Amcor LTD v Barnes

[2021] VSCA 6

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2012 0045

AMCOR LIMITED (ACN 000 017 372) AND ORS	Appellants
v
TREVOR MARK BARNES AND ORS	Respondents

S APCI 2012 0066

AMCOR LIMITED (ACN 000 017 372) AND ORS	Appellants
v
JAMES GEORGE HODGSON AND ANOR	Respondents

S APCI 2012 0081

JAMES GEORGE HODGSON AND ANOR	Applicants
v
AMCOR LIMITED (ACN 000 017 372) AND ORS	Respondents

S EAPCI 2020 0021

AUSTRALIAN CORRUGATED BOX CO PTY LTD (FORMERLY ACHILLA PTY LTD) (ACN 104 489 581) AND ANOR	Applicants
v
ORORA LIMITED (FORMERLY AMCOR PACKAGING (AUSTRALIA) PTY LTD) (ACN 004 275 165) AND ANOR)	Respondents

S EAPCI 2020 0029

ORORA LIMITED (FORMERLY AMCOR PACKAGING (AUSTRALIA) PTY LTD) (ACN 004 275 165) AND ANOR)	Applicants
v
AUSTRALIAN CORRUGATED BOX CO PTY LTD (FORMERLY ACHILLA PTY LTD) (ACN 104 489 581) AND ANOR	Respondents

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JUDGES:	FERGUSON CJ, BEACH and WHELAN JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	27–29 October 2020
DATE OF JUDGMENT:	2 February 2021
MEDIUM NEUTRAL CITATION:	[2021] VSCA 6
JUDGMENT APPEALED FROM:	[2012] VSC 94; [2012] VSC 434; [2016] VSC 707; [2019] VSC 393; [2019] VSC 849

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EQUITY – Offıcers and employees – Fiduciary duty – Breach – Secretly acquiring interest in business sold by employer – Fidelity – Information improperly used – Offıcer not exercising powers in good faith – Conflict of interest – Knowing assistance – Remedies – Loss not suffered – Gain made – Election – Account of profits – Equitable compensation.

PRACTICE AND PROCEDURE – Appellate review – Approach to appeals by way of rehearing – Court’s exercise of powers where satisfied of primary decision-maker’s error – Recognition of role of trial judge in fact-finding.

EMPLOYMENT – Contract of employment – Termination – Notice – Payment in lieu – Validity of termination – Termination premised upon payment in lieu – Whether termination required making of payment in lieu.

CONTRACT – Asset Sale Deed – Reciprocal supply and purchase obligations – Construction of purchase obligation – Which entity bound – Implied supply agreement – Existence of – Purported effect – Implied agreement inconsistent with Deed of Accession.

ESTOPPEL – Alternative to implied supply agreement – Whether common assumption gave rise to conventional estoppel – Challenge to ‘business as usual’ conclusion – Conventional basis for parties’ relationship – Whether alleged assumption consistent with Deed of Accession.

CONTRACT – Construction – ‘Business as usual’ construction – Intention to produce commercial result – Departure from natural and ordinary meaning – Avoiding commercial nonsense.

CONTRACT – Construction – Carve-out – Burden of proof – Which party bore – Whether carve-out composed of separate elements.

DAMAGES – Method of assessing – Entitlement on ‘business as usual’ construction – Whether particular work included – Whether party entitled to damages based on calculation including all fixed costs – Whether damages ought to be limited to amounts paid to alternative suppliers.

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APPEARANCES:	Counsel	Solicitors
For the Appellants in S APCI 2012 0045	Mr P Solomon QC with Mr E Gisonda and Mr C Tran	Gilbert + Tobin
For the First Respondent in S APCI 2012 0045	Mr J Moore SC with Mr J McComish	Brown Wright Stein Lawyers
For the Second, Third and Fourth Respondents in S APCI 2012 0045	Mr S Maiden QC with Ms E Murphy	Mills Oakley Lawyers
For the Fifth, Sixth and Seventh Respondents in S APCI 2012 0045	No Appearance
For the Appellants in S APCI 2012 0066	Mr P Solomon QC with Mr E Gisonda and Mr C Tran	Gilbert + Tobin
For the Respondents in S APCI 2012 0066	Mr C Gunst QC with Mr A Solomon-Bridge	AJ Macken & Co
For the Applicants in S APCI 2012 0081	Mr C Gunst QC with Mr A Solomon-Bridge	AJ Macken & Co
For the Respondents in S APCI 2012 0081	Mr P Solomon QC with Mr E Gisonda and Mr C Tran	Gilbert + Tobin
For the Applicants in S EAPCI 2020 0021	Mr S Maiden QC with Ms E Murphy	Mills Oakley Lawyers
For the Respondents in S EAPCI 2020 0021	Mr P Solomon QC with Mr E Gisonda and Mr C Tran	Gilbert + Tobin
For the Applicants in S EAPCI 2020 0029	Mr P Solomon QC with Mr E Gisonda and Mr C Tran	Gilbert + Tobin
For the Respondents in S EAPCI 2020 0029	Mr S Maiden QC with Ms E Murphy	Mills Oakley Lawyers

TABLE OF CONTENTS

Introduction......................................................................................................	4
Breach of duty claims......................................................................................	12
Factual summary..................................................................................	12
The relevant statement of claim........................................................	22
The Vickery J Principal Reasons......................................................	30
Orders made 20 March 2012 and the conduct of the account......	50
The Vickery J Further Reasons.........................................................	51
Grounds and contentions..................................................................	59
Nature of appellate review................................................................	61
Ground 3 — failing to find the Second Sale Agreement was uncommercial.......................................................................................	63
Ground 2 — error in finding that Hodgson, Sangster, Mihelic and Bayley renounced their interest in October 2005................................	71
Ground 1 — failing to find Holihan breached his fiduciary duty — and Holihan, Achilla and ACB Purchaser acted as knowing assisters — in relation to the initial sale................................................................	76
Ground 1 — submissions..................................................................	76
Ground 1 — analysis........................................................................	82
Relevant legal principles concerning relief.........................................	88
Ground 8 — no order to account and refusing amendments............	91
Ground 8 — submissions..................................................................	91
Ground 8 — analysis........................................................................	94
Ground 5 — limitation of account to period of employment...........	98
Ground 6 — no account of profits against Hodgson, Sangster, Mihelic and Bayley....................................................................................	99
Ground 4 — no constructive trust..........................................................	100
Ground 7 — no relief granted.................................................................	101
Conclusion..................................................................................................	101
Hodgson dismissal claim......................................................................................	102
Review of the documents and evidence................................................	103
The Vickery J Principal Reasons............................................................	115
Ground of appeal.......................................................................................	119
Submissions................................................................................................	120
Analysis — notice of termination/election issue.................................	124
Analysis — the payment issue................................................................	129
Conclusion..................................................................................................	135
Achilla counterclaim..............................................................................................	136
Relevant terms of the Second Sale Agreement and the Deed of Accession	142
The Sloss J Principal Reasons.................................................................	148
Significant aspects of the Sloss J Principal Reasons..........................	183
Three matters warranting mention........................................................	187
The Amcor Displays Reasons.................................................................	189
The Quantification and Interest Reasons.............................................	192
The entity bound by cl 12.2 prior to the Deed of Accession — proposed Achilla grounds 1, 2 and 3......................................................	193
Proposed Achilla grounds 1, 2 and 3 — submissions.......................	194
Proposed Achilla grounds 1, 2 and 3 — analysis.............................	198
The scope of cl 12.2 — the primary obligation — proposed Achilla ground 4.......................................................................................................	204
Proposed Achilla ground 4 — submissions......................................	205
Proposed Achilla ground 4 — analysis.............................................	207
The scope of cl 12.2 — the ‘carve-out’ — proposed Amcor ground 11.......................................................................................................................	210
Proposed Amcor ground 11 — submissions.....................................	210
Proposed Amcor ground 11 — analysis............................................	211
Achilla estopped — proposed Achilla ground 7.................................	212
Proposed Achilla ground 7 — submissions......................................	213
Proposed Achilla ground 7 — analysis.............................................	213
Achilla’s damages — Amcor Displays — proposed Achilla grounds 5 and 6..........................................................................................................	214
Proposed Achilla grounds 5 and 6 — submissions...........................	214
Proposed Achilla grounds 5 and 6 — analysis.................................	215
Achilla’s damages — fixed costs — proposed Amcor ground 12.....	216
Proposed Amcor ground 12 — submissions.....................................	216
Proposed Amcor ground 12 — analysis............................................	217
Achilla’s damages — the ‘cap’ — proposed Amcor ground 13.........	218
Proposed Amcor ground 13 — submissions ....................................	218
Proposed Amcor ground 13 — analysis............................................	219
Interest — proposed Achilla ground 8 and proposed Amcor ground 14...................................................................................................................	219
Proposed Achilla ground 8 and proposed Amcor ground 14 — submissions  .....................................................................................	219
Proposed Achilla ground 8 and proposed Amcor ground 14 — analysis..............................................................................................	221
Conclusion..................................................................................................	222
The course of the various trials and the period of delay..................................	223

FERGUSON CJ

BEACH JA
WHELAN JA:

Introduction

1. The Amcor group of companies is a multinational organisation which conducts business, amongst other things, as a packaging manufacturer and distributor.  In 2003 one of the companies in the Amcor group sold its business to corporate entities associated with that business’ general manager.  Unbeknown to Amcor, other Amcor executives held, or planned to hold, a financial interest in that business after its sale.  The terms of sale contained provisions requiring an Amcor company to supply certain materials to the new owner of the business and to purchase certain products from the new owner of the business.

1. These events have led to over 15 years of litigation.  There have been two major trials on different issues, culminating in first instance judgments of respectively 1,795 and 1,741 paragraphs in length.  There have been many other hearings, rulings and judgments on related and separate discrete issues.

1. There have been innumerable issues of dispute between the parties, but three principal areas of contention remain.  The first is claims by Amcor for breach of duty against its former executives concerning the sale of the business.  The second is a claim by one of the relevant Amcor executives concerning the circumstances of his dismissal.  The third is a claim by the new owner of the business for breaches of the supply and purchase obligations contained in the sale agreement. 

1. Broadly speaking, at first instance Amcor succeeded in establishing breaches of duty by its former executives but it obtained no relief because it was held that it had suffered no loss, that certain of the executives had made no profit, that it was not appropriate to order a constructive trust, and that two former executives who might otherwise have been required to account for profits would not be ordered to do so because the relevant claims had not been pleaded against them.  The new owner of the business recovered damages for breach of the supply and purchase obligations, but the sum recovered was less than the sum to which it claims to be entitled.  Finally, the former executive who made a claim in relation to the circumstances of his dismissal succeeded in that claim.

1. The relevant business has been referred to throughout the litigation as the ‘ACB business’.  The business was a specialty packaging business operating in premises at Wetherill Park in New South Wales.  The Amcor subsidiary which operated the business was formerly named Australian Corrugated Box Co Pty Ltd (now named ACN 002 693 843 Box Pty Ltd) (‘ACB Vendor’).  The manager of the business prior to the sale was Craig Holihan.  Two companies associated with him entered into a sale of business agreement dated 2 June 2003 whereby all the assets of the ACB business (with the exception of one large machine known as a ‘corrugator’) were transferred.  The two companies were ACB Australia Pty Ltd (‘ACB Purchaser’) and Australian Corrugated Box Co Pty Ltd (formerly Achilla Pty Ltd) (‘Achilla’).

1. Five Amcor executives other than Holihan held, or at one point planned to hold, a financial interest in the transferred business.  These executives were James Hodgson, Trevor Barnes, Ian Sangster, Christopher Bayley and Albert Mihelic.[1]

   [1]Solely for ease of reference after an individual has been named the first time, we will thereafter refer to them by their surname only.

1. All of the Amcor executives referred to were employees of Amcor Ltd, the parent company of the Amcor group.  Whether their conduct constituted a breach of duty and, if so, what remedy should be ordered, are contentious issues in the appeals and applications now before this Court (‘breach of duty claims’).

1. One of the Amcor executives referred to, Hodgson, ceased work for Amcor on 1 October 2004.  Either then or subsequently his employment was terminated.  The circumstances and consequences of that termination are also contentious issues in the appeals and applications now before this Court (‘Hodgson dismissal claim’).

1. Under the sale agreement, Achilla was under an obligation to acquire certain materials from an Amcor entity, and an Amcor entity was under an obligation to acquire manufactured products from Achilla.  Identification of the Amcor entity which was the subject of those obligations, the issue of whether that entity breached those obligations, and, if so, the issue of what damage was suffered, are also contentious issues on these applications and appeals (‘Achilla counterclaim’).

1. While much remains in dispute between the parties, over time, some areas of dispute have been finalised.  Most significantly, Amcor pursued claims in relation to another business sale, being the sale of a business called the ‘service packaging business’.  The appeals and applications now before this Court do not contain grounds of appeal or proposed grounds of appeal concerning that sale.  Because that sale was first in time, throughout the litigation the sale agreement in relation to the ACB business has been referred to as the ‘Second Sale Agreement’.  The parties continued to use that term in their submissions and we will also do so.

1. The relevant litigation began when Hodgson issued proceedings against Amcor Ltd in 2004 concerning his dismissal.  Amcor Ltd, ACB Vendor and two other Amcor subsidiaries counterclaimed against Hodgson and a company associated with him, Bankson Pty Ltd, concerning the sale of the ACB business and the sale of the service packaging business.[2]  We will refer to this as the ‘Hodgson proceeding.’

   [2]S CI 2004 09420.

1. In 2007 the four Amcor companies who brought the counterclaim against Hodgson issued proceedings against Barnes, Holihan, ACB Vendor, Achilla, Sangster, Bayley and Mihelic, making substantially similar allegations to those made in the counterclaim against Hodgson.[3]  We will refer to this as the ‘Barnes proceeding’.  So far as this appeal relates to the Barnes proceeding, Bayley, Mihelic and Sangster were not legally represented and did not appear before the Court.  Bayley and Mihelic filed a written case which adopted (and on some issues restated and amplified) the Hodgson parties’ written case.  Sangster advised the Court by email that he had read the submissions and concluded that he had no capacity or knowledge of the law to comment any further than what had already been put in opposition to Amcor’s submissions. 

   [3]S CI 2007 08181.

1. In the Barnes proceeding, ACB Purchaser and Achilla brought a counterclaim against ACB Vendor and an Amcor company formerly named Amcor Packaging (Australia) Pty Ltd and now named Orora Limited (‘APA’).  This counterclaim concerned alleged breaches of the supply and purchase obligations under the Second Sale Agreement.

1. APA was the corporate vehicle for Amcor’s Australasian operations.  It conducted its operations through six ‘divisions’, one of which was a division manufacturing cardboard corrugated products.  This division was variously referred to as ‘Corrugating/AFPA’,[4] ‘Amcor Fibre Packaging Australasia’[5] and other variations of those names.[6]  The references to this division are not uniform.  We will refer to it as ‘AFP’.  AFP was not a legal entity.  It was a business name used by APA. 

   [4]Hodgson v Amcor Ltd [2012] VSC 94, [18] (Vickery J) (‘Vickery J Principal Reasons’).

   [5]Ibid [26b].

   [6]See ibid [75]; Amcor Ltd v Barnes [2016] VSC 707, [4], [38], [55a], [211] (Sloss J) (‘Sloss J Principal Reasons’).

1. AFP was a large Amcor division.  Its head office was in Melbourne.  It operated 14 corrugated box plants in Australia and New Zealand.  Over 3,900 people were employed within the division.[7] 

   [7]Vickery J Principal Reasons [18].

1. Holihan, Barnes, Sangster, Bayley, Mihelic and Hodgson were all managers within the AFP division at the relevant time.  Holihan was the General Manager — Small Businesses, New South Wales, and reported to Barnes.[8]  Barnes was the Regional General Manager of the AFP division in New South Wales, and reported to Hodgson.[9]  Sangster, Bayley and Mihelic were also managers within the division.  Sangster and Mihelic reported to Hodgson.[10]  Bayley reported to Sangster.[11]

   [8]Ibid [129].

   [9]Ibid [101], [103].

   [10]Ibid [64].

   [11]Ibid [159].

1. At the relevant time Hodgson was the Group General Manager of business units which included the AFP division.[12]  He reported directly to the Managing Director of the Amcor group for Australasia, initially Peter Brown, and later Peter Sutton.  Brown and Sutton in turn reported to the Managing Director of Amcor Ltd, Russell Jones.  Annexure A is an organisational chart setting out the structure of the AFP division (Corrugating/AFPA) at the relevant time.

   [12]Ibid [77], [80].

1. The judgments determining the issues now raised by these appeals and applications are:

·A judgment in which Vickery J found in favour of Hodgson in relation to his dismissal claim, found that there had been breaches of duty by the relevant Amcor executives, found no loss had been suffered by Amcor Ltd and no profit had been made by the executives other than Holihan and Barnes, and indicated an intention to make orders for an account of profits on a limited basis against Holihan and Barnes (‘Vickery J Principal Reasons’).[13]

·A further judgment in which Vickery J refused an application by the Amcor parties to amend their statement of claim in the Barnes proceeding, and determined not to order an account directed to Holihan and Barnes on the basis that the relevant matters directed to that issue had not been pleaded (‘Vickery J Further Reasons’).[14]

·A judgment in which Sloss J determined most of the contentious issues on the Achilla counterclaim in relation to the purchase and sale obligations in the Second Sale Agreement (‘Sloss J Principal Reasons’).[15]

·A further judgment of Sloss J concerning an issue on the counterclaim referred to as ‘Amcor Displays’ (‘Amcor Displays Reasons’).[16]

·A further judgment of Sloss J in which she quantified the damages payable on the counterclaim following completion of a special referee process and joint expert reports, and made determinations concerning interest (‘Quantification and Interest Reasons’).[17]

[13]Hodgson v Amcor Ltd [2012] VSC 94 (‘Vickery J Principal Reasons’).

[14]Amcor Ltd v Barnes [2012] VSC 434 (‘Vickery J Further Reasons’).

[15]Amcor Ltd v Barnes [2016] VSC 707 (‘Sloss J Principal Reasons’).

[16]Amcor Ltd v Barnes [Ruling No 3] [2019] VSC 393 (‘Amcor Displays Reasons’).

[17]Amcor Ltd v Barnes [No 2] [2019] VSC 849 (‘Quantification and Interest Reasons’).

1. Having identified the broad ambit of the relevant disputes, it will be apparent that the matters in contention, whilst related, fall into three distinct areas.  The first area is the Amcor Ltd claims for breach of duty against the former executives.  The second is Hodgson’s claim against Amcor Ltd concerning his dismissal.  The third is Achilla’s counterclaim against the Amcor parties for breach of the supply and purchase obligations under the Second Sale Agreement. 

1. There are two appeals and three applications for leave to appeal now before this Court. 

1. The two appeals were instituted by the four Amcor companies (Amcor Ltd, ACB Vendor, APA and one other) who made the breach of duty claims against the former Amcor executives in the Barnes proceeding and the Hodgson proceeding.[18] These appeals were instituted before the commencement of s 14A of the Supreme Court Act 1986 (Vic), as a result of which leave to appeal is not required.

   [18]The two appeals are S APCI 2012 0045 and S APCI 2012 0066.

1. There is an application for leave to appeal by Hodgson and Bankson Pty Ltd concerning costs orders made by Vickery J.[19]  The parties were advised at the outset of the hearing that this application would be deferred pending the determination of the substantive issues. 

   [19]S APCI 2012 0181.  The application for leave to appeal itself is dated 28 May 2020.  The application number is from a summons dated 17 September 2012 seeking an extension of time.

1. There are two applications for leave to appeal concerning the Achilla counterclaim.  APA and ACB Vendor seek leave to appeal from decisions of Sloss J on the Achilla counterclaim.  The respondents to that appeal are Achilla and ACB Purchaser.[20]  Achilla and ACB Purchaser also seek leave to appeal from decisions of Sloss J on the Achilla counterclaim.[21] 

   [20]S EAPCI 2020 0029.

   [21]S EAPCI 2020 0021.

1. For ease of reference, we will generally refer to Amcor Ltd, ACB Vendor and APA as the ‘Amcor parties’ or simply ‘Amcor’ unless it is necessary or desirable to differentiate the particular Amcor company to which we refer.  Similarly, we will generally refer to Holihan, ACB Purchaser and Achilla as the ‘Holihan parties’ unless it is necessary or desirable to differentiate the particular person to which we refer.

1. Earlier we said that the issues raised by the appeals and applications could be divided into three broad areas of dispute.  We will address the issues by reference to those three broad areas of dispute, being the breach of duty claims, the Hodgson dismissal claim and the Achilla counterclaim.

Breach of duty claims

Factual summary[22]

[22]This summary is drawn from the agreed parts of a ‘draft consolidated summary’ for the Court of Appeal prepared by the Amcor, Holihan and Hodgson parties.  Sangster, Bayley and Mihelic — who were not legally represented — did not respond to the draft summary.  Barnes’ legal representatives advised they had only recently been engaged and could not agree to the summary in the time available.  So as to facilitate a coherent narrative, reference is also made to uncontentious findings of fact from the Vickery J Principal Reasons and the Sloss J Principal Reasons, and to some of the contentions made before Vickery J and some of his findings.

1. The ACB business manufactured more complex or labour-intensive cardboard box products.[23]  It generally obtained its income from two sources.  First, it had its own customers who purchased products directly.  Second, it carried out work for Amcor customers.[24]  The work done for Amcor customers was referred to as ‘outside manufacturing enterprise’, or ‘OME’, work.  This was work undertaken for customers of the AFP division.  Notwithstanding that the ACB business was operated by an Amcor subsidiary, the work was still referred to as OME work.  The OME work was the largest component of the work undertaken by the ACB business.[25] 

   [23]Vickery J Principal Reasons [857].

   [24]Ibid [248]–[250].

   [25]Sloss J Principal Reasons [5]–[6].

1. ACB Vendor usually obtained supplies of corrugated sheet from the AFP plants at Smithfield and Revesby in New South Wales.[26]  ACB Vendor owned a large factory premises at Wetherill Park in Western Sydney and the ACB business operated from those premises.[27]  In the Wetherill Park premises there was a corrugator owned by ACB Vendor.[28]

   [26]Vickery J Principal Reasons [253].

   [27]Ibid [252].

   [28]Ibid [253].

1. At the relevant time, Amcor employed a management tool which required each of its businesses to achieve a ‘threshold’ 15% return on funds employed.  This was referred to as the ‘ROFE’ or the ‘ROFE benchmark’.[29]  For a significant period of time prior to the sale, the ACB business had not met Amcor’s ROFE benchmark.  A series of proposals to restructure, sell or close the business were made during the period of five years leading up to the sale.[30]

   [29]Ibid [256].

   [30]Ibid [262]–[287].

1. In September 2001, Amcor established a ‘major operational cost savings’ team, referred to as ‘MOCS’.  Its objective was to identify cost savings across the AFP division, and in particular to identify non-core or non‑performing businesses and assets for closure or sale.[31]

   [31]Ibid [275].

1. Both the Wetherill Park premises and the ACB business were ‘targets’ of the MOCS program.[32]  By September 2002, the ACB business had been identified by the MOCS review as a non-core or non-performing business asset which was to be closed, and the Amcor Ltd board of directors approved a recommendation to close the ACB business and sell its assets on 23 October 2002.[33]  In the last financial year of ACB Vendor’s operation of the business, there was a loss of $359,000 on a turnover of $4.285 million.[34]

   [32]Ibid [277].

   [33]Ibid [861].

   [34]Ibid [872].

1. At some time prior to the Amcor board’s decision on 23 October 2002, Holihan had expressed interest in acquiring assets of the ACB business.  He expressed this interest to Barnes, his immediate superior, who passed it onto Hodgson, his immediate superior.[35]  Hodgson instructed Barnes that Holihan should submit a proposal, and Holihan prepared a document entitled ‘Management Buy Out (MBO) of Australian Corrugated Box Co (ACB)’.[36]

   [35]Ibid [873].

   [36]Ibid [875].

1. While Holihan initially dealt directly with Barnes, in or about November or December 2002, Hodgson directed that Ken Parker, the General Manager, Commercial, of the AFP division, take over responsibility for finalising negotiations in relation to the sale.[37]  Parker was a very experienced accountant and financial controller.  He also had management experience.[38]

   [37]Ibid [876].

   [38]Ibid [884].

1. Hodgson had no authority to fix the sale price or to approve the sale; only Brown, Hodgson’s immediate superior, had that authority.[39]  Hodgson also had no direct involvement in the relevant negotiations.[40]  Hodgson was aware of the terms of the Second Sale Agreement and at one point reviewed and commented on a draft of the proposed Second Sale Agreement.[41]

   [39]Ibid [949].

   [40]Ibid [951].

   [41]Ibid [948].

1. Neither Sangster, Bayley nor Mihelic had any knowledge of the terms of the Second Sale Agreement, nor did they have any role in negotiating it.[42]

   [42]Ibid [952]–[953], [954]–[956], [957]–[960].

1. After Parker took over responsibility for the sale and the review of the proposed contract, Barnes continued to act as an intermediary, receiving amendments and notes on the proposed contract from Holihan and passing them on to Parker.[43]  Parker directed another Amcor executive, Anthony Joyce, to review the proposed terms of the sale in January 2003.  Joyce completed his review and prepared a document entitled ‘Notes on Proposed ACB Contract’ dated 7 January 2003 for Parker.  The document commented on the proposed terms of the Second Sale Agreement, including the price.  There was no conclusion arrived at to the effect that the terms were uncommercial, and the transaction proceeded.[44]

   [43]Ibid [972].

   [44]Ibid [877].

1. Amcor obtained legal advice in relation to the sale from Baker McKenzie and Allens Arthur Robinson.[45]  In addition, an in-house lawyer seconded from Allens Arthur Robinson, Alyssa Caplan, reviewed the terms of the proposed agreement.[46]  None of these reviews identified the terms as being uncommercial.

   [45]Ibid [879].

   [46]Ibid [878].

1. The Second Sale Agreement was executed on 2 June 2003.  It was executed on behalf of ACB Vendor by two of its directors, Colin Clayton and Ian Lewis. 

1. Prior to execution, Parker took Clayton through the relevant clauses of the Second Sale Agreement and explained the rationale for the sale, namely, that Amcor could not run the business profitably and that it did not fit strategically with Amcor’s future objectives.  Clayton expected Parker to have been thorough in his review of the Second Sale Agreement.  Parker did not tell Clayton any reason not to execute the Second Sale Agreement, nor did Clayton consider that he should not do so.  Clayton was familiar with sale of business agreements and was aware, prior to signing, of the Second Sale Agreement’s terms.  There was nothing about the transaction which caused Clayton concern.[47]  The sale was authorised by Clayton and Lewis, and by Brown.[48]

   [47]Ibid [881]–[884].

   [48]Ibid [885].

1. One feature of the proposed transaction was the potential for Amcor to realise the underlying value of the real estate at Wetherill Park.[49]  Amcor proposed to sell the land.  In order to maximise the sale price, the plan was for Amcor to take a head lease of the premises so that the land sold would be leased to a reliable tenant of high standing.[50]  The Second Sale Agreement provided for a sublease of the premises.  The large corrugator at Wetherill Park was not transferred under the Second Sale Agreement.  The subleasing arrangements permitted Amcor to keep the corrugator at Wetherill Park.  There were benefits to Amcor in doing so.[51]  The floor space split in relation to this arrangement was agreed between Holihan and Lewis by 15 July 2003.[52]  The corrugator remained at the Wetherill site until about September 2008.[53] 

   [49]Ibid [882].

   [50]Ibid [1267].

   [51]Ibid [1260]–[1265].

   [52]Ibid [1263].

   [53]Ibid [1264].

1. An important feature of the Second Sale Agreement was provisions imposing reciprocal obligations concerning the supply of materials on the one hand (cl 12.1), and the purchase of OME requirements on the other (cl 12.2).  The named parties to those obligations were ACB Vendor and Achilla. 

1. The sale was completed on 30 July 2003. 

1. Amcor was obviously aware that it was, in effect, selling the ACB business to its manager, one of its own executives, Holihan.  It was a management buyout, as Holihan had expressly described it.  Amcor was not aware that other executives, most notably Barnes, but also Hodgson, Sangster, Bayley and Mihelic, took or planned to take an interest in the business after its sale.  At the trial Barnes’ position was that he had obtained Amcor’s approval for his participation from Brown through Hodgson.  The position of the other executives was that while they had intended to take up an interest in the business, they never in fact did so.   

1. In around late October 2002, Barnes had approached Holihan and said he wanted to be part of the ACB business.[54]  When Holihan raised the obvious conflict of interest, Barnes said that he would see if another employee of Amcor, Parker, could take over management of the sale.  Barnes also told Holihan that the sale would require the approval of Brown and possibly the Amcor board.[55]  As indicated, Hodgson instructed Parker to take over responsibility for the sale. 

   [54]Ibid [966].

   [55]Ibid [966].

1. The memorandum which was the basis for the Amcor board’s decision on 23 October 2002 had been prepared by Brown and Hodgson.  Shortly after the board’s approval, Barnes informed Holihan that ‘in principle’ approval had been given to his acquisition of the ACB business.[56]

   [56]Ibid [291]–[293].

1. In early November 2002, Barnes put a proposition to Holihan, the substance of which was that the ACB business should become part of a large group of businesses being planned by Barnes.  He suggested to Holihan that they should each reduce their interest in the ACB business to 20%, leaving 60% to be taken up by another shareholder or shareholders who would provide investment funds for this larger group of businesses.  Barnes suggested to Holihan that this would give him an interest which overall would be worth considerably more.  Both Holihan and Barnes gave evidence of their discussion of this proposal.  They were broadly consistent, but to the extent they differed the judge preferred Holihan’s account.  The judge did not accept one aspect of Barnes’ account.  Barnes said that it was agreed in this conversation that in the event that the proposed arrangement did not proceed, the ‘original 50:50 agreement’ would automatically apply.[57]  The judge found that that agreement (if the 60% shareholding did not proceed, then Barnes and Holihan would ‘revert’ to the ‘50/50 basis’) was reached in or around early February 2003.[58]  According to Holihan’s version of the conversation in November 2002, which the judge accepted, when Holihan had asked who the other shareholders would be Barnes had replied that he was not in a position to tell him.[59]

   [57]Ibid [968]–[970].

   [58]Ibid [970], [974].

   [59]Ibid [968], [970].

1. Barnes told Holihan that his involvement depended on Barnes receiving permission from Amcor to join Holihan in the ACB business.[60]  In the conversation in February 2003, Barnes told Holihan that it was important to keep his involvement in the business ‘in confidence’ until he was given permission from Amcor.[61]

   [60]Ibid [967], [974].

   [61]Ibid [974].

1. Justice Vickery found that in or about March 2003 Barnes told Holihan that Hodgson had obtained approval from Brown for him (Barnes) to take a shareholding in the ACB business.  This was said to be on condition that Barnes would stay employed by Amcor for 12 months to assist in the restructuring of the AFP division.[62]

   [62]Ibid [963].

1. Justice Vickery found that Holihan ‘accepted this assurance from his superior Barnes’.[63]  Justice Vickery also found, however, that this advice given by Barnes to Holihan was false, and that the alleged approval was never obtained.[64]

   [63]Ibid [977].

   [64]Ibid [978].

1. On or about 26 May 2003, Holihan and Barnes attended the offices of Holihan’s solicitor, David Roe, and executed an agreement relating to the ACB business referred to as the ‘26 May Holihan/Barnes 80/20 Agreement’.[65]  The effect of this agreement was as follows:

·The ACB business was to be conducted by Achilla.

·ACB Purchaser was to hold all the shares in Achilla.

·Through a complex arrangement of companies and trusts, interests in the business were held as to 20% by Holihan interests, 20% by Barnes interests, and 60% by unnamed other parties.

[65]Ibid [992]–[993].

1. The 26 May Holihan/Barnes 80/20 Agreement recited as a fact that Holihan was not aware of the interest holders other than Barnes,[66] and provided for disclosure to him of their identity at such time within one year as Barnes shall specify.[67]  The solicitor, Roe, who also acted for Holihan on the sale, recorded in his account of fees dated 17 July 2003 an item:  ‘Discussions with you at length in respect of provisions relating to parties whose identities have not been disclosed to you’.

   [66]Ibid [995]

   [67]Ibid [1011]

1. At around the same time, Barnes, Hodgson, Sangster, Mihelic and Bayley executed a deed also dated 26 May 2003, referred to as the ‘26 May 80/20 Shareholders Deed’.[68]  The version of this deed tendered in evidence had the word ‘cancelled’ written on it in handwriting, with initials by the signatories, but without a date.  The parties to the deed were Barnes and companies associated with Hodgson, Bayley, Sangster and Mihelic.  Neither Holihan, ACB Purchaser nor Achilla were parties to the deed.  The effect of the deed was to formalise arrangements whereby the 80% interest in the ACB business not held by Holihan interests was held in effect for interests associated with Barnes, Hodgson, Sangster, Bayley and Mihelic, each such interest amounting to 16%.[69]

   [68]Ibid [996].

   [69]Ibid [1000].

1. The two agreements dated 26 May 2003 each contained detailed confidentiality provisions, which Vickery J described as ‘punitive’.[70]

   [70]Ibid [1009]–[1012].

1. The individuals who were a party to the 26 May 80/20 Shareholders Deed maintained in evidence before Vickery J that the deed was cancelled shortly after it was made.[71]  Justice Vickery did not accept this evidence.[72] 

   [71]Ibid [1045].

   [72]Ibid [1084].

1. Justice Vickery found that Amcor was not informed that Barnes, Hodgson, Sangster, Bayley or Mihelic had taken, or had intended to take, an interest in the ACB business and did not consent to them doing so.[73]

   [73]Ibid [934]–[938].

1. Some time in mid-to-late 2005, a further agreement was drafted in relation to the ACB business, referred to as the ‘28 May Holihan/Barnes 50/50 Agreement’.  The agreement was backdated to 28 May 2003.  It was not executed until about October 2005.[74]  Under this agreement, the Holihan interests held a 50% beneficial interest in the ACB business and the Barnes interests held the other 50%.[75]

   [74]Ibid [1033]–[1034].

   [75]Ibid [1036].

1. In the trial before Vickery J, Holihan maintained that the 28 May Holihan/Barnes 50/50 Agreement was backdated to reflect what was said to have been the ‘default’ position between Holihan and Barnes, given that Hodgson, Sangster, Bayley and Mihelic had never proceeded with the proposal to acquire an interest in the business.  Barnes maintained that the agreement regularised the shareholding structure and gave effect to the true ownership of the ACB business.[76]

   [76]Ibid [1035]–[1037].

1. Justice Vickery rejected these contentions.  He found that the 26 May Holihan/Barnes 80/20 Agreement and the 26 May 80/20 Shareholders Deed were entered into, and were carried into effect, by the Amcor executives and the interests associated with them.  He found that these arrangements continued in effect until around October 2005, which had the consequence that Hodgson, Sangster, Bayley and Mihelic held an interest in the ACB business until then.[77]

   [77]Ibid [1084]–[1134].

1. For the financial year ended 30 June 2004, the first financial year after the sale, the business made a net profit of $1,067,000 after tax.[78]

   [78]Ibid [1098].

1. As indicated, Amcor Ltd succeeded in establishing breaches of duty against all of its former executives except Holihan, and Vickery J also found that Holihan had given ‘knowing assistance’ to a breach of duty by Barnes, but it obtained no relief.  There is an issue as to whether Vickery J made a final order concerning an obligation of Barnes and Holihan to account.  In the Vickery J Principal Reasons he expressed an intention to order an account of profits by Barnes and Holihan.  He subsequently determined that such an order ought not to be made as relevant matters had not been pleaded against Barnes and Holihan. 

1. It is accordingly necessary to review the allegations made against the executives other than Hodgson, particularly Barnes and Holihan.  The claim against Hodgson was by way of a counterclaim in the separate proceeding which he had issued.  The pleading issue which became significant did not concern him.  That issue arose in the Barnes proceeding.  The statement of claim upon which the matter went to trial before Vickery J was the third further amended statement of claim dated 12 August 2010 (‘the relevant statement of claim’). 

The relevant statement of claim

1. The relevant statement of claim alleged that all the executives, including Barnes and Holihan, owed duties as an ‘officer’ of Amcor Ltd, APA and ACB Vendor under ss 180 and 181 of the Corporations Act 2001 (Cth) (‘the Act’), and owed duties as employees of Amcor Ltd under s 182 of the Act and at common law.

1. It was alleged against Barnes that during the period September 2002 to June 2003, in consultation with Hodgson, he ‘negotiated and authorised, or caused to be negotiated and authorised … the sale of the ACB Business’.  The particulars to that allegation set out details of what were alleged to be the negotiations conducted by Barnes with Holihan.

1. It was then alleged that Barnes had contravened ss 180(1), 181(1) and 182(1) of the Act by failing to exercise the requisite degree of care and diligence, failing to act in good faith and for a proper purpose, and using his position to gain an advantage for himself or someone else or to cause detriment to Amcor, APA and/or ACB Vendor by reason of the fact that he ‘negotiated and authorised, or caused to be negotiated and authorised, the Second Sale Agreement’.

1. The allegation of a failure to exercise care, contained in paragraph 21 of the relevant statement of claim, in addition to alleging breach in negotiating, or causing be negotiated, the Second Sale Agreement, also alleged breach by reason that Barnes:

   (c)failed to warn or inform Amcor that, as was the fact, each of Barnes, Hodgson, Sangster, Bayley and/or Mihelic intended to, and further or alternatively in fact did, take a beneficial interest in the ACB Business upon Completion of the sale pursuant to the Second Sale Agreement; further or alternatively;

   (d)placed himself in a position where he had a conflict of interest between the best interests of Amcor, APA and/or ACB on the one hand and the interests of himself and/or the ACB Co Purchaser, Achilla, Holihan, Hodgson, Sangster, Bayley and/or Mihelic on the other hand, and failed to disclose the conflict of interest to Amcor, APA and/or ACB.   

2. The particulars of the allegation of a failure to exercise the required degree of care and diligence relied upon what were said to be significantly disadvantageous terms of the Second Sale Agreement. 

1. Particulars of the allegation of a failure to act in good faith and for a proper purpose asserted what was alleged to have been a ‘deliberate and dishonest concealment’ of the financial interest which he took or intended to take in the business so that he could negotiate the Second Sale Agreement for the benefit of himself and the others. 

1. The allegation of improper use of his position set out the circumstances referable to the alleged wrongful negotiation and authorisation of the Second Sale Agreement, being circumstances whereby it was alleged that the Second Sale Agreement was uncommercial, that Barnes held a financial interest and was to benefit from the transaction or intended to do so, that he entered into agreements and arrangements with Holihan, Hodgson, Bayley, Sangster and Mihelic for an illegal and improper purpose, that he ‘at all material times concealed such agreements, arrangements and/or understandings from Amcor, APA and [ACB Vendor]’ and that he ‘deliberately and dishonestly concealed’ the matters alleged from the Amcor parties ‘so that he could negotiate and authorise, or cause to be negotiated and authorised, the Second Sale Agreement on terms that were uncommercial’. 

1. It was further alleged against Barnes that ‘by negotiating and authorising, or causing to be negotiated and authorised, the Second Sale Agreement’ he breached his fiduciary duties in that he made improper use of his position to improperly gain an advantage, made secret profits and acted contrary to the interests of and to the detriment of Amcor Ltd, APA and ACB Vendor.

1. Finally, it was alleged that ‘by negotiating and authorising, or causing to be negotiated and authorised’ the Second Sale Agreement, Barnes breached his duty of fidelity and good faith.

1. As a consequence of these alleged contraventions by Barnes, the relevant statement of claim alleged loss and damage; that Barnes, ACB Purchaser and Achilla had made profits; and that Barnes, ACB Purchaser and Achilla had obtained assets and other benefits.

1. To summarise, the principal allegation against Barnes was an allegation that he had negotiated and authorised, or caused to be negotiated and authorised, the Second Sale Agreement on terms which were significantly disadvantageous to Amcor for his personal advantage. However, it is important to note that the allegations of breaches of the Act included an allegation that he had failed to warn or inform Amcor both of his intention (and that of the other Amcor executives) to take an interest in the business, and of the fact that he (and they) did so. There was also an allegation that he had deliberately and dishonestly concealed the financial interests taken, and concealed the agreements and arrangements entered into. Within the context of the claims for breach of the obligations under the Act, an allegation was also made of conflict of interest.

1. The allegations of breach against Holihan are of particular significance and it is necessary to set them out in full (excluding for these purposes the particulars).  The relevant allegations pleaded were as follows (the underlining and strike outs are as reproduced in the filed document and reflect the amendments made by this version of the statement of claim):

24A.In contravention of s181(1) of the Act, Holihan failed to exercise his powers and discharge his duties:

(a)in good faith in the best interests of ACB; and

(b)for a proper purpose,

by reason that:

(i)Holihan negotiated with Barnes and authorised the ACB Co Purchaser to enter into the Second Sale Agreement which was uncommercial and not in the best interests of ACB, and he did so for his own personal gain and/or the gain of Barnes, alternatively Barnes, Hodgson, Bayley, Sangster and/or Mihelic;

(ii)Holihan deliberately and dishonestly concealed from ACB that Barnes, further or alternatively that Barnes and other unnamed people associated with Barnes, were to acquire a beneficial interest in the ACB Business once it had been sold to the ACB Co Purchaser, and Holihan did so for his own personal gain and/or for the gain of Barnes and/or the other unnamed people associated with Barnes;

(iii)further or alternatively, Holihan entered into agreements, arrangements and/or understandings with Barnes, alternatively Barnes, Hodgson, Bayley, Sangster and/or Mihelic for an illegal and/or improper purpose, namely:

(A)to take the benefit of the ACB Business from Amcor, APA and/or ACB;  further or alternatively

(B)to secretly obtain the benefit of the ACB Business for Barnes and/or Hodgson, Bayley, Sangster and/or Mihelic.,

and at all material times concealed such agreements, arrangements and/or understandings from Amcor, APA and ACB.

[Particulars omitted]

25.Further, in contravention of s182(1) of the Act, by negotiating and authorising the ACB Co Purchaser to enter into the Second Sale Agreement, Holihan improperly used his position to:

(a)gain an advantage for himself or someone else;  and further or alternatively;

(b)cause detriment to Amcor, APA and/or ACB,

by reason that he negotiated and authorised the ACB Co Purchaser to enter into the Second Sale Agreement in circumstances where:

(i)the Second Sale Agreement was uncommercial and/or substantially for the benefit of the ACB Co Purchaser, Achilla, himself and Barnes, alternatively and Barnes, Hodgson, Bayley, Sangster and/or Mihelic, and/or detrimental to Amcor, APA and/or ACB;

(ii)Barnes held, and Holihan knew that Barnes held, a financial interest in a corporation(s) that was to obtain a financial benefit from the ACB Business once it had been sold to the ACB Co Purchaser;

(iii)alternatively to sub-paragraph (ii) above, Barnes intended, and Holihan knew that Barnes intended, to acquire a beneficial interest in the ACB Business and later acquired, and Holihan knew Barnes acquired, such an interest of approximately 20%, alternatively approximately 50%;

(iv)alternatively to sub-paragraphs (ii) and (iii) above, Barnes intended, and Holihan knew Barnes intended, to:

(1)acquire a beneficial interest in the ACB Business;  further or alternatively

(2)acquire a beneficial interest in the ACB Business together with other unnamed people associated with Barnes;

(v)further or alternatively to sub-paragraphs (ii) to (iv) above, Holihan entered into agreements, arrangements and/or understandings with Barnes, further or alternatively Barnes and other unnamed people associated with Barnes, for an illegal and/or improper purpose namely:

(1)to take the benefit of the ACB Business from Amcor, APA and/or ACB;  further or alternatively

(2)to secretly obtain the benefit of the ACB Business for Barnes and/or Barnes and other unnamed people associated with Barnes.,

and at all material times concealed such agreements, arrangements and/or understandings from Amcor, APA and ACB;

(vi)Holihan deliberately and dishonestly concealed from Amcor, APA and ACB the matters alleged in sub-paragraphs (ii) to (v) above so that he could negotiate the Second Sale Agreement on terms that were uncommercial and/or substantially for the benefit of himself, the ACB Co Purchaser, Achilla and Barnes, further or alternatively and Barnes and other unnamed people associated with Barnes;

(vii)further or alternatively, Holihan did not have authority from Amcor, APA or ACB to negotiate the Second Sale Agreement on the terms recorded in the Second Sale Agreement in the circumstances alleged in sub-paragraph (ii) to (v) above.

[Particulars omitted]

25A.Further or alternatively, Holihan was involved (as that term is defined in s79 of the Act) in the conduct of Barnes, and further or alternatively Hodgson, using his/their position to gain an advantage for Barnes, and alternatively for Barnes, Hodgson, Bayley, Sangster and/or Mihelic, and further or alternatively to cause detriment to Amcor, APA APA and/or ACB, in contravention of s182(2) of the Act.

[Particulars omitted]

26.Further or alternatively to paragraphs 24A, 25 and 25A above, by negotiating and authorising the ACB Co Purchaser to enter into the Second Sale Agreement, Holihan breached his fiduciary duties owed to Amcor, APA and ACB by:

(a)dealing with the property and interests of Amcor, APA and/or ACB, namely the ACB Business, other than in the best interests of Amcor, APA and/or ACB;

(b)making use of his position to improperly again an advantage for himself and/or someone other than Amcor, APA and/or ACB, namely for the ACB Co Purchaser, Achilla and Holihan, and further or alternatively, without the knowledge of Amcor, APA or ACB, for Barnes, alternatively, Barnes, Hodgson, Bayley, Sangster and/or Mihelic;

(c)making secret profits and/or receiving secret benefits when dealing with the property and interests of Amcor, the property and interests of APA and/or the property and interests of ACB;

(d)acting contrary to the interests of and to the detriment of Amcor, APA and/or ACB.

[Particulars omitted]

27.Further or alternatively to paragraphs 24A, 25, 25A and/or 26 above, by negotiating and authorising the ACB Co Purchaser to enter into the Second Sale Agreement, Holihan breached his duty of fidelity and good faith to Amcor, APA and ACB.

[Particulars omitted]

1. For present purposes, the matters of significance in the pleading against Holihan are that the focus, again, was on the negotiations for, and entry into, the Second Sale Agreement on terms which were said to be uncommercial and substantially for the benefit of himself, his companies and the other participants. In the context of the alleged contraventions of the Act, there were allegations of deliberate and dishonest concealment but, fairly read, those allegations also related to the negotiation of, and entry into, the Second Sale Agreement. There was an allegation against Holihan that he was ‘involved’ in Barnes’ contravention of s 182(1) of the Act as a result of which Holihan was liable under s 182(2) of the Act, but there was no other allegation against Holihan of accessorial liability for breach of duty by another. In particular, there was no allegation of a liability as a ‘knowing assister’, usually described by reference to the decision in Barnes v Addy.[79]

   [79](1874) LR 9 Ch App 244.

1. The relevant statement of claim alleged that by reason of Holihan’s conduct, the Amcor parties had suffered loss and damage; Barnes, ACB Purchaser, Achilla and Holihan had made profits; and Barnes, ACB Purchaser, Achilla and Holihan had obtained assets and other benefits. 

1. The prayer for relief claimed declarations against Barnes, including a declaration that he holds any rights or interests he has in ACB Purchaser and Achilla and in the assets and business the subject of the Second Sale Agreement on trust for Amcor Ltd or one of the Amcor parties.  Relief was also claimed by way of damages or equitable compensation, and such further or other orders as the Court sees fit. 

1. An order was sought against Holihan to set aside the Second Sale Agreement.  Declarations were sought, including a declaration in similar terms to that sought against Barnes.  Damages or equitable compensation were sought, as well as a declaration that Holihan held any shares in ACB Purchaser or Achilla on trust for Amcor Ltd or one of the Amcor parties, and an order that he transfer the shares to Amcor Ltd or one of the Amcor parties.  The prayer for relief also sought such further or other relief as the Court sees fit. 

1. In relation to ACB Purchaser and Achilla, relief was sought by way of an order that the Second Sale Agreement be set aside, that the business and assets be re-transferred, and orders be made against each company for the taking of accounts including an account of profits. 

1. The relief sought against Sangster, Bayley and Mihelic was essentially the same as that sought against Barnes and Holihan. 

The Vickery J Principal Reasons

1. As indicated in the factual summary, Vickery J found that in March 2003 Barnes advised Holihan that Hodgson had obtained approval from Brown for Barnes to take a shareholding in the ACB business.  Justice Vickery found that Holihan accepted this assurance, but that what Barnes had told Holihan was false.[80]

   [80]Vickery J Principal Reasons [976]–[978].

1. Justice Vickery concluded that Barnes was the ‘principal instigator’ of the plan to introduce himself and the other Amcor executives as equity holders in the ACB business.[81]  In relation to the initial 80/20 arrangement, Vickery J said that Barnes encouraged Holihan to proceed on this basis by telling him that the enterprise he was contemplating would grow rapidly, and could in the foreseeable future turn over very large sums at which point a float on the Stock Exchange could be contemplated.  Justice Vickery found that Holihan, relying on Barnes’ skill and experience, believed that this was possible provided additional funds could be obtained from Barnes’ 60% ‘secret’ investor or investors.[82]

   [81]Ibid [979].

   [82]Ibid [982].

1. Justice Vickery found that Barnes had refused to tell Holihan who the other shareholders would be.[83]

   [83]Ibid [988].

1. Justice Vickery addressed the 26 May 80/20 Shareholders Deed and the 26 May Holihan/Barnes 80/20 Agreement, concluding that ownership of the ACB business was concealed by two mechanisms.  The first was the complicated corporate and trust structure.  The second was elaborate confidentiality provisions which Vickery J described as ‘detailed and punitive’.[84]  Justice Vickery concluded that the principal purpose of the confidentiality regime which he had described was to conceal the interests of Amcor’s managers from their employer.[85]

   [84]Ibid [1007]–[1012].

   [85]Ibid [1018].

1. Justice Vickery was satisfied that the identity of the ultimate beneficiaries of interests in the ACB business after the sale, other than Barnes, was not disclosed to Holihan on or prior to 26 May 2003.[86]  He said that there was no evidence that Holihan became aware of the identity of those interest holders (other than Barnes), for at least a year following entry into the 26 May agreements.[87]

   [86]Ibid [1023].

   [87]Ibid [1024].

1. Justice Vickery’s conclusion was that Holihan only learned who the interest holders other than Barnes were in May or June 2004.  Holihan’s evidence was that Barnes informed him at this time who the others had been ‘supposed’ to be, but that they had decided not to proceed.[88]

   [88]Ibid [1026]–[1028].

1. As to the 28 May Holihan/Barnes 50/50 Agreement, Vickery J’s conclusion was that that agreement was not executed until about October 2005, and that it was backdated to 28 May 2003.[89]  This agreement also had confidentiality provisions, and Vickery J’s conclusion was that the reason for those provisions was the same as the reason for the confidentiality regime in the 26 May agreements.[90]

   [89]Ibid [1034]–[1035].

   [90]Ibid [1044].

1. Justice Vickery recorded the contention made by the Amcor executives, other than Holihan, that the 26 May 80/20 Shareholders Deed had been cancelled by them shortly after it had been made.  Justice Vickery reviewed the evidence each of them had given on this issue in detail.[91]  He did not accept that evidence.  He found that the two agreements of 26 May 2003 had continued in effect until around October 2005.[92]

   [91]Ibid [1045]–[1081].

   [92]Ibid [1084]–[1086].

1. Justice Vickery accepted evidence given by Holihan and Barnes that Barnes informed Holihan of the identity of the other interest holders for the first time in May or June 2004, but he did not accept the evidence they gave that the other interest holders had earlier decided not to proceed with the transaction.[93] 

   [93]Ibid [1087]–[1088].

1. Justice Vickery set out the evidence and reasoning which led him to conclude that the 26 May 80/20 Shareholders Deed had not been cancelled shortly after it had been entered into as maintained by the Amcor executives other than Holihan.

1. The first reason he gave was what he described as ‘contextual evidence’. 

1. In substance, Vickery J said that there was simply no reason for the relevant parties to have executed the 26 May 80/20 Shareholders Deed and to then almost immediately cancel it.  Justice Vickery said that there was no evidence of any relevant external event which might have prompted such a rapid ‘change of heart’.  Justice Vickery referred to evidence Hodgson had given to the effect that he intended to initially approach Brown and secure his support before then approaching Jones.  His evidence was that Brown announced his retirement at about this time and that he considered that it would take some time for Sutton to appreciate the strategic significance of the proposal.  This was said to be the explanation for the rapid change of heart.  Justice Vickery observed that Brown remained managing director until 30September 2003.  He did not accept the explanation proffered by Hodgson for failing to seek Brown’s approval.[94]

   [94]Ibid [1090]–[1095].

1. The second matter relied upon was what Vickery J described as the ‘dividend evidence’. 

1. As indicated in the summary, for the year ended 30 June 2004, the ACB business earned a profit of $1,067,000 after tax.  In October 2004, a dividend of $749,000 was declared and was allocated as to 20% in favour of Holihan’s company and 80% in favour of Barnes’ company.  What Vickery J described as the ‘paperwork’ for these dividends was prepared by Holihan’s accountants, Wheeler Grenfell.  Wheeler Grenfell had been instructed by Holihan that the Holihan interests held 20% of the ACB business and Astra Pty Ltd held 80%.  Justice Vickery observed that these are the holdings set out in the 26 May Holihan/Barnes 80/20 Agreement.  Subsequently, backdated minutes were executed by Barnes and Holihan effectively reconstructing the dividend so as to reflect 50/50 ownership.  This was done in October 2005.  Justice Vickery found that the dividend evidence was inconsistent with a conclusion that the 80/20 arrangement had been cancelled in May 2003.  He found that as at October 2004 the Amcor executives other than Holihan continued to hold between them an 80% interest in the ACB business, being 16% each.[95]

   [95]Ibid [1096]–[1123].

1. The next matter relied upon by Vickery J was described by him as the ‘Barnes Computer Information’. 

1. The Barnes Computer Information was a reference to material found at Barnes’ premises during the execution of an Anton Piller order in late 2004.[96]  Amongst other things, the Barnes Computer Information included draft instructions which Vickery J found Barnes had provided to his wife for the purpose of transmission to Barnes’ accountant.  Justice Vickery found that the information was provided to Barnes’ wife in October 2004.  It gave an account of the relevant holdings in the ACB business which was consistent only with the continuation of the 80/20 arrangement.[97]

   [96]Ibid [729].

   [97]Ibid [793]–[870], [1124].

1. The final matter relied upon by Vickery J on this issue was certain of the events which occurred leading up to October 2005 which, in Vickery J’s view, did provide an explanation for the alteration from the 80/20 arrangement to the 50/50 arrangement.  The relevant events were proceedings in the Federal Court which, in Vickery J’s view, resulted in an appreciation on the part of the former Amcor executives that Amcor was likely to obtain access to documents which had been obtained under an Anton Piller order.  Justice Vickery was satisfied that this led to ‘extensive consideration and rearrangement’ of the relevant business interests.  Justice Vickery concluded that as part of that rearrangement, the 80/20 ‘split’ of the ACB business became the 50/50 arrangement.[98]

   [98]Ibid [1125]–[1134].

1. Justice Vickery rejected a submission put by Amcor that he ought to conclude that Hodgson, Sangster, Mihelic and Bayley never gave up the interest which they had held in the ACB business.  Justice Vickery concluded that they had ‘mutually abandoned or abrogated’ any rights or entitlements which they had, and that after October 2005 the ACB business was owned by the Holihan and Barnes interests in equal shares.[99]

   [99]Ibid [1135]–[1151].

1. As has been seen in relation to the passages of the relevant statement of claim previously set out, many of the allegations of breach pursued by the Amcor parties asserted that the sale was ‘uncommercial’, and that the terms of the Second Sale Agreement were ‘uncommercial’.

1. There were a great number of features of the Second Sale Agreement upon which the Amcor parties relied in this respect.  Justice Vickery set them all out.[100]  For present purposes, the features of the arrangement which remain important are these:

·The purchase price of $1 million, plus $114,364 for stock, was said to be ‘substantially less than an arm’s length price’ for the business.

·The purchase price was payable over five years and the amount payable for stock was not payable until 12 months after completion.

·The sublease arrangements for Achilla were said to be disadvantageous to the Amcor parties in that they were substantially less than the amount payable by APA as rent under the head lease.

·Pursuant to cl 12.1 of the Second Sale Agreement, ACB Purchaser and Achilla received the benefit of a supply arrangement based on a fixed pricing arrangement which was said to be advantageous to them.

·Pursuant to cl 12.2 of the Second Sale Agreement, Achilla received the benefit of an exclusive arrangement whereby an Amcor entity was required to purchase all of its OME requirements from Achilla on a fixed pricing arrangement which was said to be advantageous to Achilla.

[100]Ibid [1215].

1. Before addressing the specific matters relied upon by Amcor in this respect, Vickery J set out what he considered to be the relevant context to the assessment of whether the Second Sale Agreement was ‘commercial’.  In summary, he described that relevant context as being the unsatisfactory underperforming character of the business over a significant period which had meant that it had for some time been the subject of proposals to restructure or sell or close the business, Amcor’s plan to sell the site at Wetherill Park, and the fact that the business could not be sold to a competitor without potential harm to Amcor.[101]

   [101]Ibid [1217]–[1218].

1. In relation to the allegation that the business had been sold at an undervalue, expert evidence was given by two accounting and valuation experts, Greg Meredith and Owain Stone.  Stone had been engaged on behalf of the Amcor parties.  Meredith had been engaged on behalf of Achilla. 

1. Stone’s opinion was that the market value of the business was $2,390,000 (low) or $4,590,000 (high), depending on the assumptions adopted.  Meredith’s opinion was, depending on the assumptions adopted, that the business was not saleable at all as a going concern (low) or was valued at $640,000 (high). 

1. Each of the experts agreed that the relevant valuation should be undertaken by assessing future maintainable earnings as at the relevant date and applying a multiplier of four. 

1. Justice Vickery preferred the opinion of Meredith to that of Stone and accordingly concluded that the purchase price was not only commercial but was positively to the advantage of Amcor.[102]

   [102]Ibid [1219]–[1239].

1. Justice Vickery reviewed the supply obligations in the Second Sale Agreement.  He concluded that the arrangements were of ‘potential benefit’ to Amcor because Achilla was a ‘conduit’ through which Amcor secured a guaranteed market for some of its raw materials.[103]

   [103]Ibid [1243]–[1252].

1. Justice Vickery addressed the subleasing arrangements in some detail.  Justice Vickery considered two matters as to be significant in this context.  The first was the benefits to Amcor in being able to keep the corrugator at the Wetherill Park site.  The second was Amcor’s proposal to sell the Wetherill Park site to an organisation referred to as ‘Stockland’, and its plan to take a head lease of the premises for the purpose of maximising the sale price.[104]

   [104]Ibid [1260]–[1274].

1. Justice Vickery considered the other matters relied upon by Amcor, including the provision of time for payment and other provisions said to be disadvantageous to Amcor. 

1. Justice Vickery’s conclusion was that when the Second Sale Agreement was considered as a whole and in its context, it had not been established that it was an uncommercial transaction.[105]  He found that by the transaction Amcor secured real benefits for itself.[106]

   [105]Ibid [1279].

   [106]Ibid [1281].

1. Justice Vickery also concluded that none of the defendants had ‘procured’ the sale on uncommercial terms, and he found that Amcor was not entitled to any relief as a consequence of entering into the Second Sale Agreement on the basis of any alleged uncommercial terms.[107]

   [107]Ibid [1282]–[1295].

1. Turning to the alleged contraventions of the Act, Vickery J first determined which of the relevant executives had been ‘officers’ within the meaning of the Act. Sections 180 and 181 impose obligations on directors and officers. Justice Vickery reviewed some of the authorities. He concluded that Hodgson was an ‘officer’ within the meaning of the Act, but that Barnes, Sangster, Mihelic, Bayley and Holihan were not because they did not hold the requisite level of responsibility.[108]

   [108]Ibid [1296]–[1332].

1. Justice Vickery determined the question of the former Amcor executives’ liability by reference to the fiduciary relationship arising out of their position as employees.  Justice Vickery concluded that the former Amcor executives, other than Holihan, had seriously compromised the relationship of employer and employee by pursuing their own private interests rather than those of their employer.  He held this to have been a breach of the duty of fidelity and trust which they owed to Amcor.[109]

   [109]Ibid [1375]–[1376].

1. Amongst other things, the conduct of the former Amcor executives, other than Holihan, denied Amcor the opportunity to exercise alternative options, including subjecting the sale process to greater scrutiny or not proceeding with it at all.[110]  Justice Vickery observed that the identity of the purchaser of the ACB business was a matter of importance to Amcor.[111]  Justice Vickery said that no question of fully informed consent arose, and that the conduct of the former Amcor executives, other than Holihan, had been ‘manifestly incompatible with the employment relationship and was of a serious dimension’.[112]

   [110]Ibid [1377]–[1378].

   [111]Ibid [1385].

   [112]Ibid [1388], [1390].

1. Justice Vickery had found Hodgson’s employment had been terminated on 1 October 2004.  The employment of Barnes, Bayley, Sangster and Mihelic had terminated on 28 October 2004.  Justice Vickery concluded that each of them had breached their fiduciary duty arising under the general law during the respective periods of their employment.[113] 

   [113]Ibid [1393].

1. Justice Vickery concluded that Hodgson had also acted in breach of his statutory duty under s 181(1)(a) of the Act in that he had failed to exercise his powers and discharge his duties in good faith in the best interests of the corporation.[114] He found that the former Amcor executives, other than Holihan, had contravened s 183 of the Act in that they had improperly used information to gain an advantage for themselves.[115]

   [114]Ibid [1394]–[1395].

   [115]Ibid [1396]–[1399].

1. Justice Vickery then turned to the case against Holihan. 

1. He observed that Holihan was not an ‘officer’ of Amcor.[116] He further observed that as Amcor was well aware that it was dealing with Holihan in the negotiation of the sale, no question of improper use of Holihan’s position or improper use of material information, in contravention of ss 182 or 183 of the Act, arose.[117]

   [116]Ibid [1400]. Justice Vickery said this meant he was not subject to the duties in ss 181(1) and 182(1). The s 182(1) duty is also owed by employees.

   [117]Vickery J Principal Reasons [1401].

1. Justice Vickery accepted that Amcor believed that it was dealing with Holihan alone.  Justice Vickery repeated his finding that at the time of entry into the Second Sale Agreement, whilst Holihan knew there were unidentified persons acquiring an interest, he did not know their identity.[118] 

   [118]Ibid [1405]–[1406].

1. Justice Vickery said that Amcor contended that Holihan had breached his duty of good faith and fidelity owed by reason of his employment in two ways. 

1. The first was that if it was accepted that Holihan did not know who the ‘unidentified partners’ were before the middle of 2004, he still knew that the business was being sold in breach of fiduciary and other duties owed by Barnes, and he was reckless as to the position of the others. 

1. The second way in which Amcor put the case against Holihan was that his evidence that he did not know who the ‘unidentified partners’ were before the middle of 2004 should be rejected, and a conclusion should be reached that he did know that the business was being sold in breach of fiduciary and other duties owed by Barnes and the others, or he was reckless as to their breaches.[119]

   [119]Ibid [1413]–[1414].

1. Amcor contended that ACB Purchaser and Achilla were each liable to account.[120]

   [120]Ibid [1415].

1. Justice Vickery said that Amcor had submitted that Holihan, or Achilla, had knowingly assisted a breach of duty ‘concerning the sale’ and was therefore liable.  This liability was contended to arise under the second limb of Barnes v Addy.[121]  

   [121]Ibid [1416], citing Barnes v Addy (1874) LR 9 Ch App 244, 251–2 (Lord Selborne LC).

1. Justice Vickery said that the relevant question was whether Holihan had breached any duty he owed to Amcor prior to the cessation of his employment.  Justice Vickery concluded that he had not.  Whilst negotiating, entering into and completing the Second Sale Agreement, Vickery J found that he was not exercising powers or discharging his duties pursuant to his contract of employment but was acting independently.  He was entitled to put his own interests ahead of those of his employer Amcor.[122]

   [122]Vickery J Principal Reasons [1422]–[1428].

1. Justice Vickery then reiterated that he had accepted that at all material times leading up to the settlement of the Second Sale Agreement, Holihan had been led to believe by his superior Barnes, and had in fact believed, that Barnes had secured Brown’s consent to his (Barnes’) involvement.[123]  Further, Vickery J reiterated his conclusion that the involvement of the other Amcor executives was not disclosed to Holihan until May or June 2004, well after he had ceased his employment with Amcor.[124]

   [123]Ibid [1429].

   [124]Ibid [1430].

1. Justice Vickery held that the fact that in the period leading up to the settlement of the Second Sale Agreement Holihan had known that there were unidentified persons who were to hold interests in the ACB business did not give rise to a duty in Holihan to disclose that fact to Amcor.  Justice Vickery said that the risk of other investors was a risk Amcor had assumed from the outset in determining to sell the ACB business.  Once it was sold, Amcor could not control the financial or equity structure of the business.[125]  Justice Vickery considered that Holihan was entitled to proceed on the basis that Barnes had secured Amcor’s consent and that the unidentified holders of interests in the ACB business did not include presently serving Amcor managers.[126]

   [125]Ibid [1431].

   [126]Ibid [1432].

1. In these circumstances, Vickery J was not satisfied that Holihan had breached any fiduciary duty owed to Amcor prior to the cessation of his employment on 31 July 2003.[127]

   [127]Ibid [1433].

1. Justice Vickery considered that Holihan committed no breach of duty by failing to disclose Barnes’ involvement after he had been informed by Barnes, who was his superior, that Amcor had consented.[128]  Further, he was under no obligation to inform Amcor of the possible participation of others given that he did not know of their identity, their identity having been deliberately kept from him.[129]  Justice Vickery was not satisfied that Holihan knew in the required sense that there were breaches of duty by Hodgson, Barnes and the other Amcor executives, nor was he reckless as to those breaches.[130]  Justice Vickery accepted evidence Holihan had given that he had been ‘shocked’ when the identity of the other participants was disclosed to him.[131]  Justice Vickery was not satisfied that Holihan had actual knowledge of the involvement of the other Amcor executives nor that he shut his eyes to the obvious or wilfully and recklessly failed to make enquiries an honest and reasonable person would have made.  Justice Vickery concluded that Holihan, Achilla and ACB Purchaser had not given ‘knowing assistance’ in relation to breaches of duty by the Amcor executives concerning the initial sale.  Thus, Amcor’s claims against Holihan, ACB Purchaser and Achilla under Barnes v Addy in relation to the circumstances surrounding the initial sale failed.[132]

   [128]Ibid [1434].

   [129]Ibid [1435].

   [130]Ibid [1436].

   [131]Ibid [1437].

   [132]Ibid [1442].

1. Justice Vickery then moved to consider the position after the settlement of the Second Sale Agreement.

1. Justice Vickery repeated his finding that by the middle of 2004, Holihan had been advised of the identity of the other interest holders in the ACB business.  Justice Vickery considered that he was then ‘put on enquiry’ as to whether those participants other than Barnes were guilty of breaches of duty to Amcor up until the time when their employment was terminated.[133] 

   [133]Ibid [1443]. The time of Hodgson’s termination was and is controversial. Justice Vickery held it to be 1 October 2004. The other executives resigned in September 2004 effective one month later. The judgment at times refers to their termination as being in September.

1. Justice Vickery concluded that Holihan had wilfully shut his eyes to the obvious or wilfully and recklessly failed to make enquiries such as an honest and reasonable person would have made as to whether Hodgson, Bayley, Sangster and Mihelic had ever had Amcor’s consent to take an interest in the ACB business.[134]  Justice Vickery considered that this conclusion ‘exposes Holihan to liability in relation to the circumstances surrounding the ongoing involvement of Hodgson, Bayley, Sangster and Mihelic … after 1 July 2004 until the termination of their respective employment contracts’.[135]  Justice Vickery said that in the light of events which he would discuss later, he was not satisfied that those circumstances gave rise to any relief against Holihan or his companies.[136]

   [134]Ibid [1444].

   [135]Ibid [1445].

   [136]Ibid [1446].

1. Turning to the position in relation to Barnes, Vickery J said that during the period 1 July 2004 until the termination of Barnes’ employment, Holihan had also wilfully shut his eyes to the obvious or wilfully and recklessly failed to make such enquiries as an honest and reasonable person would have made as to whether Barnes had ever had the consent and approval of Amcor to take up an interest in the ACB business while continuing as an employee.[137]  Justice Vickery concluded that this conduct amounted to ‘knowing assistance’ to Barnes and his company ‘during the period in question’ and that this conclusion ‘exposes Holihan to liability in respect of it under Barnes v Addy’.[138]  Justice Vickery said that the availability of relief in relation to this conduct would be discussed later.[139]

   [137]Ibid [1447]. Barnes’ employment terminated on 28 October 2004 after he resigned a month earlier.

   [138]Ibid [1449].

   [139]Ibid [1450].

1. The complaint in relation to the manner in which the judge assessed an allowance for that small amount of work is also unfounded, in our view.  The suggested calculation which resulted in the ACB business doing almost two-thirds of Amcor Displays’ OME work prior to the Second Sale Agreement was in conflict with Holihan’s own evidence, and with the evidence of Joyce.  In our opinion, the judge was right to reject ‘fall-back method 1’ and to adopt ‘fall-back method 2’.

1. We will grant leave but dismiss the appeal.

Achilla’s damages — fixed costs — proposed Amcor ground 12

1. The Amcor parties’ proposed ground 12 concerns Achilla’s entitlement to recover damages based upon a price calculation which includes all of Achilla’s fixed costs.

Proposed Amcor ground 12 — submissions

1. The Amcor parties submitted that the trial judge’s conclusion that Achilla was entitled to damages on the basis that it could recover all of its fixed costs in the relevant price calculation was not reasonable or commercial.  They contended Achilla ought only be entitled to damages on the basis that it could recover a ‘proportion of those costs attributable to such work’.  The Amcor parties submitted that cogent reasons ought to be required before a finding that the Second Sale Agreement’s silence as to apportionment should result in such an uncommercial outcome, and that no cogent reasons exist.  The Amcor parties accepted that the Second Sale Agreement was performed in a way that allowed full recovery by Achilla from APA of its fixed costs.  However, they submitted that this has ‘no logical bearing’ on the interpretation of the Second Sale Agreement.

1. Achilla submitted that Amcor was in error in construing the judge’s finding as a conclusion based on silence.  Achilla relied upon the provisions concerning the D & D pricing mechanism in the Second Sale Agreement, and in particular the matrix in Annexure 5 identifying costs to be included in the D & D calculation; and upon the post-completion consultation process provided for in the Second Sale Agreement, and undertaken by the parties in relation to the First Year Budget and the Second Year Budget.  Achilla contended that 100% of the ACB business’ fixed costs were factored into the D & D costing under the terms of the Second Sale Agreement.  Achilla submitted that the provisions of the Second Sale Agreement concerning the D & D component of the pricing alone justified the judge’s conclusion.

1. Counsel for Achilla further submitted that the judge correctly took into account what was said to be Achilla’s obligation to stand ready, willing and able to perform, and that Amcor received the benefit of the D & D pricing structure even where it did not order the forecast volume of work from Achilla, in which case Achilla would ‘under-recover’ its fixed costs. 

Proposed Amcor ground 12 — analysis

1. The Amcor parties’ complaints in relation to the issue of ‘fixed costs’ are misconceived.  The judge’s conclusion was not founded upon the way the Second Sale Agreement had been performed, it was founded upon the provisions of the Second Sale Agreement and the conduct of the parties in carrying out those provisions.  The definition of ‘D & D’ provided that it was the applicable costing base calculated as shown in Annexure 5.  Annexure 5 in turn contained a matrix specifying the costs to be included and provided that ‘D & D changes will be agreed to between [Holihan] and [ACB Vendor’s] commercial manager.’  Clause 12.3(ii) required ACB Vendor and Achilla to ‘verify and confirm’ the basis of D & D at or shortly before completion and on each anniversary thereafter. 

1. The parties carried out the exercise provided for in the Second Sale Agreement for the first year and the second year, and the exercise undertaken in the second year was carried forward in subsequent years. 

1. The judge’s conclusion that ‘D & D’ included all of the fixed costs was based upon the fact that that is what the parties determined upon pursuant to the terms, and the process provided for, in the Second Sale Agreement. 

1. The trial judge also pointed out that there was a commercial rationale for that conclusion, being that there was no minimum quantity required to be acquired and that Achilla, in effect, had to stand ready, willing and able to meet all of Amcor’s requirements.  Amcor’s characterisation of the outcome as ‘not reasonable’ is unfounded.

1. We will grant leave but dismiss the appeal.

Achilla’s damages — the ‘cap’ — proposed Amcor ground 13

1. The Amcor parties’ proposed ground 13 contends that Sloss J erred in failing to limit damages to the face value of OME supplies for work that APA obtained from other suppliers.

Proposed Amcor ground 13 — submissions 

1. The Amcor parties described the result reached by the judge as ‘startling’, ‘wrong in principle’ and wrong with regards to the nature of the cl 12.2 obligation.  They argued that the result consistent with principle was to find that Achilla’s loss could be no more than the amount which the other OME suppliers received.  It was also submitted that it is reasonable to infer that the OME supplier price was a ‘reasonable proxy’ for the price that Achilla could have obtained from APA.  They submitted the ‘carve-out’ allowed Amcor to send OME to other suppliers on the basis of price.

1. Achilla rejected the relevance of the other OME suppliers’ revenue.  Achilla relied upon the trial judge’s finding that the cl 12.2 ‘carve-out’ was a compound expression and that there was no ‘standalone’ price requirement.  Achilla submitted that there was no factual basis for a conclusion that the judge’s outcome put Achilla in a superior position to the position that it would have been in had the contract been performed. 

Proposed Amcor ground 13 — analysis

1. What the trial judge said about the ‘cap’ submission was, in our opinion, correct. 

1. The submission had the initial problem that it had not been raised during the course of evidence and accordingly had not been addressed by either of the experts. 

1. Further, the submission addressed an irrelevant issue.  Once APA had failed to bring the transactions within the exception, it was irrelevant what the alternative suppliers had received.  Achilla had a fixed price formula.  The issue was what loss did it suffer and, as the trial judge explained, that could only be determined by applying the fixed price formula to the relevant job, which is what was done. 

1. We will refuse leave on this proposed ground.

Interest — proposed Achilla ground 8 and proposed Amcor ground 14

Proposed Achilla ground 8 and proposed Amcor ground 14 — submissions

1. Achilla contends in proposed ground 8 that the trial judge erred in finding that Achilla was not entitled to interest under s 60 of the Supreme Court Act 1986 for the period prior to APA’s joinder. 

1. Achilla submitted that APA was the parent of ACB Vendor, that they had the same legal representation, and that APA was acting as if it was the counterparty to the supply obligations prior to formally becoming the counterparty.  Achilla submitted the objectives of an interest award ‘would be best served’ by awarding interest from the commencement of the proceedings, alternatively the counterclaim; or the date of breach, whichever was later.

1. APA submitted that it was plainly open for the judge to award interest from the date APA was joined, rather than from any earlier date proposed by Achilla.  

1. The Amcor parties’ proposed ground 14 asserts an error concerning the rate of interest ordered in relation to the damages recovered by Achilla.  They assert the judge mistook the facts and misconstrued the Second Sale Agreement in her conclusion that because no minimum quantity of OME supplies was specified, Achilla had to effectively stand ready to meet all of the Amcor parties’ requirements in any given year.  Proposed ground 14 also asserts an error as to the date from which interest should run but no submission was advanced in support of that complaint.

1. The Amcor parties submitted that the trial judge was in error in rejecting their proposed interest rate of 2% above the RBA cash rate as ‘arbitrary’.  This submission relied on a decision of the Full Court of the Federal Court, where Lander, Gilmour and Gordon JJ held that 4% above the RBA cash rate was an appropriate ‘rough and ready guide’.[404]  The Amcor parties submitted that this is a discretionary decision to which the principles in House v The King[405] apply, and that this Court should re-exercise the discretionary power to set the ‘appropriate’ rate of interest.

   [404]Management 3 Group Pty Ltd (in liq) v Lenny’s Commercial Kitchens Pty Ltd [No 2] (2012) 203 FCR 283, 289 [25]; [2012] FCAFC 92.

   [405](1936) 55 CLR 499, 505 (Dixon, Evatt and McTiernan JJ).

1. Achilla accepted that this is a matter to which the principles in House v The King apply.  It was submitted no error which would warrant intervention on that basis had been identified.  Achilla’s written case described the Amcor parties’ reliance on the Full Court of the Federal Court’s decision as ‘misplaced’, noting that unlike the Supreme Court of Victoria Act 1986, the Federal Court Act 1973 (Cth) does not prescribe a default rate of interest.  They further submitted that the purpose of an interest award in the federal jurisdiction is purely compensatory, unlike the additional punitive nature of an interest award in this Court. 

1. Neither of these proposed grounds were elaborated in oral submissions.

Proposed Achilla ground 8 and proposed Amcor ground 14 — analysis

1. The determination of the interest period, and the rate of interest, are discretionary decisions.  The principles in House v The King apply. 

1. In relation to the applicable period, Achilla has not demonstrated any error of the relevant kind.  In substance, Achilla merely seeks to have this court re-exercise the discretion with respect to the period of interest.  As the Amcor parties submitted, the judge’s determination of the applicable period was one clearly open to her.

1. Similarly, the Amcor parties have not demonstrated relevant error warranting the re-exercise of the discretion with respect to the rate of interest.  This Court has very recently confirmed that in Victoria the rate under the Penalty Interest Rates Act 1983  is the ‘starting point’.[406] 

   [406]Australia Kunqian International Energy Co Pty Ltd v Flash Lighting Company Ltd [2020] VSCA 259, [42] (Kyrou, Niall and Hargrave JJA).

1. As to the Amcor parties’ asserted errors, we do not accept that the trial judge either mistook the facts or misconstrued the Second Sale Agreement, for the reasons previously given. 

1. The trial judge did not err in describing Amcor’s proposed rate as ‘arbitrary’.  The trial judge noted that although the starting point may be the default penalty rate, ‘each case must be assessed by reference to its individual facts and circumstances’.[407]  It was her view that Amcor’s proposed rate would not meet the objectives or purposes of interest. 

   [407]Quantification and Interest Reasons [84].

1. Achilla correctly submitted that the power to award interest on damages does not have a sole, compensatory purpose.  Chief Justice Barwick in Ruby v Marsh identified that such an award is also to ‘provide a discouragement to defendants … from delaying settlement of the claim or an early conclusion of proceedings’.[408] 

   [408](1975) 132 CLR 642, 652–3. See also Carbone v Melton City Council (2020) 60 VR 539, 549 [44] (Tate and Kyrou JJA); [2020] VSCA 117.

1. On these two proposed grounds leave to appeal will be refused.

Conclusion

1. Leave will be granted on Achilla’s proposed grounds 1–7, but the appeal will be dismissed.  Leave will be granted on Amcor’s proposed grounds 11 and 12, but the appeal will be dismissed.  Leave will be refused on Amcor’s proposed ground 13.  Leave will be refused on Achilla’s proposed ground 8 and Amcor’s proposed ground 14.  We will hear the parties on the appropriate orders to be made.

The course of the various trials and the period of delay

1. As we noted at the outset of these reasons, this litigation has been ongoing for over 15 years.  There have been two major trials and countless other hearings.  That the litigation has spanned this length of time is regrettable.

1. To recap, the litigation began in 2004 when Hodgson issued proceedings against Amcor in relation to his dismissal.  Amcor counterclaimed.  In 2007, Amcor commenced the Barnes proceeding.  The proceedings then continued through interlocutory stages for a number of years.  It is unclear now why the litigation took as long as it did to proceed through these preparatory steps.  Whatever the reasons, delay of that order should be avoided in litigation.  The expectation and hope is that with the advent of the obligations imposed on parties and their lawyers through the Civil Procedure Act 2010 (Vic) and with the development and refinement of stronger case management by judges, a delay of this kind through interlocutory steps will not be repeated.

1. The joint trial of the Hodgson proceeding and the Barnes proceeding began in March 2011 before Vickery J and concluded in August 2011.  The substantive hearings took place in April, May and June 2011.  When the trial began, it included the Achilla counterclaim which was fixed for hearing on liability on 25–6 July 2011, but that trial date was vacated by an order made 29 June 2011.  The reason for this was that the July dates were needed to complete the Barnes and Hodgson proceedings.

1. The Vickery J Principal Reasons were handed down on 20 March 2012, and orders for the taking of accounts were made that day.  On 20 March 2012, judgment for Hodgson on his dismissal claim was obtained. 

1. The Amcor parties filed notices of appeal in relation to the 20 March 2012 orders on 16 April 2012.

1. On 17 May 2012, Vickery J made orders as to interest, and on 14 September 2012 he made orders as to costs, on the Hodgson dismissal claim.  On 27 November 2012, orders dismissing the claims against Barnes and the Holihan parties were made, and directions were given as to the Achilla counterclaim.  In April 2013, the parties informed the Registry that the appeals filed by the Amcor parties should await the determination of the counterclaim.

1. Costs orders on the Barnes proceeding were made on 21 June 2013. 

1. On 13 September 2013, the Court of Appeal allowed an appeal against a decision of Vickery J refusing the Amcor parties leave to amend their defence to the counterclaim and bring a cross-claim.  The Court was critical of the fact that the Achilla counterclaim had been separated from, and not determined with, the Barnes and Hodgson Proceedings.[409]

   [409]ACN Box v ACB Co Pty Ltd [2013] VSCA 223 [51]–[53].

1. On 13 March 2014, the Court of Appeal dismissed a Summons by the Amcor parties seeking to have their appeals heard before the Achilla counterclaim.  Counsel for Hodgson opposed the Amcor parties’ application, and counsel for the Holihan parties gave it only qualified support.  The substance of the Amcor parties’ submission was that if they succeeded against the Holihan parties there would be no need to determine the counterclaim as the business would revert to them.  As matters have transpired, that would not have been the outcome.

1. Sequencing of hearings may be an efficient means of determining disputes in some limited circumstances.  But more often than not, it leads to problems.  Those problems include:

·The judge who begins the sequence may be unable to complete it, and a second judge must undertake the burden of familiarisation with issues already the subject of a substantial hearing and determination.

·There is the potential for parties to seek a revision of determinations previously made.

·There may be dispute as to the status of matters previously determined, and questions of issue estoppel and Anshun estoppel may arise.

·The resolution of what are seen as the critical issues does not reduce the ambit of the outstanding disputes, as the parties re-double their efforts and expand the disputes left unresolved.

1. All of these problems have arisen here, and have had a significant negative impact.  They are likely to be part of the cause of the considerable delay which has occurred in reaching a final determination of all the disputes.  The events and delay in this matter underline why great caution should be taken by judges before sequencing separate hearings.

1. Justice Vickery was unable to hear the Achilla counterclaim.  Both it and Amcor’s cross-claim were heard before Sloss J between 25 May 2015 and 15 September 2015.

1. The Sloss J Principal Reasons were delivered on 28 November 2016.  Subsequently, a special referee was appointed and ultimately judgment in favour of Achilla on the counterclaim was delivered on 19 February 2020.

1. Apart from the sequencing of the trials of the Hodgson and Barnes proceedings and the Achilla counterclaim, it is apparent that there were other factors which contributed to the delay in the proceedings.  We would commend the parties and their practitioners for the focused and efficient way this case was conducted before us.  Regrettably, it appears that has not previously been the manner in which the litigation has been conducted.  Rather, it appears to have been unnecessarily protracted by what may be described as a tendency in the parties to ‘overreach’ and to argue over procedural matters that were not always of great consequence. 

1. Amcor’s principal claim that its executives had caused it substantial loss by negotiating, or authorising the negotiation of, a sale of a business on terms which were uncommercial and at a price very substantially below the true value of the business, has not been successful and the claims it has succeeded in have resulted in modest relief against one of the participants for an account of profits.  The shortcomings in Amcor’s case as to the value of the ACB business must have been apparent to Amcor from an early point in the litigation, given the material as to Amcor’s own internal assessment of the business before the sale.

1. The Holihan parties, having initially advanced claims against ACB Vendor, pursued what must be characterised as ambitious claims against APA in relation to the pre-Deed of Accession period, and have eventually recovered a relatively modest sum (in the context) on a basis that could have been the subject of a much narrower claim.  By the time of the appeals, the focus of their complaints as to the trial judge’s analysis was the adoption of a conclusion (‘business as usual’) which they had themselves contended for before the final amendment of their counterclaim in 2015.

1. All of this highlights why litigants and their legal representatives must constantly give attention to conducting court proceedings realistically; pursuing procedural matters only when there is real substance to them;  confining themselves to the real issues in dispute; cooperating in the conduct of the proceeding and not taking every possible point merely because an argument is capable of being articulated. 

ANNEXURE A

AMCOR FIBRE PACKAGING AUSTRALASIA (CORRUGATING/AFPA)

ANNEXURE B

AMCOR PARTIES GROUNDS OF APPEAL CONCERNING
BREACH OF DUTY CLAIMS

1. The trial judge erred in finding and/or concluding that:

   (a)Craig Holihan (Mr Holihan) did not breach his fiduciary duties in entering into the Second Sale Agreement (Hodgson v Amcor Ltd (2012) 264 FLR 1 at [1433]–[1435];  and

   (b)Mr Holihan (and, therefore Achilla Pty Ltd (Achilla) and ACB (Australia) Pty Ltd (ACB)) did not have sufficient knowledge of the other Respondents’ breach of fiduciary duty to reach a conclusion that he (and/or his controlled entities) gave knowing assistance to those other Respondents in relation to the initial sale of the ACB Business ((2012) 264 FLR 1 at [1436]–[1441]).

2. The trial judge erred in finding that, in October 2005, James Hodgson (Mr Hodgson), Ian Sangster (Mr Sangster), Albert Mihelic (Mr Mihelic) and Christopher Bayley (Mr Bayley) renounced any interest in the ACB Business and renounced any entitlement for them or companies associated with them to any share in the profits of the ACB Business, and after October 2005 had no interest in the ACB Business ((2012) 264 FLR 1 at ([1147], [1149], [1703]–[1704]).

1. The trial judge erred in finding and/or concluding that:

   (a)the Second Sale Agreement was not an uncommercial transaction for the Amcor Parties ((2012) 264 FLR 1 at [1279]);

   (b)there could be no breach of any obligation to warn the Amcor Parties of such an acquisition ((2012) 164 FLR 1 at [1294]);  and

   (c)The Amcor Parties were not entitled to any relief as a consequence of entering into the Second Sale Agreement and none of the defendants were liable for any breach of duty arising from the terms of the Second Sale Agreement ((2012) 264 FLR 1 at [1295]).

2. The trial judge erred in concluding that it was ‘inappropriate’ to declare a constructive trust in respect of profit generated by the ACB Business ((2012) 264 FLR 1 at [1699];  and/or in failing to order an account of profits of the ACB Business.

3. The trial judge erred in initially (cf, Ground 8 below) limiting an account of profits against Mr Barnes and Mr Holihan to the period ending 28 October 2004 when Mr Barnes’s employment with Amcor ceased ((2012) 264 FLR 1 at [1715], [1718].

4. The trial judge erred in concluding ((2012) 264 FLR 1 at [1707]) that no account of profits should be ordered against any of Mr Hodgson, Mr Sangster, Mr Mihelic and Mr Bayley on the basis that they did not receive any pecuniary benefits from the ACB Business before ‘renouncing’ their interests in that business.

5. The trial judge erred in not finding that the respondents were liable for their breaches to the appellants and in awarding no relief at all as against each of the various respondents, as a result of their breach of duties in favour of the appellants (or one or more of them).

6. The trial judge erred:

   (a)in concluding (Amcor Ltd v Barnes [2012] VSC 434 at [138], [143], [144(c)]) that there should be no order directed to Mr Barnes, Mr Holihan, Achilla and/or ACB for relief by way of an account of profits (or otherwise);

   (b)in refusing to permit the amendments sought by the Amcor Parties in the proposed Fourth Amended Statement of Claim.

ANNEXURE C

ACHILLA COUNTERCLAIM

PROPOSED GROUNDS OF APPEAL

Achilla proposed grounds of appeal: 

Ground 1: 

The learned trial judge erred by failing to draw the inference that APA and Achilla had, from the time of commencement of the SSA:  

(a)implicitly agreed to be bound by an implied agreement to the same effect as that found in cl 12.2 of the SSA;  or

(b)conducted themselves according to a ‘Common Assumption’ that they were bound by cl 12.2 of the SSA, (CCR [295], [299], [385]–[387], [391], [395]).

Ground 2:

The learned trial judge erred by failing:

(a)to find as a fact that if Achilla, APA, the first respondent and the second applicant (the contracting parties) had properly turned their minds to the question, they would have made APA a party to the SSA with the effect that cl 12.2 of the SSA would have bound APA;  and/or

(b)to find as a fact that Achilla would have charged APA higher prices had it believed that APA was not bound by cl 12 of the SSA;  and

(c)so to conclude that Achilla would suffer detriment if APA were to resile from the Common Assumption, (CCR [401]). 

Ground 3:

The learned trial judge erred by failing to conclude that, from the date of the SSA until the commencement of the Deed of Accession executed by the contracting parties on 21 March 2005:

(a)APA and Achilla were bound by the implied agreement;  alternatively

(b)APA is estopped from denying that it was bound by cl 12.2 of the SSA. 

Ground 4:

The learned judge erred by construing cl 12.2 of the SSA as requiring Achilla  to be given only ‘the same sorts of work that the ACB Business had been doing prior to the sale, save in circumstances where the exception was enlivened’ (the ‘business as usual’ construction) (CCR [436];  see also CCR [422], [1703(a)], [1703(c)] (general); CCR [479], [488]–[490], [495]–[497], [666]–[667], [1703(b)], [1703(c)] (Amcor Displays);  CCR [810] (repeat order work)). 

Ground 5:

In construing cl 12.2 of the SSA, the learned trial judge erred:

(a)by differentiating work for APA’s ‘Amcor Displays’ division from the remainder of APA’s OME work;  and

(b)in finding that Achilla would have received only a ‘small component’ of the Amcor Displays’ work even on a business as usual construction, (CCR [479], [488]–[490], [495]–[497], [666]–[667], [1703(b)], [1703(c)]). 

Ground 6:

Alternatively to ground 5, if the learned trial judge was correct to find that Achilla was entitled only to a ‘small component’ of the Amcor Displays work, then her Honour erred in the method of assessing Achilla’s damages for the Amcor Displays work by rejecting Achilla’s ‘fall-back method 1’ (ADR [159]–[160], [182]).

Ground 7:

The learned trial judge erred in finding that an estoppel by convention precluded Achilla from claiming any breach of the Purchase Obligation for the period prior to 27 September 2005(CCR [931], [939], [941], [943], [1713]).

Ground 8:

The trial judge’s discretion as to damages in the nature of interest as regards the period over which interest runs pursuant to s 60 of the Supreme Court Act 1986 (Vic) miscarried, in that her Honour should have awarded interest from the commencement of the proceeding (3 September 2007), alternatively the commencement of the counterclaim (21 January 2008), rather than from 4 October 2010 (IR [113], [117], [119]–[120]. )

Amcor proposed grounds of appeal

11.The trial judge erred:

(a)in concluding (Amcor  Ltd v Barnes [2016] VSC 707 at [510], [518]) that Achilla did not bear the burden of proving that an alleged instance of breach did not fall within the words of exception in the carve-out to cl 12.2 of the Second Sale Agreement; and

(b)in construing ([2016] VSC 707 at [523]) the words of exception in the carve-out to cl 12.2 of the Second Sale Agreement to mean that, where Achilla had demonstrated an inability to supply consistently and on a basis which was commercial and reasonably acceptable in terms of price, quality and availability, Amcor Packaging (Australia) Pty Ltd (APA) was permitted to seek the supply of products from an alternative source; and (conversely), failing to construe the words of exception to mean that:

(i)the three elements in the carve-out (namely consistency, commerciality, and reasonable acceptability in terms of price, quality and availability) were separate (and not cumulative) elements; and

(ii)a ‘commercial’ basis was not confined  to  that which  was informed by price, quality and availability.

12.The trial judge erred in finding and/or concluding ([2016]VSC 707at [1036]–[1037]) that Achilla was entitled to recover all its fixed costs across the volume of work performed for ‘Amcor Fibre Packaging Australasia’ (AFP) and that there ought be no apportionment by reference to the volume of work performed for AFP as opposed to non-AFP customers.

13.The trial judge erred in concluding (Amcor Ltd v Barnes (No 2) [2019] VSC 849 at [64]) that the quantum of Achilla’s damages for breach of clause 12.2 be fixed at the sum of $2,197,414, because:

(a)that figure was materially higher than the amount paid by APA to other suppliers to carry out the OME work;

(b)APA was not obliged under cl 12.2 to procure such OME work from Achilla, if Achilla was more expensive than other suppliers;  and

(c)further and in any event, the said sum was based on a methodology that was the subject of expert evidence at trial that was predicated upon the respondents establishing liability in respect of all  the claimed jobs, which the respondents failed to establish.

14.The trial judge erred in concluding ([2019] VSC 849 at [120], [135]) that:

(a)interest should run on the damages awarded to Achilla from 4 October 2010 rather than from 17 September 2014, alternatively from no earlier than 15 February 2013 (for any breach of cl 12.2 of the Second Sale Agreement) and 20 July 2012 (for any breach of cl 12.1);  and

(b)the interest rate on any damages should be on the applicable penalty rate(s);  and not a standard commercial rate.

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