Amcor Ltd & Ors v Barnes & Ors [2012] VSC 434

Supreme Court of Victoria|2012-09-20|Before: VICKERY J

EQUITY - Whether equitable relief barred by laches - Whether Plaintiff barred by doctrine of 'unclean hands'- Principles as to doctrine of 'unclean hands'.

EVIDENCE - Application of rule in Browne v Dunn - Principles of Browne v Dunn considered and applied - Whether defendant on notice of the new allegations.

PRACTICE AND PROCEDURE - Application to further amend statement of claim to allege new matters following conclusion of trial as to liability in order to found a new claim for equitable relief for an account of profits - Whether Plaintiff made an election as to relief - Whether equitable relief barred by laches - Whether Plaintiff barred by doctrine of 'unclean hands'- Principles as to doctrine of 'unclean hands'- Function of pleadings - Extent and effect of amendments sought - Considerations of case management - Application of Civil Procedure Act 2010 (Vic) - Aon Risk Services Australian Ltd v Australian National University [2009] HCA 27; (2009) 258 ALR 14 considered and applied - Relevance of manner in which proceeding conducted at trial - Conduct of a trial with self-represented litigants - Final submissions by draft judgement - Application of rule in Browne v Dunn - Principles of Browne v Dunn considered and applied - Whether defendant on notice of the new allegations - Prejudice of parties arising from the proposed amendments - Case management issues arising from the proposed amendments.

1 Before the Court is an application in Amcor Ltd and Ors v Barnes and Ors No. 8181 of 2007 (the "Barnes Proceeding") by Amcor Ltd and the other Amcor Plaintiffs (together all called 'Amcor') that the First Defendant ('Barnes') and/or the Second to Fourth Defendants (together all called the 'Holihan parties') account for profits made by a business called the 'ACB Business' which were available for distribution by ACB Australia Pty Ltd and Australian Corrugated Box Co Pty Ltd shareholders had any dividends been declared to distribute those profits. The account was sought in respect of the following periods:

2 The Holihan parties comprised Craig Holihan ('Holihan'), ACB Australia Pty Ltd and Australian Corrugated Box Co Pty Ltd (formerly Achilla Pty Ltd).

3 Amcor's application was made following the delivery of reasons for judgement in Hodgson v Amcor; Amcor v Barnes and Ors on 20 March 2012[1] (as amended by the 'slip rule' by order made 1 May 2012 and reasons Hodgson v Amcor (No. 8)[2]) (the 'Principal Judgement').

4 The judgement in the proceeding pronounced by order made 21 March 2012 provided:

An account by taken as to the following:
1. Between 30 July 2003 and 28 October 2004 what profits were earned by the ACB Business which were available for distribution by Australian Corrugated Box Co Pty Ltd (formerly Achilla Pty Ltd) and ACB Australia Pty Ltd to their shareholders had any dividends been declared to distribute those profits?
2. What is the calculation of one half of the sum referred to in paragraph (a)?
Following the taking of accounts, orders will be made as necessary as to payment directed to Barnes, if any are required.
A further account be taken as to the following:
1. Between 1 July 2004 to 28 October 2004 what profits were earned by the ACB Business which were available for distribution by Australian Corrugated Box Co Pty Ltd (formerly Achilla Pty Ltd) and ACB Australia Pty Ltd to their shareholders had any dividends been declared to distribute those profits?
2. What is the calculation of one half of the sum referred to in paragraph (a)?
Following the taking of accounts, orders will be made as necessary as to payment directed to Holihan, if any are required.

5 The orders made by the judgement merely provided for steps to be taken in aid of the process of the taking of accounts for profits, and stopped short of determining whether any of the Defendant parties were liable to account for any profits found to have been generated to any of the Amcor parties, or for any part of those profits.

6 The quantum of the profits earned by the ACB Business in the relevant periods was the subject of a joint report prepared by the accountants for Amcor and the Holihan parties. Between 30 July 2003 and 28 October 2004 the relevant profit generated by the ACB Business was $1,720,726 (with 50% of that total calculated at $860,363) and between 1 July 2004 to 28 October 2004 amounted to $679,217 (with 50% of that total calculated at $339,608.50).

(a) Barnes account for 50% of the profits of the ACB Business made in the period 30 July 2003 to 28 October 2004, being those profits of the ACB Business to which Barnes became entitled (the 'Barnes profits') and that those profits be paid to Amcor. The total amount in respect of which Amcor seeks payment is $860,363.

(b) The Holihan parties account for 50% of the profits (not being Barnes' share of the profits) made by the ACB Business in the period 1 July 2004 to 28 October 2004 (the Holihan parties' profits) and that those profits be paid to Amcor - the total amount in respect of which Amcor seeks payment in this regard is $339,608.50.

(c) The Holihan parties be jointly and severally liable with Barnes for the proportion of the profits in the period 1 July 2004 to 28 October 2004 for which Barnes is held to be liable to account, i.e. the Barnes profits.

8 Amcor indicated that in due course it would also seek that interest be paid on the profits ordered to be paid to it at the rate fixed from time to time under s 2 of the Penalty Interest Rates Act 1983 (Vic) on a compound basis, consistently with the principles referred to by Mason CJ and Wilson J in a joint judgement delivered in Hungerfords v Walker.[3]

9 In the Third Further Amended Statement of Claim, Amcor sought on a further or alternative basis, that the Third and Fourth Defendants, namely ACB Australia Pty Ltd and Australian Corrugated Box Co Pty Ltd account for profits earned from 30 July 2003.

10 Further, in the Third Further Amended Statement of Claim no account of profits was sought by Amcor against either Barnes or Holihan personally in the prayer for relief. Amcor nonetheless maintained that it is entitled to an account of profits against Barnes and all of the Holihan parties, including Holihan personally.

11 The Barnes profits comprised 50% of the profits of the ACB Business made in the period 30 July 2003 to 28 October 2004, amounting to $860,363.

12 Mr Barnes, who appeared in person, resisted Amcor's application that he should account personally for any of the Barnes profits, and did so on four principal grounds:

(a) Amcor had not made any election in relation to the account of profits remedy, which they were obliged to do;

(b) Amcor was guilty of laches (said to be inordinate delay arising from its late institution of the Barnes proceeding) calling for equitable relief to be denied to it in the proper exercise of the Court's discretion;

(c) Amcor came to the Court with 'unclean hands' (resulting from its participation in the cartel conduct which gave rise to the increase in prices for cardboard boxes to Australian consumers from which it now sought to profit by seeking an account of profits in relation to the ACB Business which in turn derived its profits from the sale of cardboard boxes to Australian consumers during the period of the cartel) calling for equitable relief to be denied to it in the proper exercise of the Court's discretion;[4]

(d) In all the circumstances, Barnes should only be held liable to account for the profits which he claims he actually received into his hands during the relevant period, namely $312,708 after tax (the 'Barnes Receipt of Profits Submission'); and

(e) Further, Barnes adopted an additional submission advanced by the Holihan parties (the 'Barnes Pleading Submission'), namely:

... that no breach of fiduciary duty was ever pleaded against me relevant to an alleged failure to disclose an interest, only that I breached my fiduciary duty in the circumstances of the negotiation and the sale of the ACB Business (which the court rejected).

13 The Barnes Pleading Submission included a submission that the prayer for relief in the Third Amended Statement of Claim made no claim against Barnes personally in respect of an account of profits.

14 The question of election was dealt with in the Principal Judgement in the following terms:

A defendant who breaches a fiduciary duty may be ordered to account for any profits he has made, in the alternative to pay compensation or damages.

A Plaintiff may defer making an election as to whether he chooses damages or profits until the Plaintiff has the opportunity to make an informed choice as to which remedy he will pursue.

...

Accordingly, should the Defendants be found liable for breaches of common law or equitable duties, the Plaintiffs seek appropriate orders to enable them to make an informed election between damages (or compensation) and profits.

However, before any such orders are made directed to determining quantum to enable the Plaintiff to make an informed election between damages (or compensation) and profits, an entitlement to such damages or profits must first be established. [5]

15 In the present case, the effect of the Principal Judgement was to determine that Amcor was not entitled to damages (or compensation). Consequently there was no election to be made between remedies. The Court, in its Principal Judgement determined that if any relief was available to the Amcor parties, it was confined to the taking of accounts, if that remedy was properly open.

16 Accordingly, there was no election for Amcor to make, and it cannot be denied relief for failing to do that which it was not required to do.

17 It was submitted by Barnes that Amcor's claim for equitable relief against him in the nature of an account of profits is barred by laches.

18 A classic statement of the equitable principle of laches is drawn from Lindsay Petroleum Co v Hurd:

Now the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.[6]

19 As noted in the Principal Judgement,[7] Amcor commenced the Barnes proceeding by the issue of its Writ on 3 September 2007. The Hodgson proceeding was issued on 3 December 2004. A first Defence was filed on 27 January 2005. The First Defence raised no allegation in relation to the ACB Business. However, it is accepted that those allegations were first raised by Amcor in a confidential annexure to an Amended Defence and Counterclaim filed 21 April 2006.[8]

20 It was submitted by Barnes that following execution of the Anton Pillar order made by the Federal Court of Australia on 11 November 2004 that from 14 November 2004 Amcor was possessed of all of the necessary facts and evidence upon which to initiate a proceeding in this Court against him in relation to the ACB Business.[9]

21 However, this submission fails to take into account the complex confidentiality arrangements put in place by Court orders which applied to documents obtained by Amcor through execution of the Anton Pillar order in the Federal Court Proceedings. The confidentiality regime continued with the orders of Merkel J made 16 December 2005. The use of the documents by Amcor was confined to the Hodgson Proceeding. Further, the orders made by Merkel J required a further order from the Supreme Court of Victoria before they could be shown to any person at Amcor. Such an order was made on 4 April 2006 by Harper J, and only for the purposes in relation to the Defence and Counterclaim in the Hodgson proceeding. However, this order confined access to the documents to Amcor's in-house counsel.

22 By Summons filed in this Court on 13 June 2007 Amcor made application for orders permitting it and its advisers to disclose a body of documents relating to the ACB Business for use in a proposed proceeding in the Supreme Court of New South Wales, which I infer was the proposed Barnes Proceeding. The body of documents included material which was the subject of undertakings as to its use, being documents discovered in the Hodgson Proceeding before this Court and the proceeding which was then before the Federal Court. The matter came on for hearing before Williams J on 21 June 2007. Her Honour refused the application by judgement dated 5 July 2007.[10]

23 In this context, the commencement of Amcor's proceeding against Barnes on 3 September 2007 was inexplicable and was not inordinate.

24 Reference is also made to a decision of Osborn J in the present proceeding in the course of considering an application, inter alia, pursuant to s 5(2) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth). His Honour made the following observation:

Furthermore, affidavit material filed on behalf of Amcor explains the delay in issuing the current proceeding in terms which if ultimately proven, demonstrate that its delay in issuing the Amcor proceedings is substantially explicable by reason of initial lack of knowledge of relevant matters known to the defendants and Hodgson. A further material change of circumstances occurred at the end of March 2007 when Amcor recovered the service containers business. It follows that the underlying responsibility for much of the delay in the issue of the Amcor proceeding is itself a matter in issue.[11]

25 Further reference is made to the observations of Emerton J in the course of an application for an amendment of pleadings in the current matters. Her Honour made the following observations in relation to a submission founded upon delay advanced by the resiting parties:

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 Pillar 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.[12]

26 Orders were made by Emerton J in the pleadings amendment application on 19 May 2010 which permitted causes of action to be agitated by Amcor, in spite of the apparent delay to that point.

27 I find no disagreement with the findings or reasoning of Osborn J and Emerton J in the passages cited, and I adopt them.

28 I am satisfied that the balance of justice calls for the remedy not to be refused on the ground of laches in the circumstances of this case.

29 The principle that a person who claims recognition of equitable rights and equitable relief must come to equity with clean hands is a maxim of long standing. The principle may be applied as a guide in the exercise of the Court's discretion in the grant or withholding of equitable relief.

30 Application of the maxim calls upon the Court to examine the conduct of the litigant who seeks a remedy in equity, rather than the conduct of the defendant. It is past conduct of the party who seeks equity which is relevant. This characteristic sets it apart from the maxim: 'he who seeks equity must do equity', which is concerned with the future conduct of a litigant who seeks the assistance of equity.

31 However, a sufficient nexus must exist between the alleged wrongful conduct relied upon by the defendant party and the subject matter of the action. In the words of Campbell J in Black Uhlans Incorporated v New South Wales Crime Commission and Ors ('Black Uhlans') 'the operation of the maxim is not triggered by any act of wrongful conduct by a defendant, regardless of its nature or connection to the subject matter of the suit'.[13]

32 As early as 1669, in the case of Jones v Lenthal ("Jones") Sir Harbottle Grimstone MR recognised this element of the principle.[14] Jones was a case where the Plaintiff sought to recover a debt, owing by a deceased person of whom the defendant was executrix. The Plaintiff had, in previous litigation, sworn that that debt had been fully satisfied to him. In so doing, the Plaintiff had sworn falsely, for the purpose of avoiding a sequestration of the debt 'in the Time of the Great Rebellion'. Nevertheless, Sir Harbottle required the debt to be paid upon an action commenced 'after the Restoration'.[15] As noted by Campbell J in Black Uhlans, an editorial note in the report explains the decision in the following terms:

For though the Rule be, That he who has committed Iniquity (as here, in the false Answer) shall not have Equity; yet it seems, that is to be understood, when the Iniquity is done to the Defendant himself: As where a Lessee is sued at Law on a Forfeiture of his Lease, for Non-payment of Rent or the like; if such Lease was obtained by Fraud or false Suggestion, Equity will not relieve; contra if no Fraud, &C, was done to or imposed on the Lessor.[16]

33 As the defined nexus had not been proven in Jones, the defence failed before the Master of the Rolls.

34 The requirement for there to be a sufficient nexus between the wrongful conduct relied upon to found the defence and the subject matter of the action has been expressed in various forms in contemporary case-law of the present day. A practical commonsense approach was adopted by Brandeis J in Loughran v Loughran heard in the Court of Appeals, District of Columbia, United States.[17] In recognition of the fact that there is a limitation on the types of bad conduct which may trigger operation of the maxim Brandeis J observed: 'Equity does not demand that its suitors shall have led blameless lives'. Young J expressed a similar view in FAI Insurances Ltd v Pioneer Concrete Services Ltd where it was observed: 'Unless there is established one of the equitable defences, then general naughtiness or the desire of the court to censor the Plaintiff's conduct, does not enter into the equation when one is considering whether the Plaintiff should get relief'.[18]

35 Drawing the threads of the case law together, in order for the defence in equity reflected in the maxim of unclean hands to succeed, the Plaintiff's wrong relied upon by the defendant party must bear a sufficient nexus to the subject matter of the action such as to render it inequitable for the Plaintiff to succeed in the remedy claimed.

36 Barnes in his submission also sought to link the cartel conduct in which Amcor participated between 2000-2004 to the profits generated by the ACB Business in the period 30 July 2003 and 28 October 2004. The argument in essence was that the level of profits of the ACB Business in this period was attributable to the illegal price fixing scheme in which Amcor participated during the same period, which had the effect of artificially inflating the price of cardboard boxes in the Australian market. On this basis it was put that Amcor came to the Court with unclean hands because it was seeking to recover profits of the ACB Business to which it illegally contributed through its participation in the cartel conduct.

37 Superficially attractive as this argument may appear at first glance, it was unsupported by evidence. In particular it lacked the sophisticated economic evidence that would be required to make out the propositions put. For this reason, the submission is not accepted.

38 Barnes submitted further that during the relevant period, the ACB Business made profits from something in the order of $2.4 million in new sales and that these profits were earned from new business taken from Amcor's rival, and cartel partner, Visy Pty Ltd. In these circumstances, it was put that it would be inequitable to disgorge the ACB Business profits because 'Amcor had made its election to pursue illegally gained price increases from its customers as a preferred alternative to securing profit from growth in volume (sales growth) ...'

39 I do not accept this submission. It is tantamount to saying that because Amcor participated in illegal conduct which adversely affected purchasers of cardboard boxes in the Australian marketplace, it has no entitlement to recovery by way of an account of profits from the ACB Business in the circumstances of this case, regardless of a failure to establish any causal nexus between the cartel conduct and the profits derived by ACB.

40 In particular, I do not accept that the 'election' allegedly made by Amcor referred to in the Barnes submission establishes the necessary nexus. There was no evidence of any such election, nor any evidence upon which an inference to this effect could be drawn. Further, even if it could be drawn, the nexus cannot, in my view, be logically established.

41 For these reasons, the unclean hands submission advanced by Barnes must be rejected.

42 Mr Barnes submitted that during the period only one dividend was declared and paid from the ACB Business amounting to $749,000, as found in the Principal Judgement and that he was paid from that dividend $374,500 (being 50% of the declared dividend).[19] He said that although the dividend was fully franked, it attracted a 16.5% rate of tax in his hands, resulting in an actual benefit Barnes received of $312,708. He said further that the balance of the profits earned during the relevant period were expended on making provision for payment to Amcor of the deferred purchase price instalment for the purchase of the ACB Business from Amcor in the sum of $1 million pursuant to the Asset Sale Agreement, as well as making provision for working capital and ongoing capital improvements to the ACB Business necessary to maintain the ongoing profitability of the business and its capacity to generate income.

43 The Barnes Receipt of Profits Submission was also reflected in the submission advanced by the Holihan parties adopted by him to the effect that '... the account must reflect as accurately as possible the true measure of the profit or benefit obtained by the fiduciary in breach of his duty'.

44 However, Barnes remains a half owner of the ACB Business. I infer from his admissions made in the course of his submissions that he acquired his interest, at least in significant part, by applying the profits generated by the business which were applied to the purchase price. He also may be taken to have received a benefit from the profits ploughed back into the business for use as working capital. The ACB Business in capital terms therefore gained directly from the profits which it generated. Barnes in turn shared personally in this gain in capital value derived from the exercise.

45 For these reasons, it is not inequitable for Barnes now to be asked to disgorge one half of the profits earned by the ACB Business for the whole of the relevant period. Indeed, equity as a matter of good conscience would require this to be done if the remedy was available.

46 As earlier observed, in the Third Further Amended Statement of Claim, Amcor sought on a further or alternative basis, that the Third and Fourth Defendants, namely ACB Australia Pty Ltd and Australian Corrugated Box Co Pty Ltd (formerly Achilla Pty Ltd) account for profits earned from 30 July 2003.

47 However, this claim against the Holihan companies failed. It did so because, although it was found that Holihan was the controlling mind of both Achilla and ACB (Australia) Pty Ltd, it was also found that these companies did not give 'knowing assistance' to the other Defendants in relation to the sale of the ACB Business.[20] For this reason it was found that Amcor's claims against Holihan and his companies did not succeed in relation to the circumstances surrounding the initial sale of the ACB Business.[21] No account of profits earned by the Holihan companies from 30 July 2003 could be ordered against them because the ground of liability to found such an order was not made out.

48 As earlier observed, the Third Further Amended Statement of Claim made no claim for an account of profits against either Barnes or Holihan personally in the prayer for relief.

49 Amcor nonetheless maintained that it is entitled to an account of profits against both Barnes personally and all of the Holihan parties, including Holihan personally.

50 Amcor pressed its claim for an account of profits against the Third and Fourth Defendants on the basis that the finding that Holihan knowingly assisted Barnes in the period 1 July 2004 to 28 October 2004 was equivalent to, and should be regarded as, a finding that the Third and Fourth Defendants knowingly assisted Barnes so as to give rise to liability under the second limb of Barnes v Addy ('Barnes v Addy').[22] This submission was founded on the finding made by the Court that Holihan was the controlling and the directing mind of those companies.

51 Accordingly, whether or not the Third and Fourth Defendants are liable to account on this basis, turns on whether or not the finding in the Principal Judgement that Holihan knowingly assisted Barnes in the period 1 July 2004 to 28 October 2004 could properly found such relief in favour of Amcor.

52 In the course of making its submissions on 15-16 August 2012 in relation to its claims for an account of profits, Amcor advanced submissions which went beyond the pleaded case in its Third Amended Statement of Claim.

53 In Banque Commerciale SA En Liquidation v Akhil Holdings Limited ('Banque Commerciale') Dawson J held as follows in relation to the obligation of a trial Judge to ensure that pleadings in a case are amended so as to reflect the proceedings as they have been conducted:

It is incumbent upon the trial judge to see that the pleadings or particulars are amended so that the record reflects the proceedings as they have been conducted, but his failure to do so will not result in the invalidity of those proceedings.[23]

54 Immediately following the hearings conducted on 15-16 August 2012, and mindful of the duty of a trial Judge to ensure that pleadings or particulars are amended so that the record reflects the proceedings as they had been conducted, and in order to reflect the proceedings as they had been conducted on 15-16 August 2012, the Court communicated with the parties by email on 17 August 2012 to the following effect:

Amcor & Ors v Barnes & Ors S CI 2007 8181

On the return of the hearing on 29 August 2012 of the present application by Amcor seeking orders for the taking of an account of profits in the Barnes proceeding directed to the First Defendant (Mr Barnes) and the Second to Fourth Defendants (the Holihan parties) the Court will entertain making the following orders:

1. By 4 pm Tuesday 21 August 2012 the Amcor parties file and serve a draft Further Amended Statement of Claim incorporating, with full particulars, any further allegations directed to the First Defendant (Mr Barnes) and the Second to Fourth Defendants (the Holihan parties) containing but confined to the matters addressed in Amcor's submissions presented on 15 to 16 August 2012 at the hearing of the present application by Amcor seeking orders for the taking of an account of profits (the 'Further Allegations');

2. By 4 pm Monday 27 August 2012 the First Defendant (Mr Barnes) and the Second to Fourth Defendants (the Holihan parties) file and serve any further witness statements containing relevant and admissible evidence upon which they wish to rely in addressing the Further Allegations.

In the interests of proper case management, the parties should proceed at the resumed hearing on 29 August 2012 on the assumption that these orders will be pronounced with retrospective effect, unless the Court is then persuaded otherwise, and accordingly should act upon the proposed orders as if they were presently in place and that leave will be granted to the Amcor parties to further amend the Statement of Claim in the Barnes proceeding to incorporate the Further Allegations.

55 The purpose behind the communication in this form was, as far as possible, to save cost and expense for the parties if they consented to the suggested course and to clarify in the amended draft pleading precisely the case which Amcor wished to advance in making its claims for relief by way of an account of profits.

56 On 21 August 2012 the Amcor parties filed and served a draft Fourth Amended Statement of Claim upon which, subject to the leave of the Court, it proposed to proceed. The draft Fourth Amended Statement of Claim purported to incorporate the further allegations directed to the First Defendant (Barnes) and the Second to Fourth Defendants (the Holihan parties) containing the matters addressed in Amcor's submissions presented on 15 to 16 August 2012 at the hearing of the present application by Amcor seeking orders for the taking of an account of profits.

57 Putting to one side the formal or consequential amendments, the proposed Fourth Amended Statement of Claim pleads additional matters of substance.

58 The proposed Fourth Amended Statement of Claim pleads the following additional matters in paragraph 22 (underlined below):

Further or alternatively to paragraphs 21 to 21C above, by negotiating and authorising, or causing to be negotiated and authorised, the Second Sale Agreement, and further or alternatively by failing to warn or inform Amcor of the matters referred to in paragraphs 21(c) above, and further or alternatively at all material times concealing the Agreements, Arrangements and/or Understandings from Amcor, APA and ACB, Barnes breached his fiduciary duties owed to Amcor, APA and/or ACB by:

(a) dealing with the property and interests of Amcor, APA and/or ACB, namely the ACB Business, other than in the best interests of Amcor, APA and/or ACB;

(b) making use of his position to improperly gain an advantage for himself and/or for someone other than Amcor, APA and/or ACB, namely for the ACB Co Purchaser, Achilla and Holihan, and further or alternatively, without the knowledge of Amcor, APA or ACB, for himself, Hodgson, Bayley, Sangster and/or Mihelic;

(ba) making secret profits and/or receiving secret benefits when dealing with the property and interests of Amcor, the property and interests of APA and/or the property and interests of ACB;

(c) acting contrary to the interests of and to the detriment of Amcor, APA and/or ACB.

Amcor refers to and repeats the particulars to paragraph 21A above. Amcor will provide full particulars of the secret profits and/or benefits upon completion of discovery and inspection.

59 The Third Amended Statement of Claim already contained the following pleading in paragraph 21(c) (which was referred to in the proposed new paragraph 22 pleading):

21C. Further or alternatively, in contravention of s 182(2) of the Act [the Corporations Act 2001], Barnes was involved (as that term is defined in s 79 of the Act) in the conduct of Hodgson using his position to: gain an advantage for Barnes, the ACB Co Purchaser, Achilla, Holihan, himself, Bayley, Sangster and/or Mihelic; further or alternatively cause detriment to Amcor, APA and/or ACB.

The Plaintiffs refer to and repeat the particulars to paragraph 21A above.

At all times from May 2002 to 28 October 2004 Barnes reported to Hodgson.

60 The Third Amended Statement of Claim also already contained the following pleading (particulars excluded) in paragraph 21A (which was referred to in the particulars to paragraph 21C of the pleading):

21A Further or alternatively, in contravention of s 181(1) of the Act, Barnes failed to exercise his powers and discharge his duties:

(a) in good faith in the best interests of Amcor, APA and/or ACB; and

(b) for a proper purpose, by reason that he negotiated and authorised, or caused to be negotiated and authorised, the Second Sale Agreement in one or more of the circumstances referred to in paragraph 21 above, and he did so for the benefit of himself, the ACB Co Purchaser, Achilla, Holihan, Hodgson, Bayley, Sangster and/or Mihelic.

61 Paragraph 21 of the Third Amended Statement of Claim focussed on alleged breaches of s 180(1) of the Corporations Act 2001 (Cth) in relation to the entry into and completion of the Second Sale Agreement and the alleged uncommercial terms of the Second Sale Agreement at the time of its negotiation and completion, as particularised in the paragraph.

62 The proposed Fourth Amended Statement of Claim pleads the following additional matters in a new paragraph 27A which is set out below:

27A. Further or alternatively to paragraphs 25A, 26 and/or 27 above, Holihan knowingly assisted Barnes to breach his fiduciary duties to Amcor.

Particulars

(1) Barnes and Holihan acted in concert in order to mutually benefit from Barnes' breaches of his fiduciary duties as alleged in paragraph 22 above.

(2) On or before 30 June 2004, Barnes disclosed to Holihan that Hodgson, Bayley, Sangster and Mihelic held a beneficial interest in the ACB Business by reason that they were, or alternatively that they owned and controlled, the beneficial owners of the trust shares defined in recital E and referred to in clause 20 of a deed executed by Holihan and Barnes on 26 May 2003 ("the 26 May Holihan/Barnes 80/20 Agreement").

(3) By operation of clause 20(d) of the 26 May Holihan/Barnes 80/20 Agreement, within 30 days of the disclosure referred to in particular (1) above, Holihan was entitled to withdraw from that agreement by providing notification to Barnes in writing, which notice was to be deemed a sale notice in respect of the shares in LeoRose Pty Ltd owned by Holihan Investments Pty Ltd.

(4) Within 30 days, Holihan did not provide to Barnes any such notification in writing or otherwise.

(5) On or before 30 July 2004, by operation of clause 20(e) of the 26 May Holihan/Barnes 80/20 Agreement, Holihan ratified that agreement and accepted Hodgson, Bayley, Sangster and Mihelic as a party to that agreement.

(6) On or before 30 June 2004, by operation of clauses 20(b) and (e)(ii) of the 26 May Holihan/Barnes 80/20 Agreement, Hodgson, Bayley, Sangster and Mihelic became parties to that agreement and became bound by its terms.

(7) On or before 30 June 2004, Barnes informed Holihan that he, and further or alternatively each of Hodgson, Bayley, Sangster and Mihelic, did not obtain the consent of Amcor and/or APA to acquire a beneficial interest in the ACB Business, alternatively, Holihan wilfully shut his eyes to the obvious, or wilfully and recklessly failed to make such inquiries as an honest and reasonable person would make, as to that fact.

(8) Thereafter, by operation of clause 4 of the 26 May Holihan/Barnes 80/20 Agreement, Holihan held not less than one third of the voting rights in general meeting of ACB and Achilla, and Barnes, Merrymen, Bankson, Sampson Solo and CBB Investments held the balance of the voting rights in equal proportions.

(9) In about October 2004, Holihan and Barnes oversaw and administered the declaration and payment of a dividend by LeoRose Pty Ltd to Barnes and his company, Astra Corporation Pty Ltd and to Holihan Investments Pty Ltd in the amount of $749,000 apportioned 80 per cent and 20 per cent, respectively.

(10) Eighty per cent of the share of the dividend paid to Barnes and Astra Corporation Pty Ltd was, under the terms of the 26 May Holihan/Barnes 80/20 Agreement, held on trust for Merrymen, Bankson, Sampson Solo and CBB Investments.

(11) In about October 2005, Holihan and Barnes allegedly executed a further agreement pursuant to which Holihan and Barnes each purportedly became a beneficial owner of 50 per cent of the ACB Business ("28 May Holihan/Barnes 50/50 Agreement").

(12) The 28 May Holihan/Barnes 50/50 Agreement was backdated to 28 May 2003, the effect of which was to deliberately create the wrong impression for Amcor and unknown others that Hodgson, Sangster, Bayley and Mihelic were not and had never been party to the 26 May Holihan/Barnes 80/20 Agreement with the intent that Amcor would not become aware that those persons were acting in breach of their duties to Amcor under the Act and the general law.

(13) In about October 2005, Holihan allegedly signed a minute of resolution on behalf of LeoRose purporting to declare a dividend consistent with the 28 May Holihan/Barnes 50/50 Agreement, backdated to 30 October 2004, the deliberate effect of which was to create the wrong impression particularised in particular (12) above.

(14) In about October 2005, Holihan allegedly provided instructions to his accountants, Wheeler Greenfell, to prepare the minute particularised in particular (13) above.

(15) In about September 2006, Wheeler Greenfell prepared backdated share certificates for shares in LeoRose purportedly issued to Holihan on 26 May 2003 and 5 September 2003 and backdated declarations that Holihan held those shares on trust for Holihan Investments Pty Ltd and Astra Corporation Pty Ltd, which were subsequently signed by Holihan, the deliberate effect of which was to create the wrong impression particularised in particular (12) above.

63 The proposed Fourth Amended Statement of Claim then pleads the following additional matters in paragraph 28 (underlined below):

By reason of Holihan's conduct as alleged in paragraphs 24A, 25, 25A, 26, 27 and/or 27A above:

(a) Amcor and/or ACB and/or APA have suffered loss and damage;

(b) Barnes, the ACB Co Purchaser, Achilla and/or Holihan have made profits;

(c) Barnes, the ACB Co Purchaser, Achilla and/or Holihan have obtained assets and other benefits.

Particulars

Full particulars will be provided upon completion of discovery and inspection. In addition to those particulars, the Plaintiffs refer to and rely upon an arrangement between Achilla and Sei Pak which involved Achilla sub-contracting out to Sei Pak its supply obligations under clause 12.2 of the Second Sale Agreement and ACB and/or APA paying prices not based on D&D costs of the ACB Purchaser and/or Achilla. The Plaintiffs otherwise refer to and repeat the particulars to paragraph 24 above mutatis mutandis.

64 The new proposed paragraph 27A is also pleaded in the proposed Fourth Amended Statement of Claim in the particulars supplied under paragraph 28A(d), where allegations are made as to alleged breaches on the part of Sangster, Bayley, and Mihelic in relation to the Second Sale Agreement. The new proposed paragraph 27A is also pleaded in support of the constructive trust claim against the Holihan companies pleaded in paragraph 31.

65 Paragraphs 34A, 34B and 34C are also new, as pleaded in the proposed Fourth Amended Statement of Claim. Those paragraphs are in the following terms:

34A. Alternatively, if, which is denied, Achilla did not receive any property or interests pursuant to the Second Sale Agreement that were capable of being impressed with a constructive trust in favour of Amcor and/or ACB and/or APA, then by reason of the matters pleaded in paragraphs 24, 27A and 28 above:

(a) Barnes is liable to account to Amcor for the profits earned by the ACB Business which were available for distribution by Achilla and ACB Co Purchaser to their shareholders had any dividends been declared to distribute those profits ('the Barnes profits'), alternatively 50 per cent of those profits;

(b) Holihan is jointly and severally liable with Barnes for the Barnes profits; and/or

(c) alternatively to paragraph 34A(b), Holihan is jointly and severally liable with Barnes for the proportion of the Barnes profits that were earned by the ACB Business in the period beginning on about 30 June 2004.

34B. Further to paragraph 34A above, by reason that he knowingly assisted Barnes in his breaches of fiduciary duty, Holihan is liable to account to Amcor for:

(a) any benefit received by him, whether directly or indirectly;

(b) alternatively, for 50 per cent of the profits earned by the ACB Business which were available for distribution by Achilla and ACB Co Purchaser to their shareholders had any dividends been declared to distribute those profits, in the period beginning on about 30 June 2004.

34C. Alternatively, if, which is denied, Holihan was not a knowing assistant to Barnes, then ACB Co Purchaser and/or Achilla knowingly assisted Barnes in the manner alleged in paragraphs 27A and those companies are liable in lieu of Holihan for the profits and/or benefits alleged in paragraphs 34A and 35B above.

Particulars

Amcor refers to and repeats the particulars to paragraph 27A above.

Amcor refers to and repeats the allegations in paragraphs 29 and 30 above.

66 The prayer for relief in the proposed Fourth Amended Statement of Claim makes claims against Barnes personally in the following terms: 'DD Further or alternatively, an account of profits'. A similar claim is advanced in the proposed Fourth Amended Statement of Claim against Holihan personally: 'CC Further or alternatively, an account of profits'. Both claims for relief for an account of profits as against the individuals concerned are new claims that had not been previously pleaded.

67 Mr Barnes and the Holihan parties opposed all of the amendments sought by Amcor in its proposed Fourth Amended Statement of Claim. They did so on the following principal grounds:

(a) The amended pleadings and particulars contained in the proposed Fourth Amended Statement of Claim did not reflect the proceedings as they had been conducted at the trial;

(b) Significant prejudice, which is beyond remedy, would be suffered by them if the amendments were permitted because:

(i) the matters comprising the subject matter of the amendments were not part of the Amcor case at trial;

(ii) were not matters of which they had prior notice and had the opportunity to address;

(iii) were not matters put to them contrary to the rule in Browne v Dunn;[24]

(iv) they might have conducted their cases differently at trial had they been put on notice of the allegations now sought to be put against them;

(v) given the serious nature of the allegations now sought to be advanced, it was incumbent on Amcor to have pleaded and particularised those allegations prior to, or at the very least during the trial if so permitted by the Court; and

(vi) in all the circumstances, the permitting of the amendments now sought would result in unfairness or a denial of procedural fairness or natural justice which could not be remedied by any order as to costs.

(c) As a matter of case management, it was simply too late now to amend in the manner proposed and to do so would be contrary to case management principles, as reflected for example in the Civil Procedure Act 2010 (Vic) and the observations of the High Court in Aon Risk Services Australian Ltd v Australian National University ('Aon').[25]

68 Returning to Banque Commerciale Dawson J described the function of pleadings in the following passage:

It is, of course, the purpose of pleadings to define the issues between the parties so that they may know the case which they have to meet and in order that the proceedings upon trial may be conducted in an orderly fashion by reference to those issues. The defined issues provide the basis upon which evidence may be ruled admissible or inadmissible upon the ground of relevance. But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. Special procedures apart, cases are determined on the evidence, not the pleadings.[26]

69 Part of this passage was cited with approval by Gummow, Hayne, Heydon, Crennan and Kiefel JJ in Vale v Sutherland ('Vale') where the High Court observed:

... in Banque Commerciale SA (En Liquidation) v Akhil Holdings Ltd Dawson J noted:

"But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. ... cases are determined on the evidence, not the pleadings".[27]

70 The High Court in Vale took the view that whatever was to be made of the range of issues raised by the pleadings in the case, it was nevertheless open to the Federal Magistrate to decide the case as he did, noting that no unfairness resulted to the respondent from such a result.

71 Thus even where a liberal view may be taken of the pleadings in a case, so that the proceeding is determined on the evidence adduced at trial rather than a rigid adherence to the text of what is pleaded, considerations of basic fairness are introduced to temper the application of this approach.

72 In Re Minister for Immigration and Multicultural Affairs; Ex parte Lam Gleeson CJ advanced the concept of 'practical justice' in the following way:

Fairness is not an abstract concept. It is essentially practical. Whether one talks in terms of procedural fairness or natural justice, the concern of the law is to avoid practical injustice.[28]

73 The right to know the case sought to be made against a person is a fundamental right in curial proceedings, whether they are judicial, or quasi judicial or where there is a duty to act judicially. It is a rule directed to the obligation to give a party a fair hearing, and is a minimum requirement. In Kioa v West Mason J said:

It is a fundamental rule of the common law doctrine of natural justice expressed in traditional terms that, generally speaking, when an order is to be made which will deprive a person of some right or interest or the legitimate expectation of a benefit, he is entitled to know the case sought to be made against him and to be given an opportunity of replying to it.[29]

[Footnotes omitted]

74 Subsets of the fairness principle applicable to the present case include the following basic requirements:

(a) fair notice of the allegations a party has to meet;

(b) adherence to the rule in Browne v Dunn [30] ('Browne v Dunn') where the circumstances so required;

(d) in the context of curial proceedings governed and conducted by pleadings, as this proceeding was, this translates to adverse findings being confined to what is alleged in the pleaded case; and in such a case;

(e) the relief granted must not exceed the relief claimed in the pleadings.

75 Further, considerations of case management now assume fundamental importance in determining to grant an amendment to pleadings. The movement towards the reform of civil litigation practices in common law jurisdictions has been a pervasive and worldwide trend over what is now approaching two decades.

76 Reform in the modern era can be traced back to 1994 when the Lord Chancellor of Great Britain instructed the Master of the Rolls, Lord Woolf, to report on options to consolidate the existing rules of civil procedure in England and Wales. On 26 July 1996, Lord Woolf published his report, Access to Justice.[31] It identified a number of principles which the civil justice system should meet in order to ensure access to justice.

77 The reform process in Victoria resulted in the passage of the Civil Procedure Act 2010 (Vic) ('the Act'). One of the central planks of the Act is to provide for an 'overarching purpose' described in the following terms by s 7:

(1) The overarching purpose of this Act and the rules of court in relation to civil proceedings is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.

(2) Without limiting how the overarching purpose is achieved, it may be achieved by -

(a) the determination of the proceeding by the court;

(b) agreement between the parties;

(c) any appropriate dispute resolution process -

(i) agreed to by the parties; or

(ii) ordered by the court.

78 The Act imposes overarching obligations and duties upon the parties and their lawyers to 'advance the administration of justice in relation to any civil proceeding'.[32] Further, the inherently wide powers of the court are given statutory recognition in the Act to effect its purposes, supported by sanctions for contravening the overarching obligations.[33] The overarching purpose and obligations now apply to all civil proceedings commenced in Victoria after 1 January 2011. Recent authority in Victoria emphasises that the Act requires the court to be proactive and innovative in its approach to achieve its objects.[34]

79 In Australia another development of significance has occurred, namely in the common law. On 5 August 2009, the High Court of Australia handed down its judgement in earlier mentioned Aon.[35] This decision affirmed the importance, not only to the parties, but to the Court and other litigants, of a 'just but timely and cost-effective resolution of a dispute has an effect upon the court and upon other litigants'.[36] French CJ noted that there is 'an irreparable element of unfair prejudice in unnecessarily delaying proceedings'.[37] In particular, the Chief Justice drew attention to 'the waste of public resources',[38] the 'strain and uncertainty imposed on litigants' and 'the potential for loss of public confidence in the legal system' arising from the adjournment of trials without adequate justification.[39] Similarly, in Aon, Gummow, Hayne, Crennan, Kiefel and Bell JJ referred to the 'ill-effects of delay' upon employees and officers of corporations, as well as upon defendant corporations whose ability to plan financially may be affected by a contingent liability.[40]

80 Significantly, in Aon, the High Court accepted the principles of case management by the courts, saying:

Such management is now an accepted aspect of the system of civil justice administered by courts in Australia. It was recognised some time ago, by courts here and elsewhere in the common law world, that a different approach was required to tackle the problems of delay and cost in the litigation process.[41]

81 The High Court in Aon also said that the rules concerning civil litigation are no longer to be considered as directed only to the resolution of the dispute between the parties to a proceeding. The achievement of a just but timely and cost-effective resolution of a dispute has an effect upon the court and upon other litigants. As explained by Gummow, Hayne, Crennan, Kiefel and Bell JJ:

In Sali v SPC Ltd [[1993] HCA 47; [1993] HCA 47; (1993) 67 ALJR 841 at 849] Toohey and Gaudron JJ explained that case management reflected:

[t]he view that the conduct of litigation is not merely a matter for the parties but is also one for the court and the need to avoid disruptions in the court's lists with consequent inconvenience to the court and prejudice to the interests of other litigants waiting to be heard ...[42]

In the past it has been left largely to the parties to prepare for trial and to seek the court's assistance as required. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy. It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings.[43]

83 The Court of Appeal of Victoria in Trevor Roller Shutter Service Pty Ltd v Crowe reinforced the reasoning in Aon when it observed:

As we construe Aon, it was about the impropriety of granting a party leave to make a late amendment to a pleading, in circumstances where that party had failed to act expeditiously, and where to allow the amendment was likely to be productive of wasted costs and resources. More generally, Aon may be thought to have re-invigorated the procedural paradigm, to some extent and for some time diminished by JL Holdings, that time, costs and limited judicial resources are relevant considerations in the determination of whether to allow late applications for amendment and invoke other interlocutory process.[44]

84 Barnes and the Holihan parties opposed the amendments sought by Amcor to introduce the Fourth Amended Statement of Claim.

85 I will consider Amcor's application in the light of the principles outlined.

86 Although the proceedings were highly complex, if the essence of the Amcor case is to be reduced from the Third Amended Statement of Claim, the Amcor case against Barnes and the Holihan parties may be distilled down to this: Barnes and the Holihan parties participated in the sales of the two business under the sale agreements in circumstances which amounted to a breach of their statutory and fiduciary duties to Amcor which, by reason of the sales being on uncommercial terms, Amcor suffered loss and damage and Barnes and the Holihan parties made profits, and Barnes and the Holihan parties 'obtained benefits and other benefits'.[45]

87 This basic case was well summarised in the Amcor outline of opening submissions presented at the trial in the following terms:

The secret agreements were entered into between the former managers without any disclosure to their employer: indeed, they were concealed from it. Each of Hodgson and Barnes, in particular, were heavily involved in the sale on behalf of Amcor of each of the businesses: purportedly acting for Amcor, but in fact pursuing their own interests. The sales of the businesses were under value and on uncommercial terms, detrimental to the interests of the relevant Amcor entity and the Amcor Group overall.

88 The final address presented by Amcor in its written Draft Judgement, and in its supplementary oral submissions also underscored this as the basis of the case against both Barnes and Holihan in relation to the sale of the ACB Business.

89 The proposed Fourth Amended Statement of Claim, however, seeks to take the case in a significantly different direction.

90 In the first place it seeks to make claims against both Barnes and Holihan personally for an account of profits. This had never been previously alleged.

91 Further in relation to Barnes, the new pleading alleged inter alia that he concealed from Amcor (for what appears to be an undefined period of time) the relevant 'Agreements, Arrangements and/or Understandings' between himself and Holihan and the other participants in the scheme relating to the beneficial ownership of the ACB Business, namely Hodgson, Bayley, Sangster, and Mihelic. Potentially this allegation embraced the whole of the relevant period from 30 July 2003 until the retirement of Barnes from Amcor on 28 October 2004. This had never been previously alleged against Barnes.

92 It is then alleged against Holihan that he knowingly assisted Barnes to breach his fiduciary duties to Amcor. These matters are pleaded in the proposed new paragraph 27A, earlier referred to. Included in this new paragraph are allegations that in or about October 2005, Holihan set about a deliberate course of conduct to mislead Amcor that 'Hodgson, Sangster, Bayley and Mihelic were not and had never been a party to the 26 May Holihan/Barnes 80/20 Agreement [the earlier agreement] with the intent that Amcor would not become aware that those persons were acting in breach of their duties to Amcor under the Act [the Corporations Act 2001] and the general law'. These allegations directed to Holihan that he knowingly assisted Barnes to breach his fiduciary duties to Amcor had never been previously alleged against Holihan.

Identification of Issues and Submissions by Draft Judgement

93 Mr Barnes and Mr Sangster were both self-represented during the trial.

94 In conducting the case I was conscious of the observations of Bell J in Tomasevic v Travaglini as to the duty of a trial judge in these circumstances to ensure a fair trial;[46] of the duty to assist a self-represented litigant by providing such information as is necessary to enable him to have a fair trial;[47] and to address the imbalance as far as possible; and in so doing, bearing in mind that what a judge must do to assist a litigant in person depends on the litigant, the nature of the case, and the litigant's intelligence and understanding of the case.[48]

95 However, a balance must be achieved as far as it is possible to do so. In the course of ensuring a fair trial for the self-represented litigant, an advantage cannot be conferred on that party. This was emphasised by Kyrou J in Slaveski v State of Victoria & Ors where his Honour said:

During the first and second phases of the trial, I explained to Mr Slaveski and Mrs Slaveska, respectively, the rules of evidence and procedure on various issues, and provided other assistance to them, in accordance with my duty to ensure a fair trial. This duty was discussed by Bell J in Tomasevic v Travaglini in the context of a self-represented litigant. The current proceeding, and its unusual course, has highlighted the need to ensure that the principles governing a trial judge's duty to conduct a fair trial where one of the parties is self-represented are flexible and pragmatic so that the trial judge has sufficient latitude to manage the proceeding in the interests of all the parties and of the administration of justice. It is vital that the principles are formulated and applied in a manner that does not tip the balance too far in favour of self-represented litigants, impose too high a burden on the trial judge or result in prejudice to opposing parties.[49]

96 I was in part to ensure a fair hearing of the issues to be ventilated at the trial that the Court made an order for the parties to first identify the issues in a written document which would then be settled by the Court as the list of issues to go forward for the management of the trial. The settled list of issues was then to provide the topic headings which parties were to utilise in preparing and delivering final submissions in the form of draft judgements. Further, during the course of the hearing, the topics for final address were progressively settled by the Court in conjunction with the parties.

97 Final addresses were directed to be delivered in two parts, namely:

(a) a written draft judgement in which each party was called upon to submit their best case on the findings of fact and law which each party invited the Court to make on each of the topics as finally settled by the Court; and

(b) an optional component which was to include any further or alternative submissions by way of a supplement to each party's draft judgement.

98 This approach worked to reduce the likelihood of the self represented litigants ignoring subject matter of importance in the presentation of their cases and to optimise the opportunity for each party to address and directly meet the case of the other. Further, given the complexity and volume of the factual and legal issues to be addressed in this case, delivery of submissions in the form of a draft judgement confined to the best case a party sought to advance, worked to impose a measure of discipline in the manner in which the parties sought to address the issues.

99 In this way, the order for submissions by draft judgement was not only directed to achieving fairness in the conduct of the proceeding in which self represented litigants participated, it also comprised part of the case management regime directed by the Court to assist in the process of an efficient and cost effective disposition of the proceedings before it.

100 To this end, the parties were directed to undertake the tasks specified in the Orders of the Court made 7 March 2011 which were in the following form:

Written Outlines and Draft Statement of Issues for the Joint Trial

The parties file and exchange written outlines of opening submissions, limited to 20 A4 pages, 1.5 spaced text in font size 12, by 4:00 pm on 13 May 2011.

The written outlines must contain a Draft Statement of Issues which will be used as the structure for the opening addresses of the parties.

Mr Hodgson and the Defendants shall, in consultation, together prepare and deliver one joint written outline and a joint Draft Statement of Issues.

To the extent that there may be different positions between Mr Hodgson and the Defendants or between any of the Defendants, Mr Hodgson and any such Defendants may file and deliver an additional written outline and an additional Draft Statement of Issues dealing with and limited to any such different position.

The Draft Statement of Issues, as amended from time to time during the trial and settled by the trial Judge, shall be the topics to be dealt with in the Draft Judgements of the parties as hereinafter described.

Draft Judgements in Final Addresses of Joint Trial

In the interests of a just, efficient and economical disposition of the proceeding, the following directions are made as to the delivery of final addresses in the Joint Trial.

The final address delivered by each party shall have two components:

A draft judgement; and

Optional supplementary submissions

Draft Judgement

The Amcor Parties shall prepare and deliver one draft judgement and the Defendant Parties shall, in consultation, together prepare and deliver one draft judgement.

Each draft judgement shall be in writing and should clearly state the determinations of law and the findings of fact which a party or group of parties invites the Court to make.

The draft judgements should be drawn so as to deal with each of the topics specified in the final version of the Statement of Issues settled by the Court and in the same order.

The determinations of law and the findings of fact to be contained in the draft judgements are those which are considered by each party or group of parties to be the best and most credible advanced in support reasoned decision of the Court in favour of that party or group of parties.

Determinations of law are to be supported by necessary references to the case law and sections of legislation. Important references shall include quotations from the relevant case law or legislation.

Findings of fact are to be supported by the evidence which is necessary to support each finding. Where appropriate for this purpose, references are to be made to the written material in evidence in the Court Book (citing, in each case, the relevant volume and page or page numbers), and to the exhibited material (citing, in each case, the exhibit number and page reference in the exhibit where appropriate). Where also appropriate for this purpose, references are to be made to the oral evidence (citing, in each case, the relevant page of the transcript (e.g. More XN, Transcript p.2288, lines 21-22). Important references shall include quotations from a relevant portion of the transcript (e.g. 'Were you present at the conversation?' --- 'I was not present'. Less XN, Transcript p.1122 lines 1-2).

Reference should also be made to the principal contentions of law and findings of fact which have been presented by the other party or group of parties in opposition to the position taken by the party or group of parties drafting the draft judgement. Reasons for rejecting those opposing contentions of law or findings of fact should be set out in the draft judgement, including reference to the evidence which is necessary to arrive at this conclusion.

The draft judgement should be written in an appropriately tempered and even handed 'judicial' style. Language which tends to lambaste, deprecate or inflate is to be avoided.

Supplementary Submissions

The delivery of supplementary submissions in final address is not mandatory and is optional for all parties.

Supplementary submissions in final addresses may be presented orally, by speaking to a party's draft judgement or by speaking to any other document, or by presenting supplementary submissions in writing.

A party may advance relevant matters in supplementary submissions in addition to the statements contained in that party's draft judgement. This may include, for example submissions made by individual defendants in relation to matters which distinguish that person's position from that of other Defendant Parties.

A party may advance relevant alternative submissions to the statements contained in that party's draft judgement.

A party will not be limited in the vigour with which supplementary submissions are delivered, provided such submissions are presented within the usual reasonable and acceptable bounds.

101 It is to be observed that the Orders of 7 March 2011 did not dispense with pleadings. Neither the settled statement of issues prepared by the Court, still less the draft statement of issues prepared by the parties, had this effect. Rather the statement of issues was to provide a workable articulation of the issues of fact and law raised by the pleaded cases, which would be used to direct the matters to be addressed by the parties in final address in an orderly fashion and in a manner designed to assist the Court by presenting competing positions on common pre-determined issues.

102 Accordingly, the Barnes and Holihan parties were entitled to take the view that the case presented against them was to be conducted within the cope of the allegations pleaded against them. They had no notice otherwise.

103 In any event, neither the draft statements of issues prepared by the parties nor the statement of issues settled by the Court for use in final addresses, extended the cases presented by Amcor to the new matters now sought to be agitated by Amcor in its proposed Fourth Amended Statement of Claim. Accordingly, these documents did not serve put the Barnes and Holihan parties on notice during the trial of the new allegations now sought to be pressed.

104 The trial was conducted within the scope of the pleadings and not otherwise.

105 The evidentiary course of the proceedings conducted at trial also did not serve to put the Barnes and Holihan parties on notice during the trial of the new allegations now sought to be pressed.

106 Although in a large and complex trial excessive and clinical 'puttage' is not to be encouraged in the interests of proper case management, here too judgement is called for in the interests of fairness. A major allegation, particularly one of which a party has no prior notice, must be put so as to provide an opportunity for the accused party to give an account of themselves.

107 The rule in Browne v Dunn[50] was analysed by Goldberg J in White Industries (Qld) Pty Ltd v Flower & Hart (a firm).[51] From this and other authorities the following elements of the rule may be discerned:

(a) The rule in Browne v Dunn is a rule of fairness which requires a party or a witness to be put on notice that a statement made by the witness may be used against the party or witness or to be put on notice that an adverse inference may be drawn against the witness or an adverse comment made about the witness in order that the witness may respond to that issue and give an explanation: Browne v Dunn [1894] 6 R 67 Lord Herschell LC (at 70), Lord Halsbury (at 76-7); Bulstrode v Trimble [1970] VicRp 104; [1970] VR 840 at 849; Karidis v General Motors Holdens Pty Ltd [1971] SASR 422 at 425-6; Allied Pastoral Holdings Pty Ltd v FCT (1983) 44 ALR 607 at 623; White Industries (Qld) Pty Ltd v Flower & Hart (a firm) [1998] FCA 806; (1988) 156 ALR 169 at 216.

(b) The significance of the rule is that it requires notice to be given of a proposed attack on a witness or on the witness' evidence where that attack is not otherwise apparent to the witness. The rule does not require that there be put to the witness every point upon which his or her evidence might be used against him or her or against the party who calls the witness: Browne v Dunn, Lord Herschell LC (at 70); White Industries (Qld) Pty Ltd v Flower & Hart (a firm) [1998] FCA 806; (1988) 156 ALR 169 at 217.

(c) Where, it is manifestly clear that the party or witness has had full notice beforehand that there is an intention to impeach the credibility of the story which he is telling, such as where notice has been so distinctly and unmistakably given, and the point upon which he is impeached, and is to be impeached, is so obvious, that it is not necessary to waste time in putting questions to him upon it, the rule may be dispensed with, where no unfairness will arise: Browne v Dunn, Lord Herschell LC (at 71); White Industries (Qld) Pty Ltd v Flower & Hart (a firm) [1998] FCA 806; (1988) 156 ALR 169 at 217.

(d) Notice of the relevant attack need not necessarily occur in cross-examination so long as it is otherwise clear that it will be made: Allied Pastoral Holdings Pty Ltd v FCT (1983) 44 ALR 607 per Hunt J (at 623); White Industries (Qld) Pty Ltd v Flower & Hart (a firm) [1998] FCA 806; (1988) 156 ALR 169 at 217-218.

(e) The necessary notice may be effected in pleadings, in an opening or in the manner in which the case is conducted: Seymour v Australian Broadcasting Commission [1977] 19 NSWLR 219 at 224-5, 236; Jagelman v FCT (1995) 31 ATR 467 at 472 -3; Raben Footwear Pty Ltd v Polygram Records Inc (1997) 145 ALR 1 at 15; White Industries (Qld) Pty Ltd v Flower & Hart (a firm) [1998] FCA 806; (1988) 156 ALR 169 at 218. To this list I would add notice given through witness statements or affidavits exchanged in advance of the trial.

(f) The rule has its foundation in the fair administration of justice: Browne v Dunn, Lord Halsbury (at 76-7).

108 The new case sought to be advanced against Barnes includes an allegation that he concealed from Amcor the relevant 'Agreements, Arrangements and/or Understandings' between himself and Holihan and the other participants in the scheme relating to the beneficial ownership of the ACB Business, namely Hodgson, Bayley, Sangster, and Mihelic. As earlier observed, this allegation potentially embraced the whole of the relevant period from 30 July 2003 until the retirement of Barnes from Amcor on 28 October 2004.

109 It was not put to Barnes, nor was there any notice given to him that he concealed from Amcor the relevant 'Agreements, Arrangements and/or Understandings' between himself and Holihan and the other participants in the scheme relating to the beneficial ownership of the ACB Business, namely Hodgson, Bayley, Sangster, and Mihelic, either from 30 July 2003 until the retirement of Barnes from Amcor on 28 October 2004, or at any other time. This new allegation had never been previously alleged against Barnes. The matter was not put to him in cross-examination.

110 Accordingly, during the trial Barnes was not given the opportunity to rebut this allegation or give an explanation of the events giving rise to it.

111 Further, none of the documents exchanged in the course of the trial served to put Barnes on notice that the allegation as it is now formulated was pressed by Amcor.

112 In the present case Holihan was found to have been informed of the identity of the other shareholders in the ACB Business in May or June 2004. The evidence given in his witness statement, which was exchanged with the Amcor parties prior to the trial, became his evidence when it was sworn to at the trial. Holihan was accepted on this issue as recorded in the Principal Judgement, namely:

Holihan said that in May or June 2004, '12 months after the First Shareholders Agreement had been signed' he felt 'entitled to know who the other shareholders were'. He said that Barnes informed him in a conversation at this time who the others 'were supposed to be', namely Hodgson, Bayley, Mihelic and Sangster, 'but they decided not to proceed'.[52]

Holihan said that on receipt of the advice from Barnes as to the identity of the other shareholders, he was 'shocked when Barnes told [him] who the other people were'.[53]

The version of events as stated by Holihan and Barnes to the effect that it was in May or June 2004 that Barnes informed Holihan as to the identity of the other shareholders Hodgson, Sangster, Mihelic, Bayley is accepted to a point. Given the uncertainty of the evidence as to the precise date of this conversation between Holihan and Barnes, I find that it was by 30 June 2004 that Holihan was advised as to the identity of the other shareholders.[54]

113 However, it was not put, nor was there any notice given to Holihan of an allegation now sought to be pressed that in or about October 2005, Holihan set about a deliberate course of conduct to mislead Amcor that 'Hodgson, Sangster, Bayley and Mihelic were not and had never been a party to the 26 May Holihan/Barnes 80/20 Agreement [the earlier agreement] with the intent that Amcor would not become aware that those persons were acting in breach of their duties to Amcor under the Act [the Corporations Act 2001] and the general law'. These allegations of knowing assistance to Barnes to breach his fiduciary duties were not put to Holihan during his cross-examination and I am satisfied that he did not have prior notice of them. He was not given the opportunity to rebut this allegation or give an explanation of the events giving rise to it.

114 On 13 May 2011, prior to the trial, the parties served their written opening submissions and draft statements of issues. This was done in compliance with the orders of the Court made on 7 March 2011.

115 The Amcor Draft Statement of Issues did not contain any allegation directed to Holihan of any knowing assistance given by him in Barnes' breach of fiduciary duties. The closest the Amcor parties came to making such an allegation is found in paragraph 47 which read:

There are also claims against the two companies connected with Holihan: namely ACB Co Purchaser (the Third Defendant) and Achilla (the Fourth Defendant, now Australian Corrugated Box Co Pty Ltd). Constructive trust and 'knowing assistance' claims are alleged against each company of which Holihan was the controlling or directing mind and will: pars. 29-35 of the Claims against Barnes et al.

116 Paragraph 47 of the Amcor draft statement of issues was not sufficient to put Holihan on notice of the allegation now sought to be pressed against him personally.

117 The issues list delivered on behalf of the Holihan parties included the following in relation to the Second Sale Agreement:

Did Holihan or Barnes conceal from Amcor, APA and ACB any intentions or arrangements of Barnes, Hodgson, Bayley, Sangster or Mihelic in relation to the ACB Business so that the Second Sale Agreement could be negotiated on terms which were uncommercial or detrimental to Amcor or ACB or substantially for the benefit of one or more of the defendants?
Was Barnes obliged to warn or inform Amcor that any of himself, Hodgson, Sangster, Bayley, or Mihelic intended to take or had taken a beneficial interest in the ACB Business following completion of the Second Sale Agreement, and if so, did he fail to do so?
If Holihan is found to have contravened or breached any duty to Amcor, APA or ACB, or to have assisted Barnes to have done so, then:

...

(b) Did any defendant make profits or obtain assets or other benefits as a result of Holihan's contravention, breach or assistance, and if so, to what value?

118 It was submitted by Amcor that as a result of these paragraphs of the Holihan parties' list of issues, referred to above, the Holihan parties opened up the possibility that a claim might be made against Holihan personally in respect of his alleged knowing assistance in Barnes' breach of fiduciary duties in respect of conduct which went beyond entry into the Second Sale Agreement.

119 However, I am not satisfied that these paragraphs amounted to an admission that Holihan was on notice that such a claim was being made against him. The paragraphs in the Holihan parties' list of issues, when properly read in their context, were confined to addressing an allegation as it was perceived to have been made that, amongst other things, Holihan was liable by reason of his participation in, or knowing assistance given to Barnes in respect of, entry into the Second Sale Agreement with Amcor in relation to the ACB Business.

120 On 29 June 2011 the Court made orders as to the delivery of final addresses. Final addresses were ordered to be delivered in part by delivery of a written draft judgement dealing with each of the topics specified in the final version of the Statement of Issues settled by the Court and in the same order as that annexed to the Order. The issues, so far as they were defined to relate to Holihan personally in the settled document, were confined to addressing the issue as to whether Holihan 'arising from the sale of the ACB Business' contravened ss 181 or 182 of the Corporations Act 2001 (Cth) or 'by his conduct concerning the Second Sale Agreement' breached any and what fiduciary duties or his duty of fidelity and good faith owed to Amcor and ACB. The settled issues did not include any allegations of knowing assistance directed to Holihan personally, although a question was formulated as to whether any of Holihan's companies were constructive trustees or gave 'knowing assistance' concerning the sale of the ACB Business.

121 Amcor submitted its outline of final submissions in a document dated 20 July 2011. Again these submissions, insofar as they related to Holihan, focussed on the central allegation advanced by it during the trial, namely that Holihan breached his duties to Amcor in the acquisition of the ACB Business. No allegation was made in these submissions that Holihan concealed from Amcor the continuing involvement of the other Defendants in the ACB Business for the period until the retirement of those persons from Amcor, or that Holihan knowingly assisted any party, thereby exposing him to liability. The same position was adopted by Amcor in its draft judgement submitted as part of its final address.

122 In the course of final address, Senior Counsel for Holihan pointed out that, although Barnes v Addy claims were made against Holihan's companies, no such claim was made against him personally. The following oral submission is referred to:

If Barnes is breaching his fiduciary duty by using his position of trust, our client has knowledge of that and assists and aids and abets Barnes in doing so for his own benefit, he will become liable as would a fiduciary by reason of the Barnes v Addy principle, by the aiding and abetting of somebody doing it. That's the way we say the proper analysis works. Alternatively, he would become liable as the recipient of trust property, either limb the Barnes v Addy would do it.

In fact, those claims aren't made against our client. So Your Honour doesn't need to consider the Barnes v Addy point. We might say, for what it's worth, we don't think much turns on the absence of those claims because as we see it, the liability would accrue under 182(2) if it would accrue under a Barnes v Addy claim. And so, that's the way we see the structure working.

123 For these reasons I am not satisfied that prior to or during the trial Holihan was put on notice of the new allegations now sought to be advanced against him in the proposed Fourth Amended Statement of Claim.

124 The pecuniary relief sought by Amcor against Barnes in the Third Amended Statement of Claim upon which the trial was conducted, comprised damages, further or alternatively equitable compensation and interest. Amcor did not seek an account of profits against Barnes.

125 In the Principal Judgement the Court made a number of findings against Barnes which, on a careful analysis of the pleadings, the documents submitted before and during the trial and the trial submissions, went beyond the case in fact put by Amcor. The Amcor case against Barnes at trial in essence was: Barnes participated in the sales of the two businesses in circumstances which amounted to a breach of his statutory and fiduciary duties to Amcor, and by reason of the sales being on uncommercial terms, Amcor suffered loss and damage, Barnes made profits, and Barnes 'obtained benefits and other benefits'.[55]

126 This was the fundamental case that was pleaded against Barnes. It was also the way in which Amcor conducted its case against him at trial.

127 The pecuniary relief sought by Amcor against Holihan in the Third Amended Statement of Claim upon which the trial was conducted, comprised damages, further or alternatively equitable compensation and interest. Amcor did not seek an account of profits against Holihan.

128 Again, in the Principal Judgement the Court made a number of findings against Holihan which, on a careful analysis invited by his counsel of the pleadings, the documents submitted before and during the trial and the trial submissions, went beyond the case in fact put by Amcor. The Amcor case at trial against Holihan in essence was: Holihan participated in the sale of the ACB Business under the Second Sale Agreement in circumstances which amounted to a breach of his statutory and fiduciary duties to Amcor, and by reason of the sale being on uncommercial terms, Amcor suffered loss and damage, Holihan made profits, and Holihan 'obtained benefits and other benefits'.[56]

129 Again, this was the fundamental case that was pleaded against Holihan. It was also the way in which Amcor conducted its case against him at trial.

130 I am not satisfied that Barnes and Holihan might not have presented their cases differently at trial had the new allegations now sought to be relied upon by Amcor been pleaded before the trial or had otherwise proper notice been given of them.

131 The trial of the proceeding lasted 35 days, spread over 11 weeks. Many weeks were spent in preparation of the evidence. Forensic decisions had to be made by Barnes and Holihan about what evidence should be presented, which witnesses should be cross-examined and what matters should be put to those witnesses. These decisions were likely to have been made by reference to the issues as disclosed by the pleadings, the other documents exchanged prior to the trial and the way in which Amcor presented its case at trial.

132 Further, the new claims for equitable relief against Barnes and Holihan personally for an account of profits exposed these defendants to a heightened level of exposure to orders for relief of a substantial kind being made against them. This too might have had consequences for the way in which they conducted their cases at trial.

At a glance

Court

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Before

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Judgment (269 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (9)