AWB Limited (No 5)
[2009] VSC 258
•17 July 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
| AT MELBOURNE COMMERCIAL AND EQUITY DIVISION |
COMMERCIAL COURT CORPORATIONS LIST
No. 10078 of 2007
IN THE MATTER OF AWB LIMITED (ACN 081 890 459)
| AUSTRALIAN SECURITIES AND | Plaintiff |
INVESTMENTS COMMISSION
v
| ANDREW ALEXANDER LINDBERG | Defendant |
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| JUDGE: | ROBSON J |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 4 June 2009 |
| DATE OF JUDGMENT: | 17 July 2009 |
| CASE MAY BE CITED AS: | Re AWB Limited (No 5) |
| MEDIUM NEUTRAL CITATION: | [2009] VSC 258 |
| --- |
CORPORATIONS - Civil penalty proceedings by ASIC – Application to further amend the amended statement of claim – r 13.03 Supreme Court (General Civil Procedure) Rules 2005.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N J O'Bryan SC with | The Australian Securities and |
| Mr A Hanak & Mr C H Truong | Investments Commission | |
| For the Defendant | Mr D G Collins SC with | Galbally & O’Bryan Solicitors |
| Mr G P Mullaly & Ms M Tittensor | ||
| HIS HONOUR: |
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INTRODUCTION
ASIC seeks to further amend its statement of claim. I attach, as annexure 1, the proposed further amended statement of claim dated 1 May 2009, attached to its interlocutory process of 1 May 2009.
Mr Lindberg opposes the amendments and relies on his outline of argument of 7 May 2009 and the submissions of Mr Collins SC made on 4 June 2009. The summary of the amendments is attached as annexure 2. I have numbered the objections 1 to19 for convenience.
ASIC relies on the submissions of Mr N J O’Bryan SC of 4 June 2009 and ASIC’s written response of 18 June 2009. The submissions of 18 June 2009 seek to withdraw some of the proposed amendments and to make further proposed amendments. Where the amendment is withdrawn, I will treat it as such. As to the proposed further amendments, I will deal with them where they are minor. Mr Lindberg opposes ASIC application for leave to file the further proposed amendments but has made no further submissions on them. In the circumstances, I will not rule on the further proposed amendments but will await any further application by ASIC to make any amendments that may arise from these reasons.
Since preparing these reasons and shortly prior to delivering them, I received further written submissions from Mr Lindberg dated 24 June 2009. I have taken these into account. The structure of my reasons may reflect the amendments made to accommodate the submissions of 24 June 2009.
For the following reasons, I give leave to ASIC to further amend its amended statement of claim, substantially in the form proposed in the draft of 1 May 2009, save for those amendments disallowed which are set out below. I direct that the Further Amended Statement of Claim (“FASOC”) be filed and served by 24 July 2009. I order that ASIC pay the costs thrown away by reason of the amendments and the costs of the application of 1 May 2009. I direct that the defendant file and serve his defence to the FASOC, in the form previously adopted, by 14 August 2009.
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A summary of my decision is as follows:
Objection Amendment 1 Disallowed 2 Disallowed 3 Disallowed 4 Allowed as to paragraph 12P 5 Disallowed 6 Disallowed 7 Disallowed 8 Para 29C not pressed Para 29A and 29B disallowed 9 Disallowed 10 Disallowed 11 Disallowed 12 Disallowed in their present form 13 Disallowed in their present form 14 Disallowed 15 Disallowed 16 Disallowed 17 Disallowed 2 T0258
18 Disallowed
19 Allowed save where otherwise indicated
SUMMARY OF ASIC’S CLAIM
ASIC’s case against Mr Lindberg may be summarised as follows.[1]
[1] See key propositions sought to be advanced by ASIC tendered 7 May 2009.
Between 1996 and 2003, the United Nations operated the Oil-for-Food Program (OFFP) whereby proceeds from Iraq’s oil imports were held in an UN Escrow Account and, where authorised by the UN, used by Iraq to buy humanitarian goods. During this period, relevant UN resolutions otherwise prohibited the provision of any financial or economic benefit to Iraq , including hard currency.
Between 1996 and 2003, AWB sold bulk wheat to the Iraqi Grain Board (IGB) under the Oil-for-Food Program.
Between 1999 and 2003, Iraq imposed, and AWB paid, a purported inland transportation fee in connection with all AWB shipments of wheat to Iraq. The fee was paid by AWB in hard currency to the IGB, via a Jordanian company, Alia, which was part-owned by the government of Iraq.
From 1999, each AWB contract with Iraq was inflated by the amount of the purported inland transportation fee, and this amount, having been paid to Alia by AWB, was later obtained by AWB from the UN Escrow Account.
The inland transportation fee was a sham. Neither AWB nor Alia in fact organised or provided transportation of wheat inside Iraq. The purpose of the sham fee was to provide the government of Iraq with a flow of hard currency, which the UN resolutions establishing the Oil-for-Food Program had forbidden. In an effort to evade detection of AWB’s payment of the sham fees and their recovery from the UN Escrow account:
(a) the sham fees were not referred to in the contracts submitted by AWB to the UN for approval. Instead, the sham fees were incorporated into the total sale price per tonne of wheat;
(b) contracts submitted to the UN by AWB referred to meaningless or sham trade terms (for example, “CIF Free in Truck to All Governates of Iraq”); and
(c) the sham fees were paid to the IGB via Alia.
Each payment to Alia was contrary to relevant UN sanctions because it resulted in the government of Iraq obtaining hard currency. The recovery of each payment from the UN Escrow Account was not made for legitimate humanitarian purposes and accordingly, was contrary to relevant UN sanctions.
Further allegations are made about the misuse of the UN Escrow Account in relation to what is called “the Tigris debt” and the iron filings claim. These transactions also allegedly involved inflating the sale price of wheat in a similar manner to the inland transportation fees.
All these matters were well known to AWB. By virtue of his position as managing director of AWB, his personal involvement in some of these matters, and his receipt of key communications, each of these matters became known to Mr Lindberg at various times between 2000 and 2003.
The revelation of these matters caused substantial damage to AWB.
Mr Lindberg knew or ought to have known that the revelation of AWB’s conduct was likely to cause substantial and irreparable harm to AWB, including the loss of the single desk, which was of great financial and commercial value to AWB.
Mr Lindberg, as managing director, was responsible for reporting these matters to the board and for taking reasonable steps to investigate and prevent AWB from engaging in conduct contrary to UN resolutions.
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Mr Lindberg is alleged to have breached his duties under ss 180(1) and s 181(1) of the Corporations Act by failing to take adequate steps to:
(a) follow up serious matters of concern in relation to the payment of purported inland transportation fees, raised with Mr Lindberg in late 2000 or early 2001 by Arthur Andersen;
(b) prevent AWB from entering into wheat contracts which provided for the payment and recovery of sham fees;
(c) ensure that payments or proposed payments in respect of the sham fees were disclosed to and approved by the UN;
(d) make enquiries with relevant AWB employees concerning the true commercial characteristics of certain wheat contracts;
(e) advise the AWB board of these matters;
(f) ensure that AWB complied with relevant UN Resolutions;
and by permitting AWB to enter into the contracts including the sham fees.
The critical issue in these proceedings is Mr Lindberg’s knowledge of the sham fees, particularly that the payment of these sham fees was contrary to UN resolutions and that disclosure of these payments would have been likely to cause substantial and irreparable damage to AWB.
The amended statement of claim alleges that Mr Lindberg knew or ought to have known of these matters.[2] The proposed FASOC seeks to further amend the allegation of his knowledge to include that he “knew facts that ought to have put him on a train of inquiry that would have disclosed” the sham payments.[3]
[2] Amended statement of claim of 18 April 2008, [35].
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As can be seen from this general summary, the scheme of the pleading is to first allege that certain things happened and then to allege that, by reason of matters alleged, Mr Lindberg knew or ought to have known of certain relevant matters including that the inland transport fees were a sham.[4]
[4] Ibid.
ASIC contends that it is necessary to keep in mind several factors when considering the proposed amendments.
ASIC submits that its case against Mr Lindberg alleges breaches by him of ss 180 and 181 of the Corporations Act 2001 (Cth). ASIC submits that s 180 of the Corporations Act requires that the circumstances of AWB be taken into consideration, along with the characteristics of the office which Mr Lindberg held in AWB and Mr Lindberg’s duties and responsibilities arising out of holding that office.
ASIC contends that the relevant circumstances of AWB and the characteristics of Mr Lindberg’s office include matters such as AWB’s corporate structure, its management arrangements, the size and nature of its business, the composition of its board, Mr Lindberg’s position and responsibilities within AWB, the particular management functions which Mr Lindberg performed, his experience and skills, the manner in which responsibility for the business was distributed between directors and employees and the circumstances of the specific case.[5] ASIC contends that these matters are alleged and particularised in paragraphs 3, 12F – 12R, 18 – 35, 88A – 90B and 96 - 96B of the FASOC. ASIC submits that all these matters affect the content of the duty owed by Mr Lindberg pursuant to s 180 of the Act.[6]
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[6] ASIC v Rich (2003) 44 ACSR 341, 352.
ASIC contends that similarly, s 181 of the Corporations Act, in requiring an assessment of whether a director has acted in good faith in the best interests of the company and for a proper purpose in the performance of the functions attaching to the office of director,[7] necessarily requires that the nature of the director’s office, the responsibilities of the director and the circumstances of the company be considered.
[7] See Marchesi v Barnes [1970] VR 434 at 437 per Gowens J; ASIC v MacDonald (No 11) (2009) 71 ACSR 368 at [659] to [663].
ASIC contends that the structure of the FASOC is to first set out the background facts and circumstances concerning AWB which are relevant when considering the nature of the office which Mr Lindberg held and the duties and responsibilities to AWB that ASIC alleges he had while he was in that office. It submits that the background facts and circumstances include the matters which are enumerated in the headings of the table of contents on page 2 of the FASOC, which was included, for ease of reference, to identify the key subjects in respect of which ASIC contends Mr Lindberg owed duties and had responsibilities arising out of his office.
ASIC submits, generally, that many of the criticisms made by Mr Lindberg of the amendments sought to be included in the proposed FASOC proceed upon the basis that the allegations are irrelevant because they are not material to any cause of action alleged.
ASIC contends that, on the contrary, the question of whether Mr Lindberg has breached ss 180 and 181 of the Corporations Act in the manner alleged can only be determined after the Court has made relevant findings about the nature and scope of his role, his duties and responsibilities, the characteristics of AWB,[8] the circumstances in which AWB found itself in connection with the subject matter of this proceeding (namely AWB’s substantial export wheat trade with Iraq, which was subject to stringent UN sanctions and trade regulations in the relevant period) and Mr Lindberg’s actual or imputed knowledge. ASIC asserts that all of these background facts and circumstances are relevant to the issues in the case.
[8] See, for example, the findings of the role and responsibilities of Peter MacDonald as Managing Director of James Hardie Ltd in ASIC v MacDonald (No 11) 71 ACSR 368 at [344] to [346] per Gzell J.
RELEVANT RULES OF PLEADING
Rule 13.02 provides:
Content of Pleading
13.02 (1) Every pleading shall –
(a) contain in a summary form a statement of all the material facts on which
the party relies, but not the evidence by which those facts are to be proved;
….
Rule 13.03 provides:
Documents or conversations
13.03 The effect of any document or the purport of any conversation, if material, shall be pleaded as briefly as possible, and the precise words of the document or conversation shall not be pleaded unless those words are themselves material.
Rule 13.10 provides:
Particulars of Pleading
13.10 (1) Every pleading shall contain necessary particulars of any fact or
matter pleaded.
….
(3) Without limiting paragraph (1), every pleading shall contain particulars
of any –
….
(b) disorder or disability of the mind, malice, fraudulent intention or other
condition of the mind, including knowledge or notice-
which is alleged
I now turn to consider the 19 objections.
OBJECTION 1 - PARAS 12F -12N
Paras 12F to 12H allege that Mr Lindberg was aware of certain demurrage and delay problems, was told about them and attended meetings about the issue. Mr Lindberg submits that these paragraphs are irrelevant and not material to any cause of action alleged.
ASIC submits that these paragraphs are relevant to ASIC’s case against Mr Lindberg. ASIC contends that Mr Lindberg’s involvement in and knowledge of inland transportation fees, changes to AWB’s contracts with Iraq, shipping issues (including demurrage) and insurance problems which had been experienced by AWB are of critical relevance in assessing:
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(a) his role, duties and responsibilities and the circumstances of AWB at the relevant time within the meaning of s 180;
(b) Mr Lindberg’s interest and involvement in the Iraq wheat trade and the importance of the Iraq trade to AWB; and
(c) whether Mr Lindberg was aware or should have been aware of impropriety by AWB with respect to the Oil-for-Food Program.
ASIC contends that these matters will define the content of the duty under s 180. ASIC submits that they are therefore material to the causes of action alleged against Mr Lindberg.
ASIC alleges that paragraph 12G pleads a circumstance relevant to AWB, namely the limited appointment of Alia as protective agent, where Alia’s appointment did not extend or relate to the inland transportation of wheat and where Alia’s appointment (unlike the purported inland transportation arrangements) was formally recorded in writing.
Mr Lindberg does not accept that these paragraphs are relevant to: (a) the causes of action alleged; or (b) assessing the matters ASIC refers to. Mr Lindberg alleges that the allegations are vague, referring in general terms to “demurrage” and “chartering” issues. Mr Lindberg contends that the new paragraph 12F asserts that the defendant became aware of “significant demurrage costs” and “the details of AWB arrangements for the shipment of wheat”. Mr Lindberg submits that the pleading does not identify those demurrage costs or the details of those arrangements. As a result, he submits that the pleading fails to disclose or define the issues to be raised at trial.
Mr Lindberg submits that in any event, the particulars do not support the allegations in paragraph 12F.
Mr Lindberg submits that paragraph 12J remains embarrassing. He contends that there is a complete absence of any particulars to support the allegation or to disclose
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or define the issues to be raised at trial.
Paras 12F to 12N relate to demurrage and Mr Lindberg allegedly being informed of issues concerning “contractual performance.” Paragraph 12F alleges, in substance, that Mr Lindberg knew that AWB had significant demurrage costs as a result of delays in the discharge of AWB shipments to Iraq. Paragraph 12G deals with the appointment of Alia as a protective agent. Paragraph 12H alleges a meeting which discussed demurrage. Paragraphs 12I, 12J, 12K and 12L deal with meetings that Mr Lindberg allegedly attended. Paragraphs 12M and 12N deal with communications received by Mr Lindberg.
ASIC asserts that paragraphs 12F to 12N are relevant in assessing Mr Lindberg’s role, duties and responsibilities at the relevant time. Mr Lindberg’s responsibilities and duties are pleaded in paragraphs 96A, 96B and 96C. None of those paragraphs seek to rely on paragraphs 12F to 12N in defining his responsibilities and duties.
Paragraphs 12F to 12N appear to have two functions in the claim. First, the pleas are in the nature of particulars to support the allegations of knowledge in paragraph 35. Secondly, the pleas are relied on in alleging the conduct said to constitute the breach of duty by Mr Lindberg in paragraph 97.
As to the issue of knowledge, paragraph 35 alleges that by reason of the matters alleged in paragraphs 12 to 34N, including 12F to 12N, Mr Lindberg knew or ought or ought to have known of certain matters or knew facts that ought to have put him on a train of enquiry that would have disclosed certain matters.
It is not clear to me what particular facts alleged in paragraph 12F to 12N are relied on to establish knowledge of which particular matters referred to in paragraph 35. Further, it is not clear whether a particular fact is relied on to establish actual knowledge or that Mr Lindberg ought to have known of the particular fact alleged or facts otherwise known to him ought to have put him on a train of enquiry that would have disclosed the particular fact alleged. As to the latter, it is not clear what these other facts are.
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For example, is the allegation in paragraph 12F relied on to establish that Mr Lindberg had actual knowledge that AWB was continuing to make purported inland transportation payments in connection with its trade with the IGB notwithstanding the concerns that had been raised in the Arthur Andersen Report in December 2000 and the trip report in February 2001 as alleged in paragraph 35(a)?
As to the issue of the contravention of Mr Lindberg’s alleged duties, paragraph 97 does seek to rely on paragraphs 12F to 12N although it is not clear to what extent it does so. The paragraph is not easy to understand. I shall seek to take an example to explain its role in the pleading.
ASIC alleges, inter alia,
(a) that Mr Lindberg had a responsibility to take reasonable steps to prevent AWB from entering into contracts which included the inland transportation fee;[9]
(b) that Mr Lindberg owed a duty to AWB to exercise his powers and discharge his duties with the degree of care and diligence a reasonable person would exercise;[10]
(c) that Mr Lindberg failed to take steps to prevent AWB from entering into contracts which included the inland transportation fee;[11] and
(d) by doing so Mr Lindberg breached his duty as aforesaid.[12]
[9] Paragraph 96A(h)
[10] Paragraph 96B
[11] Paragraph 97(b)
[12] Paragraph 98
In that context, ASIC seek to rely, inter alia, on paragraphs 12F to 12N in making out the allegation that Mr Lindberg failed to take steps to prevent AWB from entering into contracts which included the inland transportation fee. Further, paragraph 97 contains some twenty plus instances of Mr Lindberg failing to do something that he allegedly ought to have done if he exercised the required degree of care and diligence.
By rolling up the plea in this fashion, it is not clear what relevance, if any, paragraphs 12F to 12N have and which of the twenty odd paragraphs allege failures to act.
In my opinion, Mr Lindberg is entitled to know precisely what matters he is alleged to have known that give rise to each of his alleged failures to act. The pleading is vague and too general.
In my opinion the pleadings in paragraph 12F to 12N are embarrassing.
I disallow the amendments.
OBJECTION 2 – PARA 12I
Mr Lindberg complains that this paragraph is “vague, general and unintelligible.”
ASIC submits that this criticism is unjustified. ASIC contends that paragraph 12I is simply and clearly expressed in its terms and readily understood as a material allegation in support of Mr Lindberg’s actual or constructive knowledge of Iraqi wheat contracts at the relevant time.
However, to address this criticism, ASIC proposes to give additional particulars of paragraph 12I, which are contained in the amended version of the FASOC filed with their submissions in order to make the allegation clearer and more complete.
I agree that the pleading is too vague, general and unintelligible. The allegation does not plead the material effect of what Mr Officer said. Rule 13.03 provides:
The effect of any document or the purport of any conversation, if material, shall be pleaded as briefly as possible, and the precise words of the document or conversation shall not be pleaded unless those words are themselves material.
Leave to amend is disallowed.
OBJECTION 3 – PARA 12J
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The same criticism Mr Lindberg made in respect of paragraph 12I is made by Mr Lindberg of paragraph 12J. Again, ASIC submits that this criticism is unjustified for the same reasons as those provided in response to paragraph 12I.
Further, ASIC submits that this paragraph is material and relevant to allegations of a breach of s 180 of the Corporations Act.
ASIC contends that Mr Lindberg’s involvement in the meetings of AWB’s corporate risk committee is of critical significance in assessing:
(a) the nature of his role, duties and responsibilities in connection with the OFFP; and
(b) whether Lindberg was aware or should have been aware of impropriety by AWB with respect to the OFFP.
ASIC refers to para 96(d) of the FASOC and contends that the corporate risk committee was responsible for formulating risk minimisation strategies, including those relevant to the contractual terms on which AWB supplied wheat to Iraq. As far as I am aware, the FASOC does not contain a para 96(d).
ASIC submits that Mr Lindberg’s attendances at the meetings provides one of the factual bases for alleging that his responsibilities included the formulation of the risk minimisation strategies referred to in para 96(d) of the FASOC. ASIC contends that these allegations are therefore highly material to the causes of action alleged.
I agree that the allegation is too vague and general. The committee’s function is not pleaded. With greater particularity, the allegation may have been a material allegation. Leave to amend is disallowed.
OBJECTION 4 – PARA 120 AND 12P
Mr Lindberg complains that these paragraphs are vague and are not material to any cause of action alleged against him.[13]
[13] Submissions 24June 2009 [13]
ASIC submits that these paragraphs, and in particular the issue of the significance of AWB’s wheat trade with Iraq and Mr Lindberg’s recognition of this, are relevant to:
(a) assessing Mr Lindberg’s role, duties and responsibilities in connection with this part of AWB’s business;
(b) whether Lindberg was aware or should have been aware of impropriety by AWB with respect to the OFFP; and
(c) the balancing of the commercial importance of Iraq to AWB and the political and reputational risks that the country posed to AWB;
and are therefore material to those causes of action alleged against him.
ASIC submits that it will contend that the wheat market in Iraq was so important to AWB’s revenue (a circumstance relevant to AWB) that Mr Lindberg’s responsibilities included taking reasonable steps to protect that market by ensuring that AWB complied with the international sanctions applicable to that market (e.g. paras 96A(f), (fa), (fg)[sic] and (i) FASOC) and by preventing or halting impropriety by AWB with respect to the OFFP.
For reasons discussed under objection 1, I do not accept that these allegations are relied on in alleging Mr Lindberg’s responsibilities or duties.
ASIC contends that Mr Lindberg’s recognition of the matters alleged in paragraph 12O and 12P is relevant to the balancing of the commercial importance of Iraq to AWB and the political and reputational risks that the country posed to AWB. I put aside the issue that paragraph 12P may be an allegation of evidence rather than of a material fact. In my opinion, it does support the allegation in paragraph 35(c).
I fail to see how the fact alleged in paragraph 12O supports the allegation in paragraph 35(c).
I will allow the amendment in paragraph 12P.
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OBJECTION 5 – PARA 12Q, 12R AND 97(0)
Mr Lindberg complains that these paragraphs raise a new cause of action and are vague and embarrassing. He asks: what is it that he should have informed the board of? Mr Lindberg submits that the court ought not allow the amendments in the absence of any explanation of: (a) why they were not pursued earlier; or (b) how they will effect the trial.
ASIC contends that the substance of these new allegations is that Mr Lindberg, as Managing Director of AWB, improperly executed deeds of release by and on behalf of the AWB Board in favour of Messrs Officer and Emons when they ceased their employment with AWB in mid-2000. ASIC contends that these deeds acknowledged that AWB had made “agency payments” to overseas agents for wheat sales in 1999 and 2000.
ASIC submits that these allegations are relevant to:
(a) Mr Lindberg’s knowledge of the payments that AWB was making to overseas agents in respect of such sales, which may tend to support actual or constructive knowledge of similar payments in Iraq; and
(b) the question whether it was appropriate for Mr Lindberg and AWB to be giving releases of this sort, in respect of matters which were of such significance to the company, without informing or advising the AWB Board of either the subject matter of the releases or the fact that the releases had the effect contended in paragraph 12R, or seeking approval from the AWB Board with respect to the releases.
ASIC says that in response to Mr Lindberg’s criticism of these paragraphs, the paragraphs have been redrafted to make these points clearer.
As far as I am aware, no issue has been raised in these proceedings or allegation made that Mr Lindberg “improperly executed” the deeds.
In those circumstances, leave to amend is disallowed.
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OBJECTION 6 – 21A, 21B & 97(n)
Mr Lindberg’s criticism is that these paragraphs introduce a new cause of action and are vague and general.[14] Mr Lindberg submits that the particulars to paragraph 21 (which form the basis of paragraph 21A and 97(n)) do not give details of what was discussed about “the purported inland transportation fee” or the “concern” that some (and if so what) funds were being paid to Iraq. Mr Lindberg contends that it is stated that further particulars to paragraph 21 may be provided prior to trial. He submits that the court ought not to allow amendments in this form at this stage of the proceeding.
[14] Submissions of 24 June 2009 [15]
Further, Mr Lindberg submits that these paragraphs constitute a new cause of action and the court ought not to allow the amendments at this time in the absence of any explanation of: (a) why they were not pursued earlier; or (b) how they will effect the trial.
ASIC submits that paragraphs 21A and 21B support both an existing alleged breach of duty, namely, paragraph 97(a) and a new but related alleged breach of duty in connection with the Arthur Andersen report, namely paragraph 97(n).
ASIC contends that paragraphs 21A and 21B relate to material facts which support ASIC’s allegation that Mr Lindberg had knowledge of that report and the key matters which were found in it and what Mr Lindberg did following receipt of the report and its findings.
ASIC contends that paragraph 97(n) complains that Mr Lindberg failed to inform or advise the AWB board of the existence of and/or the findings contained in the Arthur Andersen report.
ASIC contends that this is a new breach of duty alleged but is inextricably related to an existing breach of duty alleged in paragraph 97(a). ASIC submits that each of the sub-paragraphs of paragraph 97 constitutes an alleged breach of duty of s 180.
Para 19 alleges the existence of the Arthur Andersen report and the effect of it. Para 21 alleges that Mr Lindberg provided a copy of the report to Mr Fuller. I do not understand how that purports to be a material fact to the cause of action pleaded. I would have thought that the material allegation is that Mr Lindberg received a copy of the report but did not inform the board of what is alleged to be the material effect of the report. Para 21B does not plead the material effect of the report. Para 97(n) does not plead precisely what purport of the report Mr Lindberg did not inform the board of.
In those circumstances, leave to amend is disallowed.
OBJECTION 7 – 22A
Mr Lindberg complains that paragraph 22A is not a material allegation of fact and is vague and general.
ASIC submits that this paragraph relates to the internal audit services fraud risk assessment undertaken by Ernst & Young on behalf of AWB in early 2002. ASIC submits that it is alleged that Mr Lindberg received a copy of this important report concerning fraud risks which AWB faced in or around July 2002.
ASIC submits that this paragraph is material and relevant for the following reasons:
(a) the Ernst & Young fraud risk assessment is relevant to the question of whether Mr Lindberg knew or ought to have known that AWB sold wheat in countries where bribery and corruption, including kickbacks and agency payments, were common business practices raising a high risk of fraud or other improprieties as alleged in paragraph 35(n);
(b) the allegations in paragraphs 22A and 35(n) taken together, it is submitted, are of critical significance in assessing Mr Lindberg’s role, duties and responsibilities having regard to the circumstances of AWB as disclosed to Mr Lindberg in 2002 by the Ernst & Young fraud assessment report; and
(c) the circumstances of AWB, as disclosed by the Ernst & Young fraud
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assessment report, are relevant to whether Mr Lindberg was aware of or should have been aware of, or should have availed him of the means of becoming aware of, impropriety by AWB with respect to the OFFP.
ASIC contends that paragraph 22A is therefore material to the causes of action alleged against Mr Lindberg.
Paragraph 22A is not relied on in supporting the allegations of responsibilities and duties.
Paragraph 22A is relied on to support the allegations made in paragraph 35. For the reasons given to objection 1, I consider the pleading of 22A and 35 embarrassing. ASIC submits that paragraph 22A is relevant to the allegation in 35(n). That link is not made clear in the pleading.
I refer to and repeat my observations under objection 1 on the reliance of paragraph 22A in paragraph 97.
Leave to amend is disallowed.
OBJECTION 8 – PARA 29A-29C
Mr Lindberg complains that these are not material allegations of fact and notes that paragraph 29C relates to an email which is particularised under paragraphs 26 and 31.
ASIC accepts the objection in respect of paragraph 29C and will remove this paragraph as it is adequately addressed in the other particulars referred to.
With respect to the remaining paragraphs 29A and 29B, ASIC submits that these paragraphs are relevant to the breaches of duty alleged in respect of the Tigris debt (paragraph 29A) and the iron filings claim (paragraph 29B), both of which are important incidents in respect of which it is alleged that Mr Lindberg breached his duties to AWB.
Under this claim, ASIC alleges that Mr Lindberg knew that IGB’s iron filing claim
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was to be paid using the sham inland transportation fees (para 35B(i)).
Para 29B alleges that Mr Lindberg attended a meeting at which he was handed a document that referred to a proposal to offset the Iron Filings claim against the Tigris Debt.
ASIC submits that para 29B is material to the Tigris debt allegation and the iron filings claim. ASIC alleges that Mr Lindberg knew that the Tigris debt was to be recovered by “loading up” the AWB contracts with IGB.
In my view, para 29A does not allege a material fact. In my opinion, para 29B does not properly plead the relevant effect of the document it seeks to rely on: see r 13.03.
I disallow the amendment in its present form.
OBJECTION 9 – 34A PARTICULAR HA
Mr Lindberg complains that particular HA (page 33) is not a particular of what Mr Lindberg was told.
ASIC submits that it is a particular of what Mr Lindberg was told at the meeting which occurred on or about 10 June 2003.
To avoid any possible confusion, ASIC seeks to further amend the particular.
The particular does not allege that he was told anything. It says certain things were referred to. If it is alleged that Mr Lindberg was told something, then the particular should allege the effect of what was said: r 13.03.
I disallow the amendment.
OBJECTION 10 – 34B TO 34I, PARTICULARS C & D, 96A (k) & (l), 97(p),(s) & (u)
These amendments seek to introduce allegations concerning Project Rose.
Mr Lindberg complains that these paragraphs introduce a new cause of action in relation to Project Rose which he says are vague, general and embarrassing.
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Mr Lindberg maintains that these paragraphs are vague and general and ought not to be allowed at this stage of the proceeding. Mr Lindberg submits that, for example, paragraph 34E is now drafted in the widest possible terms: that the defendant “knew, ought to have known or knew facts which ought to have put him on a train of enquiry”. He submits that the particulars do not identify how Mr Lindberg had such knowledge.
The essence of the “Project Rose” allegations is that:
(a) Mr Lindberg was responsible for the establishment,[15] supervision[16] and operation[17] of an inquiry into the allegations made by US Wheat Associates that AWB was inflating its contracts for the sale of wheat to Iraq under the OFFP and some of the excess had gone into the accounts of Saddam Hussein’s family.[18] The inquiry was known as Project Rose;[19]
(b) Mr Lindberg reported to the AWB Board that Project Rose was a thorough, detailed and genuine investigation of the allegations;[20]
(c) Mr Lindberg knew that Project Rose was not a thorough, detailed and a genuine investigation of the allegations;[21]
(d) Mr Lindberg reported to the AWB Board that the investigation had found no impropriety on AWB’s part and absolved AWB from any responsibility [the pleading is ambiguous as to whether or not the inquiry had found impropriety or whether or not he knew that it had];[22] and
(e) Mr Lindberg failed to ensure the investigation was thorough and bona fide.[23]
[15] Para 34C.
[16] T0258
[17] Para 34D.
[18] Para 34B.
[19] Para 34C.
[20] Para 97(p).
[21] Para 35C(q) & D.
[22] Para 97(p), 35D, 96A (l).
[23] Para 96A (k).
ASIC submits that these allegations are relevant to:
(a) Mr Lindberg’s actual or constructive knowledge as to Project Rose as alleged in paragraphs 35(q), (r) and (s) of the FASOC;
(b) Mr Lindberg’s alleged responsibilities with respect to Project Rose as alleged in paragraphs 96A(k) and (l) of the FASOC; and
(c) the breaches of duty alleged in paragraphs 97(p), (s) and (u), where they are alleged to constitute breaches of s 180 of the Corporations Act.
ASIC submits that these allegations with respect to Project Rose are clear and simply expressed and form an important part of the Plaintiff’s case against Mr Lindberg.
ASIC accepts that these allegations relate to new alleged breaches of duty under ss 180 and 181 of the Corporations Act.
The pleadings are unsatisfactory. In paragraph 35(r), it is alleged that Mr Lindberg knew or ought to have known that the Board of AWB had been misinformed by Mr Lindberg and others that Project Rose involved a rigorous and detailed review of the facts surrounding AWB’s OFFP contracts with Iraq and uncovered no evidence of wrongdoing by AWB or its officers despite that rigorous and detailed review. It is unclear whether the allegation includes an allegation that the board was misinformed because Project Rose did uncover evidence of wrong doing. If so, what was the wrongdoing that was uncovered? If not, then what is the relevance of this allegation?
In paragraph 97(p), it is alleged that Mr Lindberg misinformed the Board that the review had found no evidence that AWB had knowledge that monies paid to Alia were passed on to the former government of Iraq. As far as I can see, there is no allegation that the review did find such evidence. Rather, I took the allegation to be that the review did not find such evidence as it was not thorough.
In my opinion, the allegations are embarrassing. “A pleading is embarrassing when it places the opposite party in the position that he or she does not know what is alleged against him or her.”[24] ASIC does not precisely state what it is Mr Lindberg is alleged to have known and how precisely he misinformed the board. Is it alleged that he knowingly did so? When it alleges that he allowed others to misinform the board, is that allegation that he knowingly did so?
[24] Civil Procedure Victoria [23.02.35].
Paragraph 97(s) alleges that Mr Lindberg failed to take any reasonable steps to properly investigate the allegations made in the US Wheat Associates complaint. It is not clear whether it is alleged that Mr Lindberg knew that the complaints were well-founded and deliberately set about ensuring that Project Rose would not ascertain what he knew to be the true state of affairs. What does ASIC mean, in para 35(q), when it alleges that Mr Lindberg knew that the inquiry was not a bona fide or thorough investigation into wrongdoing by AWB? Is it alleging that, although he did not know of the wrongdoing, he knew that those conducting the inquiry did not seek to ascertain whether AWB was engaged in wrongdoing? Or is it alleging that, he did not know of the wrong doing, but knew the inquiry was not seeking to uncover the true state of affairs? What is the alleged wrongdoing?
If it is alleged that Mr Lindberg knew that the complaints were well founded, then it would follow that if the investigations did not disclose that the complaints were well founded, that Mr Lindberg would know that the report was not thorough and if he permitted the report to be presented to the board, he would have allowed the board to be misled. These allegations are not pleaded and what is left is vague and embarrassing.
In my opinion, the allegations ought to have an appropriate degree of particularity such that Mr Lindberg knows precisely what is alleged against him.
I disallow the amendments relating to Project Rose.
OBJCECTION 11 – PARA 34E
Mr Lindberg contends that para 34E is unintelligible, vague and embarrassing.
ASIC contends that this paragraph alleges in clear and unambiguous terms that Project Rose did not constitute a bona fide attempt to investigate whether AWB and its officers, agents or employees had engaged in any impropriety in relation to the OFFP. ASIC says that further, detailed particulars of that allegation are given in the FASOC.
I have already ruled that the proposed amendment in para 34E is not allowed. The allegation is ambiguous, vague and embarrassing. It is not clear whether it is alleging that those conducting the inquiry deliberately did not interview Hogan, Whitwell and Long, when those conducting the inquiry otherwise knew they ought to if the inquiry was to ascertain the true state of affairs. Project Rose did not conduct the inquiry. The inquiry was conducted by people. The pleading alleges that Project Rose did not constitute a bona fide attempt to investigate. It is not clear what this means. The pleading is embarrassing.
I disallow the amendment.
OBJECTION 12 – PARAS 34J-34N, PARTICULAR 35 E AND PARAS 97(q),(r), (t)
& (u)
Mr Lindberg contends that these paragraphs raise a new cause of action based on his reporting to the AWB board on the inquiry by the Independent Inquiry Committee (“IIC”) into the OFFP. Mr Lindberg submits that the allegations are too general and unparticularised. He also submits that the amendments should not be permitted as they introduce a new cause of action at this late stage of the proceeding.
ASIC contends that as with the Project Rose allegations, these paragraphs set out important allegations of fact in respect of which it is alleged that Mr Lindberg failed to adequately inform the AWB Board as to:
(a) the IIC investigations;
(b) the nature of the allegations which had been put to Mr Lindberg by IIC
23 T0258
investigators and the seriousness of the subject matter which
Mr Lindberg was called upon to address; and
(c) the full extent of the findings and proposed findings of the IIC with respect to AWB’s involvement in the OFFP and the factual basis for these findings.
ASIC contends that the facts which were or should have been known to Mr Lindberg are alleged in paragraphs 34J – 34N. The non-disclosure to the AWB Board of those facts, and other relevant matters within Mr Lindberg's knowledge, is alleged in paragraphs 97(q), (r), (t) and (u). ASIC submits that these allegations are clear and unambiguous and appropriately pleaded.
In substance the “IIC” allegations is as follows:
(a) In April 2004, the United Nations established a committee known as the Independent Inquiry Committee into the United Nations Oil-for- Food Program (IIC) to investigate and determine whether established procedures under the OFFP were violated and whether contractors engaged in any illicit or corrupt practices.[25]
[25] Para 34J.
(b) In February 2005, IIC investigators interviewed Mr Lindberg. During the interview, the investigators informed Mr Lindberg that they had been informed by various sources that Alia had been used to channel funds to the former government of Iraq under the guise of transportation costs, that it was not possible to contract with the Iraq government without making “a side payment” to the Hussein regime, and no company had been exempt from paying a 10 per cent kick back to the Iraq government.[26]
[26] Para 34K.
(c) On 8 September 2005, Mr Lindberg informed the boards of AWB and AWB International that:
(i) the IIC had issued a major report in September 2005; (ii)
the relevant issues discussed in the report were the use of Alia, the purported inland transportation fee and the size of AWB’s exports to Iraq; and
(iii)
AWB had not paid sham or purported inland transportation fees for non-existent trucking services, but there was a risk that AWB’s “legitimate trucking operations” in relation to Australian wheat could be misinterpreted as purported inland transportation fees.[27]
[27] Para 34L.
But that Mr Lindberg did not tell the board that:
(d) the IIC report described the purported service fees paid by contractors under the OFFP as a source of kick backs; and
(e) the report indicated that the service fees amounted to double the amount of purported inland transportation fees paid by contractors.[28]
(f) on or about 26 September 2005, Mr Lindberg was informed by the IIC of what the ICC intended to report and Mr Lindberg responded to the ICC by saying he was concerned about the IIC’s proposed findings on AWB’s participation in the OFFP and that AWB had believed that Alia was a bona fide company providing a genuine service.[29]
(g) Mr Lindberg knew or ought to have known that IIC’s investigation was not limited to purported inland transportation fees but extended to purported service fees.[30]
(h) Mr Lindberg failed to adequately inform or advise the AWB board of the allegations raised by the IIC investigators in February 2005, including that the IIC’s allegations included the payment of the purported service fees.[31]
(i) Mr Lindberg failed to inform the AWB board of the true nature and extent of the allegations raised by the IIC in its September report, including allegations concerning the payment of the purported service fees.[32]
(j) Mr Lindberg failed to take any reasonable steps to properly investigate the allegations made by the IIC investigators or the findings of the IIC.[33]
(k) Mr Lindberg failed to inform or advise the board of his knowledge of the matters set out in para 35.[34]
[28] Para 34L.
[29] Paras 34M & N.
[30] Para 35 Particular E.
[31] Para 97(q).
[32] Para 97(r).
[33] Para 97(t).
[34] Para 97(u).
In my opinion, these allegations do seek to raise a new cause of action and the pleading of this cause of action is unsatisfactory.
Paragraph 34K does not plead that the investigators made any allegations. If it is assumed that the matters they informed Mr Lindberg of are allegations, then it is pleaded that on 2 September 2005, he did advise the board of several matters relating to the IIC inquiry. I do not see the relevance of pleading these matters when the allegation is that he did not advise the board of certain allegations. The matters he advised the board of do appear to include some of the allegations made by the investigators in February 2005. This pleading lacks precision and includes irrelevant allegations. In my opinion, it is embarrassing.
Paragraph 97(r) does not allege what constituted the “true nature” of the allegations that were made in the September 2005 report. As far as I am aware, they are not pleaded elsewhere. In my opinion, this pleading is vague and embarrassing.
Paragraph 35 does not distinguish between those matters Mr Lindberg is alleged to have known, those matters he ought to have known or those matters that would have been disclosed to him by enquiry. In my opinion, para 37(u) requires the pleader to plead precisely those matters Mr Lindberg knew, as opposed to matters he ought to have known or would have been disclosed to him on enquiry. Is Mr Lindberg accused of not telling the board matters he did know? Or is Mr Lindberg accused of not telling the board matters he did not know himself? Or is Mr Lindberg accused of not telling the board matters he did not know but ought to have known or would have known if he make certain inquires that he did not make?
Mr Lindberg submits that I should disallow the amendments as they raise a new cause of action. I do not propose to disallow the amendments for that reason. I do, however, disallow the amendments in their present form for the above reasons.
OBJECTION 13 – 35(c), (f), (j), (l), (n) &(o)
Mr Lindberg maintains that these paragraphs are unintelligible and embarrassing and ought not to be allowed in this form at this stage of the proceeding. Mr Lindberg contends that ASIC now appears to concede that AWB cannot breach UN Resolutions: see paragraph 66 of the 18 June submissions. As a result, it is meaningless to allege that AWB acted “contrary to or inconsistent with” resolutions which it was not bound to comply with. Mr Lindberg notes that, notwithstanding its concession, ASIC maintains its plea that AWB acted “in contravention” of the UN Resolutions.
Mr Lindberg complains that para 35(c) does not allege a material fact to any cause of action alleged.
The paragraphs are not relied on in establishing Mr Lindberg’s duties or responsibilities.
For the reasons given under objection 1, I consider paragraph 35(c) should not be allowed. As I said earlier, it is not clear which paragraphs support this allegation. It is not clear whether it is alleged that he knew of the matter or ought to have known
27 T0258
of the matter, and if so why he ought to have known, or that the matter would have been disclosed to him on inquiry. It is not clear what facts it is alleged he knew that should have put him on a train of enquiry that would have disclosed the matter alleged in paragraph (c).
The same observations may be made as to paragraph 35(n).
Mr Lindberg alleges that the amendment concerning AWB’s conduct as “otherwise contrary to or inconsistent with” the UN sanctions is meaningless and unintelligible. This complaint relates to the amendments to paragraphs 35(f), 35(j), 35(l) and 35(o).
ASIC contends that the objection that the wording “otherwise contrary to or inconsistent with” the UN sanctions is vague, general or embarrassing is without justification.
ASIC accepts that the UN resolutions and arrangements did not bind AWB directly as a matter of law. However, ASIC submits that a participating supplier in the OFFP, as AWB was, can act consistently or inconsistently with the purposes and procedures of the OFFP as codified in the UN resolutions. What is alleged is that:
(a) AWB acted contrary to or inconsistently with the stated purposes and procedures of the OFFP as set out in the UN resolutions;
(b) if AWB behaved in a manner which was contrary to or inconsistent with the UN resolutions concerning the international wheat trade with Iraq, the revelation of that fact would be likely to expose AWB to international and domestic criticism, and harm its business and therefore the company itself; and
(c) Mr Lindberg knew or ought to have known of the consequences of any revelation that AWB acted contrary to or inconsistently with the UN resolutions.
Accordingly, ASIC submits that even though AWB cannot be directly prosecuted for breaches of the UN resolutions, that any impropriety with respect to OFFP and any
28 T0258
flouting of UN resolutions exposed AWB to the risk of harm which AWB ultimately experienced after it was discovered that it had acted in a manner contrary to or inconsistent with the UN resolutions. ASIC also alleges that Mr Lindberg knew or ought to have known that this would occur.
UN sanctions
I refer to paragraphs 4-11 where allegations are made concerning the United Nations Security Council resolutions 661, 687, 986 and 1472 and a Commonwealth regulation.
Paragraph 4 alleges that, by resolution 661, the Security Council decided that member states should prevent the sale of supply by their nationals or from their territories of any commodities or products to any person or body in Iraq … but not including supplies … in humanitarian circumstances, foodstuffs.
As far as I am aware, no allegation is made as to the affect of that resolution on Australian nationals. In fact it does not call on Australian nationals to do or not do anything. It is directed to member states and decides that they should prevent certain activities by their nationals and from their territories.
As far as I am aware, no allegation is made that the Australian Government did or did not comply with that decision of the United Nations Security Council. Para 11 does allege that a Commonwealth regulation prohibited the exportation of wheat to Iraq unless it received permission for the export of wheat from the Minister of Foreign Affairs and Trade or his authorised representative. As far as I can ascertain, this allegation is not material to any cause of action pleaded.
Can the conduct of AWB, which is not alleged to contravene any domestic or international law, be conduct which is “contrary to or inconsistent” with the United Nations Security Council decision as to what its member states should do? In my opinion, it might be alleged to be conduct that the United Nations called on the Commonwealth of Australia to prevent.
Mr Lindberg alleges that the allegation is meaningless and unintelligible.
29 T0258
Mr Lindberg asks, ‘What does it mean to say they acted inconsistently with UN resolutions?’ He asks rhetorically, ‘Is it alleged AWB made a payment it was not authorised to make? Did AWB make a supply it was not authorised to make? What did it do that it was not entitled to do?’[35]
[35] Transcript 127 lines 7- 13.
ASIC currently alleges that the conduct of AWB was or was likely to be in contravention of UN sanctions. In view of the concession made by ASIC, that allegation is ambiguous and vague. What does ASIC mean when it alleges that the conduct was in contravention of UN sanctions, particularly when it concedes that AWB was not obliged to observe the sanctions? It is not alleged that AWB was in contravention of any law of the Commonwealth of Australia made in response to the United Nations request.
Paragraph 35(l) says “or otherwise contrary to or inconsistent with United Nations sanctions in that they resulted either directly or indirectly in the illegitimate payment of funds to Iraq or its instrumentalities.” Why are the payments illegitimate?
In my opinion, this pleading is not open to be made.
On the current pleadings, the status of UN resolutions is not made clear. Do they bind the Australian government, and if so, in what way? Is it alleged, for example, that the Australian government did or did not comply with the decision?
Mr Lindberg should know precisely what it is alleged against him and what relevance the UN sanctions are alleged to have to his alleged conduct.
Accordingly, I disallow the amendments in their current form.
OBJECTION 14 – 89A, 90A, 90B, 96A(fb), 97(da)
These fall under the heading of “Entry into Tigris agreement and approval of payment to Tigris.”
Mr Lindberg complains that these paragraphs raise new causes of action, are vague, general and embarrassing. Mr Lindberg concedes that the existing amended statement of claim makes allegations about the Tigris transaction. He says that the amendments seek to add a further element that an agreement between Tigris and AWB did not reflect the true position and that Mr Lindberg should have so informed the board.
ASIC submits that these allegations all relate to the Tigris transaction, pursuant to which it is alleged that AWB collected an amount of money on behalf of Tigris, deducted a commission from the payment received in respect of that money and then remitted the balance to Tigris.
The essence of these allegations is that AWB entered into the Tigris transaction in circumstances where:
(a) Mr Lindberg knew or ought to have known that the form and content of the Tigris agreement did not reflect the true factual circumstances and AWB had engaged in impropriety with respect to recovering the Tigris debt under the OFFP;
(b) Mr Lindberg did not inform the AWB Board of these important matters in connection with the Tigris transaction; and
(c) this conduct gives rise to alleged breaches of duty on Mr Lindberg’s part.
ASIC submits that these allegations are clearly expressed and easily understood. ASIC accepts that these allegations introduce new alleged breaches of duty but are related to existing alleged breaches of duty in connection with contracts A1670 and A1680 and the Tigris transaction. ASIC submits that the trial will not be delayed and the Defendant is not otherwise prejudiced by these amendments.
Mr Lindberg maintains that these paragraphs are vague and general and ought not to be allowed at this stage of the proceeding. He contends that in paragraph 70 of the 19 June submissions, ASIC asserts that these paragraphs demonstrate that the
31 T0258
defendant knew or ought to have known that the Tigris Agreement did not reflect the true factual circumstances and the defendant did not inform the AWB board of these matters.
Mr Lindberg notes that paragraph 90B goes much further than this, alleging that Lindberg knew, ought to have known or knew facts that ought to have put him on enquiry that would have disclosed, among other things, that the Tigris debt had been recovered by inflating the price of wheat: see paragraph 90B(a).
Mr Lindberg contends that the paragraphs referred to in support of paragraph 90B do not establish any knowledge on his part: see paragraphs 16, 17, 29C (which has been deleted), 34A, 35 and 90B itself. Mr Lindberg submits that there is no duty or breach alleged based on paragraph 90B(a): see paragraphs 96A(fb) and 97(da).
In this instance, paragraph 90B alleges that Mr Lindberg knew or ought to have known or knew facts that ought to have put him on a train of enquiry that would have disclosed three specific matters.
The relevant reasonability and duty it is alleged Mr Lindberg owed are as follows.
It is alleged that he was responsible to take reasonable steps to inquire into the facts and to ensure that the Tigris Agreement accurately reflected the true circumstances in which the Tigris Debt was recovered, and to inform AWB’s Board that the Tigris Agreement, as concluded, did not do so.[36]
[36] Para 96A(fb)
It is alleged that he failed to:
(a) table the Tigris Agreement at any AWB Board meeting;
(b) inform or advise the Board that the rate of commission for assisting Tigris to recover a debt was not reflected in the Tigris Agreement;
(c) inform or advise the Board of the nature or contents of the Tigris Agreement;
(d) inform or advise the Board as to how Tigris was entitled to commission; and
(e) discuss or explain to the Board how the Tigris Debt was collected.
There is no allegation that Mr Lindberg failed to take reasonable steps to inquire into the facts as it was alleged he was obliged to do.
Mr Lindberg allegedly failed to inform AWB’s Board that the Tigris Agreement, as concluded, did not accurately reflect the true circumstances in which the Tigris Debt was recovered.
In my opinion, it is not clear whether it is alleged that Mr Lindberg knew the relevant facts but failed to tell the board or that for some reason or other he ought to have known of the relevant facts and did not tell the board or that the relevant facts would have been disclosed to him on inquiry he failed to make and did not tell the board. In my opinion, the pleading is vague and unintelligible. In my opinion, the pleading is embarrassing.
I disallow the amendments.
OBJECTION 15 – 90C, 90D, 90E, 90F & 91
Mr Lindberg complains that these paragraphs are vague and unintelligible and not material to any cause of action. Mr Lindberg submits that these allegations relate to alleged contraventions of the UN resolutions and appear under the heading “Contraventions of and actions otherwise contrary to or inconsistent with United Nations Resolutions.”
Mr Lindberg contends that he is not alleged to know of the matters pleaded and, in particular, of the agreement alleged between Alia and ISCWT. Mr Lindberg says that this is not alleged to be conduct by AWB.[37] Further, Mr Lindberg contends that the allegation that certain payments were made contrary to or inconsistent with resolution 661 is embarrassing for the reasons addressed earlier. He contends that these allegations seem to be at the core of the case as to what was wrong with what happened.[38]
[37] Transcript 125 lines 10-11.
[38] Ibid, line 7.
ASIC submits that this criticism is without justification. ASIC contends that paragraphs 90C, 90F and 91 are existing pleadings. The proposed amendments to these paragraphs (which are minor) merely clarify existing allegations.
ASIC submits that paragraphs 90D and 90E relate to Alia’s practice of receiving payments in respect of purported inland transportation and purported service and remitting them to the Iraqi regime, and therefore support existing allegations that AWB made payments of inland transportation fees and purported service fees in a manner which was contrary to or inconsistent with the UN sanctions.
ASIC contends that these allegations are clearly expressed, easily understood and adequately particularised. ASIC submits that these allegations concerning Alia are highly material to the allegations of breach of duty made against Mr Lindberg, in particular paragraphs 97(b) to 97(d), 97(k), 97(l), 97(m) of the FASOC.
As far as I am aware, it is not alleged that Mr Lindberg knew or ought to have known of the matters now sought to be alleged. In my view, they are irrelevant to any allegation against him.
I disallow the amendments.
OBJECTION 16 – 95 & PARTICULARS DA, F(e), GA, HA, I & IA
Mr Lindberg complains that paragraph 95 and some of the particulars included in it are vague and unintelligible and introduce matters which will delay the trial.
As to para 95, the purpose of the amendment is to delete the allegation of breaches of and failure to comply with UN resolutions and instead, allege actions contravening, failing to comply with or which were otherwise contrary to or inconsistent with UN resolutions. This raises the same issue as that discussed earlier, which is: what is the material allegation against AWB in relation to UN resolutions it was not bound by?
It may be that what is alleged is no more than that Mr Lindberg knew or ought to have known that, by AWB engaging in the alleged conduct that the Commonwealth of Australia had been called on by the United Nations Security Council to prevent its nationals from doing, it was likely that AWB would suffer loss and damage.
As to para 95DA, Mr Lindberg contends that he does not understand what this is a particular of.
As to para 95(F)(e), Mr Lindberg contends that the mere reference to a case, without any further allegation as to its merits, means nothing.
As to para 95(GA), Mr Lindberg submits that there is no allegation that the fall in the share price was the result or any cause or connected to the matters alleged.[39]
[39] Transcript 126 lines 2-4.
As to para 95(HA), Mr Lindberg alleges that introducing allegations about the Cole Inquiry opens up a huge scope of additional material to the trial. He says that no explanation has been provided of why these allegations should be introduced at this stage. Mr Lindberg says that this criticism also applies to paragraphs 97(I) and (IA) which deal with the alleged damage caused by the Wheat Export Marketing Act 2008.
ASIC submits that these criticisms are without justification. ASIC contends that, first, paragraph 95 is an existing pleading and until 7 May 2009, Lindberg did not criticise this paragraph. Secondly, ASIC submits that paragraph 95 is a clearly and simply expressed allegation that the revelation of AWB’s actions in contravening, failing to comply with or otherwise acting contrary to or inconsistently with the UN resolutions caused substantial and enduring harm to AWB. Thirdly, ASIC contends that detailed particulars of each alleged instance of harm are given. Fourthly, ASIC submits that the trial will not be delayed, and Mr Lindberg is not otherwise prejudiced, by these amended instances of harm.
In my opinion, to introduce allegations of alleged foreseeable harm arising out of the Cole Inquiry and the amending Act are unfair at this stage. ASIC has known of the Cole Inquiry since the proceeding commenced. The amending Act has been known of since 2008. I am not prepared to allow these amendments.
I disallow the amendments that seek to allege “otherwise contrary to or inconsistent with” UN resolutions in their present form.
I disallow particulars 97(F)(e) and (GA). I accept the submissions of Mr Lindberg in relation to these particulars. They open up multiple issues at this late stage and it would be unfair for Mr Lindberg to meet them.
I disallow the amendments.
OBJECTION 17 – 97(a), (c)(ii) & (iii)
Mr Lindberg complains that the expression “otherwise contrary to or inconsistent with” is unintelligible and embarrassing.
ASIC submits that these amended paragraphs are neither unintelligible nor embarrassing. It contends that these are important allegations in connection with Mr Lindberg’s state of knowledge of the wrongdoing by AWB, revelation of which caused AWB substantial harm.
For the reasons expressed above, in dealing with the allegation of AWB acting inconsistently with the UN resolutions, I do not allow these amendments in their present form.
OBJECTIONS 18 – ALL AMENDMENTS ADDING “OTHERWISE CONTRARY
TO OR INCONSIST WITH”
For the reasons given above, I agree that the allegations concerning conduct being contrary to UN resolutions are embarrassing to plead to in their present form.
OBJECTION 19- GENERAL
Mr Lindberg objects to the addition of new causes of action and he alleges that they will delay the trial. Insofar as I have formed the view that the new cause of action would delay the trial, I have not allowed the amendment.
36 T0258
---
CERTIFICATE
I certify that this and the 124 preceding pages are a true copy of the reasons for
Judgment of Robson of the Supreme Court of Victoria delivered on 17 July 2009.
DATED this seventeenth day of July 2009.
Associate
37 T0258
DRAFT – 1 May 2009
IN THE SUPREME COURT OF VICTORIA AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
No.10078 of 2007
IN THE MATTER OF AWB LIMITED
ACN: 081 890 459
B E T W E E N:
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Plaintiff
- and -
ANDREW ALEXANDER LINDBERG
Defendant
FURTHER AMENDED STATEMENT OF CLAIM
Filed and served pursuant to the order of
Justice Robson made [date] 2009
| Date of Document: | [date] April 2009 |
| Filed on behalf of | The Plaintiff |
| Prepared by: | Dx | 423 Melbourne |
| THE | AUSTRALIAN | SECURITIES | Telephone: | (03) 9280 3200 |
| AND INVESTMENTS COMMISSION | Facsimile: | (03) 9280 3402 |
| Level 24 | Ref: | Mr Savas Miriklis |
| 120 Collins St Melbourne Vic 3000 | ||
| SC: | 1 | ANNEXURE 1 |
| DRAFT |
TABLE OF CONTENTS
(i) Parties 3
| United Nations Resolutions on Trade with Iraq | 4 |
| AWB’s sales of wheat to Iraq, its importance to AWB and the | 9 |
| introduction of purported inland transportation fees and purported service fees | |
| Approval of Deeds of Release acknowledging payments of | 15 |
| commissions and fees to overseas agents for wheat sales | |
| The Tigris Debt | 16 |
| The Arthur Andersen Integrity Risk Review | 17 |
| February 2001 Trip Report | 21 |
| Ernst & Young Fraud Risk Assessment | 22 |
| Negotiations Relating to The Iron Filings Claim and the Tigris Debt | 23 |
| The US Wheat Associates Complaint and Project Rose | 36 |
| Independent Inquiry Committee into the United Nations Oil- | 40 |
| for-Food Programme | |
| AWB Contracts with the IGB | 48 |
(2) 1) Contract A1111 48 (3) 2) Contract A1112 52 (4) 3) Contract A1441 56 (5) 4) Contract A1670 61 (6) 5) Contract A1680 66
| Entry into Tigris agreement and approval of payment to Tigris | 71 |
| Contraventions of, and actions otherwise contrary to or | 74 |
| inconsistent with, United Nations Resolutions | |
| Risk of Harm to AWB | 76 |
| Lindberg’s responsibilities and duties | 82 |
| Contraventions by Lindberg | 86 |
| Relief | 95 |
| SC: | 2 | ANNEXURE 1 |
| DRAFT |
Parties
The Plaintiff (ASIC) is a body corporate:
established by s.7 of the Australian Securities and Investments Commission Act 1989 (Cth);
continued by s.261 of the Australian Securities and Investments Commission Act 2001
(Cth) (ASIC Act);
able to sue in its corporate name by reason of s. 8 of the ASIC Act.
AWB Limited (AWB) is and was at all material times a corporation duly incorporated.
The Defendant (Lindberg) was at all material times from April 2000 to February 2006:
an employee of AWB;
the Managing Director of AWB;
a regular attendee at meetings of the audit committee established by the Board of
AWB and, from around 2002, a member of the audit and investment committees established by the Board of AWB;
a member of an executive committee of AWB known as the Executive Leadership Group (ELG) that comprised the managing director and senior executives of AWB, and which was responsible for implementing the Board’s decisions concerning, and monitoring, the operational and strategic direction of AWB;
a member of an executive committee of AWB known as the Corporate Risk Review Committee (CRRC);
from 20 March 2003, the Chair of a sub-committee of the ELG known as the Iraq Emergency Response Team (IERT), which he established by him.
| 3A. | Further, in addition to his employment at AWB as alleged in paragraph 3 above, |
| SC: | 3 | ANNEXURE 1 |
| DRAFT |
Lindberg had extensive experience in senior management including the following:
(a) Lindberg was the managing director of the Victorian WorkCover Authority for approximately 7 years;
(b) Lindberg was the managing director of the Victorian Accident Compensation Commission for approximately 5 years;
(c) Lindberg was an executive officer of the Australian Manufacturing Council;
(d) Lindberg was awarded a Masters of Business Administration by the University of Melbourne; and
(e) Lindberg completed a senior executive programme at Stanford University in the United Stated and was a life member of the Stanford Business School.
United Nations Resolutions on Trade with Iraq
By resolution 661 of the United Nations Security Council adopted on 6 August 1990, (Resolution 661) the Security Council, inter alia:
decided that member states should prevent the sale or supply by their nationals or from their territories of any commodities or products to any person or body in Iraq or to any person or body for the purposes of any business carried on in or operated from Iraq, but not including supplies intended for strictly medical purposes and, in humanitarian circumstances, foodstuffs;
decided that all member states should not make available to the Government of Iraq any funds or any other financial or economic resources and should prevent their nationals and any persons within their territories from removing from their territories or otherwise making available to the Government of Iraq any such funds or resources, except payments exclusively for strictly medical or humanitarian purposes and, in humanitarian circumstances, foodstuffs;
established a Committee of the Security Council that became known as the 661 Committee (661 Committee).
| SC: | 4 | ANNEXURE 1 |
| DRAFT |
Particulars
Resolution 661 is in writing and is available for inspection on reasonable notice.
By resolution 687 of the United Nations Security Council adopted on 3 April 1991, the Security Council determined, inter alia, that the prohibitions on the sale of commodities or products and prohibitions on financial transactions related thereto contained in Resolution 661 should not apply to foodstuffs notified to the 661 Committee.
Particulars
Resolution 687 is in writing and is available for inspection on reasonable notice.
By resolution 986 of the United Nations Security Council adopted on 14 April 1995 (Resolution 986), the Security Council, inter alia:
authorised member states to permit the importation of petroleum and petroleum products originating in Iraq, notwithstanding Resolution 661, of a value not exceeding one billion US dollars every 90 days;
required the funds paid for the purchase of Iraqi petroleum and petroleum products to be paid into an escrow account to be established for the purposes of Resolution 986 (the UN Escrow Account);
decided that the funds in the UN Escrow Account should be used to meet the humanitarian needs of the Iraqi population, including to finance the export to Iraq of foodstuffs in accordance with the procedures established by the 661 Committee.
Particulars
Resolution 986 is in writing and is available for inspection on reasonable notice. The initiative established by Resolution 986 became known and is hereafter referred to as the “Oil-for-Food Programme”.
Resolution 986 authorised the operation of the Oil-for-Food Programme for an initial
period of 180 days. Subsequent resolutions of the United Nations Security
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Council extended the operation of the Oil-for-Food Programme for further periods of 180 days.
Particulars
The initial period of 180 days was referred to as Phase I of the Oil-for-Food Programme. Subsequent resolutions adopted by the United Nations Security Council extending the operation of the programme were as follows:
Phase Resolution Date adopted Phase II Resolution 1111 4 June 1997 Phase III Resolution 1143 4 December 1997 Phase IV Resolution 1153 20 February 1998 Phase V Resolution 1210 24 November 1998 Phase VI Resolutions 21 May 1999, 19 November 1242, 1275, 1999, 3 December 1999 1280 Phase VII Resolution 1281 10 December 1999 Phase VIII Resolution 1302 8 June 2000 Phase IX Resolutions 5 December 2000, 1 June 1330, 1352 2001 Phase X Resolution 3 July 2001 1360, Phase XI Resolution 1382 29 November 2001 Phase XII Resolutions 14 May 2002, 25 November 1409, 1443 2002 Phase XIII Resolution 1447 4 December 2002 The resolutions are in writing and are available for inspection on reasonable notice.
On or about 20 March 2003, coalition forces commenced an invasion of Iraq.
By resolution 1472 of the United Nations Security Council adopted on 28 March 2003 (Resolution 1472), the Security Council, inter alia approved adjustments to the Oil-for-Food Programme and authorised:
the review of the approved funded and non-funded contracts concluded by the Government of Iraq to determine the relative priorities of the contracts;
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the negotiation and agreement on necessary adjustments in the terms or conditions of these contracts and their respective letters of credit.
Particulars
Resolution 1472 is in writing and is available for inspection on reasonable notice. Subsequent resolutions of the United Nations Security Council extended the operation of Resolution 1472 as follows. Resolution 1476 was adopted on 24 April 2003 that extended the operation of Resolution 1472 until 3 June 2003. Resolution 1483 was adopted on 22 May 2003 which and extended the operation of Resolution 1472 for a further 6 months from 3 June 2003, transferred responsibility for the Oil-for-Food Programme to the Coalition Provision Authority and required the termination of the Oil-for-Food Programme at the end of that period. The Oil-for- Food Programme was terminated on 21 November 2003. Copies of these resolutions may be inspected upon reasonable notice.
At all material times from November 2001 to 21 November 2003:
in order to obtain payment from the UN Escrow Account, exporters of foodstuffs to Iraq were required to submit to the United Nations Office of the Iraq Programme (the OIP) the concluded contract for each transaction in respect of which payment was sought;
each concluded contract was required to be submitted through the exporter’s United
Nations embassy;
the contracts were examined by the OIP for, inter alia, price and value;
if the OIP approved the relevant contract, the exporter became eligible for payment from the UN Escrow Account.
Particulars
The procedures for obtaining payment from the UN Escrow Account were initially established by the 661 Committee on or about 8 August 1996 and are contained in a letter from the Chairman of the 661 Committee to the President of the United Nations Security Council of that date. A copy of the letter is available for inspection on reasonable notice.
The OIP was established by the United Nations Secretary General on or about 15 October 1997 and was responsible for, inter alia, managing the activities of the United Nations Secretariat pursuant to Resolution 986 and Resolution 661.
The procedures were varied by the United Nations Security Council resolution 1284 (adopted on 17 December 1999), resolution 1382 (adopted on 29 November
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2001), resolution 1409 (adopted on 14 May 2002) effective 30 May 2002 and resolution 1454 (adopted on 30 December 2002). Copies of these resolutions are available for inspection on reasonable notice.
As a matter of practice, at all times from October 1997 until the termination of the Oil-for-Food Programme on 21 November 2003 the OIP reviewed contracts for price and value, and payments were not made from the UN Escrow Account without the relevant contract having received approval from the OIP.
Pursuant to Reg. 13CA of the Customs (Prohibited Exports) Regulations 1958 (Cth) (the Customs Regulations), at all material times prior to 9 May 2003, AWB was prohibited from exporting wheat to Iraq unless it received permission for the export of wheat from the Minister of Foreign Affairs and Trade or his authorised representative.
AWB’s Sales of wheat to Iraq, its importance to AWB and the introduction of purported
inland transportation fees and purported service fees
During the period 1996 to 21 November 2003, AWB entered into various contracts with the Grain Board of Iraq (“IGB”) for the sale of wheat in accordance with the procedures established by the Oil-for-Food Programme.
| 12A. | In the period between 1996 and June 1999, the usual contractual basis on which AWB sold wheat to the IGB was “CIF Umm Qasr” or “CIF Free Out Umm Qasr” which meant that the price per tonne for which the wheat was sold included: | |||||
|
Particulars
Copies of wheat contracts entered into between AWB and the IGB in this period are available for inspection upon reasonable notice.
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| 12B. | In the period between June 1999 and March 2003, all Wheat Tenders issued by the IGB to AWB for the supply of Australian hard wheat to be shipped to Iraq included a requirement that AWB pay a specified amount on account of the purported "cost of discharge at Umm Quser and land transport", which amount was fixed by Iraq in US dollars, Euros or other internationally traded currency, and which was payable to an entity nominated by Iraq (purported inland transportation fee). |
Particulars
Copies of the Wheat Tenders are available for inspection upon reasonable notice. Clause 10 of the Wheat Tender issued in June 1999 was expressed to be: “CIF FREE ON TRUCK TO SILO AT ALL GOVERNARATE. COST OF DISCHARGE AT UMM QUSER AND LAND TRANSPORT WILL BE U.S.D. 12 PER METRIC TON. TO BE PAID TO THE LAND TRANSPORT CO. FOR MORE DETAILS CONTACT IRAQI MARTIN IN BASRAH.”
| 12C. | In the period between November 2000 and March 2003, the IGB also imposed a purported "service fee" at the rate of 10% of the total price per tonne of all wheat shipped to Iraq by AWB (the purported service fee). The purported service fee was paid by AWB between November 2000 and March 2003 as an increase in the purported inland transportation fee. |
Particulars
The purported service fee, and the fact that it would be incorporated into the purported inland transportation fee, is referred to in an email from Dominic Hogan to various AWB employees dated 2 November 2000. A copy of the email is available for inspection upon reasonable notice.
| 12D. | On or around 19 October 1999, AWB received a facsimile from Alia for Transportation & General Trade (Alia) stating that Alia was the agent of the State Company for Iraqi Land Transport, and offering to provide its purported inland transportation services. |
Particulars
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A copy of the facsimile is available for inspection upon reasonable notice.
| 12E. | In the period between 2000 and March 2003, AWB made payments to Alia in respect of purported inland transportation fees (including purported service fees which were incorporated into the purported inland transportation fees) in connection with contracts with the IGB for the sale of wheat. |
Particulars
The payments made in respect of Contracts A1111, A1112 and A1441 are referred to in paragraphs 44, 53 and 63 below.
| 12F. | In around mid 2000, Lindberg became aware that in early 2000 to mid 2000, AWB had incurred significant demurrage costs as a result of delays in the discharge of AWB shipments of wheat to Iraq. |
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Risk of Harm to AWB
At all material times, AWB and its subsidiary AWBI AWB (International) Ltd (AWBI) held a statutory monopoly for the export of wheat from Australia, which monopoly was known as the “single desk”.
Particulars
The statutory monopoly was established pursuant to s.57 of the Wheat Marketing Act 1989 (Cth). The term “single desk” is a shorthand description for the legislated position conferred on AWB to be the sole exporter of bulk shipments of Australian wheat.
From 1 July 1999, AWBI held the single desk export rights under the Wheat
Marketing Act.
The single desk was of great financial and commercial value to AWB.
Particulars
The single desk enabled AWB to aggregate the output of thousands of wheat producers across Australia, markets those outputs strategically to around 50 countries worldwide, and manages the risks associated with this process.
Under the single desk, AWB was responsible for marketing all bulk exports of
Australian wheat that growers delivered to the National Pool.
The role of a the single desk, which is similar to that of a fund manager, was to
maximise net returns to wheat growers who delivered to the National Pool while
providing a management fee to AWB for the provision of certain services to
operate the National Pool. From 2001, the management fee was performance-
based and comprising comprised a base fee (calculated as 1.5% of Gross Pool
Value) and an out-performance incentive (calculated as 20% of National Pool
returns achieved above a specified benchmark and a hurdle). AWB’s revenue from
the management fee (including both the base fee and out-performance incentive)
was as follows in each financial year from 2002 to 2007:
Financial Year Management Fee (AUD$) 2002 $68.3 million
2003 $77.1 million
2004 $98.5 million
2005 $100.9 million
2006 $92.4 million
2007 $46.3 million
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From 2001 until the single desk was abolished in July 2008In 2001, around 90% of the grains bulk wheat exported from Australia were was exported by AWBI under regulated by the single desk or equivalent arrangements. The single desk ensured AWB was able to sell Australia’s wheat crop at premium prices into world markets that were distorted by the high levels of subsidies by the governments of other exporting nations. In 2002, a study of AWB National Pool prices by Econtech, found that, as the single desk manager, AWB achieved on average a premium of $13 per tonne on Pool export sales. It also ensured that AWB did not face any competition in the international wheat markets from any other source in Australia. Australia is one of the largest wheat producers and exporters in the world. The AWB single desk facilitated the export of up to 15 to 18 17 million tonnes of wheat valued at up to $4 $5 billion annually.
Managing exports through the single desk marketing system also enabled AWB to deliver value other than simple market premiums. This value related to research and development, logistics capacity and efficiency, superior information, economies of scope and scale, integration of the value chain, strong customer relationships, continuity of supply, consistent quality, reliable performance and effective risk management.
The single desk achieved a level of international market power that individual growers in Australia could not achieve. Further, by exercising collective bargaining power and expending significant resources to undertake complex marketing and branding activities, the single desk obtained better returns for growers.
Further particulars may be provided prior to trial.
By reason of the matters alleged in paragraphs 92 and 93 above, the risk of harm or substantial threat to AWB’s standing or reputation as an exporter of wheat constituted a risk to AWB’s right to operate the single desk and was therefore a serious threat to AWB as a whole.
Revelation of AWB’s actions in contravening, failing to comply with, or which were otherwise contrary to or inconsistent with breaches of, and failures to comply with, the United Nations Resolutions as alleged in paragraph 91 above caused substantial and irreparable enduring harm to AWB.
Particulars
(A)
Trade with Iraq worth more than $500as much as US$470 million per annum has beenwas forfeited following an announcement by the Iraqi Government in 2005 2006 to suspend purchases of AWB wheat during the Inquiry into Certain Australian Companies in relation to the United Nations Oil-for-Food Programme conducted by Commissioner the Hon Terence RH Cole AO, RFD, QC (Cole Inquiry) and grain production averaging 35-40 million tonnes each year with an estimated value of AUD $8 to $10 billion was damaged. In 2001 and 2002, Australia was the second largest wheat exporting country behind the United States. Between 2003 and 2005, the
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United States increased sales of US wheat to Iraq. A copy of the AWB announcement to the ASX dated 13 February 2006 notifying of the suspension is available for inspection on reasonable notice,
(AA) As disclosed by AWB’s Chairman Brendan Stewart in a press conference on 29 November 2006, AWB's reputation was "shattered by the events of the last year, as [AWB's] role in the Oil-for-Food program has been examined forensically by Commissioner Cole". A copy of the transcript of this press conference is available for inspection on reasonable notice. (B) On 20 December 2006, the United States Department of Agriculture (USDA)government announced the immediate suspension and debarment of AWB and its affiliates from participating in US government programs and contracting with the US government. In a letter dated 28 November 2005 from Lindberg on behalf of AWB to Deputy Prime Minister Vaile, Lindberg referred to a previous decision by the USDA to so suspend AWB (which decision had been reversed with the assistance of the Australian government) and acknowledged that the suspension had caused significant problems for AWB. A copy of this letter is available for inspection on reasonable notice. (C) The revelation of AWB's actions in contravening, failing to comply with, or which were otherwise contrary to or inconsistent with,breach of the United Nations sanctions resulted in the resignation of Lindberg as Managing Director in 2005, the departures of Charles Stott (resigned on 15 June 2006), Paul Ingleby (redundant on 30 October 2006), James Cooper (resigned on 15 April 2006), Peter Geary (redundant on 3 November 2006), and irreparably substantially harmed AWB employee morale and led to an increase in voluntary turnover requiring a workforce re-engagement programme being implemented within AWB. (CA) AWB incurred significant costs associated with the Cole Inquiry. For the 2006 financial year, AWB reported costs of $23.7 million associated with the Cole Inquiry in its accounts, and a further $6.6 million in the 2007 financial year.
(D)
During 2006, KPMG was engaged by AWB to consider the current governance, internal reporting structures and practices of AWB which resulted in a report by KPMG recommending fundamental changes to corporate practices within AWB including changes to promote ethical and responsible decision making within the board and executive management of AWB.
(DA) During 2006, PWC was engaged by AWB to conduct a review into AWB’s
international marketing activities.(E) [deleted] (F) Legal proceedings have been commenced against AWB in Australia and
overseas, including the following which remain on foot:
a. [deleted]
b. [deleted]
c. Watson v AWB Limited (Federal Court) NSD 659/2007; and d. [deleted]
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e. The Republic of Iraq v. ABB AG et al (US District Court for the Southern District of New York) 1:08-CV-05951.
(G)
The AWB's share price and market capitalisation have has more than halved since the revelations of breaches of UN Sanctions. When Commissioner Cole was initially given his powers on 10 November 2005, the opening share price for AWB was $5.37. When public hearings commenced on 16 January 2006, the opening share price for AWB was $6.26. When Commissioner Cole presented his report on 24 November 2006, the opening share price for AWB was $2.59. As at 18 December 2007, the opening share price for AWB was $2.63. As at 20 February 2009, the opening share price for AWB was $1.24.
(GA)
On 1 December 2006, as a result of the fall in AWB's share price during that year, AWB was removed from the Standard & Poor's (S&P) ASX 100 index. This index consists of the 100 largest and most liquid stocks by market capitalisation in Australia, and represents both the large cap and mid cap components of the S&P/ASX index family, covering 74% of Australian equity market capitalisation.
(H) [deleted] (HA)
S&P revised its credit rating and outlook for AWB as a result of the Cole Inquiry and the implications for AWB's business of the risk of loss of the single desk:
a.
On 4 April 2006, S&P affirmed AWB's 'BBB' long-term corporate credit rating, however revised the outlook for AWB from 'stable' to 'negative', citing factors including the ongoing Cole Inquiry as having heightened the risk of a possible deterioration in AWB's credit quality.
b.
On 28 November 2006, following the release of the Cole Inquiry report, S&P placed AWB's 'BBB' corporate credit rating and the corporate credit rating of AWB Harvest Finance Ltd (AWBHF) (a subsidiary company which conducted AWB's crop financing business) on "CreditWatch with negative implications" as a result of the risk that AWB would lose the single desk;
c.
On 11 January 2007, AWB's 'BBB' corporate credit rating was affirmed, and both AWB and AWBHF were removed from CreditWatch, however S&P retained a 'negative' outlook for both companies; and
d.
On 24 August 2007, S&P lowered AWB's long-term corporate credit rating from 'BBB' to 'BBB minus', with a 'negative' outlook, citing the risk that at least some contestable wheat-export services would be provided by grain marketers/handlers other than AWB, thereby reducing the certainty of contributions of service fees and dividends from AWB's export operations.
e.
AWB's long-term corporate credit rating has remained at 'BBB minus' since the revision referred to at (d) above.
Copies of the S&P Research Updates for the above revisions are available for inspection on reasonable notice.
(I)
On 5 March 2008, the Minister for Agriculture, Fisheries and Forestry, Hon. Tony Burke, released proposed legislation that will On 30 June 2008, the Wheat Export Marketing Act 2008 was assented to. That Act:
(a) abolished AWB's statutory monopoly over wheat exports and
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the single desk;
(b) repealed the Wheat Marketing Act 1989 (Cth); and
(c) introduced a new accreditation scheme for all Australian wheat exporters, requiring inter alia that the relevant company be fit and proper.
Particulars of the Minister's announcement are at
But for AWB's breaches of the United Nations sanctions and its other misconduct as alleged above, such legislation is unlikely to have been introduced either so soon or at all.
(IA)
As a result of the introduction of the new accreditation scheme under the Wheat Export Marketing Act 2008, AWB has faced, and continues to face, significant competition in the export of bulk wheat from Australia.
Particulars
Since 1 July 2008, 23 entities have been accredited to export bulk wheat from Australia under the Wheat Export Marketing Act 2008. Twenty-one of those entities are not controlled by, and are competitors of, AWB and its subsidiaries.
In the period 1 July 2008 to 29 March 2009, approximately 7.7 million tonnes of bulk wheat was exported from Australia, of which:
• Approximately 1.5 million tonnes comprised legacy
shipments exported pursuant to contracts concluded under
the single desk and/or transitional arrangements; and
• Approximately 6.2 million tonnes comprised shipments
exported pursuant to the new accreditation scheme under
the Wheat Export Marketing Act 2008 (new exports).
Of the new exports, approximately 2.2 million tonnes (or 34 percent) were exported by AWB subsidiaries, while approximately 4 million tonnes (or 64 percent) were exported by competitors of AWB and its subsidiaries.
(J) Further particulars may be provided prior to trial.
Lindberg knew or ought to have known each of the facts alleged in paragraphs 92 to 94
above and that revelation of AWB’s actions in contravening, failing to comply
with, or otherwise acting contrary to or inconsistently withbreaches of, and failures
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Particulars
Lindberg’s knowledge is to be inferred from the matters pleaded in and the particulars to paragraphs 3, 3A, 12I, 12N, 12O, 12P, 18 to 35, 89, 90 and, 90A, 90B, and 96A hereof. The Plaintiff also refers to and relies on a board meeting on 27 April 2005 attended by, inter alia, Lindberg and Dr Richard Fuller in which Lindberg acknowledged that revelations that AWB may have been involved in any impropriety with respect to the Oil-for-Food Program had major implications for AWB’s business overseas and to whether the single desk was retained. This meeting was recorded in handwritten notes prepared by Fuller, a copy of which is available for inspection on reasonable notice.
Lindberg’s responsibilities and duties
| 96A. | By reason of his position as Managing Director, and the matters alleged in paragraphs 3 and 3A above, during the period from April 2000 to February 2006, Lindberg’s responsibilities included the following: |
Lindberg was ultimately responsible for the management of AWB in accordance with the policies established by its board;
Lindberg was ultimately responsible for the overall corporate governance of AWB, including the work behaviour and performance of all of AWB’s senior executives;
Lindberg was required to take reasonable steps to ensure that he and the other members of AWB’s Board were informed of all relevant information that may materially impact upon AWB’s performance;
Lindberg was responsible for administering and enforcing the policies and procedures relating to risk management, legal and regulatory compliance and management controls within AWB;
and as a member of the CRRC, Lindberg's responsibilities included:
(e) the assessment and consideration of reports gathered by the Corporate Risk Unit, which investigated all irregular or suspicious activities within AWB; and
(eeea) discussing, formulating and implementing risk minimisation strategies,
including such strategies relating to demurrage, shipping and insurance of
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AWB’s wheat shipped the conditions upon which AWB supplied wheat to
Iraq;
and from each of the times when he knew or ought to have known of the matters alleged in paragraphs 16 to 35 above, Lindberg’s responsibilities included the following:
(f) to take reasonable steps to enquire into the facts and to inform AWB’s Board, the CRRC and the audit committee that AWB’s contracts for the sale of wheat to Iraq included purported inland transportation fees and purported service fees, that payments of those fees were, or were likely to be, a breach of or otherwise contrary to or inconsistent with, United Nations sanctions relating to Iraq and that obtaining funds from the UN Escrow Account in respect of such payments was, or was likely to be, contrary to Resolution 986;
(fffa) to take reasonable steps to enquire into the facts and to inform AWB’s Board, the CRRC and the audit committee that contracts A1670 and A1680 included an amount in respect of the Tigris Debt, and that obtaining from the UN Escrow Account in respect of such amount was, or was likely to be, contrary to or otherwise inconsistent with, Resolution 986;
(fb)
to take reasonable steps to enquire into the facts and to ensure that the Tigris Agreement accurately reflected the true circumstances in which the Tigris Debt was recovered, and to inform AWB’s Board that the Tigris Agreement, as concluded, did not do so.
(g)
to take reasonable steps to enquire into the facts and to ensure that AWB complied with United Nations Resolution 661 and Resolution 986 when selling and exporting wheat to Iraq and obtaining payments from the UN Escrow Account
(h)
to take reasonable steps to prevent AWB from entering into contracts for the sale of wheat with the IGB which required AWB to pay purported inland transportation fees, or to obtain funds from the UN Escrow account on account of purported inland transportation fees and the Tigris Debt;
(hhha)
to take reasonable steps to enquire into the facts and to inform the ELG and the Board of AWB of the matters set out in paragraphs 23 to 34A and 35 in relation to the proposed payment of the Iron Filings Claim, and to state clearly his objection thereto and recommendation against, and to make a decision not to approve, the mechanism for the proposed payment in relation to the iron filings claimIron Filings Claim referred to therein;
(i)
to take reasonable steps to ensure that the payment or proposed payment by AWB of purported inland transportation fees and the iron filings
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UN Escrow Account in respect of purported inland transportation fees and on account of the Tigris Debt were disclosed to the United Nations and were approved by it; and
(j) to take reasonable steps to prevent AWB from making payments of the purported inland transportation fees and obtaining payments from the UN Escrow Account on account of the Tigris Debt and the purported inland transportation fees;
(k) to take reasonable steps to ensure that Project Rose was a bona fide attempt to investigate whether AWB, its officers, agents or employees had engaged in any improper conduct in relation to the Oil-for-Food Programme; and
(l) to take reasonable steps to inform AWB’s Board and the Project Rose Joint Board Committee that Project Rose was not a bona fide attempt to investigate whether AWB, its officers, agents or employees had engaged in any improper conduct in relation to the Oil-for-Food Programme.
Particulars
Lindberg’s position as Managing Director is pleaded in paragraph 3 above. Lindberg’s experience is set out in paragraphs 3 and 3A above. The particular circumstances then pertaining to AWB are alleged in paragraphs 4 to 12R and 16 to 95 above. Lindberg’s knowledge is alleged in paragraphs 16 to 35, 88A to 90B and 96 above.
| 96B. | By reason of the matters alleged in paragraphs 3, 3A and 96A above, during the period April 2000 to February 2006, Lindberg owed a duty to AWB to exercise his powers and discharge his duties with the degree of care and diligence that a reasonable person would exercise if they: |
(a) were an officer of a corporation in AWB’s circumstances; and
(b) occupied the office held by Lindberg and had the same responsibilities as Lindberg.
Particulars
The duty arises by reason of s. 180 of the Corporations Act 2001. The particular circumstances then pertaining to AWB are alleged in paragraphs 4 to 12R and 16 to 95 above.
| 96C. | By reason of the matters alleged in paragraphs 3, 3A and 96A above, during the period April 2000 to February 2006, Lindberg owed a duty to AWB to exercise his powers and discharge his duties: |
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(a) in good faith in the best interests of AWB; and
(b) for a proper purpose.
Particulars
The duty arises by reason of s. 181 of the Corporations Act 2001.
Contraventions by Lindberg
Having regard to the matters alleged in paragraphs 12 to 12R, 18 to 22A and 36 to 44 (inclusive) (in respect of Contract A1111), paragraphs 12 to 12R, 18 to 22A and 45 to 53 (inclusive) (in respect of Contract A1112), paragraphs 12 to 12R, 18 to 22A and 54 to 64 (in respect of Contract A1441), paragraphs 12 to 12R, 18 to 34A, 35 and 65 to 75 (inclusive) (in respect of Contract A1670), paragraphs 12 to 12R, 18 to 34A, 35 and 76 to 88 (in respect of Contract A1680) and paragraphs 92 34B to 34N and 88A to 96 inclusive above, and in breach of the duty alleged in paragraph 96B above:
Lindberg took no or no reasonable steps to investigate and follow up on the matters
raised in the Arthur AndersonArthur Andersen Report referred to in paragraphs 18
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(ii) the said payments were or were likely to constitute contraventions of or were otherwise contrary to or inconsistent with, United Nations sanctions established by Resolution 661; and
(iii) obtaining funds from the UN Escrow Account in respect of purported inland transportation fees or purported service fees was, or was likely to be, contrary to or otherwise inconsistent with Resolution 986.
Particulars
The Plaintiff refers to and repeats paragraph 13 of its further and better particulars dated 11 June 2008, save that each reference to "purported inland transportation fees" shall be read as referring to "purported inland transportation fees (including any incorporated purported service fees").
Lindberg took no or no reasonable steps to ensure that the payment or proposed payment by AWB of purported inland transportation fees, purported service fees and the iron filings compensation claim, and the obtaining of funds from the UN Escrow Account in respect of purported inland transportation fees and purported services fees and on account of the Tigris Debt, were disclosed to the United Nations and were approved by it;
(da) Lindberg failed to:
(i) table the Tigris Agreement at any AWB Board meeting; (ii)
inform or advise the Board that the receipt of a commission for assisting Tigris to recover a debt was not reflected in the Tigris Agreement;
(iii)
inform or advise the Board of the nature or contents of the Tigris Agreement;
(iv)
inform or advise the Board as to how Tigris was entitled to a commission from AWB or AWB (International) Ltd for services allegedly provided by Tigris;
(v) discuss or explain to the Board how the Tigris Debt was collected.
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Lindberg made no or no reasonable enquiries of those AWB employees who were responsible for the negotiation and administration of Contract A1670 as to whether:
(i) the purported inland transportation fees and purported services fees, and the proposed recoupment of the Tigris Debt by inflating the contract price for wheat, had been disclosed to and approved by the United Nations;
(ii) obtaining funds from the UN Escrow Account in respect of purported inland transportation fees and purported services fees and on account of the Tigris Debt, and the payment by AWB of the purported inland transportation fees, were permitted under United Nations Resolutions 661 and 986;
(iii) the payment of the purported inland transportation fees and purported services fees was being made in consideration of transportation services or other services in fact being provided to AWB; and
(iv) the purported inland transportation fees were being paid, directly or indirectly, to the IGB, the Government of Iraq and/or its instrumentalities.
Lindberg took no or no reasonable steps to prevent AWB from entering into Contract A1670 when it provided for the payment of purported inland transportation fees and purported service fees, and would result in AWB obtaining funds from the UN Escrow Account in respect of purported inland transportation fees and purported services fees, and on account of the Tigris Debt;
by reason of the matters alleged in sub-paragraphs (d) to (f) above, Lindberg authorised, permitted and/or assisted AWB to enter into and carry out Contract A1670 in circumstances where he knew or ought to have known that:
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(i) the contract price included an amount to be paid for purported transportation fees and purported services fees, which amount was or was likely to be paid, directly or indirectly, to the Government of Iraq and/or its instrumentalities, and funds for which amount would be obtained by AWB from the UN Escrow Account;
(ii) the contract price included an amount on account of the Tigris Debt, funds for which amount would be obtained by AWB from the UN Escrow Account;
(iii) the payment of purported inland transportation fees and purported services fees constituted or was likely to constitute a contravention of, or was otherwise contrary to or inconsistent with, United Nations sanctions established by Resolution 661; and
(iv) obtaining funds from the UN Escrow Account in respect of purported inland transportation fees and purported services fees, and on account of the Tigris Debt was, or was likely to be, contrary to or otherwise inconsistent with Resolution 986.
Particulars
The Plaintiff refers to and repeats paragraph 14 of its further and better particulars dated 11 June 2008, save that each reference to "purported inland transportation fees" shall be read as referring to "purported inland transportation fees (including any incorporated purported service fees)".
Lindberg made no or no reasonable enquiries of those AWB employees who were responsible for the negotiation and administration of Contract A1680 as to whether:
(i) the purported inland transportation fees and the purported service fees, and the proposed recoupment of the Tigris Debt by inflating the contract price for wheat had been disclosed to and approved by the United Nations;
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(ii) obtaining funds from the UN Escrow Account in respect of purported inland transportation fees and purported services fees, and on account of the Tigris Debt, and the payment by AWB of the purported inland transportation fees and purported services fees, were permitted under United Nations Resolutions 661 and 986;
(iii) the payment of the purported inland transportation fees and purported services fees was being made in consideration of transportation services in fact being provided to AWB;
(iv) the purported inland transportation fees and purported services fees were being paid, directly or indirectly, to the IGB, the Government of Iraq and/or its instrumentalities.
Lindberg took no or no reasonable steps to prevent AWB from entering into Contract A1680 when it provided for the payment of purported inland transportation fees and purported services fees, and would result in AWB obtaining funds from the UN Escrow Account in respect of purported inland transportation fees and purported services fees, and on account of the Tigris Debt;
by reason of the matters set out in sub-paragraphs (d), (h) and (i) above, Lindberg permitted or assisted AWB to enter into and carry out Contract A1680 in circumstances where he knew or ought to have known that:
(i) the contract price included an amount to be paid for purported inland transportation fees and purported services fees, which amount was or was likely to be paid, directly or indirectly, to the Government of Iraq and/or its instrumentalities, and funds for which amount would be obtained by AWB from the UN Escrow Account;
(ii) the contract price included an amount on account of the Tigris Debt, funds for which amount would be obtained by AWB from the UN Escrow Account;
| SC: | 82 | ANNEXURE 1 |
| DRAFT |
(iii) the payment of purported inland transportation fees and purported services fees constituted or was likely to constitute contraventions of, or was otherwise contrary to or inconsistent with, United Nations sanctions established by Resolution 661; and;
(iv) obtaining funds from the UN Escrow Account in respect of purported inland transportation fees and purported services fees, and on account of the Tigris Debt was, or was likely to be, contrary to or otherwise inconsistent with Resolution 986.
Particulars
Lindberg’s knowledge is pleaded and particularised in paragraphs 16 to 35 inclusive above. The Plaintiff further refers to and repeats the particulars to paragraph 97(g) above.
Lindberg failed to take any or any reasonable steps to inform or advise the AWB Board that AWB’s contracts for the sale of wheat to Iraq included purported inland transportation fees and purported services fees, which fees were, or were likely to be, paid to the IGB or to other Iraqi Government instrumentalities in breach of or otherwise contrary to or inconsistent with United Nations sanctions on trade with Iraq, and funds in respect of which fees would be obtained by AWB from the UN Escrow Account;
(kkka) Lindberg approved or permitted the mechanism for payment of the iron filings claimIron Filings Claim referred to in paragraph 26 above in circumstances
where he knew or ought to have known that such payments if actually made:
(i) were, or were likely to be, paid, either directly or indirectly, to the Government of Iraq and/or its instrumentalities; and
(ii) would, or would be likely to, constitute a breach of, or be otherwise contrary or inconsistent with, Resolution 661.
| SC: | 83 | ANNEXURE 1 |
| DRAFT |
Particulars
Lindberg’s knowledge is pleaded and particularised in paragraphs 16 to 35 inclusive above. The Plaintiff refers to and repeats paragraph 16 of its further and better particulars dated 11 June 2008, save that each reference to "purported inland transportation fees" shall be read as referring to "purported inland transportation fees (including any incorporated purported service fees)".
Lindberg failed to take any or any reasonable steps to ensure that AWB complied with United Nations Resolutions 661 and 986 when selling and exporting wheat to Iraq and obtaining payments from the UN Escrow Account; and
Lindberg failed to take any or any reasonable steps to prevent AWB from making payments of the purported inland transportation fees and obtaining payment from the UN Escrow Account of funds in respect of purported inland transportation fees and the Tigris debt;
Lindberg failed to inform or advise the AWB Board of the existence of and/or the findings contained in the Arthur Andersen Report, particularly in relation to the issue of purported inland transportation fees and the concern that some of those fees were being paid to Iraq;
Lindberg failed to inform or advise the AWB Board of the matters contained in the
Deeds of Release referred to in paragraph 12R above;
Lindberg misinformed the AWB Board and allowed others to misinform the AWB
Board to the effect that:
Project Rose constituted a comprehensive review of the facts surrounding AWB's contracts with Iraq under the Oil-for-Food Programme, including all contract arrangements and inland transportation arrangements;
That comprehensive review had found no evidence that AWB had any knowledge that monies paid to Alia were passed on to the former government of Iraq; and
| SC: | 84 | ANNEXURE 1 |
| DRAFT |
That comprehensive review had found no evidence that AWB had made payments to any other person in relation to shipments of wheat under the Oil-for-Food Programme.
Lindberg failed to adequately inform or advise the AWB Board of the allegations raised by the IIC investigators in February 2005, including that the IIC's allegations included the payment of the purported service fees;
Lindberg failed to inform or advise the AWB Board of the true nature and extent of allegations raised by the IIC in September 2005, including allegations concerning the payment of purported service fees, which fees could not be explained by reference to trucking arrangements;
Lindberg failed to inform or advise the AWB Board of the true nature and limitations of Project Rose, or to otherwise correct any of the misrepresentations made by him and others as described above;
Lindberg failed to take any reasonable steps to properly investigate the allegations made in the US Wheat Associates complaint and by the IIC investigators, or the findings made by the IIC, in relation to the payment of purported inland transportation fees and purported services fees; and
Lindberg failed to inform or advise the AWB Board of his own knowledge of any of
the matters set out in paragraph 35 above after he became aware of them.
By engaging in the conduct alleged in paragraph 97 above, Lindberg:
failed to exercise his powers and discharge his duties with the degree of care and
diligence that a reasonable person would exercise if they:
were an officer of a corporation in AWB’s circumstances; and
occupied the office held by Lindberg and had the same responsibilities as
Lindberg; and
| SC: | 85 | ANNEXURE 1 |
| DRAFT |
In the premises, Lindberg breached the duty alleged in paragraph 96B above.
| 98A. | In the premises, by engaging in the conduct alleged in paragraph 98 above, |
| Lindberg contravened s. 180 of the Corporations Act. |
Further and alternatively:
Lindberg engaged in the conduct referred to in sub-paragraphs 97 above(a) to (n)u
inclusive;
in so doing, Lindberg failed to exercise his powers and discharge his duties in good faith in the best interests of AWB and for a proper purpose;
in the premises, Lindberg breached the duty alleged in paragraph 96C above.
In the premises, by engaging in the conduct alleged in paragraph 99 above, Lindberg contravened s. 181 of the Corporations Act.
Relief
By reason of the contraventions set out in paragraphs 98A to and 100 above, Lindberg is liable to be the subject of a declaration in respect of each contravention pursuant to s. 1317E(1)(a) of the Corporations Act.
Further, the contraventions and each of them:
materially prejudiced the interests of AWB; or
were serious –
within the meaning of s. 1317G(1) of the Corporations Act.
In the premises, Lindberg is liable to pay a pecuniary penalty pursuant to s. 1317G(1) of the Corporations Act in respect of each contravention.
| SC: | 86 | ANNEXURE 1 |
| DRAFT |
Further, ASIC seeks an order pursuant to s. 206C(1) of the Corporations Act to disqualify Lindberg from managing a corporation for such period as the Court considered considers appropriate.
AND THE PLAINTIFF CLAIMS:
A. A declaration pursuant to s. 1317E of the Corporations Act that Lindberg has contravened s. 180 of that Act in respect of each of the matters pleaded in paragraph 97 hereof.
B. A declaration pursuant to s. 1317E of the Corporations Act that Lindberg has contravened s. 181 of that Act in respect of each of the matters pleaded in paragraph 98, 99 and 100 hereof.
C. An order pursuant to s. 1317G of the Corporations Act that Lindberg pay to the Commonwealth a pecuniary penalty in relation to each civil penalty contravention in such amount as the Court thinks fit.
D. An order pursuant to s. 206C(1) of the Corporations Act to disqualify Lindberg from managing a corporation for such period as the Court considers appropriate.
E. Costs.
F. Such further or other relief as the Court thinks fit.
Dated the day of April 2009
Norman O’Bryan
Andrew Hanak
Cam Truong
______________________
Savas Miriklis
Solicitor for ASIC
| SC: | 87 | ANNEXURE 1 |
Proposed further amended statement of claim draft 22 April [35].
See s 180 Corporations Act; ASIC v Maxwell (2006) 59 ACSR 373 at [99] to [102] per Brereton J; ASIC v MacDonald (No 11) (2009) 71 ACSR 368 at [236] to [242] per Gzell J.
6 T0258
7 T0258
11 T0258
13 T0258
Para 34D.
20 T0258
21 T0258
22 T0258
24 T0258
25 T0258
26 T0258
30 T0258
32 T0258
33 T0258
34 T0258
35 T0258
a 10 per cent service fee the purported service fee of 10 per cent was also applied by the IGB to the entire "Free-in-Truck" (FIT) value of each AWB wheat sale contract; and
the authors of the report believed that the increase in the purported inland transportation fee and addition of the purported service fee were both mechanisms for extracting money illegitimately from the UN Escrow Account.
Particulars
A copy of the trip report is available for inspection on reasonable notice. Lindberg’s receipt of the Iraq Trip Report is to be inferred from the following facts:
(a) the email dated 7 February 2001 and attached Iraq Trip Report was received by Dianne Sharpe, Lindberg’s secretary and executive assistant at the relevant time;
(b) Lindberg initialled a copy of the email dated 7 February 2001, a copy of which is available for inspection on reasonable notice;
(c) given the importance of the Iraq market to AWB, Iraq Trip reports were commonly sent to members of the AWB Executive Group which included Lindberg.
Further particulars may be provided prior to trial.
Ernst & Young Fraud Risk Assessment
| 22A. | In or around July 2002, Lindberg received a copy of a report dated March 2002 prepared by Ernst & Young entitled “Internal Audit Services Fraud Risk Assessment” which advised that: | |
|
| SC: | 20 | ANNEXURE 1 |
to comply with, the United Nations Resolutions was likely to cause substantial and irreparable enduring harm to AWB as alleged in, and of the nature particularised in, paragraph 95 above.
| SC: | 74 | ANNEXURE 1 |
compensation claimIron Filings Claim, and the obtaining of funds from the
| SC: | 76 | ANNEXURE 1 |
to 21 above to ensure that AWB was complying with or otherwise acting
consistently with, the United Nations sanctions on trade with Iraq;
Lindberg took no or no reasonable steps prevent AWB from entering into Contract A1111, A1112 or A1441 when each contract provided for the payment of purported inland transportation fees and purported service fees; and
by reason of the matters set out in sub-paragraph (a) and (b) above, Lindberg authorised, permitted and/or assisted AWB to enter into and carry out Contract A1111, A1112 and A1441 in circumstances where he knew or ought to have known:
(i) the contract price included an amount to be paid for purported inland transportation fees and purported service fees, which amount was or was likely to be paid, directly or indirectly, to the Government of Iraq and/or its instrumentalities and funds for which amount would be obtained by AWB from the UN Escrow Account;
| SC: | 78 | ANNEXURE 1 |
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