Hodgson v Amcor Ltd
[2010] VSC 204
•19 May 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 9420 of 2004
| JAMES GEORGE HODGSON | Plaintiff |
| v | |
| AMCOR LTD | Defendant |
AND BETWEEN:
| AMCOR LTD & ORS | Plaintiffs by Counterclaim |
| v | |
| JAMES GEORGE HODGSON & ANOR | Defendants by Counterclaim |
No. 8181 of 2007
| AMCOR LTD & ANOR | Plaintiffs |
| v | |
| TREVOR MARK BARNES & ORS | Defendants |
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JUDGE: | Emerton J | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 15-16 December 2009 | |
DATE OF JUDGMENT: | 19 May 2010 | |
CASE MAY BE CITED AS: | Hodgson v Amcor Ltd; Amcor Ltd v Barnes | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 204 | |
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PRACTICE AND PROCEDURE – amendment of pleadings – addition of parties – whether amendments necessary to determine the real question in controversy between the parties and to avoid multiplicity of proceedings – explanation for delay – prejudice to other parties – whether appropriate to determine limitations question at the interlocutory stage – form of pleading – Supreme Court Act 1986 (Vic) s 29(2) – Supreme Court (General Civil Procedure) Rules 2005 (Vic) rr 1.14, 9.06, 36.01(1),(4)-(6) – Limitation of Actions Act 1958 (Vic) s 34.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff and Defendants by counterclaim in proceeding 9420 of 2004 | Mr C. Gunst QC with Mr P. Booth | A.J. Macken & Co. |
| For the Defendant and Plaintiffs by counterclaim in proceeding 9420 of 2004 and Plaintiffs in proceeding 8181 of 2007 (Amcor parties) | Mr J. Elliot SC with Ms R. Enbom and Ms K. Beattie | Corrs Chambers Westgarth |
| For the First Defendant in proceeding 8181 of 2007 | Mr C. Northrop | Kirby & Co. |
| For the Second, Third and Fourth Defendants in proceeding 8181 of 2007 | Mr P. Riordan SC | Mills Oakley |
| For the Fifth, Sixth and Seventh Defendants in proceeding 8181 of 2007 | Mr M. Champion | Holding Redlich |
HER HONOUR:
There are two applications before the Court for leave to add parties to existing proceedings and to amend pleadings –
(a) In proceeding no 9420 of 2004 (‘the Hodgson proceeding’), Amcor Ltd (‘Amcor’), ACN002693843 Box Pty Ltd[1] (‘ACB’) and Service Containers Pty Ltd (‘Service Containers’) (collectively, ‘the Amcor parties’), seek leave to file and serve a further amended defence and counterclaim and to add a further plaintiff by counterclaim. The proposed additional plaintiff by counterclaim is another company in the Amcor group, Amcor Packaging (Australia) Pty Ltd (‘APA’).
(b) In proceeding no 8181 of 2007 (‘the Barnes proceeding’), Amcor and ACB seek leave to file and serve a further amended statement of claim and to add two further plaintiffs. The additional plaintiffs are Service Containers and APA.
[1]Formerly Australian Corrugated Box Co Pty Ltd.
Both the Hodgson proceeding and the Barnes proceeding concern (at least in part) the conduct of former employees of companies in the Amcor group and their role in the sale of businesses owned by companies in the Amcor group in 2002 and 2003. In February 2002, a packaging materials business conducted by Service Containers (‘Service Containers business’) was sold to interests associated with Mr Hodgson, the plaintiff in the Hodgson proceeding, and some of the defendants in the Barnes proceeding, namely Messrs Barnes, Sangster and/or Bayley; in June 2003, a corrugated packaging business previously conducted by ACB (‘ACB business’) was sold to interests associated with Mr Hodgson and some of the defendants to the Barnes proceeding, namely Messrs Holihan, Barnes, Sangster, Bayley and/or Mihelic.
The Amcor parties claim that the terms of both the sale of the Service Containers business in 2002 (‘the first sale agreement’) and the sale of the ACB business in 2003 (‘the second sale agreement’), and supply agreements forming part of those sale agreements, were uncommercial and detrimental to the interests of Amcor and the relevant vendor. Moreover, they say the defendants deliberately and dishonestly concealed from Amcor and the vendor their interests in the ACB and Service Containers businesses.
The ownership structure within the Amcor group has been somewhat opaque to date. One of the pleading amendments sought to be made is to specify that Amcor is the holder of all the issued share capital in APA and that APA holds all the issued share capital in ACB and Service Containers. It follows that Amcor is not a shareholder in either ACB or Service Containers.
Current state of the pleadings
In the Hodgson proceeding, the current pleading is the amended defence and counterclaim, which is dated 21 April 2006. In the Barnes proceeding, the current pleading is the amended statement of claim dated 11 December 2008.
It is convenient to set out how the current pleadings describe the relationship, especially the obligations and duties, that each defendant (or, in the case of Mr Hodgson, defendant by counterclaim) is alleged to have had to a relevant Amcor company. The nature and extent of the defendants’ alleged obligations and duties to particular companies in the Amcor group is relevant to submissions that were made as to whether APA should be added as a plaintiff by counterclaim in the Hodgson proceeding and APA and Service Containers should be added as plaintiffs in the Barnes proceeding.
In the Barnes proceeding -
(a)The first defendant, Trevor Barnes, was employed by Amcor as its Regional General Manager of the Amcor Fibre Packaging (Australasia) Division in New South Wales from January 2000 to the end of 2002 and from 1 January 2003 to 28 October 2004 as its general manager, operations, of the NSW division. He was an ‘officer’ of Amcor, ACB and Service Containers for the purposes of s 9 of the Corporations Act 2001 (Cth). Barnes supervised Messrs Holihan and Hottes, who were respectively responsible for running the ACB business and the Service Containers business. Barnes reported to Hodgson.
(b)The second defendant, Craig Holihan, ran the ACB business from December 1998 until the end of July 2003. He was an ‘officer’ of ACB for the purposes of s 9 of the Corporations Act. He was a director of the entity (the third defendant) that purchased the ACB business (‘the ACB Purchaser’) and a director of the fourth defendant, Achilla Pty Ltd (‘Achilla’). From 30 July 2003, the ACB purchaser was the legal owner of the ACB business and operated the ACB business with Achilla.
(c)The fifth, sixth and seventh defendants – Ian Sangster, Christopher Bayley and Albert Mihelic – were employed by Amcor in senior positions from approximately 1990 to 28 October 2004. They were ‘officers’ of Amcor for the purposes of s 9 of the Corporations Act.
(d)Barnes, as an officer and employee of Amcor, ACB and Service Containers, had obligations pursuant to ss 180(1), 181(1), 182(1) and (2) of the Corporations Act to Amcor, ACB and Service Containers, and owed fiduciary duties and a duty of fidelity and good faith to Amcor, ACB and Service Containers.
(e)Holihan, as an officer of ACB, had obligations pursuant to ss 180(1), 181(1), 182(1) and (2) of the Corporations Act to ACB, as well as owing fiduciary duties and a duty of fidelity and good faith to ACB and Amcor.
(f)Each of Sangster, Bayley and Mihelic, as officers of Amcor, and as employees of Amcor, had obligations pursuant to ss 180(1), 181(1), 182(1) and (2) of the Corporations Act to Amcor and owed fiduciary duties and a duty of fidelity and good faith to Amcor.
In the Hodgson proceeding -
(g) Hodgson was employed by Amcor in a senior management position until 13 December 2004. He was an officer for the purposes of s 9 of the Corporations Act of Amcor, APA and ACB, as well as being a director of a number of subsidiaries of Amcor, including Service Containers (until 9 November 2004). He was also a director, shareholder and effective controller of Bankson Pty Ltd (the second defendant by counterclaim).
(h) Hodgson had obligations under s 181, 182 and 183 of the Corporations Act to Amcor, APA, ACB and, relevantly, Service Containers, as well as fiduciary duties and a duty of fidelity and good faith to Amcor, ACB and Service Containers.
The pleading of the breaches of duty arising from the sale agreements is complex. Summarising the pleadings will involve the inevitable omission of allegations that turn out to be significant at trial. The summary below does not purport to be comprehensive. Nonetheless, it is useful to briefly describe the ‘bare bones’ of the allegations against Hodgson and the Barnes defendants in relation to the sale agreements.
The first sale agreement
Amcor alleges that Hodgson was involved in the sale by Service Containers of its business on terms uncommercial to Amcor and Service Containers; that he was involved in the conduct of Barnes, Sangster and/or Bayley to effect such a sale; and that he acquired, or intended to acquire, an interest in the Service Containers business for himself and/or entities associated with him, concealing such interest from Amcor and Service Containers.
Correspondingly, it is alleged that Hodgson was involved in the acquisition of interests in the Service Containers business by Barnes, Bayley, Sangster and/or entities associated with them, and that he also concealed such interests from Amcor and Service Containers.
Amongst other things, it is proposed to add that the concealment by Hodgson was deliberate and dishonest and that Hodgson entered into agreements, arrangements or understandings with Barnes, Bayley, and/or Sangster for an illegal or improper purpose, namely to take the benefit of the Service Packaging business from Amcor and Service Containers and to secret obtain the benefit of the business for himself and/or the others.
In the Barnes proceeding, Amcor alleges that Barnes, along with Hodgson and/or Hottes, negotiated the first sale agreement which was uncommercial and detrimental to the interests of Amcor and Service Containers; that Bayley and Sangster stood by while this happened; that Barnes, Bayley and Sangster had interests in entities that were to obtain a financial benefit from the Service Containers business (or, alternatively, that each of them intended to acquire a beneficial interest in the service Containers business and later acquired such an interest); and that they failed to warn or inform Amcor of this fact. Allegations of deliberate and dishonest concealment, entering into arrangements for an illegal and improper purpose and the receipt of secret benefits are also made against Barnes, Bayley and Sangster.
Although the current form of the counterclaim in the Hodgson proceeding makes no reference to it, it is alleged in the Barnes proceeding that the first sale agreement included a 5 year supply agreement between Service Containers and the Service Containers purchaser which was uncommercial and detrimental to Service Containers. It is proposed to amend the Hodgson proceeding to allege that Hodgson was knowingly involved in the supply agreement and that that agreement was made on terms uncommercial and substantially for the benefit of Hodgson, the Service Containers purchaser, Hottes, Barnes, Bayley and/or Sangster.
The second sale agreement
In the Hodgson proceeding, it is alleged that Hodgson was involved in the sale of the ACB business; that he was involved in the conduct of Barnes, Mihelic, Sangster and/or Bayley to effect a sale of the ACB business; that he acquired an interest in the ACB business for himself and/or entities associated with him; and that he concealed such interests from Amcor and ACB.
Amongst other things, it is proposed to add that Hodgson deliberately and dishonestly concealed his interest and the interests of the ACB purchaser, Achilla, Holihan, Barnes Sangster, Bayley and/or Mihelic from to Amcor and/or ACB. It is also proposed to add that Hodgson entered into secret agreements, arrangements or understandings with Barnes, Bayley, Sangster and/or Mihelic for an illegal or improper purpose, namely to take the benefit of the ACB business from Amcor or ACB.
Although the current form of the pleading in the Hodgson proceeding makes no reference to it, it is alleged in the Barnes proceeding that the second sale agreement included a 5 year supply agreement between ACB and the ACB purchaser and Achilla which was uncommercial and detrimental to ACB. It is proposed to amend the Hodgson proceeding to make reference to the supply agreement and Hodgson’s involvement in it.
In the Barnes proceeding, it is alleged that Barnes, in consultation with Hodgson, negotiated the sale of the ACB business with Holihan on behalf of the ACB purchaser and Achilla on terms uncommercial and detrimental to the interests of Amcor and ACB and substantially for the benefit of Barnes, the ACB purchaser, Achilla, Holihan, Hodgson, Bayley, Sangster and/or Mihelic and that he failed to warn Amcor about interests of those persons in the business and, in fact, deliberately and dishonestly concealed those matters form Amcor and ACB. Similar allegations are made against Holihan.
As a result of that conduct, Barnes and Holihan are alleged to have improperly used their positions to gain advantage for themselves and persons other than Amcor and ACB, made secret profits and obtained secret benefits when dealing with the property of Amcor and ACB.
To similar effect, it is alleged against Sangster, Bayley and Mihelic in relation to the second sale agreement that each of them was involved in the conduct of Hodgson and/or Barnes; that they failed to exercise powers or discharge duties by allowing or causing the negotiation of the second sale agreement in the relevant circumstances, failing to warn Amcor and ACB and placing himself in a position of conflict of interest; and that, at the time of the negotiations for the second sale agreement, each of Sangster, Bayley and Mihelic held the financial interests in a corporation that was to obtain a financial benefit from the ACB business once it had been sold to the ACB purchaser (or, alternatively, intended to acquire a beneficial interest in the ACB business and later acquire such an interest). The allegations of failure to warn and deliberate and dishonest concealment are made against those defendants, along with those of acting for an illegal or improper of purpose and obtaining secret benefits.
The establishment of AMCG
Furthermore, in the Hodgson proceeding, the Amcor parties allege that from at least August 2004, Hodgson was involved in the establishment of Australasian Manufacturing Consulting Group (‘AMCG’) by enticing Barnes, Bayley, Sangster and Mihelic to work in AMCG’s business, approaching Amcor’s competitor, Carter Holt Harvey Ltd with a view to providing consultancy services and, during August and September 2004, copying, removing and secretly storing for use in AMCG’s business, over 30,000 documents belonging to Amcor, including customer lists, product specifications, financial analyses, strategic financial plans, reports, product research and development laboratory reports, diagrams for plant layout and so on. It is also alleged that Hodgson canvassed Amcor’s customers for AMCG’s business, otherwise made preparations for the conduct of that business and provided consultancy services to Carter Holt Harvey in connection with strategies to compete with Amcor.
Relief claimed
In the Barnes proceeding, Amcor and ACB seek declarations that Barnes, Sangster and Bayley breached ss 180(1), 181(1), 182(1) and (2) of the Corporations Act with respect to the conduct alleged in connection with both sale agreements, and that Mihelic breached ss 180(1), 181(1), 182(1) and (2) and Holihan breached ss 181(1), 182(1) and (2) in respect of the second sale agreement. They also seek orders to set aside the second sale agreement and claim damages, equitable compensation, the taking of accounts, an account of profits and the declaration of a constructive trust and consequential orders in favour of Amcor or ACB over any rights or interests that Barnes, Holihan, Sangster, Bayley and Mihelic hold in the ACB business and/or the companies that now own the business, as well as any shares that Holihan holds in those companies and any shares that the ACB Purchaser holds in Achilla.
In the Hodgson proceeding, the Amcor parties seek by way of counterclaim damages, equitable compensation, an account of profits, the declaration of a constructive trust and consequential orders in favour of the Amcor parties over moneys and assets derived from the sale and carrying on of both businesses. It is proposed to add a declaration that the defendants by counterclaim breached ss 180, 181, 182 and 183 of the Corporations Act.
If APA is added as a party in both proceedings, it will be alleged that it has suffered loss and damage by reason of the conduct of Hodgson, Holihan, Barnes, Sangster, Bayley and Mihelic, and that it is a beneficiary of constructive trusts arising from the circumstances of the sale and subsequent conduct of the ACB business and is due, amongst other things, an account of profits.
If Service Containers is added as a plaintiff in the Barnes proceeding, it will be alleged that it has suffered loss and damage by reason of the conduct of Barnes, Sangster and Bayley, and that it is a beneficiary of constructive trusts arising from the circumstances of the sale and subsequent conduct of the Service Containers business and is due, among other things, an account of profits.
The proposed addition of parties and amendments
Amcor seeks leave to join APA as a plaintiff in the Barnes proceeding and as a plaintiff by counterclaim in the Hodgson proceeding. The addition of APA as a party is said to have been made necessary by the belated discovery of a document purporting to create certain rights in APA in relation to the second sale agreement (and the supply agreement associated with it). The document in question is an agreement bearing the title, “Deed of Accession”.
The Deed of Accession was executed on 21 March 2005. The parties to the Deed of Accession are ACB, APA and the second to fourth defendants in the Barnes proceeding – Holihan, ACB Australia Pty Ltd (the ACB Purchaser) and Australian Corrugated Box Co Pty Ltd (formerly Achilla).
Clause 2 of the Deed of Accession provides:
2.Novation
2.1The Transferee as a party to the Asset Sale Deed
With effect on and from the Accession Date:
(a)the Transferee [APA] shall be substituted for the Vendor [ACB] in all capacities and for all purposes under or pursuant to the Asset Sale Deed; and
(b)the Asset Sale Deed shall take effect as a deed on the same terms as previously except that references to the Vendor [ACB] shall be read and construed as if they were references to the Transferee [APA].
2.2Assumption of benefits and obligations
With effect on and from the Accession Date, the Transferee [APA] shall observe, perform, be bound by and comply with the provisions of the Asset Sale Deed binding on the Vendor [ACB] and shall enjoy all the rights and benefits of the Vendor [ACB] under or pursuant to the Asset Sale Deed.
Hence, the Deed of Accession provides that:
(a)the second sale agreement will continue to operate on the same terms except that references to ACB must be read and construed as references to APA (clause 2.1(b));
(b)from the Accession Date (21 March 2005) APA will observe, perform, be bound by and comply with the provisions of the second sale agreement binding on ACB and will enjoy all rights and benefits of ACB thereunder (clause 2.2).
By amendment to the pleadings in the proceedings, the Amcor parties now seek to allege that loss and damage suffered on and from 21 March 2005 by reason of the second sale agreement is loss and damage suffered by APA.
Amcor and ACB also seek leave to join Service Containers as a plaintiff in the Barnes proceeding. This application was foreshadowed by letter from Amcor’s solicitors, Corrs, to the solicitors for the defendants dated 14 December 2009 – the day before the hearing of the amendment applications on 15 December 2009. The proposed addition of Service Containers as a party is said to be necessary “in light of the assertion that is now put that Amcor has not suffered loss in relation to the two transactions”. The letter from Corrs also refers to proposed amendments to correct the allegations in paragraph 1(b) and (c) in relation to the corporate structure of the Amcor group of companies and to add the words “alternatively, Amcor” at the end of paragraph (d) of the particulars to paragraph 24, which are in themselves amended particulars alleging loss and damage by APA as a result of the second sale agreement.
In the Barnes proceeding, the proposed amendments are principally related to the Deed of Accession and the addition of APA and Service Containers as plaintiffs.
In the Hodgson proceeding, the proposed amendments are much more extensive. Apart from amendments necessitated by the Deed of Accession and the addition of APA as a plaintiff to the counterclaim, the Amcor parties seek to make a range of amendments apparently directed to ensuring that the allegations in the Hodgson proceeding ‘mirror’ those in the Barnes proceeding. According to counsel for Amcor, this will “facilitate a joint trial where the court can then not be perhaps consumed with niceties between the form of one pleading and the form of another by seeking to make them coincide.” However, as counsel for Mr Hodgson pointed out, this will also result in an expansion of the relevant part of the counterclaim (Annexure C) from 4 to 24 pages.
Counsel for Amcor provided to the Court a schedule which identifies, for each amendment in the proposed further amended defence and counterclaim in the Hodgson proceeding, the corresponding allegation in the existing amended statement of claim in the Barnes proceeding. The schedule does show that that proposed amendments correspond with allegations in the Barnes proceeding. In submissions filed on behalf of Mr Hodgson, it is conceded that the amendments do cause the pleadings to “coincide” or to be “more aligned”.
There is disagreement between the parties as to whether some of the proposed amendments raise new allegations or whether they reformulate existing allegations. However, the Amcor parties concede that at least some of the allegations in the proposed amendments involve allegations that are new to the Hodgson proceeding.
Other amendments to the Hodgson pleading are said to be directed at improving the form of the pleading, including the addition of further particulars and the incorporation of material from Annexure C in the primary document.
In summary, leave is sought:
(a) to add APA as a plaintiff by counterclaim in the Hodgson proceeding and as a plaintiff in the Barnes proceeding;
(b) to add Service Containers as a plaintiff in the Barnes proceeding;
(c) to make various amendments necessitated by the operation of the Deed of Accession and the addition of parties in both proceedings;
(d) to make extensive amendments to the amended defence and counterclaim in the Hodgson proceeding, which are said to be necessary to ensure that the allegations in the Hodgson proceeding are aligned with those in the Barnes proceeding.
In support of its applications, Amcor relies on:
(a)the affidavit of Janet Mary Vivienne Whiting sworn 5 October 2009 in support of the application in the Hodgson proceeding (the ‘first Whiting affidavit’);
(b)the affidavit of Janet Whiting sworn 5 October 2009 in support of the application in the Barnes proceeding (‘the second Whiting affidavit’); and
(c)The affidavit of Janet Whiting sworn 13 October 2009 in support of the application in both proceedings (‘the third Whiting affidavit’).
In the Hodgson proceeding, Mr Hodgson relies on the affidavits of Dominic James Macken sworn on 6 October 2009 and 23 October 2009. No evidence was put before the Court by the defendants in the Barnes proceeding, although extensive submissions were made on behalf of each of them resisting the applications to amend and add parties in that proceeding.
Background to the applications
History of steps taken in the proceedings
The Hodgson proceeding was commenced on 3 December 2004. Mr Hodgson made claims for debt and damages for breach of contract for amounts which he contends accrued to him as a result of Amcor’s termination of his employment on 1 October 2004. Amcor filed its defence on 27 January 2005 and Mr Hodgson filed a reply to defence on 22 April 2005. The defence contained an allegation in relation to Mr Hodgson’s involvement in the establishment of AMCG.
By the time the Hodgson proceeding was issued, there was on foot in the Federal Court of Australia a proceeding between Amcor and some of the defendants to the Barnes proceeding –
· On 10 November 2004, Amcor commenced proceedings in the Federal Court against Messrs Mihelic, Sangster, Bailey, Barnes and AMCG (‘the Federal Court proceeding’).
· On that same day, Amcor obtained an Anton Piller order from the Federal Court (‘the Anton Piller order’), which was executed on 11 November 2004.
· On 15 November 2004, Mr Hodgson was joined as a party to the Federal Court proceeding.
· On 17 December 2004, the Federal Court proceeding was settled.
· In July and December 2005, the Federal Court imposed a confidentiality regime in respect of documents obtained by Amcor pursuant to the Anton Piller order, which permitted Amcor to use certain of the documents obtained pursuant to the Anton Piller order in the Hodgson proceeding.
On 21 April 2006, Harper J granted leave to Amcor to file and serve an amended defence and counterclaim in the Hodgson proceeding. This order was made by consent. The amended defence and counterclaim filed on 27 April 2006 included the allegations against Mr Hodgson in relation to the sale of the Service Containers business and the ACB business, as well as in relation to the establishment of AMCG. Many of these allegations were contained in confidential annexures as a result of orders made in the Federal Court proceeding.
Interlocutory steps in the Hodgson proceeding, including the filing of defences and replies, and requests for and giving of particulars, took place between June 2006 and March 2007.
On 14 June 2007, the Amcor parties applied in the Hodgson proceeding for orders permitting them to disclose and use documents obtained pursuant to the Anton Piller order for the purposes of a proposed proceeding in New South Wales in which the Amcor parties intended to make allegations that were substantially in the same terms as those now made by Amcor and ACB in the Barnes proceeding. By order dated 5 July 2007, Williams J declined to grant the Amcor parties leave to disclose documents in the proposed proceeding.[2]
[2][2007] VSC 237.
On 3 September 2007, Amcor and ACB commenced the Barnes proceeding. In her first affidavit, Janet Whiting deposes to the Barnes proceeding having been commenced without access to the documents that were obtained as a result of the Anton Piller order.
On 3 September 2007, the Amcor parties applied to have the Barnes proceeding and the Hodgson proceeding heard together. Mr Hodgson resisted the consolidation of the proceedings on the grounds that consolidation would possibly delay the time by which the Hodgson proceeding would be ready for trial until late 2010.
On 14 December 2007, Osborn J ordered that the proceedings be heard together.[3]
[3]Amcor Ltd v Barnes [2007] VSC 515.
From approximately April 2008 until early December 2008, discovery, including from non-parties, was sought and provided in the Barnes proceeding. In her first affidavit, Janet Whiting deposes to the various steps in discovery that were taken under the heading “Failure of the defendants and non-parties to the Barnes proceeding to provide timely and adequate discovery”. She alleges that the discovery by the first to the fourth defendants in the Barnes proceeding and the plaintiff in the Hodgson proceeding has been inadequate and that those parties have failed to discover documents to which they were a party or that were sent or received by them. Consequently, she says that she caused to be undertaken significant forensic work and made numerous applications for non-party discovery.[4] These steps were difficult and time-consuming.
[4] According to Ms Whiting, some discovery made by a particular non-party was subject to claims for legal professional privilege by the first and second defendants in the Barnes proceeding. Orders were ultimately obtained in December 2008 permitting inspection of those documents. In late December 2008, pursuant to orders of Byrne J made on 10 December 2008, computer specialists on behalf of the Amcor parties captured forensic images of data from computers at the office of the non-party. The solicitors for the Amcor parties obtained copies of the forensic images on 13 February 2009.
On 11 December 2008, Amcor and ACB filed an amended statement of claim in the Barnes proceeding.
On 5 March 2009, Ms Whiting wrote to A J Macken & Co, the solicitors for Mr Hodgson, proposing that discovery in the Hodgson proceeding be deemed discovery in the Barnes proceeding and vice versa. Holding Redlich, the solicitors representing the fifth to seventh defendants in the Barnes proceeding, advised they would not consent to such orders.
On about 9 April 2009, the Amcor parties served a proposed further amended defence and counterclaim on A J Macken & Co, solicitors for Mr Hodgson. The covering letter foreshadowed that the Amcor parties would seek the leave of the Court to file and serve the proposed pleading when the matter was next before the Court for directions.
Mr Hodgson gave no response to the proposed further amended defence and counterclaim prior to a directions hearing on 15 September 2009. In his affidavit, Mr Macken, on behalf of Mr Hodgson, explains that no response was given when the proposed further amended defence and counterclaim was served, as no comment or response was invited. He says that notwithstanding the service of the proposed further amended defence and counterclaim on 9 April 2009, the Amcor parties took no further steps to seek the leave of the Court to file and serve that document until 3 September 2009.
On 15 September 2009, Byrne J made an order by consent that discovery in the Barnes proceeding was deemed discovery in the Hodgson proceeding and vice versa.
On 17 September 2009, Goldberg J in the Federal Court of Australia gave Amcor leave to disclose to the defendants in the Barnes proceeding, and for the parties in that proceeding to use, certain documents obtained pursuant to the Anton Piller order.
On 29 September 2009, Amcor produced the proposed further amended defence and counterclaim that is the subject of the present application in the Hodgson proceeding. According to Ms Whiting, only a small number of amendments have been made to the version served on A J Macken & Co on 9 April 2009. These further amendments relate to particulars of documents obtained from non-parties in the Barnes proceeding and the Deed of Accession.
Difficulties obtaining, identifying and using documents
In her first affidavit, Ms Whiting deposes to the difficulties experienced in relation to the use of documents and the confidentiality regimes that were in force.[5] Ms Whiting says that as a result of these difficulties, she did not obtain “key documents” in the proceedings until late October 2008. In her third affidavit, Ms Whiting says that the “key documents” include:
(a)an executed deed between the purchaser of the Service Containers business, G5, Hottes, Barnes, Hodgson, Bayley and Sangster; and
(b)an executed deed between the purchaser of the Service Containers business, G5, Hottes, Bankson Pty Ltd, Brobel Investments Pty Ltd, CBB Investments Pty Ltd, Merrymen Pty Ltd, Hodgson, Barnes, Bayley and Sangster.
[5]Ms Whiting says she obtained documents in the Barnes proceeding that were clearly relevant in the Hodgson proceeding, but felt that they could not be used in the Hodgson proceeding without specific orders of the Court. She was of the view that a similar scenario could apply to documents in the Hodgson proceeding, which could become relevant in the Barnes proceeding.
According to Ms Whiting, these documents were required to finalise the amended statement of claim in the Barnes proceeding and for the purpose of the amendments in the further amended defence and counterclaim in the Hodgson proceeding. Although the second of the key documents may have been referred to in an affidavit of documents sworn by Mr Barnes, that affidavit indicated that the second key document was not in Mr Barnes’ possession and no copy was provided to the Amcor parties in either the Hodgson or Barnes proceedings.
One of the principal reasons given by the Amcor parties for the need to amend and add parties is the Deed of Accession.
The Deed of Accession was discovered by the second to fourth defendants in the Barnes proceeding (the Holihan parties) and is referred to in their amended defence dated 19 March 2009. However, Ms Whiting deposes that the Deed of Accession was first brought to her attention in correspondence from the lawyers for the Holihan parties on 11 June 2009. Corrs, the solicitors for the Amcor parties, did not receive any instructions in relation to the Deed of Accession at the time of preparing the proposed further amended defence and counterclaim dated 7 April 2009.
Not surprisingly, Mr Macken for Mr Hodgson responds that the Deed of Accession was executed on behalf of APA and ACB by Ian Lewis and Colin Clayton, who were officeholders in those companies. At the date upon which the Amcor parties secured the leave of the Court to file its amended defence and counterclaim in the Hodgson proceeding (21 April 2006), and at the date upon which Amcor and ACB filed the statement of claim in the Barnes proceeding (3 September 2007), Mr Lewis and Mr Clayton were officers of those companies. The Deed of Accession appears, on its face, to be a document created by, or at the instance of, Amcor companies. The Amcor parties therefore have to explain why they failed to discover their own document in the Hodgson proceeding and the Barnes proceeding.
Moreover, Mr Macken points out that the Deed of Accession was discovered to the Amcor parties in an affidavit of documents sworn by Mr Holihan on 3 September 2008 and a copy of it was provided to the solicitors for the Amcor parties prior to the filing and service of the amended statement of claim in the Barnes proceeding in December 2008. Accordingly, at all material times the Amcor parties have been in a position to identify and discover the Deed of Accession. The Amcor parties were in a position to identify the significance of the Deed of Accession from the date it appeared in Mr Holihan’s affidavit of documents, or at least from the time a copy was provided to the Amcor parties. Nonetheless, the Amcor parties took no step to advise Mr Hodgson of their intention to join APA as a party to the Hodgson proceeding until 15 September 2009.
Ms Whiting’s third affidavit responds to this criticism of the Amcor parties. She explains that Mr Lewis dealt with the Deed of Accession on behalf of APA in 2004, when Amcor Australasia decided to liquidate companies within the Amcor group that were no longer useful. This apparently included ACB, which was no longer trading after the ACB business was sold. Ms Whiting states that she was informed by Mr Lewis and believes that Mr Lewis did not consider the Deed of Accession to be relevant to the Hodgson proceeding or the Barnes proceeding and, accordingly, did not notify Group General Council of Amcor of the existence of the Deed or provide instructions to Corrs in relation to it. She says that this is explicable because Mr Lewis was not permitted access to restricted information and confidential material and, until late 2008, was located in a different office from Group General Council.
Addition of new parties
The applications to add parties to the proceedings are strenuously opposed by Mr Hodgson and the defendants in the Barnes proceeding. Each of them has raised a limitation issue in relation to the addition of parties at this late stage in the proceedings. It is submitted that as the first sale agreement was concluded in 2002 and the second sale agreement in 2003, any claims that APA and Service Containers may have against the defendants arise from events which occurred more than six years ago and such claims are, at least on their face, statute barred.
The guiding principle for dealing with a limitation question in an interlocutory application was set out by Mason CJ, Dawson, Gaudron, and McHugh JJ in Wardley Australia Ltd v Western Australia:
We should … state in the plainest of terms that we regard it is undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question.[6]
[6](1992) 175 CLR 514, 533 (‘Wardley’).
In addition to uncertainty surrounding the timing and duration of any damage said to have been suffered, deciding a limitation question at an interlocutory stage requires the Court to assume that the defendants will actually plead a limitations defence and that the plaintiffs will not avail themselves of any exception to the defence such as acknowledgment of a debt, concealed fraud,[7] waiver[8] or estoppel.[9]
[7]See Ronex Properties Ltd v John Laing Construction Ltd (1983) QB 398, 404 (Donaldson LJ).
[8]See, eg, Commonwealth v Verwayen (1990) 170 CLR 394, especially at 473 (Toohey J).
[9] This was the concern expressed by the Queensland Court of Appeal in Noble v Victoria [2000] 2 Qd R 154, 167 considering the above principle in the context of an application for summary dismissal:
However, the defendants submit that the applications to join APA and Service Containers involve the ‘clearest of cases’ in which the Court should determine that APA’s and Service Containers’ claims will be statute-barred and leave should not be given to add them as parties.
For its part, Amcor submits that the limitation question is a live one, as the breaches alleged against the defendants – breaches of statutory duties, fiduciary duties and duties of fidelity and good faith – were continuing breaches, because the relevant duties were continuing duties. If the defendants had a duty to disclose the transactions in question before or at the time they were entered into, then they had an ongoing duty to disclose the transactions thereafter, and a cause of action arose each successive day after the first breach. The defendants’ obligation to disclose was a continuing obligation – at least for so long as the defendants remained in the employ of Amcor.
Dixon J, in Larking v Great Western (Nepean) Gravel Ltd (in liq) observed that the distinction between a one-off obligation and a continuing duty “may be difficult of application in a given case”.[10] The NSW Court of Appeal considered Larking in Sheldon v McBeath, and concluded that “there are no general principles of law requiring particular answers in different categories of factual situations.”[11] Factually and contextually dependant issues should be determined at trial after an appraisal of all of the facts.
[10](1940) 64 CLR 221, 236 (‘Larking’).
[11][1993] Aust Torts Reports ¶81-209, 62,072 (Priestley JA; Mahoney JA agreeing).
In response, the defendants submit that whatever continuing duties of disclosure may have existed following the sales of the businesses, no loss or damage flows from the breach of such a duty. Any loss and damage was incurred at the time of the sale. The cause of action, and the basis for the claim for loss and damage, is not an ongoing failure to disclose the circumstances of the sale (whether or not that also constitutes a breach of duty) but rather the sale of the businesses at an undervalue and the entry into disadvantageous supply agreements, which are specific events.
Amcor contends that the loss and damage flowing from the entry into the sale agreements and attendant supply agreements was ongoing. To paraphrase counsel’s submissions, Amcor says that in breach of their duties, the defendants took its businesses, ran its businesses and enjoyed profits from its businesses. Its claims are ongoing claims in relation to the conduct of the businesses once sold. Constructive trust claims made years down the track are complex; all sorts of prejudice, all sorts of further losses may have been suffered subsequent to the sales.
In the light of the competing submissions, I am satisfied that the limitation questions that have been raised are of the kind referred to in Wardley, the determination of which is undesirable at the interlocutory stage. The addition of APA and Service Containers as plaintiffs in the proceedings should not be refused on the basis that a limitation defence will inevitably succeed.
I now turn to deal with specific objections that have been raised to the addition of each of the proposed parties.
APA
The addition of APA as a party in the proceedings raises difficult conceptual issues. This is in part because, while it is proposed to allege that APA has suffered loss and damage as a result of the conduct of the defendants, it is not proposed to allege that any of the defendants owed any duties to APA. As a related matter, there are real uncertainties about the legal effect of the Deed of Accession. So much was apparent from the at times conflicting submissions of the defendants.
Hence, the Holihan parties submitted that the amended pleading did not disclose that APA had a cause of action of against the Holihan parties: it did not allege that they owed any duties to APA, any breach of any such duty or any other basis upon which the Holihan parties could be liable to APA for damages or as a constructive trustee. In the amended pleading, APA claims loss and damage from 21 March 2005 only; it does not claim that it is entitled to bring claims that would otherwise have been brought by ACB. As a consequence, if APA has suffered loss and damage as a result of taking over ACB’s obligations under the first sale agreement, then that has occurred by reason of it entering into the agreement embodied in the Deed of Accession, in respect of which no misconduct by the defendants is alleged. The Holihan parties said further that, if the effect of the Deed of Accession was to assign ACB’s rights of action to APA, then it would not be possible for APA to now bring a claim, because the cause of action accrued more than six years ago, in May 2003; moreover, if the effect of the Deed was to assign ACB’s rights of action to APA, then ACB would have no entitlement to bring this proceeding years after it had assigned its rights.
It was submitted on behalf of Mr Barnes that the Deed of Accession was in fact a deed of novation. The effect of a novation is to bring about a discharge of the original contract and to create a new contract which binds the parties to the new contract. It is a tripartite arrangement by which one party assumes the contractual obligations owed by another party to the third party. The Deed did not even purport to be an assignment of any interests, any cause of action or any rights that existed under the relevant contract. Accordingly, on any view, a claim by APA based on the Deed of Accession could only be relevant to events that occurred after the Deed was entered into.
For his part, Mr Hodgson contended that the Deed of Accession had the result that ACB could not have and did not have any legal rights arising under or in relation to the second sale agreement, or any transactions or conduct flowing from or related to the second sale agreement, and that ACB did not have any cause of action arising from or relating to the second sale agreement as pleaded against Mr Hodgson in the proceeding.
The fifth to the seventh defendants in the Barnes proceeding (the Sangster parties) also opposed the application to join APA on the grounds that neither ACB nor APA had a cause of action against the Sangster parties. It was not alleged that the Sangster parties owed any duties to ACB or APA, or that they breached any duties owed to ACB or APA.
Moreover, the Sangster parties, like the other defendants in the Barnes proceeding, stressed the problematic nature of the proceeding as a whole: Amcor, as a separate legal entity from ACB, has no cause of action against the Sangster parties. It was not a party to either of the two impugned transactions and has suffered no loss.
The question as to who or which entity is a ‘proper plaintiff’ in the proceedings is one that will undoubtedly loom large at the trial of the proceedings in due course. Amcor has, by a succession of consent orders, been allowed to plead that its former employees have caused it loss and damage by selling off the assets of other entities in the Amcor group on terms that are commercially disadvantageous to those other entities. However, no defendant has sought to strike out Amcor’s pleadings on the grounds that Amcor has not suffered the relevant loss and damage or, alternatively, that the entities that have had their assets sold off are not owed any duties by the defendants. Indeed, up until this point, the defendants have agreed to amendments to pleadings in which Amcor has been the principal plaintiff or plaintiff by counterclaim. Accordingly, whether Amcor is a proper plaintiff in either proceeding is not a question that should be determined in the context of the current applications.[12]
[12]In the course of argument, counsel for Amcor referred the Court to a number of authorities concerning the rights of a shareholder to sue to recover losses incurred by the company in which the shares are held. However, given the long history of the proceedings, it is neither convenient nor appropriate to decide at this point whether Amcor has a cause of action against the defendants in respect of loss and damage suffered by ACB, APA or Service Containers.
The addition of APA as a party to both proceedings is sought pursuant to r 9.09(2) or, alternatively, r 36.01 or r 9.06 of the Supreme Court (General Civil Procedure) Rules 2005.
It is unnecessary to consider whether the APA and Service Containers can be joined under r 9.09(2) or r 36.01. The applications can conveniently be determined under r 9.06, which relevantly provides that at any stage of a proceeding, the Court may order that:
(b)any of the following persons be added as a party, namely–
(i)a person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon; or
(ii)a person between whom and any party to the proceeding there may exist a question arising out of, or relating to, or connected with, any claim in the proceeding which it is just and convenient to determine as between that person and that party as well as between the parties to the proceeding;
It seems tolerably clear that by reason of the Deed of Accession, APA has rights and obligations arising from the second sale agreement. The nature and extent of those rights and obligations remain to be determined. In my view, the presence of APA before the Court is necessary to ensure that all questions in the proceedings are effectually and completely determined and adjudicated upon. Alternatively, I am satisfied that APA is entity between whom and at least those defendants who are parties to the second sale agreement there may exist a question arising out of, or relating to, or connected with, a claim in the proceedings which it is just and convenient to determine as between APA and the relevant defendant, as well as between the parties to the proceeding. This is so, even though the Amcor parties do not seek to plead in either proceeding that any of the defendants owes or owed any duties to APA.
Accordingly, notwithstanding the conceptual difficulties with the pleadings, the addition of APA, as a plaintiff in the Barnes proceeding and as a plaintiff by counterclaim in the Hodgson proceeding, should be allowed.
Service Containers
In submissions that corresponded with those made in respect of the addition of APA, the relevant Barnes defendants submitted that the proposed amended pleading in the Barnes proceeding did not disclose that Service Containers had a cause of action against them: it did not allege that they owed any duties to Service Containers, any breach of any such duty or any other basis upon which they could be liable to Service Containers. Many of the same considerations arise in respect of the addition of Service Containers as arose in relation to the addition of APA. Ultimately, however, the assets that are alleged to have been taken and profited from in breach of various duties were owned by Service Containers. Moreover, Mr Barnes is alleged to have been an officer of Service Containers and to have owed duties to it as a consequence. As a result, the presence of Service Containers before the Court is necessary to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon.
The principal argument for not allowing Service Containers to be added as a plaintiff in the Barnes proceeding was made by Mr Barnes. Counsel for Mr Barnes submitted, correctly, that no adequate explanation had been given as to why it was necessary to join Service Containers as plaintiff at this late stage. In so far as any explanation has been given, it was the surprising explanation that it was necessary for Service Containers to be joined as a plaintiff in case the defence was made good that Amcor had not suffered the relevant loss and damage. However, that did not explain why the decision to join Service Containers was not made at a much earlier point in time. It ought to be inferred that a decision was made prior to the commencement of the Barnes proceeding not to include Service Containers as a plaintiff.
The need to provide a proper explanation when there has been delay making an amendment was emphasised by the High Court in Aon Risk Services Australia Ltd v Australian National University:[13]
Generally speaking, where a discretion is sought to be exercised in favour of one party and to the disadvantage of another, an explanation will be called for. The importance attached by Rule 21 to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the Court’s attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. There can be no doubt that an explanation was required in this case.
[13](2009) 239 CLR 175, 215 (‘Aon’) (Gummow, Hayne, Crennan, Kiefel and Bell JJ).
It was also submitted on behalf of Mr Barnes that although the addition of Service Containers as a plaintiff only involved a small number of amendments, it would add another layer of complexity to the proceedings. At present, the controversy that is the subject of the proceeding concerns the rights of Amcor as a shareholder to damages said to flow as a consequence of the sale of the Service Containers business at an undervalue. The controversy is focussed on Amcor as a shareholder; by adding a new plaintiff the controversy will focus on loss and damage which might have been suffered by the vendor of the business. The proposed addition of Service Containers will require a ‘teasing out’ the separate causes of action, requiring the presentation of the different causes of action in an intelligible form. This will set back the progress of the Barnes proceeding, in circumstances where no explanation has been given as to why Service Containers was not included as a party from the outset.
The amendments arising from the addition of Service Containers as a plaintiff in the Barnes proceeding are to add Service Containers in the three paragraphs alleging loss and damage against Sangster and Bayley (18G, 18N and 18U). Nonetheless, I accept that those proposed amendments and the general inclusion of Service Containers as a plaintiff seeking relief against the defendants gives rise to new claims that some or all of the defendants may be obliged to respond to. I also accept that no satisfactory explanation has been given for the belated application to join Service Containers. It is entirely unsatisfactory for Amcor to say that it has now decided that it should ‘cover all bases’ in the event that it cannot succeed in its claim for loss and damage because it is not even a shareholder of the entity (Service Containers) that was the victim of the breaches of duty by the former employees. A casual approach to fundamental legal issues underpinning the proceedings – such as who is a proper plaintiff – which is evidenced by the application to join Service Containers the day before the hearing of the amendment applications, ought not to be encouraged.
However, it is clear that loss and damage suffered by Service Containers will be one of the critical issues at trial. It will be necessary examine in detail that loss and damage in any event, along with the specific circumstances surrounding the sale of the Service Containers business. As a result, I am satisfied that Service Containers is a party whose presence before the Court is necessary to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon.
Accordingly, I propose to grant leave for Service Containers to be added as a plaintiff in the Barnes proceeding.
The proposed amendments generally
The amendments for which leave is sought concern matters consequential upon the pleading of the Deed of Accession and the addition of APA and Service Containers and, in the Hodgson proceeding, the extensive amendments to the counterclaim (particularly in Annexure C), which are aimed at bringing the Hodgson proceeding into line with the Barnes proceeding.
The effect of granting the Amcor parties leave to amend their pleadings so as to introduce new claims by existing parties is that the amended document dates back to the original and the new claims are thus taken to have been made as at the commencement of proceedings. Section 34 of the Limitation of Actions Act 1958 (Vic) provides that if a court would, but for the expiry of any relevant period of limitation after the day a proceeding has commenced, allow a party to amend a document in the proceeding, the court must allow the amendment to be made if it is satisfied that no other party to the proceeding would by reason of the amendment be prejudiced in the conduct of that party’s claim or defence in a way that could not be met by an adjournment, an award of costs or otherwise. Rule 36.01(6) of the Supreme Court (General Civil Procedure) Rules 2005 is a procedural rule to similar effect.
It was submitted on behalf of Mr Hodgson that he will suffer prejudice of the kind referred to in s 34 and r 36.01(6) if he is deprived of the opportunity which he would have had, were the claims made in fresh proceedings, to successfully raise a limitations defence. To be deprived of the opportunity to plead a limitations defence constitutes prejudice in the conduct of that party’s defence that could not be met by an adjournment, an award of costs or otherwise and is prejudice that is relevant for the purposes of s 34 and r 36.01(6). No authority was referred to in support of this proposition.
In my view, the difficulty in characterising the loss of a potential limitations defence as relevant prejudice for the purpose of s 34 of the Limitation of Actions Act and r 36.01(6) is that these provisions are enabling provisions, which provide for the very thing that Mr Hodgson says will cause him prejudice. Their purpose would be largely defeated if the thing for which they provide was relevantly prejudicial and therefore unavailable.[14]
[14]Counsel for Mr Hodgson pointed to two situations in which s 34 and r 36.01(6) would nonetheless have work to do. The first is where a new claim is pleaded by a new party, as is the case for the claims the Amcor parties seek leave to plead on behalf of APA (in both proceedings) and Service Containers (in the Barnes proceeding). Any such claim would be backdated only to the date on which that party became a party to the proceeding, and would still be vulnerable to a limitations defence if the party had been added after the expiry of time. Those particular claims are, however, also opposed on the basis of futility. The second example is where the statutory limitation period does not apply or where time commences running again, such as where there is an acknowledgement of a debt. To this may be added the examples of concealed fraud, waiver and estoppel. These are not, however, cases in which there is an expiry of a relevant period of limitation but nonetheless no prejudice in allowing a new claim to be backdated. They are cases in which there is no expiry of any relevant period of limitation at all, and therefore cases in which the provisions, far from being rendered operative in a meaningful way, are simply not applicable.
In the absence of authority to the contrary on this point, I do not accept that the loss of a limitations defence constitutes relevant prejudice for the purposes of s 34 or r 36.01(6).
For their part, the Sangster parties submitted that s 34 of the Limitation of Actions Act does not operate in respect of a Commonwealth statutory cause of action, such as those derived from breaches of ss 180, 181 and 182 of the Corporations Act. The rule in Weldon v Neal continues to be the law. The Court is therefore precluded from allowing, or should not allow, amendments giving rise to new claims under the Corporations Act, as the relevant statutory claims are now statute-barred.
There is force to the argument that the limitation period specified in s 1317K of the Corporations Act cannot be extended and is not affected by s 34 of the Limitation of Actions Act or r 36.01(6) of the Rules. However, as discussed, there is a live issue as to whether the breaches alleged to have been committed are continuing breaches. Amcor argues the statutory claims are not statute-barred, as the relevant breaches continued at least until the defendants left Amcor’s employment. For the reasons set out below, the question as to whether the statutory causes of action under the Corporations Act are statute-barred is one that is most appropriately left for trial.
Whether the amendments should be allowed remains to be considered on the ordinary discretionary bases.
Rule 36.01(1) provides:
(1)For the purpose of –
(a)determining the real question in controversy between the parties to any proceeding; or
(b)correcting any defect or error in any proceeding; or
(c)avoiding multiplicity of proceedings-
the Court may, at any stage order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding.
In Re AWB Ltd (No 7),[15] Robson J discussed the legal principles governing applications to amend a civil claim, and in particular the impact of the High Court’s decision in Aon on the exercise of the Court’s discretion to grant leave to do so, in accordance with the relevant provisions of the Supreme Court Act 1986 (Vic) and rules of court. His Honour observed that the reference to “the real question in controversy” in r 36.01 refers to a question that exists at the time of the application to amend.[16] However, an unduly narrow approach should not be taken to what are the real issues in controversy.[17] They may extend beyond the existing pleadings.[18] In Etna v Arif,[19] Batt JA (with whom Charles and Callaway JJA agreed) said that r 36.01(1) should “be read, and as, in substance, comprehending questions potentially within the ambit of the controversy or lis between the parties.[20]
[15][2009] VSC 413.
[16]Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, 205 (Gummow, Hayne, Crennan, Kiefel and Bell JJ), 218 (Heydon J); a similar conclusion had been reached in this court in Etna v Arif [1999] 2 VR 353.
[17]Ibid 209 (Gummow, Hayne, Crennan, Kiefel and Bell JJ).
[18]Ibid 205 (Gummow, Hayne, Crennan, Kiefel and Bell JJ).
[19][1999] 2 VR 353, 366.
[20]Re AWB Ltd (No 7) [2009] VSC 413, [18] and [33].
Although the Court’s powers under r 36.01 are discretionary, their exercise is governed by the mandatory directions in r 1.14(1)(a) and in s 29(2) of the Supreme Court Act.[21]
[21]Re AWB Ltd (No 7) [2009] VSC 413, [25].
Section 29(2) of the Supreme Court Act provides that the Court:
…subject to the provisions of this or any other Act, must so exercise its jurisdiction in every proceeding before it as to secure that, as far as possible, all matters in dispute between the parties are completely and finally determined, and all multiplicity of proceedings concerning any of those matters is avoided.
Rule 1.14 of the Supreme Court (General Civil Procedure) Rules 2005 provides:
(1)In exercising any power under these Rules the Court –
(a)shall endeavour to ensure that all questions in the proceeding are effectively, completely, promptly and economically determined;
(b)may give any direction or impose any term or condition it thinks fit.
(2)The Court may exercise any power under these Rules of its own motion or on the application of a party or of any person who has a sufficient interest.
The following principles articulated in Aon are also relevant:
· Issues of case management are relevant to the discretion to allow an amendment.[22]
· An award of costs is not always a satisfactory resolution to the added strain imposed on litigants by delay and disruption.[23]
· The onus is on the party seeking the amendment and “generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for.”[24]
[22]Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, 211-13 (Gummow, Hayne, Crennan, Kiefel and Bell JJ) citing with approval Toohey and Gaudron JJ in Sali v SPC Ltd (1993) 667 ALJR 841, 849.
[23]Ibid 189-90 (French CJ), 213-14 (Gummow, Hayne, Crennan, Kiefel and Bell JJ).
[24]Ibid 215 (Gummow, Hayne, Crennan, Kiefel and Bell JJ).
The Court has to take into account a range of factors in deciding to whether to exercise its discretion to allow the proposed amendments. These include any delay by the Amcor parties in prosecuting their case and, in particular, in applying for leave to amend, the adequacy of the explanation given for any delay, the impact of any delay in bringing the proceedings to hearing on the parties, and so on.
In this case, I am especially cognisant of the position of Mr Hodgson, who commenced relatively uncomplicated proceedings against Amcor in December 2004 to recover (in the scheme of things, relatively small) amounts said to be due to him under his employment contract. He is still waiting for his day in court, some 3 ½ years after the previous application to amend and almost 6 years after he commenced his action. Mr Hodgson argued, and I accept, that when Osborn J ordered that the Hodgson and Barnes proceedings be heard together there was no suggestion that further parties would be added in the Barnes proceeding (let alone in both proceedings) or that there would be extensive amendments to the pleadings introducing a raft of new allegations against him, ostensibly on the basis of aligning the pleadings in the two proceedings.
Mr Hodgson also submitted that the actions of the Amcor parties in seeking the amendments appeared to be ‘strategic’ and that there was no reason why the case now sought to be made could not have been made in April 2006, or even earlier. The fact that some of the amendments are intended to align the allegations in the Hodgson proceeding with those in the Barnes proceeding (which were made in September 2007) highlights the delay and the prejudice to Hodgson in making them at this late stage.
On the other hand, I am satisfied that the Amcor parties have been handicapped in making their case against the former Amcor employees who allegedly acted secretly and in concert by the complex web of confidentiality requirements in which it has been ensnared since the execution of the Anton Piller order in November 2004. This has caused Amcor’s solicitors to tread warily in relation to the use of information and has necessitated extensive independent investigative work on their part, including numerous applications for discovery against non-parties. Until the order made on 15 September 2009 that discovery in the Barnes proceeding was deemed to be discovery in the Hodgson proceeding and vice versa, the Amcor parties faced difficulties aligning the two proceedings, notwithstanding that the claims made against Mr Hodgson are intimately related to the claims made against the defendants in the Barnes proceeding. Ms Whiting deposed that she obtained documents in the Barnes proceeding that were clearly relevant in the Hodgson proceeding, but felt that they could not be used in the Hodgson proceeding without specific orders of the Court. She was of the view that a similar scenario could apply to documents in the Hodgson proceeding, which could become relevant in the Barnes proceeding. The affidavits filed on behalf of the Amcor parties provide a comprehensive description of these difficulties and a reasonably cogent explanation as to why the amendments have taken so long to formulate.
The problems experienced in identifying the Deed of Accession and recognising its significance for the litigation are more difficult to understand, given that it is plainly a document that was prepared by, or at the behest of, Amcor companies and must be assumed to have been in the possession of one or more of those companies at all relevant times. It ought to have been identified as relevant to the proceedings and discovered by the Amcor parties. Nonetheless, I accept that the persons responsible on behalf of Amcor for identifying the relevant documents and formulating the claims on the basis of those documents did not know about or appreciate the significance of the Deed of Accession until June 2009.
As a result, I do not consider that to allow the amendments would be to fall into the trap of treating them with “uncomplaining supine liberality”.[25] Nor do I consider that any forbearance and liberality inherent in allowing the amendments at this stage in the proceedings should be regarded as being extended to a “delinquent”, and as imposing a relative disadvantage on “those who proceed methodically and in due time”.[26] The circumstances of these proceedings are unfortunate, but quite unusual. An explanation for Amcor’s failure to recognise the potential importance of the Deed of Accession has been given and Amcor has acted with reasonable expedition to seek leave to make the amendments required.
[25]Aon, [133] referring to the comment of Bryson J in Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd[2000] NSWSC 753 at [15].
[26]Ibid.
I accept that the prejudice to Mr Hodgson in allowing the proposed extensive amendments to the amended defence and counterclaim is significant for several reasons. Mr Hodgson is physically frail; he is approaching old age and has a serious heart condition. He underwent a quadruple bypass in 1995, and it is anticipated that he will require further surgery in the future. I take into account the additional strain that the that new allegations may impose on him, as well as the strain inevitably arising from litigation that takes much more time that it should to reach a resolution. I also take into account the fact that Mr Hodgson is retired and has not been paid, or has been under-paid, termination entitlements that he says have been owing to him for five years.
However, as the Amcor parties point out, Mr Hodgson was made aware of the allegations against him that are now contained in Annexure C when the statement of claim in the Barnes proceeding was served upon him some time ago. In that sense, the allegations are not new to him. The existing pleading already contained the nucleus of the allegations that are now sought to be made, and they required an extensive response in any event. Counsel for Mr Hodgson was pressed to identify new claims that Mr Hodgson would have difficulty answering, given the delay and the effluxion of time. The allegations identified were those relating to arrangements between Achilla and Sei Pak (Aust) Pty Ltd. As I understand the amended pleading, this is a relatively small part of the allegations concerning the sale of the ACB business.
The prejudice to Mr Hodgson arising from further delay can be ameliorated to some extent by ensuring that Amcor puts on its evidence without further delay, and the proceedings are given an expedited hearing date.
If its allegations are made out, Amcor will have a good defence to the claims made against it by Mr Hodgson. Amcor should not be precluded from advancing best case available to it to defend itself against the allegations made by Mr Hodgson and, on the counterclaim, to recover for loss and damage it says it has suffered as a result of the first and second sale agreements.
On balance, having regard to the submissions of the parties and the considerations that I have outlined above, I have concluded that the amendments should be allowed in each proceeding and that the Amcor parties should be granted leave to file and serve the proposed amended pleadings, including the amendments foreshadowed in Corrs letter to the Barnes defendants dated 14 December 2009.
Form of pleading in the Hodgson proceeding
Mr Hodgson complains about the form of the proposed amended defence and counterclaim. He is right to do so.
The form of the counterclaim in the Hodgson proceeding is unsatisfactory. It is in a form which makes it almost impossible for Mr Hodgson to understand the case that he is asked to meet. The proposed amendments do nothing to simplify the pleading and make it more intelligible. To the contrary, the proposed amendments make the pleading even more difficult to understand, because they add to the volume of material which is included in an annexure, away from the main body of the pleading.
The main reason for this is, of course, the fact that many of the allegations, and certainly most of the documents particularised, are or have been required to be kept confidential. In my view, there is a pressing need for the Amcor parties to undertake the exercise of ‘auditing’ and, if necessary, seeking to remove or amend, the confidentiality regimes that are applicable in order to integrate the material contained in the confidential annexures in the body of the pleading.
Amcor will be granted the indulgence of further amending the amended defence and counterclaim at this late stage in the proceeding. However, the indulgence carries with it an expectation that Amcor will use its best endeavours to resolve the status of the confidentiality requirements to enable the allegations currently contained in the annexures to be integrated into the counterclaim proper. The other parties to the Hodgson and Barnes proceedings are also be expected to do their best to assist Amcor in this regard.
Complaint was also made by Mr Hodgson that the counterclaim cross-referenced particulars previously provided without setting out those particulars in full. In my view, this complaint has less merit – cross-referencing may be usefully deployed to ensure that the pleading is kept to a manageable size.
Costs
The Amcor parties submit that the costs of the applications should be reserved in each proceeding. Mr Hodgson seeks his costs on an indemnity basis. The same application is made by the defendants in the Barnes proceeding, although less vociferously.
Mr Hodgson submits that he should at least be awarded costs on an indemnity basis of the Amcor parties’ application for leave to amend and the costs thrown away and of and occasioned by any leave to file a further amended defence and counterclaim. The costs thrown away should include all reserved costs in relation to prior objection taken by him to the form and content of pleadings which the Amcor parties no longer seek to defend. Mr Hodgson says that any less advantageous order for costs would visit unreasonable out-of-pocket expenses on him. This would be unfair in circumstances where he is a private person opposed to a public company, which has shareholders to bear its costs. He says that his estimated solicitor and own client costs thrown away as a result of the proposed amendments will approach $120,000.
The Amcor parties have sought an indulgence from the Court. The Court has had the benefit of the very helpful submissions made on behalf of Mr Hodgson and the Barnes defendants as to the exercise of its discretion to allow the amendments and the joinder of parties. The defendants cannot be criticised for not consenting to the proposed joinder and amendments. Amcor should pay the defendants’ costs of the applications and any costs thrown away as a result of the amendments.
Furthermore, I consider that the test for an award of special costs is satisfied in this case. The late realisation by Amcor of the existence and significance of the Deed of Accession was not in any way the fault of any of the defendants. To the contrary, Amcor bears the responsibility for realising so late in the day that the Deed was important in the formulation of its claims against the defendants. It must have had the Deed in its possession at all material times, and it had persons working for it who knew about the Deed and were capable of drawing it to the attention of Amcor’s legal counsel. While Amcor carried out extensive forensic investigations to obtain material to support its case against the defendants, it failed to identify an important document that was under its nose.
Moreover, the application to join Service Containers as a plaintiff in the Barnes proceeding has all the hallmarks of being an afterthought. That application was first foreshadowed by letter the day before the hearing of the amendment application. No proper explanation was given for the application or for the delay in making it, other than that the defendants might be correct to assert that Amcor is not entitled to recover from the defendants in the Barnes proceeding in respect of the first sale agreement. The defendants ought to be compensated for the inconvenience associated with the delay.
Accordingly, I propose to order that costs be paid on a solicitor and own client basis.
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Their Honours were there speaking of a case in which the gist of the action was the damage sustained, which is here not so of either of the causes of action on which it is sought to rely. But, in a matter of this kind, there is always a question whether an answer to the plea under the statute may yet be found. … That may at present seem very unlikely; but, for all that, a decision to strike out an action summarily as an abuse of process ought in the end to be based on the inherent weaknesses of the action itself, and not on what appears to be the potential strengths of a defence to which an answer may yet emerge.
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