Hopkins v AECOM Australia Pty Ltd

NICHOLAS J: 1 Before me is an application made by the first respondent ("AECOM") seeking leave to file an Amended Defence to the Second Further Amended Statement of Claim ("the Amended Defence") and, by implication, to amend various cross claims filed by it. Many of the allegations made in the Amended Defence are incorporated by reference into AECOM's cross-claims against, inter alios, the cross respondent to the second cross claim (Mr Hicks) and the cross respondents to the fifth to eighth cross claims ("the Sponsor Clients"). While the applicants do not oppose AECOM's proposed amendment, it is opposed by Mr Hicks and the Sponsor Clients. 2 There have been numerous interlocutory judgments in this proceeding the most recent of which was given on 13 November 2015 (Hopkins v AECOM Australia Pty Ltd (No 5) [2015] FCA 1228). In that judgment I set out at [4]-[17] some background to the proceeding (which I need not repeat) and also referred at [18]-[20] to what I called "the para 28(aa) allegations". 3 The present dispute relates to AECOM's proposed response to the para 28(aa) allegations. Paragraph 28 of the applicants' Second Further Amended Statement of Claim ("the Statement of Claim") relevantly alleges: There were omissions from the Consented Material, in that it did not contain: (aa) Any disclosure that: (i) AECOM did not consider the Forecasts to be the most appropriate traffic forecast, but considered the Low Case Scenario to be most realistic; (ii) AECOM did not agree with what the Consented Material recorded RCM's view as being, namely that the Forecasts were the most appropriate traffic forecast to be included in the PDS or that it was the only scenario forecast that was material to potential equity investors; (iii) AECOM considered that the probability of the Forecasts being achieved was low. 4 The particulars given make reference to six emails from or to Messrs Broadbent, Johnston, Hicks, Yelds and Watson. They include Mr Johnson's email dated 7 July 2006 which I referred to in my previous judgment at [19]. 5 The Forecasts, as defined, are the traffic forecasts for the "base" case scenario ("the Base Case Scenario"), which I referred to in my earlier judgment at [8] but not the more conservative "bank" case scenario ("the Low Case Scenario"). Only the Base Case Scenario was included in the Summary Letter that formed part of the Consented Materials in the PDS. 6 AECOM denies that it held any of the opinions or beliefs referred to in para 28(aa)(i)-(iii) of the Statement of Claim ("the 28(aa) Beliefs"). 7 The Amended Defence further responds to the allegations in para 28(aa) of the Statement of Claim by alleging that Mr Yelds was the relevant corporate mind of AECOM for the purpose of authorising and consenting to the inclusion of the Consented Material in the PDS, that he believed that the Forecasts were the most appropriate traffic forecasts to be included in the Summary Letter, and that he "did not believe that the probability of the Forecasts being achieved was low". 8 The present dispute arises out of AECOM's desire to plead, in the alternative, that if AECOM did hold the 28(aa) Beliefs, then this was something known to Mr Hicks and the Sponsor Clients. The question for me is whether AECOM should be permitted to adopt what Mr Hicks and the Sponsor Clients contend are alternative cases based upon two sets of inconsistent facts. 9 Mr Smith SC, who appears for Mr Hicks and Leighton, referred me to r 16.06 of the Federal Court Rules 2011 (Cth) which provides that a party must not plead inconsistent allegations of fact or inconsistent grounds or claims except as alternatives. Mr Smith SC did not submit that a party could not plead inconsistent facts in the alternative. Rather, he submitted that a party is not permitted to do so if he or she knows that one of the postulated alternatives must be untrue. 10 In support of his submissions Mr Smith SC referred to the Full Court's decision in Issitch v Worrell (2000) 172 ALR 586. The facts of that case were relevantly as follows. The first respondent was the trustee of a bankrupt estate. The appellant was found to have withdrawn a sum of money from an account of the bankrupt prior to the sequestration order being made which was then used by the appellant to fund the construction of a house for herself at Wishart. The trustee, relying upon s 120 of the Bankruptcy Act 1966 (Cth), obtained judgment against the appellant for an amount representing the sum withdrawn from the bankrupt's account and applied toward the construction of her house. A significant issue at the trial was whether the money the appellant used to construct the house at Wishart came from her own funds or from the funds withdrawn from the bankrupt's account. The respondent claimed that she funded the construction of the house using her own moneys. 11 On appeal, the respondent sought to argue that it was not open to the primary judge to find against her because the trustee had not proven that she gave no consideration for the funds she withdrew from the bankrupt's account. Drummond J (with whom Spender and Katz JJ agreed) found that the appellant should not be allowed to rely on this point. As Drummond J observed, not only was the point not run at trial, but it was inconsistent with the case she did run at trial which was that the funds used to construct the house were her own. His Honour said at [32]-[33]: [32] … A party can as a general rule plead inconsistent sets of facts in the alternative (cf O 11 r 8(2); Re Morgan (1887) 35 Ch D 492 and Delfino v Trevis (No 1) [1963] NSWR 191 at 196), but not where one of those sets must be known to the party to be false. It has long been recognised that such a pleading is embarrassing and will be struck out. In Brailsford v Tobie (1888) 10 ALT 194 at 195, the defendant pleaded two factually inconsistent accounts in justification for not having paid the moneys claimed by the plaintiff. Holroyd J ordered that the defendant elect which one of these two cases she would maintain, saying: … I think it would be most improper to allow the defendant to plead as she has done. The actual facts must be within her own knowledge, and that being so she has set up two sets of facts inconsistent with one another. If this were allowed it would be permitting a party knowing the facts to deliberately place on the record statements, one or other of which must be known to be a lie. This, in my opinion, ought not to be allowed. [33] Whether or not the gloss on the general rule referred to in Brailsford has its foundation in the old requirement for sworn pleadings, it is in accord with modern practice in not permitting parties to litigate whatever issues they choose, only the crucial issues: see, for example, Ashmore v Corporation of Lloyd's [1992] 1 WLR 446 at 448 and, more generally, UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 at 459. 12 Rule 16.06 does not prohibit a party pleading inconsistent factual allegations provided that this is done in the alternative. This is consistent with authorities which recognise that a party may plead facts in the alternative provided that this would not require the party, if he or she were required to verify the defence, to do so falsely. A party may plead alternative cases including inconsistent facts in circumstances where the relevant facts may be open to different interpretations: see, for example, Fenton v Fenton [1966] 2 NSWR 605 at 606. 13 There are no doubt cases in which it would not be appropriate to permit a respondent to plead inconsistent allegations of fact even in the alternative. For example, in a simple case in which X sues Y for repayment of money lent, Y might not be permitted to both deny receiving the money and to allege, even if only in the alternative, that if she did receive the money, she repaid it. But even then, it might not be inappropriate to permit such an approach where the question whether there was a loan or a repayment depends upon a complex legal analysis of the facts. 14 The applicants' case based upon the para 28(aa) allegations raise a number of issues. One issue is who within AECOM is to be taken to reflect the company's corporate mind. AECOM says it is Mr Yelds but the applicants, at least for the purposes of attributing the 28(aa)(iii) Belief to AECOM, will presumably argue that it is Mr Johnson's state of mind that is most relevant. Another issue concerns the proper interpretation of para 28(aa) itself and the relevant email correspondence including, in particular, Mr Broadbent's email of 29 November 2005 and Mr Johnson's email of 7 July 2006. 15 The source of the para 28(aa)(i) allegation appears to be Mr Broadbent's email of 29 November 2005. In that email he requested that Mr Johnson and Mr Yelds inform Mr Hicks that AECOM's view was that the Low Case Scenario was "the most realistic scenario". The Amended Defence does not suggest that Mr Broadbent was of a different view though it does allege that Mr Yelds believed that the Base Case Scenario was the most appropriate traffic forecast to include in the Summary Letter. 16 It seems that Mr Broadbent had a much greater involvement with Mr Hicks than either Mr Yelds or Mr Johnston. It is therefore possible that the Court might hold that Mr Hicks knew that Mr Broadbent did not believe the Base Case Scenario was the most realistic scenario modelled by AECOM. That is not inconsistent with the allegation that AECOM, through Mr Yelds, believed that the Base Case Scenario was the most appropriate Forecast to be used in the Summary Letter. 17 Mr Johnson's email of 7 July 2006 is no doubt the source of the allegation made in para 28(aa)(iii). Mr Johnson does not state in terms in his email that he considered that the probability of the Forecasts being achieved was low. However, his email does include the following: a. There might be 20 key assumptions that go into our forecasts - each has a plausible upper and lower bound. b. I have seen on NSBT each of those assumptions pushed to the most favourable position for the revenue - still in the plausible range. c. The probability that they will all turn out that way is low - possible but low. d. The most important of these is the population and employment forecasts (that we did not do). 18 Whether or not this establishes that Mr Johnston was of the view that the probability of the Forecasts being achieved was low is a matter to be decided in light of all the evidence. At this stage all I would say is that the email may be open to more than one interpretation. 19 Mr Smith SC submitted that permitting AECOM to plead in the alternative as it proposes to do in the Amended Defence is inconsistent with the "overarching purpose" set out in s 37M of the Federal Court of Australia Act 1976 (Cth) and that it is also likely to result in an unfair trial. I do not accept that submission at least in so far as it relates to the 28(aa)(i) and (ii) Beliefs. 20 Mr Smith SC also argued that it is not reasonably open to infer that Mr Hicks and Leighton knew that AECOM considered that the probability of the Forecasts being achieved was low. He also points to AECOM's failure to properly particularise the facts upon which they rely to found such an inference. 21 Further, Mr Smith SC submitted that AECOM should not be allowed to advance a positive case that Messrs Yelds and Johnson held relevant beliefs and then cross-examine Mr Hicks to the effect that he knew that Messrs Yelds and Johnson held different and inconsistent views. He submitted that, as a matter of fairness, AECOM will need to elect whether it still maintains that it did not hold any of the 28(aa) Beliefs before counsel for Mr Hicks and the Sponsor Clients cross-examine Messrs Johnson or Yelds. 22 Mr Smith SC points to witness statements served by AECOM made by Mr Yelds and Mr Johnson indicating that they did not hold the 28(aa)(iii) Belief and to the absence of any suggestion in the particulars or the witness statements that Mr Hicks was told otherwise. 23 It is common ground that AECOM does not assert in its Amended Defence or the particulars it has given that Mr Hicks was told by either Mr Johnson, Mr Yelds or Mr Broadbent (or anyone else) that AECOM considered that the probability of the Forecasts being achieved was low. Nor is it alleged that Mr Hicks received a copy of Mr Johnson's email of 7 July 2006. 24 Mr Steele SC, who appeared for AECOM, submitted that if the Court were to find that AECOM held the 28(aa)(iii) Belief, it would also be open for the Court to find that Mr Hicks knew, or ought to have known, that AECOM held that belief. Mr Steele SC argued that if Mr Hicks knew that the Low Case Scenario was the more realistic of the scenarios modelled and that it utilised more conservative assumptions than the Base Case Scenario, and if Mr Hicks also knew that this was AECOM's view, then he might also be taken to know that AECOM believed that the probability of the Forecasts being achieved was low. 25 In AECOM's written submissions, the argument was developed in this way (at para 26): a. the Objecting Parties [ie. Mr Hicks and the Sponsor Clients]: i. gave instructions and directions to AECOM Australia such that the key assumptions which underpinned the forecasts were pushed to the most favourable position for revenue (within the plausible range); and ii. knew that AECOM Australia wanted to include the "low (bank) scenario" forecasts in the Summary Letter, but determined, and directed AECOM Australia that, only the "base scenario" forecasts were material and appropriate for investors; so that b. if knowledge of those states of affairs is held to provide the basis for a finding that, in substance or effect, AECOM Australia had a corporate "belief" that the "base" scenario forecasts were not those "most appropriate" for inclusion in the Summary Letter and/or that they had a "low" probability of being achieved, then the Objecting Parties were materially aware of those states of affairs and, accordingly, in the premises, ought to be held to have known of those "beliefs" by AECOM Australia. 26 The particulars that have been given by AECOM identify facts and circumstances from which it might be concluded that Mr Hicks knew that AECOM considered the Low Case Scenario to be the most realistic of the forecasts it prepared because it utilised more conservative assumptions than were utilised in the Base Case Scenario. But in my view the particulars given do not identify facts and circumstances from which it might be inferred that Mr Hicks knew that AECOM believed that the probability of the Forecasts being achieved was low. Even if Mr Hicks knew that AECOM believed that the assumptions used for the purposes of the Low Case Scenario were more conservative and more realistic than those used in the Base Case Scenario, it could not be inferred from those facts alone that Mr Hicks knew, or ought to have known, that AECOM considered the probability of the Forecasts being achieved was low. 27 Mr Dick SC, who appeared for the Sponsor Clients, Bilfinger and Baulderstone, adopted Mr Smith SC's submissions, but also took issue with the way in which AECOM had particularised its case against his clients based on sub-paras (i) and (ii) of the applicants' para 28(aa) allegations. The main focus of Mr Dick SC's complaint was a paragraph in Mr Broadbent's statement (para 1443) relied upon by AECOM as a statement of relevant particulars of the allegation that, independently of Mr Hicks, Bilfinger and Baulderstone were somehow made aware that AECOM wanted both the Low Case Scenario and the Base Case Scenario included in the PDS. I am not inclined to disallow the proposed amendments on that basis, but I will make an order requiring AECOM to provide the best particulars it can provide of the events referred to in the relevant paragraph of Mr Broadbent's statement. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholas.

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