I.2 Conclusion on the No Relevance Contention
65 This contention is without merit.
66 Returning to basic principles, the admissibility of evidence is subject to the rules contained in Chapter 3 of the EA. Relevantly, s 56 contains the primary rule of admissibility, that is: (1) except as otherwise provided by the EA, "evidence that is relevant in a proceeding is admissible in the proceeding"; and that (2) evidence that is not relevant is not admissible. Section 55 then provides that evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding and that evidence is not taken to be irrelevant only because it relates only to the credibility of a witness, the admissibility of other evidence, or a failure to adduce evidence. Needless to say, the party who seeks to adduce a written representation into evidence bears the onus of identifying the representation, proving the provenance and authenticity of the document containing the representation (if put in issue), and satisfying the Court that it is relevant.
67 As Gleeson CJ usefully explained in HML v The Queen [2008] HCA 16; (2008) 235 CLR 334 (at 352 [6]):
Information may be relevant, and therefore potentially admissible as evidence, where it bears upon assessment of the probability of the existence of a fact in issue by assisting in the evaluation of other evidence. It may explain a statement or an event that would otherwise appear curious or unlikely. It may cut down, or reinforce, the plausibility of something that a witness has said. It may provide a context helpful, or even necessary, for an understanding of a narrative.
68 "Context evidence", as referred to by Gleeson CJ, is evidence which may help the tribunal of fact assess and evaluate other evidence in the case in a true and realistic context, and may, for example, be used to explain the conduct or state of mind of a person: see Hollingsworth v The Queen [2021] VSCA 354; (2021) 294 A Crim R 179 (at 204 [104] per Niall and Kennedy JJA, Macaulay AJA)
69 I not only have the pleadings to assist in identifying the facts in issue, but also an agreed document identifying the issues of fact and law I must decide. That statement of issues includes the following:
Boral and Windows' systems and controls
2. What were Windows' systems and controls, and Boral's systems and controls insofar as they related to Windows, during 21 November 2016 to 10 February 2020?
3. During the Relevant Period:
(a) Was the lack of automatic integration between the inventory systems and the accounting systems unreasonable and inadequate? If so, at what point in time?
(b) Were certain manual controls in place regarding the inventory systems and the accounting systems unreasonable and inadequate? If so, at what point in time?
(c) Were certain controls in place relating to journal entries in the accounting systems used within the Windows business unreasonable and inadequate? If so, at what point in time?
(d) Were the "accountability mechanisms" in relation to Windows, relating to shared services, formal policies and procedures, and fraud reporting, unreasonable and inadequate? If so, at what point in time?
4. If the systems were unreasonable or inadequate, what were the potential consequences (if any) of Boral (including Windows) maintaining systems and controls of the kind that it did during the Relevant Period as at the dates identified in answer to question 3?
70 Apart from the termination date of the relevant period, matters have not been refined by the way the case has been opened. In particular, Boral has not taken the step of confining its case (as it might have done) and running the trial on the basis that it admits that information as to inadequate systems and controls existed (and it was information of which officers ought to have been aware), but that the applicants case simply goes nowhere because this information (as to a minor part of the business of Boral) was not material. During the oral opening of Boral, which seemed to be heavily focussed on materiality, I thought this development may be occurring, but was soon corrected. As Mr Withers explained in his opening when I enquired of Boral's case theory (T226.4-227.15):
HIS HONOUR: So you're not saying there were adequate - are you saying there were adequate controls in place during all of this period?
MR WITHERS: I most certainly am. My expert says there were adequate - - -
HIS HONOUR: Leave aside what your expert says. I'm just trying to understand what the case theory is. The - and I know this is joined on the pleading. I'm just trying to work out really what the substance of the case is…. I'm not suggesting this is a well-informed decision but I will just give you an indication. Look, at the end of the day, people recognise there was a stuff-up, but the stuff-up didn't really matter very much and, again, it - there was a real question as to whether the - how quickly the stuff-up should have been identified and should have been escalated by people who would be aware of it. That's really the answer to this claim.
But you're - putting it bluntly, your case goes beyond that to say, "Well, notwithstanding what they said at the time when this was all revealed, and the admissions that have been made in that regard, there wasn't a stuff-up. It is all tickety boo."
MR WITHERS: No. There was a stuff-up insofar as two people colluded and manipulated - - -
HIS HONOUR: No. There were things that happened which ought not to have happened but all the systems and controls were in place at the time. That could reasonably have been placed - reasonably be in place at the time. No one can be perfect, no control is perfect, and this is something which was never going to be detected, even with adequate controls, etcetera. I understood that case was pleaded. But how does that sit happily with what your people said at the time, you know, when we get to the end of the relevant period of the mea culpas?
MR WITHERS: What they said at the time in the - some of the materials you were shown this afternoon was there were two people who engaged in collusion
HIS HONOUR: No. They went further than that.
MR WITHERS: Well, one has to be a bit careful about using after the event analysis from people who aren't actually necessarily qualified to express an opinion on whether a control was inadequate or not.
HIS HONOUR: No. I understand that. That's why I say - I'm not suggesting for a moment whether or not that's a good argument or a bad argument. I was just giving you an indication of where I thought the real core of this dispute was in this case.
MR WITHERS: Yes.
HIS HONOUR:… - and I don't know enough about the underlying facts to express an informed view. But I had thought that there was sort of a corporate recognition that there had been a failure. It's just that it was not - it was an explicable failure on one level because of, you know, the nature of these businesses and the very small - the very small component of the business that was affected and, in any event, who cares because it wasn't particularly material.
MR WITHERS: Well, that's a very good summary, with respect, what your Honour just said about what the real issue is in the case but I'm still having to meet a case that said you had unreasonable and inadequate systems in place and you should have disclosed that from 30 August 2017.
HIS HONOUR: No. I understand.
71 Hence it is clear that the present facts in issue include whether Windows had inadequate systems and controls, and whether those within Boral (including Messrs Kane, Mariner and Post) ought to have been aware of those inadequate systems and controls and whether there had been financial manipulation and misreporting within Windows.
Ex A1
72 There is no issue as to the authenticity of Ex A1, being the document containing the relevant communication and other representations, and there is no ground of objection to the document being received into evidence as part of the applicants' case in chief other than as to a want of relevance.
73 Boral places great emphasis upon the fact that the relevant communication was made on 25 January 2020 and the contravening conduct is alleged to have ceased on 5 December 2019. But this cannot mean the relevant communication (and other representations within Ex A1) are not relevant within the meaning of ss 55 and 56 of the EA.
74 It is beyond serious disputation that Mr Kane reviewed and considered some representations from EY during the period of contravening conduct, including immediately before Boral made the December Announcement to the ASX (T462.12-13, 467.7-469.22). To repeat, A&B had engaged EY on 11 November 2019 to investigate financial irregularities that had occurred within the Windows business. Mr Kane's contemporaneous state of mind as to whether "controls were as bad as EY suggests" and his understanding of what was known, or ought to be known, as to financial manipulation and misreporting within Windows at any time prior to, and contemporaneously with, the December Announcement is plainly relevant. Similarly, given the evidence he has now given on oath at trial in support of Boral's case as to the adequacy of the controls that were put in place, his apparently contemporaneous understanding of EY's characterisation of the controls, which then led Mr Kane to query whether Boral's auditor, KPMG, its internal audit team and others within Boral should have picked up the difficulty could rationally affect (directly or indirectly) the assessment of the cogency of his evidence at trial that he believed (and believes) that sufficient controls were in place. In this way it may bear upon the plausibility of what Mr Kane has said about his state of mind as to the adequacy of controls and, at the very least, given the receipt and consideration of the representations of EY, may provide some relevant context.
75 Further, as the applicants submit, the representations within Ex A1 from Mr Kane to Mr Mariner referring to the "Magnolia letter" (which is evidently a reference to Mr Tinkey's letter of resignation in which he alleges that there had been financial manipulation and misreporting within Windows by Mr Phillips adjusting the books) as a "missed opportunity" is relevant to an issue in the proceeding.
76 The above deals sufficiently with Boral's four points but for completeness it can be further observed that:
(1) although there is expert evidence about systems and controls, this does not mean other evidence, which could bear upon or be used to challenge evidence given as to the contemporaneous understanding of an officer of Boral, is irrelevant, and to dismiss Mr Kane's understanding of what was said by EY as being "hindsight material" is incomplete given the nature of the representations contained in Ex A1 as explained above and, in any event, is not determinative of the question of relevance;
(2) there is no point going to procedural fairness in the tender of Ex A1; the present issue is not one of pleading or particulars but of the relevance of representations in Ex A1 to a fact in issue;
(3) the narrow approach taken by Boral as to relevance is well illustrated by its submission (T578.31-37) that Ex A1 is irrelevant "[b]ecause it is hard to imagine a scenario where your Honour says 'I find that controls are bad because EY found the controls are bad'. Very hard to imagine that". But contrary to the notion implicit in this submission, the truth of the relevant communication does not need to be accepted (or even be considered to be of real weight) for it to be relevant and its weight and its assessment, in the light of all other evidence, is an entirely different matter; and
(4) the conclusion as to relevance is hardly surprising given that it ought not be forgotten that Boral itself discovered the document that has become Ex A1 because it formed the view, conscientiously and on the basis of advice given to it during the course of preparing a list of documents pursuant to an order of the Court, that Ex A1 was a document that is "directly relevant to the issues raised by the pleadings" (see r 20.14(1)(a)).
Proposed Kane Evidence
77 As I noted during oral submissions, attempting to rule on the relevance of what might be described as a "line of questioning" before specific questions have been asked is fraught with difficulty. To the extent the Proposed Kane Evidence can be anticipated, I deal with it (in the context of the Abuse of Process Contention at Section L below).