Hodgson v Amcor Ltd; Amcor Ltd & Ors v Barnes & Ors [2011] VSC 63

Hodgson v Amcor Ltd; Amcor Ltd & Ors v Barnes & Ors [2011] VSC 63 - VSC 2011 case summary — Zoe

[25]

Delay does more than deny justice. It has multiple cost implications, some more apparent than others. In commercial enterprise, for example, the unnecessary resulting from delay has both direct and incidental costs. Some of these will be measurable, and some not. In either case they may have a substantial impact upon an enterprise and the lives of those involved in it. In the private lives of people engaged in litigation the uncertainty associated with delay also has a social cost. Moreover, in all litigation - although most obvious in commercial litigation - there is the cost attributable to the time of those involved in the litigation as parties and witnesses.

There is a broader point about the role of courts with a commercial jurisdiction as part of what may be seen as the commercial infrastructure of a county. If courts are to perform that role - as well as their fundamental constitutional roles - commercial dispute resolution should function on a commercial timescale. Corporations see many courts as operating on a timescale foreign to commercial thinking. The timelines for a commercial enterprise are quarterly, six-monthly and yearly - so that matters that take more than a year to resolve are outside normal operational timelines for commercial decision-making. As well, in some cases the principal remedy sought becomes redundant when a case is drawn out too long, such as where a party seeks corrective advertising as the most effective remedy for a misleading statement.

I should also note that while delay is difficult enough for large scale corporations, for smaller corporations it may be life imperilling and can impose great personal cost on the owners of the enterprise. Large corporations can, and do, take advantage of this imbalance by using delay as a tactic to force resolution in litigation against smaller players. If competitive markets are to be maintained we should not allow this imbalance.

In short, the need to reduce delay in litigation, and the uncertainties and costs associated with delay, is incontrovertible.

[71]

In the Barnes proceeding -

(a) The first defendant, Trevor Barnes, was employed by Amcor as its Regional General Manager of the Amcor Fibre Packaging (Australasia) Division in New South Wales from January 2000 to the end of 2002 and from 1 January 2003 to 28 October 2004 as its general manager, operations, of the NSW division. He was an 'officer' of Amcor, ACB and Service Containers for the purposes of s 9 of the Corporations Act 2001 (Cth). Barnes supervised Messrs Holihan and Hottes, who were respectively responsible for running the ACB business and the Service Containers business. Barnes reported to Mr Hodgson.

(b) The second defendant, Craig Holihan, ran the ACB business from December 1998 until the end of July 2003. He was an 'officer' of ACB for the purposes of s 9 of the Corporations Act. He was a director of the entity (the third defendant) that purchased the ACB business ('the ACB Purchaser') and a director of the fourth defendant, Achilla Pty Ltd ('Achilla'). From 30 July 2003, the ACB purchaser was the legal owner of the ACB business and operated the ACB business with Achilla.

(c) The fifth, sixth and seventh defendants - Ian Sangster, Christopher Bayley and Albert Mihelic - were employed by Amcor in senior positions from approximately 1990 to 28 October 2004. They were 'officers' of Amcor for the purposes of s 9 of the Corporations Act.

(d) Barnes, as an officer and employee of Amcor, ACB and Service Containers, had obligations pursuant to ss 180(1), 181(1), 182(1) and (2) of the Corporations Act to Amcor, ACB and Service Containers, and owed fiduciary duties and a duty of fidelity and good faith to Amcor, ACB and Service Containers.

(e) Holihan, as an officer of ACB, had obligations pursuant to ss 180(1), 181(1), 182(1) and (2) of the Corporations Act to ACB, as well as owing fiduciary duties and a duty of fidelity and good faith to ACB and Amcor.

(f) Each of Sangster, Bayley and Mihelic, as officers of Amcor, and as employees of Amcor, had obligations pursuant to ss 180(1), 181(1), 182(1) and (2) of the Corporations Act to Amcor and owed fiduciary duties and a duty of fidelity and good faith to Amcor.

In the Hodgson proceeding -

(g) Mr Hodgson was employed by Amcor in a senior management position until 13 December 2004. He was an officer for the purposes of s 9 of the Corporations Act of Amcor, APA and ACB, as well as being a director of a number of subsidiaries of Amcor, including Service Containers (until 9 November 2004). He was also a director, shareholder and effective controller of Bankson Pty Ltd (the second defendant by counterclaim).

(h) Mr Hodgson had obligations under s 181, 182 and 183 of the Corporations Act to Amcor, APA, ACB and, relevantly, Service Containers, as well as fiduciary duties and a duty of fidelity and good faith to Amcor, ACB and Service Containers.

[73]

The first sale agreement

(a) Amcor alleges that Mr Hodgson was involved in the sale by Service Containers of its business on terms uncommercial to Amcor and Service Containers; that he was involved in the conduct of Barnes, Sangster and/or Bayley to effect such a sale; and that he acquired, or intended to acquire, an interest in the Service Containers business for himself and/or entities associated with him, concealing such interest from Amcor and Service Containers.

(b) Correspondingly, it is alleged that Mr Hodgson was involved in the acquisition of interests in the Service Containers business by Barnes, Bayley, Sangster and/or entities associated with them, and that he also concealed such interests from Amcor and Service Containers.

(c) Amongst other things, it is proposed to add that the concealment by Mr Hodgson was deliberate and dishonest and that Mr Hodgson entered into agreements, arrangements or understandings with Barnes, Bayley, and/or Sangster for an illegal or improper purpose, namely to take the benefit of the Service Packaging business from Amcor and Service Containers and to secret obtain the benefit of the business for himself and/or the others.

(d) In the Barnes proceeding, Amcor alleges that Barnes, along with Mr Hodgson and/or Hottes, negotiated the first sale agreement which was uncommercial and detrimental to the interests of Amcor and Service Containers; that Bayley and Sangster stood by while this happened; that Barnes, Bayley and Sangster had interests in entities that were to obtain a financial benefit from the Service Containers business (or, alternatively, that each of them intended to acquire a beneficial interest in the service Containers business and later acquired such an interest); and that they failed to warn or inform Amcor of this fact. Allegations of deliberate and dishonest concealment, entering into arrangements for an illegal and improper purpose and the receipt of secret benefits are also made against Barnes, Bayley and Sangster.

(e) Although the current form of the counterclaim in the Mr Hodgson proceeding makes no reference to it, it is alleged in the Barnes proceeding that the first sale agreement included a 5 year supply agreement between Service Containers and the Service Containers purchaser which was uncommercial and detrimental to Service Containers. It is proposed to amend the Hodgson proceeding to allege that Mr Hodgson was knowingly involved in the supply agreement and that that agreement was made on terms uncommercial and substantially for the benefit of Mr Hodgson, the Service Containers purchaser, Hottes, Barnes, Bayley and/or Sangster.

The second sale agreement

(f) In the Hodgson proceeding, it is alleged that Mr Hodgson was involved in the sale of the ACB business; that he was involved in the conduct of Barnes, Mihelic, Sangster and/or Bayley to effect a sale of the ACB business; that he acquired an interest in the ACB business for himself and/or entities associated with him; and that he concealed such interests from Amcor and ACB.

(g) Amongst other things, it is proposed to add that Mr Hodgson deliberately and dishonestly concealed his interest and the interests of the ACB purchaser, Achilla, Holihan, Barnes Sangster, Bayley and/or Mihelic from to Amcor and/or ACB. It is also proposed to add that Mr Hodgson entered into secret agreements, arrangements or understandings with Barnes, Bayley, Sangster and/or Mihelic for an illegal or improper purpose, namely to take the benefit of the ACB business from Amcor or ACB.

(h) Although the current form of the pleading in the Hodgson proceeding makes no reference to it, it is alleged in the Barnes proceeding that the second sale agreement included a 5 year supply agreement between ACB and the ACB purchaser and Achilla which was uncommercial and detrimental to ACB. It is proposed to amend the Hodgson proceeding to make reference to the supply agreement and Mr Hodgson's involvement in it.

(i) In the Barnes proceeding, it is alleged that Barnes, in consultation with Mr Hodgson, negotiated the sale of the ACB business with Holihan on behalf of the ACB purchaser and Achilla on terms uncommercial and detrimental to the interests of Amcor and ACB and substantially for the benefit of Barnes, the ACB purchaser, Achilla, Holihan, Mr Hodgson, Bayley, Sangster and/or Mihelic and that he failed to warn Amcor about interests of those persons in the business and, in fact, deliberately and dishonestly concealed those matters form Amcor and ACB. Similar allegations are made against Holihan.

(j) As a result of that conduct, Barnes and Holihan are alleged to have improperly used their positions to gain advantage for themselves and persons other than Amcor and ACB, made secret profits and obtained secret benefits when dealing with the property of Amcor and ACB.

(k) To similar effect, it is alleged against Sangster, Bayley and Mihelic in relation to the second sale agreement that each of them was involved in the conduct of Mr Hodgson and/or Barnes; that they failed to exercise powers or discharge duties by allowing or causing the negotiation of the second sale agreement in the relevant circumstances, failing to warn Amcor and ACB and placing himself in a position of conflict of interest; and that, at the time of the negotiations for the second sale agreement, each of Sangster, Bayley and Mihelic held the financial interests in a corporation that was to obtain a financial benefit from the ACB business once it had been sold to the ACB purchaser (or, alternatively, intended to acquire a beneficial interest in the ACB business and later acquire such an interest). The allegations of failure to warn and deliberate and dishonest concealment are made against those defendants, along with those of acting for an illegal or improper of purpose and obtaining secret benefits.

The establishment of AMCG

(l) Furthermore, in the Hodgson proceeding, the Amcor parties allege that from at least August 2004, Mr Hodgson was involved in the establishment of Australasian Manufacturing Consulting Group ('AMCG') by enticing Barnes, Bayley, Sangster and Mihelic to work in AMCG's business, approaching Amcor's competitor, Carter Holt Harvey Ltd with a view to providing consultancy services and, during August and September 2004, copying, removing and secretly storing for use in AMCG's business, over 30,000 documents belonging to Amcor, including customer lists, product specifications, financial analyses, strategic financial plans, reports, product research and development laboratory reports, diagrams for plant layout and so on. It is also alleged that Mr Hodgson canvassed Amcor's customers for AMCG's business, otherwise made preparations for the conduct of that business and provided consultancy services to Carter Holt Harvey in connection with strategies to compete with Amcor.

Relief claimed

(m) In the Barnes proceeding, Amcor and ACB seek declarations that Barnes, Sangster and Bayley breached ss 180(1), 181(1), 182(1) and (2) of the Corporations Act with respect to the conduct alleged in connection with both sale agreements, and that Mihelic breached ss 180(1), 181(1), 182(1) and (2) and Holihan breached ss 181(1), 182(1) and (2) in respect of the second sale agreement. They also seek orders to set aside the second sale agreement and claim damages, equitable compensation, the taking of accounts, an account of profits and the declaration of a constructive trust and consequential orders in favour of Amcor or ACB over any rights or interests that Barnes, Holihan, Sangster, Bayley and Mihelic hold in the ACB business and/or the companies that now own the business, as well as any shares that Holihan holds in those companies and any shares that the ACB Purchaser holds in Achilla.

(n) In the Hodgson proceeding, the Amcor parties seek by way of counterclaim damages, equitable compensation, an account of profits, the declaration of a constructive trust and consequential orders in favour of the Amcor parties over moneys and assets derived from the sale and carrying on of both businesses. It is proposed to add a declaration that the defendants by counterclaim breached ss 180, 181, 182 and 183 of the Corporations Act.

(o) If APA is added as a party in both proceedings, it will be alleged that it has suffered loss and damage by reason of the conduct of Mr Hodgson, Holihan, Barnes, Sangster, Bayley and Mihelic, and that it is a beneficiary of constructive trusts arising from the circumstances of the sale and subsequent conduct of the ACB business and is due, amongst other things, an account of profits.

(p) If Service Containers is added as a plaintiff in the Barnes proceeding, it will be alleged that it has suffered loss and damage by reason of the conduct of Barnes, Sangster and Bayley, and that it is a beneficiary of constructive trusts arising from the circumstances of the sale and subsequent conduct of the Service Containers business and is due, among other things, an account of profits.

[77]

(c) On 21 April 2006, Harper J granted leave to Amcor to file and serve an amended defence and counterclaim in the Hodgson proceeding. This order was made by consent. The amended defence and counterclaim filed on 27 April 2006 included the allegations against Mr Hodgson in relation to the sale of the Service Containers business and the ACB business, as well as in relation to the establishment of AMCG. Many of these allegations were contained in confidential annexures as a result of orders made in the Federal Court proceeding.

(d) Interlocutory steps in the Hodgson proceeding, including the filing of defences and replies, and requests for and giving of particulars, took place between June 2006 and March 2007.

(e) On 14 June 2007, the Amcor parties applied in the Hodgson proceeding for orders permitting them to disclose and use documents obtained pursuant to the Anton Piller order for the purposes of a proposed proceeding in New South Wales in which the Amcor parties intended to make allegations that were substantially in the same terms as those now made by Amcor and ACB in the Barnes proceeding. By order dated 5 July 2007, Williams J declined to grant the Amcor parties leave to disclose documents in the proposed proceeding.[38]

(f) On 3 September 2007, Amcor and ACB commenced the Barnes proceeding. In her first affidavit, Janet Whiting deposes to the Barnes proceeding having been commenced without access to the documents that were obtained as a result of the Anton Piller order.

(g) On 3 September 2007, the Amcor parties applied to have the Barnes proceeding and the Hodgson proceeding heard together. Mr Hodgson resisted the consolidation of the proceedings on the grounds that consolidation would possibly delay the time by which the Hodgson proceeding would be ready for trial until late 2010.

(h) On 14 December 2007, Osborn J ordered that the proceedings be heard together.[39]

(i) From approximately April 2008 until early December 2008, discovery, including from non-parties, was sought and provided in the Barnes proceeding. In her first affidavit, Janet Whiting deposes to the various steps in discovery that were taken under the heading "Failure of the defendants and non-parties to the Barnes proceeding to provide timely and adequate discovery". She alleges that the discovery by the first to the fourth defendants in the Barnes proceeding and the plaintiff in the Hodgson proceeding has been inadequate and that those parties have failed to discover documents to which they were a party or that were sent or received by them. Consequently, she says that she caused to be undertaken significant forensic work and made numerous applications for non-party discovery.[40] These steps were difficult and time-consuming.

(j) On 11 December 2008, Amcor and ACB filed an amended statement of claim in the Barnes proceeding.

(k) On 5 March 2009, Ms Whiting wrote to AJ Macken & Co, the solicitors for Mr Hodgson, proposing that discovery in the Hodgson proceeding be deemed discovery in the Barnes proceeding and vice versa. Holding Redlich, the solicitors representing the fifth to seventh defendants in the Barnes proceeding, advised they would not consent to such orders.

(l) On about 9 April 2009, the Amcor parties served a proposed further amended defence and counterclaim on AJ Macken & Co, solicitors for Mr Hodgson. The covering letter foreshadowed that the Amcor parties would seek the leave of the Court to file and serve the proposed pleading when the matter was next before the Court for directions.

(m) Mr Hodgson gave no response to the proposed further amended defence and counterclaim prior to a directions hearing on 15 September 2009. In his affidavit, Mr Macken, on behalf of Mr Hodgson, explains that no response was given when the proposed further amended defence and counterclaim was served, as no comment or response was invited. He says that notwithstanding the service of the proposed further amended defence and counterclaim on 9 April 2009, the Amcor parties took no further steps to seek the leave of the Court to file and serve that document until 3 September 2009.

(n) On 15 September 2009, Byrne J made an order by consent that discovery in the Barnes proceeding was deemed discovery in the Hodgson proceeding and vice versa.

(o) On 17 September 2009, Goldberg J in the Federal Court of Australia gave Amcor leave to disclose to the defendants in the Barnes proceeding, and for the parties in that proceeding to use, certain documents obtained pursuant to the Anton Piller order.

(p) On 29 September 2009, Amcor produced the proposed further amended defence and counterclaim that is the subject of the present application in the Hodgson proceeding. According to Ms Whiting, only a small number of amendments have been made to the version served on AJ Macken & Co on 9 April 2009. These further amendments relate to particulars of documents obtained from non-parties in the Barnes proceeding and the Deed of Accession.

[195]

In this case, I am especially cognisant of the position of Mr Hodgson, who commenced relatively uncomplicated proceedings against Amcor in December 2004 to recover (in the scheme of things, relatively small) amounts said to be due to him under his employment contract. He is still waiting for his day in court, some 3 ½ years after the previous application to amend and almost 6 years after he commenced his action. Mr Hodgson argued, and I accept, that when Osborn J ordered that the Mr Hodgson and Barnes proceedings be heard together there was no suggestion that further parties would be added in the Barnes proceeding (let alone in both proceedings) or that there would be extensive amendments to the pleadings introducing a raft of new allegations against him, ostensibly on the basis of aligning the pleadings in the two proceedings.
Mr Hodgson also submitted that the actions of the Amcor parties in seeking the amendments appeared to be 'strategic' and that there was no reason why the case now sought to be made could not have been made in April 2006, or even earlier. The fact that some of the amendments are intended to align the allegations in the Hodgson proceeding with those in the Barnes proceeding (which were made in September 2007) highlights the delay and the prejudice to Mr Hodgson in making them at this late stage.
I accept that the prejudice to Mr Hodgson in allowing the proposed extensive amendments to the amended defence and counterclaim is significant for several reasons. Mr Hodgson is physically frail; he is approaching old age and has a serious heart condition. He underwent a quadruple bypass in 1995, and it is anticipated that he will require further surgery in the future. I take into account the additional strain that the that new allegations may impose on him, as well as the strain inevitably arising from litigation that takes much more time that it should to reach a resolution. I also take into account the fact that Mr Hodgson is retired and has not been paid, or has been under-paid, termination entitlements that he says have been owing to him for five years.
The prejudice to Mr Hodgson arising from further delay can be ameliorated to some extent by ensuring that Amcor puts on its evidence without further delay, and the proceedings are given an expedited hearing date.

[202]

At no time have I had anything but respect for the court and its orders. I am very conscious of my obligations as an officer of the court and, at all times, have been conscious and respective of the orders made in these proceedings.

It is put against me that I have no regard for the court's orders of 19 May which required statements to be filed by 13 August 2010. We sought and obtained a variation of that order on 11 August 2010.

It is also put against me that I have had no regard for the court's orders made on 11 August 2010. We sought and obtained a variation of those orders on 1 October 2010.

I note I am in breach of the orders of 1 October requiring statements to be filed in November. I seek the court's indulgence in relation to those orders for the reasons set out in this my affidavit.

In attending to the work in relation to the witness statements an enormous amount of work has been undertaken by me, together with solicitors assisting me, and all have been diligent in doing work. I will be unable to fully explain all that has been done or the reasons for decisions that have been made because to do so, will result in the disclosure of legal advice and would, of itself, disclose the client's privilege. However, I will try and explain, to the best of my ability without waiving privilege, matters that have been attended to in relation to the complaint regarding the failure to provide the witness statements in accordance with each order.

I have been unable to adhere to the timetable due to the amount of work that has been undertaken in this matter. At no stage have I had a cavalier attitude to the orders of the court and have been diligently preparing this matter.

There are numerous affidavits filed by me in these proceedings which detail the difficulties that have been undertaken, principally, as a result of the failure of the defendants to discover key documents. Key information that is relied on by Amcor in these proceedings is information that has always been known by the defendants and much of it documented by them. However, many such documents have not been provided by any of the defendants. Such matters complicate the preparation of the matter and extend the time necessary. In support of this I refer to my affidavits in these proceedings including 15 December 2010, 9 December 2010, 30 September 2010, 19 August 2010, 17 August 2010 and 16 August 2010.

As part of the consideration of what evidence would need to be called extensive regard was had to the matters that need to be proved and how such matters could be proved. Extensive Notices to Admit were prepared and served on all the parties in November 2010. Preparation of those Notices to Admit were extensive. Due to privilege issues I am not at liberty to set out all of the considerations taken in considering the question of the Notices to Admit and the form and breadth of them. I am able to say that it was my view that Notices to Admit were a method by which many documents could be brought into evidence without the need for oral evidence in relation to their authenticity or source and accordingly would reduce the number of witnesses required during the trial. The consideration of and the ambit of the Notices to Admit were very much part of my thinking in relation to my work regarding the witness statements to be filed on behalf of Amcor.

13 lay witness statements have now been filed and one expert statement. As part of the preparation of witness statements, other potential witnesses were canvassed, consideration as to what their evidence would be and the value or otherwise of that evidence. Such matters include the willingness of individuals to give evidence. Such issues had been canvassed by me extensively in the last six months of 2010.

Of the lay witness statements that have been filed on behalf of Amcor, seven are by individuals who are still employed by Amcor. Two of those witnesses are based overseas. Of the other witnesses, they are no longer employed by Amcor. They have other commitments and accordingly our claims on their time were subject to their good will and their other commitments.

The expert report was originally ordered to be filed by 13 August 2010. The court varied this order at the request of Amcor.

Her Honour Justice Emerton ordered on 1 October 2010 an extension in which to file the expert statement to 5 November 2010. Extensive material was required by the expert in order to prepare his report. As part of that process, it was necessary to obtain documents from the second to fourth defendants in relation to the ACB Business. This matter came before the court on 18 August and 20 August. Part of the difficulty was that Mr Holihan was resisting the production of material in full, alternatively that it only be provided to the expert witness, alternatively that it be provided to the expert witness and to Corrs. However, Mr Holihan was resisting that the material be available to Amcor. I was not prepared to receive information that I could not obtain instructions on. Ultimately, after an application before her Honour Justice Emerton on 20 August 2010 an order was made that the General Counsel for Amcor could have access to the documents. However, access could only be provided at Corrs' offices and not in the Amcor offices.

I refer to my affidavit of 15 December 2010. In particular, I refer to paragraph 40-68 inclusive. In that affidavit I set out, in detail, the difficulties that were experienced in relation to obtaining documentation that was needed to be given to the expert in order for the report to be finalised. As at the date of swearing my affidavit of 15 December 2010 I noted that all of the material required had still not been provided.

As part of the matters set out in my 15 December affidavit I noted that we required the consent of the parties in the Barnes and Mr Hodgson proceedings to allow the expert witness to have access to Carter Holt Harvey's documents as they were subject to a confidentiality regime. Ultimately, such consents were obtained. All of this information was collated and sent to Jennifer Gould, the Associate to Her Honour Justice Emerton on 15 November 2010.

The order was ultimately made by Her Honour on 18 November 2010 and the documents provided to the expert witness.

The position on 1 October 2010 by Mr Hodgson's counsel [at a directions hearing] was that they were content if the witness statements to be filed by the end of the year.

It has been put against me that we served the statements at the end of last week in a contrived way. That is incorrect. We received the expert statements late on Monday 14 February. I read the statement on Tuesday 15 February. Copies were served on the parties on Thursday 17 February. Other witness statements were ready to be finalised. When serving the witness statements we served them with full copies of all of the annexures.

[224]

Anything which would throw light upon the case is relevant and, in my opinion, material. There is no present day justification, in my view, for construing relevance in any other way. See Hutchinson v Glover (1875) 1 QBD 138 at 141 per Blackburn J; Donaldson v Harris & Anor (1973) 4 SASR per Wells J at 304-305; and Compagnie Financiere v The Peruvian Guano Co (1882) 11 QBD 55 per Brett, LJ at p63.

Marks J has in Ansett Industries v The Commonwealth No 268 of 1987, a judgment apparently delivered on 3 April 1987, stated that the advancement of the "fair determination of the issues in the case," which he inferred to be one of the principle purposes of the Rule, " ... would not be met should the Rule be used for collateral purposes, such as disadvantaging a business competitor. Also the Court must be careful not to allow the power to be used oppressively, for example, for mere fishing expeditions.

I can only say that what one person may categorise as a "mere fishing exhibition" another may claim to be a legitimate use of the Rule. I have myself no hesitation in making the order which has been sought against the liquidator in the present case.

I have in the past explained that the person called upon to make an affidavit of documents pursuant to R32.07 may take objections to produce any such document on the ground of privilege (see r32.02).

The Court's order in the case of non-party discovery does not go automatically but involves the exercise of a discretion in each case. The Court may refuse in any particular case, if thought appropriate, to exercise its discretion. However, I would interpret the scope of the Rule concerning non-party discovery to favour the allowance of the same rather than its restriction simply because of an element of fishing (whatever that means) is seen to be involved.

The value of discovery as a tool leading to the disposal of actions cannot, in my opinion, be overestimated. Furthermore, the saving of costs is a consideration of such importance today in the overall administration of justice that it ought to be advanced whenever the opportunity arises. I think that the opportunity arises here and I would seek to exercise it.

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