted

“That three out of the six members of the court indicated that in their view, further development of the law in that field will be to the benefit of natural rather than artificial persons (at paragraphs [58], [132]). However, the Chief Justice (at paragraph [43]), and Kirby J, at paragraph [191], did not think it necessary to embark on a consideration of the question, whether such a tort should be restricted to natural persons. Callinan J generally appears to be in favour of the development of such a tort, and would not appear to restrict it to natural persons: paragraphs [313] - [336].”

93 Without meaning any disrespect to the submissions I would think that if any such tort was the only cause of action available a case brought solely on that cause of action would be highly speculative.

The first and second and third defendants’ information

The directors’ code of conduct

94 The disclosure of two separate board deliberations clearly indicates a course of conduct that might have serious ramifications for the board and the plaintiff company. Although the disclosure of a paper that dealt with the privileges and benefits to which directors are entitled could perhaps be said to be only something of an embarrassment to the directors, disclosure of dissent about the wisdom of bringing defamation proceedings I would have thought would be a serious breach of the code of conduct.

Breach of confidence

95 There are two different areas to consider in respect of information given to the second and third defendants. The first seems to be fairly clear. The whole or part of Ms Kelly's paper prepared in respect of the directors’ expense policy has been made available to the journalist. That policy clearly related to the reimbursement of directors’ expenses and associated matters. Ms Kelly's paper gave general advice of a legal nature from her position as group general counsel.

96 The other area concerned the article on the 31st August in which reference was made to some of the directors seeking to stop the legal actions mounted against Channel 9 and CBD’s employer John Fairfax Holdings and the reasons for the dissent. There is nothing in the evidence to suggest that the actual paper prepared by Ms Kelly entitled “Recent Legal Developments” was made available to the journalist. As that report is clearly privileged it could be thought that any disclosure of that report would be a serious breach of confidence, which would have the possibility of causing detriment to the plaintiff.

97 It was submitted that there are a number of reasons why the case was not a strong one in respect of information disclosed as to the first, second and third defendants. First, the subjects of disclosure were matters to which no obligation of confidence attached. Second, that it is an ambit claim without any attempt to specify the relevant confidential information. Third, the disclosures relate to trivial matters. Fourth, the issues are already in the public domain or fifth have subsequently entered the public domain. Sixthly discretionary reasons. Seventh, no detriment and thus no claim for equitable compensation.

The subjects of disclosure were matters to which no obligation of confidence attached

98 The first matter concerned advice on the grant of an indemnity to directors. I am prepared to infer that the paper was made available to the journalist. The actual policy was attached to it but I would not infer that it was made available to the journalist having regard to what was said in the published article. The question which arises is whether the information is likely to attract confidence. The grant of indemnity to directors is commonplace and regulated by the Corporations Act. It would be a rare company that did not grant such indemnities. It is in the members’ interests to have some such indemnity granted. The actual detail of the advice given in the paper was extremely general. In my view it could not be said to have the necessary element of confidentiality.

99 The second matter concerns the report of dissent over the legal actions against Channel 9 and CBD's own employer John Fairfax Holdings. It was submitted that the costs involved in such litigation and the potential for a public relations fiasco is not a matter of confidence. Although the unknown nature of costs and the potential for a public relations fiasco are matters that are notorious, I would have thought that the knowledge that the board was divided on the issue might be important confidential information so far as the potential defendants to the action were concerned.

An ambit claim without specifying the relevant confidential information

100 So far as the first matter is concerned it is very obvious that the confidential information is the contents of Ms Kelly's paper which was made available to the board and ultimately the journalist. The second matter of confidential information is the fact of dissent on the board about the proceedings.

134 The article published on 31 August 2001 was in the following terms:-

“Brawls as usual.

We can happily report that the board meeting of NRMA lived up to expectations yesterday.

As usual, there was plenty of dissent, with three directors seeking to stop the legal actions mounted against Channel Nine and CBD's own employer, John Fairfax Holdings, on the grounds of the unknown nature of the costs involved and the potential for a public relations fiasco. They didn't get their way.

The other hot topic of discussion was - for something different - the NRMA's magazine for members. For the first time in the history of The Open Road it will carry ads for the factions, setting out the policies of election candidates.

The Open Road, which lands in the mail boxes of NRMA's 19 million members, usually carries a column signed by el presidente Nick Whitlam with some message or other as well as articles of general interest to members.

This year both Members First, the dominant faction led by Nick the Nice - and Members Voice - a varied group of professionals promising no caucuses, no political party influences, no corporate election funding and definitely no demutualisation or privatisation (though we understand they could be into a bit of boot scootin') - are running advertisements in the magazine.

According to the head of another faction, the Motorist Action Group, and former long standing director Richard Talbot, who is not advertising in the mag, political ads were not in the past allowed because they were perceived as politicising the members' magazine.

Mick Gallagher of Members Voice said its ad will cost the group $5,350 for about an eighth of a page and is being funded by a bush dance and a trivia night.

Last time it spent just $3,000 on handouts - maybe the roll-up was down for the bush dance that year.

It's all a bit different to Nick's lunches at the Royal Automobile Club and his corporate sponsors.

Applicability to the affairs of the NRMA

135 It was submitted that there were three ways in which it could be said that the implied freedom arose. First it was said that discussion about the NRMA generally was political discussion. Failing acceptance of this submission it was suggested that each of the articles themselves were political discussion. The first submission requires a consideration of the role of the NRMA in our society. The role of the NRMA has been discussed in a number of cases concerning the body and was also the subject of evidence before me. A notice to admit facts was given in this matter as a result of which the following matters were admitted in respect of the activities of the NRMA: --

1 The NRMA regularly issues media releases stating its position on a variety of issues including the following:

(a) roads and infrastructure;
(b) motoring safety;
(c) petrol pricing;
(d) speed limits;
(e) petrol tax;
(f) other motoring issues.

In respect of planning issues, the NRMA regularly communicates with members, local, state and federal governments in relation to a variety of issues which impact upon the motoring public including*

(a) traffic patterns;
(b) traffic difficulties;
(c) the state of the roads;
(d) traffic flow.

3 The NRMA drafts discussion papers which are circulated to its members, government and various interest groups on a variety of topics which relate to motoring.

4 The NRMA regularly liaises with various interest groups and statutory instrumentalities in relation to the matters set out in paragraphs 1 and 2 above.

5 Specific examples of the matters referred to in paragraphs 1 and 2 above include:

136 There were some admissions which were not made by the plaintiff in response to a notice to admit. As a result there was tendered a substantial bundle of documents, which showed the activities of the NRMA in relation to its activities with the government on a Commonwealth, State and territory level. It is clear from this material that:-

(a) The NRMA regularly communicates with Federal and State governments on issues including roads and infrastructure, motoring safety, petrol pricing, speed limits, petrol tax and other motoring issues; and

137 The plaintiff has approximately 1.8 million members. I would agree with the observation of Bryson J. in NRMA v Geeson supra that the plaintiff is so large and its activities are so pervasive that it is part of the general organisation of society in New South Wales. It has a very substantial effect on the roadside and motoring facilities available to the public in New South Wales. It is self-evident that the public would have a real interest in NRMA's affairs particularly immediately prior to a board election.

138 The various political matters in which the NRMA involves itself from time to time, its size and also the fact that its activities are so pervasive that it is part of the general organisation of society in New South Wales found the submission that any discussion about the NRMA is political discussion. It is to be noted that the NRMA is not a part of the government but is a public company. It certainly seems to me that one must have regard to the terms of the discussion in question before I can conclude that the discussion concerns political or governmental matters. The NRMA in my view is not such an organisation that any discussion about it per se is a discussion of political matters.

139 The NRMA has many different activities. An example of one of these activities that clearly involves governmental or political matters is the question of excise duty and its effect on motoring. Discussion about that subject would, I have thought, clearly have been political discussion. Discussion about the NRMA's views as presented to the government of the day on that subject would also be political discussion. Consistent with the wide range of political discussion any discussion about a board member of the NRMA espousing those views would also be political discussion. Similarly discussion about the election of a board faction to push for the NRMA to espouse views on excise duty to the government would also be political discussion.

140 In contrast an activity in which is the NRMA is engaged is the carrying out of pre-purchase car inspection reports. This is a service provided to the members of the company. It is hard to see that discussion about the timeliness or quality of that service is political discussion. Similarly discussion about the qualifications of persons who provide that service would also not be political discussion. It follows that discussion about a member of the board who proposed to improve that service or the election of a faction of the board proposing to improve that service would not be a matter of political discussion.

141 This illustrates that many subjects that concern NRMA are quite remote from the political or governmental discussion necessary for the effective operation of a system of representative and responsible government. Thus one has to be careful to consider the basic subject of the discussion in order to see whether it might be protected by the implied freedom.

142 The article published on 29 June 2001 contained three subject matters. They were: --

143 In respect of the first matter the fact that the person is a former politician does not make her appointment to the NRMA board political discussion. That is a matter in the past. The second and third subjects concern the working of the NRMA board. Absent any connection to some other subject matter that was in the political arena they are not in my view political discussion.

144 The article published on 31 August 2001 dealt with board disputation about a defamation action and the advertising policy in respect of the forthcoming election of directors. The first one is a matter which is personally connected to the company and its reputation. Such a matter has no connection with political or governmental matters. The second is simply a matter touching on the board's election. Although the company from time to time is clearly involved in subjects that are subject to the implied freedom none of these particular subjects is in any way linked to the matters talked about in the article. In my view the article is not one concerned with political or governmental discussion. In these circumstances it is not necessary to consider the interesting questions which arise as to whether the provisions of Part 3 R 1 are reasonably appropriate and adapted to serve a legitimate end, the fulfilment of which is compatible with the system of government prescribed by the constitution.

Sections 126A and 126B of the Evidence Act

145 There was evidence given before me that Ms Lampe obtained the information for the two articles from one of more sources each of whom was provided by her with an undertaking that she would keep their identity confidential. It is also apparent from the conversation between Ms Kelly and Ms Tasker that the source regarded the matter as confidential and wished to remain anonymous. In these circumstances a question must arise as to whether the provisions of section 126B should be applied. The two relevant provisions in the Evidence Act are as follows: -

146 The plaintiff submitted that information given by a source to a journalist would not be in the course of a relationship in which the journalist was acting in a professional capacity. The definition of “profession” in the Shorter Oxford English Dictionary includes the following:

Spec.

147 In Prestia v Aknar (1996) 40 NSWLR 165 Santow J was concerned with the meaning of “professional activity” in connection with deciding whether a solicitor, acting as an unpaid informal mediator for the purposes of the Fair Trading Act, was engaged in professional activities. At pages 184-186 he analysed a number of cases and gave a working definition of that expression in these terms:-

“This would embrace intellectual activity, or manual activity controlled by the intellectual skill of the operator whereby services are offered to the public, usually though not inevitably for reward and requiring professional standards of competence, training and ethics, typically reinforced by some form of official accreditation accompanied by evidence of qualification.”

148 I would not adopt the offering of services to the public as critical but the other matters he mentions are relevant.

149 The occupation of a journalist involves skills which in the past were acquired by practise and instruction as a cadet and now by tertiary courses. The learning acquired includes the skill to investigate and write on matters of topical public interest. Their work is subject to procedures which makes their employers (and thus them) accountable for their actions. I would have thought that journalism is based upon some department of learning and thus would be within the narrower sense of the word. The wider sense referred to in the definition would seem to be beyond the purposes of the legislation which is involved with protection of confidences.

150 The plaintiff suggested that acting in a professional capacity meant that professional services were being delivered to the confider which, of course, did not happen in this matter. This is not required by the section and there is no warrant for including this as an element in the definition. The element of relevance is whether the journalist was acting in a professional capacity. He can do so if his job can be described as a profession.

151 To the extent that the provision is obscure under s 34 of the Interpretation Act one can have regard to extrinsic materials such as the second reading speech.

152 In the second reading speech, when introducing the amendments, the Attorney General indicated that the definition may include confidences imparted to doctors, other health professionals, journalists, social workers and other relationships in which confidentiality is an integral element. This reinforces the view which I have expressed above. It would also seem fairly clear that there was an express obligation not to disclose the contents of the communication.

153 There has been no application for a direction under section 126B but the court may give a direction on its own initiative and must give such a direction if it is satisfied of the matters in subsection (3). There is no express evidence of harm which could be caused by the disclosure of the confidence. In cases concerning confidences with health professionals the harm can be self evident. The only possibility of harm in this case is that the disclosure of the confidence will render the source who is the protected confider liable to be sued by the plaintiff in these proceedings. It is thus necessary to consider whether the nature and extent of that harm outweighs the desirability of the evidence being given.

154 Subsection (4) directs the court to take into account a number of matters and I will turn my attention to these matters but before doing so I should deal with an argument based upon s 126D which is in the following terms:-

“126D(1) This division does not prevent the adducing of evidence of communications made or the contents of a document prepared in the furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty.”

155 In Attorney-General (NT) v Kearney (1985) 158 CLR 500 the High Court considered the common law equivalent and noted the expansive meaning of the word “fraud” in that context. Even adopting this there can be no suggestion here of fraud or an offence.

156 Of relevance is whether there was a commission of an act that renders a person liable to a civil penalty. A breach of s 182 and 183 leads to a person being liable to a civil penalty. See s 1317E of the Corporations Act. Such a penalty will only be payable under s 1317G (1)(b) if the contravention.

(i) materially prejudices the interests of the corporation or scheme, or its members; or

157 The determination of materially under (i) and seriousness under (iii) all involve a complex judgment which the evidence does not address and indeed is beyond the scope of the court’s function at this stage. In view of this I think it appropriate to proceed on the basis that the penalty may not apply.

The probative value of the evidence in the proceedings

158 As there is no other way to determine the identity of the source in these proceedings, questions of probative value would not seem to arise.

The importance of the evidence in the proceedings

159 As I have indicated the orders sought are the only way in which the identity of the source will be ascertained.

The nature and gravity of the relevant offence, cause of action or defence and the nature of the subject matter of the proceeding

160 The present proceedings are not for an offence and are specifically directed to obtaining the evidence with which I am concerned. It is the only purpose of the proceeding.

The likely effect of adducing evidence of the protected confidence or protected identity information, including the likelihood of harm and the nature and extent of harm that would be caused to the protected confider

161 Giving of the evidence is likely to lead to proceedings against the protected confider. Proceedings of themselves may cause harm although if the proceedings are justified the relevance of the harm is lessened.

The means (including any ancillary orders that may be made under section 126 E. available to the court to limit the harm or extent of the harm that is likely to be caused if evidence of the protected confidence or the protected identity information is disclosed

162 It is evident that such matters are not applicable to the present proceedings.

If the proceeding is a criminal proceeding whether the party seeking to adduce evidence of the protected confidence or protected identity information is a defendant or the prosecutor

163 This is not relevant.

Whether the substance of the protected confidence or the protected identity information has already been disclosed by the protected confider or any other person

164 I am mainly concerned with the disclosure of the protected identity information. I have already found that this has not been disclosed.

Other factors to be taken into account

165 The above list of matters which the court has to take into account does not limit the questions that I may consider. Importantly in the context of the present application I have to consider the desirability of journalists being able to keep secret the identities of their informants. The very nature of the discretion to be exercised under s 126B(1) when one is dealing with journalists’ sources must take into account the relevant policy considerations.

166 In John Fairfax & Sons Ltd v Cojuangco (supra) the current state of those considerations in Australian law was summarised at p 354-5 in these terms:-

“In Granada the majority of the House of Lords rejected this broad view of the newspaper rule. Their reasons for so doing are convincing. It is a fundamental principle of our law, repeatedly affirmed by Australian and English courts, that the media and journalists have no public interest immunity from being required to disclose their sources of information when such disclosure is necessary in the interests of justice: see McGuinness, at pp 102-104; Granada, at pp 1169-1170, 1179-1181. The point is that there is a paramount interest in the administration of justice which requires that cases be tried by courts on the relevant and admissible evidence. This paramount public interest yields only to a superior public interest, such as the public interest in the national security. The role of the media in collecting and disseminating information to the public does not give rise to a public interest which can be allowed to prevail over the public interest of a litigant in securing a trial of his action on the basis of the relevant and admissible evidence. No doubt the free flow of information is a vital ingredient in the investigative journalism which is such an important feature of our society. Information is more readily supplied to journalists when they undertake to preserve confidentiality in relation to their sources of information. It stands to reason that the free flow of information would be reinforced, to some extent at least, if the courts were to confer absolute protection on that confidentiality. But this would set such a high value on a free press and on freedom of information as to leave the individual without an effective remedy in respect of defamatory imputations published in the media.

That is why the courts have refused to accord absolute protection on the confidentiality of the journalist's source of information, whilst at the same time imposing some restraints on the entitlement of a litigant to compel disclosure of the identity of the source. In effect, the courts have acted according to the principle that disclosure of the source will not be required unless it is necessary in the interests of justice. So, generally speaking, disclosure will not be compelled at an interlocutory stage of a defamation or related action and even at the trial the court will not compel disclosure unless it is necessary to do justice between the parties.

167 This is a more restrictive approach than that which applies in England and Europe. See Ashworth Hospital Authority v MGN Ltd [2001] 1 WLR 515 at 536-537.

168 The question is whether the disclosure is necessary in the interests of justice. The inability of the plaintiff to sue if the sources are not disclosed is obvious. This will leave the plaintiff without a remedy and the consequences of this have to be considered.

169 The harm caused to the plaintiff is one which results from the publication of board discussion. There can be no differentiation between respective defendants as all are involved in different incidents concerned with the revelation of board discussion. The breaches of the code of conduct show deliberate disregard of its terms and the source or sources have taken care to extract a confidentiality undertaking from the journalist. Hence in my view there is a very real likelihood of further breaches occurring if a director feels that a subject warranted public discussion outside the board room. The matters disclosed would cause some harm to the plaintiff but arguably are not serious. It is potential for further harm that is important. The plaintiff is a very large organisation fulfilling an important role in this State. We are not here concerned some small local organisation whose members are at loggerheads. Many of the subjects discussed by the board are extremely confidential and serious harm could result from disclosure of such discussions. The leaking of the matter concerning the defamation proceedings was selective in respect of a highly confidential subject. The source may not be so selective in the future. I am satisfied that the interests of justice in giving the plaintiff an effective remedy outweighs the possible harm which might be caused to the reputation of journalists and their ability to obtain information if they are forced to give details of their sources.

Orders of the court

170 I make orders 1 to 11 in the plaintiff’s summons filed herein on 7 September 2001 and will hear submissions on the day to be appointed for the examination. I have been asked to order that confidentiality no longer applies in respect of various exhibits and evidence tendered on a confidential basis. It may be that there is still some utility, given that the proceedings are not yet concluded, to defer this matter until the conclusion of the proceedings. I will hear submissions on that aspect at some convenient time.

Costs

171 I will hear submissions on costs after the parties have had the opportunity to consider these reasons.

**********

Last Modified: 06/28/2002

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Citations

NRMA v John Fairfax [2002] NSWSC 563

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Fasold v Roberts [1997] FCA 439

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68

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Luxton v Vines [1952] HCA 19

Briginshaw v Briginshaw [1938] HCA 34

CITATION:	NRMA v John Fairfax [2002] NSWSC 563
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 4454/2001
HEARING DATE(S):	11, 12, 25, 27, 28 March 2002; 8, 12 April 2002
JUDGMENT DATE:	26 June 2002
PARTIES :	NRMA v John Fairfax Publications Pty Limited & 4 Ors
JUDGMENT OF:	Master Macready at 1

COUNSEL :	Ms R McColl SC with Mr Blackburn for plaintiff Mr G O'L Reynolds SC with Mr M Leeming for 1st to 3rd defendants Mr J Gleeson with Mr R Dick for 4th and 5th defendants Mr MG Sexton SC, Solicitor-General with Ms BK Baker for Attorney-General of NSW
SOLICITORS:	Corrs Chambers Westgarth for plaintiff Freehills for 1st to 3rd defendant Mallesons Stephen Jaques for 4th and 5th defendants Crown Solicitor for Attorney-General of NSW
CATCHWORDS:	Practice. Application for preliminary discovery against newspaper publisher and journalists who received information concerning allegedly confidential discussions in board room of the plaintiff in order to establish the name of the person disclosing the information. Orders made for examination and production of documents. Constitutional law. Whether Part 3 r 1 of the Supreme Court Rules is compatible with the implied constitutional freedom of discussion of political and governmental matters. The newspaper articles which were said to be the relevant discussions were not a discussion of political or government matters and thus the question does not arise. Evidence. Discretion under s 126B of the Evidence Act. Held that the section applies to a journalist but in the circumstances of the case the interests of justice require the disclosure of the journalists' sources.
CASES CITED:	Taylor v Osbourne (1973) 1 NSWLR 52 National Education Advancement Programs (NEAP) Pty Ltd v Ashton (1995) 33 IPR 281 Jones v Dunkel (1959) 101 CLR 298 Briginshaw v Briginshaw (1938) 60 CLR 336 Williams v Minister Aboriginal Land Rights Act 1983 ALRA [2000] NSWCA 255 Stewart v Miller (1979) 2 NSWLR 128 Exley v Wyong Shire Council (9 December 1976 unreported) Harkness v Commonwealth Bank Of Australia Ltd (1993) 32 NSWLR 543 NRMA v Geeson & Ors (2001) 39 ACSR 401 Coco v A.N. Clark (Engineers) Limited [1969] RPC 41 A-G (UK) v Heinemann Publishers Australia Pty Limited (1987) 10 NSWLR 86 Smith Kline & French Laboratories (Aust) Limited v Secretary, Department of Commonwealth Services (1990) 22 FCR 73 Church of Scientology v Kaufman (1973) RPC 636 Moorgate Tobacco Co Limited v Philip Morris Ltd ( No 2) (1984) 156 CLR 414 Johns v ASC (1993) 178 CLR 408 Attorney General v Observer Limited (1990) 1 AC 109 NRMA v Yates [1999] NSWSC 701 AG Australian Holdings Ltd v Burton [2002] NSWSC 170 Smith Kline & French Laboratories (Aust) Limited v Department of Community Services and Health (1990) 22 FCR 73 A v Hayden (1984) 156 CLR 532 AG Australian Holdings Ltd v Burton Johns v ASC (1993) 178 CLR Attorney General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109 Attorney General v Punch Ltd [2001] 2 WLR 1713 ABC v Lenah Game Meats (2001) 185 ALR 1 John Fairfax & Sons Limited v Cojuangco (1988) 165 CLR 346 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 Cunliffe v The Commonwealth (1994) 182 CLR 272 Levy v Victoria (1997) 189 CLR 579 John Fairfax Publications Pty Ltd v Attorney General (NSW) (2000) 181 ALR 694 Prestia v Aknar (1996) 40 NSWLR 165 Attorney-General (NT) v Kearney (1985) 158 CLR 500 Ashworth Hospital Authority v MGN Ltd [2001] 1 WLR 515
DECISION:	Paragraph 170