Cargill Australia Ltd v Viterra Malt Pty Ltd (No 12)

[2018] VSC 454

IN THE SUPREME COURT OF VICTORIA	Not Restricted
AT MELBOURNE COMMERCIAL COURT

S ECI 2014 000146

CARGILL AUSTRALIA LIMITED (ACN 004 684 173)	Plaintiff
v
VITERRA MALT PTY LTD (ACN 096 519 658) AND OTHERS	Defendants
and
CARGILL, INCORPORATED AND OTHERS	Third parties

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JUDGE:	ELLIOTT J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	13 AUGUST 2018
FURTHER SUBMISSIONS:	14 AUGUST 2018
DATE OF RULING:	15 AUGUST 2018
CASE MAY BE CITED AS:	CARGILL AUSTRALIA LTD v VITERRA MALT PTY LTD (No 12)
MEDIUM NEUTRAL CITATION:	[2018] VSC 454

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PRACTICE AND PROCEDURE – Order of evidence at trial – Subpoena’s to give evidence issued by plaintiff to third parties – Application by plaintiff to leave open its case pending the calling of evidence in the defendants’ and third parties’ cases – Possibility of plaintiff calling third parties as witnesses in its case pursuant to subpoenas if not called in third parties’ cases – Considerable delay in proceeding to date – Some prejudice to parties inevitable – Most efficient and timely alternative – Leave granted – Civil Procedure Act 2010 (Vic) ss 7, 9, 47, 49.

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APPEARANCES:	Counsel	Solicitors
For the plaintiff and the 1st and 2nd third parties	Mr P Anastassiou QC Ms L Nichols QC Ms K Burke Ms H Tiplady Mr C Tran Mr T Barry Mr M Tennant	Gilbert + Tobin
For the defendants	Mr A Myers QC Mr S Senathirajah QC Mr S Parmenter QC Mr K Wolahan Mr S Prendergast Ms K Dovey Mr O Wolahan	King & Wood Mallesons
For the 3rd third party	Mr J Peters QC Mr S Rosewarne	Maddocks
For the 4th third party	Mr M Galvin QC Mr D Bongiorno	Ward Lawyers
For the 5th third party	Mr R Attiwill QC Ms M Szydzik	Ward Lawyers
For the 6th third party	Ms W Harris QC Mr C Archibald Mr T Jeffrie	HWL Ebsworth
For the 7th third party	Mr S Pitt Ms C Alden	Ward Lawyers

HIS HONOUR:

A.       Introduction

1. The trial of this proceeding commenced on 18 June 2018.  The plaintiff, Cargill Australia Ltd (“Cargill Australia”) is still leading evidence in its case.  It has been agreed between the parties, and accepted by the court, that all lay evidence will be given before any expert evidence. 

1. Ordinarily, it would be expected that a plaintiff would lead its evidence, and close its case, before the defendants and any third parties would be required to lead evidence in their respective cases.  Notwithstanding the usual position, Cargill Australia has made an application to split its case, in the sense that it applies to not close its case at the conclusion of its current calling of its lay witnesses.[1]  In short, Cargill Australia wants to leave open the possibility of adducing further lay evidence in its case later in the trial if it considers it necessary to do so. 

   [1]This is expected to occur at the end of next week.

1. The court has a discretion to allow a party to re-open its case after it has been formally closed.[2]  However, Cargill Australia does not want to run the risk of closing its case presently, only to find any later application it might make to re-open it is refused.

   [2]See, for example, Ezra Abrahams Pty Ltd v Milburn [2017] VSCA 355, [46]-[58] (Kyrou, Kaye and McLeish JJA), and the cases there cited; Advanced Fuels Technology Pty Ltd v Blythe [2017] VSC 250, [5]-[13] (Macaulay J), and the cases there cited.

1. To explain how the issue arises, further background is required.

B.       Background

1. Cargill Australia brought this proceeding against the defendants (“the Viterra Parties”) following its purchase of the shares in a company, who is now the second third party in the proceeding (“Joe White”).[3]  In essence, Cargill Australia alleges that the Viterra Parties failed to disclose certain practices and policies (“the Viterra Practices”).[4]  Cargill Australia alleges the Viterra Practices were unlawful.  Further, it is alleged that, if Cargill Australia had known of the Viterra Practices before it executed the acquisition agreement on 4 August 2013 it would not have acquired Joe White.[5]

   [3]Joe White was formerly known as Joe White Maltings Pty Ltd.  It is now known as Cargill Malt Asia Pacific Pty Ltd.

   [4]The allegations by the Cargill Parties in respect of the Viterra Practices fall into 3 broad categories.  First, the alleged issuing of certificates of analysis to customers that misstated the results of analytical testing on malt supplied to those customers, so that it appeared to accord with contractual specifications.  Secondly, the alleged supply of malt to customers that was produced using barley varieties other than those specified by the customer.  It is further alleged that certificates of analysis falsely stated that the barley specified by the customer had in fact been used.  Thirdly, the alleged use of gibberellic acid in the malt production process contrary to the terms of customer contracts.  (Certificates of analysis accompanied malt supplied by Joe White to its customers and included or purported to include details of testing that had been conducted in respect of the malt supplied.)         

   [5]This is only a cursory account of some of the issues in the case.  For a fuller account of the facts, see Cargill Australia Ltd v Viterra Malt Pty Ltd (No 2) [2017] VSC 283, [6]-[9] and Cargill Australia Ltd v Viterra Malt Pty Ltd [2017] VSC 126, [2]-[28] (Daly AsJ).

1. The Viterra Parties consist of 3 companies who were the sellers of Joe White (“the Sellers”),[6] together with the ultimate holding company of the group, the fourth defendant, Glencore International AG (“Glencore”).  Glencore acquired the Sellers in December 2012.  The Sellers had already acquired Joe White in or about September 2009, as part of a larger acquisition.  In May 2013, Glencore decided the Sellers were required to dispose of Joe White.

   [6]Viterra Malt Pty Ltd, Viterra Operations Ltd and Viterra Ltd.

1. In response to Cargill Australia’s allegations, the Viterra Parties not only denied liability but also made third party claims.  The third party claims were made against the ultimate holding company of Cargill Australia, Cargill, Inc (who is the first third party) and Joe White.  It is unnecessary to discuss the nature of those third party claims. 

1. More relevantly, the Viterra Parties made claims against their former employees, each of whom became an employee under the control of Cargill Australia upon completion of the acquisition (“the Third Party Individuals”).  Effectively, the Viterra Parties seek to be indemnified by the Third Party Individuals in the event they are held to be liable to Cargill Australia. 

1. The third third party is Gareth Hughes (“Hughes”).  At the time Glencore acquired the Sellers, Hughes was director and executive manager – malt at Joe White and executive manager for Viterra Malt Pty Ltd (“Viterra Malt”).  Following Cargill Australia’s acquisition of Joe White, Hughes was employed by Cargill Australia as regional general manager, Asia Pacific until June 2014. 

1. The fourth third party, Peter Youil (“Youil”), remains an employee of Joe White.  Youil is currently the strategic project manager, a position he has held since October 2016.  Youil commenced employment at Joe White in 1988.  In 2013, Youil was the general manager operations – malt at Joe White and reported directly to Hughes.

1. The fifth third party, Robert Wicks (“Wicks”), commenced work at Joe White in 1983.  In 2009, Wicks was appointed general manager, commercial for Viterra Malt.  In 2013, Wicks also reported to Hughes.  Wicks remained employed as the general manager, commercial at Joe White until late January 2016.

1. The sixth third party, Douglas Stewart (“Stewart”), is a biochemist who has worked in the malting industry since January 2000.  Upon an earlier acquisition of Joe White in December 2002, Stewart then worked for Joe White.  In around March 2010, he was appointed by Viterra Ltd (“Viterra”) as general manager technical – malt.  Stewart also reported to Hughes.  Stewart remained with Joe White until September 2014, and is now employed by Coopers Brewery Ltd.

1. The seventh third party, Scott Argent (“Argent”), is currently the financial controller of Joe White.  Argent commenced employment with Joe White in February 2003 as an accountant.  In February 2012, Argent was appointed to the position of controller, processing for Joe White and Viterra’s New Zealand feed business.  He reported directly to the finance director for Australia and New Zealand. 

1. The Viterra Parties claim that the Third Party Individuals made certain representations concerning the accuracy of information and warranties provided to Cargill Australia, and the existence of the Viterra Practices.  The Viterra Parties further allege that the Third Party Individuals have not acted in the best interest of Viterra or have not acted ethically, contrary to their contracts of service with Viterra. 

1. In support of these claims, the Viterra Parties contend that their acquisition of Joe White amounted to a “pass through”, in the sense that Glencore acquired Viterra with no intention of retaining Joe White, which, at that time, was a subsidiary of the Sellers.  It is alleged that Joe White was “passed” to Cargill Australia prior to Glencore having any real involvement in, or understanding of, the business conducted by Joe White.  The Viterra Parties therefore seek to pass through the claims made by Cargill Australia to the Third Party Individuals.  

C.       The conduct of Cargill Australia’s case

1. Cargill Australia has already led a large amount of evidence concerning the Viterra Practices.  Although not admitted on the pleadings, the Viterra Parties now concede, quite properly on the evidence before the court, that the occurrence of the Viterra Practices with respect to certificates of analysis was “not insignificant” before Joe White was acquired in August 2013. 

1. However, Cargill Australia also intends to rely upon evidence of the Third Party Individuals, or at least some of them, with respect to establishing the existence and prevalence of the Viterra Practices before the acquisition.  Each of the Third Party Individuals has been subpoenaed by Cargill Australia to give evidence.  If the Third Party Individuals had not been joined by the Viterra Parties to the proceeding, it is likely each of them would have been called by Cargill Australia in the usual way.

1. The Third Party Individuals oppose being compelled to give evidence before the Viterra Parties have opened their case[7] and given all their evidence against them.  The Third Party Individuals contend that it would be unfair if they were required to give evidence, including being cross-examined on all issues, before knowing the evidence of the case against them.  In response to this position, Cargill Australia has supported the proposal that the Third Party Individuals not be required to give evidence as part of Cargill Australia’s case, provided that Cargill Australia is not required to close its case until after the Third Party Individuals have given their evidence (or, for completeness, indicated that they do not intend to give evidence).[8]

   [7]The Viterra Parties chose to open their case against the Cargill Parties at the early stages of the trial, but not as against the Third Party Individuals.

   [8]To elaborate, Cargill Australia seeks a direction from the court now so it is not confronted with the possibility of closing its case and then having 1 or more of the Third Party Individuals remaining a party but choosing not to give evidence or, possibly, not being before the court because of a future settlement between the Viterra Parties and any of the Third Party Individuals.

1. The Viterra Parties submit that it would be unfair to them if they were compelled to lead all their lay evidence before Cargill Australia has closed its case.  The Viterra Parties contend that the court should require Cargill Australia to close its case with respect to all its lay evidence before the Viterra Parties are required to lead any evidence. 

1. In support of this contention, the Viterra Parties highlighted that the case against them is complex and that it involves hundreds of millions of dollars.  In these circumstances, it was submitted that, if the court were to accede to Cargill Australia’s application, they would be left in an entirely unsatisfactory position; namely, being required to give evidence in response to the allegations about the Viterra Practices and other material matters when significant witnesses with respect to such matters were yet to be called as part of Cargill Australia’s case.

D.       History of this proceeding

1. The litigation the subject of this proceeding is substantial.  The proceeding was commenced in October 2014.  Since then, it has utilised a significant amount of the court’s resources.  To date, there have been in excess of 100 interlocutory orders made.  There have also been numerous interlocutory appeals or applications for leave to appeal.[9]

   [9]An application for special leave to appeal to the High Court has also been filed on 21 May 2018.

1. Further, the trial of this proceeding was due to commence on 7 May 2018.[10]  On the application of the Cargill Parties, that date was deferred to 28 May 2018.  Then, on the application of the Viterra Parties, the trial date was delayed even further, ultimately being fixed for 18 June 2018.  In the weeks leading up to trial, and after the trial commenced, there have been a large number of ongoing interlocutory disputes. 

   [10]It was originally fixed for 9 October 2017, but the trial was vacated pursuant to an order sought by the Cargill Parties with the support of the Viterra Parties and the Third Party Individuals: see Cargill Australia Ltd v Viterra Malt Pty Ltd (No 5) [2017] VSC 798 [12]-[14].

1. Before the trial commenced, the joint estimate for its duration was 14 weeks.  Accordingly, on the original timetable, the trial would have finished last Thursday.  On present estimates, the lay evidence is to be completed on 8 November 2018, with expert evidence and closing submissions to follow.  Self-evidently, this case has already caused significant disruption to the listing of other matters in this court.

1. Case management issues of the court are relevant to determining appropriate orders in interlocutory hearings.[11]  Those issues are particularly acute in this case.  Further, the Civil Procedure Act 2010 (Vic) requires these issues to be taken into account in the court pursuing the overarching purpose.[12]  The court ought to try to implement a process that causes the least amount of disruption to other cases waiting to be heard, while remaining conscious that the approach adopted be consistent with the parties in this proceeding receiving a fair trial.

   [11]See, for example, Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, 182 [6], 192 [30] (French CJ), 211 [92]-[93], 212 [95], 213 [97]-[98] (Gummow, Hayne, Crennan, Kiefel and Bell JJ).

   [12]The overarching purpose in the conduct of civil proceedings is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute: s 7.

E.        The court’s power

1. There is no question that the court has the power to allow a party to effectively split its case.[13]  Occasionally, this approach is adopted in commercial litigation with respect to the splitting of issues of liability and quantum; which, in some cases, may involve witnesses giving evidence twice.

   [13]For example, see Civil Procedure Act, ss 7, 9, 47, 49.

F.        Considerations relevant to the future conduct of the trial

1. All parties accept that it would be preferable for the Third Party Individuals to be called as witnesses only once.  If the course suggested by the Viterra Parties were adopted, there would be a real prospect, if not a likelihood, that some or all of the Third Party Individuals would need to be called twice.  The Viterra Parties conceded that, if the Third Party Individuals gave evidence in Cargill Australia’s case, it would not be appropriate for the court to completely shut them out, now, from giving further evidence when it was possible that, after they have heard the Viterra Parties’ case, they may consider it necessary to give additional evidence.  Further, if the Third Party Individuals were to be called twice, almost inevitably this would give rise to overlapping evidence, both with respect to evidence in chief and cross-examination.  Leaving aside any unfairness to the Third Party Individuals being vexed more than once with the role of being a witness, it is difficult to envisage that a procedure which involved the Third Party Individuals giving evidence twice would not give rise to significant delay and increased complexity in the conduct of the trial.

1. A further relevant consideration is the fact that the Third Party Individuals have filed very detailed witness statements of the evidence they proposed to give.  Although it is anticipated that some of the evidence will be given orally with respect to critical conversations and the like, the substance of that evidence has also been set out.  Moreover, Cargill Australia has filed outlines of the evidence it would seek to adduce if it were to call the Third Party Individuals in its own case.  These outlines refer extensively to the witness statements already filed by the Third Party Individuals.

1. It follows that the Viterra Parties have notice of the evidence to be relied upon by Cargill Australia as part of its case, even though that evidence has yet to be formally led.  Whilst it is possible that some evidence ultimately given by the Third Party Individuals may not accord with the witness statements and outlines already provided, this potentiality can be addressed by also allowing the Viterra Parties to leave their case open at the conclusion of their lay evidence.  In those circumstances, the court could, if necessary, permit the Viterra Parties to lead further evidence after they have heard the evidence of the Third Party Individuals.  Given the extensive notice already given to the Viterra Parties of the Third Party Individuals’ cases, it can be anticipated that any such further evidence is likely to be of narrow compass.

G.       Ruling

1. In determining the issue at hand, a balancing of the relevant competing interests needs to be considered.  As all counsel acknowledged, whatever course is adopted by the court, some of the parties will be disadvantaged by that particular course.

1. In my view, the considerations as set out above lead to the conclusion that permitting Cargill Australia to leave its case open upon completion of all its lay evidence, other than the evidence of the Third Party Individuals, is the course most aligned with the overarching purpose.  Not only can any potential difficulties be addressed by appropriate case management if and when the need arises, but adopting this course will allow the current timetable to be substantially implemented. 

1. If follows that, Cargill Australia will not be required to call the Third Party Individuals presently, but will be able to adduce evidence from them during the course of their defences to the third party claims.  It also follows that the Viterra Parties will not be required to close their case, in the limited manner referred to above,[14] until after they have heard the evidence of the Third Party Individuals.

   [14]See par 28 above.

1. Although raised in argument, it is not appropriate at this point to make any ruling with respect to the manner in which evidence might be led or adduced from the Third Party Individuals.  Whether Cargill Australia ought be permitted to cross-examine the Third Party Individuals, or the extent to which they ought to be able to cross-examine, is a matter to be addressed at the time the relevant evidence is sought to be adduced.  Nothing in this ruling is to be understood as expressing any opinion on the appropriate course in that regard.

1. The outcome of this ruling is that the case of each of Cargill Australia, the Viterra Parties and the Third Party Individuals will be allowed to remain open for the limited purpose of facilitating the calling, or possible calling, of evidence as set out above. Directions will be made accordingly.

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