Re AWB Limited No 11
[2009] VSC 567
•9 December 2009
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE COMMERCIAL AND EQUITY DIVISION | Not Restricted | |
COMMERCIAL COURT
CORPORATIONS LIST
No 10078 of 2007
RE AWB LIMITED (ACN 081 890 459)
BETWEEN:
| AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION | Plaintiff |
| v | |
| ANDREW ALEXANDER LINDBERG | Defendant |
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JUDGE: | ROBSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 November 2009 | |
DATE OF JUDGMENT: | 9 December 2009 | |
CASE MAY BE CITED AS: | Re AWB Limited No 11 | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 567 | |
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CORPORATIONS – civil penalty proceedings – pleadings –whether allegations should be struck out for not containing a material allegation of fact - application refused - r 23.02 Supreme Court (General Civil Procedure) Rules 2005
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M J Colbran QC with Mr N J O'Bryan SC, Mr J P Moore, Ms M S Wall and Mr C H Truong | The Australian Securities and Investments Commission |
| For the Defendant | Mr D G Collins SC with Mr K J A Lyons and Ms M Tittensor | Galbally & O’Bryan Solicitors |
AWB Limited (No 7) [2009] VSC 413
Heffernan v Hayes (1899) 25 VLR 156
HIS HONOUR
INTRODUCTION AND SUMMARY
Mr Lindberg applies for an order that paragraphs 60 and 61 of the second further amended statement of claim dated 14 October 2009 (“the October claim”) be struck out, pursuant to r 23.02 of the Supreme Court (General Civil Procedure) Rules 2005.[1] He claims that only material allegations can be made by ASIC and that r 23.02 provides that every pleading shall contain, in a summary form, a statement of all material facts. Mr Lindberg contends that there is no alleged breach of duty which relies on the pleas in paragraphs 60 and 61 of the second further amended statement of claim and that accordingly, those paragraphs should be struck out.
[1]Interlocutory process of 18 November 2009.
For the reasons that follow, I refuse the application.
THE RELEVANT PLEADINGS
The relevant pleadings fall under the heading of “The Tigris Debt”. In substance, the relevant pleas are as follows. I will preface each plea with the relevant paragraph number.
[58] On or about 13 July 2000, BHP assigned to the Tigris Corporation, inter alia, its rights to receive value from the IGB in relation to the cargo of grain delivered by AWB to the IGB in January 1996.
[59] On 28 September 2000, Tigris requested that AWB assist it in recovering US$8,052,550 (“the Tigris debt”), which was said to be the amount due to BHP for delivery of the grain.
[59A] In order to recover the Tigris debt, AWB inflated the price of wheat under contract A1670 and A1680 by an amount that was calculated to recoup the entirety of the Tigris debt from the UN escrow account once both contracts were paid in full. These contracts were entered into on or about 11 December 2002.
[60] On or about 19 November 2004, Mr Lindberg approved the payment of the Tigris debt by AWB to Tigris, after the deduction of the sum of US$500,000, which was to be retained by AWB as a commission.
[61] On or about 10 November 2004, Mr Lindberg received an email from James Cooper attaching a draft agreement between Tigris and AWB. The email referred to Tigris having agreed to pay AWB an amount of US$500,000 in return for AWB’s services in collecting a debt from the IGB. The agreement did not refer to a debt owed to Tigris, but instead referred to Tigris receiving a commission of US$7,087,202.24.
[62] On or about 9 December 2004, AWB paid Tigris US$7,087,202.24, purportedly as the repayment of the Tigris debt.
[63(a)] At all material times, from around November 2002, Mr Lindberg knew that AWB was proposing and had agreed with the IGB to recover the Tigris debt for Tigris by inflating the total price payable under AWB’s contracts with the IGB. The particulars relied on allege that Mr Lindberg’s knowledge is to be inferred, inter alia, from the matters alleged in paragraphs 60 and 61 and other particulars of knowledge previously relied on arising out of communications to and from Mr Lindberg and meetings attended by Mr Lindberg before the Government of Iraq fell in about March 2003.
[63(b)] At all material times, from around November 2002, Mr Lindberg knew that the payment obtained from the UN escrow account in respect of the Tigris debt was not obtained on account of humanitarian goods supplied by AWB to Iraq. The particulars relied on allege that Mr Lindberg’s knowledge is to be inferred from the matters alleged in paragraph 61 and sub paragraph 63(a), the plea previously referred to.
[65] By reason of his position as managing director of AWB and other matters earlier pleaded, including AWB’s circumstances previously alleged and Mr Lindberg’s knowledge alleged earlier and in paragraph 63 (which includes the knowledge alleged in paragraphs 60 and 61), at all material times Mr Lindberg had duties:
(a) to inform AWB’s board (and others) that:
(i) the contract price for contracts A1670 and A1680 was inflated in order to recover the Tigris debt;
(ii) AWB received payments from the UN escrow account on account of the Tigris debt. (The particulars allege that AWB received payments from the UN escrow account pursuant to contract A1670 from 30 March 2004 to 22 November 2004 and pursuant to contract A1680 from 21 May 2003 to 10 March 2004);
(iii) any payment received by AWB from the UN escrow account on account of the Tigris debt was not a payment on account of humanitarian goods supplied by AWB to the people or government of Iraq; and
(iv) the revelation of any conduct by AWB that resulted in AWB’s receipt of payment from the UN escrow Account (other than on account of humanitarian goods supplied by AWB to the people or Government of Iraq) would cause, or would be likely to cause, substantial and enduring harm to AWB of the kind alleged in paragraph 27;
(b)to take reasonable steps to prevent AWB from entering into contracts with the IGB for the sale of wheat which required or enabled AWB to obtain funds from the UN escrow account on account of the Tigris debt;
(c)to take reasonable steps to ensure that AWB’s acquisition of funds from the UN escrow account on account of the Tigris debt was disclosed to the United Nations and was approved by it;
(d)to take reasonable steps to prevent AWB from obtaining payments from the UN escrow account on account of the Tigris debt;
(e)not to authorise and/or permit and/or assist AWB to enter into and carry out contracts A1670 and A1680 in circumstances where he knew the matters set out in paragraph 63; and
(f)to take reasonable steps to enquire of those AWB employees who were responsible for the negotiation and administration of contracts A1670 and A1680 as to whether:
(i)the proposed recoupment of the Tigris debt by inflating the contract price for wheat had been disclosed to and approved by the United Nations; and
(ii)obtaining funds from the UN escrow Account on account of the Tigris Debt constituted conduct that the United Nations had called on Australia to prevent.
[66] In breach of the duties alleged, Mr Lindberg did not do the things it is alleged he had a duty to perform.
[67]-[68] ASIC also alleges that if Mr Lindberg did not have the knowledge alleged (including the knowledge alleged in paragraph 63), then Mr Lindberg had the means of obtaining that knowledge and he breached his duties by not informing himself of those matters by using those means.
[69]-[70] By engaging in this conduct, Mr Lindberg breached his duties and contravened s 180 and s 181 of the Corporations Act 2001.
Mr Lindberg submits that ASIC does not found any alleged breach of duty by Mr Lindberg on Mr Lindberg’s approval of the payment of the Tigris debt by AWB on or about November 2004. He submits, therefore, that the allegation in paragraph 61 is mere surplusage that may waste time at the trial. Similarly, he submits that ASIC does not allege any alleged breach of duty by him arising out of his receipt of the email or the draft Tigris agreement pleaded in paragraph 61.
ASIC’S CONTENTIONS
ASIC contends that paragraphs 60 and 61 were the subject of the lengthy amendment applications. ASIC argues that Mr Lindberg should not now be allowed to contend that the inclusion of the paragraphs were wrong. Paragraph 60 of the October claim appeared as paragraph 89 of the 24 July 2009 further amended statement of claim (“the July claim”). Paragraph 89 of the July claim had appeared in the previous 18 April 2008 amended statement of claim, save that some amendments were made to the particulars in the July claim. Paragraph 61 of the October claim was added by the amendments introduced to the July claim as paragraph 88A.
ASIC are correct that paragraph 61 was the subject of the amendment applications earlier this year, but paragraph 60 was not so.
In any event, I do not need to decide this issue as for the reasons that follow I do not accede to Mr Lindberg’s application.
ASIC contends that paragraphs 60 and 61 raise material allegations. First, ASIC says that paragraphs 60 and 61 are expressly relied on as particulars of Mr Lindberg’s knowledge as alleged in paragraph 63. As indicated in my September 2009 decision,[2] I construed the allegations of Mr Lindberg’s breach of duty to be limited to breaches by him that occurred prior to the fall of the Government of Iraq. An integral element of the alleged breaches is his knowledge or his failure to exercise the means of obtaining knowledge available to him at the time.
[2]Re AWB Limited (No 7) [2009] VSC 413.
I have not heard any submissions on how Mr Lindberg’s approval of any payment to Tigris or his receipt of the email and draft agreement on 10 November 2004 is relevant to his knowledge before the fall of the Government of Iraq in or about March 2003. Without the benefit of such submissions, at this stage, I have some trouble in seeing their relevance.
ASIC also alleges that “this knowledge relevantly forms part of the basis of Mr Lindberg’s alleged duties, breaches and contraventions of s 180 and 181 in connection with the Tigris transaction”.[3] Again I have some difficulty in seeing the relevance of his “knowledge” in November 2004 to his alleged breach of duty in the period before the fall of the Government of Iraq in connection with the Tigris transaction.
[3]Written submissions of Plaintiff of 26 November 2009 at [48].
Thirdly, ASIC contends that under paragraph 27(l), it is alleged that, in relation to the proposed legislation repealing the Wheat Marketing Act 1989:
But for the revelation of AWB’s conduct of the sort alleged in paragraphs 15A, 21, 50 and 59A to 62 inclusive herein such legislation is unlikely to have been introduced either so soon or at all.
Paragraph 27 alleges that the revelation of AWB’s conduct of the sort alleged, inter alia, in paragraphs 60 and 61, was likely to cause and in fact caused substantial and enduring harm to AWB. The harm includes things that happened to AWB in 2006 and subsequently, including the loss of the single desk.
As yet, I have not heard submissions on the relevance of the allegations in paragraphs 60 and 61 to the allegation that the alleged contraventions of Mr Lindberg’s duties were serious or materially prejudiced the interests of AWB.[4] In particular, I have not heard argument on whether or not Mr Lindberg’s alleged conduct after the fall of the Government of Iraq may be relevant to whether or not his alleged contraventions before the fall of the Government of Iraq were serious or materially prejudiced the interests of AWB. The current pleading does rely on matters that happened well after the fall of the Government of Iraq. ASIC submits that they are relevant to the harm suffered by AWB and to meeting Mr Lindberg’s defence, as well as establishing Mr Lindberg’s knowledge.
[4]Ibid [72].
THE JURISDICTION OF THE COURT
Previously, the rules used to contain a provision that only material facts were to be stated in pleadings.[5] This particular rule has now been abolished. Nevertheless, the practice was not to strike out the non material facts unless they would delay the fair trial of the proceeding or otherwise be embarrassing.[6] The current rules provide that any part of a pleading may be struck out if it does not disclose a cause of action or may prejudice, embarrass or delay the fair trial of the proceeding. I assume, for present purposes, that the effect the rules now is not materially different to what it was when the rules expressly provided that only material facts were to be pleaded.
[5]Order 19 r 4.
[6]Williams, Civil Procedure at [13.02.20]; Heffernan v Hayes (1899) 25 VLR 156.
As indicated above, Mr Lindberg’s sole ground of objection to paragraphs 60 and 61 is that the payment to Tigris and the content of the Tigris agreement are not subjects of any alleged breach of duty by Mr Lindberg. ASIC does not dispute this submission. On the other hand, the pleas may be relevant particularly on the issue of the seriousness of the alleged contraventions or on whether the alleged contraventions materially prejudiced the interests of AWB. Further, there may be an argument that some of the matters pleaded assist in establishing, by inference, Mr Lindberg’s state of knowledge or what he had the means of knowing at the relevant times before the fall of the Government of Iraq.
I think it is preferable that I hear further argument on these matters when the matters alleged are sought to be proven and the relevance of the evidence is assessed.
Accordingly, I decline to make the orders sought in Mr Lindberg’s application. As these issues may be resolved during the trial, I will reserve the costs.
RECONSIDERATION OF ISSUES ARISING FROM SEPTEMBER DECISION
ASIC applied ore tenus for me to reconsider “some aspects” of my September decision.[7] Mr Lindberg objected to this course and did not respond to the substance of the submissions.
[7][2009] VSC 413.
ASIC’s application was not formalised in any way. Rather, counsel for ASIC said “that as our learned friends are re-agitating the issue, your honour, it is an appropriate moment to invite you to reconsider some aspects of this judgment on their motion”.[8] In particular, ASIC requests that I reconsider what I found in paragraph 138 of my September decision. In that paragraph, I said:
Mr Lindberg is alleged to have failed to take any or any reasonable steps to prevent AWB from making payments of the inland transportation fees (this must relate to the illegitimate ones where money was likely to go to the Government of Iraq)[9] and obtaining funds in respect of purported inland transportation fees and the Tigris debt (this must relate to funds that were obtained that were likely to go to the Government of Iraq).[10]
[8]Transcript 477 of 27 November 2009.
[9][97(m)] of the July claim.
[10][97(m)] of the July claim.
ASIC submits that the funds obtained on the relevant contracts from the UN escrow account in respect of the inland transportation fees and the Tigris debt were not all to go to the Government of Iraq, but a part of it was to go to AWB, and then to Tigris, and a part to the Government of Iraq. I do not think that anything particularly turns on paragraph 138 and if it be a mistake, then the parties can read it accordingly.
ASIC says, however, that the error has some relevance to another issue. ASIC contends that Mr Collins has submitted that nothing is relevant in this case after 31 March 2003 and that his contentions are incorrect and inconsistent with my September reasons and the decision I made on the form of the amendments on 5 October 2009. ASIC says that the allegations about the payment by AWB to Tigris is an example of where Mr Collins says the allegations are irrelevant.
As indicated above, the October claim does refer to matters that occurred after the fall of the Government of Iraq. These allegations mainly relate to the alleged material prejudice suffered by AWB. They may also relate to the allegation that Mr Lindberg’s alleged contraventions were serious. As indicated above, I have not heard argument on this issue.
As indicated above, paragraphs 60 and 61 are relied on by ASIC to draw inferences as to Mr Lindberg’s knowledge of certain matters allegedly held before the fall of the Government of Iraq as well as the allegation of prejudice to AWB. As indicated, I do not wish to make any observations on these contentions until each party has had an opportunity to address me on the issues.
Further, ASIC submits that I should reconsider my construction in the September decision of the July claim where I held, in effect, that the alleged breaches of duty by Mr Lindberg were limited to breaches that occurred before the fall of the Government of Iraq and I did not permit amendments in the October claim that sought to allege breaches of duty after the fall of the Government of Iraq.
This construction was the basis for my decision on the amendments. ASIC sought leave to appeal against that decision. The first ground of the application for leave to appeal was that my construction was incorrect because I concluded that the questions in controversy related only to Mr Lindberg’s conduct before the fall of the Government of Iraq.[11] Leave to appeal was refused.
[11]PTG-21 to Mr Galbally’s affidavit of 11 November 2009 filed in 9938 of 2009.
At this stage, I do not propose to accept ASIC’s invitation to say anything further about the relevance of particular issues to the case. I consider that the proper course is to address them when they are properly raised and fully argued by each party.
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