Hodgson v Amcor Ltd
[2012] VSC 94
•20 MARCH 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
SCI 9420 of 2004
| JAMES GEORGE HODGSON | Plaintiff |
| v | |
| AMCOR LTD (ACN 000 017 372) | Defendant |
SCI 8181 of 2007
| AMCOR LTD AND ORS (ACN 000 017 372) | Plaintiffs |
| v | |
| TREVOR MARK BARNES AND ORS | Defendants |
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JUDGE: | VICKERY J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 30-31 MARCH 2011; 1 APRIL 2011; 16–19, 23–26, 30-31 MAY 2011; 1–2, 6-10, 14-16, 20-23, 27-29 JUNE 2011; 25-28 JULY 2011; & 1 AUGUST 2011 | |
DATE OF JUDGMENT: | 20 MARCH 2012 | |
CASE MAY BE CITED AS: | HODGSON v AMCOR; AMCOR v BARNES & ORS | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 94 | 1st Revision: 2 May 2012 |
NOTE: This version has been amended pursuant to the ‘Slip Rule’ by Order made 1 May 2012 and reasons: James George Hodgson v Amcor (No. 8) [2012] VSC 162
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COMPANIES – “Officer” of a corporation – Duties arising under ss 180, 181, 182 and 183 Corporations Act 2001 - Persons who constitute the directing mind of a corporation –Alleged sale of company assets on uncommercial terms – concept of an ‘uncommercial transaction’ – Whether breach of fiduciary duty for employee to participate in a sale of company assets on uncommercial terms – Noting business opportunities – Whether breach of fiduciary duty to employer – Making preparations for new business following termination of employment - Whether breach of fiduciary duty to employer - Concealing useful commercial intelligence from employer – Whether breach of fiduciary duty to employer – Failing to disclose own breaches of fiduciary duty – Whether in itself a breach of fiduciary duty to employer – Compensation under Corporations Act 2001 s 1317H – Claims by shareholders for losses suffered by a company - Claims by shareholder for damages reflective of company losses
EMPLOYER and EMPLOYEE – Redundancy at common law – Whether employee made redundant – Contractual termination by notice – Purported summary dismissal post termination – Whether purported ground of summary dismissal made out - Burden on employer to establish serious misconduct – Whether grounds of termination may change by reason of after acquired information – Application of principle in Shepherd v Felt and Textiles of Australia (1931) 45 CLR 359 – Entitlement to bonus – Quantum of bonus – Long service leave calculation – Annual leave calculation – Whether accrued entitlements survive termination – Sale of employers’ businesses to employees – Fiduciary duties of employees
EQUITY – Fiduciary duties of employees - Equitable remedies – Election as to relief - Equitable compensation - Taking of accounts – Causation and equitable relief – Barnes v Addy liability – Knowledge of fiduciary breach – Equitable defence of laches in relation to fiduciary claims
EVIDENCE – Admissions made by a party in computer stored information- ss 59(1), 81(1), 87(1)(a) Evidence Act 2008 – Admissions admissible against parties other than the maker – s 87(1)(a) Evidence Act 2008 – Proof of requirements under s 87(1)(a) Evidence Act 2008
PRACTICE and PROCEDURE – Application at trial to amend defence to withdraw an admission - Principles to be applied – Anshun estoppel - Principles to be applied
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff (9420 of 2004) | Mr C Gunst QC with Mr P Booth of counsel | A.J. Macken & Co |
| For the Defendant (9420 of 2004) | Mr WT Houghton QC with Mr G Fitzgerald of counsel | Corrs Chambers Westgarth |
| For the Plaintiffs (8181 of 2007) | Mr WT Houghton QC with Mr G Fitzgerald of counsel | Corrs Chambers Westgarth |
| The First Defendant (8181 of 2007) | Mr T Barnes appeared in person | |
| The Second–Fourth Defendants (8181 of 2007) | Mr PJ Riordan SC with Mr SJ Maiden of counsel | Mills Oakley |
| The Fifth Defendant (8181 of 2007) | Mr Sangster appeared in person | |
| The Sixth–Seventh Defendants (8181 of 2007) | Mr M Champion of counsel | Mr David Shaw |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
The Hodgson Proceeding........................................................................................................... 1
The Barnes Proceeding............................................................................................................... 2
Amcor......................................................................................................................................... 3
Barnes Proceeding - The First Sale Agreement......................................................................... 4
Barnes Proceeding - Second Sale Agreement............................................................................ 5
Amcor Parties............................................................................................................................ 7
Amcor Packaging (Australia) Pty Ltd (“APA”)....................................................................... 8
Corrugating/AFPA.................................................................................................................... 9
Speciality Packaging Group Pty Ltd (Formerly Service Containers Pty Ltd)........................ 10
ACN 002693843 Box Pty Ltd (“ACB”).................................................................................. 11
Re-organisation of Amcor operations (2000)........................................................................... 12
Changes to Key Personnel Following Re-organisation........................................................... 12
Hodgson................................................................................................................................... 13
Bankson Pty Ltd...................................................................................................................... 16
Hodgson’s Employment Contract........................................................................................... 16
Hodgson’s Scope and Level of Authority................................................................................. 16
Amcor’s Principal Allegations Against Hodgson................................................................... 19
Barnes....................................................................................................................................... 19
Barnes ’s Employment Contract.............................................................................................. 20
Barnes Scope and Level of Authority....................................................................................... 23
Barnes’ Cessation of Employment with Amcor....................................................................... 24
Barnes Federal Court Proceeding Settlement.......................................................................... 24
Barnes’ Companies................................................................................................................... 25
Amcor’s Principal Case Against Barnes................................................................................. 25
Holihan.................................................................................................................................... 26
Holihan ’s Employment Contract............................................................................................ 26
Holihan’s Scope and Level of Authority.................................................................................. 28
Holihan s’ Cessation of Employment with Amcor.................................................................. 29
ACB (Australia) Pty Ltd......................................................................................................... 29
Australian Corrugated Box Co Pty Ltd (formerly Achilla Pty Ltd)....................................... 30
Holihan Investments Pty Ltd.................................................................................................. 30
Amcor’s Principal Case Against Holihan............................................................................... 31
Sangster................................................................................................................................... 31
Sangster ’s Employment Contract........................................................................................... 32
Sangster’s Scope and Level of Authority................................................................................. 33
Sangster’s Cessation of Employment with Amcor.................................................................. 35
Sangster’s Federal Court Proceeding Settlement.................................................................... 35
Merrymen Pty Ltd................................................................................................................... 35
Amcor’s Principal Case Against Sangster.............................................................................. 36
Bayley....................................................................................................................................... 36
Bayley’s Employment Contract............................................................................................... 37
Bayley’s Scope and Level of Authority.................................................................................... 40
Bayley’s Cessation of Employment with Amcor...................................................................... 40
Bayley’s Federal Court Proceeding Settlement....................................................................... 41
CBB Investments Pty Ltd........................................................................................................ 41
Amcor’s Principal Case Against Bayley.................................................................................. 41
Mihelic..................................................................................................................................... 42
Mihelic ’s Employment Contract............................................................................................. 43
Mihelic’s Scope and Level of Authority................................................................................... 45
Mihelic’s Cessation of Employment with Amcor.................................................................... 45
Mihelic’s Federal Court Proceeding Settlement...................................................................... 45
Sampson Solo Pty Ltd.............................................................................................................. 46
Amcor’s Principal Case Against Mihelic................................................................................ 46
Summary of Relevant Organisational Relationships within Amcor....................................... 47
Hottes....................................................................................................................................... 47
Hottes’ Scope and Level of Authority...................................................................................... 49
Carter Holt Harvey.................................................................................................................. 49
AMCG..................................................................................................................................... 49
Directors, Shareholders and Officers of AMCG...................................................................... 51
Business of AMCG.................................................................................................................. 52
CHH “Side Letter”.................................................................................................................. 52
The ACB Business................................................................................................................... 52
Amcor’s Management of the ACB Business............................................................................ 53
Amcor’s Proposals to Deal with the ACB business (late 1990’s until sale to Holihan)......... 54
Conclusion as to the Position of ACB within Amcor.............................................................. 61
Amcor’s Cartel Conduct.................................................................................................................. 62
Whether Hodgson was a ‘Whistleblower’................................................................................... 65
Events Giving Rise to the Proceedings........................................................................................ 68
Hodgson’s Monetary Claim Against Amcor............................................................................... 70
Hodgson’s Employment Contract........................................................................................... 71
Total fixed remuneration......................................................................................................... 71
Whether Hodgson Made Redundant....................................................................................... 72
Basis of Hodgson’s Claim to Redundancy............................................................................... 74
Amcor Principal Case on Redundancy.................................................................................... 74
Common Law Relating to Redundancy................................................................................... 75
Whether Amcor’s Re-organisation Was Capable of Giving Rise to a Redundancy of Hodgson 82
Hodgson’s Termination........................................................................................................... 85
Termination Contractual Provisions....................................................................................... 86
Events Commencing 5 August 2004 Leading up to Hodgson’s Dismissal with Effect 1 October 2004.................................................................................................................................................. 87
Events Following 11 August 2004.......................................................................................... 91
Letter Dated 29 September 2004.............................................................................................. 92
Conclusion as to the Effect of the 29 September Letter............................................................ 94
Validity of the 29 September 2004 Letter................................................................................ 95
Events leading up to the 13 December 2004 Purported Summary Dismissal of Hodgson..... 99
Purported Summary Dismissal of Hodgson.......................................................................... 101
The Validity of the Purported Dismissal of Hodgson of 13 December 2004......................... 101
Amcor’s Case on Hodgson’s Involvement in the Cartel as a Ground for Summary Dismissal 102
Payment in Lieu of Notice..................................................................................................... 109
MIP Bonus............................................................................................................................. 109
Accrued Entitlements............................................................................................................ 116
Calculation of Long Service Leave......................................................................................... 116
Calculation of Annual Leave................................................................................................. 120
Accrued Annual Leave and Long Service Leave Survive Termination................................. 121
Payments Made to Date......................................................................................................... 122
Summary of Hodgson’s Entitlements on Termination......................................................... 122
Claim for Interest................................................................................................................... 123
Briginshaw Standard of Persuasion........................................................................................... 123
First Sale Agreement – Sale of the Service Packaging Business.......................................... 125
Amcor’s Management of the Service Packaging Business................................................ 125
Amcor’s proposals to deal with the business (late 1990’s until sale to Hottes)..................... 126
Key Terms and Effect of the First Sale Agreement................................................................ 127
Amcor’s Approval of the First Sale Agreement..................................................................... 128
Involvement of Hodgson and the Other Defendants............................................................. 129
The Deacons 19 December 2000 – the “Dillman Advice”.................................................... 129
Steps taken to Effect the Sale to Hottes.................................................................................. 134
First Sale Agreement Extension – the Addendum to the Supply Agreement....................... 141
First G5 Deed.................................................................................................................................. 141
Second G5Deed.............................................................................................................................. 144
Confidentiality of G5 Deeds........................................................................................................ 145
Whether the G5 Deeds Proceeded With.................................................................................... 146
The 3M Wrapping Business.................................................................................................. 146
Evidence of the First G5 Deed being subject to Oral Conditions........................................ 147
Evidence of the Second G5 Deed being subject to Oral Conditions.................................... 149
Whether the First and Second G5 Deeds Subject to Oral Conditions................................. 151
Hottes Email of 3 September 2003......................................................................................... 151
Ian to Ian Letter..................................................................................................................... 152
Pleadings................................................................................................................................ 156
Dettmar’s Evidence................................................................................................................ 157
Mrs Hottes Evidence.............................................................................................................. 158
“Secret Partners” Conversation............................................................................................ 158
Meeting of Sangster and Barnes with the Hottes in July 2004............................................. 159
Assessment of Mrs Hottes’ Evidence as to the “Secret Partners Confession”...................... 160
No Assessment of Commercial Viability............................................................................... 162
Barnes Computer Information.................................................................................................... 162
Source and Form of the Barnes Computer Information........................................................ 163
Admissibility of Barnes Computer Information..................................................................... 165
Legal Principles...................................................................................................................... 166
Application of s. 87(1)(c) to the Documents in Question..................................................... 174
Barnes Computer Information - Service Packaging Business............................................... 175
Barnes Computer Information – ACB Business.................................................................... 178
The Barnes Finance Letter and the Toyota Printout............................................................. 181
Evidence Supporting the Defendants’ Position Relating to the Service Packaging Business 186
Conclusion as to Ownership of the Service Packaging Business......................................... 188
Acquisition of the Service Packaging Business by Mrs Hottes and Reacquisition by Amcor 190
Service Packaging Business Profits............................................................................................ 192
The Second Sale Agreement – Sale of the ACB Business...................................................... 193
The ACB Business................................................................................................................. 193
Amcor Decision to Sell the ACB Business............................................................................ 194
Holihan’s Proposal to Purchase the ACB Business............................................................... 195
Amcor’s Approval of the Second Sale Agreement................................................................. 196
Role of CERG......................................................................................................................... 198
MBOs..................................................................................................................................... 200
Sale of the ACB Business by Amcor (the Second Sale Agreement)....................................... 201
Negotiation of the Sale Price.................................................................................................. 203
Whether Sale of the Assets or Sale of the Business................................................................ 205
No Approval the Sale of the ACB Business to Defendants other than Holihan.................... 206
Involvement of Defendants in the Second Sale Agreement (Amcor’s Sale of the ACB Business) 207
Barnes.................................................................................................................................... 207
Hodgson............................................................................................................................... 208
Sangster................................................................................................................................ 209
Bayley.................................................................................................................................... 209
Mihelic.................................................................................................................................. 210
Interest of the Defendants in the Acquisition of the ACB Business.................................... 211
Genesis of the Involvement of Barnes in the ACB Business.................................................. 211
False Advice from Barnes to Holihan that Barnes Involvement Approved by Amcor.......... 214
Barnes Involves the Other Shareholders................................................................................ 215
Incorporation of Holihan Investments and LeoRose.............................................................. 217
The 26 May 80/20 Holihan/Barnes Agreement..................................................................... 217
The 26 May 80/20 Shareholders Deed (marked ”Cancelled”)............................................... 219
The ACB Business Structure (80/20 Split)........................................................................... 220
Confidentiality as to the ACB Business Structure................................................................ 222
Findings as to the Confidentiality Regime Relating to the ACB Business Structure........... 224
Events Following May 2003.................................................................................................. 225
Disclosure to Holihan of Identity of Other Shareholders...................................................... 226
28 May Holihan/Barnes 50/50 Agreement Executed October 2005..................................... 227
Confidentiality of the 28 May Holihan/Barnes 50/50 Agreement........................................ 229
Defendants Cases in relation to the 26 May 80/20 Shareholders Deed............................... 229
Hodgson................................................................................................................................. 230
Barnes..................................................................................................................................... 231
Sangster................................................................................................................................. 233
Mihelic................................................................................................................................... 233
Bayley..................................................................................................................................... 234
Holihan.................................................................................................................................. 235
Amcor’s Case in relation to the 26 May 80/20 Shareholders Deed....................................... 235
Findings as to the Alleged Cancellation of the 26 May 80/20 Shareholders Deed............ 236
Contextual Evidence.............................................................................................................. 237
Dividend Evidence................................................................................................................. 238
Barnes Computer Information............................................................................................... 243
Events Leading to October 2005............................................................................................ 243
Whether Defendants (other than Holihan and Barnes) Continue to Hold an Interest in the ACB Business................................................................................................................................. 245
Uncommercial Transaction.......................................................................................................... 248
Legal Principles...................................................................................................................... 248
Uncommercial Transaction - First Sale Agreement (Service Packaging Business).............. 250
Purchase Price - First Sale Agreement.................................................................................. 251
Provision of Vendor Finance - First Sale Agreement............................................................ 253
Payment of Stock in Instalments - First Sale Agreement..................................................... 253
59 day Payment Terms - First Sale Agreement..................................................................... 254
Price Increases under the Supply Agreement - First Sale Agreement.................................. 254
Lease of Premises at Below Market Rent - First Sale Agreement.......................................... 254
Loss of Use of Funds.............................................................................................................. 255
Extension of Supply Agreement............................................................................................ 255
Fundamental Difference in Approach between Experts........................................................ 256
Whether Other Terms in the First Sale Agreement Uncommercial...................................... 257
No Relevant Conduct of the Defendants giving rise to any Uncommercial Terms.............. 259
No Loss to Amcor................................................................................................................... 259
Uncommercial Transaction – ACB Business Sale................................................................. 260
Sale at Undervalue Allegation – ACB Business Sale............................................................ 268
Provision of Vendor Finance................................................................................................. 274
Payment of stock in instalments............................................................................................ 274
Price increases under the supply agreements........................................................................ 275
Purchase of goods on same day terms.................................................................................... 277
Cost of sale documentation.................................................................................................... 277
Sub-Lease below market rent................................................................................................. 278
Loss of Use of Funds.............................................................................................................. 280
Conclusion as to Uncommercial Transaction – Second Sale Agreement.............................. 281
No Relevant Conduct of the Defendants giving rise to any Uncommercial Terms.............. 281
Liability of Defendants under Corporations Act..................................................................... 283
Whether Defendants “Officers” of Amcor............................................................................. 286
The Position of Hodgson........................................................................................................ 291
Position of the Other Defendants.......................................................................................... 293
Finding as to ss 180 and 182 Corporations Act.................................................................... 293
Finding as to s 181(1)(a) Corporations Act........................................................................... 294
Identification of a Fiduciary Relationship............................................................................. 294
Relationship Between a Binding Contract and a Fiduciary Relationship............................. 296
Content of Fiduciary Duty.................................................................................................... 297
Fiduciary Duty Proscriptive not Prescriptive....................................................................... 299
Fiduciary Duty of Employee.................................................................................................. 299
Conflict of Interest................................................................................................................. 300
Employee Taking Preparatory Steps...................................................................................... 301
Cessation of Duty.................................................................................................................. 302
Informed Consent................................................................................................................... 302
Chinese Walls......................................................................................................................... 303
Breaches of Fiduciary Duty................................................................................................... 303
Further Breach by Hodgson of s 181(1)(a) Corporations Act............................................... 308
Breach by Other Defendants of s 183 Corporations Act....................................................... 308
Amcor’s Case Against Holihan............................................................................................. 309
Whether Holihan in Breach of any Duty to the Amcor Parties............................................ 312
AMCG Allegation made against Hodgson............................................................................... 318
Hodgson’s Involvement with CHH....................................................................................... 319
Payments from AMCG.......................................................................................................... 330
Whether Hodgson breached any duty to Amcor arising from his involvement with AMCG 333
Amcor’s General AMCG Allegation..................................................................................... 334
Whether Hodgson Enticed Defendants to Work for AMCG................................................. 335
Mis-Use of Amcor’s Documents............................................................................................ 336
Incorporation of AMCG........................................................................................................ 336
Renting Premises and Acquiring Office Furniture and Equipment..................................... 337
Canvassing of Customers...................................................................................................... 337
Noting of Business Opportunities for AMCG’s Business.................................................... 337
Preparations to Conduct AMCG’s Business......................................................................... 339
Provision of Consultancy Services........................................................................................ 339
Concealing Information Useful to Amcor............................................................................. 340
Employee Failing to Disclose Own Breaches......................................................................... 342
Consequence of Hodgson’s Breaches of Duty......................................................................... 346
Remedies.......................................................................................................................................... 357
Amcor’s Claims...................................................................................................................... 357
Election as to Relief................................................................................................................ 359
Legal Basis for Amcor’s Claims............................................................................................. 360
General Principles of Equitable Compensation..................................................................... 362
Causation and Equitable Compensation................................................................................ 363
Loss Based and Gain Based Equitable Compensation........................................................... 368
Account of Profits.................................................................................................................. 370
Compensation under the Corporations Act........................................................................... 371
Application of the Remedies to the Facts............................................................................... 372
Compensable Loss or Profits Derived from the First Sale Agreement................................... 373
Equitable Compensation, Constructive Trust and Account of Profits - ACB Business...... 375
Liability of the Defendants (other than Barnes and Holihan) for Profits of the ACB Business 376
Accountability of Barnes........................................................................................................ 377
Accountability of Holihan...................................................................................................... 379
Whether the Correct Plaintiff...................................................................................................... 380
Deed of Accession – Second Sale Agreement......................................................................... 388
Limitation of Action Defences.................................................................................................... 389
Corporations Act Claims....................................................................................................... 389
Fiduciary Claim Against Barnes........................................................................................... 390
Anshun Estoppel............................................................................................................................. 391
Application of the principles.................................................................................................. 398
Orders............................................................................................................................................... 399
HIS HONOUR:
Introduction
The Court has before it two proceedings which were heard concurrently in a joint trial:
(a)James George Hodgson v Amcor Limited and Amcor Limited & Others (Supreme Court Proceeding No. 9420 of 2004) (the “Hodgson Proceeding”); and
(b)Amcor Limited & Others and Trevor Mark Barnes & Others (Supreme Court Proceeding No. 8181 of 2007) (the “Barnes Proceeding”).
The proceedings involve a substantial multinational business based in Australia, generally known as Amcor. The Amcor group of companies comprise one of the world's largest packaging manufacturers and distributors.
Serious issues have arisen between Amcor Limited and a number of its former senior managers which have spawned this complex litigation. In these reasons the former senior managers are called collectively the “Defendants”, with the composition of that group changing from time to time in accordance with the context.
All of the Amcor entities are collectively referred to as “Amcor” or the “Amcor Parties”, again with the composition of those entities changing from time to time in accordance with the context.
The Hodgson Proceeding
In the Hodgson Proceeding, Mr James Hodgson (“Hodgson”) as the Plaintiff claims amounts due to him under his contract of employment with Amcor consequent on the termination of his employment with that company which he claims to have occurred on 1 October 2004. Hodgson, at the time of his departure from Amcor occupied a senior position as Group General Manager of Amcor’s corrugating division known as Amcor Fibre Packaging Australia (“Corrugating/AFPA”). The company has defended Mr Hodgson's claims, by challenging the quantum of the sum due to him, and on the basis that he is disentitled to the amounts he claims by reason of serious misconduct, as alleged in Amcor’s counter-claim.
The trial of the quantum of Hodgson’s claim in the Hodgson Proceeding was conducted in an earlier and separate trial. The balance of the issues, including Amcor’s counter-claim, were heard in the principal trial which was conducted concurrently with the Barnes Proceeding. These reasons include reasons for decision in relation to both parts of the Hodgson Proceeding.
The Barnes Proceeding
In the Barnes Proceeding, the Amcor Parties claim that the natural person Defendants, Messrs Trevor Barnes “(Barnes”), Craig Holihan (“Holihan”), Ian Sangster (”Sangster”), Roger Bayley (“Bayley”) and Albert Mihelic (“Mihelic”), and the first defendant by counterclaim in the Hodgson Proceeding, Hodgson, as former senior managers of Amcor’s corrugating division, Corrugating/AFPA, breached various contractual, equitable and statutory duties they owed to the company.
The duties alleged to have been breached were fiduciary duties and duties of fidelity and good faith, together with duties under sections 180, 181, 182 and 183 of the Corporations Act2001.
The Amcor Parties claim that the Defendants breached their duties by entering into agreements between themselves relating to their acquisition or proposed acquisition of interests in two businesses sold by the Corrugating/AFPA division of Amcor, namely:
(a)a business known as the “Service Packaging Business” sold by an agreement dated 1 February 2002 by two Amcor subsidiary companies to a Mr Ian Hottes (“Hottes”) (the “First Sale Agreement”). Hottes is now deceased and could not be called to give evidence. The purchase price was $81,650. The sale included a supply agreement; and
(b)a business known as the “ACB Business” was sold by an agreement dated 2 June 2003 by two other Amcor subsidiaries to Holihan (the “Second Sale Agreement”). The base purchase price was $1 million (plus stock), payable within five years of completion. There was also an associated supply agreement.
It is alleged that the former managers secretly entered into arrangements to gain interests in the two businesses and maintained those interests without any disclosure to their employer at the time, Amcor Limited.
Amcor claims that the Defendants were heavily involved in each of the sales on behalf of Amcor, purportedly acting for Amcor, but in fact pursuing their own interests.
It is also alleged that the sales of the businesses were effected at an under value and on uncommercial terms, which was detrimental to the interests of the relevant Amcor selling entity in each case, as well as to the Amcor Group overall.
Amcor further alleges that Hodgson, in breach of his duties to Amcor, involved himself in a company unrelated to Amcor, Australian Manufacturing Consulting Group Pty Ltd. It is alleged that this company secretly conducted business activities in competition with and against the interests of Amcor.
Amcor
Amcor Limited (“Amcor Ltd”), the first plaintiff in the Barnes Proceeding, is the corporate vehicle for Amcor’s worldwide operations.
At the time relevant to this litigation, there were seven individual businesses that made up Amcor’s worldwide portfolio – Amcor Australasia, Global Tobacco, Amcor Rentsch Europe, Amcor Asia, Amcor Sunclipse, Amcor Flexibles Europe, Amcor PET and Amcor Closures.
Amcor Australasia itself had six discrete operating businesses – Corrugating/AFPA, Metals, Plastics, Cartons & Sacks, Paper and Glass. The head office of Amcor Australasia was in Melbourne. It operated 66 manufacturing plants, including 14 corrugated box plants, 14 metal packaging plants, 13 flexible and plastic packaging plants, 4 paper mills, 13 carton and sacks plants and a glass plant, employing in excess of 7,800 people.
In the financial year ending 30 June 2002 sales for Amcor Australasia were in excess of $2.36 billion. In the financial year ending 30 June 2003 sales were in excess of $2.45 billion.
Corrugating/AFPA, the largest division of Amcor Australasia, was Amcor’s corrugated packaging business in Australia and New Zealand. It focussed on the manufacturing of cardboard corrugated products, principally cardboard boxes. It had its head office in Melbourne. It operated 14 corrugated box plants in Australia and New Zealand. In 2002, Corrugating/AFPA employed over 3,900 people.
In the financial year ending 30 June 2002 sales for Corrugating/AFPA were in excess of $860 million and in the financial year ending 30 June 2003 sales were in excess of $920 million.
Barnes Proceeding - The First Sale Agreement
The agreements relating to the First Sale Agreement for the Service Packaging Business entered into by the relevant Defendants to give effect to their interests inter se are alleged by the Amcor Parties to be comprised in the following documents:
(a)a deed between Service Packaging Pty. Ltd. (“Service Packaging”), Hottes, G5 Investments Pty Ltd (Hottes’ company) (“G5”), Barnes, Hodgson, Bayley and Sangster concerning the Service Packaging Business (the “First G5 Deed”). The deed provided in essence that Hottes held the five issued shares in Service Packaging on trust for G5. It also provided that Hottes held one share in G5 beneficially and the other four shares in G5 in trust, one each for the other “shareholders” (Hodgson, Barnes, Bayley and Sangster, but not Mihelic). The former Amcor managers who were signatories admit that it was signed by them sometime in late 2001 but contend that it did not proceed, essentially due to non-fulfilment of an oral condition relating to Hottes obtaining an exclusive distributorship for 3M stretch wrapping machinery;
(b)a deed between Service Packaging, G5, Hottes, Bankson Pty Ltd (representing Hodgson) (“Bankson”), Brobel Investments Pty Ltd (representing Barnes) (“Brobel”), CBB Investments Pty Ltd (representing Bayley) (“CBB”), Merrymen Pty Ltd (representing Sangster) (“Merrymen”), Hodgson, Barnes, Bayley and Sangster ( the “Second G5 Deed”). It provided in essence that Hottes held one share in G5 beneficially and the other four shares in G5 in trust, one each for the company shareholders representing each of Barnes, Hodgson, Bayley and Sangster. In other words, the individual beneficial interests held under the First G5 Deed by those persons were substituted by the beneficial interests held by the companies nominated by those original shareholders (the companies being Bankson, Brobel, CBB and Merrymen). The former managers admitted executing the Second G5 Deed in late 2002, but again contend that it did not proceed essentially due to non-fulfilment of an oral condition relating to Hottes obtaining an exclusive distributorship for 3M stretch wrapping machinery.
Barnes Proceeding - Second Sale Agreement
The agreements relating to the Second Sale Agreement for the ACB Business entered into by the relevant Defendants to give effect to their interests inter se are alleged by Amcor to be comprised in the following documents:
(a)a deed dated 26 May 2003 between Barnes and Astra Corporation Pty Ltd (“Astra”) (being a Barnes company ), Merrymen (representing Sangster), Bankson (representing Hodgson), Sampson Solo (representing Mihelic), CBB (representing Bayley) and Brobel (representing Barnes) (the “26 May 80/20 Shareholder Deed”). It provided in essence that pursuant to a management agreement between Barnes and Holihan in relation to the ACB Business acquired by Holihan’s company ACB (Australia) Pty Ltd (the holding company), the shares in the ACB Business, through a complicated company and trust structure, were held beneficially in trust ultimately for each of the company shareholders representing each of Holihan, Barnes, Hodgson, Bayley, Sangster and Mihelic. The 26 May 80/20 Shareholder Deed contained a detailed and punitive confidentiality clause. The various signatories to the Deed admitted executing it, but contend that it was cancelled by them on about 28 May 2003;
(b)an agreement dated 26 May 2003 between Holihan and Barnes regarding purchase of the ACB Business (the “26 May Holihan/Barnes 80/20 Agreement”). Pursuant to this agreement, Holihan in effect gained a 20 per cent beneficial interest in the ACB Business, while together, Barnes, Hodgson, Bayley, Sangster and Mihelic in effect gained an 80% beneficial interest. However, other than Barnes, the identity of the other ultimate beneficiaries, namely Hodgson, Bayley, Sangster and Mihelic, was not disclosed to Holihan in this agreement, who was said in the agreement to be “not aware of the identity of the beneficial owners of the trust shares”. The agreement also contained a detailed and punitive confidentiality clause. Holihan and Barnes admit executing the 26 May Holihan/Barnes 80/20 Agreement on about 26 May 2003;
(c)the Agreement dated 28 May 2003 between Barnes and Holihan regarding the ACB Business purchase, but in fact executed in October 2005 (the ”28 May Holihan/Barnes 50/50 Agreement”). Pursuant to this agreement, in the circumstances described, Holihan and interests associated with him in effect gained a 50 per cent beneficial interest in the ACB Business, while Barnes and interests associated with him gained the other 50% beneficial interest. By this means, Hodgson, Bayley, Sangster and Mihelic dropped out of the arrangement in favour of a 50/50 split between Holihan and Barnes. Again, this agreement also contained a detailed and punitive confidentiality clause.
It is the case of the Amcor Parties that Hodgson, Barnes, Sangster, Bayley and Mihelic first proposed acquiring Amcor businesses whilst employed by Amcor in late 2000, when advice was sought from their jointly engaged solicitor, Mr Mark Dillman at Deacons. It is alleged that the scheme involved using a genuine purchaser to acquire the interest from Amcor (Hottes, in the case of the Service Packaging Business, and Holihan for the ACB Business). It was proposed that the genuine purchaser would hold some equity with the balance held by the former managers.
Amcor further alleges that the former managers’ interests would be concealed by utilising a trust structure. It was contended that the acquisition of the Service Packaging Business provided the template for the later acquisition of the ACB Business by the former managers of Amcor.
Amcor further contends that its management was completely unaware of the involvement of the former managers (apart from Hottes in the first instance and the Holihan in the second) in acquiring any interest in the businesses or of the existence of the agreements.
The Amcor Parties also advance the case that its proper processes for sales of business assets to current managers were not followed and had it known that the former managers were proposing to acquire interests in the businesses, the sales would not have proceeded, or a different procedure would have been adopted in effecting the sales.
Amcor Parties
The plaintiffs in the Barnes Proceeding are the same as the plaintiffs by counterclaim in the Hodgson Proceeding:
(a) Amcor Limited (“Amcor Ltd”) (which has been earlier described) is the First Plaintiff. Amcor is a publicly listed, multinational packaging company;
(b)Amcor Packaging (Australia) Pty Ltd (“APA”) is the Third Plaintiff. APA is the corporate vehicle for Amcor Australasia’s operations. It is, and was at all relevant times, wholly owned by Amcor. APA was at all relevant times, the parent company of both ACB and Service Containers. APA trades as Amcor Fibre Packaging Australasia (“Corrugating/AFPA”). APA is described in more detail below;
(c) Specialty Packaging Group Pty Ltd. (formerly Service Containers Pty Ltd (ACN 005 319 666), is the Fourth Plaintiff, (“Service Containers”) and the vendor of the assets of the Service Packaging Business on the terms of the First Sale Agreement. Service Containers is described in more detail below;
(d) ACN 002693843 Box Pty Ltd (formerly Australian Corrugated Box Co Pty Ltd) (“ACB”), the Second Plaintiff, was the vendor of the assets of the ACB Business on the terms of the Second Sale Agreement. ACB is described in more detail below.
Amcor Packaging (Australia) Pty Ltd (“APA”)
Amcor Packaging Australia Pty Ltd (“APA”) is the corporate vehicle for Amcor Australasia’s operations and the conduct of its various divisions. APA is, and was at all relevant times, a wholly owned subsidiary of Amcor.
APA was at all relevant times, the parent company of both ACB and Service Containers.
APA was the trading entity responsible for Amcor Australasia’s corrugated packaging operations.
From 2000, Amcor Australasia was divided into six operational “groups”: AFPA/Corrugating, metals, plastics, cartons & sacks, paper and glass.
Each business division had a Group General Manager, who reported to Mr Brown (“Brown”) and later to Mr Sutton (“Sutton”).
APA has at all material times owned all the issued shares in:
(a) ACB; and
(b) Service Containers.
Amcor Ltd, is not a shareholder in either ACB or Service Containers. However, it holds all the issued shares in APA. Accordingly, at all relevant times, Amcor Ltd was the ultimate holding company of ACB and Service Containers.
The officers of APA at relevant times were:
·Clayton – Director from February 1998 to July 2008 and Secretary from October 1995 to July 2008;
·Brown – Director from November 1998 to September 2003;
·Mr Lachal (“Lachal”) – Director from July 2000 to January 2008; and
·Mr Lewis (“Lewis”) – Director from August 2004 to present and Secretary from July 1999 to present.
·The directors of APA at the relevant times were Brown (from November 1998 to September 2003), Clayton (from February 1998 to July 2008), Lachal (from July 2000 to January 2008), Mr Reichler (from November 1998 to January 2003) and Mr Crawford (from January 2003 to July 2004). Lewis was appointed Company Secretary July 1999, a position Clayton also held from October 1995 to July 2008.
·None of the Defendants was a director of APA.
Corrugating/AFPA
The principal operation of Corrugating/AFPA was the production of corrugated cardboard products, including cardboard boxes and the like.
Corrugating/AFPA comprised several departments: Sales and Marketing, Operations, Commercial, New Zealand Box, Packaging Solutions, and Human Resources. The department General Managers were as follows:
(a) Sangster (based in Queensland) - Sales and Marketing;
(b) Barnes (based in New South Wales)– Operations;
(c) Parker (based in Burwood)– Commercial;
(d) Mr McElroy (“McElroy”) (based in Auckland) - New Zealand box;
(e) Mihelic, General Manager, Packaging Solutions (based in Burwood); and
(f) Mr Dwyer (“Dwyer”) (based in Burwood) - Human Resources.
Hodgson was the Group General Manager of Corrugating/AFPA.
Hodgson reported to the managing director Amcor Australia, Brown, who in turn reported to the CEO and Managing Director of Amcor Ltd, Jones.
Mr Clayton (“Clayton”) held the position of Group General Manager, Finance & Operations. Clayton reported to Brown. Mr Parker, General Manager of the Commercial department of Corrugating/AFPA (“Parker”), reported directly to Hodgson with an indirect line of responsibility to Clayton.
The structure of Corrugating/AFPA at relevant times is set out in Schedule 1 to these reasons.
Speciality Packaging Group Pty Ltd (Formerly Service Containers Pty Ltd)
Speciality Packaging Group Pty Ltd (formerly Service Containers Pty Ltd) (“Service Containers”) is and was at all relevant times a wholly owned subsidiary of the Amcor company, APA.
Service Containers conducted a business known as the Service Packaging Business as part of the Corrugating/AFPA division before that business was sold to a Mr Ian Hottes (“Hottes”) on 2 February 2002, in circumstances which are the subject of controversy in this proceeding.
The directors of Service Containers at the time of the First Sale Agreement were Clayton (from April 2001 to July 2008), Hodgson (from August 2001 to November 2004), Brown (from February 1996 to September 2003), and Lachal (from April 2001 to July 2008). Lewis was the secretary from December 2001 to present.
Apart from Hodgson, none of the Defendants was a director of Service Containers.
Prior to the sale Service Containers conducted two businesses: Amcor Displays and the Service Packaging Business. The businesses were situated in NSW.
Amcor Displays was a graphics and displays business.
The Service Packaging Business had two discrete aspects to its business operations. First, it received orders from its customers for the supply of finished corrugated products and corrugated boxes. It sourced its supply of corrugated cardboard from Amcor’s corrugated packaging division. It charged a premium on the cost of supply to it by Amcor. Second, it brokered the sale to its customers of a range of plastic wraps, tapes, stock boxes and general packaging which Amcor did not manufacture and which the Service Packaging Business sourced externally.
The Displays Business was profitable, however the Service Packaging Business was not. The turnover of the Service Packaging Business in or about February 2002 was approximately $3.0 million. This was less than 0.5% of Corrugating’s Australasian turnover of about $900 million. It had trading stock of approximately $400,000 and book assets of about $80,000 representing less than 0.1% of Corrugating’s assets. It had three employees, not including Hottes. It was a non-core and underperforming business for Amcor.
ACN 002693843 Box Pty Ltd (“ACB”)
ACN 002693843 Box Pty Ltd (“ACB”) conducted the ACB Business as part of the Corrugating/AFPA division before that business was sold to the Holihan in 2003, in the controversial circumstances the subject of this proceeding.
ACB is and was at all relevant times a wholly owned subsidiary of APA, the directors of which were at the relevant times Clayton (from April 2001 to July 2008), Mr Crawford (from January 2003 to July 2004), Brown (from February 1996 to September 2003), Lachal – Director from September 1996 to November 1997 and September 2005 to January 2008 and Mr Reichler (from March 1999 to January 2003). Lewis was appointed Company Secretary of ACB in January 2000 to present and Director from August 2004 to present.
ACB conducted the ACB Business as part of the Corrugating/AFPA division of Amcor Australasia and was the owner and the vendor of the business assets sold to ACB Australia Pty Ltd by the terms of the Second Sale Agreement dated 2 June 2003.
Holihan was the General Manager of that business. He reported to Barnes in Barnes’ capacity as General Manager Central Region, at least until November 2002. Barnes reported to Hodgson in Hodgson’s role as Group General Manager, AFPZA/Corrugating.
None of the Defendants was a director of ACB.
Re-organisation of Amcor operations (2000)
Amcor reorganised its global operations in 2000. This reorganisation saw the birth of Amcor Australasia and the implementation of the broad structure that was in place at the time of the sales of each of the two businesses the subject of this litigation.
All of Amcor’s Australasian businesses became one division called “Amcor Australasia”. Brown became the Managing Director of Amcor Australasia. He continued to report to Jones.
It was during this restructure in 2000 that Hodgson became Group General Manager of Corrugating/AFPA.
Changes to Key Personnel Following Re-organisation
As a consequence of the reorganisation, in about February 2000 Hodgson’s position and title was changed to Group General Manager, Corrugating/AFPA, Northern Region, however his responsibilities remained unchanged.
Mr Morriss (“Morriss”) was Hodgson’s then equivalent in the Southern Region, but at about this time Morriss left Amcor in February 2000 and an Mr Smith replaced him. At or about the same time, AFPA’s New South Wales Corrugating operations became part of Hodgson’s responsibility in the Northern Region.
After Morriss left in February 2000 Hodgson was asked by Brown to run the Australian and New Zealand box business. Hodgson took up this role in early June 2000.
On 1 July 2000, Hodgson was appointed as the Group General Manager, Corrugating/AFPA with responsibility for Amcor’s box business throughout Australia and New Zealand.
In this position Hodgson reported to Brown. Hodgson still retained direct responsibility for the Queensland operations until about June 2001 at which time Sangster replaced Hodgson in that role upon his appointment as General Manager, Corrugating/AFPA, Northern Region.
At or about this time, in June 2001, a Central Region was also created which encompassed New South Wales operations for which Barnes was responsible. Sangster (Northern Region), Barnes (Central Region) and Mr Smith (Southern Region) reported to Hodgson.
Hodgson undertook his new role while based in Camberwell in Melbourne but he commuted from Brisbane until early 2001 when his family moved to Melbourne.
Both prior to and after the 2000 restructure Barnes, Bayley, Sangster and Mihelic reported up to Hodgson, who in turn reported to Brown, who in turn reported to Jones.
Hodgson
Since joining Amcor in 1966, Hodgson enjoyed a long career with the company group.
Hodgson is the plaintiff in the Hodgson Proceeding. He was employed by Amcor Limited (“Amcor”) (or by companies acquired by Amcor) from 13 January 1966, when he joined Amcor. During the period of his employment with Amcor he held various managerial positions and was ultimately Group General Manager of Corrugating/AFPA from 1 July 2000. He left his position on 1 October 2004 in the circumstances later described.
Between about 1966 and about 1979, he was employed by Queensland Fibre Packages at its fibreboard packaging plant located at West End, Queensland. Hodgson commenced working in Accounts Payable and then Customer Service before becoming a Sales Representative in about 1969.
In about 1979, Fibre Containers took over the business of Queensland Fibre Packages. Hodgson continued as its Sales Representative until he was appointed as Sales Manager in 1980. In that same year Hodgson completed a Bachelor of Commerce degree from the University of Queensland majoring in financial accounting. In July 1986 Hodgson was appointed as General Manager of Fibre Containers.
Between about 1992 and 1996, Hodgson continued as General Manager of Fibre Containers which Amcor operated as a separate and independent brand to its fibre packaging interests in Queensland.
In about May 1996, Hodgson was appointed the State General Manager, Queensland of Corrugating/AFPA, with responsibility for Amcor’s Fibre Packaging Business (boxes) throughout Queensland and New Zealand. At that time Hodgson was based in Brisbane and reported to Brown who was Managing Director of Corrugating/AFPA. Brown reported to Jones who was Managing Director of AFP.
In about 1997, Amcor organised the business into the following divisions:
(a)Amcor Containers Packaging;
(b)Amcor Fibre Packaging (“AFP”);
(c)Amcor Printing Papers Group; and
(d)Amcor Europe.
The Australian sub-division of AFP was Corrugating/AFPA.
In January 1998 Jones became Managing Director of Amcor Limited. Hodgson continued to report to Brown at that time, who continued as Managing Director of Corrugating/AFPA.
In January 2000, Amcor reorganised its worldwide business regionally, and all of Amcor’s Australasian businesses became one division called “Amcor Australasia”. Brown became the Managing Director of Amcor Australasia and continued to report to Jones.
The sub-divisions of Amcor Australasia relating to “Fibre Packaging” included:
(a)Mills - which made recycled paper;
(b)Corrugating - which made boxes; and
(c)Cartons - which made cartons and paper for cartons at a mill in Queensland.
In about February 2000, Hodgson’s title changed to Group General Manager, Corrugating/AFPA, Northern Region. From about March 2000, that role incorporated responsibility for Amcor’s fibre packaging business in New South Wales.
On 1 July 2000, Hodgson was formally appointed as the Group General Manager of the Amcor businesses trading under the names Corrugating/AFPA, Fibre Containers Queensland and Kiwi Packaging, with responsibility for corrugating products n Australia and New Zealand. Hodgson continued to report to Brown.
Hodgson retained direct responsibility for the Queensland operations until about June 2001 at which time Ian Sangster took over the role of General Manager, Corrugating/AFPA, Northern Region. At this time, Mr Trevor Barnes was responsible for the Central Region (which encompassed New South Wales operations), and Mr Tony Smith was responsible for the Southern Region.
Hodgson was senior to each of the other Defendants, who were his subordinates.
Hodgson remained in the role of Group General Manager of Corrugating/AFPA until his departure from Amcor on 1 October 2004.
As such, Hodgson was responsible for the largest division of Amcor Australasia, with the most staff, resources and revenue. In 2004 it had an annual turnover of approximately $970 million, an annual profit of approximately $70-$80 million and employed about 2,600 people.
Hodgson is not a party to the Barnes Proceeding, although in essence the same allegations that are pressed by Amcor in that proceeding, are alleged against Hodgson by counter-claim in the Hodgson Proceeding.
Bankson Pty Ltd
Bankson Pty Ltd (“Bankson”) is the Second Defendant to the Counterclaim in the Hodgson Proceeding.
Bankson Pty Ltd was incorporated on 25 June 1996 with Hodgson and his wife Natasha Hodgson as its sole directors and shareholders.
It was through Bankson that Hodgson, at least initially, acquired an interest in the Service Packaging Business. Pursuant to the terms of the Second G5 Deed, Hottes held one of the five issued shares in G5 Investments Pty Ltd on trust for Bankson, and by this means, Bankson acquired a one fifth interest in the Service Packaging Business.
It was also through Bankson that Hodgson in 2003 first acquired a 16% interest in the ACB Business, pursuant to the terms of the 26 May Holihan/Barnes 80/20 Agreement and the 26 May 80/20 Shareholders Deed as later described.
Hodgson’s Employment Contract
Hodgson’s contract of employment relevant to these proceedings commenced 1 July 2000 (“Hodgson’s Employment Contract”). It was extended for three years from 1 July 2003 under the same terms and conditions.
Hodgson’s Employment Contract, insofar as it relates to his remuneration, will be dealt with below in the context of a consideration of the entitlements he claims on cessation of his employment with Amcor on 1 October 2004.
Hodgson’s Scope and Level of Authority
From 1 July 2000, when Hodgson was appointed as the Group General Manager (“GGM”) of Corrugating/AFPA, Hodgson was on the third tier of management within the Amcor hierarchy. He reported to the Managing Director of Amcor Australasia (Brown from 2000 until 2003, then to Sutton from 2003 until 2004), who in turn reported to Jones, Managing Director of Amcor Limited, who in turn reported to the Amcor Board, which was chaired by Mr Roberts.
As earlier referred to, an organisational chart of Corrugating/AFPA at relevant times is set out as Schedule 1 to these reasons. This depicts Hodgson’s key managerial position within the Amcor hierarchy.
In the 2002/2003 financial year Hodgson had authority to approve budgeted capital expenditure up to $250,000 with prior approval from the Amcor Board.
In the 2003/2004 financial year, in his capacity as Group General Manager of Fibre Packaging I accept that Hodgson was relatively senior in the organisation of Amcor Limited. He had seven General Managers reporting to him.
As to his scope and level of authority within Amcor, Hodgson gave the following evidence, which I accept:
I did not have power as one of the Group General Managers of Amcor Australasia to make substantial decisions affecting Amcor or indeed Corrugating. As Group General Manager, I had limited authority, in the 2002/03 financial year, to approve budgeted (namely, transactions pre-approved by the Amcor Board) capital expenditure only up to $250,000. I do not recall having any authority to sell Amcor assets and I do not recall ever doing so. I had no financial authority in respect of unbudgeted transactions. Amcor had a policy ("Acquisition of Capital Assets" in relation to capital expenditure and a review committee referred to as the Capital Expenditure Review Group (CERG) was established by that policy. In the late 1990s when I was working at Rocklea in Queensland, I was a member of CERG with Mr Morris, Mr Brown and, I believe, Mr Reichler. CERG was responsible for acquisitions (capital expenditure). The policy did not apply to the sale of assets. No one at Amcor told me that the sales of the Service Packaging Business and the ACB Business the subject of these proceedings had to be approved or reviewed by CERG. The first time I ever saw a suggestion that these two sales should have been referred to or reviewed by CERG was in February 2011 when I read the witness statements filed on behalf of the Amcor Parties in this proceeding.
The power to make decisions in relation to Amcor Australasia was vested in Mr Brown and later Mr Sutton in their role as Managing Director, Amcor Australasia. In the 2002/03 financial year, Mr Brown had financial authority to approve budgeted capital expenditure up to $2 million and unbudgeted capital expenditure up to $1 million.
I could make recommendations, submissions and presentations to Mr Brown and Mr Sutton relevant to Corrugating and I did so (less often in the case of Mr Sutton).
Some decisions affecting Amcor Australasia could not be made by Mr Brown or Mr Sutton. These types of decisions (for example, the recommendations set out in the BluePrint for Further Improvement for the closure of Amcor’s Townsville, Box Hill and Wetherill Park operations to which I refer below) required approval by Mr Jones and the Amcor Board.
I did make, when asked to do so by Mr Brown or Mr Sutton (less so by Mr Sutton) or Mr Jones, formal submissions to the Amcor Board on matters relevant to the interests of Corrugating. Again, by way of example, I presented the BluePrint for Further Improvement to the Board of Amcor Limited in conjunction with Mr Brown.
Mr Brown and Mr Sutton in relation to Amcor Australasia and, at the higher level, Mr Jones and the Amcor Board made all the significant decisions that were considered to affect Amcor’s interests and the interests of Corrugating. My role as Group General Manager, Corrugating was to make recommendations or submissions for approval by Brown (later Sutton) and the Amcor Board but otherwise to implement the directions or the strategic vision given to me by my superiors.
I also accept that Hodgson, although he had authority to approve budgeted capital expenditure of up to $250,000 with prior approval from the Amcor Board, he had no authority to approve unbudgeted capital expenditure.
I do not accept that Hodgson had any authority to sell Amcor assets, and he did not have authority to sell either of the subject businesses. Lewis conceded that Hodgson had no authority to sell the ACB Business and that only Brown had authority to sell the Service Packaging Business even though in relation to the Service Packaging Business, Hodgson was one of its several directors. The evidence of Lewis was that these decisions were made by the person within Amcor who had the financial authority to make those decisions. Further, Brown gave evidence that he, not Hodgson, in fact approved the sales of the ACB Business and the Service Packaging Business. Brown said in the course of his evidence:
But otherwise if the proposal looked feasible and it wasn't vetoed by some strategic consideration, then it was your practice to approve?---Yes.
That's what happened with respect to both of the sales which are the subject of this proceeding wasn't it?---Yes.
Proposals were put to you and you approved them?---As did the expenditure review committee as I recall.
Further, I am not satisfied on the evidence that Hodgson was an officer of ACB. Although the decision to sell the ACB Business was a decision which affected the whole, or a substantial part, of the business of ACB, there is no evidence that Hodgson exercised any decision making authority in relation to the ACB Business that did not reflect a direction given, or approval first sought and obtained, from Brown.
Hodgson was from August 2001 to October 2004 a director of Service Containers. It was not disputed by Hodgson that he owed statutory and fiduciary duties to Service Containers for the period of time that he held that office.
Amcor’s Principal Allegations Against Hodgson
The principal case put by the Amcor parties against Hodgson is that he gained and maintained an interest in the ACB Business and the Service Containers business at the time of his employment with Amcor and subsequently, and thereby was in breach of his duties to Amcor.
It is also put that the sale agreements in respect of the two businesses were uncommercial.
Amcor further alleges against Hodgson (and Hodgson alone) that he breached his duties to Amcor in the course of his employment, by his secret participation in the business of a company known as Australasian Manufacturing Consulting Group Pty Ltd (“AMCG”) which provided consultancy services to an Amcor competitor Carter Holt Harvey (“CHH”). AMCG was incorporated on 22 September 2004.
Barnes
Barnes, the First Defendant in the Barnes Proceeding, was appointed to the position of Regional General Manager of Amcor Fibre Packaging in New South Wales commencing 1 January 2000. This was done pursuant to the terms of a letter of appointment dated 19 February 2000. He was employed by Amcor from January 1998 until he resigned on 28 September 2004, with effect on 28 October 2004.
During his employment with Amcor Barnes held the following management roles:
(a)from January 1998 until early 1999 he was employed as a Site Manager, Amcor Fibre Packaging (New South Wales) for the Smithfield site;
(b)from early 1999 until 1 January 2000 he was employed as General Manager Operations Amcor Fibre Packaging (New South Wales), reporting to David Ley;
(c)from 1 January 2000 until June 2000, he was employed as Regional General Manager, Amcor Fibre Packaging (New South Wales), reporting to John Morriss and, from February 2000, to Hodgson;
(d)from June 2000 until November 2002, he was General Manager, Amcor Fibre Packaging, Central Region, reporting to Hodgson;
(e)from July 2002 until his resignation in September 2004, he was employed as General Manager Australian Operations (a position held concurrently with his management of the Central Region until November 2002), also reporting to Hodgson; and
(f)in January 2003 he was additionally appointed to the role of project director supervising a large team of implementation consultants.
Thus from February 2000 until his resignation in September 2004, Barnes reported to Hodgson.
The Amcor Parties allege that he was an officer of each of Amcor, APA, Service Containers and ACB. Barnes denies this allegation.
Barnes ’s Employment Contract
Barnes’ position as Regional General Manager for AFPA in NSW from 1 January 2000 was subject to a written contract of employment dated 10 January 2000 and signed on 19 February 2000 (“Barnes’ Employment Contract”). While in this position, Barnes received a salary of $175,000 per annum.
In accordance with Barnes’ Employment Contract, Barnes' employment was subject to the following relevant conditions:
Under clause 5 Barnes had a duty to comply with directions and keep Amcor informed by:
(i)reporting to Mr Morriss, Regional General Manager, Northern Region AFPA;
(ii) informing Amcor of any developments in relation to his role;
(iii)abiding by all ethical standards, policies and procedures that related to the operation of the business;
(iv)devoting his full time and attention to Amcor’s business during working hours; and
(v)honestly and diligently carrying out his duties and responsibilities.
Under clause 7 Barnes was entitled to further remuneration including:
(i)a fully maintained motor vehicle inclusive of $4,000 worth of options;
(ii) health insurance cover under the Amcor Health Care Plan; and
(iii)eligibility to participate in the Amcor Employee Incentive Share Plan.
Under clause 15 Barnes had a duty to avoid conflicts of interest by:
(i)refraining from any involvement with, or financial interest in, any business or enterprise that competed with, was a customer of, or supplied goods or services to, any business or enterprise within the Amcor Group including the Amcor Limited Group and its related bodies corporate whilst employed by Amcor; and
(ii)arranging his affairs to ensure there was no conflict between his personal interests and those of the Amcor Group;
Under clause 16 Barnes had a duty of confidentiality which required him to refrain from:
(i)disclosing or using, other than for the purposes of Amcor, any information to which he was exposed during his employment that was not in the public domain relating to the financial affairs; suppliers; customers and clients (including lists of names and addresses); future plans, research and development; business methods, systems and strategies; technical operations and pricing policies and costings of businesses and enterprises within the Amcor Group; and
(ii)disclosing, for his own purposes or those of any person associated with him, any knowledge of financial results of businesses and enterprises within the Amcor Group prior to their release to the public, in particular, any information concerning Amcor which, if publically disclosed, could affect the market price of Amcor shares.
Under clause 23 Barnes was restrained from:
(i)employing, engaging or endeavouring to entice away from Amcor any employee of Amcor either on his own account or for any other person, form or company during his employment and for a period of three months following the effective date of the termination of his employment (namely, 28 January 2005);
(ii)disclosing confidential information about Amcor or belonging to Amcor obtained during employment;
(iii)engaging in any business, employment, consultancy or otherwise, engaging in any specific project or research in relation to which the use of Amcor’s confidential information may reasonably be expected to put him at an unfair advantage during his employment and at all times after the termination of his employment; and
(iv)canvassing or soliciting business the same as or similar to that provided by Amcor from persons who have been clients or customers of Amcor during his employment and for a period of three months in Australia following the termination of his employment (namely 28 January 2005).
Barnes’ employment as General Manager Operations Australia of AFPA (which he held from July 2002 until his resignation in September 2004) was “regularised” by a letter from Hodgson dated 19 August 2003 “embodying” the terms of his current employment. This letter was in very similar terms to the 19 February 2000 letter described above, except that:
(a) Barnes’ title and salary increased; and
(b)under clause 5 Barnes now reported to the Group General Manager AFPA (Hodgson).
Barnes contended that between 1 November 2002 and 19 August 2003, the terms of his employment were not in writing. However, I accept the submissions made by Amcor that:
(a)given the broad similarities between the written letters of offer which applied before and after this period of time it is clear that the policies and procedures set out in both letters applied to Barnes during this intervening period; and
(b)the “regularising” letter operated retrospectively and set out in writing what had fact occurred in Barnes’ employment. Accordingly, the terms and conditions of Barnes’ employment between 1 November 2002 and 19 August 2003 were effectively set out in the letter of 19 August 2003.
Prior to his resignation on 28 September 2004, for the financial year ending 30 June 2004, Barnes received a salary package of $374,988 which comprised a salary component of $284,200 together with a Management Incentive Program payment of $90,788.
Barnes Scope and Level of Authority
Barnes simultaneously held two key positions within AFPA.
First, as General Manager Amcor Fibre Packaging - Central Region from June 2000 until November 2002, Barnes:
(a) had direct responsibility for Corrugating's New South Wales operations;
(b)had Mr Alvarez, Hottes and Holihan reporting to him as their immediate superior; and
(c) had oversight of:
(i)the ACB Business from 19 February 2000 until he left this role in November 2002; and
(ii)the Service Packaging Business from 19 February 2000 until it was sold on 1 February 2002.
Second, as General Manager Australian Operations from July 2002 until the cessation of his employment on 28 October 2004 following his resignation on 28 September 2004, he held a senior executive position within Amcor. In this capacity, the following Amcor managers reported directly to him:
(a)five separate Regional Operations Managers in Victoria, New South Wales, Queensland, Western Australia, Tasmania, South Australia and New Zealand;
(b) National Technical Manager;
The position is, however, different where the company suffers loss caused by the breach of a duty owed both to the company and to the shareholder. In such a case the shareholder's loss, in so far as this is measured by the diminution in value of his shareholding or the loss of dividends, merely reflects the loss suffered by the company in respect of which the company has its own cause of action. If the shareholder is allowed to recover in respect of such loss, then either there will be double recovery at the expense of the defendant or the shareholder will recover at the expense of the company and its creditors and other shareholders. Neither course can be permitted. This is a matter of principle; there is no discretion involved.
The principles in Johnson v Gore Wood were adopted by the Queensland Court of Appeal in Thomas v D’Arcy,[272] and the NSW Court of Appeal in Chen v Karandonis[273] and Oates v Consolidated Capital Services Pty Ltd.[274]
[272][2005] 1 Qd R 666.
[273][2002] NSWCA 412 at pars [35] to [44].
[274](2009) 257 ALR 558 at 600-603 [207]-[217]. These matters not dealt with in the report at 76 NSWLR 69.
The third principle as stated by Lord Bingham in Johnson v. Gore Wood & Co has been re-framed in terms of a prohibition on a shareholder recovering damages for a loss caused by a breach of duty owed both to the company and the shareholder where the shareholder's loss reflects the diminution in the value of his shareholding. In Thomas v D’Arcy,[275] McPherson JA (with whom Williams JA and White J agreed) said:[276]
[275]In Thomas v D’Arcy, the respondent owed duties to both the appellant (personally) and the company: at 677-678 [25]-[26] (per Williams JA).
[276] Ibid at 674 [13], [15].
Accepting the principles adopted by Lord Bingham, Lord Goff and Lord Millett in Johnson v Gore Wood & Co, the question here is to identify the category into which the relevant allegations fall …
According to what was said by Lord Millett in the passage quoted from Johnson v Gore Wood & Co [2002] 2 AC 1, 62, the point of principle is that a shareholder will not be permitted to recover damages for a loss caused by a breach of duty owed both to the company and the shareholder where the shareholder's loss reflects the diminution in the value of his shareholding.
McPherson JA concluded in Thomas v D’Arcy that to the extent that the decision of the New Zealand Court of Appeal in Christensen v Scott suggests that a reflective loss may be recovered by the shareholder rather than the company itself, it should not be followed.[277]
[277] Ibid at 677 [21].
The second principle as stated by Lord Bingham in Johnson v. Gore Wood & Co was applied by Ferguson J in Groeneveld Australia Pty Ltd v Wouter Nolten.[278] The proceeding concerned an application to join a fourth plaintiff (GNZ) to a proceeding against Mr Nolten (the defendant) in circumstances where Mr Nolten was a director of both GNZ and GA. Her Honour said:[279]
[278][2010] VSC 249.
[279] Ibid at [43].
Counsel also submitted that none of the cases deal with the situation here where there is a separate and distinct duty that Mr Nolten owes to GA, as a director, from the duty that he owes to GNZ as its sole director. It was put that if Mr Nolten was not a director of GNZ and was only a director of GA and, if in that capacity, he allowed GNZ to enter into an uncommercial lease, GA would be entitled to plead a case against him for breach of duty. In my view, this analysis does not assist GA because, in those circumstances, no issue of reflective loss would arise as GNZ would have no claim against Mr Nolten. Both Johnson v Gore Wood & Co and Thomas v D’Arcy make it clear that shareholders may sue for loss suffered by them when the company has no cause of action available to it. [Emphasis added]
Amcor submitted, however, that it was not claiming a “reflective loss”. It contended that the authorities do not address the circumstances in this case where, by reason of consolidated accounting within a corporate group, the ultimate parent company of wholly owned subsidiaries includes the results of all of its subsidiaries in its consolidated results. It said that, as a result of the consolidated accounting within the Amcor Companies, as a matter of fact all relevant losses flow through to and are suffered by Amcor. It was said that this is not a case where the loss of Amcor (the shareholder) is a diminution in the value of the shareholding or dividend because of the improper transfer of assets from the company. The wholly owned subsidiary companies do not suffer any relevant loss because of the consolidated nature of the accounts. That is, any loss goes directly to the profit and loss statement of Amcor, and then, at the end of the relevant trading period, directly to the balance sheet of Amcor. It followed from this submission, so it was put, that Amcor suffered a direct loss as a result of a breach of duties owed to it by each of the Defendants to the Barnes Proceeding and the Defendant by Counterclaim to the Hodgson Proceeding. Accordingly, so it was submitted, in relation to all claims Amcor is the proper plaintiff and the proper plaintiff by counterclaim to the Hodgson Proceeding.
I do not accept this submission. The manner in which a loss may be recorded in the books of account of a company, does not necessarily evidence a loss, and I am not satisfied that it does so in this case. It is actual loss which is critical to the operation of the principles in Johnson v Gore Wood & Co, not a recorded loss for accounting purposes.
However, applying the second principle of Lord Bingham in Johnson v Gore Wood & Co produces a different result. In this case, in relation to Barnes, the subsidiary company has no cause of action to sue to recover any loss arising from any breach of duty. Barnes owed his fiduciary duty, not to the subsidiary, but to his employer Amcor, which, as the shareholder in the subsidiary company, may sue in respect of it. Amcor has a cause of action to do so by reason of the breach of duty which Barnes owed to it.
Further, Amcor claims equitable relief by reason of breach of duties to it, including equitable compensation and the taking of accounts.
In Shaker v Al-Bedrawi[280] the Court of Appeal (UK) observed:[281]
[280][2003] Ch 350.
[281]At 378.
In circumstances where the Prudential principle applies to bar a viable claim on the footing of the company's cause of action which it does not assert, the application of the principle can work hardship. Moreover in this case the application of the principle might serve to leave the trustee holding a profit without being accountable for it to his beneficiary, and that may run counter to a basic equitable principle.
In my opinion, the rules in Johnson v Gore Wood & Co cannot be applied in this case to bar Amcor’s claim to equitable relief from Barnes by way of equitable compensation. Barnes owed a fiduciary duty to his employer Amcor, which he breached. He owed that duty, not to the subsidiary company, but to Amcor. It was Amcor which approved the Second Sale Agreement acting on behalf of its subsidiary, without which the Second Sale Agreement would not have proceeded. As a result of the breach, Barnes derived profits which, in equity, he ought to disgorge to the party to whom he owed his duty, Amcor.
Deed of Accession – Second Sale Agreement
On or about 21 March 2005, ACB, APA, Holihan, the ACB Purchaser and Australian Corrugated Box Co Pty Ltd (formerly, Achilla) entered into a transaction known as the “Deed of Accession” (the “Deed of Accession”). The Deed of Accession in effect substituted APA for ACB in relation to “all capacities and for all purposes under or pursuant to the Second Sale Agreement”. Clause 2 of the Deed of Accession provided:
2 Novation
2.1 With effect on and from the Accession Date:
(a)[APA] shall be substituted for [ACB] in all capacities and for all purposes under or pursuant to the [Second Sale Agreement]; and
(b)the [Second Sale Agreement] shall take effect as a deed on the same terms as previously except that references to [ACB] shall be read and construed as if they were references to [APA].
2.2 Assumption of benefits and obligations
With effect on and from the Accession Date, [APA] shall observe, perform, be bound and comply with the provisions of the [Second Sale Agreement] binding on [ACB] and shall enjoy all the rights and benefits of [ACB] under or pursuant to the [Second Sale Agreement].
The Accession Date is 21 March 2005.
Following the discovery of the Deed of Accession, Amcor and ACB then sought leave to add APA as a plaintiff to the Barnes Proceeding and APA as a plaintiff by counterclaim to the Hodgson Proceeding. The application for leave to add APA and Service Containers as parties was heard on 15 and 16 December 2009. On 19 May 2010, Emerton J ordered that APA and Service Containers be added as plaintiffs in the Barnes Proceeding pursuant to r 9.06 and the writ be amended accordingly. The order did not specify any time for amending the writ. The date of filing of the amended writ in the Barnes Proceeding is stated, on its face, to be 3 June 2010.
On these facts it was further contended, in respect of the Second Sale Agreement, that ACB had no cause of action (by reason of entry into the Deed of Accession) and APA did not suffer any loss or damage as a result of the conduct of the relevant Defendants (but instead, suffered its loss, if any, by reason of entry into the Deed of Accession in respect of the Second Sale Agreement).
However, given the finding that as a result of his breach only Barnes derived profits which, in equity, he ought to disgorge to the party to whom he owed his duty, namely Amcor, and given that no loss has been found to have been suffered by either APA or ACB at the hands of the Defendants arising from the Second Sale Agreement, the submission has no practical effect.
Limitation of Action Defences
Corporations Act Claims
Part 9.4B of the Corporations Act is titled "Civil Consequences of Contravening Civil Penalty Provisions”. Section 1317E(1)(a) provides that ss 180-182 are civil penalty provisions. Section 1317J(1) reserves solely to ASIC the right to apply for a declaration of contravention. A corporation may, however, apply for a compensation order: section 1317J(2).
Section 1317H creates a statutory right of compensation for the contravention of a civil penalty provision. It provides as follows:
(1)A Court may order a person to compensate a corporation ... for damage suffered by the corporation...if:
(a)the person has contravened a corporation ... civil penalty provision in relation to the corporation ...; and
(b) the damage resulted from the contravention.
The order must specify the amount of the compensation.
Section 1317K provides for a time limitation in the following terms:
Proceedings for a declaration of contravention, a pecuniary penalty order, or a compensation order, may be started no later than 6 years after the contravention. [Emphasis added]
As no liability has been found in respect of Holihan, Bayley, Sangster, or Mihelic (or their associated companies) it is unnecessary to determine whether or not the claims against them are barred by the passage of time.
Fiduciary Claim Against Barnes
It was submitted that Amcor’s claim for breach of fiduciary duty found against Barnes is barred by laches.
A classic statement of the equitable principle of laches is drawn from Lindsay Petroleum Co v Hurd:[282]
[282](1874) LR 5 PC 221 at 239, 240.
Now the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.
Amcor commenced the Barnes proceeding by the issue of its writ on 3 September 2007. The Hodgson proceeding was issued on 3 December 2004. A first defence was filed on 27 January 2005. The first defence raised no allegation in relation to the ACB Business. An amended defence and counterclaim filed 21 April 2006 similarly raised no allegation in relation to the ACB Business. It was not until the further amended defence and counterclaim was filed on 3 June 2010 pursuant to the orders of Emerton J made 19 May 2010 that allegations were first made by Amcor in the Hodgson proceeding concerning the ACB Business.
the length of the delay in this case in Amcor prosecuting its claims in respect of the ACB Business were considerable. Nevertheless, orders were made by Emerton J on 19 May 2010 which permitted these causes of action to be agitated by Amcor, in spite of the apparent delay to that point.
Further I am not satisfied that any party has suffered in the presentation of their cases at trial by reason of the delay, and no evidence was adduced to this effect.
I am not satisfied that it would be practically unjust to give a the remedy which I propose in favour of Amcor. The balance of justice calls for the grant of the remedy in the circumstances of this case.
Anshun Estoppel
The final question is whether the Amcor Parties are estopped by the application of the Anshun principle in respect of any, and if so which, of their claims.
Hodgson and the Defendants to the Barnes proceeding who were also respondents to the Federal Court proceedings have pleaded an estoppel against the Amcor Parties in respect of the claims now made against them and heard in the present trial.
It was submitted by the Defendants that a reasonable inference may be drawn that the Amcor Parties had, contrary to the bare denial raised on their pleadings, sufficient knowledge of the matters now alleged which would have permitted the ventilation of the claims made in the present proceedings in the Federal Court Proceeding. The question is whether, on the authorities, the Amcor Parties who were parties to the Federal Court Proceedings ought be estopped from raising the claims they could have raised against the parties who were also parties in the Federal Court Proceeding. Hodgson, Barnes, Bayley, Sangster and Mihelic were all respondents to the Federal Court Proceedings and Amcor, APA and Service Containers were applicants.
The Federal Court Proceedings were settled on 16 December 2004 and, subject to the relevant undertakings being given to the Court, consent orders giving effect to the settlement were made by the Federal Court on 17 December 2004. Neither the settlement nor the 17 December 2004 orders reserved to Amcor or any subsidiary the right to institute proceedings canvassing again the issues litigated in the Federal Court Proceedings.
The Amcor Parties called no evidence from any of the directors or senior officers of Amcor who made the decision to settle the Federal Court Proceedings to the effect that they had no knowledge at that time of the matters of the subject of the claims advanced on behalf of the Amcor Parties in this Joint Trial. The Defendants, on the other hand pointed to a number of facts from which it may be inferred that the Amcor parties in fact had the relevant knowledge following the settlement of the Federal Court proceedings.
On this basis it was submitted that it is not open for Amcor or its subsidiaries to seek to re-agitate the issues raised (and settled) in the Federal Court Proceedings, by way of its claims in the present trial. Such claims, it was submitted, are barred by either issue estoppel (to the extent that the pleaded issues of fact or law are the same) or by Anshun estoppel.
The distinction between res judicata and issue estoppel is discussed in the judgment of Gibbs CJ, Mason and Aickin JJ in Port of Melbourne Authority v Anshun Proprietary Limited[283] as follows:
[283](1981) 147 CLR 589 at 597.
The distinction between res judicata (in England called "cause of action estoppel") and issue estoppel was expressed by Dixon J in Blair v Curran[1939] HCA 23; (1939) 62 CLR 464, at p 532 in these terms: "in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order." (at p597)
The distinction was restated by Fullagar J. in his dissenting judgment in Jackson v Goldsmith[1950] HCA 22; (1950) 81 CLR 446, at p 466. His Honour expressed the rule as to res judicata by saying: "where an action has been brought and judgment has been entered in that action, no other proceedings can thereafter be maintained on the same cause of action. This rule is not, to my mind, correctly classified under the heading of estoppel at all. It is a broad rule of public policy based on the principles expressed in the maxims 'interest reipublicae ut sit finis litium' and 'nemo debet bis vexari pro eadem cause’." His Honour went on to discuss issue estoppel, citing the comment of Dixon J in Blair v Curran (1939) 62 CLR, at p 531: "A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies."
(at p597)
As to res judicata and issue estoppel, the Federal Court proceedings were settled, as reflected in the consent orders of Merkel J made 17 December 2004. The proceedings were not determined judicially and decided by a prior judgment or order. Nor did the rights or causes of action claimed in the Federal Court Proceedings pass into judgment. Undertakings given to the Court aside, the settlement of the Federal Court Proceedings arose from a contractual document potentially giving rise to contractual remedies if breached. The settlement precluded the possibility of inconsistent findings of fact by a court or otherwise conflicting judgments.[284]
[284]See: Snowy Mountains Organic Dairy Products Pty Ltd v Wholefoods Pty Ltd & Ors [2008] VSC 405 at [51-52].
The principle of Anshun estoppel is set out in Port of Melbourne Authority v Anshun Proprietary Limited[285] (Anshun) where Gibbs CJ, and Mason and Aickin JJ said:
[285](1981) 147 CLR 589 at 598, and at 602 “it would be an abuse of process to allow a new proceeding” and at 604, and see also Brennan J at 609, and also Chamberlain v. Deputy Commissioner Of Taxation (1988) 164 CLR 502.
The critical issue, then, is whether the case falls within the extended principle expressed by Sir James Wigram VC in Henderson v Henderson. The Vice-Chancellor expressed the principle in these terms:
“where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matters which might have been brought forward as part of the subject in contest, but which was not brought forward …”
In Anshun, Gibbs CJ, Mason and Aickin JJ said further:[286]
[286]At 602-603.
In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few. [Emphasis added]
This principle equally applies with respect to a claim. The question is whether the claim was “so relevant” to the earlier litigation that it was “unreasonable” not to have raised it.[287] This principle was discussed by the Court of Appeal in Gibbs v Kinna.[288] As Ormiston JA observed:[289]
[287]Rahme v Commonwealth Bank of Australia (unreported, Court of appeal NSW, 20 December 1991) per Priestley JA; Ling v Commonwealth (1996) 68 FCR 180 at 184; Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33 at par [4]; Solak v Registrar of Titles (No 2) [2010] VSC 146 at [8].
[288][1999] 2 VR 19.
[289]At 20 [1].
The double negative is here significant because the question is not whether it would have been reasonable to take the course of relying on a particular defence or cause of action in the first proceeding, for more often than not it was then possible to rely upon the proposed defence or cause of action. The issue is whether it was unreasonable to defer reliance upon the defence or cause of action, so, if it cannot be shown to have been unreasonable not to have relied earlier on the defence or cause of action, then the principle stated by the majority in Anshun's Case will not shut out a party's later reliance on the defence or cause of action, unless some other principle of estoppel or the law can be called in aid.
Whether or not it is unreasonable for a party asserting a cause of action in a later proceeding not to have done so in an earlier proceeding depends almost entirely on the particular circumstances.[290]
[290]Gibbs v Kinna [1999] 2 VR 19 at 26-27 [23].
As Kenny JA observed in Gibbs v Kinna,[291] there is at least one factor which is indicative on “unreasonableness” in not asserting a cause of action in an earlier proceeding: if any judgment or order which might have been made on the cause of action in the subsequent proceeding would conflict with a judgment or order in the earlier proceeding, then is will ordinarily be unreasonable to refrain from raising the cause of action in the first proceeding.
[291][1999] 2 VR 19 at 27.
The relevant principles in relation to Anshun estoppel were conveniently summarised by Davies J in Solak v Registrar of Titles (No. 2).[292] They include as follows (citations omitted):
[292][2010] VSC 146 at [8]-[12].
(a)An Anshun estoppel will arise in circumstances where a party to a subsequent proceeding seeks to litigate a claim or defence “which could and should have been litigated in the earlier proceedings” (underlining added).
(b)The estoppel is “analogical extension” of the doctrines of res judicata and issue estoppel and operates to preclude a litigant from bringing a particular claim where it was “unreasonable” for the litigant not to have brought that claim, or rely on that claim as a defence, in an earlier concluded proceeding.
(c)If the litigant was unable to raise the claim or defence in the earlier proceeding, no Anshun estoppel will arise.
(d)Equally so the fact that the litigant could have raised the claim or defence in the earlier proceeding does not mean that the estoppel will arise. The test is “based on the reasonableness of the conduct of a litigant in earlier proceedings”.
(e)The mere fact that the matter could have been raised does not mean that it should have been raised for the operation of the estoppel. The “unreasonableness” criterion involves an evaluative element based upon what a litigant could reasonably have been expected to do in the earlier proceeding. In Port of Melbourne Authority v Anshun Pty Ltd, the majority Mason and Aickin JJ stated:
there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding.
(f)Although the estoppel was expressed in reference to the failure to raise a defence, the principle equally applies with respect to a claim. The question is whether the claim was “so relevant” to the earlier litigation that it was “unreasonable” not to have raised it.
(g)Whether a claim was “so relevant” to the earlier litigation that it was “unreasonable” not to have raised it falls to be considered on a case by case basis. This requires consideration of all the circumstances bearing upon unreasonableness in the particular matter, not simply identifying common facts in, or subject matter of, both proceedings. In Anshun, Gibbs CJ, Mason and Aickin JJ explained that:
there are a variety of circumstances … why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings eg expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few.
(h)Circumstances bearing on “unreasonableness” include, but are not confined to, the potential for the judgment in the later proceeding to “conflict” with the judgment in the earlier proceeding. Gibbs CJ, Mason and Aickin JJ in Anshun explained:
By “conflicting” judgments we include judgments which are contradictory, though they may not be pronounced on the same cause of action. It is enough that hey appear to declare rights which are inconsistent in respect to the same transaction.
Thus the estoppel may apply where the subject matter of the later proceeding is so closely connected with the subject matter of the earlier proceeding that there may be an inconsistent determination of rights in respect to the same transaction, although there is not precise correspondence between the legal claims.
(i)Anshun estoppel can apply even though the subsequent action is against a party that was not a party to the earlier action as the consideration that underlies the estoppel, as with res judicata and issue estoppel, is the “general public interest in the same issue not being litigated over again”. Justice Handley, writing extracurially, explained:
The extended res judicata doctrine applied in Anshun is based on the court’s inherent jurisdiction to prevent abuse of its process by proceedings which are vexatious, that is unreasonable. It is not necessary for this purpose to establish identity of parties or privity. A good example is Hunter v Chief Constable where civil proceedings for assault brought by members of the Birmingham Six against police officers were dismissed as an abuse of process because they sought to relitigate issues decided against them in the criminal trial. Needless to say the police officers were not parties to the criminal proceedings. [References omitted]
(j)The doctrines of res judicata, issue estoppel and Anshun estoppel “can be regarded as serving a public policy which protects against abuse of process by supporting the finality of judicial dispositions of particular controversies”.Thus in Rippon v Chilcotin Pty Ltd the New South Wales Court of Appeal held that the proceedings were an abuse of process because the plaintiff was attempting to litigate or relitigate issues that had been determined in an earlier proceeding against persons who were not parties to that earlier proceeding. Although the Anshun principle was not relied on to support the application to have the proceeding dismissed as an abuse of process, Handley JA (with whom Mason P and Heydon JA agreed) stated that:
[I]t could fairly have been said, in the language of the joint judgment in Port of Melbourne Authority v Anshun (at 602), that the claims against the accountants were so relevant to the subject matter of the first action that it was unreasonable for the purchasers not to rely upon them in that action: compare Morris v Wentworth-Stanley (1999) QB 1004 at 1011, 1017.
(k)The guiding consideration where an action is commenced against a party that was not a party to the earlier action is whether there is such a close connection between the actions, albeit against different defendants, that it would be expected that the claims would all be dealt with in the one proceeding, thereby avoiding multiplicity of legal proceedings and the possibility of conflicting or inconsistent judgments.
Courts are reluctant to apply the Anshun principle in circumstances where serious injustice would arise. If there is fraud of which a party only becomes aware after the initial proceeding, there is no Anshun estoppel. As Nettle and Harper JJA said in Gangemi v Osborne[293] ”… if it is true that there was fraud of which Gangemi has only now become aware, there would be no Anshun estoppel either”.
[293]See Gangemi v Osborne [2009] VSCA 297 at [169] (per Nettle and Harper JJA).
Application of the principles
In my opinion, the Anshun principle does not prevent Amcor from maintaining these proceedings against each of the Defendants to the Barnes Proceeding or the plaintiff in the Hodgson Proceeding.
With one exception, the same or substantially the same facts do not arise for consideration in these Proceedings as in the Federal Court Proceeding. The Federal Court Proceeding in broad terms concerned the circumstances under which Hodgson, Barnes, Sangster, Bayley and Mihelic left their employment with Amcor, including the copying and removal of confidential information and the making of preparations to conduct AMCG’s business. Those matters are not the subject of the Barnes Proceeding. The Federal Court Proceeding largely concerned different underlying facts to those alleged in the Barnes Proceeding.
The exception lies in respect of causes of action in relation to the AMCG business. This was at issue in the Federal Court Proceeding. It was also raised by Amcor as an issue in the Hodgson Proceeding.
The claims in these proceedings arising from the First Sale Agreement and Second Sale Agreement could not have been raised in the Federal Court Proceeding. For the reasons above, the breaches of Hodgson and the Defendants to the Barnes Proceeding in respect of their concealment from Amcor of their involvement with the businesses sold under the First Sale Agreement and Second Sale Agreement were concealed by fraud, the true extent of which Amcor only became wholly aware after the settlement of the Federal Court Proceedings.
No Anshun estoppel arises in these circumstances.[294] The Anshun principles would give rise to a serious injustice if they were to apply.
[294]See Gangemi v Osborne [2009] VSCA 297 at [169] (per Nettle and Harper JJA).
Further, the settlement of the Federal Court Proceeding precludes the possibility of inconsistent findings of fact or conflicting judgments in this case.[295]
[295] Snowy Mountains Organic Dairy Products Pty Ltd v Wholefoods Pty Ltd & Ors [2008] VSC 405 at [51]-[52].
The Federal Court Proceeding was settled with final orders based on undertakings of Hodgson, Barnes, Sangster, Bayley and Mihelic which were not, and could never have intended to be, met. In circumstances where the Amcor parties were materially misled as to the basis upon which they chose to conclude the Federal Court Proceeding, it is not unreasonable to raise the allegations they now seek to raise in these proceedings.
The preparation to conduct AMCG’s business, which was an issue in the Federal Court Proceeding is the subject of the defence but not the counterclaim in the Hodgson Proceeding.[296] Although there is some overlap of underlying facts in this regard, Amcor does not raise this issue as a claim in the Proceedings, which could be “estopped”.
[296](Vol 2, CB P668; Vol 2, CB P697).
For the above reasons, the circumstances do not warrant the application of the Anshun principle.
Orders
I will order that an account be taken as to the following:
(a)Between 30 July 2003 and 28 October 2004 what profits were earned by the ACB Business which were available for distribution by Australian Corrugated Box Co Pty Ltd (formerly Achilla Pty Ltd) and ACB Australia Pty Ltd to their shareholders had any dividends been declared to distribute those profits?
(b) What is the calculation of one half of the sum referred to in paragraph (a)?
Following the taking of accounts I will make such orders as are necessary as to payment directed to Barnes, if any are required.
I will order that a further account be taken as to the following:
(a)Between 1 July 2004 to 28 October 2004 what profits were earned by the ACB Business which were available for distribution by Australian Corrugated Box Co Pty Ltd (formerly Achilla Pty Ltd) and ACB Australia Pty Ltd to their shareholders had any dividends been declared to distribute those profits?
(b) What is the calculation of one half of the sum referred to in paragraph (a)?
Following the taking of accounts I will make such orders as are necessary as to payment directed to Holihan, if any are required.
I will hear the parties at an appropriate time to be fixed for the setting down of any necessary directions hearing in relation to any further orders which ought to be made generally or in relation to the taking of accounts and any hearing in relation to the costs of the proceedings.
SCHEDULE 1 - AMCOR FIBRE PACKAGING AUSTRALASIA (Corrugating / AFPA)
Appendix A
The “80/20 split” as structured in the 26 May Holihan/Barnes 80/20 Agreement and the 26 May 80/20 Shareholder Deed
Appendix B
Structure of the 28 May Holihan/Barnes 50/50 Agreement
(the 50/50% split)
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[259]Section 1317E(1)(a) Corporations Act2001.
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