Cargill Australia Ltd v Viterra Malt Pty Ltd (No 31)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

S ECI 2014 00146

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:	1 March 2022
DATE OF RULING:	4 April 2022
CASE MAY BE CITED AS:	Cargill Australia Ltd v Viterra Malt Pty Ltd (No 31)
MEDIUM NEUTRAL CITATION:	[2022] VSC 164

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DECLARATORY RELIEF – Declaration sought in respect of breach of employment contract – Whether declaration sought appropriate – Pleadings and agreed issues for determination – Whether declaration sought would produce foreseeable consequences – Subject matter of declaration included rights of non-party to proceeding – Part of declaration sought not the subject of findings in proceeding – No ongoing relationship between parties – Relief refused.

DAMAGES – Award of nominal damages – Quantum.

COSTS – Nominal damages – Objective of proceeding brought against third parties – “Pass through” claim – Determination of successful party – Award of nominal damages reflected lack of success - Costs awarded in favour of third third party on standard basis.

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APPEARANCES:	Counsel	Solicitors
For the plaintiff and the 1^st and 2^nd third parties	No appearance	Gilbert + Tobin
For the defendants	Mr S Senathirajah QC Mr O Wolahan	Johnson Winter & Slattery
For the 3^rd third party	Mr J Peters QC	Maddocks
For the 4^th third party	No appearance	Gilchrist Connell
For the 5^th third party	No appearance	Gilchrist Connell
For the 6^th third party	No appearance	HWL Ebsworth
For the 7^th third party	No appearance	Gilchrist Connell

HIS HONOUR:

IntroductionA.

BackgroundA.1

Judgment was handed down in this proceeding on 28 January 2022 (“the Principal Judgment”).[1] A number of issues arose from the findings made in the Principal Judgment relating to a third party claim brought by the defendants (“the Viterra Parties”) against the third third party, Gary Hughes (“Hughes”). At the time of the events the subject of this proceeding, Hughes was a former director and an ongoing executive manager of the second third party, Joe White Maltings Pty Ltd (“Joe White”).[2]
[1]Cargill Australia Ltd v Viterra Malt Pty Ltd (No 28) [2022] VSC 13.
[2]For a detailed account of the positions held by Hughes, see ibid, [47].
The Viterra Parties unsuccessfully alleged that Hughes had engaged in misleading or deceptive conduct in contravention of section 18 of Schedule 2 of the Competition and Consumer Act 2010 (Cth) (“the Australian Consumer Law”).[3] The Viterra Parties also alleged that Hughes had breached the terms of his contract of employment with the third defendant, Viterra Ltd (“the Hughes/Viterra Contract”). It was found that, although Hughes had breached the Hughes/Viterra Contract by failing to act ethically, honestly and in the best interest of Viterra Ltd,[4] the Viterra Parties had not established that they had suffered any loss as a result.[5]
[3]Ibid, issues 124-128, [4774]-[5119].
[4]Ibid, issues 137-138, [5223]-[5260].
[5]Ibid, [5262]-[5264].
Based on these findings, the Viterra Parties sought nominal damages with respect to the contractual claim. In addition, a declaration was sought relating to the breaches as found. On the question of costs, the Viterra Parties submitted that they should be considered the successful party in respect of their claims against Hughes. They contended that the court should order that Hughes pay the entirety of the costs of their claims against Hughes.
Hughes accepted that nominal damages should be awarded against him, but opposed the making of any declaration. Hughes submitted that he should be considered to have succeeded in respect of the Viterra Parties’ claims against him and, accordingly, the Viterra Parties should pay his costs.

Changing positions of the Viterra PartiesA.2

Upon delivery of the Principal Judgment, orders were made for the scheduling of the remaining issues in the proceeding. Relevantly, the Viterra Parties were ordered to file and serve submissions in relation to the appropriate orders to be made concerning their claims against Hughes, including on the question of costs. Hughes was required to provide submissions in response a week later.
In accordance with the orders made, the Viterra Parties filed and served submissions on 4 February 2022. Initially and for the first time, they sought a very general declaration, based on the evidence already before the court, to the effect that Hughes had breached his obligations to act ethically, honestly and in the best interest of Viterra. However, late in the evening of 20 February 2022, the day before the scheduled hearing of these issues, the Viterra Parties provided the court with further submissions, as well as an affidavit of Thomas Jarvis (“Jarvis”), a solicitor acting on behalf of the Viterra Parties (“the Jarvis Affidavit”). By these documents, the Viterra Parties sought to raise 2 issues.
First, the Jarvis Affidavit disclosed the existence of a directors and officers liability policy (“the Zurich Policy”) which Glencore Xstrata PLC[6] had taken out with Zurich Insurance PLC (“the Insurer”).[7] The Zurich Policy had not been the subject of evidence previously. Jarvis stated that Hughes was insured under the Zurich Policy, and that his legal fees in this proceeding had been paid by the Insurer.
[6]Glencore Xstrata PLC was not a party to the proceeding, but was a company related to the Viterra Parties including the fourth defendant, Glencore International AG.
[7]The Insurer was also not a party to the proceeding.
Section 8 of the Zurich Policy provided:
The Insurer shall not be liable under this Policy to make any payment for Financial Loss in connection with any Claim made against any Insured:
Conduct
8.1 arising from, based upon, attributable to or as a consequence of:
8.1.1 …; or
8.1.2 any intentionally dishonest or intentionally fraudulent act or omission committed by an Insured;
in the event that either of 8.1.1 or 8.1.2 is determined or established by: (i) a formal written admission by the Insured; or (ii) a judgement or other final, non-appealable adjudication adverse to the Insured in the underlying action; Defence Costs shall be advanced by the Insurer pursuant to Section 4 of the Policy until such a judgement or other final, non-appealable adjudication is made.
Secondly, the Jarvis Affidavit referred to an indemnity agreement (“the Indemnity Agreement”) entered into by Hughes with Viterra Inc, the parent company of Viterra Ltd at the time the Indemnity Agreement was entered into.[8] The Indemnity Agreement was contingent upon Hughes having “acted honestly and in good faith with a view to the best interests of” Viterra Inc or a subsidiary of Viterra Inc.
[8]Viterra Inc was not a party to the proceeding.
The Indemnity Agreement had previously been tendered during the trial,[9] and was relied on by Hughes in his defence to the third party claim. Although, on the face of it, this defence gave rise to an issue for the court to determine, Hughes did not pursue any issue in relation to the Indemnity Agreement in closing submissions.[10]
[9]See Principal Judgment, fn 1065.
[10]Ibid, [5266]. In closing submissions at trial, Hughes stated that he accepted that the Indemnity Agreement did not provide him with an indemnity to the claims made against him by the Viterra Parties in the third party claim.
After setting out evidence regarding the Zurich Policy and the Indemnity Agreement, Jarvis deposed that the Viterra Parties sought a declaration in the following form:
Gary Hughes, in his capacity as director and executive manager of Joe White Maltings Pty Ltd, for the reasons set out in the reasons of judgment delivered in this proceeding on 28 January 2022, failed to act in the best interest of Viterra Ltd, failed to act ethically and failed to act honestly, and thereby in each respect breached his contract of service with Viterra Ltd that was effective from 1 November 2009.
Mr Hughes thereby failed to act honestly and in good faith with a view to the best interests of Viterra Ltd, a subsidiary of Viterra Inc, for the purposes of the [I]ndemnity [A]greement between Viterra Inc and Hughes dated 8 August 2012.
Mr Hughes further thereby engaged in intentionally dishonest acts for the purpose of the Directors and Officers Liability and Company Reimbursement Insurance entered into between Glencore Xstrata PLC and Zurich Insurance Plc, policy number SPRDR1400506 [that is, the Zurich Policy].
At a hearing on 21 February 2022, the Viterra Parties sought leave to rely on the Jarvis Affidavit and the submissions which had accompanied it. In explaining why leave was sought, the Viterra Parties stated they were concerned about an ongoing debate over insurance coverage for Hughes, whether it might be declined and the consequences that would flow from it. Based on findings previously made concerning Hughes, the Viterra Parties stated they apprehended the Insurer would cease financial support and may possibly wish to recoup some or all of the money it spent under the Zurich Policy. It was submitted that these matters were directly relevant to whether the declaration ought to be made. Senior counsel for the Viterra Parties explained the delay in raising this issue on the basis that it was not obvious until the Principal Judgment was delivered that the Insurer could seek to claw back moneys paid, with the possibility that “my client” would be up for payment of moneys under the Indemnity Agreement.[11]
[11]Precisely to whom senior counsel was referring as “my client” was not clear.
The Viterra Parties also submitted that the point had not been raised in their original submissions filed on 4 February 2022 because the Viterra Parties had not been able to get hold of the Zurich Policy. The court was informed that Jarvis had obtained a copy of the Zurich Policy on Friday 18 February 2022, which had led to the Jarvis Affidavit being prepared over the weekend. In fact, the Zurich Policy had been the subject of a hearing in this proceeding as long ago as 12 June 2015.[12]
[12]At a hearing on that day, the Viterra Parties’ senior counsel acknowledged that the Viterra Parties were in possession of the Zurich Policy but were refusing to provide a copy to Hughes and other third parties in the proceeding who were former employees of Viterra Ltd. This was put on the basis that the Viterra Parties were “concerned and surprised” that the third parties could not put on their defences prior to getting access to the Zurich Policy. The position adopted was that the third parties could obtain a copy of the Zurich Policy from the Insurer. When it was pointed out by the court that the Insurer was not before the court and it was unclear how long that process would take and that, alternatively, the Viterra Parties could simply hand over the Zurich Policy that day, senior counsel for the Viterra Parties acknowledged he understood what was being said but also stated he did not have instructions to hand over the Zurich Policy and that he could not get them. Further, the Viterra Parties maintained that the Zurich Policy was not a discoverable document. After a discussion took place about the obligations of the Viterra Parties under the Civil Procedure Act 2010 (Vic), they were ordered to provide a copy of the Zurich Policy to the relevant third parties. This was not on the basis that it was relevant to the issues in the proceeding, but rather in order to facilitate a resolution of the claims against the relevant third parties by enabling them to have a proper understanding of whether or not they had coverage under the Zurich Policy. Obviously, the fact that the Viterra Parties had retained different solicitors since the completion of the trial could not provide a proper basis to suggest they were not aware of the contents of the Zurich Policy. Further, there was ample time for the current solicitors to obtain access to the Zurich Policy because orders were made as far back as 28 January 2022 for submissions to be made on this issue.
It was acknowledged that the late filing of the Jarvis Affidavit was unfortunate and would give rise to delay. However, the Viterra Parties submitted that they should be given leave to rely on the Jarvis Affidavit as it was relevant to the question of relief and no substantial prejudice would be caused to Hughes if an adjournment were granted before the substantive application was heard.
When I enquired of the Viterra Parties’ senior counsel as to what pleaded issue the question of whether or not Hughes had coverage under the Zurich Policy went, the response was that it went to no specific issue. However, reliance was placed upon CGU Insurance Ltd v Blakeley[13] in submitting that there was a real and legitimate interest in the Viterra Parties having the question of insurance cover be the subject of a declaration, and that this enlivened the court’s jurisdiction to make the declaration sought.
[13](2016) 259 CLR 339, 367 [83], 369-376 [89]-[111] (Nettle J). The case was plainly distinguishable from the present issue in this proceeding as in that case liquidators successfully sought to join the insurer as a party to the proceeding in order to discharge rights and obligations under s 562 of the Corporations Act 2001 (Cth).
At a subsequent hearing on 25 February 2022, senior counsel for the Viterra Parties then sought to clarify that the intention had been only to seek leave to file the Jarvis Affidavit and submissions after the 4 February 2022 deadline. The Viterra Parties then contended they did not need to also seek leave to re-open their case in order to rely on the Jarvis Affidavit. At both hearings, and in further written submissions filed on 25 February 2022, Hughes took the position that the Viterra Parties would need to seek and receive leave to reopen their case before they could put the Jarvis Affidavit into evidence. Hughes opposed the grant of such leave.
But the matter did not rest there. In a third set of submissions,[14] the Viterra Parties indicated that, in light of the submissions of Hughes, they no longer sought to rely on the Zurich Policy. They also ceased to rely upon those parts of the Jarvis Affidavit that referred to it.[15] The Viterra Parties maintained their reliance on the Indemnity Agreement, and sought a declaration in the same form as previously, but without the third paragraph concerning the Zurich Policy.
[14]These were filed on 28 February 2022, the day before the hearing on these issues; the previous submissions having been filed on 4 and 20 February 2022.
[15]Leaving aside the formal matters deposed to, the Jarvis Affidavit consisted of 23 paragraphs. In addition to excising part of the proposed declaration previously said to be appropriate for the court to make, the court was informed that 18 paragraphs of the Jarvis Affidavit, together with the exhibited Zurich Policy, were no longer relied upon. On the basis that the Viterra Parties were only relying on this limited evidence in the Jarvis Affidavit, there was no ongoing objection by Hughes to the Jarvis Affidavit being relied upon.
Although the Viterra Parties ceased to rely upon the Zurich Policy and decided not to seek any relief in that regard, this history as set out above demonstrates that the Viterra Parties themselves were unsure of the basis upon and extent to which they were to seek declaratory relief right up until the eve of the hearing of the issue.
A.3 Nominal damages
At the hearing on 1 March 2022, both Hughes and the Viterra Parties accepted that $100 was an appropriate sum to be awarded by way of nominal damages.[16]
[16]In State of New South Wales v Stevens (2012) 82 NSWLR 106, 114 [37], McColl JA (with whom Ward JA agreed) found that an award of $100 was the appropriate quantum for an award of nominal damages. This amount has been used in a number of recent cases: see, for example, Anderson v Canaccord Genuity Financial Ltd [2022] NSWSC 58, [2791] (Ward CJ in Eq); Saafin Constructions Pty Ltd (in liq) v MAG Financial and Investment Ventures Pty Ltd [2021] VSC 702, [45] (Riordan J); Romero v Farstad Shipping (Indian Pacific) Pty Ltd (No 3) [2017] FCAFC 102, [13], [90] (Allsop CJ, Rares and McKerracher JJ).
A.4 Hughes’ offer of compromise
In written submissions, Hughes sought indemnity costs against the Viterra Parties based on their refusal of his offer of compromise, which was made at the end of the first day of trial. Hughes had offered to compromise all claims against him in the proceeding by paying no amount to the Viterra Parties and bearing his own costs. However, also at the hearing on 1 March 2022, Hughes accepted that, given the award of nominal damages was appropriate, the offer of compromise made on 18 June 2018 could not be relied upon to found a claim for indemnity costs.
A.5 Remaining matters for determination
Given the agreement on the award and amount of nominal damages, the following questions remain: (1) whether any declaratory relief should be given, and if so, what form it should take; and (2) which party or parties should be considered to have succeeded for the purposes of making an order as to costs.

Legal principlesB.

Declaratory reliefB.1

The principles governing declaratory relief were set out in the Principal Judgment.[17] It is unnecessary to repeat them here. Broadly, the court’s discretion to make a declaration is confined by considerations that mark out the boundaries of judicial power, and must be directed to the determination of legal controversies.
[17]Principal Judgment, [5269].
Further, speaking generally, all parties who may be affected by a declaration sought should be made parties to the proceeding.[18] This enables affected persons to make submissions and seeks to ensure all relevant material is put before the court before any declaration is made.[19] Furthermore, it is not usually appropriate for a court to make a declaration when the declaration sought does not concern a right of the moving party or parties.[20]

Cost consequences of an award of nominal damagesB.2

[18]QBE Insurance (Aust) Ltd v Lois Nominees Pty Ltd [2012] WASCA 186, [171] (Murphy JA); Kadian v Richards (2004) 61 NSWLR 222, 254-255 [98] (Campbell J) and the cases there cited; Australasian Oil Exploration Ltd v Lachberg (1958) 101 CLR 119, 133.7-134.2 (Dixon CJ, McTiernan and Taylor JJ).

[19]Ibid.

[20]Gardner v Dairy Industry Authority (NSW) (1977) 18 ALR 55, 60.7 (Barwick CJ), 69.7 (Mason J, with whom Jacobs and Murphy JJ agreed), 71.6 (Aickin J).

The court has a discretion when awarding costs, which must be exercised judicially by reference to the relevant facts connected with the litigation.[21] The ordinary rule is that a successful litigant should receive its costs.[22] In KSG Investments Pty Ltd v Open Markets Group Ltd (No 2),[23] the principles pertaining to an award of costs in the case of nominal damages were addressed.[24] It is now well accepted that a litigant who has only been awarded nominal damages is not usually entitled to recover costs, as they cannot be regarded as the successful party.[25]
[21]Northern Territory v Sangare (2019) 265 CLR 164, 172 [24] (Kiefel CJ, Bell, Gageler, Keane and Nettle JJ).
[22]Ibid, 173 [25], 174 [27].
[23][2021] VSC 359 (Nichols J).
[24]Ibid, [9]-[13].
[25]Ibid, [9]. See also Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171, [14] (Hodgson JA, with whom Allsop P and Macfarlan JA agreed); Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603, 757 [685] (Campbell JA, with whom Giles JA agreed); Oshlack v Richmond River Council (1998) 193 CLR 72, 98 [70] (McHugh J).

However, the court retains its discretion to award costs in favour of a party who is only entitled to nominal damages. In some circumstances, it may follow that a moving party who has only received nominal damages should have its costs.[26] Such instances may include where proof of a breach of contract was a substantial and vigorously contested aspect of the case at trial,[27] or where the primary purpose of a proceeding was not merely to recover substantial damages but to establish or vindicate some legal right.[28] Conversely, a factor that will militate against a moving party who has only received nominal damages being considered the successful party is where the real purpose of the proceeding was to obtain substantial damages.[29]

SubmissionsC.

Declaratory reliefC.1

[26]Ibid, [10] and the cases there cited.

[27]Ibid, [10] and the further cases there cited.

[28]Ibid, [10]. See also Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873, 874G (Devlin J).

[29]Ibid, [11]. See also Romero v Farstad Shipping (Indian Pacific) Pty Ltd (No 3) [2017] FCAFC 102, [103] (Allsop CJ, Rares and McKerracher JJ); Actrol Parts Pty Ltd v Coppi (No 3) (2015) 49 VR 573, 600-601 [98]-[101] (Bell J); Motium Pty Ltd v Arrow Electronics Australia Pty Ltd [2011] WASCA 65 (S), [10] (McLure P, Newnes and Murphy JJA).

In support of their claim for declaratory relief, the Viterra Parties submitted that the declaration as ultimately sought was warranted in light of the obvious gravity of Hughes’ misconduct. The Viterra Parties also relied on the fact that, but for Hughes’ misconduct, their liability to Cargill Australia would not have arisen. They further noted that Hughes had strongly disputed that he had engaged in the misconduct.
In relation to the inclusion of the reference to the Indemnity Agreement in the proposed declaration, the Viterra Parties noted that Hughes had admitted in his submissions that the Indemnity Agreement did not indemnify him in relation to the third party claim. The Viterra Parties submitted that they were therefore entitled to receive an appropriately formulated declaration in order to determine the issue once and for all. It was submitted such a declaration would produce a foreseeable consequence,[30] as it would rule out any possibility of further disputation in relation to the application of the Indemnity Agreement.
[30]See Principal Judgment, [5269(4)].
In opposing the declaration sought by the Viterra Parties, Hughes relied on Warramunda Village Inc v Pryde[31] as supporting the proposition that “[t]he remedy of a declaration is not an appropriate way of recording in a summary form, conclusions reached by the Court in reasons for judgment”.[32] In reply, the Viterra Parties disputed that Warramunda Village Inc v Pryde stood for this broad proposition. Rather, they contended that the decision should be confined to the specific facts of the case, namely that the trial judge had failed to make all factual findings necessary to underpin the declaration. The Viterra Parties submitted that no such error had occurred in the present proceeding and that all necessary factual findings to support the declaration sought had been made in the Principal Judgment.
[31](2001) 105 FCR 437.
[32]Ibid, 440 [8] (Gray, Branson and North JJ). See also Campaigntrack Pty Ltd v Real Estate ToolBox Pty Ltd(No 2) [2021] FCA 1053, [7] (Thawley J).
Hughes further submitted that the declaration should not be granted because the Viterra Parties did not seek any such relief in their second further amended statement of claim on third party notice. Furthermore, Hughes submitted that the historical nature of the breaches and the fact that he was no longer in any continuing relationship with the Viterra Parties necessarily meant that the declaration, if granted, would produce no foreseeable consequences for the parties.
In response to the reference to the Indemnity Agreement in the proposed declaration, Hughes submitted that declaratory relief must be directed to the determination of legal controversies. In his supplementary submissions, Hughes noted that he had previously accepted that the Indemnity Agreement did not provide him with an indemnity to the claims made against him in the third party claim.[33] Hughes therefore submitted that there was no legal controversy in relation to the Indemnity Agreement because, if he sought to raise the issue in some future litigation, an Anshun estoppel would arise or the court would stay the proceedings.[34]

CostsC.2

[33]See Principal Judgment, [5266].

[34]See Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.

In submitting that they should properly be considered the successful party in their claim against Hughes, the Viterra Parties relied on the fact that their case was primarily run on the basis that they did not know about the practices alleged to have been engaged in by Joe White (“the Viterra Practices”).[35] They referred to their position at trial, where they had submitted that if the Viterra Practices had occurred the Viterra Parties’ liability should be passed on to the third parties by reason of the failure of the third parties to disclose the existence of the Viterra Practices to the Viterra Parties.
[35]Principal Judgment, [1851].
The Viterra Parties noted that no attempt was made by them at trial to quantify any damage arising from the breach of contract, other than to seek to “pass through” any liability and costs arising from Cargill Australia’s claims against the Viterra Parties.[36] Accordingly, they submitted that, as between Viterra and Hughes, the Viterra Parties had sought only to establish breach of contract and not the quantum of any damages. The Viterra Parties submitted that the vast majority of time at trial had been devoted to establishing the breach of contract by Hughes, and that comparatively little time had been devoted to the issue of loss on which the Viterra Parties were ultimately unsuccessful.
[36]Ibid, [53]-[54], [4795].
The Viterra Parties further submitted that they had successfully established that Hughes had engaged in serious misconduct and, by reference to the Principal Judgment, “for a period of time the Viterra Parties were undoubtedly deprived of the possibility to avoid liability to Cargill Australia”.[37] They also contended that, in deciding to proceed with the sale in October 2013, the Viterra Parties had relied to a significant extent on what they had been told by Hughes and other executives of Joe White.[38]
[37]Ibid, [5263]. In the Viterra Parties’ written submissions, they erroneously contended that as a result of Hughes’ breaches they were not actually aware of the Viterra Practices. At the hearing, they acknowledged this contention was incorrect.
[38]Ibid, [1357], including fn 819, was relied upon to support this submission.
Hughes submitted that he was the successful party and should be entitled to an order for costs for 6 reasons.
(1)Hughes was wholly successful in defeating the Viterra Parties’ claim for misleading or deceptive conduct.[39]
(2)While the Viterra Parties were successful in proving a breach of the Hughes/Viterra Contract, they failed to prove they had suffered any loss or damage.[40] Contrary to the Viterra Parties’ submissions, the contractual claim could not properly be characterised as a proceeding for the vindication of any right, rather it was made purely for the purpose of passing through to Hughes and others the Viterra Parties’ liability to Cargill Australia.
(3)The Viterra Parties had not sought to quantify any damages suffered as a result of Hughes’ breach, which constituted a failure to prosecute all relevant aspects of the claim.
(4)To the extent that the Viterra Parties asserted they had been vindicated by the findings made about Hughes’ conduct, they had not provided an explanation as to why it was necessary to join Hughes as a third party in order to achieve this result. The factual findings made against Hughes were sought by the Cargill Parties against the Viterra Parties, and it was open to the Viterra Parties not to have contested those findings, or to have agitated the relevant issues by raising an apportionment defence alone.[41]
(5)The Viterra Parties had not pointed to any of the recognised circumstances to establish why Hughes, as the successful party, should be deprived of his costs, and no such circumstances existed.
(6)In exercising its power to award costs, the court must have regard to the overarching purpose of the Civil Procedure Act 2010 (Vic), which includes “the cost effective resolution of the real issues in dispute”.[42] The court should take into account the disproportionate costs involved in a proceeding when assessed against the award of nominal damages.
[39]Ibid, issues 124-128, [4774]-[5119].
[40]Ibid, [5264].
[41]The Viterra Parties submitted that this submission was wrong, as Hughes would not have met the definition of a concurrent wrongdoer under ss 24AF and 24AN of the Wrongs Act 1958 (Vic). It is unnecessary to determine this issue for the purposes of this application. I will proceed on the assumption that the Viterra Parties’ submission is correct.
[42]Civil Procedure Act, s 1(c).
Hughes further submitted that the transaction at the centre of the dispute had involved the Viterra Parties selling a business which was overvalued. When this overvaluation became apparent (which, in Hughes’ submission, occurred prior to completion of the sale), the Viterra Parties had continued to completion, holding on to the advantage they had gained. At the same time, the Viterra Parties turned to their employees, including Hughes, and claimed that if it was found that too much had been paid and the amount of the overvaluation had to be returned, then the employees would be required to compensate the Viterra Parties for this same amount. Hughes submitted, as he had at trial, that this claim against him was fundamentally misconceived. If the Viterra Parties had sold at an overvalue and then been required to return the extra money received (as has been found), they would have suffered no loss which could be properly passed through to the employees.
Hughes submitted that a different approach had been open to the Viterra Parties. It was contended they could have sought compensation from Hughes for the transaction costs which would have been wasted in selling the business (“the Joe White Business”)[43] at an overvalue and later paying back the overpayment. Hughes contended that this would have been a balanced approach. However, the Viterra Parties instead chose unsuccessfully to seek a level of compensation which would have enabled them to keep the benefits of having sold the asset at an overvalue.

AnalysisD.

Declaratory reliefD.1

[43]As to the full meaning of the Joe White Business, see Principal Judgment, fn 13.

The declaration should not be made for a number of reasons, each of which lead to the conclusion that it would be an inappropriate exercise of the court’s discretion to grant the relief sought.
First, the declaration sought was not the subject of any pleading. Although the prayer for relief in a pleading does not form part of the allegations made, in this case the parties were repeatedly told that the only issues the court would determine were those expressly referred to in the pleadings.[44] At the court’s direction, the issues as they arose on the pleadings were made the subject of an agreed list of issues for determination. This list of issues included any questions that arose on the pleadings in relation to the relief sought (other than questions relating to interest and costs).
[44]See Principal Judgment, fn 1096. See also at [1920], [3563].
Secondly, the history of this application demonstrated that seeking declaratory relief was plainly an afterthought on the part of the Viterra Parties.[45] In these circumstances, it must follow that Hughes could not have had any real expectation of the Viterra Parties seeking the relief they now seek. In my view, this is particularly relevant in circumstances where Hughes chose not to give evidence based on the pleadings as they stood.[46]
[45]See pars 5-18 above.
[46]See Principal Judgment, [3278].
Further, it is difficult to understand how it was not obvious to the Viterra Parties that the facts as found could not have been foreseen when each of them has been made strictly on the pleaded allegations and closing submissions. A central issue in the case was whether or not Hughes had acted dishonestly or unethically. Further, Hughes always maintained that he ought not be liable to the Viterra Parties, including by reason that any loss suffered by them was not caused by any conduct of Hughes.[47] In short, the issues as defined in the proceeding meant it was plainly possible that Hughes might have been found liable under the Australian Consumer Law or for breach of contract and also have been found not to have caused the Viterra Parties any loss.
[47]Ibid, [5135]. Thirty two pages of Hughes’ written closing submissions directly addressed why it was contended that the Viterra Parties were informed by Hughes of the relevant matters and that the case of the Viterra Parties based upon the alleged lost opportunity causing them loss ought to fail.
Thirdly, in light of the position adopted by Hughes in closing submissions, there has been no adjudication whatsoever on the position of Hughes under the Indemnity Agreement. Thus, it would be entirely inappropriate for the court to make a declaration when no relevant determination has been made on this issue. This is the case whether or not Hughes’ submission concerning an Anshun estoppel ought to be accepted,[48] and regardless of the gravity of Hughes’ misconduct. That said, as a matter of substance, the foreseeable consequence identified by the Viterra Parties that there would no longer be any possibility of further dispute regarding the Indemnity Agreement was illusory. As submitted by Hughes, this was already the position in the absence of any declaration. At trial, Hughes had already accepted that the Indemnity Agreement did not indemnify him against the third party claim.
[48]By making this observation, there is no suggestion that it would not be accepted. Put simply, the inappropriateness of the making of a declaration as sought concerning the Indemnity Agreement applies regardless of whether or not an Anshun estoppel could arise.
Fourthly, the Indemnity Agreement was an agreement between Hughes and Viterra Inc, a company not a party to the proceeding. It is not appropriate for the Viterra Parties to move for a declaration in relation to a right to which none of them is entitled and which is sought to be obtained for the benefit of an entity which is not a party to the proceeding.
Fifthly, the language in the Indemnity Agreement (about which there has been no findings made) was different to the language in the Hughes/Viterra Contract. While the Hughes/Viterra Contract required Hughes to act honestly, ethically and in the best interest of Viterra Ltd, the Indemnity Agreement required Hughes to act honestly and in good faith with a view to the best interests of “the Corporation or Subsidiary” (being Viterra Inc or any wholly owned or controlled subsidiary of Viterra Inc). No consideration was given in the Principal Judgment to the meaning of these terms in the context of the Indemnity Agreement.
Sixthly, insofar as a declaration is sought concerning the Hughes/Viterra Contract, it is very broad in its terms. It does not specifically identify which acts or omissions were said to give rise to Hughes failing to act ethically, honestly and in the best interest of Viterra Ltd, and thereby in breach of his contract of service for an unspecified period after 1 November 2009 until, presumably, 31 October 2013.
Seventhly, much like the declaration sought by Cargill, Inc against the Viterra Parties in this proceeding,[49] the first paragraph of the declaration sought by the Viterra Parties relating to Hughes’ misconduct would have no foreseeable consequences for the parties. As correctly submitted by Hughes, the breaches found were historical, and the parties are not in any continuing relationship.
[49]See Principal Judgment, [5288]-[5290].
For each of these reasons, both independently (in whole or in part, depending on the scope of the subject matter of the particular reason) and collectively, no declaration will be made.
For completeness, given the extent of the submissions made concerning the case of Warramunda Village Inc v Pryde,[50] it should be referred to briefly. The facts in that case were far removed from those presently at hand. The trial judge, when considering an application under the Workplace Relations Act 1996 (Cth), was required to determine whether a certain type of shift known as a sleepover shift was covered by the provisions of 2 awards.[51] The trial judge found that these shifts were covered by the awards, but did not make any factual findings as to whether any of the applicants had worked a sleepover shift on any particular day.[52] As a purported means of recording the findings on the application of the awards, the trial judge made declarations that the respondent at trial had breached the awards by failing to pay the applicants while engaged in sleepover duties.[53] On appeal, it was held that the declarations made were not declarations of right and were no more than summary expressions of the trial judge’s conclusions.[54] Accordingly, no appeal could be made with respect to them.[55]

CostsD.2

[50](2001) 105 FCR 437 (Gray, Branson and North JJ).

[51]Ibid, 439 [4].

[52]Ibid.

[53]Ibid, 439 [5].

[54]Ibid, 442 [13].

[55]Ibid, 442, [14].

As identified by both the Viterra Parties and Hughes, the objective of the Viterra Parties in bringing the claims against Hughes was to pass through to Hughes (and the other third parties) any liability that the Viterra Parties were found to have to Cargill Australia.[56] It was not a case in which the primary aim was to establish or vindicate a legal right. While, as part of their primary case, the Viterra Parties denied any such liability to Cargill Australia, their claim against the third parties recognised they could face a substantial liability if unsuccessful and would benefit if any liability were passed through to another. The Viterra Parties’ submission that they did not seek to quantify any loss caused by Hughes was of little significance given their entire aim was to pass through a loss that, on their primary case, they claimed did not exist. As the Viterra Parties were found to have substantial liability to Cargill Australia, and have not been able to pass this liability through to Hughes (or any other third party), it necessarily follows that the Viterra Parties have failed to achieve the primary objective of their third party claim.
[56]See Principal Judgment, [53]-[54], [4795], [5121].
As to the amount of time spent on particular issues, little need be said. In fact, there was a significant body of evidence concerning what the Viterra Parties claimed they would have done if they had been told about, broadly speaking, the Viterra Practices or the inaccuracy of certain warranties (whether earlier, more comprehensively or at all).[57] Further, a very large part of the third party proceeding was spent on dealing with alleged contraventions of the Australian Consumer Law, including as part of a warranty verification process, in relation to which the Viterra Parties were unsuccessful.[58] But whatever the amount of time spent on various issues, it did not change the fact that the Viterra Parties fundamentally failed to achieve their stated objective with respect to the third party proceeding.
[57]See issues 131, 139, ibid, [5132]-[5182], [5261]-[5264].
[58]Ibid, issues 124-128, [4774]-[5119].

Further, as submitted by Hughes, the objective of the Viterra Parties’ claim against him was problematic from the outset. The case against the Viterra Parties was that they had unlawfully sold an asset at an overvalue. Based on the possible scenario that Cargill Australia succeeded, the Viterra Parties sought to retain the additional money paid to them as a result of the overvaluation by passing their liability on to Hughes and others. In other words, on the assumption that Cargill Australia’s allegations were correct, the Viterra Parties sought to maintain possession of their ill-gotten gains rather than make a claim against others that was consistent with the Viterra Parties only receiving an amount that reflected the true value of the Joe White Business.
Specifically in relation to the claim against Hughes for breach of contract, there were further obvious difficulties. The Viterra Parties failed to acknowledge that, if Hughes had not breached his contract and accordingly had not authorised and engaged in the Viterra Practices over many years leading up to the sale in August 2013, Joe White would not have been able to perform as it had done or produce the results that it did,[59] and thus realistically would not have been able to attract a purchase price of anything like $420 million in the first place.
[59]Ibid, [2560]-[2613].
Furthermore, the finding in the Principal Judgment that the Viterra Parties were deprived of the possibility to avoid liability to Cargill Australia due to Hughes’ misconduct “for a period of time”[60] must be put in context. In the Principal Judgment, it was found that the Viterra Parties were deprived of the possibility to avoid liability only up until around 22 October 2013.[61] After this time, Hughes and others gave substantial details of the position within Joe White. Nevertheless, the Viterra Parties failed to properly investigate the matters raised and pressed on towards completion of the sale.[62] This led to the finding that the loss suffered by Cargill Australia was because of the conduct of the Viterra Parties in pursuing completion of the sale despite being on notice of material financial and operational issues with the Joe White Business.[63]
[60]Ibid, [5263].
[61]Ibid, [5160]-[5174].
[62]Despite this approach being queried internally: ibid, [1454].
[63]Ibid, [5263].
Moreover, in relation to the Viterra Parties’ contention that, in proceeding to completion of the sale, they had relied significantly on what was said by Hughes and other employees regarding the Viterra Practices, it did not take the matter any further. Leaving aside the significant issues with the reliability of the evidence of the key witness in question, this submission failed to grapple with the extensive amount of information that was provided to the Viterra Parties about the Viterra Practices on and after 22 October 2013.[64] The submission also failed to address the fact that, in so relying, the Viterra Parties had effectively ignored the concerns raised by the Cargill Parties.[65] They also made no attempt to confirm with others operating in the malting industry whether the practices in question were standard or acceptable.[66] This approach by the Viterra Parties in October 2013 was indicative of an unwillingness to properly confront and address the issues with the Joe White Business.
[64]See, for example, Principal Judgment, annexure C.
[65]Principal Judgment, [1444]-[1450], [1545], [1549].
[66]Ibid, [1342].
More generally, when the facts of this case are viewed objectively as a whole, the Viterra Parties must be considered to be wholly unsuccessful in their objective concerning the third party proceeding, that is, to pass through any of their liability to Hughes arising out of the findings made in favour of Cargill Australia. Obversely, Hughes was clearly successful in resisting this objective.
In light of the above, as between the Viterra Parties and Hughes, Hughes is the successful party and is entitled to an order for costs on a standard basis.
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[2022] VSC 164

4 April 2022