Plaintiffs v Defendants

ESTOPPEL BY CONVENTION - Alternatively to implied supply agreement - Whether during negotiations for Asset Sale Deed, Purchaser and parent company of Vendor adopted the assumption that the effect of the Deed would be that parent company of Vendor would be bound by cl 12.2 obligation - Whether Purchaser and parent company of Vendor conducted their relationship on the basis of such mutual assumption - Whether parent company of Vendor is estopped from denying it was bound by terms equivalent to those alleged in the implied supply agreement.

CONTRACT - Deed of Accession - Novation of Vendor's rights and obligations under Asset Sale Deed to parent company of Vendor - Whether parent company of Vendor breached cl 12.2 obligation to obtain 'all its' supplies of finished products from Purchaser.

CONTRACT - Asset Sale Deed - Deed contained clause that Purchaser may not permit, allow or suffer a change in its control or the control of another party without first obtaining written consent of Vendor (cl 16.4) - Relevant concept of 'change of control' - Whether Purchaser breached cl 16.4 - Rights available to Vendor in the event that the Purchaser is found to have breached cl 16.4 - s 50AA Corporations Act 2001 (Cth).

ANSHUN ESTOPPEL - Asset Sale Deed - Whether Anshun estoppel operates to preclude Vendor and parent company of Vendor from claiming that the Purchaser breached cl 16.4.

CONTRACT - Asset Sale Deed - Deed contained indemnity clause (cl 11.3) whereby the indemnifier agreed to indemnify the Vendor in respect of all 'Claims' - Construction of 'Claims' - Whether 'Claims' means third party claims.

CONTRACT - Fixed and floating charge - Chargor granted fixed and floating charge to secure payment of the 'Secured Money' - What amounts and liabilities are captured by 'Secured Money' - Whether Chargor made a valid and effective tender under the charge - In what circumstances is the Chargor entitled to a discharge of the charge - Whether interest is payable.

For the Plaintiffs by Counterclaim and Defendants by Cross-Claim

For the Defendants by Counterclaim and Plaintiff by Cross-Claim

1 This proceeding, involving the trial of a counterclaim and cross-claim, forms part of a suite of litigation that was commenced several years ago between Amcor Limited ('Amcor') and several related companies on the one hand and a number of former Amcor executives and their associated corporate entities on the other. Two proceedings, known as 'the Hodgson proceeding'[1] and 'the Barnes proceeding'[2] respectively, were heard concurrently in a joint trial on questions of liability that took place before Vickery J in 2011 (the 'principal proceeding').

2 Relevantly, both the present counterclaim and the cross-claim are brought in the Barnes' proceeding. The counterclaim is brought by the fourth defendant, Australian Corrugated Box Co Pty Ltd (formerly Achilla Pty Ltd) (referred to throughout as 'Achilla'), a corporate entity associated with Mr Craig Holihan (a former Amcor executive and the second defendant in the Barnes' proceeding), and another entity associated with him, ACB Australia Pty Ltd ('ACB Co Purchaser'), against two Amcor entities, Orora Limited (formerly Amcor Packaging (Australia) Pty Ltd) (referred to throughout as 'APA') and ACN002693843 Box Pty Ltd ('ACB Co Vendor'). The cross-claim is brought by APA against Achilla, ACB Co Purchaser and Mr Holihan. For convenience, throughout these reasons I will adopt the descriptions the parties used when referring to themselves, and generally refer to them as 'the Amcor parties' and 'the Holihan parties' respectively.

3 The matters raised in the counterclaim and cross-claim have their genesis in the sale by the Amcor parties of two businesses. The first, the 'Service Packaging Business', was sold in February 2002 (and was the subject of the 'First Sale Agreement'). The second, the 'ACB Business', was sold in 2003 (and was the subject of the 'Second Sale Agreement'). Events concerning or arising from the sale of the ACB Business are the focus of both the counterclaim and the cross-claim.

4 At all relevant times, APA, a wholly-owned subsidiary of Amcor, was the corporate vehicle for conducting the Australasian corrugated packaging operations of Amcor. One of the divisions of APA was called 'Amcor Fibre Packaging Australasia' ('AFP'), which produced and supplied corrugated cardboard packaging products. APA was also the sole shareholder of ACB Co Vendor.

5 Prior to the sale, ACB Co Vendor owned and operated an 'in-house', 'short-run' manufacturing operation or 'specialty' packaging business. The business, which was known as the 'ACB Business', operated from large factory premises at Wetherill Park in Western Sydney. The ACB Business produced and supplied packaging products made from corrugated cardboard sheets, usually in the form of customised packaging or non-standard boxes, and the business obtained its supplies of corrugated cardboard sheets from the AFP plants at Revesby and Smithfield in New South Wales. The ACB business catered mainly for smaller customers, or large customers who had specialised box requirements where the quantity of the product required was too small for them to be produced economically in large-scale production facilities, or was 'fiddly work' that would cause bottlenecks in a higher-speed, lower-cost production plant.

6 Before the sale, the largest part of the work undertaken by the ACB Business was in performing what was referred to as 'outside manufacturing enterprise' ('OME') work for customers of the AFP division. The ACB Business also did a limited amount of work for other non-AFP customers. Within Amcor, the outside manufacturing work that was sourced from a third party was referred to as 'OME work' and the third parties that supplied it, were referred to as 'OMEs'. However, the work that the ACB Business did for AFP or for customers of AFP was also referred to as 'OME work', even though it was done 'in-house' by an Amcor business. Relevantly, before the sale took place, there were at least eight alternative suppliers (or OMEs) who performed OME work for AFP or for customers of AFP.

7 During the 2001/2002 financial year Amcor was considering the fate of the ACB Business after internal reviews had shown it to be an underperforming business in terms of its 'return on funds employed' benchmark. At that time, Mr Craig Holihan, who was then employed as the general manager of the ACB Business, and reporting to Mr Trevor Barnes,[3] expressed interest in purchasing the ACB Business if it were to be closed down. Mr Barnes communicated Mr Holihan's interest to Mr Hodgson, whom he reported to, and in about mid-2002, Mr Hodgson spoke to his superior, Mr Peter Brown, the managing director of Amcor Australasia,[4] about Mr Holihan's interest. Mr Brown said that if Mr Holihan put in a proposal, they would look at it. Encouraged by that indication, Mr Holihan put forward a proposal, and in late 2002 and early 2003, negotiations took place which culminated in the sale of the ACB Business to Mr Holihan.

8 The sale of the ACB Business to Mr Holihan (and corporate entities associated with him) was effected by an Asset Sale Deed executed on 2 June 2003 between ACB Co Vendor and the Holihan entities (ACB Co Purchaser, Achilla and Mr Holihan), for a base purchase price of $1 million (plus stock) payable by instalments within five years of completion (the 'Second Sale Agreement'). As part of those arrangements, ACB Co Purchaser also granted a charge to APA and ACB Co Vendor, by way of security, and Achilla undertook to enter into a sub-lease with APA of the factory premises at Wetherill Park where the business was conducted.

9 An important feature of the Second Sale Agreement was clause 12, which entrenched counterpart obligations between the parties concerning the supply/purchase of raw materials on the one hand and the purchase/supply of finished products on the other, in each case for a period of five years. Under clause 12:

(a) the Vendor undertook to continue to supply the ACB Business (under the new ownership) with supplies of raw materials at prices based on 'D & D' (direct and distribution) costs to the Vendor, and the ACB Business would obtain all such supplies from the Vendor, save in the case of products the ACB Business manufactures for itself, and it would not, during that period, purchase or procure the supply of raw materials from any other party, other than due to the Vendor's inability 'to supply consistently and on a basis which is commercial and reasonably acceptable in terms of price, quality and availability'; and

(b) Achilla (as the trading entity of the ACB Business under new ownership) undertook to supply products to the Vendor at prices based on 'D & D' costs to Achilla, and the Vendor would obtain all its OME supplies of products from Achilla, and would not during that period purchase or procure the supply of products from any other party other than due to Achilla's inability 'to supply consistently and on a basis which is commercial and reasonably acceptable in terms of price, quality and availability.'

10 On 30 July 2003 or thereabouts, most of the assets of the ACB Business were transferred by ACB Co Vendor to ACB Co Purchaser, and Achilla (as the trading entity) began to operate the ACB Business using those assets. For the first year or so after the sale, the arrangement seemed to be working well. But in late 2004, Amcor became aware for the first time of secret arrangements apparently in place between Mr Holihan and other former executives of Amcor or former senior managers of Amcor's AFP corrugating division, namely Messrs James Hodgson, Trevor Barnes, Ian Sangster, Roger Bayley and Albert Mihelic, whereby they had agreed to take a stake in the ACB Business. Thereafter, the business relationship became disharmonious, and in the years that followed, the amount of work performed by the ACB Business for the Amcor parties decreased, and OME work continued to be given to at least eight alternative suppliers.

11 In March 2005, the Amcor parties made arrangements with the Holihan parties for APA to effectively 'step into the shoes of' ACB Co Vendor for the purposes of the Second Sale Agreement. To facilitate that course, the parties to the Second Sale Agreement, namely ACB Co Vendor, ACB Co Purchaser, Achilla and Mr Holihan, entered into a 'Deed of Accession' with APA (as transferee). The Deed of Accession provided for the novation of the rights, covenants, undertakings and obligations of ACB Co Vendor as Vendor under the Second Sale Agreement on terms that APA be substituted for ACB Co Vendor in all capacities and for all purposes under the Second Sale Agreement, with effect on and from 21 March 2005, and that ACB Co Vendor be released. Accordingly, by virtue of the Deed of Accession, with effect from 21 March 2005, APA became bound to 'observe, perform, be bound by and comply with' the provisions of the Second Sale Agreement binding on the Vendor, and 'shall enjoy the rights and benefits of the Vendor' thereunder.

12 In July 2008, the Second Sale Agreement came to an end by effluxion of time and the arrangements were not renewed. Towards the end of the five year term, a dispute arose between the parties concerning the payment of the final instalment of purchase price that was due on 31 July 2008, with the result that payment was not effected and so the charge remains on foot.

13 In their counterclaim, the Holihan parties seek damages for alleged breaches of the supply arrangements in place between the parties as part of the sale of the ACB Business.[5] They also seek a discharge of the charge that was entered into contemporaneously with the sale, and to recover amounts that they contend Achilla was overcharged for raw materials.

14 The gist of the Holihan parties' substantive case on the counterclaim is that it was a breach of contract for the Amcor parties to send OME work to the eight alternative suppliers during the five year term of the agreement. They claim that there were 1,913 jobs that were sent by the Amcor parties (including the division of APA known as 'Amcor Displays') to suppliers other than Achilla, and they now seek to recover the profit that they say Achilla was entitled to make on that work. The breach of contract contended for, however, is not pleaded as a breach of the Second Sale Agreement. Rather the Holihan parties plead there was a breach of an 'implied supply agreement', the terms of which they say were identical to clause 12 of the Second Sale Agreement, save that under the implied supply agreement, APA had the rights and obligations that ACB Co Vendor had under clause 12 of the Second Sale Agreement.[6]

15 In essence, the Holihan parties maintain that the written terms of the Second Sale Agreement failed to embody the supply agreement that all of the parties understood they had entered into, or the arrangements that they acted upon. The Holihan parties contend that the facts demonstrate that the parties always intended APA to be the counterparty to the supply obligations embodied in clause 12, and that throughout the negotiations that culminated in the Second Sale Agreement, the role of APA (and the AFP division) as the party bound by the supply obligations was taken for granted by those doing the negotiating. Further, they say, unless construed and interpreted in that way, the arrangements would have made no commercial sense. That is because, under the Second Sale Agreement, ACB Co Vendor had sold all of its assets and terminated all of its employees, such that following the sale, it was unlikely to have any OME requirements, nor any capacity to supply raw materials to Achilla. In those circumstances, the Holihan parties contend that the law (via an implied contract, or an estoppel to like effect) recognises a contract between Achilla and APA effectively in the same terms as the purchase obligation[7] and the sale obligation[8] set out in clause 12 of the Second Sale Agreement.

16 The Amcor parties respond by contending that the Second Sale Agreement represents the entirety of the agreement reached between the parties, and that APA did not become a party to, or bound by, the Second Sale Agreement until the Deed of Accession was executed. They submit that, absent a claim for rectification, the alleged un-commerciality of the Second Sale Agreement and the alleged post-contractual conduct have no traction in the face of the clear terms of the Second Sale Agreement. Further, they say pre-contractual negotiations cannot support an estoppel by convention that is inconsistent with the terms of a written contract.

17 The Amcor parties also refute the Holihan parties' claim that under the Second Sale Agreement the ACB Business was entitled to perform all of the OME work requirements of the business known as 'Amcor Displays'. They contend that Amcor Displays was distinct from the business operated by ACB Co Vendor prior to entry into the Second Sale Agreement, and that Amcor Displays' OME work requirements were not encompassed within the supply obligations under clause 12 of the Second Sale Agreement.

18 In respect of the Holihan parties' claim that APA charged Achilla prices that were higher than it was entitled to charge under the contractual 'D & D' formula, the Amcor parties admit there was some overcharging but say that it is not established in every instance alleged. In those cases where there was overcharging, the Amcor parties say that Achilla avoided any loss by passing on those overcharges to its customers by pricing its own products based on the prices Achilla was charged by APA. Further, the Amcor parties submit that in the process of investigating Achilla's claims of overcharging, several instances of undercharging by APA have been revealed which they effectively seek to set-off against any amount found due to Achilla.

19 As to the charge given by Achilla in favour of ACB Co Vendor and APA, the Holihan parties contend that they offered to pay the final instalment of $300,000 well in advance of the due date, and sought a release of the charge. The Amcor parties refused to accept the Holihan parties' tender in circumstances where there was litigation on foot between them and, in their view, no basis upon which the charge should be released. In effect they submit that there was no obligation upon them to discharge the charge because, at all material times, it operated to secure moneys potentially owed to the Amcor parties by ACB Co Purchaser as a result of the litigation Amcor had commenced against its former executives.

20 The Amcor parties, by their cross-claim, seek damages for alleged breaches of a change of control provision set out in clause 16.4 of the Second Sale Agreement. Clause 16.4(i) provided that '[t]he provisions of this clause 16.4 apply only for so long as the Charge remains in force or is not discharged.' The relevant concept of 'control' for the purposes of the Second Sale Agreement is one defined by reference to section 50AA of the Corporations Act 2001 (Cth).

21 The Amcor parties submit, by reference to facts as found by Vickery J in the principal proceeding, that there was a change of control of ACB Co Purchaser and/or Achilla in both May/June 2004 and in October 2005, which ACB Co Purchaser 'permit[ted], allow[ed] or suffer[ed]' without first informing ACB Co Vendor or APA and obtaining their consent, in breach of clause 16.4. They submit that the evidence shows that at each alleged change of control, ACB Co Vendor and/or APA would have terminated the clause 12 supply agreement in accordance with clause 16.1, or in reliance upon its rights at general law. Accordingly, the Amcor parties contend that had ACB Co Vendor or APA not been deprived of the opportunity to terminate the supply agreement at or about the date of the relevant change of control, any alleged breaches of contract by them after that date would not have occurred.

22 The Amcor parties also dispute the Holihan parties' contention that clause 16.4(ii) of the Second Sale Agreement operated in any way to fetter the right to terminate the supply obligation found in clause 16.1 or under the general law. Rather, they submit that clause 16.4(ii) provides ACB Co Vendor (and APA, following entry into the Deed of Accession) with an alternative and more expansive option in the event of breach.

23 The Holihan parties deny that there was any change of control of ACB Co Purchaser or Achilla in May/June 2004 or in October 2005. They submit that when the whole of the evidence, including the findings made by Vickery J, is examined, it is clear that none of Messrs Barnes, Hodgson, Bayley, Mihelic or Sangster was ever in a position to exercise the degree of practical influence necessary to establish that a change of control had occurred. But if, contrary to their submission, the Court finds that there was a change of control, they submit it was not 'permit[ted], allow[ed] or suffer[ed]' by ACB Co Purchaser because in the circumstances alleged, ACB Co Purchaser had no ability to prevent it. Further, if the Court finds, contrary to their submission, that ACB Co Purchaser had 'permit[ted], allow[ed] or suffer[ed]' a change of control, the Holihan parties contend that APA would not have issued a cure notice, but even if it had, Achilla would have paid out the purchase price, thereby denuding the charge of any operative force and effectively denying APA any ability to terminate for breach under clause 16.4.

24 The Holihan parties also take issue with the loss claimed by APA in that it includes the loss of the chance to terminate the employment of Messrs Barnes, Hodgson, Mihelic, Bayley and Sangster and thereby avoid payments made to them in 2004.

The counterclaim was scheduled to be heard as part of the trial of the principal proceeding but was not reached

25 When the trial of the principal proceeding commenced before Vickery J on 30 March 2011, it was scheduled to include the hearing (on 25 and 26 July 2011) of the counterclaim brought by Mr Holihan and the corporate entities associated with him ('the Achilla counterclaim'). On 29 June 2011, however, the dates for the hearing of the Achilla counterclaim were vacated - apparently due to a shortage of time - and it was adjourned sine die.[9]

26 The gist of the Amcor case that was run against Mr Barnes and the Holihan parties at the trial before Vickery J was that they participated in the sale of the two businesses, the Service Packaging Business and the ACB Business, 'in circumstances which amounted to a breach of their statutory and fiduciary duties to Amcor which, by reason of the sale 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".'[10]

Following the delivery of judgment in the principal proceeding, the Holihan parties made substantial amendments to their counterclaim and the Amcor parties commenced a cross-claim

27 Justice Vickery delivered judgment in the principal proceeding on 20 March 2012 ('the principal judgment').[11] Following delivery of the principal judgment, further interlocutory steps were undertaken by the parties, including by way of substantial amendment of both the Achilla counterclaim and the Amcor defence to counterclaim. Also, Amcor subsequently sought and obtained (in September 2013) leave to bring their 'change of control' cross-claim against the Holihan parties, the substance of which is set out above.

28 As a result, new pleas have been added that were not present when the principal proceeding was heard and determined. Furthermore, with the separation of the hearing of the Achilla counterclaim and the associated Amcor cross-claim from the trial of the principal proceeding, and the introduction of fresh claims, the Court has now heard a substantial body of evidence that is additional to the evidence that was adduced before Vickery J, but in circumstances where much of the relevant background to the entry into the sale agreements and the arrangements in place between the former executives has already been the subject of findings made by his Honour on the basis of the evidence adduced before him. Not surprisingly, this situation has given rise to questions of issue estoppel and Anshun estoppel in the context of the current hearing.

29 The Holihan parties also pointed to a further complication in this regard, arising from the fact that after the delivery of the principal judgment, when dealing with a claim for an account of profits sought by Amcor, his Honour appeared to 're-visit' or comment upon some of the findings he had made in the principal judgment. This took place in a context where, following the trial on liability and delivery of the principal judgment, Amcor sought leave to amend its pleadings by making fresh claims against each of Mr Barnes and Mr Holihan personally for an account of profits, based on findings made in the principal judgment. Vickery J refused Amcor's application for leave to make the proposed amendments. In his ruling, delivered on 20 September 2012,[12] his Honour noted that the pecuniary relief sought by Amcor against each of Mr Barnes and Mr Holihan in the Third Amended Statement of Claim upon which the trial was conducted 'comprised damages, further or alternatively equitable compensation and interest' and did not seek an account of profits. Relevantly, in the context of the claims made against Mr Holihan, Vickery J observed:

[128] Again, in the Principal Judgment 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'.

[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.[13]

[142] I am satisfied that the findings in the Principal Judgment made against Barnes and Holihan which went beyond the case advanced by Amcor at trial and which now provide content for the new allegations in the proposed Fourth Amended Statement of Claim, should not provide the foundation for any relief granted to Amcor.

[143] There should be no order directed to Barnes or Holihan or Holihan's companies for relief by way of an account of profits or otherwise based upon these findings.[14]

Issues for determination at the trial of the Achilla counterclaim and Amcor cross-claim

31 On 13 March 2015, Vickery J made orders in preparation for the trial of the Achilla counterclaim and Amcor parties' cross-claim, including an order that 'pursuant to section 50 of the Civil Procedure Act 2010, the trial of the proceeding be conducted by reference to the statement of issues annexed to this order.' The annexed 'Joint Statement of Issues' set out a summary of the issues that the parties consider to arise from the pleadings. This document was amended by the parties from time to time, in consultation with one another, during the course of the trial.

32 In its final iteration, the Joint Statement of Issues occupied 8 pages, and the twenty or so issues were identified and arranged under the following headings:

1. Issues arising on the Counterclaim regarding the Supply Agreement (Issues 1A, 1B, 1-7).
2. Issues arising on the Counterclaim regarding the Charge (Issues 8-13).

1. Issues arising on the Cross-Claim (Issues 14-18).

1. Liability of Holihan, Achilla and ACB Co Purchaser (Issues 19-20).

33 The parties identified and listed the 'key issues' in dispute, as follows:

1. Was there an Implied Supply Agreement between APA and Achilla containing terms identical to clause 12 of the Second Sale Agreement, or is APA estopped from denying that it was bound by terms equivalent to those alleged in the implied supply agreement?
2. What is the scope of clause 12 of the Second Sale Agreement, and the equivalent clause of any implied supply agreement?
3. Did APA breach the Second Sale Agreement or any implied supply agreement, and if so how is any loss suffered by Achilla to be quantified?
4. What is the scope and effect of APA's alleged overcharging and undercharging of Achilla?
5. What is the scope and effect of the Charge, what if any amount remains secured by it, is ACB Co Purchaser entitled to a discharge of it, and if so on what conditions?
6. Did ACB Co Purchaser breach the Second Sale Agreement or any implied supply agreement by reason of a change of control, and if so, what is the effect of that breach and what, if any, liability for it is borne by ACB Co Purchaser, Achilla and/or Mr Holihan?

The hearing of the counterclaim and the cross-claim

34 The hearing of the Achilla counterclaim and the Amcor parties' cross-claim proceeded against that background. The Holihan parties were represented by Mr Maiden and Ms Murphy, instructed by Mills Oakley, and the Amcor parties were represented by Dr McNicol QC and Mr Tran, instructed by Gilbert + Tobin. During the hearing, Counsel for the respective parties pointed to passages in the principal judgment and other interlocutory rulings and decisions of both Vickery J and the Court of Appeal that they sought to rely upon, often contending that they were findings that gave rise to an issue estoppel or Anshun estoppel. Written submissions were filed by the parties addressing the paragraphs of the various judgments which they contended gave rise to an issue estoppel, and oral submissions were made, as and when required, by Counsel for the respective parties. The Holihan parties also stated formally that, for the purposes of narrowing the issues in dispute on the cross-claim, and without prejudice to their rights to challenge the findings on appeal, there were (identified) paragraphs of the principal judgment to which no objection is made and they would not object to the Amcor parties relying on the findings made by Vickery J at paragraphs [1087], [1088], [1147] and [1149] of the principal judgment.[15]

35 Save in respect of some discrete paragraphs said to be relevant to the Amcor parties' cross-claim, which the Court ruled did give rise to an issue estoppel (see below under 'change of control'), the general approach adopted by the Court for the purposes of the trial of the counterclaim and cross-claim was that the Court would have regard to the findings made by Vickery J as relevant background but not treat them as determinative of the issues before the Court on the hearing of the counterclaim and cross-claim.

Factual background to the asset sale transactions as found by Vickery J

36 Before turning to consider the host of issues formulated in respect of the counterclaim and cross-claim, it is convenient to set out in a summary way the factual background to the two asset sale transactions, namely the sale of assets of the Service Packaging Business (the First Sale Agreement) and of the ACB Business (the Second Sale Agreement), as described by Vickery J in the principal judgment.

37 Amcor is a publicly-listed multinational packaging company. Its Australian operations comprise six discrete operating businesses - Corrugating/AFPA, Metals, Plastics, Cartons & Sacks, Paper and Glass - which are conducted through a number of divisions, and a group of corporate entities. Amcor's corrugated packaging business, which focussed on the manufacture of cardboard corrugated products, principally cardboard boxes, was the largest division in Australasia. It had its head office in Melbourne and operated 14 corrugated box plants throughout Australia and New Zealand.

38 At all relevant times, APA was the corporate vehicle for conducting the Australasian corrugated packaging operations of Amcor, with a division - AFP - that produced and supplied corrugated cardboard packaging products. Relevantly, APA trades as Amcor Fibre Packaging Australasia ('Corrugating/AFPA').

39 Relevantly, APA was the parent company of, and owned all of the issued shares in:

(a) Specialty Packaging Group Pty Ltd. (formerly Service Containers Pty Ltd (ACN 005 319 666) ('Service Containers') - the vendor of the assets of the Service Packaging Business on the terms of the First Sale Agreement.

(b) ACN 002693843 Box Pty Ltd (formerly Australian Corrugated Box Co Pty Ltd) (i.e., ACB Co Vendor) - the vendor of the assets of the ACB Business on the terms of the Second Sale Agreement.

40 Amcor holds all of the issued shares in APA and was relevantly the ultimate holding company of each of ACB Co Vendor and Service Containers.

• Mr Colin Clayton - Director from February 1998 to July 2008 and Secretary from October 1995 to July 2008;
• Mr Peter Brown - Director from November 1998 to September 2003;
• Mr Peter Reichler (from November 1998 to January 2003)
• Mr Louis Lachal - Director from July 2000 to January 2008;
• Mr John Crawford (from January 2003 to July 2004); and
• Mr Ian Lewis - Director from August 2004 to December 2013 and Secretary from July 1999 to December 2013.

Neither Mr Holihan nor any of the other former executives that were named as defendants (namely Messrs Barnes, Hodgson, Sangster, Bayley and Mihelic) was a director of APA.

42 APA's Corrugating operations (i.e., 'Corrugating/AFPA') comprised several departments: Sales and Marketing, Operations, Commercial, New Zealand Box, Packaging Solutions, and Human Resources. The principal business activity conducted was the production of corrugated cardboard products, including cardboard boxes and the like. Mr Hodgson was the Group General Manager of Corrugating/AFPA. He reported to the managing director of Amcor Australia, Mr Peter Brown, who in turn reported to the CEO and Managing Director of Amcor, Mr Russell Jones. Several of the other defendants in the principal proceeding were departmental general managers of Corrugating/AFPA, as follows:

(a) Mr Sangster (based in Queensland) - Sales and Marketing;

(b) Mr Barnes (based in New South Wales) - Operations;

(e) Mr Mihelic, General Manager, Packaging Solutions (based in Burwood).

43 In addition, Mr Clayton held the position of Group General Manager, Finance & Operations. Mr Clayton reported to Mr Brown. Mr Parker, the General Manager of the Commercial department of Corrugating/AFPA, reported directly to Mr Hodgson with an indirect line of responsibility to Mr Clayton.

44 The structure of Corrugating/AFPA at relevant times is set out in Schedule 1 to the principal judgment. For convenience, it is reproduced as Schedule 1 to these reasons.

Speciality Packaging Group Pty Ltd (formerly Service Containers Pty Ltd)

45 Prior to the sale of the Service Packaging Business to Mr Ian Hottes on 2 February 2002, that business formed part of the Corrugating/AFPA division and was conducted by Service Containers.

46 When the First Sale Agreement with Mr Hottes was entered into, the directors of Service Containers were Mr Clayton (from April 2001 to July 2008), Mr Hodgson (from August 2001 to November 2004), Mr Brown (from February 1996 to September 2003), and Mr Lachal (from April 2001 to July 2008). Mr Lewis was the secretary from December 2001 [to the present].

47 Apart from Mr Hodgson, neither Mr Holihan nor any of the other former executives named as defendants to the principal proceeding was a director of Service Containers.

48 Prior to the sale, Service Containers conducted two businesses: Amcor Displays, a graphics and displays business, and the Service Packaging Business. Each of the businesses was situated in NSW.

49 Mr Hottes managed both the Service Packaging Business and Amcor Displays at premises situated in Revesby, New South Wales, and from 10 January 2000, he reported to Mr Barnes.

50 Justice Vickery described the two businesses as follows:

[46] Amcor Displays was a graphics and displays business.

[47] The Service Packaging Business had two discrete aspects to its business operations. First, it received orders from its customers for the supply of finished corrugated products and corrugated boxes. It sourced its supply of corrugated cardboard from Amcor's corrugated packaging division. It charged a premium on the cost of supply to it by Amcor. Second, it brokered the sale to its customers of a range of plastic wraps, tapes, stock boxes and general packaging which Amcor did not manufacture and which the Service Packaging Business sourced externally.

[48] The Displays Business was profitable, however the Service Packaging Business was not. The turnover of the Service Packaging Business in or about February 2002 was approximately $3.0 million. This was less than 0.5% of Corrugating's Australasian turnover of about $900 million. It had trading stock of approximately $400,000 and book assets of about $80,000 representing less than 0.1% of Corrugating's assets. It had three employees, not including Hottes. It was a non-core and underperforming business for Amcor. [16]

51 Mr Hottes controlled Service Packaging Pty Ltd, the corporate vehicle named as purchaser of the assets of the Service Packaging Business. In April 2001 Mr Hottes was diagnosed with cancer and he had major surgery in May 2001. He recovered sufficiently to return to work in late 2001, however, the cancer returned in mid-2003 and he became very sick and was hospitalized for 55 days and on life support. From mid-2003 until his death, Mr Hottes rarely attended work. Throughout this period Ms Dettmar, who had been the business manager of the Service Packaging Business since 1996, continued to manage the business.

52 In 2003, given the infirmity of Mr Hottes, his wife, Mrs Marlene Hottes, was made a director of Service Packaging Pty Ltd. Mr Hottes died on 5 August 2004.

53 Prior to the sale of the ACB Business to the Holihan parties in June 2003, ACB Co Vendor conducted the ACB Business as part of the Corrugating/AFPA division. Prior to the sale, Mr Holihan was the General Manager of the ACB Business. He reported to Mr Barnes, who was the General Manager Central Region, at least until November 2002. Mr Barnes in turn reported to Mr Hodgson, the Group General Manager, AFPA/Corrugating.

54 Neither Mr Holihan, nor any of the other the former executives named as defendants in the principal proceeding, was a director of ACB Co Vendor.

55 Mr Barnes was the first defendant in the Barnes Proceeding. He was employed by Amcor from January 1998 until he resigned on 28 September 2004, with effect on 28 October 2004. Vickery J found that during the period of his employment with Amcor, Mr Barnes held the following management roles:

(a) from January 1998 until early 1999 he was employed as a Site Manager, Amcor Fibre Packaging (New South Wales) for the Smithfield site;

(b) from early 1999 until 1 January 2000 he was employed as General Manager Operations AFP (New South Wales), reporting to David Ley;

(c) from 1 January 2000 until June 2000, he was employed as Regional General Manager, AFP (New South Wales), reporting to John Morriss and, from February 2000, to Mr Hodgson;

(d) from June 2000 until November 2002, he was General Manager, AFP, Central Region, reporting to Mr Hodgson;

(e) from July 2002 until his resignation in September 2004, he was employed as General Manager Australian Operations (a position held concurrently with his management of the Central Region until November 2002), also reporting to Mr Hodgson; and

(f) in January 2003 he was additionally appointed to the role of project director supervising a large team of implementation consultants.[17]

56 Thus, from February 2000 until his resignation in September 2004, Mr Barnes reported to Mr Hodgson.[18]

57 Mr Holihan was employed by Amcor from December 1988 until his resignation on 30 July 2003. Whilst employed with Amcor, Mr Holihan undertook the following management roles:

(a) from 4 December 1998 until 13 October 2000, he was employed as Southern Region Specialty Packaging Manager, reporting to Mr Morriss; and

(b) from 13 October 2000 until the sale of the ACB Business and the corresponding cessation of Mr Holihan's employment, he was employed as General Manager-Small Businesses, NSW, reporting to Mr Barnes. Shortly after Mr Holihan took over the General Manager role, he also took over the role as site manager of the ACB Business.

58 Justice Vickery found that Mr Holihan's employment with Amcor and its subsidiaries ended when his trading company, Achilla, began to trade with Amcor on 31 July 2003 in accordance with the terms of the Second Sale Agreement executed on 2 June 2003.[19]

59 ACB Co Purchaser was registered by Mr Holihan on 23 April 2003 for the purpose of holding the assets of the ACB Business that were purchased from Amcor pursuant to the Second Sale Agreement. Upon registration, and at all material times thereafter, Mr Holihan was the sole director and secretary of ACB Co Purchaser. Mr Holihan held the one ordinary share of ACB Co Purchaser that was issued in that company on registration. On 5 September 2003 a further 999 shares were issued to LeoRose Pty Limited ('LeoRose') and the share held by Mr Holihan was transferred to LeoRose.

60 Achilla was registered by Mr Holihan on 23 April 2003 to be the trading company for the ACB Business post sale. From 1 August 2003, Achilla used the assets held by ACB Co Purchaser to conduct the ACB Business.

61 Upon registration, and at all material times thereafter, Mr Holihan was the sole director and secretary of Achilla. On registration, the one ordinary share that was issued in that company was held by Mr Holihan. This was corrected, however, on 5 September 2003 so that the one issued share was held by ACB Co Purchaser.

62 Following the sale of the ACB Business to the Holihan parties, Achilla changed its name to Australian Corrugated Box Co Pty Ltd on 2 September 2003.

63 The ACB Business is conveniently described by Vickery J in the principal judgment as follows:

The ACB Business

[247] ACB, when owned by Amcor, was an "in-house" manufacturing enterprise operation that produced customised or unusual boxes. The business catered mainly to smaller customers, or large customers who had specialised box requirements. The business supplied corrugated products where the quantity of the product was deemed to be too small, or would result in bottlenecks in a higher-speed, lower-cost production plant - such as the plants run by Amcor at Smithfield and Revesby in NSW.

[248] The ACB Business generally obtained its income in two main areas.

[249] First, ACB had its own customers who purchased packaging products directly from ACB. In this respect, ACB essentially operated as a re-seller. Products (such as cardboard) were purchased from Amcor and ACB on-sold them to customers.

[250] The second aspect of the ACB Business involved "toll processing" or "toll manufacturing" work from Amcor customers. This part of the business involved Amcor transferring cardboard to ACB for further processing on its specialised machines operated by a specialised labour force.

[251] ACB's operations continued in this way both when the business operated within the Amcor stable and after the business was sold to Holihan in 2003.

[252] ACN Box[20] owned large factory premises at Wetherill Park in Western Sydney (Wetherill Park) and the ACB Business, which operated from those premises. The Wetherill Park site had a written down value of $7,455,780 and occupied a site of 20,241 square metres and a building area of around 12,200 square metres.

[253] ACN Box usually obtained its supplies of corrugated sheet from the AFPA plants at Revesby or Smithfield in New South Wales. It also owned its own corrugator machine ('the ACB Corrugator'). The ACB Corrugator was a very large and expensive machine. It had a written down value of $4,409,738. It occupied floor space of around 2,945 square metres.

Vickery J's summary of Amcor's proposals to deal with the ACB business (late 1990's until sale to Holihan) and conclusions as to the position of the ACB Business within Amcor

64 In the principal judgment, Vickery J outlined the background to the sale of the ACB Business by Amcor, and his conclusion as to the position of the ACB Business within Amcor, as follows:

Amcor's Proposals to Deal with the ACB business (late 1990's until sale to Holihan)

[256] At all relevant times, Amcor employed a management tool which required that each of its businesses achieve a 'threshold' 15% return on funds employed ("ROFE" or the "ROFE Benchmark"). ROFE was normally calculated by taking Profit Before Interest and Tax ("PBIT"), dividing it by the amount of funds employed (normally working capital, property, plant and equipment and other items such as employee entitlements and goodwill) and multiplying by 100 to arrive at a percentage.

[257] The Amcor parties did not dispute that the aim to achieve a return on funds employed of 15 per cent was a well-known target within Amcor at the time that both the Service Packaging and the ACB Businesses were disposed of.

[258] Although the ROFE Benchmark was not a carte blanche instruction to sell non-core and non-performing businesses at any cost regardless of their strategic value, it was an important criterion against which a decision would be made as to the future of the business within Amcor.

[259] Lachal, Amcor's executive general manager at the relevant time (and later managing director of Amcor Australasia) stated that any business not of strategic significance that did not achieve the ROFE Benchmark would be subject to a 'mantra' requiring it to be fixed, closed or sold.

[260] Brown, the managing director of Amcor Australasia at the relevant time, described the ROFE Benchmark as "a very critical part of the assessment of the business".

[261] Clayton, former Group General Manager Finance & Operations, gave evidence that "fix, close or sell" was a "mindset".

[262] Historically the ACB Business did not meet the ROFE Benchmark. A series of proposals to restructure, sell or close the business were made in the five years leading up to the negotiations of the Second Sale Agreement.

[263] Commencing with a board memorandum dated 28 January 1997, Amcor's managing director Jones noted that AFPA's ROFE was 9.3%, and that its position against Visy (its major competitor) had deteriorated.

[264] In a memorandum to the board of 2 September 1997, Brown described AFPA's corrugating sites (including "Wetherill Park", which was the site of the ACB Business, and was used in Amcor documents to describe the ACB Business) as:

... old disparate factories with few common features ... the result of acquisitions of low-tech companies, taken to improve market share. They are a constant drain on funds for replacement assets and O H & S requirements.

[265] Brown proposed the closure of Wetherill Park, writing

[t]he proposed structure will result in the closure of Revesby and Wetherill Park plants. These properties could realise $16 million ...

[266] A business summary from some time in 1998 suggested that the closure of four plants was part of a broader strategy designed to increase AFPA's ROFE to 16.4%.

[267] The Amcor Board appears to have approved the proposal to close Wetherill Park. In a memorandum to the Board dated 4 December 1998, Brown wrote

In December 1997 the Board approved $101.6 million to improve the cost competitiveness of the NSW corrugated business. The approval included the construction of a Greenfield plant in the western suburbs of Sydney and reinvestment in the Smithfield plant, resulting in the closure of the Revesby and Wetherill Park sites. A short run box plant was also foreshadowed. The project was to deliver a PBIT/FE return of 15.7% with an IRR of 12.8%.

[268] On 3 April 1998, Jones presented the Board with his three year strategic plan. He forecasted that AFPA would improve its ROFE from 10.9% to 15.1%. In his closing comments, Jones wrote:

The fundamental objective of Amcor Packaging is the achievement of a minimum 15% PBIT to Funds Employed ratio. This will be achieved by:

- Disposal of non-core and non-performing businesses.

- Focus on cost reduction in Australasia ....

- Improved control of Working Capital and tight management of Capital Expenditure.

[269] Plans for Wetherill Park appear to have changed for a short period. In a Board memorandum dated 4 December 1998 it was stated:

... new management team has now re-looked at the plan to address the deficiencies in the manufacturing facilities. It has concluded that these can be substantially addressed by reinvesting in the current plants.

The proposal is to invest in the Smithfield, Revesby and Wetherill Park plants by upgrading the corrugators and installing new, or where appropriate, modernise existing converting equipment to current technological standards. A new plant specialising in short-run box production, displays and packaging sales will also be established.

[270] However, the proposal to revitalise Wetherill Park was short lived. On 31 May 1999, the Wetherill Park site manager, Mr Michael Brown, announced that increased capacity at the Revesby plant would lead to Wetherill Park being "scaled down". Seventy five jobs were shed. In cross-examination, Brown agreed that by May 1999, the prospects were that Wetherill Park was to be closed.

[271] By June 1999, AFPA's commercial staff were planning to wind up the ACB Business and transfer its staff to Amcor and its business to APA. Wetherill Park's output was in the process of being reduced and its production capacity moved to the Revesby site. In August, Brown expressed his "main interest" regarding Wetherill Park was in "quitting the site". In his view, it had "value as a superb industrial site" but "was not doing much at all".

[272] In February 2000, Mr John Morriss floated the idea of Amcor running two separate businesses from the Wetherill Park site: a sheet feeding business and a short run box business that would manufacture boxes for supply to brokers. However, it appears that Brown was not in favour of the concept. He had formed the view that the Wetherill Park site should be closed. He believed the site was "very valuable" but "was hardly being utilised at all". In Brown's view, from the year 2000, the need to close the Wetherill Park site was "pressing". Brown saw "no possibility" of ACN Box [ACB Co Vendor] continuing at the Wetherill Park site. Because the corrugators at other sites had been upgraded, in his view there was no possibility of upgrading the ACB Business to better utilise the site. His assessment was that the business was going to have to be "moved to another site, closed or sold".

[273] By the time Holihan accepted the appointment as its general manager in December 2000, the performance of the ACB Business was far below the ROFE Benchmark. In October 2000, Mr Alvarez (then AFPA's financial controller-specialty business) ("Alvarez") showed Holihan the figures of the ACB Business. The first set forecast a PBIT loss of $1,345,762 for the 2000/2001 financial year. A revised set of figures showed a projected PBIT of $265,212 for the same period, but with the business's net assets of $16,221,953, even that modest profit would have resulted in a ROFE of less than 2%.

[274] By August 2001, the entire AFPA business was forecast to deliver PBIT of $21 million against a budget of $32.8 million. This was some 35% under budget. On 13 August 2001, Brown notified businesses with major shortfalls against budget that they would be approached to develop "profit improvement plans". On 27 August 2001, he sent a memorandum to Hodgson attaching a "strong request" from Jones to develop such a plan.

[275] In September 2001 Amcor established the "major operational cost savings" team ("MOCS"). Its objective was to identify cost savings across the AFPA businesses for the purpose of increasing ROFE. In particular its task was to identify non-core or non-performing businesses and assets for closure or sale. The target set was $10 million in cost savings in 2001-2002, with a further $25 million in 2002-2003. These targets were in addition to existing budget commitments. Hodgson gave unchallenged evidence that "one of the fastest ways to achieve the [ROFE Benchmark] was to close non-core and/or underperforming business assets and sell the assets, particularly the real estate".

[276] Brown instructed Hodgson to commence the MOCS process. Hodgson appointed Kevin McCluskey as the leader of the scheme.

[277] Both the Wetherill Park site and the ACB Business were targets of the MOCS programme.

[278] At the monthly AFPA management meeting in September 2001, the sale of the Wetherill Park land and buildings was discussed. A marketing submission was obtained from Colliers Jardine. It reported a likely price of $9,750,000 to $10 million if sold on a five year leaseback and $10,250,000 to $10,500,000 if sold on a ten year leaseback.

[279] On 2 November 2001, Barnes sent the Colliers Jardine proposal to Hodgson and recommended seeking expressions of interest. He noted that a sale at the forecast $10 million point would generate a profit of about $2.5 million.

[280] Barnes' memo was provided to Mr Ken Parker, who was then AFPA's general manager - finance. On 12 November 2001, Parker responded to the Barnes proposal. His view was that a sale of the site was probably inevitable, but that it should take place following a review of the ACB Business and a determination of whether that business was core to AFPA's long term plan (in which case a lease back could be obtained) or not (in which case the business could be sold and the property sold with vacant possession). It appears that he did not consider selling the business and entering a tenancy with the prospective purchaser, which would have resulted in both a sale of the business and a sale of the property on the more profitable lease back basis.

[281] In November 2001, Barnes directed Holihan to meet with Colliers Jardine to discuss the marketing submission. Holihan was told that a sale subject to a lease would attract a higher price.

[282] The question of whether to keep, sell or close the ACB Business was raised at a MOCS meeting in Sydney in November 2001, and again at a meeting held on 6 December 2001.

[283] In January 2002, Alvarez sent Holihan two spreadsheets which showed the number of employees at Wetherill Park reducing from 43 to 12 and to 0, respectively. Someone other than Holihan had asked Alvarez to consider those reductions as part of a proposal to shut the site and move its work to the other two main plants.

[284] A presentation to Amcor's board dated February 2002 was headed on its first slide: "AFPA Challenge: Achieve a sustainable 15% ROFE in the shortest possible time." The presentation canvassed an upgrade of corrugators and other equipment at Smithfield and Revesby and a review of possible plant closures in New South Wales to achieve a permanent cost reduction of $20 million p.a. A board memorandum co-authored by Hodgson and Brown stated that "we are developing a proposal to rationalise capacity in ... New South Wales ... Preliminary indications are that PBIT will be increased by over $20m per annum when the process is expected to be complete in mid 2004".

[285] A memorandum from Parker to Lachal, Clayton, Brown and Hodgson dated 6 May 2002 referred to the closure of three smaller plants (including Wetherill Park) which (if the closures proceeded) would occur in about February 2003.

[286] Some time after 29 July 2002, Holihan contacted Lewis and asked if he knew of any Amcor business that might take a lease over the Wetherill Park site. Lewis told him that Amcor Aerosols, another business operated by Amcor, would be looking for a new site. Site visits by staff from Amcor Aerosols, and further conversations with Lewis about the proposal followed.

[287] It appears that Amcor was considering the sale of the ACB Corrugator machine (the "Corrugator") in July and August 2002. This was a valuable, very large (about 80 metres in length) and heavy industrial machine which manufactured corrugated cardboard for use in cardboard boxes. The machine was situated within the Wetherill Park site.

[288] In a joint memorandum to the board dated 15 October 2002, Hodgson and Brown wrote:

Our Wetherill Park site in New South Wales is currently focused on ·short run orders and fitment work, which inhibits the overall capacity of our major plants. It is located on a site which is much larger than required and we are considering relocation and/or selling the business and envisage entering a long-term supply arrangement with the purchaser should we sell.

[289] By that time, Holihan was of the belief that the interest of Amcor Aerosols in the Wetherill Park site was wavering. He sought information about Amcor's use of rented storage at non-Amcor premises, believing that the Wetherill Park site might be used as a substitute for those sites.

[290] In evidence in chief, [Mr Peter] Brown said that by 15 October 2002 "I had already formed the view at this stage that Amcor should not remain in businesses specialising in filling orders for small quantities of boxes (Short Run Box Businesses)". This was the kind of business conducted by the ACB Business.

[291] A memorandum of 15 October 2002 entitled "Blueprint for Further Improvement", was prepared by Brown and Hodgson and put to and approved by Amcor's Board on 23 October 2002. The Board minute in relation to the memorandum reads:

AFPA Future Improvement

The Board received and discussed BO/1092.

Hodgson reminded the Board of the strategy for this business. The first phase generated significant improvement in both PBIT and ROI in the 2001/02 year. 2002/03 will see further improvement.

To further increase profit, ROI and cash generation, a step change reduction in the cost base and a securing of increased profitable growth by achieving much greater levels of customer intimacy with major customers is required. A comprehensive restructure of the business from a regionally based model to a customer and market centric model will be fully implemented by January 2003. The new organization structure, supports the customer-centricity ambitions and facilitates the standardisation of best practices on a national basis. Significant cost reductions are expected from capacity rationalisation and process improvements, driven by the deployment of proprietary Amcor technologies and an integrated IT platform primarily at the transaction layer to replace existing 20 year old legacy systems.

Following discussion the Board resolved to endorse the restructuring strategy.

[292] The strategy endorsed by the Board was set out in the AFPA "Blue Print for Further Improvement" slide presentation. Slide 12 related exclusively to Wetherill Park. It reported that the site was to be sold and the business closed or sold by June 2003. Key assets would be retained. The following was included in the presentation: "Sell remaining business (outsource)." This action was said in the presentation to result in a manning reduction of 48 and overhead savings, with PBIT impact of +$0.5 million. Hodgson, Clayton and Parker were involved in preparing the presentation.

[293] Shortly after the Board endorsed the plan reflected in the presentation, Barnes informed Holihan that the Board had given 'in principle' approval to his acquisition of the ACB Business.

Conclusion as to the Position of ACB within Amcor

[294] I accept that before Holihan became its general manager, since the late 1990's the possible disposal of the ACB Business by AFPA was under consideration by Amcor. The business was underperforming against the ROFE Benchmark. Following the significant investments made in the nearby Revesby and Smithfield plants in about 1999-2000, the ACB Business did not remain as a core AFPA business. Further, the MOCS programme set in place a chain of events which ultimately led to the sale of the business to Holihan.

[295] It was Holihan's case that his proposal to purchase the ACB Assets and enter a supply agreement was endorsed by Amcor's board in October 2002, and that this coincided with AFPA's long-term plan to sell the site and cease operating the business.

[296] On the other hand, it was Amcor's case that an adverse inference ought to be drawn against Holihan and the Defendant parties from the fact that there was no proposal suggested for any person or entity other than Holihan and his associated companies to purchase the ACB Business. No offering to the public was undertaken or contemplated, which Amcor alleged was part of Hodgson's responsibility to at least consider. The fact that there were no other proposals to deal with the business after Holihan first expressed his interest in it is, on the Amcor case, said to be significant.[21]

Other findings made by Vickery J that are of relevance

Amcor alleged that the businesses were sold on terms that were 'uncommercial'

65 In the principal proceeding, Vickery J was also required to deal with the claim made by the Amcor parties that the sale of the Service Packaging Business (to Mr Hottes) and of the ACB Business (to Mr Holihan) were 'uncommercial transactions' or that they were entered into on 'uncommercial terms' or alternatively, were uncommercial and substantially for the benefit of the relevant defendants.[22]

66 Relevantly, in the context of the sale of the ACB Business, his Honour found as follows:

Uncommercial transaction - ACB Business Sale'

...

[1218] I find that by the time the ACB Business came to be sold to Holihan, it was underperforming in profit generation and had been considered by Amcor for closure since at least November 2001.

Sale at Undervalue Allegation - ACB Business Sale

[1219] Amcor submitted that the ACB Business was not sold at a "fair market value" to the Holihan interests, and for this reason alone, the Second Sale Agreement was uncommercial.

...

[1224] The Amcor parties contended that the ACB Business, as sold pursuant to the Second Sale Agreement, was not sold at a "fair market price". The Amcor parties rely principally on the expert evidence of Mr Stone to support this contention. Mr Stone's opinion was that the fair market value of the business as at 30 July 2003, was $4.6 million (rounded up from $4,590,000).

...

[1226] On the other hand, Mr Meredith valued the business as at 30 July 2003 at a low of nil and a high of $720,000, but settled upon $640,000 as being a fair market value (inclusive of stock).

...

[1237] I accept each of the contentions of the Defendants as to the approach of Mr Stone compared with the approach of Mr Meredith, and for these reasons I prefer the opinion of Mr Meredith to that of Mr Stone.

[1238] I find that savings in employee costs were both achievable and foreseeable by an arm's-length purchaser. Accordingly, I accept Mr Meredith's assessment of the market value as $640,000 of the ACB Business (inclusive of stock). When the price paid ($1,114,364 inclusive of stock) is taken into account, the net value of the transaction was in fact a benefit to the Amcor Parties of $474,364 as reflected in the following table:

[1239] It follows that the purchase price was not only "commercial", but was positively to the advantage of Amcor.

...

Price increases under the supply agreements

[1243] Reciprocal supply agreements were in place (the "Supply Agreement"). The Supply Agreement had two elements.

[1244] First, for a period of five years from completion, ACB would supply raw materials in the nature of corrugated board and cartons to Achilla and the Purchaser at prices based on a direct costs and distribution costs ("D&D") basis. This part of the agreement also provided for Achilla and the Purchaser to obtain these supples [sic.] solely from ACB, thereby guaranteeing ACB with a secure market for these products. Achilla purchased products from APA in order to supply corrugated packaging to Achilla's non-Amcor customers.

[1245] Clause 12.1 of the Second Sale Agreement was in the following terms relating to supply of raw materials to Achilla and the Purchaser:

12.1 Supply by Vendor of raw materials

...

[1246] Second, for a period of five years from completion, Achilla was required under the Second Sale Agreement to undertake work for AFP on "base products" supplied by it (for example, boxes or corrugated sheets). Achilla was obliged to perform work on this material (for example, affixing a label or performing some other special work) and then return the modified product to AFP and charge AFP for the work done and any additional material used.

[1247] Clause 12.2 of the Second Sale Agreement reflected this arrangement in the following terms:

12.2 Supply by Purchaser

...

[1248] Amcor submitted that the price increases under the supply agreements were on uncommercial terms.

[1249] D&D was defined in the Second Sale Agreement as the applicable cost base for products for the purposes of calculating costs in relation to the Supply Agreement.

[1250] The Supply Agreement was of potential benefit [to] Amcor and its related entities. This was so because Achilla was a conduit through which Amcor sold raw materials. This arose because of the terms of the Supply Agreement pursuant to which Achilla was compelled to purchase materials from Amcor for the duration of the Second Sale Agreement.

[1251] If Achilla was charged a significantly higher margin on top of D&D for materials purchased by Achilla in the course of its business, it would have added a significant cost to Achilla. For example, if a margin of 44% over D&D was charged, it would have added an additional minimum cost to Achilla of approximately $720,000 for the eleven months of trading in the financial year ending 2004.

[1252] As matters stood under the executed Second Sale Agreement, Amcor secured for itself a guaranteed market for the sale of some of its raw materials for the duration of the agreement.

...

Sub-Lease below market rent

[1260] The parties entered into a separate agreement for the sublease of the premises at Wetherill Park from which the ACB Business operated. The sub-lease was annexed to the Second Sale Agreement (clause 5.4).

[1261] Negotiations as to the lettable floor space under the lease commenced on 11 July 2003.

[1262] The sublease was for the Wetherill Park premises. However, the Amcor vendor, APA, was to keep its large corrugator machine on the premises and was required to pay for "the space consumed by this machine and associated raw materials". The corrugator machine was a substantial piece of equipment (although it was quite narrow, it was very long). APA was also permitted at any time, under certain conditions as to making good the premises and the like, to remove the corrugator machine from the premises.

[1263] By 15 July 2003 Holihan agreed with Lewis on the floor space split.

[1264] The ACB Corrugator remained at the Wetherill Park site until about September 2008.

[1265] There were benefits to Amcor in keeping the ACB Corrugator at the Wetherill Park site, which I accept. These included the following:

(a) it delayed the cost that would have been incurred in disassembling and moving the ACB Corrugator;

(b) any potential buyers of the ACB Corrugator could see the machine operating if and when they wished to inspect it; and

(c) ACB could take its time in selling the corrugator, and not be forced into selling the machine to a competitor.

[1266] The sublease term was for 5 years with a 5 year option. Rental was $560,000 per annum in years 1 and 2, and $600,000 per annum in years 3,4 and 5. In total, Achilla paid $2,920,000 in rent to APA, and 65% of the total outgoings of the Wetherill Park site.

[1267] Amcor proposed to sell the land comprising the Wetherill Park site to an entity called Stockland. In order to maximise the sale price of the land, the plan was for Amcor to take a head lease of the premises so that the land sold would be subject to a lease to a reliable tenant of high standing.

[1268] Amcor contended that the sub-lease was not on commercial terms. It pointed to the fact that the sublease rate of rental on an occupancy basis was significantly lower than that which Amcor (APA) was required to pay to Stockland under the head lease and was not governed by the same escalation clauses. It said that this resulted in Amcor subsidizing the Achilla's (the lessee company) rent by $2,246,000 over the five year term.

[1269] Amcor's expert, Mr Stone, took the alleged "sacrifice" of $2.246 million into account in his assessment.

[1270] Amcor contended further that the terms of the sub-lease provided that if the corrugator was removed then Holihan was required to pay 100 per cent of the outgoings however, his rent did not increase. Further, there was nothing in the Second Sale Agreement which gave Amcor the right to sublease the area occupied by the corrugator, if it was to be removed.

[1271] However, I accept that the sub-lease to Holihan and his associated companies for a rental less than that contained in the head lease between Amcor and the head lessor Stockland was the price to be paid for achieving a higher sale price on the divestment of the Wetherill Park site to Stockland. Counsel for Holihan put to Lewis that a leaseback to a blue chip company such as Amcor, rather than to a $2 company such as Achilla, or a sale with no leaseback, resulted in a higher property sale price. Lewis agreed that a sale with a leaseback is generally more valuable than if the site is sold with vacant possession; and he agreed with the proposition that a differential of approximately $1.5m would be achieved on a sale of the land for about $10 million if it was the subject of a lease to a tenant of the quality of Amcor.

[1272] The Wetherill Park site was sold by Amcor in October 2003 for a price of $10,452,000.

[1273] No property leasing expert, with qualifications and experience in commercial or industrial property leasing was called. In the end the Court is left with little reliable evidence upon which it can determine the submissions made by Amcor as to the alleged uncommercial terms of the sublease. For this reason alone, the contentions of Amcor on the alleged uncommercial terms of the sublease must fail.

[1274] However, I am also satisfied that by selling the Wetherill Park site subject to a lease to a "blue chip" company such as an Amcor subsidiary company, served to maximise the saleability and purchase price of the Wetherill Park site. The sub-lease of part of the Wetherill Park site to the Holihan company must be viewed in this overall commercial context.

...

Conclusion as to Uncommercial Transaction - Second Sale Agreement

[1279] When the Second Sale Agreement is considered as a whole and in its context, it has not been established that it was an uncommercial transaction, and I reject Amcor's contentions on the issue.

[1280] Nor am I satisfied that the Second Sale Agreement was substantially for the benefit of Hodgson, the Service Containers Purchaser, Hottes, Barnes, Sangster and Bayley.

[1281] By the transaction, Amcor secured real benefits for itself, particularly, as I have found, the increase in sale price achieved by the sale and lease-back arrangement, which, to the tune of $2,920,000 over the 5 year term was subsidised in significant part by the rent payable under the sublease, and when the early payment of the sale price upon the sale of the Wetherill Park site is taken into account.

No Relevant Conduct of the Defendants giving rise to any Uncommercial Terms

[1282] Specifically in relation to the case as pleaded by Amcor, I am not able to be satisfied that any of the Defendants procured the sale on uncommercial terms or were involved in the conduct of others to effect a sale on uncommercial terms.

[1283] Indeed, with one exception, I am not satisfied that any of the Defendants were materially involved in the formulation of any of the terms of the Second Sale Agreement alleged by Amcor to be uncommercial.

[1284] A number of Amcor personnel had been engaged in settling the term of the Second Sale Agreement.

[1285] Clayton, who executed the Second Sale Agreement on behalf of Amcor, was briefed by Parker and Lewis, who were both senior employees, beforehand. Parker and Lewis were involved in the settling of the terms of the transaction. Prior to signing the agreement Clayton did not consider the terms to be uncommercial or detrimental to Amcor. Further, he gave no evidence that he considered the terms to be uncommercial after he executed the Second Sale Agreement.

[1286] Mr McPhail [sic],[23] the external lawyer, drafted the agreement. He raised no issues as to the terms. Amcor accepted the terms as drafted by Mr McPhail.

[1287] Further, a number of other Amcor employees were involved at various points in the transaction. These included Ms Caplan, Ms Cleaver, Ms Flannigan and Mr Timos. None of those persons raised any concern that the terms of the proposed transaction were uncommercial or not in Amcor's interests. None of these were called by the Amcor Parties to give evidence.

[1288] The exception referred to earlier relates to the inclusion of what was known as the NXT licence in the Second Sale Agreement for no additional price.

...

[1292] ... I am not satisfied that the inclusion of the NXT General Licence as one of the assets sold in the Second Sale Agreement, was either in itself an uncommercial term at the time of entry into the agreement, or was such as to render the agreement as a whole uncommercial.

[1293] Further, I am not satisfied that Amcor suffered any loss by reason of having parted with the NXT General Licence. Indeed, in all likelihood, it was saved paying for the ongoing licence fees for no financial gain.

[1294] Further, in the light of my finding that the transaction overall was not uncommercial, it follows that there could be no breach of any obligation to warn Amcor of such an acquisition, if any such duty arose.

[1295] For these reasons Amcor is not entitled to any relief as a consequence of it entering the Second Sale Agreement on the basis of any alleged uncommercial terms, and none of the Defendants are liable for any breach of duty arising from the terms of the Second Sale Agreement.

Sale of the Service Packaging Business to Mr Hottes

67 As noted earlier, while in the hands of Amcor, the Service Containers Business had two discrete aspects to its operations:

• the Service Packaging Business, which received orders from its customers for the supply of finished corrugated products and corrugated boxes, and sourced its supply from Amcor's corrugated packaging division (upon which it charged a premium on the cost of the supply); and

• the Displays Business, which involved the sale to its customers of a range of plastic wraps, tapes, stock boxes and general packaging which Amcor did not manufacture and which the Service Packaging Business sourced externally.

68 The Service Packaging Business was not profitable and was later sold to Mr Hottes, whereas the Displays Business, which was profitable, was retained by Amcor.[24] The sale was effected by the First Sale Agreement. The terms of the proposed First Sale Agreement were drafted and amended through Baker and McKenzie, on behalf of Amcor, and Mr Walmsley, the lawyer acting on behalf of Mr Hottes.[25] Throughout the second half of 2001, Mr Barnes remained the officer within Amcor who was primarily responsible for the sale and approval of any substantial changes to the documentation.[26]

69 On 1 February 2002 the First Sale Agreement was executed. The parties to the agreement were Service Containers Pty Ltd (the vendor, an Amcor subsidiary), Service Packaging Pty Ltd (the purchaser) and Mr Hottes (the director and owner of the purchasing company).[27] Vickery J said he accepted that the First Sale Agreement 'effected the sale of the business in its entirety, not merely the assets of the business, although the sale agreement was entitled "Asset Sale Agreement".'[28]

70 Mr Hottes had managed both the Service Packaging Business and the Displays Business for approximately five years before the sale took place in February 2002.[29] From early 2000, Mr Hottes reported directly to Mr Barnes, who in turn reported directly to Mr Hodgson in respect of the operations of the Service Packaging business.[30] Following the sale, Mr Barnes 'authorised the continued employment of Mr Hottes to manage the Displays Business at a monthly fee of $8,800 (annual fee of $105,600 including GST)'.[31]

71 Following the death of Mr Hottes, Amcor re-acquired the Service Packaging Business from Mrs Hottes on 30 March 2007.[32] Amcor paid $125,000 to Mrs Hottes for the business. She did not share this with any of the defendants to the principal proceeding.[33]

72 In the hands of Mr Hottes, and until Amcor re-acquired the business on 30 March 2007, the Service Packaging Business was profitable.[34]

73 As at June 2003, that is just prior to the sale of the ACB Business, the directors of ACB Co Vendor were Messrs Brown, Clayton and Crawford and Mr Lewis was the company secretary. Mr Holihan was the manager of the ACB Business and he reported to Mr Barnes, who in turn reported to Mr Hodgson.

74 In September 2002, the ACB Business had been identified by Amcor in its 'Major Operational Costs Saving ('MOCS') review as a non-core or non-performing business asset which was to be closed. On 23 October 2002, the Amcor Board approved the recommendation to close the ACB Business and sell its assets.

75 Vickery J described the events leading up to this decision as follows:

[863] In the 2001/2002 financial year and after the sale of the Service Packaging Business Brown instructed Hodgson to commence the "MOCS" review, as it was called.

[864] The purpose of the MOCS review was to identify for the purposes of closure or sale, non-core and/or non performing fibreboard packaging business assets of Amcor or its subsidiaries.

[865] Amcor settled upon a strategy of closing non-core and/or underperforming business assets and sell the assets, particularly the real estate. This had been identified as one of the means by which a directive of Jones and the Amcor Board to increase overall profitability was to be achieved. Hodgson placed Mr Kevin McCluskey ("McCluskey") in charge of the MOCS initiative.

[866] Part of Mr McCluskey's role was to identify relevant business assets for closure and sale. The MOCS Report produced by McCluskey recommended the closure of the Townsville, Wetherill Park [the ACB Business] and Box Hill operations.

[867] A strategy document incorporating McCluskey's MOCS Report was prepared and presented by Hodgson and Parker to Brown, Jones, Lachal and Clayton at Abbottsford on 20 September 2002. Brown and Jones suggested some changes but otherwise approved the presentation and told Hodgson to prepare the amended document for presentation to the Amcor Board.

[868] Parker and Hodgson amended the document and made the changes recommended by Brown and Jones. They called the final version of this strategy document "Blueprint for Further Improvement". This was considered by the Amcor Board on two occasions, the first being a presentation made to the Amcor Board by Hodgson on 16 October 2002. Brown was also present at this meeting. Hodgson spoke to the "Blueprint Print for Further Improvement" document on this occasion. This exercise was repeated on 23 October 2002, when it was approved by the Amcor board.

[869] The "Blueprint for Further Improvement" document made provision for 265 redundancies across Australia including all 48 employees at Wetherill Park and the closure of the ACB Business.

[870] By this means, the Amcor Board approved the sale of the land and certain assets of the ACB Business at Wetherill Park, but for commercial reasons, exempted the large corrugator machine situated on the site.

[871] The Amcor Board was advised that the sale of the Wetherill Park assets (excluding the corrugator) was expected to raise approximately $1.2 million. The calculations of the value of the assets of the ACB Business were prepared by Parker. He wrote all of the financial parts of the "Blueprint for Further Improvement" document and Hodgson wrote the implementation strategies.

[872] In the financial year ended 2003, the ACB Business had a turnover of approximately $4,285 million but made a loss of approximately $359,000. Accordingly, it was not only a business which was not profitable, it was a loss making enterprise, a situation which did not escape the attention of Amcor.[35]

Holihan's Proposal to Purchase the ACB Business

76 In 2002, Mr Holihan told Mr Barnes that if the ACB Business were to be sold or closed down he would be interested in purchasing it. Vickery J described the sequence of events that led to the sale of the ACB Business to Mr Holihan as follows.

[873] Sometime prior to the Amcor Board's approval on 23 October 2002 of the "Blueprint for Further Improvement" recommendations, Barnes told Hodgson that Holihan, the ACB Business manager at the time, had expressed interest in acquiring some of the assets of the ACB Business if that business was to be closed down. His initial plan was to buy some of the assets of the ACB Business excluding the corrugator and relocate its operations to a smaller plant employing an entirely new workforce that would not be covered by Amcor industrial agreements.

[874] In about mid-2002, Hodgson spoke to Brown about Holihan's interest. Brown said "Let him put in a proposal and we'll look at it".

[875] Hodgson told Barnes that Holihan should submit a proposal for consideration by Brown. Holihan subsequently prepared a document entitled "Management Buy Out (MBO) of Australian Corrugated Box Co (ACB)".

Amcor's Approval of the Second Sale Agreement

[876] In or about November or December 2002, Hodgson directed Parker to take responsibility for finalising negotiations in relation to the Second Sale Agreement proposed with Holihan.

[877] Parker in turn directed Mr Tony Joyce to review the sale and the proposed terms in early January 2003. Joyce completed the review and prepared a document entitled "Notes on Proposed ACB Contract" for Parker dated 7 January 2003. The document commented on the terms of the proposed Second Sale Agreement including the price. There was no conclusion arrived at to the effect that the proposed Second Sale Agreement was uncommercial, and the transaction proceeded on its way.

[878] Ms Alyssa Caplan, an in-house lawyer seconded from Allens Arthur Robinson to Amcor reported to Lewis. She was asked to review the terms of the Second Sale Agreement. She did so without identifying that the terms were uncommercial.

[879] Legal advice was also sought by Amcor from Baker & McKenzie and from Allens Arthur Robinson.

[880] The vendor company was ACB [i.e., ACB Co Vendor], an Amcor subsidiary.

[881] Ultimately, Clayton signed the Second Sale Agreement. He was a Director of ACB [ACB Co Vendor]. Lewis also signed the document in his capacity as the secretary of the vendor company. Clayton said that prior to signing the agreement, he asked Parker to come to his office and take him though the relevant clauses of the Second Sale Agreement. He was familiar with sale of business agreements and was aware prior to signing that the sale price was $1 million which was payable over five years.

[882] Clayton also gave evidence in cross-examination about a number of other clauses in the Second Sale Agreement. For example, Parker told Clayton that there was a five year contract for the supply of corrugated board by Amcor. Clayton also gave evidence that Parker explained the rationale for the sale to Holihan, namely that Amcor could not run the business profitably and it did not fit strategically with Amcor's future objectives. He also noted in his evidence that the transaction had the advantage of realising the underlying value of the real estate where the business was situated.

[883] Clayton agreed in cross-examination that Hodgson had no authority to approve the sale and that he spoke to Brown who confirmed that he (Brown) had approved it. In this regard, Clayton said in his evidence:

Prior to signing the Asset Sale Deed I had a meeting with Ken Parker. Ken Parker told me that the sale had the approval of Jim Hodgson and Peter Brown. I do not recall how the $1 million dollar sale price was arrived at, how the sale price was justified or whether I was every briefed on such matters. I was told by Ken Parker that the rationale for selling the businesses was that Amcor could not run it profitably and it did not fit strategically and that Craig Holihan had the specific knowledge and skill set to obtain growth from the business as a stand alone entity.

I had a conversation with Peter Brown where he confirmed that he had approved the sale of the ACB business to Holihan.

[884] As Clayton said, and I accept, Parker was a very experienced accountant and financial controller. He also had management experience. He said that if Parker had considered there was anything wrong with the transaction that he (Parker) would have told him. He expected Mr Parker would have been thorough and that he (Parker) did not tell him any reason not to execute the document, nor did he (Clayton) consider he should not sign it. Clayton considered that "it was his job" not to sign the agreement if he didn't get satisfactory answers to any question he put to Parker about it. He said that Lewis did not tell him that there was anything uncommercial about the sale of land or the proposed lease. He said there was nothing that caused him any concern about the transaction.

1. I am satisfied that Brown, Clayton and Lewis on behalf of Amcor authorised and approved both the sale and lease arrangements comprised in the Second Sale Agreement and thereby Amcor itself approved of the sale and its terms.[36]

77 Vickery J was satisfied that the sale of the ACB Business to Mr Holihan pursuant to the Second Sale Agreement was in the Amcor category of an 'unbudgeted sale of up to $1 million' and thus, because the sale took place for the sum of $1 million, it did not require Amcor board approval.[37] As such, his Honour said the approval level for the sale rested with the Managing Director of Amcor Australasia, who in this instance was Mr Brown.

78 Vickery J then proceeded to deal with the sale of the ACB Business, describing the sale process as follows:

Sale of the ACB Business by Amcor (the Second Sale Agreement)

[904] The ACB Business was eventually sold by Amcor to companies associated with Holihan pursuant to a document entitled "Asset Sale Deed" dated 2 June 2003 (the "Second Sale Agreement"). The Second Sale Agreement was executed on 3 June 2003 by Lewis and Clayton on behalf of ACB, the Amcor vendor.

[905] The Second Sale Agreement was completed on 30 July 2003.

[906] The parties to the executed deed were Australian Corrugated Box Co Pty Ltd (the vendor), ACB Australia Pty Limited (the Purchaser), Achilla Pty Limited (the Purchaser Trading Company) and Holihan (the director and owner of the purchaser and trading companies) (collectively called the "Purchasers").

[907] The key terms of the Second Sale Agreement involved the transfer to the Purchasers included [sic] all property and assets owned or used by ACB [ACB Co Vendor] in the ACB Business as at completion, including:

(1) Stock;

(2) Plant and equipment;

(3) All of the interest of ACB under or arising out of existing contracts, including contracts and agreements for supply to customers;

(4) ACB's customers;

(5) ACB's books and records;

(6) ACB's business name; and

(7) ACB's goodwill.

[908] The purchase price for the ACB Business was $1 million, payable in the five annual instalments and commencing 12 months after completion of the sale. There was no provision for any payment at the time of sale and most of the purchase price was payable by the fourth and fifth instalments (clause 3).

[909] The price for the stock was payable 12 months from completion, at a price determined by a stock take conducted by ACB prior to completion, with the costs borne exclusively by ACB (clause 6).

[910] The parties were required to enter a separate agreement for the sublease of the premises at Wetherill Park from which the ACB Business operated. The sub-lease was annexed to the Second Sale Agreement (clause 5.4) and provided for a rental at a lower rate than under the head lease.

[911] It was agreed that ACB would effect the termination of employment of its employees and was obliged to pay their entitlements and the Purchasers were entitled to offer employment to the employees on any terms (clause 7).

[912] The Purchasers were entitled to all accounts receivable accruing but not paid by the date of the sale and to accounts receivable after the sale (clause 8).

[913] ACB assigned to the Purchasers, or was obliged to obtain novation of, its interests under all contracts, including a licence known as the NXT General Licence between New Transducers Limited and ACB of July 2002 (clause 9). The NXT licence was included in the assets after the sale price had been settled.

[914] Further, a supply agreement was incorporated into the Second Sale Agreement (clause 12). For a period of five years from completion, the Amcor company ACB was obliged to supply raw materials in the nature of corrugated board and cartons to the Purchaser Trading Company Achilla and the Purchaser at prices based on a direct costs and distribution costs ("D&D") basis. Second, for a period of five years from completion, Achilla was required under the Second Sale Agreement to undertake work for AFP on "base products" supplied by it (for example, boxes or corrugated sheets). Achilla was obliged to perform work on this material (for example, affixing a label or performing some other special work) and then return the modified product to AFP and charge AFP for the work done and any additional material used.[38]

79 His Honour also addressed the rival contentions advanced by the parties about whether the Second Sale Agreement was a sale of the assets of the ACB Business, or a sale of the business, and made findings as follows:

Whether Sale of the Assets or Sale of the Business

[932] The Defendants contended that a distinction needs to be drawn between an agreement pursuant to which it is intended that the purchaser takes an interest in an entity which purchased assets of the ACB Business and an agreement where it is intended that the purchaser takes an interest in the business. Amcor, on the other hand, contended that the subject matter of the Second Sale Agreement was, as defined in its pleading, the ACB Business which included the sale and supply of corrugated packaging conducted by the NSW Division of AFP.

[933] I am satisfied that the Second Sale Agreement, although it was contained in a document described as "Asset Sale Deed", was in substance the sale of the entire business of ACB (excluding certain defined assets such as the corrugator). Although the Second Sale Agreement did provide for the transfer of certain assets to the Purchasers, clause 3.1 makes clear that the $1 million purchase price was the [sic] "the purchase price for purchase of the Business", a term defined in the agreement as "the business carried on by the vendor of the sale and supply of corrugated packaging".[39]

Issues for determination at the trial of the Achilla counterclaim and Amcor parties' cross-claim

80 As noted earlier, in its final iteration, the Joint Statement of Issues identified some twenty or so issues that the parties considered arose from the pleadings. Following the exchange of extensive written submissions at the conclusion of the evidence, the issues for determination were narrowed a little.

Outstanding Issues for decision on the Achilla Counterclaim

81 On the counterclaim there are five main issues outstanding, the first four of which relate to the Second Sale Agreement/implied supply agreement.[40] First, did the Second Sale Agreement/implied supply agreement bind APA from Completion, or only from 21 March 2005 when the Deed of Accession was entered into? The second issue is to identify which, if any, of the 1,913 jobs claimed by Achilla were performed by alternative suppliers in breach of the agreement? The third issue concerns how any compensation payable to Achilla in respect of any such breaches is to be calculated? The fourth issue is whether Achilla is entitled to compensation for amounts that it was overcharged? The final issue on the counterclaim relates to the charge, namely, what amount must ACB Co Purchaser pay to APA for a release of the charge? That is, is that sum $300,000 or is it $300,000 plus interest, and if so, what amount?

Outstanding Issues for decision on the Amcor Cross-claim

82 On the cross-claim there are four main issues in contention.[41] First, should the cross-claim be refused because of Anshun estoppel or abuse of process? The second issue, is whether ACB Co Purchaser breached the Second Sale Agreement by not informing ACB Co Vendor of a change in control of ACB Co Purchaser or Achilla in June 2004 or by not informing APA of a change of control of ACB Co Purchaser or Achilla in October 2005? The third issue is if the Court finds there was such a breach, did that breach cause any loss to APA and, if so, how is APA's compensation for that breach to be calculated? The final issue on the cross-claim is, if the Court finds that ACB Co Purchaser or Achilla is obliged to compensate APA, to what, if any, degree is Mr Holihan personally liable to make that compensation?

83 Those are the principal issues expressed in a way that excludes what is now common ground between the parties as a result of concessions made, or arguments abandoned, in the exchange of closing written submissions. Behind that short summary, however, lies a vast landscape of issues that are canvassed in the pleadings and have been the subject of extensive evidence at the trial.

84 The Holihan parties called sixteen lay witnesses to give evidence at the trial. In some cases the witnesses gave their evidence by video-link from Sydney, but otherwise they were examined and cross-examined in person in Melbourne. [42]

85 Much of the evidence about the operation of the ACB Business both before and after the sale was given by Mr Holihan. The Holihan parties filed a lengthy witness statement in chief from Mr Holihan,[43] a witness statement in reply (responding to matters raised in the witness statements served by the Amcor parties and providing his evidence concerning the Amcor cross-claim),[44] and an affidavit sworn on 3 August 2015 (concerning the preparation of the particulars of loss for the Achilla counterclaim and the use of the profit and loss statements of Achilla).[45]

86 Representatives of the alternative suppliers other than Sainsbury's (which nowadays is part of the Amcor Group) were also called by the Holihan parties. Evidence was given by:

• Mr Anthony Jeffriss Kent, who was a director of Thompson Screen Printing and Displays Pty Limited ('Thompson') and the owner of the business during the relevant period. He is now employed as a sales representative with the Blue Star Group. During the relevant period, Thompson did printing work for clients including entities within the Amcor Group. Mr Kent gave his evidence by video-link.

• Mr Stanislaw Kierdal, the manager of the business known as J S Cutting Formes ('J S Cutting'), which made corrugated knives for different businesses in the packaging industry, including Amcor. Mr Kierdal gave his evidence by video-link.

• Mr Roberto Valentino Pellizzari, the managing director of Pandapak Pty Ltd trading as Northwest Packaging ('Northwest Packaging'). Amcor was one of its main clients. In the relevant period, Northwest Packaging predominantly made partitions, single face pads, corrugated pads and some short runs in cartons. Mr Pellizzari gave his evidence by video-link.

• Mr Remy Anthony Pribilovics, the managing director of SPS Packaging Services Pty Ltd. In the relevant period, SPS Packaging did work for Amcor. The work generally involved the making of pads, partitions, and fibre pallets from sheets of corrugated board and the gluing and stitching of cartons. Mr Pribilovics gave his evidence by video-link.

• Mr Christopher Prasad, the manager at All Pack Australia ('All Pack'). Amcor was All Pack's main customer and the work it performed for Amcor was mainly done by hand. Generally the work involved packaging, assembling of cardboard products such as large cartons and display stands, gluing cartons and re-palletising some of their products by strapping and shrink wrapping them on a pallet ready for delivery. Mr Prasad gave his evidence by video-link.

• Mr Joseph Borg, the CEO and managing director of the Ubeeco Group Pty Ltd, trading as Ubeeco Packaging Solutions ('Ubeeco'). During the relevant period, Amcor was a customer of Ubeeco. Ubecco assembled product for Amcor and sold them timber pallets in both hardwood and softwood, and supplied them with consumables such as nails. Ubeeco would also do 'value-adding' work by attaching foam inserts or insets to the timber pallets depending on the needs of the particular customer, making fibreboard pallets for Kellogg's (which was a customer of Amcor), and hand-scoring (to shape) corrugated board components supplied by Amcor. Mr Borg gave his evidence by video-link.

• Mrs Kaye Frances Le Breton, a director and secretary of M Le Breton Graphics (Australia) Pty Ltd and M Le Breton Graphics Pty Ltd (together called 'Le Breton'). Mrs Le Breton's husband, Max, operated the business but, as he was in hospital at the time of the trial and unable to give evidence, the Holihan parties called Mrs Le Breton in his place. She was familiar with the work undertaken by the business over the past 25 to 30 years, having worked in the office performing bookkeeping and accounting type tasks, and she had prepared the response to the subpoena for documents served by the Holihan parties. Mrs Le Breton thought Amcor was probably a large customer of Le Breton during the relevant period, performing mainly laminating work (which usually involved Le Breton sourcing litho prints from other companies and then mounting the prints to cardboard supplied by Amcor) and die-cutting work and stripping and gluing. Mrs Le Breton gave her evidence by video-link.

87 The Holihan parties also called a number of persons who were employed by Amcor entities at the time of the sale and working in roles involved with the ACB Business and/or the AFP corrugating division, as follows:

• Mr Anthony Peter Joyce, an accountant, who served in the roles of Commercial Manager, Operations, AFP (between early 2001 and late 2003 or early 2004), and then as General Manager, Commercial, AFP Australasia (until May 2005, when he ceased employment with Amcor). Mr Joyce was based in Melbourne and his responsibilities were to support all of the AFPA operations with their financial reporting, governance and control requirements. Mr Joyce also had an indirect role in the negotiation of the Second Sale Agreement in the sense that in January 2003, his general manager Mr Ken Parker, asked him to review the draft agreement and provide his comments and observations. Later, he also became involved in discussions with Mr Holihan concerning aspects of the (draft) Second Sale Agreement. Mr Joyce also gave evidence about Annexure 5 to the Second Sale Agreement and the specific cost elements that went into the 'D & D rates' formula for determining the charging mechanisms under the Second Sale Agreement and in the setting of the First Year Budget.[46] Mr Joyce gave his evidence in person.

• Mr Nicholas Papadimatos, who initially was a management accountant with AFP in its New South Wales operation (between 2000-2002), and then with the finance division of the AFP paper mill at Botany (June 2002-July 2003). In July 2003, he joined the ACB Business (under the new management) as an accountant, working with Mr Holihan. The focus of the evidence given by Mr Papadimatos was on Annexure 5 and the 'D & D rates' formula, and the setting of the first and second year budgets. The Holihan parties tendered a witness statement prepared for Mr Papadimatos[47] and he gave his evidence by video-link.

• Mr Paul Gordon Ward, previously occupying the role of General Manager Marketing & Sales Administration for AFP Australia ('AFPA') (from about March/April 2005 until about early to mid-2008), then working on a legal matter, following which he worked as Commercial Manager, Strategy in the Fibre division and finally as Chief Financial Officer for AFP before he left in September 2010. In his role as General Manager Marketing & Sales Administration for AFPA, Mr Ward was based at Burwood in Victoria but was effectively the head of sales & marketing for the whole of the fibre packaging division, which included the corrugated business, the specialty business and the Amcor Displays business. Mr Ward gave evidence that in about June 2005 he was asked to have look at the contract in place between APA and ACB Co Purchaser concerning the ACB Business. Mr Ward also gave evidence about email correspondence passing between himself and Mr David Beynon (then the regional manager of New South Wales), Mr David Manser (who was running either or both of the specialty business and the Displays business for New South Wales) and Mr Greg Crouch (the Group General Manager for New South Wales) in early July 2005, and correspondence between himself and Mr Holihan in late July and late November 2005. Mr Ward gave his evidence in person.

• Mr Anthony Eugene Cichonski, previously operations manager at the Revesby plant (from about 1995 until mid-2002), then the regional operations manager of Amcor (between June 2000 to January 2005) following which he left to join the ACB Business (under new management) as the Operations Manager. He is currently working with Wellen Pty Ltd. Mr Cichonski gave evidence about the plant upgrades at Revesby in 2000 and thereafter at Smithfield to bring that plant up to a similar standard to Revesby. He also gave evidence about obtaining quotes from OME suppliers for work to be performed, the operation of the 'PICK' system[48] and the routing of OME work both before and after the sale of the ACB Business, 'repeat orders' and the workforce available to the ACB Business to perform work following the sale. The Holihan parties tendered a witness statement prepared for Mr Cichonski[49] and he gave his evidence in person.

• Mr David Oliver Manser, who worked for AFP between about 1999 through to 2006 in various roles as the Commercial Manager Speciality Group from about 2002 to October 2004, and then as Acting General Manager of the Speciality Group from October 2004 to February 2006. Mr Manser gave evidence about the Amcor Displays work, and in particular the re-structuring of Displays NSW and Displays Victoria and the movement of Displays NSW work to Displays Victoria where they were setting up a specialised footprint for bringing the Displays work under the one roof. He also gave evidence about the formal arrangements made between Displays NSW and the ACB Business for Mr George Daaboul, an employee of the ACB Business, to manage Displays NSW. Mr Manser gave his evidence in person.

• Mr Paul Silva, currently working with Wellen Pty Ltd (a fibre packaging business) run by Mr Trevor Barnes as Corrugator Manager, but formerly he was the Logistics Manager at ACB Co Vendor's Wetherill Park factory. Mr Silva was made redundant when the ACB Business was sold, but he was re-employed by Mr Holihan a few days later to work in the ACB Business (under new ownership) in a similar role. He gave evidence about the work that the ACB Business (under new ownership) received from AFP and also from Amcor Displays, the freight/delivery arrangements that applied to raw materials and finished products, the work recorded on the 'PCS' system (which recorded the history of the work orders) and the 'PICK' system, and the quality of the OME work performed. The Holihan parties tendered a witness statement prepared for Mr Silva[50] and he gave his evidence in person.

88 The Holihan parties also called Mr Mark William Whitechurch, the owner and managing director of Converta Machinery Pty Ltd ('Converta') between June 1994 and August 2012 to give evidence. Converta imported machines into Australia and provided after sales support to customers, but its core business was the supply of machinery to the corrugated box segment of the market. It was one of the main suppliers of imported machinery, such as laminators, die-cutters, box making machines and other related cardboard manufacturing equipment, to the corrugated box segment. The ACB Business was one of Converta's customers both before the sale to the Holihan parties and afterwards. Mr Whitechurch closed the Converta business in August 2012. The Holihan parties tendered a witness statement from Mr Whitechurch[51] canvassing his involvement with the ACB Business over the relevant period and the purchase and/or use of the 'Grassi No 1' and 'Grassi No 3' laminating machines and 'Eterna Platen' die-cutters by the ACB Business over time.[52] Mr Whitechurch gave his evidence in person.

89 The expert accounting witness engaged by the Holihan parties to prepare an expert's report and give evidence on the quantum issue was Mr Gregory Pollard Meredith, a partner of the firm of Ferrier Hodgson and leader of its Forensics Practice.

90 The Amcor parties called eight lay witnesses to give evidence at the trial. Each of the witnesses was examined and cross-examined in person in Melbourne. In addition, they tendered (by consent) an affidavit from a further witness, Ms Charlotte Gerke, now employed as the NSW Customer Services Manager with Orora Fibre Packaging (part of the Amcor Group).

91 The expert accounting witness engaged by the Amcor parties to prepare an expert's report and give evidence on the quantum issue was Ms Dawna Kathleen Wright, a Senior Managing Director and Leader for Australia in the Forensic Accounting and Advisory Services practice of FTI Consulting.

92 The Amcor parties called Mr John Burnett MacPhail, the solicitor at Baker & McKenzie engaged by the Amcor parties to undertake the documentation of the Second Sale Agreement. Mr MacPhail was also involved in the drafting of the First Sale Agreement for the sale of the Service Packaging Business to Mr Hottes. Mr MacPhail gave evidence about the process by which he obtained instructions from Mr Barnes, his initial meeting with Mr Holihan, and the correspondence that ensued concerning the various drafts of the agreement and the drafting process generally. The Amcor parties tendered a witness statement prepared for Mr MacPhail.[53]

93 The Amcor parties also called several former employees of entities within the Amcor Group, as follows:

• Mr Darren Robert Nellies, the Customer Service Manager for AFP in NSW between 2003 and 2008. Mr Nellies left Amcor in 2009. He gave evidence over a wide range of topics but in particular concerning the work performed by the ACB Business prior to the sale, his role in managing the relationship with the ACB Business under Mr Holihan's ownership, including dealing with complaints from the ACB Business about work being sent to alternative OME suppliers, the standard of the work performed by the ACB Business, the routing of work in the PCS and PICK systems, the de-commissioning of the PICK system in October 2005 or thereabouts and the movement across to the new system, 'SAP'.[54]

• Mr Darryl Francis Roberts, the former Group General Manager at AFP from October 2004, who replaced Mr Hodgson, after 10 years or so working in Amcor's metal can business in various configurations. In December 2004, Mr Roberts became the acting Managing Director of Amcor Australasia. Mr Roberts gave evidence about the business divisional structure in place at Amcor from January 2000 or thereabouts, and his knowledge of the arrangements entered into with Mr Holihan for the sale of the ACB Business. Mr Roberts also gave evidence relevant to the May/June 2004 'change of control' allegations made by the Amcor parties on their cross-claim, and in particular, as to what Amcor would have done had it known of the various facts and matters revealed in the principal judgment concerning the shareholder agreements in place between the former executives and employees of Amcor in relation to the ACB Business. The Amcor parties tendered a witness statement prepared for Mr Roberts.[55]

• Mr Laurence Bruce Phillips, a retired accountant, formerly an Accounting Manager at the Amcor sites at Clayton and Box Hill in Victoria, and General Manager of Amcor's Indonesian operations. In 2005, he acted as a consultant to APA on the review of the costing and operations systems that Amcor utilised for its corrugated fibreboard packaging business, as part of APA's transition from the PICK system to SAP. Mr Phillips gave evidence about the demands, costs, timing and labour needs required to fulfil 'specialty work' jobs, 'repeat jobs', OME work performed by the alternative suppliers, OME work performed for Amcor Displays, and the identifying business code 'SX' used for Amcor Displays in the SAP system. The Amcor parties tendered a witness statement prepared for Mr Phillips.[56]

94 Several current employees of entities within the Amcor Group were also called by the Amcor parties, namely:

• Mr Bruce Geoffrey Powell, the General Manager of Specialty Packaging with Orora Fibre Packaging, a business division of Orora Australasia which is itself a business division of Orora Limited, formerly known as APA (i.e. within the Amcor Group). Between December 2005 and January 2010, Mr Powell's role within APA's corrugated fibre packaging division was as Specialty Manager (New South Wales), reporting to Mr David Beynon. By the time Mr Powell assumed that role, both the Service Packaging Business and the ACB Business had been sold, to Mr Hottes and to Mr Holihan respectively, and the remaining specialty businesses in New South Wales were Amcor Displays and Central Coast Cartons. Mr Powell gave evidence about a request made of him by Mr Roberts that he re-build each of these businesses following the sale of the Service Packaging Business and the ACB Business, and the work undertaken to explore and implement this initiative, including a request made of Mr Nellies at the end of July 2008 to assess the short run work that had been outsourced to the ACB Business. Mr Powell also gave evidence about the acquisition of the Sainsbury business, which specialised in producing point of sale retail displays and short run boxes, and was acquired on his recommendation. The Amcor parties tendered a witness statement prepared for Mr Powell.[57]

• Ms Julie Frances McPherson, who joined Amcor as its Group General Counsel and Company Secretary on 18 April 2005. Ms McPherson gave evidence directed to the allegations made in the Amcor parties' cross-claim concerning the alleged change of control in October 2005, and as to what the Amcor parties would have done had they known of the (undisclosed) arrangements in place between the former executives and Mr Holihan, as revealed by Vickery J in the principal judgment. The Amcor parties tendered a witness statement prepared for Ms McPherson[58] and also an affidavit sworn by her on 4 August 2015.[59]

• Mr Robert Allen Guy, now a Territory Manager for Orora Fibre Packaging, who worked in sales of corrugated fibre packaging with AFP since about December 1993. Mr Guy gave general evidence about matters such as the work undertaken by an account manager with customers of the business as part of the sales process, and the nature of 'short run' and 'long run' business, but the focus of his evidence was on the 'RTS Imaging account' which was identified by the Holihan parties as OME work performed by an alternative OME supplier, namely Le Bretons. The Amcor parties tendered a witness statement prepared for Mr Guy.[60]

• Mr Adayres Bibiano Garcia, currently employed by Orora Australasia as a Regional Estimator. Mr Garcia commenced employment with Amcor in 1992, and worked in the NSW Estimates Department for 12 years before leaving in December 2004 to work in the ACB Business (under new management) and other businesses owned by Mr Holihan and Mr Barnes until he resigned in April 2013. After a short retirement, he commenced working with Orora Australasia about July 2013. Mr Garcia gave evidence about the work done by estimators in generating quotes and routing jobs through the PICK system, the work done by the ACB Business before and after the sale, and the division of responsibility between the estimators at AFP and the separate estimating workforce in place at Amcor Displays.

Commercial background - operation of the ACB Business prior to the sale

95 The extracts from the principal judgement set out above provide a convenient summary of the background to the sale of the ACB Business and the entry into the Second Sale Agreement. As will be apparent, after deliberations over many years, the Amcor parties effectively determined to offload the ACB Business, which was then considered an underperforming asset[61] but nevertheless an important business, and to allow one of its executives, Mr Holihan, to purchase it. Before doing so, however, the Amcor parties arranged for the Wetherill Park site (from which the ACB Business was conducted) to be leased to APA, so that the property could be sold on the open market with the lease in place to a quality tenant, in order to realise the highest possible price for the land.

96 So far as the sale of the ACB Business was concerned, the assets of the ACB Business were to be sold to Mr Holihan. But, at the same time, Amcor wished to ensure that it would also be able to continue to have the specialty work that was performed by the ACB Business prior to the sale performed by the ACB Business after the sale, and also that it would continue to supply raw materials to the ACB Business once the sale was completed.

97 Before the sale, the ACB Business had two distinct income streams:

(a) Income earned from work it did for AFP's customers, for which it charged AFP; and

(b) Income earned from work it did for its own customers.[62]

98 Prior to the sale, the largest part of ACB Co Vendor's business was performing 'OME' work for AFP. Within Amcor, work sourced from a third party was referred to as 'OME' work.

99 Under cross-examination by the Amcor parties, Mr Joyce explained what 'OME' work was:

[MR TRAN:] But what does OME mean to you?---Okay, it's an acronym. OME stands for outside manufacturing expense. So it's recognising that there are certain steps in the corrugated box manufacturing process that Amcor did not have the machinery within its portfolio of assets to undertake that manufacturing step. So therefore it would send it to an external third party supplier to undertake that step of the manufacturing process for them.

So your answer there referred to manufacturing very quickly. Did this term have relevance to the manufacturing side of Amcor? So was this a term that was used by the box plants at say Smithfield and Revesby?---Absolutely.

And why would that term have particular relevance to these manufacturing plants?--- ?---Because within...the manufacturing operations personnel, they would understand that ... a particular job needed to be routed to an external supplier because Amcor did not have the machinery capable of doing that particular conversion process.[63]

100 Relevantly, at that time of the sale, the largest customer of the ACB Business by turnover[64] was AFP, in the sense that work done for AFP's customers provided something in the vicinity of 80% of the work being performed by the ACB Business.[65] Mr Holihan said that the AFP customers for whom the ACB Business did work included sales groups within AFP such as 'Heavy Duty', 'Fruit and Veg', and Amcor Displays,[66] although the ACB Business did not do very much work for Amcor Displays because, shortly after the ACB Business obtained a litho laminating machine in June 2001, AFP entered into a supply agreement with ACE Print & Display Pty Ltd ('ACE Print') in relation to Amcor Displays' work.[67]

101 Mr Holihan gave evidence about the types of OME work that the ACB Business performed prior to the sale, when he was its General Manager. He said that the OME work the ACB Business did for AFP (i.e. for AFP Customers) was varied and among other things, included the following types of work:[68]

(a) From around June 2001, it did litho laminating, including 'wide format' litho laminating. Litho lamination is a process of combining (by lamination) litho printed 'top' sheets (paper) onto a sheet of corrugated cardboard. Litho is a high quality type of printing in the sense that it is high gloss and high resolution.[69] 'Wide format' was the term used in the industry for sheets measuring greater than 1020mm x 720mm and less than 1400mm x 1600mm. When the ACB Business did litho lamination work for AFP, AFP would procure the litho printed top sheets and deliver them to the ACB Business, along with the cardboard. The ACB Business would then laminate the two together on a Grassi Sheet Laminating Machine - Compact Semi-Automatic No 1 model ('Grassi No 1').

(b) It made plain and printed boxes of varying sizes. The ACB Business did the flexographic ('flexo') printing in-house using one of its machines, such as the Maramatsu Jumbo printer, the ZLM flexo folder gluer and the Koppers rotary die-cutter.

(c) It did die-cutting, including wide format die-cutting (on a T70 machine (which did wide format die-cutting), a Koppers rotary die-cutter, a Platen and an Astroforme), and the stripping of waste resulting from that process.

(d) It made corrugated pads, by slitting larger pieces of cardboard (using a slitter or bandsaw) to make smaller ones.

(e) It made corrugated partitions. These were (and are) sometimes referred to in the industry as a 'divider' or a 'nest'. They are made from slotted pads of corrugated cardboard (usually made on a 'Mecanelec') which are then 'slid' together to make a partition, such as that often found on the inside of wine cartons.

(f) It slit and 'slotted' corrugated cardboard (using the Mecanelec).

(g) It did hand work, including the hand assembly of corrugated products (e.g. the assembly of corrugated partitions), folding, gluing, packing, bundling (products together), strapping (products together with plastic straps), stapling, wrapping (including wrapping corrugated products into an 'outer' cardboard box, sometimes called a 'shipper') and folding.

(h) It had the capability to make corrugated pallets, which are pallets made of corrugated cardboard used to hold and used for shipping products. They resemble wooden pallets in shape but are lighter in weight. Prior to the sale, the ACB Business produced pallets for a customer called Power One. The ACB Business used a bandsaw, slitter and glue in the production of pallets, which was predominantly handwork.

102 Further, Mr Holihan said, much of the work done by the ACB Business required the use of 'dies' and 'stereos'. A die is a set of steel knives used for cutting and/or dull rounded blades (or cutting formes) used for creasing, set in timber. The dies were used in die-cutting machines, which pressed the die onto a sheet of corrugated cardboard to cut or crease it to a desired shape. Where the cardboard was cut, it created waste that had to be stripped away from the resultant product. 'Stereos', which were also known as plates, were made by exposing polymer resin to light (in the olden days they were made of rubber and cut by hand) and are used in the flexo printing process. They resemble a large rubber stamp and are mounted onto a cylinder inside a printing machine.[70]

103 When the ACB Business did OME work destined for AFP customers, Mr Holihan said[71] the raw materials (usually corrugated cartons and board) would be sent by AFP to the ACB Business at Wetherill Park, usually from the AFP plants operating at Smithfield[72] or Revesby,[73] but sometimes they would be sourced from a main AFP site interstate. In some cases, the work performed by the ACB Business for the relevant AFP customer was the production of an entire product starting from paper (for single faced and fanfold production of corrugated cardboard) or from a sheet of raw corrugated cardboard supplied by AFP (for boxes, pads or partitions). In other cases, AFP might supply partly finished items for the ACB Business to finish (for example, AFP might supply a pre-cut, pre-slotted box for folding, gluing or stitching by the ACB Business). The ACB Business would then 'finish' (or 'convert') the raw materials or partly finished items and supply the end (or finished) product direct to the relevant AFP customer. AFP then organised and paid for the delivery of the finished products to AFP customers.[74]

104 The ACB Business did not pay any freight associated with the delivery of the raw materials to it. Where the ACB Business did OME work for AFP, the ACB Business would issue invoices for its work direct to the AFP customers on behalf of and in the name of the relevant AFP business.[75]

105 Mr Holihan said that in performing work for AFP (and indeed others), ACB Co Vendor often had to buy things, or use the services of, third party (OME) suppliers. For example, ACB Co Vendor often had to buy special paper or cardboard, starch, timber pallets, printing plates, plastic strapping and stretch film. These goods were either incorporated into the finished product (e.g. in the case of paper or cardboard) or were used in the doing of the OME work (e.g. the plastic strapping was used to strap finished products together and timber pallets were used for transportation of finished products). Services, such as screen printing or organising and paying for 'tooling' (generally the production of dies), were also purchased on occasion in order that the ACB Business could make the finished product. ACB Co Vendor also charged AFP for labour related to the work that it did, such as hand assembly, gluing and bundling needed to make a finished product.[76]

106 At the end of each month, AFP would credit ACB Co Vendor for the work done by the ACB Business for AFP customers as calculated by the 'PICK' system, a costing and sales order processing system used by the ACB Business, plus a margin. The price of a product charged was based on 'direct and distribution' (called 'D & D') cost plus a margin. Mr Holihan explained that before the sale, where the ACB Business did work (i.e. produced finished products) for an AFP business, the amount payable to the ACB Business was ascertained by working on a D & D cost basis, plus a margin of 15%. Where the ACB Business purchased products (usually raw materials) from an AFP business, the parties worked on a D & D cost basis, plus a margin of 10%.[77]

107 Generally speaking, the D & D costs payable to ACB Co Vendor for OME work done for AFP were a combination of costs based on estimates and costs actually incurred.[78] Mr Holihan said the 'estimated costs', which were typically things such as electricity, freight (including truck charges), labour and raw materials (paper and starch), were based upon the volume of work done in square metres (sqm) or the number of hours that manufacturing machines were employed, or the number of hours that it took to have handwork done.[79] The 'other costs' were additional costs that were incurred by the ACB Business in relation to goods and services obtained from third parties.[80]

108 Mr Holihan's evidence was that when OME providers were doing OME work for AFP, it was 'common practice' for them to use goods and services purchased from others because there was no 'one stop shop' OME provider in New South Wales that was capable of doing every kind of work that AFP obtained from OMEs.[81]

109 Prior to the sale of the ACB Business, Mr Holihan was aware that ACB Co Vendor was not the only New South Wales-based OME supplier to AFP. He acknowledges that from his time spent in management of the ACB Business, and participation in the monthly management meetings of AFP New South Wales, he knew that other OME suppliers were used. He acknowledged that on 20 March 2003, he received an email from Megan Young (later known as Megan Griffiths) ('Young'),[82] one of the assistants to the accountants at AFP Smithfield, showing that the entities performing OME work included:

(a) Le Breton;

(b) Northwest Packaging;

(c) SPS Packaging;

(d) J S Cutting;

(e) Thompson;

(f) Ubeeco; and

(g) ACE Print.

110 In the principal judgment, Vickery J found that on 23 October 2002, the Amcor Board endorsed the plan reflected in the AFPA 'Blueprint for Further Improvement' slide presentation to the effect that the Wetherill Park site was to be sold, and the business closed or sold by June 2003.[83] Shortly thereafter Mr Barnes informed Mr Holihan that the Board had given 'in principle' approval to his acquisition of the ACB Business.[84]

111 On 2 June 2003, ACB Co Vendor, ACB Co Purchaser, Achilla and Mr Holihan (as the provider of limited guarantees of due performance by the Purchaser) executed an 'Asset Sale Deed' whereby most of the assets of the ACB Business were to be transferred by ACB Co Vendor to ACB Co Purchaser, so as to enable Achilla to carry on the ACB Business.[85] As was noted in the introduction, an important feature of the Second Sale Agreement was the reciprocal supply obligations pertaining to the supply of raw materials on the one hand, and the procuration of OME work on the other, that were to apply for a period of five years after Completion. As part of the contractual arrangements, ACB Co Purchaser (as 'Chargor') also granted a 'fixed and floating charge' to ACB Co Vendor and APA (jointly and severally as 'Chargee') to effectively secure the payment of the purchase price of $1 million by instalments over the five year period.

The Holihan parties contend that the Second Sale Agreement (as written) does not reflect the bargain the parties reached

112 In the Achilla Counterclaim, the Holihan parties contend that the Second Sale Agreement, as written, with ACB Co Vendor as the counterparty, does not accurately reflect the bargain that the parties reached. However, they do not contend for rectification of the agreement. Rather, they say, the facts demonstrate that the real or commercial agreement was one reached with APA, rather than ACB Co Vendor, such that the Court should find there was an implied supply agreement containing terms identical to clause 12 of the Second Sale Agreement, or alternatively, that APA is estopped from denying that it was bound by terms equivalent to those alleged in the implied supply agreement.

113 In support of their implied supply agreement, the Holihan parties say that both the 'sale obligation' contained in clause 12.1 and the 'purchase obligation' contained in clause 12.2 of the Second Sale Agreement were imposed on the 'Vendor', which was ACB Co Vendor, but they contend that that can only be due to misapprehension because 'the facts demonstrate that the parties always intended APA to be the counterparty to the supply obligations.'[86] They submit that for ACB Co Vendor to carry either the 'sale obligation' or the 'purchase obligation' after the sale of the ACB Business would demonstrably have made 'no commercial sense'[87] and would render them 'hollow' obligations.[88] That is because under the Second Sale Agreement, ACB Co Vendor sold all of its assets, being plant and equipment,[89] interests in contracts, customers, books and records, business name and goodwill, to ACB Co Purchaser and terminated all of its employees. Having done so, the Holihan parties contend ACB Co Vendor 'was left with no business that would have any OME requirements, and no capacity to supply raw materials to Achilla.'[90]

114 Further, the Holihan parties say that throughout the negotiations that culminated in the Second Sale Agreement, 'the role of APA/AFP/AFPA as the party bound by the purchase obligation and the sale obligation was taken for granted by those doing the negotiation.'[91] They say that their case is 'a very simple one', namely:

APA is a company that entered into a contract that bound it. The terms of that contract read down the scope of its operation by reference to a particular type of work, that being fibre packaging work, and by reference to, among other things, a geographical area by use of the exception. We don't need to draw fine distinctions between various business names that were owned by APA and used in the conduct of its business, and we don't structure our case by reference to those at all.[92]

Accordingly, Achilla has not made a claim for any work done for any business other than an AFP business, and no claim is made for any work done for any of the non-Sydney arms of the business.[93]

115 The Holihan parties submit that when regard is had to the evidence concerning the negotiations that led to the entry into the Second Sale Agreement, it is clear that the agreement as written 'did not embody the supply agreement that all of the parties understood that they had entered, or the arrangements that they acted upon.'[94] Further, they maintain that the parties' conduct after execution of the Second Sale Agreement effectively confirms this position. Accordingly, they contend that in those circumstances 'the law (via an implied contract, or an estoppel to like effect) recognises a contract between Achilla and APA in the same terms as those in clause 12 of the Second Sale Agreement.'[95]

116 In their counterclaim, the Holihan parties plead that the terms of the 'implied supply agreement' they contend for were 'identical to' clause 12 of the Second Sale Agreement, save that under the implied supply agreement, APA had the rights and obligations that ACB Co Vendor had under clause 12 of the Second Sale Agreement.[96] By the time closing submissions were made, however, the content of the alleged implied supply agreement had been enhanced. During closing submissions, in answer to a question from the Court, Counsel for the Holihan parties clarified the scope of the alleged implied supply agreement, as follows:

MS MURPHY: Your Honour, the implied agreement doesn't just pick up 12.1 and 12.2. So it would pick up, for example, the obligation to - clause 5.5, provide financial assistance for the first six months where Amcor was to pay weekly in arrears rather than the monthly reconciliation. It would pick up also clause 9.3, the PICK system, the obligation to leave intact the existing computer system. It would pick up...the restraint in clause 12.5 for example, 12.3, 12.4 obviously, and in relation to the lease, Your Honour, the lease is a separate agreement that stands, express agreement that can happily stand alongside the implied agreement.

So what we say is that the implied agreement picks up everything in the written agreement that is necessary for the operation of the supply agreement, the performance of the obligations.[97]

117 Further, in support of their implied supply agreement, the Holihan parties submit that the best indication of the fact that the construction for which they contend works is that it is precisely the construction that the parties explicitly agreed to on 21 March 2005 when they entered into the Deed of Accession, which Vickery J found 'in effect substituted APA for ACB [ACB Co Vendor] in relation to "all capacities and for all purposes under or pursuant to the Second Sale Agreement"'.[98] Accordingly, the Holihan parties say that from 21 March 2005 until its expiry, this contract worked exactly as they contend it was intended to work from Day 1, so there can be no objection to its practical operation in that context. (It is implicit in their argument that once the Deed of Accession was entered into, the implied supply agreement no longer operated.[99])

The Amcor parties contend that the Second Sale Agreement represents 'the entire agreement' between the parties

118 The Amcor parties' response is to deny that there was any implied agreement of the kind contended for by the Holihan parties or any estoppel by convention.

119 In their closing submissions, the Amcor parties adverted to the obvious shortcomings of the alleged implied supply agreement, pointing out that, 'for the implied Supply Agreement to function, more terms of the Second Sale Agreement would have to be picked up and included in that collateral contract'.[100] They observed that clause 12 cannot effectively function without, for example, bringing with it Annexure 5 (which deals with the D & D basis of charging for the purposes of clauses 12.1, 12.2 and 12.3) and the definitions clause in the Second Sale Agreement. They submitted that none of that is pleaded, and without it, the pleaded contract is inefficacious.[101]

120 Further, in reliance upon clause 15.11, the Amcor parties contend that the Second Sale Agreement represents 'the entire agreement between the parties', and say that while APA was 'clearly contemplated by' the Second Sale Agreement, it was not bound by it until the Deed of Accession was entered into in March 2005.[102]

121 The Amcor parties submit that, in any event, the evidence shows that there was no pre-contractual common intention that APA should be bound to obtain supplies from Achilla. They maintain that 'APA' was not, and never was, the same as the trading division 'AFP'. Furthermore, they submit APA was not the supplier of the ACB Business prior to the sale, nor was it the customer, so the premise that APA was the party to the supply arrangements does not fit with the commercial reality of what happened. Importantly, the Amcor parties say, Achilla does not claim that the Second Sale Agreement was 'mistaken' in its imposition of the clause 12.2 obligation upon ACB Co Vendor rather than APA. Had the Holihan parties wished to contend for this, they would have sought rectification, but they disavowed this course earlier on, preferring to opt for an implied agreement whereby they could contend that APA agreed to obtain 'all OME supplies' from Achilla or to rely upon an estoppel to similar effect. The Amcor parties submit that in this way, the Holihan parties seek to extend the 'business as usual' concept that the parties were operating under far beyond whatever happened in practice, and thereby to 'bind a large slice of APA (and thus its subsidiaries, divisions and their businesses such as Displays but not Metals, Corrugated, Plastics, Cartons and Sacks, Paper and Glass) to an obligation to obtain "all its OME Supplies" from Achilla.'[103]

122 Further, the Amcor parties contend that pre-contractual negotiations cannot support an estoppel by convention that is inconsistent with the terms of a written contract.[104]

The dispute between the parties involves the construction of the Second Supply Agreement and its terms

123 Against that background, it will be seen that there is a real dispute between the parties as to what was agreed between them, and by whom, concerning the sale of the ACB Business. The Amcor parties contend that their agreement is as recorded in the Second Sale Agreement (as written) and the Deed of Accession. Whereas the Holihan parties contend that at least until the Deed of Accession was entered into, there was also an implied supply agreement between APA and Achilla running 'sidecar' with the Second Sale Agreement and containing terms identical to clause 12 (and read together with 'everything in the written agreement that is necessary for the operation of the supply agreement'[105]); alternatively, that their relationship was conducted at all material times on the basis of a mutual assumption that the effect of the Second Sale Agreement would be that APA would be the entity bound by the sale obligation and the purchase obligation in clause 12.

124 The logical starting point is the Second Sale Agreement itself.

125 The Second Sale Agreement was styled as an 'Asset Sale Deed' and made between ACB Co Vendor (as 'Vendor'), ACB Co Purchaser (as 'Purchaser'), Achilla (as the trading entity) and Mr Holihan (as the provider of limited guarantees of due performance by the Purchaser) and executed on 2 June 2003.[106] The recitals stated:

1. The Vendor carries on the Business and owns the Assets.
2. The Vendor wishes to sell and the Purchaser wishes to purchase the Assets on the following terms and conditions.

1. Achilla will with the Vendor's consent change its name to Australian Corrugated Box Co Pty Limited [i.e., ACB Co Vendor's name].

1. The Vendor and Achilla will enter into trading arrangements as set out in detail in this Deed.
2. [Holihan] is a director of the Purchaser and is a party to this Agreement to provide certain limited guarantees of due performance by the Purchaser.

126 In clause 1.1 the terms 'Business' and 'Assets' were defined to mean, unless the context otherwise requires, as follows:

'Business' means the business carried on by the Vendor of the sale and supply of corrugated packaging as at the date of this Deed and for the avoidance of doubt, does not include any part or parts of the business of Amcor Packaging (Australia) Pty Limited [i.e., APA] or Amcor Ltd;

'Assets' means the property and assets owned by the Vendor in connection with the Business as at Completion including:

(a) the Stock;

(b) the Plant and Equipment;

(c) all of the interest of the Vendor under or arising out of the Contracts;

(d) the Customers;

(e) the Books and Records;

(f) the Business Name; and

(g) the Goodwill.

127 The 'Contracts' referred to in paragraph (c), and the 'Customers' referred to in paragraph (d) of the definition of Assets were defined in clause 1.1 to mean, respectively:

'Contracts' means any contracts and agreements (whether written, oral or arising through a course of trading, or a combination of any of these) which relate to the Business and to which the Vendor is a party or by which the Vendor may be bound as at Completion, including for the avoidance of doubt contracts and agreements for supply to Customers;

...

'Customers' means the customers of the Business or other persons to which the Business supplies or supplied products or services at the Completion Date or during the period of 12 months before that date, and for the avoidance of doubt includes:

(a) customers of the Vendor appearing on its debtors ledger; and

(b) those customers with which the Vendor's sales team has dealt at any time during the 12 month period up to the Completion Date.[107]

128 Clause 9 dealt with 'Contracts'. Clause 9.1 provided for the assignment of the Vendor's interest in, or the novation of, the Contracts in favour of Achilla or ACB Co Purchaser or both, on and from completion. These assignments and novations were expressed in clause 9.1(b) to be 'subject to and conditional upon the obtaining of any third party consents or approvals which may be necessary or desirable'. Provision was also made in clause 9.1(d) to ensure that following completion, ACB Co Purchaser or Achilla (or both) could obtain supplies of requisite materials such as starch, inks, waste, energy and relevant services 'at prices and on other terms which are no worse than those upon which the Vendor obtains the same'.

129 Clause 9.2 dealt with 'Practical arrangements' concerning assigned or novated contracts. Where a contract had been assigned or novated, or purported to be assigned or novated, ACB Co Vendor was required, 'to the extent practicable and appropriate to the nature of the relevant Contract', until the assignment or novation takes place to:

(a) sub-contract or grant to the Purchaser or Achilla a sub-lease or sub-licence or other right to use or exercise the subject matter of the Contract as if the Purchaser or Achilla had the same right, title and interest under the Contract as the Vendor, and the Purchaser or Achilla will otherwise in all respects carry out and perform obligations under such Contracts as sub-contractor for the Vendor; or

(b) hold the benefit of the Contract for the Purchaser or Achilla, provided that the Purchaser performs the obligations of the Vendor under the Contract on its behalf.[108]

130 Under clause 9.3, Achilla or ACB Co Purchaser was also given the ability to continue to use the existing computer ordering system that was used by the ACB Business. Clause 9.3 provided that:

The Vendor will at no cost to the Purchaser or Achilla and subject always to the terms of any licence in force for use of the same:

(a) leave intact the existing computer system by which orders are placed direct into the manufacturing system, use of which (and any related software) is pursuant to a licence from the Vendor, and no ownership or title therein is conferred on the Purchaser or Achilla, but upon replacement by the Vendor of the existing system with another system (as it is acknowledged is currently contemplated), the parties will meet to discuss and agree upon an effective and efficient process for achieving the same or substantially the same results; and

(b) make available to the Purchaser or Achilla an effective order processing and tracking system similar to that available to other customers of the Vendor by which the Purchaser may place and track orders in the Vendor's manufacturing system.[109]

131 Relevantly, the evidence was that there were two computer systems in use at the time of the sale, namely the Production Control System or 'PCS' and the 'PICK' system. The 'PICK' system was a costing and sales order processing system used by the ACB Business.[110] The component costs for each item of OME supply were effectively fixed at (or ascertainable by using) rates that were contained within the 'PICK' system.[111] Lead times for work to be undertaken were dictated by the amount of work that particular machines or work types were required to do at the time when the work was ordered. Mr Holihan said that 'PCS' (or Production Control System) was the machine loading and feedback system which received information from the 'PICK' system and managed the flow of work through the machines.

132 Clause 3.1 provided that the 'purchase price' for the 'purchase of the Business' (other than the Stock, Accrual Amount and pre-payment Amounts) is $1,000,000. The 'purchase price' was payable by instalments progressively over the period of the contract, with the first instalment (of $100,000) being payable within 12 months of completion and the fifth and final instalment (of $300,000) being payable within 60 months of Completion. Under clause 3.2, the purchase price for the stock was to be calculated pursuant to a stocktake and 'be payable 12 months from Completion'.

133 The 'trading arrangements' referred to in recital D were relevantly those set out in clause 12. Clause 12.1 dealt with the 'supply by the Vendor of raw materials' (corrugated board and cartons) and clause 12.2 dealt with the supply by the Purchaser of (finished) products. Each supply arrangement was drafted in a similar fashion, as is demonstrated in the side-by-side comparison below, and imposed correlative obligations on the Vendor on the one hand, and Achilla and/or the Purchaser on the other, that were to remain in force for a period of five years:

The Vendor will for a period of 5 years from Completion supply corrugated board and corrugated cartons ('Products') to the Purchaser and Achilla at prices based on D & D costs to the Vendor.

Achilla will for a period of 5 years from Completion supply Products to the Vendor at prices based on D & D costs to Achilla.

Achilla (and if appropriate the Purchaser) will for that period obtain all supplies of Products from the Vendor, save for those products that Achilla manufactures for itself (or the Purchaser), and will not during that period purchase or procure the supply of Products from any other party other than due to the Vendor's inability to supply consistently and on a basis which is commercial and reasonably acceptable in terms of price, quality and availability. After this period Achilla may (but only if the parties agree in writing) purchase Products from the Vendor on terms expected to be D & D + 20%.

The Vendor will for that period obtain all its OME supplies of Products from Achilla and will not during that period purchase or procure the supply of Products from any other party other than due to Achilla's inability to supply consistently and on a basis which is commercial and reasonably acceptable in terms of price, quality and availability.

For the periods referred to below prices to Achilla will be as follows:

For the periods referred to below prices to the Vendor will be as follows:

In all other respects supplies by the Vendor and acquisitions by Achilla will so far as not inconsistent with this clause 12 be made on Amcor Packaging (Australia) Pty Limited's standard terms and conditions applying for substantially similar supplies from time to time.

Achilla may request that the supply and other obligations in this clause 12 be extended by a further period of 60 months, such additional term to commence 60 months from Completion, but it is acknowledged that this will only be effected if all the parties agree in writing. The request will be exercisable by notice in writing to the Vendor given at any time within 30-60 months after Completion. A pricing basis of D & D +20% is expected to apply for the renewal term of 60 months.

134 Under clause 12.1, the Vendor was required to supply 'Products', being 'corrugated board and corrugated cartons', to the Purchaser and Achilla at prices based on D & D costs to the Vendor.[112] The acronym 'D & D' was defined in clause 1.1 to mean 'the applicable costing base of products for the purposes of calculating costs in relation to clause 12 as shown in Annexure 5'. Relevantly, the D & D costs were 'direct and distribution costs' that were effectively fixed or ascertainable under the contractual mechanism agreed between the parties (and further explained in Annexure 5 thereto) and were to be ratcheted up in each contract year by the agreed margin specified in clause 12. By adopting the D & D pricing mechanism, when an order was placed with the ACB Business using Amcor's 'PICK system', the PICK system could generate a costing or quote for the proposed work.

135 Under clause 12.1, Achilla (and if appropriate ACB Co Purchaser) was obliged to obtain all of its supplies of Products from the Vendor, save in the exceptional circumstances mentioned. Strictly speaking, this required Achilla to obtain from the Vendor 'all' of the raw materials to be used in any order placed by a customer irrespective of whether the work to be performed was 'OME' work (for an Amcor related customer) or third party work (for a non-Amcor related customer). In practical terms, however, the undertaking in clause 12.1 applied only to the supply of corrugated board and corrugated cartons for the non-Amcor work to be performed by the ACB Business, which constituted about 20 percent of its work. The evidence was that where the ACB Business was required to perform a job for an Amcor entity (or the customer of an Amcor entity), which constituted about 80 percent of the work performed by the ACB Business, the raw materials were supplied by the Amcor entity to Achilla and they remained its property during the whole process. That is, there was no initial charge to Achilla for the raw materials, and Achilla supplied the finished product to the Amcor entities at prices based on D & D costs to it. Further, in that scenario, the Amcor entity would invariably arrange (and bear the cost of) the freight associated with delivery of the finished product to the customer.

136 By means of the arrangement set out in clause 12.1, Achilla and ACB Co Purchaser were effectively assured that a supply of raw materials would be available to them by ACB Co Vendor at set prices throughout the term of the agreement, and ACB Co Vendor bound them to continuing to source their raw materials from it, save in the exceptional circumstances mentioned.

137 Similarly, under clause 12.2, Achilla was required to supply 'Products' to ACB Co Vendor at prices based on D & D costs to it. ACB Co Vendor, in turn, was obliged to 'obtain all its OME supplies' of 'Products' from Achilla, save in the exceptional circumstances mentioned. The prices at which Achilla was to make the OME supplies of 'Products' available to ACB Co Vendor were based on 'D & D costs' plus a margin (initially 12% and ratcheted up by an additional 2% in each annual period of the 5 year term to a maximum of 20%). Once again, the contractual pricing mechanism of 'D & D' plus a margin operated so that, by using the PICK system, the parties could ascertain or predict the price at which the relevant supply of Products would take place in each 12 month period during the term.

138 Under clause 2.2, the Vendor and Purchaser agreed, 'solely for Tax[113] purposes' that any supply made under the Second Sale Agreement 'is of a going concern as defined within A New Tax System (Goods and Services Tax) Act 1999.'

139 Under clause 4.2, each of the Vendor and Mr Holihan 'as an employee of the Vendor' undertook that until Completion[114] they would 'conduct the Business in the ordinary course and in substantially the same manner as it was conducted prior to the date' of the Second Sale Agreement.

140 The only Amcor company that was named as a party to the Second Sale Agreement was ACB Co Vendor, which carried on the 'Business' and owned the relevant 'Assets'. APA, the parent of ACB Co Vendor, was mentioned in the Second Sale Agreement but was not named as a party to it. For example:

• As noted above, the definition of the 'Business' in clause 1.1 expressly stated 'for the avoidance of doubt' that the Business 'does not include any part or parts of the business of Amcor Packaging (Australia) Pty Limited [i.e., APA] or Amcor Ltd'.
• Clause 12.1 provided, in the context of supplies of raw materials by ACB Co Vendor and acquisitions by Achilla, that such supplies 'will be made on Amcor Packaging (Australia) Pty Limited's [i.e., APA's] standard terms and conditions applying for substantially similar supplies from time to time.'
• The Deed of Charge set out in Annexure 4 to the Second Sale Agreement was to be a fixed and floating charge made at Completion between ACB Co Purchaser as Chargor and ACB Co Vendor and 'Amcor Packaging (Australia) Pty Ltd (trading as Amcor Fibre Packaging)' jointly and severally as Chargee.
• The draft of the proposed sub-lease of the Wetherill Park premises, where the ACB Business was conducted, was set out in Annexure 6 to the Second Sale Agreement. It was to be made at Completion between APA (as lessee) and Achilla (as sub-lessee), and provided amongst other things that APA would 'maintain its corrugator and pay for the space consumed by this machine and associated raw materials' but APA was also permitted to remove the corrugator from the Wetherill Park premises at any time.

141 Further, clause 2.4 expressly provided that obligations of the Vendor, or property to be transferred by the Vendor, may be carried out or effected 'by or through a Related Body Corporate, including for the avoidance of doubt Amcor Packaging (Australia) Pty Limited and Amcor Ltd.'[115]

142 As noted earlier, it was not until the Deed of Accession was entered into in March 2005 that APA formally became a party to the Second Sale Agreement.

Issue 1A: Was the date of 'Completion' of the Second Sale Agreement 30 July 2003 (as the Amcor parties contend) or 31 July 2003 (as the Holihan parties contend)?

143 Issue 1A simply reflects a contest between the parties as to when 'Completion' took place. The Amcor parties contend that it was on 30 July 2003 whereas the Holihan parties submit the evidence demonstrates that it took place on the following day.

144 Clause 9.4 of the Second Sale Agreement provided that ACB Co Purchaser was to assume:

(a) all liabilities of the Vendor in relation to the Business which arise in relation to the conduct of the Business arising following Completion; and

(b) all liabilities which arise in relation to the conduct of the Business prior to Completion, to the extent that that liability has been included in the calculation of the Accrual Amount.[116]

145 Similarly, under clause 12.2, Achilla's obligation to supply Products to the Vendor operated 'from Completion' for a period of five years.

146 The expression 'Completion' was defined in clause 1.1 to mean:

completion of the sale and purchase of the Assets under this Deed.

147 Under clause 5.1, 'Completion' was to take place at the Wetherill Park factory premises on the 'Completion Date', which was defined in clause 1.1 to mean:

close of business on 30 July 2003 or such other time and date as the parties agree in writing.

148 The Holihan parties submit that while there is no evidence of an explicit agreement as to the Completion Date, nevertheless the evidence demonstrates that the parties had agreed to change the date to 31 July 2003.[117]

149 Mr Holihan gave evidence that Completion took place on 31 July 2003[118] and ACB Co Purchaser took control of all of the equipment of the ACB Business on 1 August 2003.[119] The Amcor parties led no evidence to the contrary from any witness.

150 Documentation passing between the parties was consistent with the evidence given by Mr Holihan, as was the Amcor parties' internal correspondence.

151 On the morning of Thursday 31 July 2003, Mr Holihan sent Mr Darren Nellies, a business services manager for Amcor,[120] an email confirming the contents of an earlier telephone conversation between them. He stated that they were 'loading stuff today for delivery tomorrow [Friday]', and asked that Mr Nellies arrange for 'any trucks with board to come in after noon'.[121] Mr Holihan said that he informed Mr Nellies that they would lose only one day of production, being Friday 1 August 2003, and production would re-commence the following Monday (4 August 2003). Any deliveries would be received by Achilla that afternoon, and with extra people and overtime used on Monday, they would convert the material with minimum disruption. Mr Holihan also explained that on Friday 1 August 2003, which he said was the first day of the supply contract, each of the ex-ACB Co Vendor employees that worked in the Wetherill Park factory underwent an interview with Forstaff, the labour hire firm Achilla had commissioned to find suitable factory staff. He said that they had sufficient numbers available on that day for the volume of work Achilla had received.[122]

152 On 31 July 2003, Mr Holihan also received an email from Amcor representatives confirming that Amcor-owned stock and equipment at the Wetherill Park factory would continue to be covered by its insurance until such time as alternative insurance arrangements have been received.[123] Mr Holihan forwarded this email to Mr Ian Lewis at Amcor's head office. At that point in time, Mr Lewis was the secretary of ACB Co Vendor. The Holihan parties submit this email confirmation is consistent with the transfer of ownership of the ACB Business on that date.

153 Also on 31 July 2003, Mr Holihan executed a letter agreement with AFP to issue 'recipient created tax invoices' that Mr Anthony (Tony) Joyce (then Commercial Manager, Operations, AFP) had sent him. In his letter, Mr Joyce referred to Achilla receiving fees for toll converting from AFP 'from 1 August 2003'.[124]

154 Similarly, the Holihan parties submit that AFP's internal correspondence indicates an acceptance that Completion occurred on 31 July 2003. In an email from Mr Lewis to Mr Joyce, Mr Brown (then Managing Director of Amcor Australasia) and others dated 4 August 2003, Mr Lewis stated that 'the business operating as Australian Corrugated Box has been sold effective 31 July 2003.'[125]

155 The submission made by the Amcor parties simply focusses on the provisions of the Second Sale Agreement (referred to above). They contend that the Second Sale Agreement says what Completion is, and as there is no evidence that it was varied in writing, Completion remained as 30 July 2003. Further, they noted that when the definition of Completion Date refers to 'close of business on 30 July 2003' (emphasis added), it may be that it gave the false impression that completion occurred on 31 July 2003.

156 In my view, the internal correspondence sent by Mr Lewis dated 4 August 2003 informing interested Amcor staff and entities that 'the business operating as Australian Corrugated Box has been sold effective 31 July 2003'[126] confirms that Completion did not occur prior to that date. He was clearly operating on the basis that the sale was 'effective 31 July 2003'. It will be recalled that Mr Lewis was the secretary of ACB Co vendor and he witnessed its execution of the Second Sale Agreement. He was also aware of the insurance arrangements concerning the Amcor-owned stock and equipment at the Wetherill Park factory because Mr Holihan had forwarded the insurance advice to him. In my view, the internal correspondence records, or provides written confirmation of, the effective position between the parties. Accordingly, I am satisfied that Completion took place on 31 July 2003.

Issue 1B: Did Achilla commence operations of the ACB Business on 4 August 2003 (as the Amcor Parties contend) or 1 August 2003 (as the Holihan Parties contend)?

157 There now appears to be no real dispute between the parties on this issue. The Amcor parties accept that because there is unchallenged evidence that Achilla had commenced operations on 1 August 2003, in so far as material was being loaded, deliveries were being received, and potential staff were being interviewed on that day, the Court can make a finding to the effect.[127] Accordingly, I so find.

KEY ISSUE: Was there an implied supply agreement between APA and Achilla containing terms identical to clause 12 of the Second Sale Agreement, or is APA estopped from denying that it was bound by terms equivalent to those alleged in the implied supply agreement?

Issue 1: Was there an implied supply agreement between APA and Achilla containing terms identical to clause 12 of the Second Sale Agreement?

The 'implied' supply agreement alleged by the Holihan parties

158 As noted above, the Holihan parties allege that at all relevant times prior to the entry into the Deed of Accession there was an 'implied' supply agreement between APA, the parent of ACB Co Vendor, and Achilla containing terms identical to clause 12 of the Second Sale Agreement. In essence, they contend that the reference to 'the Vendor' in clauses 12.1 and 12.2 of the Second Sale Agreement was, and was treated by all parties as, a reference to APA, rather than to ACB Co Vendor itself. They say the facts demonstrate that the parties always intended APA to be the counterparty to the clause 12 supply obligations because after Completion of the sale of the ACB Business, there was simply no prospect that ACB Co Vendor would have any need for the supply of OME products, it having sold all of its plant and equipment, interests in contracts, customers, books and records, business name and goodwill to ACB Co Purchaser, and terminated all of its employees. Further, it was also said that because ACB Co Vendor was not itself a supplier of raw materials before the sale, it was unlikely that after completion of the sale, ACB Co Vendor would have any ability or capacity to supply raw materials to Achilla.

159 The Holihan parties seek to address the disconformity between what they contend was the practical and commercial reality of the arrangements proposed between the parties on the one hand, and the terms of the Second Sale Agreement on the other. To this end, they plead the existence of an implied contract between APA (the parent of ACB Co Vendor) and Achilla (but not ACB Co Purchaser) in essentially the same terms as those set out in clause 12 of the Second Sale Agreement.

160 The plea concerning the implied supply agreement was not present in the original counterclaim when it was filed by Achilla but it was added at a later point.[128] In its current form in the Fourth Amended Counterclaim, the 'implied' supply agreement is pleaded as follows:

Contemporaneous with the execution of the Second Sale Agreement, APA and Achilla entered an exclusive supply agreement (the "Supply Agreement"), the terms of which were identical to cl. 12 of the Second Sale Agreement, save that under the Supply Agreement, APA had the rights and obligations that [ACB Co Vendor] had under cl. 12 of the Second Sale Agreement. [129]

161 Particulars of the implied supply agreement were given as follows:

The Supply Agreement was partly in writing and partly to be implied.

In so far as it was in writing, it was constituted by the Second Sale Agreement. In so far as it was implied, it was implied from the following facts:

(a) the Second Sale Agreement provided for [ACB Co Vendor] to sell all of the property and assets that it owned in connection with the business of selling and supplying corrugated packaging, including its interest in contracts with its customers;

(b) prior to completion of the Second Sale Agreement, APA was the largest customer of [ACB Co Vendor] by turnover;

(c) the effect of the Second Sale Agreement was to be that [ACB Co Vendor] would no longer be a purchaser or supplier of corrugated products;

(d) for those reasons, if [ACB Co Vendor] (and not APA) was to be the counterparty to Achilla under clause 12 of the Second Sale Agreement, that clause would serve no commercial purpose;

(e) during the negotiations that culminated in the execution of the Second Sale Agreement, Achilla (through Mr Holihan) and APA (through its representatives including Trevor Barnes, John MacPhail, Tony Joyce, Ryan Patrick (sic[130]), Ken Parker, Jim Hodgson, Paul Brown, Peter Dwyer and Greg Crouch) expressed a common intention that the effect of the agreement would be that APA would be the party bound by clause 12.

The intention of the parties is to be inferred from a conversation between Mr Holihan and Mr MacPhail on or about 20 September 2002 in which:

- Mr MacPhail said words to the effect that the vendor and purchaser companies needed to be corrected in the draft agreement so that the agreement was between [ACB Co Vendor], and Mr Holihan and his company;

- Mr Holihan said words to the effect that the supply agreement needed to involve AFP;

- Mr MacPhail said words to the effect that that was unnecessary, that the involvement of AFP was taken care of under clause 2.4; and that the agreement would work exactly the same way as it had with ACB Packaging[131] -

...[132]

(f) in the period following execution of the Second Sale Agreement (and save to the extent that APA breached the Supply Agreement as described below), APA and Achilla conducted themselves as if they were bound by clause 12 of the Second Sale Agreement.

The conduct was as follows:

(i) APA gave orders to Achilla, and Achilla supplied Products to APA, as if those orders and supplies were subject to clause 12.2 of the Second Sale Agreement. Particulars of those supplies are set out in document 1L of Achilla's discovery on the counterclaim; and

(ii) as demonstrated by the following documents.[133]

...

162 As pleaded, it is clear that the implied supply agreement alleged by the Holihan parties is not simply a term that is to be implied into the Second Sale Agreement. Rather, it involves the Court finding a fresh agreement that is said to have been entered into contemporaneously with the written agreement, but between different parties, and operating alongside the written agreement and concerning only the obligations and matters set out in clause 12 of the Second Sale Agreement. Further, the Holihan parties say that just as the rights and obligations in clause 12 of the Second Sale Agreement must be read in the context of the remainder of that agreement, so the rights and obligations under the implied contract would be subject to the same ancillary machinery, mutatis mutandis.

163 It should also be noted that by contending that APA is the counterparty under the implied supply agreement, the Holihan parties seek to capture, and bring within the Vendor's obligation in clause 12.2, all of APA's OME requirements. That is, they effectively maintain that the Vendor's obligation in clause 12.2 is to be construed so as to mean that any OME work required by any of the AFP businesses that fall within APA's Corrugating division in New South Wales, including Amcor Displays, was to be given to Achilla.

164 In opening the case for the Holihan parties, Counsel said the implied contract 'sits happily next to the equivalent part of the written agreement, which can sit silently unused while the remainder of the written agreement is complied with.'[134] Further, Counsel for the Holihan parties explained:

the parties didn't intend to have a written agreement and an implied oral agreement sitting next to it. The parties intended to have one suite of agreements which would operate in a particular fashion. The fact is they didn't write that down. What they did write down gave rise at law to the effect that the part they didn't write down took effect as an implied agreement. And the reason that there's no problem about that is because the implied agreement can happily sit consistently with what they wrote down and did.[135]

165 The Holihan parties' case as summarised in their closing oral submissions has three aspects to it. First, it was said the structure of the Second Sale Agreement demonstrates that APA was intended to be the counterparty. Secondly, the facts demanded that APA be the counterparty in the sense that it had to be the counterparty in order for the agreement to work. Thirdly, the parties at all times conducted themselves as if APA was the counterparty.[136]

166 The impact of this implied supply agreement issue is important because, as the Holihan parties' observe, APA is the only (relevant) defendant to counterclaim, so that if the implied supply agreement is accepted, Achilla's claim will extend from the date of Completion to the date five years after that date. If the implied supply agreement is rejected, however, then Achilla's claim will be restricted to supplies made after the commencement of the Deed of Accession on 21 March 2005.[137]

The Amcor parties deny that there was any implied supply agreement

167 In their defence, the Amcor parties deny that there was any implied contract or supply agreement of the kind the Holihan parties allege.[138] They plead that '[t]he Second Sale Agreement represented the entire agreement of the parties about the subject matter of that deed'[139] and that 'it superseded any representations, negotiations, arrangements, understandings or agreements and all other communications',[140] and that '[i]t follows that the Second Sale Agreement superseded all arrangements and understandings including the common intention to which Achilla refers ... (the existence of which is denied).'[141]

168 Further, they contend that, in the premises, the Second Sale Agreement does not provide a written foundation for the alleged implied supply agreement. Rather, they say that the implied supply agreement is an artificial concept designed by the Holihan parties to avoid or circumvent the existence and plain effect of the Second Sale Agreement (including the 'entire agreement' clause set out in clause 15.11) and the operation of the Deed of Accession that was entered into in March 2005. They also rely upon clause 2.4 of the Second Sale Agreement, contending that it enabled any obligation imposed on ACB Co Vendor under the agreement to be carried out by ACB Co Vendor through a related body corporate, including APA and Amcor Limited.

169 The Amcor parties plead that pursuant to the Second Sale Agreement:

(a) in the period from close of business on 30 July 2003 to 21 March 2005:

(i) ACB Co Vendor whether in its own capacity or through a related entity such as APA pursuant to clause 2.4 supplied corrugated board and corrugated cartons (defined as "Products" in the Second Sale Agreement) to Achilla; and

(ii) ACB Co Vendor whether in its own capacity or through a related entity such as APA pursuant to clause 2.4 sought OME (Outside Manufacturing Enterprise) supply from Achilla.[142]

(b) In the period from 21 March 2005 to 30 July 2008, as a result of the matters pleaded below in respect of the Deed of Accession, APA in its own right fulfilled the supply obligations resting on ACB Co Vendor under clause 12 of the Second Sale Agreement.[143]

170 In further answer to the implied supply agreement advanced by the Holihan parties, the Amcor parties also plead that the 'Amcor Displays Business', being the graphics and displays business operated by the business named 'Amcor Displays', was 'distinct from' both the business operated by ACB Co Vendor prior to the execution of the Second Sale Agreement and the businesses operated by APA.[144] In that regard, the Amcor parties plead that, at all material times:

(a) The Amcor Displays Business did not form part of the Amcor Fibre Packaging business carried on at APA's Smithfield and Revesby box plants ("AFP Business");

(b) The OME supplies of Products to Service Containers[145] did not form a supply of such Products to APA;

(c) The parties did not intend that, following the execution of the Second Sale Agreement, Service Containers would become obliged to purchase or procure all of its OME supplies of Products from Achilla.[146]

Further, they contend that '[u]nder the Second Sale Agreement, as a matter of interpretation, the obligations in clause 12 did not extend to the OME supply of Products to Service Containers'[147] and a similar position applies in the case of the implied supply agreement (the existence of which is denied).[148] Accordingly, they plead that there was 'no mutual understanding or arrangement that Service Containers would be bound to obtain all of its OME supplies of Products from Achilla.'[149]

171 In particular, the Amcor parties take issue with two fundamental aspects of the factual basis the Holihan parties rely upon as giving rise to the implied supply agreement. They point to the fact that first, the Holihan parties allege that at the time of sale the largest customer of the ACB Business was AFP, which was a trading division of APA. Secondly, they say the Holihan parties then proceed to effectively equate AFP with APA and maintain that (1) APA sent short run specialty work (or OME) to the ACB Business; and (2) APA supplied the ACB Business with raw materials (i.e., corrugated cardboard), both for use in work for its own customers and as the raw product for OME work required by APA.[150]

172 The case presented by the Amcor parties at trial, however, differed somewhat from the case as pleaded. The Amcor parties acknowledge that 'there are difficulties with the named parties within the agreement' and they say this is because 'Amcor has at all times operated a business model based on operating divisions.'[151] The Amcor parties dispute, however, both that APA was the supplier of corrugated cardboard to the ACB Business and that it was relevantly the customer of the ACB Business. They say that APA ran national businesses across different industries: Metals, Corrugated, Plastics, Cartons and Sacks, Paper and Glass,[152] as Vickery J noted in the principal judgment. APA operated sites within those different divisions nationally and also in New Zealand. The Amcor parties contend that the customer of the ACB Business was not APA, but rather that it was the businesses conducted at the Smithfield and Revesby sites in New South Wales, trading as AFP, that placed orders with the ACB Business and supplied the raw materials.[153] Further, they say that APA was not and never was the same as 'AFP', AFP being simply a reference to the division of Amcor that operated the corrugated board aspect of the Amcor business, nor was it the equivalent of the AFP New South Wales, Smithfield and Revesby sites.[154]

173 The gist of the Amcor parties' response to the implied supply agreement alleged by the Holihan parties was explained by Senior Counsel in opening their case, as follows:

we say the objective intention was that the [ACB Co Purchaser] would step into the shoes of the [ACB Co Vendor], the shoes that [ACB Co Vendor] was wearing prior to the sale. And our case will be that on [that] construction of the contract that Achilla would continue to get the kind of work that it was doing before ...[155]

174 The Amcor parties expressly accept that clause 12.2 of the Second Sale Agreement required Amcor to continue to obtain OME supplies from Achilla, where the previous ACB Business had already been producing those jobs for Amcor's customers, unless Achilla could not do so consistently and on a basis which was commercial and reasonably acceptable in terms of price, quality and availability.[156]

Amcor's 'business as usual' case as set out in their aide-mémoire documents

175 During the opening of the Amcor parties' case, Senior Counsel provided two diagrams to the Court, the first entitled 'Diagram of how the AFP NSW Smithfield and Revesby sites gave work to the ACB Business and other OME suppliers before the sale' and the second entitled 'Diagram of how the AFP NSW Smithfield and Revesby sites gave OME jobs to Achilla and other OME suppliers after the sale.' These diagrams represented the gist of what their 'business as usual' case entailed as a practical matter both before and after the sale.

176 In their closing written submissions, the Amcor parties refined the argument further and sought to explain the role of ACB Co Vendor in the context of their 'business as usual' case. They contended that while under clause 12.2 of the Second Sale Agreement, the obligation to obtain OME supplies from Achilla is imposed on the 'Vendor', and ACB Co Vendor is the named vendor, nevertheless '[t]he evidence shows that the parties did not have regard to the identity of the "Vendor" but continued to operate on the basis of business as usual, as it was run on the day before the sale.'[157] In other words, the Amcor parties maintain that, notwithstanding the sale of the ACB Business to the Holihan parties, the ACB Business would (and did), as a practical matter, continue to do 'business as usual', in the sense that under the new ownership arrangements, the ACB Business would (and did) continue to perform the work that historically had been undertaken by the ACB Business, and essentially on the same basis as before, including that its supplies of raw material would continue to be sourced from the AFP businesses conducted at the Smithfield and Revesby sites in New South Wales.

177 In the course of presenting their oral closing submissions, the Amcor parties provided a further table format document to the Court as an aide-mémoire to assist the Court and the parties to better understand the Amcor parties' case concerning the operation of the Second Sale Agreement with ACB Co Vendor as the Vendor. The aide-mémoire set out the essential propositions of the respective parties' cases under a timeline, commencing with the 'Period pre-Completion of the Second Sale Agreement', then moving through the 'Period between Completion and the Deed of Accession', and finally the 'Period following the Deed of Accession'. Relevantly the document summarised the Amcor parties' case by reference to those various periods in time as follows.

(1) Period pre-Completion of the Second Sale Agreement

178 The Amcor parties submit that in the pre-Completion period:

• Some of the short run work was done by the ACB Business within Amcor;

• ACB[158] operated out of Wetherill Park and serviced the Amcor corrugated box manufacturing sites at Smithfield and Revesby (AFP NSW);

• Other short run work from Smithfield and Revesby was outsourced externally to several OME suppliers, including Thompson, J S Cutting, Northwest Packaging, Sainsbury, SPS Packaging and Ubeeco.

(2) Period between Completion and the Deed of Accession

179 The Amcor parties contend that in this period the Amcor entity that was the party to the supply agreement was ACB Co Vendor. The Amcor parties' position is that:

• Pursuant to clause 12.2, ACB Co Vendor would obtain all its OME supplies from Achilla other than due to Achilla's inability to supply consistently and on a basis which is commercial and reasonably acceptable in terms of price, quality and availability.

• Clause 2.4 allowed ACB Co Vendor to have any of its obligations carried out by other parts of Amcor.[159]

• The words 'all its OME supplies' refer to the business that the ACB Business was conducting prior to the sale, i.e., 'business as usual'.

• After Completion and before the Deed of Accession was entered into, the Smithfield and Revesby box plants (AFP NSW) continued to give the Holihan parties the sort of work ACB[160] had been doing prior to the sale.

• 'AFP NSW'[161] did not include, and was separate from, Amcor Displays.

180 The Amcor parties contend that following the entry into the Deed of Accession, the Amcor entity that was the party to the supply agreement was APA 'insofar as it was to perform the rights and obligations of ACB Co Vendor.' The Amcor parties' position is that:

• The evidence is that the Deed of Accession was entered into as a result of a 'tidying up' within head office which administered the corporate entities for statutory and accounting purposes.[162] The operating side of Amcor was not involved and had no knowledge.

• The Deed of Accession did not expand the obligations under the Second Sale Agreement. Rather, APA simply 'stepped into the shoes of' ACB Co Vendor.[163] Amcor Displays was not part of the agreement in 2003, and it was not inadvertently included from 21 March 2005 as a result of the Deed of Accession.

• Further, the Amcor parties contend that the Deed of Accession 'also points firmly against the adoption of a common assumption' of the kind pleaded by the Holihan parties in their estoppel by convention case 'that APA was bound by clause 12'.[164]

181 As will be apparent from the foregoing, in the period between Completion and entry into the Deed of Accession, the Amcor parties effectively acknowledge the difficulty in making the Second Sale Agreement work as a practical matter in circumstances where ACB Co Vendor is the Amcor entity that is bound by the supply obligations in clauses 12.1 and 12.2. In the course of oral closing submissions, Senior Counsel for the Amcor parties explained the operation of clauses 12.1 and 12.2 of the Second Sale Agreement in the period after Completion, submitting that ACB Co Vendor is promising in clause 12.1 that it will supply corrugated board and corrugated cartons, and in clause 12.2 that it will procure OME supplies from Achilla, and in each case, 'is delegating the performance of that promise to AFP'.[165] Senior Counsel elaborated further, by submitting that 'there's been a delegation of that performance',[166] and she referred the Court to a line of English cases, notably Nokes v Doncaster Amalgamated Collieries Limited,[167] British Waggon Co and Parkgate Waggon Co v Lea & Co[168] and Davies v Collins[169] as cases establishing the concept of vicarious or delegated performance.

182 In Nokes, the question before the House of Lords was whether, upon the court making an order for the amalgamation of two companies under section 154 of the Companies Act 1929, a contract of personal service existing at the date of amalgamation between a workman and the transferor company is automatically transformed into a contract of personal service between the employee and the transferee company irrespective of the consent of the employee. The House of Lords (Lord Romer dissenting) held that it does not.

183 In support of their delegation of performance argument, the Amcor parties rely upon a passage in the judgment of Viscount Simon LC, where his Lordship discusses the assignability of contracts, as follows:

The rules of law restricting the assignability of contracts are, however, by no means limited to contracts of personal service. In the case of contracts for the sale of goods, for example, (unless the contract expressly or by implication covers the purchaser and his assigns), the seller is entitled to rely on the credit of the purchaser and to refuse to recognise any substitute. Similarly, the purchaser is entitled to rely upon the seller and to hold him responsible for due performance. I may add that a possible confusion may arise from the use of the word "assignability" in discussing some of the cases usually cited on this subject. Thus, in British Waggon Co and Parkgate Waggon Co v Lea the real point of the decision was that the contract which the Parkgate company had made with Lea for the repair of certain wagons did not call for the repairs being necessarily effected by the Parkgate company itself, but could be adequately performed by the Parkgate Company arranging with the British Waggon company that the latter should execute the repairs. Such a result does not depend on the assignment of contract at all. It depends on the view that the contract of repair was duly discharged by the Parkgate company by getting in the repairs satisfactorily effected by a third party. In other words, the contract bound the Parkgate company to produce a result, not necessarily by its own efforts, but, if preferred, by vicarious performance through a sub-contractor or otherwise.[170]

184 Senior Counsel for the Amcor parties submitted that the concept in British Waggon that Viscount Simon LC had referred to was that of 'getting the job done, not necessarily by its own efforts, but it's arranging or facilitating to get it done',[171] and that '[i]t doesn't require an assignment or proof in writing. Inference can be it's going to be done.'[172] She acknowledged, however, that the position was different where a contract expressly or impliedly required personal performance.

185 Senior Counsel then proceeded to explain how the Amcor parties contended this concept of delegation of performance operated in the present case without invoking the operation of clause 2.4. [173] In effect, Dr McNicol QC submitted that in contradistinction to clause 2.4, the common law authorities she had referred to make clear that the ability to delegate performance is not confined to delegation to a related body corporate. She then summarised the Amcor parties' position, contending that it was neither relevant, nor necessary, to ask the question of the proper construction of the contract, but rather to look at the fact that the obligation was fulfilled through the life of the contract. It was said that 'the way that the Amcor business was structured, it ran on operational levels,'[174] and there was no evidence that clause 2.4 was invoked.[175] Dr McNicol QC submitted that relevantly, clause 12.2 operated by guaranteeing that ACB Co Vendor would obtain all its OME supplies from Achilla for the relevant period and the expression 'all its OME supplies' meant 'the OME supplies of the pre-existing ACB business.'[176] She explained:

It's business as usual, that's the concept that we've invoked, and we say that whatever evidence there is of the conduct and operation of the ACB business prior to the execution is precisely the same business that is to be carried on after the execution.[177]

186 The Holihan parties contend that where the facts indicate the existence of a particular agreement or contractual relationship, the law will imply a contract where to do so is necessary to give effect to the reality of the parties' intentions. In this regard, they rely upon (what are said to be) the words of Bingham LJ in The Aramis,[178] to the effect that the common law will imply a contract where that is:

... necessary ... in order to give business reality to a transaction and to create enforceable obligations between parties who are dealing with one another in circumstances in which one would expect that business reality and those enforceable obligations to exist.[179]

The Holihan parties acknowledge, however, that consistency of the parties' conduct with the terms of the contract alleged is not enough: rather, there must be a positive indication of the existence of the particular agreement in question.[180]

187 The Holihan parties submit that there is nothing novel in the co-existence of a written contract between parties A and B, and an implied contract between parties B and C, concerning overlapping subject matter. They argue that such contracts are frequently recognised by courts in what are known as 'triangular contracting' cases, in the context of employment law: where a labour hire company enters into a written contract with a worker requiring the worker to provide services to a customer, and a contract with the customer agreeing to provide the services of workers to that customer, but the courts nevertheless find there is an implied contract between the worker and the customer. They rely upon the decision of the Court of Appeal in Homecare Direct Shopping Pty Ltd v Gray[181], which was a triangular labour hire case, where Forrest AJA (with whom Neave and Kellam JJA agreed) accepted that when the totality of the triangular arrangements made between the parties are examined, the court may find that the entry into a written contract does not preclude the implication of a contract in a context where work is performed by one person for another. Forrest AJA referred to the decision of the English Court of Appeal in Brook Street Bureau (UK) Ltd v Dacas[182] where Mummery LJ said:

Depending on the evidence in the case, a contract of service may be implied - that is, deduced - as a necessary inference from the conduct of the parties and from the circumstances surrounding the parties and the work done. As already indicated, the overall situation under consideration is shaped by the triangular format used for the organisation of the work: the applicant, the employment agency and the end-user are all involved. Each participant in the triangular situation may have an express contract with either one of, or with each of, the other two parties.

The critical point is that, although the construction of the contractual documents is important, it is not necessarily determinative of the contract of service questions, as contractual documents do not always cover all the contractual territory or exhaust all the contractual possibilities. In determining the true nature of the relationship (if any) between each of the respective parties, it is necessary to consider the total situation occupied by the parties.[183]

188 Forrest AJA said that this approach was consistent with what was said in Ermogenous v Greek Orthodox Community of SA Inc[184] where the High Court recognised that the search for whether a contract exists may not be confined to the examination of the terms of a particular contractual document. His Honour said that in ascertaining whether an implied contract exists, the court must consider 'all the factual issues, including the written agreements'[185] and that 'it is the whole of the circumstances viewed objectively that will determine whether a contract exists or not.'[186] Forrest AJA found that, in the circumstances of the Homecare case, it was open for the trial judge to find that there was an implied contract between the retailer and the worker.[187]

189 The Holihan parties also rely upon the decision of the Full Federal Court in Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd[188] and the earlier case of Damevski v Guidice[189] to which North and Bromberg JJ referred with approval in their joint judgment in Quest.[190] Since the present matter was argued, however, the High Court has allowed an appeal from the decision of the Full Federal Court in Quest, concerning the proper construction of s 357(1) of the Fair Work Act 2009 (Cth): see Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (ACN 109 989 531).[191]

190 In Quest, the respective decisions turn on the nature of the employment relationship of the two women, who were employed as housekeepers, and the sham nature of their independent contractor status. The High Court noted that the two women 'continued to perform precisely the same work for Quest in precisely the same manner as they had always done' and 'in law, they never became independent contractors.'[192] The High Court held that s 357(1) of the Fair Work Act 2009 (Cth) is not confined in the manner suggested by the Full Federal Court, namely to misrepresentations by an employer to an employee. Rather, the High Court said the purpose of the provision, when read in the context of the legislative scheme, 'is to protect an individual who is in truth an employee from being misled by his or her employer about his or her employment status, and 'it is the status of an employee which attracts the existence of workplace rights.'[193]

191 In my view, the respective decisions in Quest turn on the particular facts of the employment situation and the statutory framework and do not assist in resolving the quite different issues that arise in the present case.

192 The Holihan parties' case for implication of a fresh and separate agreement between APA and Achilla is advanced primarily on the basis that it is necessary to do so in order to give effect to the 'obvious business reality'[194] of the situation that existed between the parties. They contend that absent the implied agreement, the business reality of the parties' relationship would be frustrated.

193 The Holihan parties' case is effectively that the documentation of the agreement reached between the parties miscarried - while ordinarily that would give rise to a claim for rectification, the Holihan parties seek to sidestep the difficulties inherent in making out such a case by pleading the existence of a fresh implied contract, made between a subset of the parties that were involved in the negotiations.

194 The Amcor parties reject the notion that there was any implied agreement of the kind contended for. First, they say the implied agreement is nothing short of a claim for recognition of a 'collateral contract', and courts are notoriously slow to find the existence of a collateral contract, particularly where the contract is one sought to be implied from conduct. As Finkelstein J observed in Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd,[195] 'the case for an implied contract will be rare' and 'it is only in a very clear case that a promise will be implied from facts which do not involve written or oral communications from which a promise appears.'[196]

195 Further, the Amcor parties say[197] that for a contract to be implied:

the conduct relied upon must 'necessarily'[198] lead to the inference that an agreement has been made. 'Not only must the conduct point to the existence of a contract but it must point to the existence of the contract in the terms alleged in the proceedings.'[199] And '[i]t is not enough that the conduct is consistent with what are alleged to be the terms of a binding agreement. The evidence must positively indicate that both parties considered themselves bound by that agreement.'[200]

196 The Amcor parties also identified what they contend is 'a fundamental threshold difficulty' with the Holihan parties' case, namely the fact that the evidence led at trial did not demonstrate any intention on the part of the parties to bring into existence a separate and independent contract, nor did it support the co-existence of an implied supply agreement running in parallel with the written agreement.

197 The Holihan parties responded by clarifying that their implied contract case does not rest on the existence of any subjective intention, and they submitted that demonstrating an intention to be bound to a separate unwritten contract is not essential to a finding that an unwritten contract existed parallel to a written one. Rather, the Holihan parties contend that the task of the Court in construing the effect of the parties' arrangements is, as the High Court stated in Ermogenous v Greek Orthodox Community of SA Inc,[201] namely, to undertake an 'objective assessment of the state of affairs between the parties' to determine whether their agreement has the character of a contract.[202] And the Holihan parties submit that an objective analysis of the relevant circumstances demonstrates that the parties intended APA to be bound by clause 12.

198 The Amcor parties submitted that the evidence that Mr Holihan gave, to the effect that clause 2.4 of the Second Sale Agreement permits APA to come within the agreement on the supply side, was 'fatal to this implied contract theory'.[203] Mr Holihan's evidence was to the effect that APA was 'covered off' because Mr MacPhail had said to him words to the effect of '[d]on't you worry about APA, they're looked after, they'll fall under the rubric of clause 2.4'.[204] The Amcor parties submitted that this evidence 'directly contradicts the need for having an implied supply agreement.'[205] Further, they contended, when the Deed of Accession was entered into, 'there was no evidence that anyone thought they were putting an implied agreement into an express form.'[206]

199 The Amcor parties also noted that the Holihan parties' 'implied agreement' case does not grapple with the inconsistency that arises between clause 12 of the written agreement and clause 12 of the alleged implied agreement in circumstances where the latter operates only as between APA and Achilla, and ACB Co Purchaser is not mentioned. Further, they say that the Holihan parties do not explain how the implied agreement can arise, and exist, in the face of the entire agreement clause contained in clause 15.11 of the Second Sale Agreement.

Circumstances where courts have recognised or found an 'implied contract' - applicable legal principles

200 The courts in the United Kingdom, and in Australia, have long recognised that the business dealings between commercial people do not always fit readily within the offer and acceptance framework and that there are cases where it is objectively clear that less formal dealings between the parties will nevertheless suffice to manifest them as having reached an agreement. In 1877, in Brogden v Metropolitan Railway Co,[207] the House of Lords recognised an acceptance by conduct, finding that a contract came into existence either when the defendant company ordered its first load of coal from Brogden or when Brogden supplied it, in each case on the terms of a draft form of agreement, the execution of which had never been completed. Lord Cairns LC described the correspondence between the parties as being imbued with -

[T]he expression of a feeling on the one side and on the other that those who were ordering the coals were ordering them, and those who were supplying the coals were supplying them, under some course of dealing which created on the one side a right to give the order, and on the other side an obligation to comply with the order.[208]

201 Brogden has been applied many times in Australian courts. In Vroon BV v Foster's Brewing Group Ltd,[209] Ormiston J referred to Brodgen and cases of a similar kind, including his own analysis in Gjergja v Cooper[210] and the decisions of the Court of Appeal in New South Wales in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd[211] and in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd.[212] Ormiston J said that he was 'prepared to accept' that -

agreement and thus a contract can be extracted from circumstances where no acceptance of an offer can be established or inferred and where the most that can be said is that a manifestation of mutual assent must be implied from the circumstances.[213]

202 The decided cases make clear, however, that where an acceptance by conduct is alleged, the focus will be on the particular facts of the case and that what actually happened will be all-important.[214] The courts continue to approach the task of implying a contract with a good deal of caution, and require that the conduct relied upon must 'necessarily' provide evidence of acceptance,[215] and it may not be sufficient if the conduct is only consistent with acceptance.[216]

203 A few months after Vroon was decided, an appeal was heard in Toyota Motor Corporation Aust Ltd v Ken Morgan Motors Pty Ltd,[217] a case which had raised the issue of whether the parties intended to create legal relations. The trial judge held that a binding agreement was made in December 1990, the terms of which were recorded in a letter dated 19 December 1990 and a one page enclosure dated 20 December 1990 (together referred to as 'Exhibit G'). On appeal, the Full Court held that Exhibit G did not evidence a binding contract. In his reasons, Tadgell J referred to Ormiston J's analysis in Vroon but expressed doubt about whether, in the absence of an offer and acceptance, an 'implied contract' can be discerned from the parties' dealings and communications with one another over a period of time. His Honour said:

Despite several references in the judgment in the Vroon Case to an "implied contract", perhaps encouraged by some text writers (e.g. Greig and Davis, at pp. 249-52) and some judges (e.g., Lord Brandon of Oakbrook in Paul Wilson & Co A/S v Partenreederei Hannah Blumenthal (The Hannah Blumenthal) [1983] 1 AC 854, at p 914) I do not find the concept easy to comprehend, respectfully sharing as I do with Oliver LJ: "... some difficulty in the concept of the implication of a term, not for the purpose of finding what the parties have agreed on a matter on which their written or proven oral exchanges are silent, but for the purpose of ascertaining whether they have entered into an agreement at all": Harvela Investments Ltd v Royal Trust Company of Canada (CI) Ltd [1985] 1 Ch 103, at p 141. If there is that difficulty in implying a term, how much greater the difficulty to imply a contract when the question is whether parties have entered into an agreement at all. If a contract is to be discerned in the absence of offer and acceptance I venture the suggestion that, leaving aside questions of estoppel, it is to be discovered by inferring from the relevant facts the conclusion that the parties have agreed to incur reciprocal promissory obligations: cf. Pearl Mill Co Ltd v Ivy Tannery Co Ltd [1919] 1 KB 78, at p 82, per Rowlatt J; applied in André & Cie SA v Marine Transocean Ltd (The Splendid Sun) [1981] 1 QB 694, a decision questioned by the Court of Appeal in Allied Marine Transport Ltd v Vale Do Rio Doce Navegacao SA (The Leonidas D) [1985] 1 WLR 925, at pp 937-40, although apparently approved by at least some of the Lords in The Hannah Blumenthal and embraced by Kerr LJ in The Antclizo, at pp 148-9. As Williston suggests, the necessity or opportunity to infer in the absence of offer and acceptance is likely to be rare, and in my opinion neither necessity nor opportunity exists here.[218]

204 Tadgell J's observations, and the cautionary note expressed by his Honour, serve to emphasise the difficulty the Holihan parties face in advancing a case for the implication of a supply contract between APA and Achilla based on the provisions of clause 12, in circumstances where ACB Co Vendor has entered into a written contract with ACB Co Purchaser and Achilla containing the whole suite of provisions, including those in clause 12.

The evidence falls short of demonstrating a proper basis for implying an agreement between APA and Achilla

205 In my view, when the whole of the circumstances are viewed objectively, the evidence falls short of demonstrating a proper basis for implying an agreement between APA and Achilla of the kind contended for by the Holihan parties, effectively requiring that (prior to entry into the Deed of Accession in March 2005) 'all' of the OME work that APA required be performed by Achilla.

206 First, the case opened by the Holihan parties was posited on 'the parties' (without specifying whom) not intending 'to have a written agreement and an implied oral agreement sitting next to it.'[219] Rather, it was said 'the parties' 'intended to have one suite of agreements which would operate in a particular fashion.'[220] The loose reference to 'the parties' rather than to the particular entities involved suggests that each of them was involved in the 'one suite of arrangements' and that each intended to be bound by them. As a matter of law, however, for the Holihan parties to make out their case for an implied supply contract, they were required to lead evidence that would show first, an intention on the part of each of 'the parties', and in particular, relevantly APA and Achilla, to be legally bound by an agreement or arrangement of the kind contended for; and secondly, that the conduct relied upon by them necessarily leads to the inference that an agreement was made between APA and Achilla and in the terms alleged.

207 In my view, for the reasons set out below, the evidence led on behalf of the Holihan parties fell short of establishing each of those matters.

208 The List of Issues poses five 'sub-issues', formulated by the parties, that (it is stated) 'might impact on the determination of' the central issue of whether there was an implied supply agreement between APA and Achilla in the same terms as clause 12 of the Second Sale Agreement. Those sub-issues are framed as follows:

(a) If ACB [Co Vendor] (and not APA) was to be the counterparty to Achilla under clause 12 of the Second Sale Agreement, would the clause have any commercial purpose?

(b) During the negotiations before entry into the Second Sale Agreement, did Achilla and APA express a common intention that the effect of that agreement would be that Achilla would obtain the benefit of the business which was at that time provided to ACB Co Vendor by APA?

(c) Following execution of the Second Sale Agreement, did APA and Achilla conduct themselves as if they were bound by the terms of clause 12 of that agreement?

(d) Did ACB Co Vendor, in its own capacity, ever supply Products to Achilla or purchase Products from Achilla in the period from Completion to 21 March 2005?

(e) Do the Second Sale Agreement and the Deed of Accession preclude a finding that there was an implied supply agreement between APA and Achilla?

209 Having now heard all of the evidence called and the submissions made by the parties, my view is that the 'sub issues' posed operate to distract or divert the Court away from the determination of the central issue in an orthodox and principled way. So much may be demonstrated by issue 1(a), which effectively seeks to discern from an allegedly 'uncommercial' outcome that is said to arise from a contract entered into between the parties that there is another contract to be implied between different parties that would render a more commercial outcome.

210 In those circumstances, I propose to briefly discuss each of the documents relied upon and the evidence advanced by the Holihan parties in support of the alleged common intention(s), as part of the overall chronological context of relevant events and circumstances that they rely upon for their implied supply agreement.

Chronological context of relevant events - body of (pre-contractual) evidence relied upon by the Holihan parties in support of the alleged common intention

211 The first document identified is the January 2002 Business proposal that Mr Holihan says he put to 'AFP representatives' (without specifying whom)[221] seeking '[t]o be the preferred supplier of OME to Amcor Fibre Packaging (AFP-NSW)'.[222] Relevantly, the proposal identified four supply opportunities sought to be undertaken by Mr Holihan as follows:

1. To supply the solid fibre partitions currently produced in AFP Box Hill primarily used in the wine industry.

1. To supply litho laminated products and cartons to AFP NSW at current pricing levels to that supplied by Le Breton Graphics and ACE Print and Displays. This would note [sic] replace any contractual agreement or heads or [sic] agreement already in place with ACE.

1. To supply corrugated pads and partitions to AFP NSW at current pricing levels to that supplied by NorthWest Packaging.

1. To be the Sydney Metro supplier of P84 erected cartons at the current prices of $150/000.[223]

212 Mr Holihan followed up in August 2002 with a 'Management Buyout' proposal for 'the Australian Corrugated Box Co' (i.e., ACB Co Vendor). In his proposal, he stated that 'the business will supply corrugated products to AFP where these products are deemed to be either too big, too small or that may result in bottlenecks in a high-speed low-cost producing plant', and noted that 'the existing ACB business has been set up on this basis.'[224] Mr Holihan pointed out that some of the inefficiencies in the present business, such as the hidden cost associated with 'a fragmented approach' to the supply of OME products could be 'removed via a close relationship with a partnered supplier who understands the workings of AFP.'[225] In his proposal, he summarised the benefits he perceived would accrue to Amcor:

The Benefits to Amcor

With a neutral impact on AFP's profit, the added benefits will flow from

• the reduction of AFP resources required in managing this business
• AFP management being able to focus on the core business
• the elimination of the IR risks and issues
• the elimination of capital expenditure
• the removal of LTI, safety and environmental issues
• securing volumes in the short run end of the market
• consistency of supply through one supplier
• agreed pricing levels with an open book policy and pricing formula
• job tracking mechanism

The business will make its money by trying to reduce its cost basis via flexible work place agreements and a working environment which is not possible being part of a large company such as Amcor.[226]

213 Mr Holihan said that he prepared the Management Buyout Proposal with himself as a potential purchaser in mind and presented it to Mr Alvarez, Mr Barnes, Mr Cichonski and Mr Beynon, all of whom were part of the AFP New South Wales management team, at some time between 5 and 15 August 2002, but he cannot remember exactly when.[227] Mr Holihan was unable to remember the detail of what was discussed at the presentation but said he does remember presenting his proposal document by reading it out to the attendees using an overhead projector, and discussing the effect of consolidation of supply. He said that during the presentation he referred to the situation where the OME supplier was on the PICK system as being something that would be beneficial to AFP and that 'none of Barnes, Alvarez, Cichonski nor Beynon said that they disagreed'.[228]

214 Mr Holihan was cross-examined about this notion of consolidation of supply. Senior Counsel for the Amcor parties asked him whether in August 2002, when he presented the Management Buyout Proposal, any Amcor staff said they saw a benefit to Amcor in having one consolidated supplier. He responded by saying that 'I don't recall now that they said that. But in presenting it, nobody said that they didn't think it was a good approach.'[229] He was then asked whether after August 2002 any Amcor staff said to him that they saw a benefit to Amcor in having one consolidated supplier. He responded '[p]ossibly Barnes' but added that 'I can't be sure, so I'll just have to answer that I don't recall.'[230] Mr Holihan was then asked a further question of whether at any time before entering into the Second Sale Agreement, any Amcor staff said to him that they saw a benefit to Amcor, and he responded 'No'. Senior Counsel then concluded the cross-examination of Mr Holihan by putting to him 'that Amcor simply did not see it as a benefit.' He responded, as follows:

... well I believe that they did, even though it wasn't - I don't recall them discussing it, it [sic.] believe it was a benefit to them because of the fact that having a fragmented approach people - there's a lot of resources tied up in dealing with multiple suppliers and it just makes much more sense to have one entity supplying the lot and not having to raise multiple purchase orders, pickups for products, dropping products off. Um, it was very time consuming and resource - very resourceful in dealing with multiple suppliers.[231]

215 Of the AFP New South Wales management team who attended at Mr Holihan's presentation, Mr Cichonski was the only one that was called by the Holihan parties to give evidence at the hearing of the Achilla counterclaim. Mr Cichonski said that he could not recall any such presentation by Mr Holihan and could not recall Mr Holihan having presented a management buyout proposal.[232] In re-examination, when Mr Cichonski was asked about the suggested benefits of consolidating OME supply, as mentioned in Mr Holihan's August 2002 note, Mr Cichonski agreed that they 'make a lot of sense.'[233] The Amcor parties submit that as Mr Cichonski was not involved in the negotiation of the Second Sale Agreement, and was unable to recall any such management buyout proposal presentation having been made by Mr Holihan, his observations in June 2015 about events that took place in August 2002 could be accorded only 'little' weight. I share that view.

216 It would appear that from early in the discussions, Mr Holihan was keen to highlight the benefits of consolidation of supply, contending that it would be of benefit to Amcor to have one consolidated OME supplier. What is not clear, however, is that the Amcor parties ever shared this view. Mr Holihan gave evidence that nobody at Amcor said to him, and/or that he could not recall them saying to him, that they agreed that it would be a benefit to Amcor to have one consolidated OME supplier.[234] Indeed prior to the sale, when the ACB Business was operated 'in-house', the position was that Amcor had chosen to source the supply of certain OME work from other external suppliers, and in many cases had done so over a long period of time. Mr Darren Nellies,[235] who gave evidence on behalf of Amcor, did not accept that there was necessarily a benefit to Amcor if OME work was consolidated in a single supplier.[236] But he did accept that there were benefits to Amcor in having more supply on the PICK system, given that it was a quicker way of arranging orders.[237] Mr Joyce,[238] who gave evidence on behalf of the Holihan parties, was also asked whether he recalled any discussions to the effect that a benefit of the sale was that Amcor could obtain all of its OME supplies from the one supplier, but he said he did not specifically recall that point being made to him.[239] Mr Joyce also observed that he 'saw no commercial reason' why any other outside manufacturing work that was previously going directly external 'needed to be channelled through the new Australian Corrugated Box Company'.[240]

217 Mr Holihan said that at the end of the meeting at which his Management Buy Out Proposal was being discussed, Mr Barnes told him that if he was interested in buying the ACB Business, he would need to work up an agreement with Mr MacPhail at Baker & McKenzie.[241]

218 At a practical level, the Second Sale Agreement was negotiated between Mr Holihan and Mr Barnes for the most part. At the trial of the principal proceeding, both Mr Barnes and Mr Holihan gave evidence. At the trial of the Achilla counterclaim, however, Mr Barnes did not give evidence.

219 Each of Mr Holihan and Mr MacPhail, the solicitor at Baker & McKenzie in Sydney who was engaged by the Amcor parties in relation to the drafting of the Second Sale Agreement, gave evidence at the trial of the Achilla counterclaim and was cross-examined extensively. The Court directed that in the case of each of Mr Holihan and Mr MacPhail, where their evidence was to cover the same territory and was contentious, it must be given viva voce rather than by each of them simply relying on their witness statements.

Initial discussions between Holihan and Barnes

220 The evidence was that the 'negotiations' commenced on 26 August 2002, when Mr Barnes emailed a draft 'asset sale agreement' to Mr Holihan.[242] It is unclear who actually prepared that draft, but shortly after Mr Holihan received it, he followed up by making an appointment to meet with Mr Barnes on or about 27 August 2002 at the AFP office at Smithfield.

221 The first draft had been prepared by using the First Sale Agreement (prepared by Baker & McKenzie for the sale of the Service Packaging Business to Mr Hottes) as a template for the transaction. The first draft bore the name of Baker & McKenzie on the front page but it was not prepared by that firm.[243] The document was styled as an 'asset sale agreement' between 'Amcor Fibre Packaging Pty Ltd' as the vendor and 'Australian Corrugated Box Pty Ltd' as purchaser, and 'Craig Holihan' as guarantor of the due performance by the purchaser. At that point in time, however, there was no corporate entity in existence known as 'Amcor Fibre Packaging Pty Ltd' and the ABN[244] recorded on the recital page as '48 005 319 666'[245] was in fact the ABN for Service Containers Pty Ltd, which was the named vendor under the First Sale Agreement with Mr Hottes.

222 Mr Holihan said that during his initial meeting with Mr Barnes on 26 August 2002, he made notes on the draft 'asset sale agreement'.[246] The substance of the discussion that took place between them was to the effect that Mr Holihan should use the draft as a template to work on in conjunction with Mr MacPhail and 'knock it into shape' and when they were happy with it the agreement would be put up for review. Mr Holihan said that Mr Barnes also mentioned to him that there needed to be a clause in the agreement for the supply of OME to AFP so that it could get its OME work from the new business. Mr Barnes apparently made a note to this effect on Mr Holihan's copy of the draft agreement, under clause 13.1. Mr Holihan then referred him to clause 13.4 of the working draft (which was an early iteration of what became clause 12.2), which he said covers this.[247] Mr Holihan said that this was also in line with what was discussed earlier in August 2002 when he first presented the Management Buyout Proposal to Mr Barnes and others.

223 Mr Holihan reviewed the draft agreement that Mr Barnes had given him. He summarised the observations he had made at the time, stating:

It had a number of mistakes in it that I picked up. It had wrong entities, wrong ABN numbers. It has references to other people. So the first thing I picked up was that it needed to be between Amcor Fibre Packaging and my new company. The rest of it I walked through and...amended where I could...changed references to the vendor and the purchaser, and finally sent a draft to MacPhail to consider that we then sat down and went through on 20 September 2002.[248]

Mr MacPhail's role in drafting the Second Sale Agreement

224 Between 1999 and 2003, Mr MacPhail was a Senior Associate in the Sydney office of Baker & McKenzie, and he acted for a variety of companies or entities within the Amcor group in drafting a number of commercial agreements, usually on instructions from Mr Barnes. In around 2001 to 2002, Mr MacPhail had acted for Amcor on the sale of the 'Service Packaging Business' to Mr Hottes. That sale was effected by the First Sale Agreement, dated 1 February 2002. In that matter, he received instructions from Mr Barnes and Mr Hottes.[249]

225 In around 2002 to 2003, Baker & McKenzie, and thereby Mr MacPhail, were again engaged to act for Amcor on the sale of the ACB Business to Mr Holihan. Mr MacPhail said that in that matter, he 'was acting essentially for the vendor for the sale of the assets.'[250] He received his instructions from Mr Barnes, but some of the instructions were communicated to him by Mr Holihan. He said that while his day to day instructions were from Mr Holihan, Mr Barnes was his instructor and he had complete control and power to override Mr Holihan.

226 Mr MacPhail said that initially he had spoken with Mr Barnes by phone. Mr Barnes told him that the deal that was about to be done for the ACB Business was essentially the same as Mr Hottes' management buyout for the specialty trading unit of the Amcor group that he had done in February 2002. Mr Barnes said to Mr MacPhail words to the effect that the current deal 'was going to be very much in the same flavour' and that 'the deal was to get some assets off the books of Amcor which was consistent with a financial policy or an accounting policy' and that Mr MacPhail's job was to do the legal documentation for the deal, being the sale of the assets to Mr Holihan.[251]

Preliminary discussions between Mr Holihan and Mr MacPhail

227 Mr Holihan followed up with Mr MacPhail, telephoning him on or about 11 September 2002 to discuss about the terms of sale for the ACB Business. He said he told Mr MacPhail that he would be buying the subject assets. Mr Holihan also told him a little about the benefits of the sale for both parties and said he would send through his comments on the draft asset sale agreement and any suggested changes once he had had a chance to review it in more detail.

228 On 12 September 2002, Mr Holihan sent an email to Mr MacPhail enclosing a version of the draft asset sale agreement with his comments and amendments.[252] Clause 13 of this draft contained a supply agreement between the vendor, named as 'Amcor Fibre Packaging Pty Ltd', and the purchaser. Mr Holihan said that this was consistent with his intention that he, or a company of his, would effectively 'step into the shoes' of ACB Co Vendor in terms of the existing relationship between ACB Co Vendor and AFP insofar as OME work was concerned.[253] Also, in this version, the term of the respective supply obligations was expressed to be 'for a period of 7 years from Completion' rather than five years as stated in the first draft.

229 A further draft of the agreement was generated on or around 16 September 2002.[254] Mr Holihan said that he worked through the document by himself in his office at Wetherill Park and made some amendments to it. One of the changes he made was to include a reference to APA as the vendor, and consequentially, as the party to the supply obligations in clause 12. He says that by this time, he had learned that there was no legal entity known as 'Amcor Fibre Packaging' and that APA was the corporate vehicle through which AFP conducted its operations. Further, he said, as the purchaser was to be a new 'Australian Corrugated Box' company owned by him, he also crossed out the ACN[255] under the name of the purchaser on the front page of the agreement.

230 On 20 September 2002, Mr Holihan emailed to Mr MacPhail the latest version of the agreement he had been working on.[256] The email cover sheet indicates that they were going to meet at around 4.00 pm that day to discuss the matter. The front cover sheet of this version of the draft showed the parties as being 'Amcor Packaging Australia Pty Ltd ABN 55 004 275 165'[257] and 'Australian Corrugated Box Co Pty Ltd ABN 93 002 693 843' and Craig Holihan. Mr Holihan says that this reflected his intention, namely, that APA would be the counterparty to the supply agreement under clause 12. Under cross-examination, he said that in September 2002, he thought that APA and AFP were the same entity[258] but he later clarified that answer by saying 'AFP was a trading entity of APA, so AFP on its own couldn't have signed the agreement.'[259] In this version of the draft, however, the listing of the parties (just above the Recitals) continued to show the vendor as being 'Amcor Fibre Packaging Pty Ltd ABN 48 005 319 666'[260] rather than APA (as was shown on the cover sheet).

The meeting at Baker & McKenzie's office on 20 September 2002

231 The meeting between Mr MacPhail and Mr Holihan on 20 September 2002 took place at Baker & McKenzie's office in Sydney. This was the first time that Mr MacPhail and Mr Holihan had met. Mr Holihan described the meeting as being 'the start of a process and for me [Holihan] to inform him [MacPhail] of what Amcor's wishes were.'[261] Mr Holihan said that at the meeting with Mr MacPhail he was wearing two hats - one as the purchaser, and the other as general manager of the ACB Co Vendor.[262]

232 Mr MacPhail said that his recollection of the meeting was a bit distant now, it having taken place some 13 years ago. He said that during the meeting he was doing at least three things: listening to Mr Holihan, speaking himself and making notes on a note pad contemporaneously.[263] He said he had used those notes to refresh his memory for the purposes of giving evidence.

233 At the beginning of the meeting, Mr MacPhail asked Mr Holihan if he had a solicitor dealing with the matter who would be providing separate legal advice to him. Mr Holihan mentioned that Mr David Roe was his solicitor. Mr MacPhail said he believes that at their initial meeting, Mr Holihan had flagged that he would be obtaining advice from his solicitor, but Mr MacPhail did not deal with Mr Roe until much later in the piece.[264]

234 Mr MacPhail said that, in essence, Mr Holihan confirmed what Mr Barnes had told him about the deal in their earlier phone calls. Mr Holihan explained to him what 'OME' or outside manufactured enterprise product was. The ACB business involved taking raw product, usually corrugated board, and manufacturing it into finished product, such as cartons, pallets, or display stands etc. In the majority of cases the finished product was for customers of Amcor, and in others, it was for non-Amcor customers. At one stage during the meeting, Mr Holihan assisted Mr MacPhail by making a note on MacPhail's note pad to explain the operation of the manufacturing and selling arms of the Amcor business and the relative numbers of customers involved in each activity, as follows:

235 Mr MacPhail said that he understood that the agreement for the sale of the Service Containers Business that took place in February 2002 was being used as a template for the documentation of this deal - in the sense that ACB Packaging was effectively being substituted for Service Containers in all the documents - and so 'it was just a kind of cut and paste job on the documentation.'[266] But he confirmed that the version of the draft that was available for discussion at the meeting with Mr Holihan was not one that was drafted by him and that he had only received it that afternoon by fax or email from Mr Holihan.[267] Mr MacPhail said that at the meeting:

I was really taking instructions and saying, well what is the deal that you and Trevor have worked out. And I saw my role very much as I suppose an amanuensis, or kind of just doing the legals on the particular...deal which had been struck,...as I was instructed between Trevor Barnes and Mr Holihan.[268]

236 During the meeting, matters such as employees, and how to deal with them, and the vendor financing of the purchaser were raised. Mr Holihan explained that Amcor would be a secured creditor and he would be repaying the loan out of cash flow. He said he would not be giving any warranties, guarantees or indemnities to the vendor, but would accept liability for third party claims. The file note also records that Mr Holihan was to 'retain "control" of the [Purchaser] co' but 'only whilst $ o/standing' and that Amcor was to have '1st rt to buy business & last refusal'.[269] Mr MacPhail said he thought the first part of the note was a reference to the fact that Mr Holihan would not be permitted to part with control of his company or sell the shares in it to another party whilst any of the vendor finance was still outstanding.[270] He thought the second part was that Amcor was to have a first and last right to buy the business if Mr Holihan was trying to sell it, but he could not recall whether this was limited to the period of the vendor financing.[271] The final line of the note stated 'share sale - what if Amcor sells the Amcor Fibre Packaging'. Mr MacPhail said there may have been some brief discussion about whether this deal would be easier and neater if done as a share sale, but he did not think they spent long on it and it was, or would have been, rejected anyway.[272] Mr Holihan disputes this account given by Mr MacPhail. In examination-in-chief he said this entry was in fact a reference to his concern, which he expressed to Mr MacPhail at the meeting, that there was chatter in the marketplace to the effect that Amcor Fibre Packaging might possibly be going to sell its business to a competitor, being Carter Holt Harvey, and how would that affect the supply arrangements entered into.[273] He said Mr MacPhail did not know the answer to that question, but he made a note about that part of the conversation.

237 Mr Holihan said that at the meeting he raised with Mr MacPhail the question of the identity of the vendor, pointing out that the agreement needed to involve AFP on the supply side, otherwise he could not see how the supply side could work. In his evidence-in-chief, Mr Holihan explained that, without Amcor Fibre Packaging as a party to the agreement for the supply side, it made no sense because the named vendor would be effectively closing its doors once the assets of the business were sold.[274] He said Mr MacPhail's response was to the effect that:

... he took me to clause 2.4 and pointed it to me and read it to me and said that the - the work can be done through a related entity, and it can be done via AFP, or APA, and that 2.4 allowed for that, and he also referred to the fact that the existing contract that was in place with Ian Hottes - the ACB - the prior sale - had also a clause that allowed for that and that was working perfectly fine.[275]

2.4 Vendor obligations

Where any obligations are expressed to be carried out or property transferred by the Vendor, the Vendor may where appropriate procure such carrying out or effect such transfer by or through a Related Body Corporate, including for the avoidance of doubt Amcor Fibre Packaging (Australia) Pty Limited and Amcor Ltd.

239 Mr MacPhail disputes that any such conversation took place about the identity of the vendor. He said he does not remember Mr Holihan saying that the agreement needed to involve APA on the supply side, nor does he remember any mention of clause 2.4.[276]

240 Mr MacPhail said that during the meeting, he did say to Mr Holihan that the important thing about the vendor in the sale agreement was that it actually had to own the assets being sold so as to be able to transfer legal title to the purchaser. However, he said, at that stage, they were not worrying too much about which particular legal entity it was.[277]

241 Mr MacPhail said he thinks that early in the meeting, he asked Mr Holihan about whether Amcor Fibre Packaging was going to continue to do business after the sale. Mr Holihan responded along the lines that:

It's going to be the same - it's going to be business as usual, it's going to be the same...exact trading relationship as currently pertains between the entities or within the Amcor group.[278]

242 When Mr MacPhail asked Mr Holihan what was going to happen, Mr Holihan added that:

they're going to buy from me because where else are they going to get it from. ...also I know the prices, I know the product, I know the way these things work, so yeah, there will be buy and - and take obligations in the deal...as they were. But it doesn't matter too much, because basically for the short to medium term, at least, they're always going to be taken from me because I can give them the best price, the best product and you know, get it on time and on...on the right terms.[279]

243 Mr MacPhail said that he would not have, and did not, refer to clause 2.4 at the meeting. He said that he was not familiar with the agreement that had been drafted for the sale of the ACB Business and had not reviewed it in detail in advance of the meeting. Further, he said he did not read clause 2.4 because it was not in 'the operative parts of the agreement, on which [he] was concentrating when [he] was talking to [Mr Holihan]and getting instructions as to what the deal was.'[280]

244 Under cross-examination, Mr MacPhail continued to maintain that he did not recall there having been any discussion at the meeting about clause 2.4. It was put to him that the discussion might have taken place in the context of a discussion about the identity of the vendor and the assets it owned, but he responded saying:

---I don't think we had that conversation and because my notes don't contain any reference explicitly or impliedly to clause 2.4, I don't think we had that conversation.

MR MAIDEN: It's fair to say that your recollection of this meeting is driven principally by reference to what's in your notes, isn't it?---Yes, yes.

It's also fair to say that because you were communicating to Mr Holihan, taking instructions from him and at the same time, trying to make notes of the most significant aspects of your conversation, that your three page note wouldn't reflect everything that was said in that meeting?---No, that's correct, but I think it's true to say that if it was stuff that I needed to do later... offline, then I would have taken a note of the particular clauses, just as I did with a couple of other clauses there.

Yes. So it's possible that you did discuss clause 2.4 in the context of saying to Mr Holihan, it's really an asset sale agreement. We've got to make sure that the vendor is the company that owns the assets and I've got this clause that allows you to take any of the assets that may not legally be owned by the vendor. That's fair, isn't it?---I just don't recall making any reference to clause 2.4. I more recall that it was just a general principle which was discussed, which was if you're going to purport to sell stuff, you've got to have legal title to it. And we've got to just make sure that comes good when we do the deal.

Yes. So it's not the case that you remember not discussing clause 2.4, you just don't remember discussing it?---I just don't think we discussed clause 2.4.

. . .

MR MAIDEN: Mr MacPhail, it would be logical to say that if you had been discussing the need for the vendor to be the company that owned the assets and if clause 2.4 had been discussed in the context of that discussion, that Mr Holihan might have misunderstood the reference to 2.4 and taken it to be something beyond what you'd said. You'd accept that?---Well, I just don't recall that we would have discussed 2.4.[281]

245 Mr MacPhail said that he understood Mr Holihan's reference to 'business as usual' to be an apt description for the deal that was being done. He said that, in essence, it meant -

that the legal ownership and management of the business unit would change and would be bought out by Mr Holihan and his company. But that the actual flow of product and the prices paid for it would remain exactly the same. And so that customers of the business unit...would probably not even know that there had been a change of ownership...except for perhaps the changes of invoicing. And so that they would continue to go direct to that business unit and place orders or sell product for transformation and finishing to that unit.

...

... Amcor customers as they then were, would be switched across, in effect and be getting their finished product. Probably still from Amcor, but the actual transformative process would be done again in the same premises and by the same equipment, but just under the auspices and control of Mr Holihan and his company. [282]

246 Mr MacPhail was also asked, in examination-in-chief, whether he was given any instructions about Amcor Displays, or whether it was mentioned in discussions. He said 'No, no that was never mentioned. Not in this meeting anyway.'[283]

247 Following the meeting, Mr MacPhail wrote to Mr Barnes and Mr Holihan in relation to the sale of the ACB Business. In his letter dated 25 September 2002, Mr MacPhail stated:

As mentioned to Craig [Holihan], and so as to avoid any misunderstandings and make matters clear, I have assumed that Amcor Fibre Packaging Pty Limited (Amcor) is my client (from which I will take instructions and for which I will seek the best possible outcome).

However, assuming Trevor [Barnes] instructs me to do so, I am happy to take instructions from Craig for the purposes of assisting with documenting and facilitating what appears to be a relatively uncontroversial transaction. If any contentious, sensitive or confidential issues arise, I may need to seek specific instructions direct from Trevor. Craig is obtaining or will obtain separate legal advice and assistance on particular issues.

I attach a redrafted version of the proposed Asset Sale Agreement, marked up in redline. The following are particular comments which you should both note.

General Comments

...

(iii) during the 10 year period[284] that a portion of the purchase price is outstanding from the Purchaser to Amcor, there will be a charge in favour of Amcor over the assets of the business. This fixed and floating charge will be released by Amcor once the final instalment of the purchase price is paid. The charge is attached as a separate document. It contains no unusual or out of the ordinary provisions. It has been pruned down from a lengthy standard-form document customarily used in banking and financing transactions.

Specific comments

...

I look forward to receiving your comments and further instructions once you have reviewed the attached.[285]

248 The 'assumption' noted at the outset of Mr MacPhail's letter suggests that, at that point, he was unaware that 'Amcor Fibre Packaging Pty Limited' was not a corporate entity. Mr MacPhail said that he became aware of that fact a little later. During cross-examination, Mr MacPhail readily acknowledged that when he first met with Mr Holihan he did not have a complete understanding of the various Amcor companies and the relationships between them,[286] nor was he aware of all of the various 'divisions'.[287] He said that what he had understood was that 'Amcor Fibre Packaging whether or not it be Pty Ltd, would have been the ultimate parent or holding company, or one of the intermediate holdings companies of the vendor.'[288] He agreed also that he understood there to be two companies involved, one of which was the vendor that was selling the assets and the other, which was the Amcor Fibre Packaging entity, that sat somewhere above the vendor in the corporate structure.[289]

249 Between 25 September and 28 November 2002, emails were exchanged back and forth between Mr Holihan and Mr MacPhail discussing the agreement and the related security. A further draft of the agreement was sent on behalf of Mr MacPhail on 21 October 2002 to Messrs Holihan and Barnes. The covering email stated:

Craig - I enclose the redlined version of the amended draft. I think you will need to check carefully in clauses 12.1 and 12.2 the use of the term 'corrugated board and cartons'. In view of the importance of that term in the context of the agreement, should this perhaps be a defined term?

As soon as you confirm that the agreement is in final form, I will send a clean version for execution.[290]

250 This version of the draft showed the parties as being 'Australian Corrugated Box Co Pty Ltd ABN 93 002 693 843' as vendor, 'NewCo' as the purchaser and Mr Holihan as guarantor of the due performance by the purchaser. Mr Holihan says that he did not think about this change in the identity of the vendor 'because of the discussion that [he] had with Mr MacPhail about how clause 2.4 would operate on 20 September 2002'.[291] This version of the draft agreement also contained clause 14.16, dealing with change of control of the purchaser.

251 On 25 November 2002, Mr MacPhail emailed a further version of the draft agreement to Messrs Barnes and Holihan, marked-up to show changes.[292] In his covering email, headed 'Asset Sale Agreement', Mr MacPhail explained that he had deleted several redundant definitions and changed the order of the 'back end' to make it more logical. He then discussed the scheme of the guarantee and charge, noting that Amcor has three separate options to purchase back the business. He recorded that Mr Holihan has expressed concern and asked him to specifically point out to Amcor that, with the delays involved in any purchase back arrangement, he may lose a potentially lucrative offer from a third party, but he said that he saw 'no easy way to accommodate this'.[293] Mr MacPhail also noted that he has discussed the assignment clause, clause 14.9, with Mr Holihan.

252 Meanwhile, on 15 November 2002, Mr MacPhail had sent two memos to Mr Barnes dated 14 and 15 November 2002 dealing with the 'Fixed and Floating Charge from ACB' and the 'Proposed Sale of ACB to Craig Holihan' respectively, and requesting that Mr Barnes discuss the latter with him.[294] Mr Barnes forwarded Mr MacPhail's email to Mr Holihan on 18 November 2002, commenting that 'the first document makes sense' and requesting that Mr Holihan give him a call. In the memo to Mr Barnes dated 14 November 2002, dealing with the charge, Mr MacPhail describes the charge to be given in favour of Amcor as follows:

The charge is in favour of Australian Corrugated Box Co Pty Limited ("ACB") [i.e., the vendor] and Amcor Fibre Packaging Pty Limited ("Amcor") [i.e., the company that Mr MacPhail referred to as being further up or elsewhere in the corporate chain[295]], jointly and severally. It is not clear whether ACB will be an on-going entity after the sale of its assets to Craig Holihan's "Newco" has taken place, but this is not relevant for present purposes.[296]

253 When cross-examined about this memo, Mr MacPhail said that he was not quite sure what he meant. But he accepted that he could have been saying that the vendor, ACB Co Vendor, might not be an on-going entity in the sense that it might not continue in existence after the sale.[297] It was put to him that if the vendor were not to continue in existence, then the reference to the vendor as the party that had the five year purchasing obligation in clause 12.2 of the draft agreement might have been erroneous. He acknowledged that the obligation in clause 12.2 was inconsistent with this statement in the memo but added that 'I clearly don't have ... clause 12.1, 12.2 in my mind, when I'm writing that.'[298] He also accepted that the reason that the 'Amcor Fibre Packaging' entity was to be a party to the charge was so that there would still be an Amcor party in existence that was capable of enforcing the charge.[299]

254 On 21 November 2002, Mr Holihan sent an email to Mr MacPhail setting out points to consider and points requiring discussion.[300] One of the points noted concerned clause 14.16, which (then) dealt with change in control of the purchaser. Mr Holihan's comment was that this clause only applies whilst there is a charge over the assets held by the vendor and if the vendor refuses the change of control, the vendor must buy back the business as outlined in clause 12.5.

255 Mr MacPhail and Mr Holihan had a further discussion on 26 November 2002. Mr Holihan says that he said to Mr MacPhail words to the effect that he would incorporate a company to perform the supply obligations under clause 12 and have ACB Co Purchaser hold the assets to be used in the business. He asked Mr MacPhail to amend the draft agreement to provide for this. Mr MacPhail made a file note of this conversation,[301] indicating that the phone call took place at 5.30 pm that day. Mr MacPhail sent an email to Messrs Holihan and Barnes at 6.55 pm that day, enclosing a further draft, but it did not deal with the issue of having a trading company performing the purchaser's obligation under clause 12 etc. The covering email noted that '[t]here are still some gaps to fill in - identity of NewCo, completion of annexures etc.'.[302]

256 In this draft, the provisions of the clause dealing with change in control of the purchaser changed from the earlier draft, as shown below in the side by side comparison below:

Earlier draft

14.16 Change of control of Purchaser

The Purchaser may not permit, allow or suffer a change in its control without first obtaining the written consent of the Vendor in its sole and absolute discretion. If notwithstanding there is a change in control of the Purchaser, then the Vendor may at its option -

(a) terminate this Agreement on 10 Business Days' notice to the Purchaser; or

(b) provide the Purchaser with a cure period of 10 Business Days, and if at the end of that period of control the Purchaser has not returned to the status quo ante, the Vendor may thereafter terminate this Agreement on written notice to the Purchaser.

In this clause 14.16 "control" has the meaning set out in the Corporations Act.

Later draft

16.14 Change of control of Purchaser

(i) The provisions of this clause 16.4 apply only for so long as the Charge remains in force or is not discharged.

(ii) The Purchaser may not permit, allow or suffer a change in its control without first obtaining the written consent of the Vendor in its sole and absolute discretion. If notwithstanding there is a change in control of the Purchaser, then the Vendor may at its sole option provide the Purchaser with a cure period of 10 Business Days, but if at the end of that period the Purchaser has not returned to the status quo ante, the Vendor may thereafter -

(a) terminate this Agreement on 10 Business Days' notice to the Purchaser; or

(b) acquire the Purchaser's Business, for the consideration and as referred to in clause 16.3 (with any necessary changes).

In this clause 16.14 "control" has the meaning set out in the Corporations Act.

257 In the next iteration of the draft agreement, the definitions of 'control' were moved into the supply agreement provisions in clause 12.[303]

258 In around December 2002, Mr Barnes told Mr Holihan that Mr Ken Parker, Amcor's Group General Manager Commercial, was going to review the sale agreement and that he could expect a call from him.[304]

259 In January 2003, Mr Parker requested Mr Joyce to review an early draft of the Second Sale Agreement. Relevantly, at that time Mr Joyce was AFP's Commercial Manager Operations, and based in Melbourne. In that role, Mr Joyce supported all of AFP's operations for all financial reporting, governance and control requirements. He was later appointed General Manager Commercial, AFP.[305] In that role, the Amcor Displays business was part of his responsibility.[306] Mr Joyce left Amcor in May 2005 and joined another industrial company as the general manager, finance.

260 Mr Joyce was called by the Holihan parties to give evidence. Mr Joyce, whose corporate reporting line was to Mr Parker, said that Mr Parker had asked him to review the draft agreement and 'provide comments and observations as to things that [he] thought needed some investigation or amendment or correction.'[307] He did so and prepared a typewritten document of 8 pages for Mr Parker headed 'Notes on Proposed ACB Contract' dated 7 January 2003.[308]

261 Mr Joyce did not have any direct role in the negotiation of the 'asset sale' part of the Second Sale Agreement with Mr Holihan. But he said he and Mr Parker did work collaboratively to refine the definition of what was explicitly included and excluded in the formula for determining the charge rates, that is, the 'D & D' rates, that would apply under the supply agreement, so as to reach an acceptable position that Amcor was comfortable with. In that regard, he was also working and in regular conversation with Mr Holihan. They also collaborated to identify the list of assets that were to be included and excluded from the sale.

262 In the note he prepared for Mr Parker, Mr Joyce commented on, or raised queries about, various clauses of the proposed contract, and also in relation to the 'Fixed and Floating Charge' to be provided over the assets of Mr Holihan's company. Throughout the note, Mr Joyce continually refers to 'the vendor' as being 'AFPA' or 'we'. For example, in commenting on clauses 12.1 and 12.2 of the draft agreement, Mr Joyce states:

• States that we will supply at D&D + 12% for year 1, increasing to D&D + 20% in year 5, with CH having an option to purchase at D&D + 20% for an unlimited period thereafter. Are we happy to lock in at these up-charges and how does it compare to other customers/OME's. e.g. CCC=D&D + 50%, Sainsbury = D&D +50%. Are there any implications for Victoria and Queensland.

• Says that AFPA will obtain ALL OME from CH for 5 years and that CH has an option to extend this for a further 5 years. Similar D&D percentages are to apply. Do we need access to CH's records or any guarantees of efficiencies from him re D&D? The way this is set up we pay all his costs at the D&D level and guarantee him a margin on top of that to cover overheads. Where is his obligation to be efficient?
• We also need to define OME to exclude e.g. silk screening - any others?[309]

263 Whilst under cross-examination by the Amcor Parties, Mr Joyce was asked whether he recalled any discussions about what work was to be routed to Mr Holihan. Mr Joyce said it was not his expectation that Mr Holihan's business was going to be the only supplier to Amcor following the sale of the ACB Business.[310] He said that in the discussions to which he was privy during the negotiations to sell the ACB Business he did not have any specific recollection of anyone saying that work that was currently being sent to other suppliers should be re-routed to Mr Holihan. Rather, he said, 'the guiding principle [he] operated by at the time was that the work that was, and had historically been routed through Australian Corrugated Box would continue to be routed through that operation.'[311] The reason for this was, he explained:

Because the site had contained certain specialist corrugating conversion machinery and therefore that work logically had to continue to be routed through that facility. In terms of any other outside manufacturing work that was previously going directly external, I saw no commercial reason why it needed to be channelled through the new Australian Corrugated Box Company.[312]

264 In re-examination, Mr Joyce was also asked about the vendor obligation in proposed clause 12.1. He confirmed that the base material used by the ACB Business was corrugated sheet sourced from either the Smithfield or Revesby sites, and he said the negotiations for the sale proceeded on the basis that that supply agreement should continue.[313]

265 In respect of clause 12.2, Mr Joyce said that 'there were elements of how the clause was structured that struck [him] as being commercially unusual.'[314] One example he referred to was the fact that the agreement was structured such that under the formula provided for calculating the charge back mechanisms, if the new company's owners were successful in achieving efficiencies in the business over time, the result would be that 'Amcor never received any share of those production or performance improvement efficiencies via a reduction in their charge out rate.'[315] In relation to the definition of OME work, he said there were no specific exclusions as to what types of OME should be carved out of the agreement, and at the time he could think of at least one that historically had not been performed by ACB, being silk screening, and he proposed to have a further conversation about whether there were any others that should be specifically carved out.[316] Later in his evidence, Mr Joyce said 'carton erecting' was another area that he recalled was not included.[317] Mr Joyce explained[318] that one of the normal arrangements was that in a fruit or vegetable growing region where Amcor's customers would be operating, Amcor would provide carton erecting services. Amcor would produce completed 'blanks' that were then flat packed and sent to the regional area. Amcor had specialist machinery located in regional areas that would take those flat packed blanks and assemble them into a box that the produce could be inserted into and then sealed for on-shipping to customers. Amcor owned the machinery required and typically it would be operated out of leased premises in the regional area. When he referred to 'Amcor' Mr Joyce said this was a reference to APA.[319]

266 Mr Joyce described the process used in agreeing the charge (or recovery) rates, that is the 'D & D' rates, as one where the volumetric data used was the historical actual throughput from the Wetherill Park plant operated by ACB, and by reference to the individual machines located there, and that was used as a reference point for agreeing the recovery rates that would be used for the purposes of the agreement.[320]

Mr Holihan reviews and comments on Mr Joyce's note

267 In early January 2003, when Mr Holihan was present in Mr Barnes's office, Mr Barnes gave him a copy of the 'Notes on ACB Contract' which he said had been prepared by Mr Joyce. Mr Holihan knew Mr Joyce to be the AFP Commercial Manager Operations based in Melbourne. Mr Barnes asked Mr Holihan if he would like to look at Mr Joyce's comments. Mr Holihan then proceeded to read the document in Mr Barnes's office and made a number of handwritten comments on it.[321] At the end of this process, Mr Holihan said to Mr Barnes that he did not see anything in the note that was controversial and which couldn't be sorted out, and that he would prepare a formal reply which Mr Barnes could pass on to Mr Parker and Mr Joyce.

268 One of the handwritten comments that Mr Holihan made on Mr Joyce's note concerned the issue of silk screening or screen printing raised by Mr Joyce in his comments on clause 12.2 of the draft agreement. Mr Holihan said that he was aware, that ACE Print had a contract with AFP to do OME work, including screen printing work, for Amcor Displays. The comment he made in relation to screen printing was 'with exception where any other contract to supply exists at the time of completion'. That is, Mr Holihan says he accepted that, if he entered into a supply agreement of the kind contained within the Second Sale Agreement, the agreement would not extend to any OME work that was the subject of the agreement with ACE Print (while that agreement remained on foot).[322] Under cross-examination, he acknowledged that he was aware that the contract with ACE Print did not relate only to Amcor Displays' work, and he said he believed 'that AFP would have had all of its screen print work made by Ace and then Ace did other things as well.'[323]

269 Mr Holihan prepared a formal response to Mr Joyce's comments, dated 10 January 2003,[324] which he discussed it with Mr Barnes on 13 January 2003 when he met with him.[325] Mr Holihan said he doesn't remember exactly what was said but Mr Barnes made handwritten notations on his copy of Mr Holihan's response. Mr Holihan's formal response commented on clause 12.2, which required all OME to be purchased from him for five years at D & D costs plus a margin, noting that the benefits to consolidate Amcor's supply of OME have been discussed and he added that he 'would not expect Amcor to have any OME made by the new business that was under contract or where it could manufacture it more competitively itself.'[326]

270 Between 21 January and 1 April 2003, many more emails, memoranda and drafts passed between Mr Holihan and Mr MacPhail and others. In late January 2003, Mr Holihan sent an email to Mr Barnes concerning 'D & D charge back' and enclosed an email exchange that he had had with Mr Greg Crouch of Amcor some 12 months earlier, clarifying with Mr Crouch the operation and components of the (then) current D & D mechanism used by and between AFP and Wetherill Park for charging.[327] Mr Barnes provided Mr Holihan with a copy of some preliminary legal advice dated 7 February 2003, given by Mr Patrick Ryan of Arthur Robinson & Hedderwicks, Amcor's external solicitors, at the request of Mr Parker concerning the potential for trade practices problems to arise in relation to the sale of the ACB Business and the proposed toll manufacturing arrangement with ACB.[328] Relevantly, the Holihan parties rely upon the external solicitors' description of the proposal under consideration as supporting their implied agreement. In their letter, the 'Proposal Considered' was described as follows:

• Amcor proposes to sell the ACB business and;
• Amcor will enter into an arrangement with ACB for ACB to toll manufacture fibre containers for ACB's current customers who purchase 'AFPA' branded containers (Reserved Customers); and
• Amcor will supply board to ACB who will convert it into containers for sale to any person other than a Reserved Customer.[329]

At the conclusion of the letter, Mr Ryan expressed a 'Cautionary Note' to the effect that '[w]hen the proposal is finalised, it would be prudent for you to send it to me for a legal sign-off.'[330]

271 On 19 February 2003, Mr Barnes provided Mr Holihan with a further iteration of the draft sale agreement and a draft of the proposed agreement for lease of the Wetherill Park premises.[331] On 21 February 2003, Mr Barnes sent an email to Mr Parker and Mr Hodgson enclosing the agreement, together with his comments on it, the lease proposal and the list of assets included in the sale.[332] Mr Barnes said that when they were all in agreement he would pass the documents on to the lawyer for updating. The lease proposal was for the Wetherill Park premises, where the corrugator was located, and was documented in the form of a memorandum to be signed by Mr Holihan. It provided that Mr Holihan would lease the Wetherill Park premises and 'operate the corrugator for the purpose of supplying AFP.'[333]

272 In the draft 'Sale Agreement', a comment was inserted under clause 5.4 (dealing with 'Premises') to the effect that if, at the end of the lease, the tenant wishes to re-site the business, 'AFPA will be solely responsible for the costs associated with the removal and disposal of the corrugator and ancillary plant and equipment'.[334] Against clause 5.5 (dealing with 'Line of Credit') the following comment was inserted, suggesting that 'AFPA' would make payments to Mr Holihan:

Based on CH remaining in WP building, suggest that the line of credit be replaced by AFPA paying CH weekly for OME (50 to 60% of this is wages) for the first six months. Thereafter standard trading terms. Refer 12.3. This should not affect AFPA current cash flow at all.[335]

273 A comment was also inserted after clause 9.1(d) (dealing with 'Assignment and novation') noting that the clause had been 'inserted to ensure that CH obtains the same prices for starch, inks, waste, energy etc as Amcor' and thereby ensure that OME costs are contained.[336] The 'author' suggests that the terms should be changed to reflect one of three options:

1. AFP pays for these costs directly to suppliers based on usage by ACB.
2. ACB pays the suppliers direct and is paid at the same time by AFP. (Note this depends on whether suppliers will offer the same terms to ACB as AFP.)
3. AFP pays the supplier and ACB pays AFP on invoice at agreed trading terms.[337]

274 In clause 15.9, dealing with assignment, a comment was inserted at the end of paragraph (d) stating that 'AFP will have the ability to veto assignment to Visy board.'[338]

275 On 20 March 2003, Mr Holihan received a list of OMEs that he had requested from Ms Megan Young, one of the assistants to the accountants at AFP Smithfield.[339] Mr Holihan said that he was using this list in the lead up to the commencement of the supply agreement to establish which of those suppliers were supplying corrugated products, and of those, which were the bigger ones that he could attack first.[340]

276 On 24 March 2003, Mr MacPhail sent Mr Holihan and Mr Barnes a further draft of the sale agreement.[341] This version included, for the first time, clause 12.4, which permitted a related company of the purchaser to perform the supply obligations under the agreement. Mr Holihan said this clause was included at his request. This draft of the sale agreement also included 'Annexure 5', outlining the 'D & D basis' pertaining to sales from Vendor to Purchaser and for sales from Purchaser to Vendor. The draft Annexure 5 noted, in the context of sales from Purchaser to Vendor, that 'paper and freight remain the responsibility of AFPA' and for 'corrugator related activities' similarly 'Paper, Maintenance, Rent and freight remain the responsibility of AFPA.'[342] Reference was also made to 'sales of fanfold, single face and solid fibreboard from ACB to Amcor.' The draft also stated that 'D & D changes will be agreed to between CH and the Vendor's Operations financial manager (Tony Joyce)'.[343]

277 On 1 April 2003, Mr Barnes sent an email to Mr Parker, Mr Hodgson and Mr Peter Dwyer,[344] copied to Mr Holihan, enclosing a suite of 'final documents'.[345] Annexure 5 of the sale agreement was in substantially the same form as before and continued to make reference to 'AFPA' and 'Amcor' in addition to the 'Vendor'.[346] Mr Holihan says that for several weeks following, there was little or no work done on the sale agreement that involved him.[347]

278 On 23 April 2003, each of ACB Co Purchaser and Achilla were registered as companies, Mr Holihan's intention apparently being that ACB Co Purchaser would own the subject assets and Achilla would be the trading company for the ACB Business.

Final stages of negotiating the Sale Agreement

279 During May 2003, a lot of activity took place regarding the draft sale agreement and much of the correspondence passing between the respective parties concerned the D & D costing mechanism. On 15 May 2003, Mr Parker sent an email to Mr Holihan enclosing a spreadsheet dealing with the D & D in respect of supplies proposed to be made under clause 12.[348] This spreadsheet commenced with 'an excerpt from Annexure 5' and reproduced the text of Annexure 5 as contained in the final draft mentioned above. This spreadsheet gave rise to a host of subsequent emails passing between Messrs Crouch, Parker, Barnes and/or Holihan dealing with the same issue.

280 In the final stages of those discussions, Mr Holihan came up with the idea of presenting the definitions of the D & D charges in a matrix form, with an 'x' representing instances where a charge would be applicable so as to capture the costs.[349] Mr Crouch prepared and circulated the first version of the matrix to Mr Holihan on 23 May 2003.[350] Mr Holihan responded a few days later with a revised version.[351] Various iterations of the matrix were prepared following comments and revisions suggested by those involved in the discussions. Throughout this exchange of views, the matrix continued to refer to charges 'from AFP to ACB' and 'from ACB to AFP' and 'Corrugated work for AFP by ACB'.[352]

281 In essence, the matrix set out to record the (then) current basis for charging - using the headings set out below, and taking 'Direct Materials' and 'Board' as an example:[353]

282 In his evidence-in-chief, Mr Holihan explained the way these 'Direct Materials' costs were to be captured and charged for:

So paper, Amcor would take, Amcor being Amcor Fibre Packaging, would take paper, run on their corrugator using the next line being starch to make corrugated board. So the first two crosses relate to the manufacture of corrugated board from AFP to ACB.

Now, the reason there are no crosses in the next two columns is because we didn't supply corrugated board to AFP. The supply of board was one way. We manufactured products that were given to us by AFP, and it was only then the value add, if you like. The value add to that board that we got reimbursed for.

...

MR MAIDEN: The second entry is heading, "Board"?---Yes.

There's no cross underneath the AFP to ACB column?---No.

But there is a cross underneath the ACB to AFB column?---Yes.

Can you explain why that is?---I can. So - so the first lines I told you before was paper and starch, that's starting from the raw material. The board side was - let me go back again. Those first two with the manufacturing, Amcor's manufacturing for paper and starch to make board. They would supply us sometimes stock board, which was used for making very short quantities. They weren't efficient - they couldn't be run off their corrugators efficiently. Somebody may require 50, 100 boxes, or it could be a very small box and it wasn't possible to run that paper on the corrugator to run that product, so we were given stock board, which would be charged from Amcor, and then in the manufacturing of those very small products, using that stock board, we had to get reimbursed, if you like. We would charge Amcor for the use of that stock board. ...

... But in the norm, if you like, in the 99 per cent, we were given material from Amcor at no charge to convert product for their customers, which then went back to AFP.[354]

283 Mr Holihan said that in those discussions he had with AFP representatives about the D & D calculations, 'AFP' was referred to as the business that would be buying OME supplies from his company after the sale was completed.

284 On 27 May 2003, Mr MacPhail circulated a revised version of the draft agreement, redlined to show changes from the draft circulated in early April 2003.[355] In his covering email, Mr MacPhail mentioned that he had received some further small changes from Mr Parker which would be factored into the next draft. Mr Holihan's solicitor, Mr Roe, was included in the list of recipients for this email. Mr MacPhail noted that Mr Roe had sought copies of various documents from him. In his covering email, Mr MacPhail added a comment to the effect that now that he knows Mr Roe is acting for Mr Holihan, he should ask Mr Roe to confirm that it is acceptable for him to correspond with Mr Holihan direct.[356] As was noted earlier, Mr Roe's name had been mentioned at Mr MacPhail's first meeting with Mr Holihan, and Mr MacPhail had written it down at the beginning of his file note.[357]

285 On 28 May 2003, Mr Parker sent an email to Mr MacPhail, copied to Mr Barnes and Mr Holihan, enclosing both his and Mr Holihan's final comments and requesting that the document be finalised that day so that the transaction could be completed.[358] Attached to Mr Parker's email was a copy of Mr Holihan's summary of changes to be made to the Second Sale Agreement, a spreadsheet entitled 'D & D inclusions' (which it was proposed would be inserted as Annexure 5 to the Second Sale Agreement) and a list of the assets to be purchased pursuant to the Second Sale Agreement (which it was proposed be inserted as Annexure 3). Mr Parker told Mr MacPhail that the listing of D & D inclusions was to be inserted in Annexure 5 'with words of his choosing' but indicating that '[d]etails of costs included in the calculation of D & D are as set out and marked below'.[359]

286 In the process of finalising the Second Sale Agreement, Mr MacPhail adjusted the description used in the column headings in Annexure 5. Relevantly, the words 'From AFP to ACB' became 'From the Vendor to Achilla' 'From ACB to AFP' became 'From Achilla to the Vendor', and 'Corrugated work for AFP by ACB' became 'Corrugated work for the Vendor by Achilla'.[360]

287 Between 28 and 30 May 2003, a number of emails passed between Mr Holihan and others about the draft of the Second Sale Agreement. At around this time, Mr Holihan started working with Carden Calder & Associates, Corporate Affairs, Communication and Reputation Management consultants ('CCA'), in relation to a 'communication plan' for the announcement of the sale of the ACB Business. He did so at the request of Mr Jon Dyster, who was the AFP NSW Human Resources Manager. AFP had apparently engaged and was instructing CCA.

288 During cross-examination, Mr MacPhail was taken to the wording of clause 12.2 in the form in which the agreement was executed, and to the second sentence in particular, which records the obligation on the part of the vendor, as follows:

The Vendor will for that period obtain all its OME supplies of Products from Achilla and will not during that period purchase or procure the supply of Products from any other party other than due to Achilla's inability to supply consistently and on a basis which is commercial and reasonably acceptable in terms of price, quality and availability.[361]

289 Mr MacPhail was asked whether it would have been a simple thing to exclude particular types of OME work from the clause had he understood the clause not to extend to all OME supplies and products. He acknowledged that whilst perhaps not simple, it would have been 'do-able', in the sense of 'wordsmithing' to exclude particular types of OME work from that clause.[362] A series of further examples were then put to him by Counsel, and the following exchange took place:

MR MAIDEN: For example if the obligation was intended only to cover all OME supplies and products of the type done at the time of the agreement, words to that effect could have been included in clause 12.2?---Yes, I don't think I'd be quite happy with that wording, I'd want to expand the concept.

Of course?---But I'd understand the concept and possibly be able to wordsmith it, yes.

Similarly, if you'd been aware that the clause was intended to exclude work done by competitors of the ACB business, it would have been an easy enough exercise to draft it so as to exclude those jobs wouldn't it?---Yes, if I'd been instructed I certainly would have.

Or for example if work for the Amcor Display's division was to be excluded from the agreement, it could have been drafted so as to exclude that, couldn't it?---Yes, yes, if I'd been instructed.[363]

290 In re-examination, Mr MacPhail said that clause 12.2 was one of the more 'hotly negotiated' clauses where the language was tweaked and changed and it went through several iterations before the final version was arrived at.[364] He added that the words 'other than due to Achilla's inability ...' were inserted in clauses 12.1 and 12.2 in the first half of 2003, following a conversation with Mr Parker where Mr Parker had expressed a concern about the possibility of Amcor being tied to unfavourable pricing terms and being obliged to purchase product from Achilla. Mr MacPhail said that he 'certainly didn't understand D & D properly' and so that was why he put in those words including that term 'price'.[365]

Formal entry into the Second Sale Agreement, the Sub-Lease and the giving of the Charge

291 The Second Sale Agreement was executed on 2 June 2003.[366] The common seal of ACB Co Vendor was affixed in the presence of Mr Ian Lewis (as secretary) and Mr Colin Clayton (as director). Mr Holihan executed it on behalf of ACB Co Purchaser and Achilla, as well as in his own capacity (as guarantor).

292 Also on or around 2 June 2003, ACB Co Purchaser, as Chargor, granted a fixed and floating charge to ACB Co Vendor and APA 'trading as Amcor Fibre Packaging' jointly and severally over the Secured Property (as defined) ('the Charge').[367] The Charge was executed by Mr Holihan as the sole director of ACB Co Purchaser, and by ACB Co Vendor and by APA in each case by affixing the common seal in the presence of Mr Lewis (as secretary) and Mr Clayton (as director).

293 A Sub-Lease of the Wetherill Park premises was also executed between APA as sub-lessor and Achilla as sub-lessee.[368] The Sub-Lease was for a term of '5 years less 1 day', commencing on 1 August 2003 and terminating on 30 July 2008. In similar fashion to the other documents, the Sub-Lease was executed by Mr Holihan as the sole director of ACB Co Purchaser, and by ACB Co Vendor and APA in each case by affixing the common seal in the presence of Mr Lewis (as secretary) and Mr Clayton (as director).

294 As noted earlier, despite the Completion Date being stated in the Second Sale Agreement as 30 July 2003, Completion took place on the following day, 31 July 2003. On 1 August 2003, ACB Purchaser took control of all of the equipment of the ACB Business.

The evidence adduced does not provide a proper basis for the Court to imply a supply agreement

295 In my view, there is no proper basis for the Court to imply a supply agreement of the kind alleged by the Holihan parties. First, and fundamentally, there is no evidence of an objective intention on the part of APA to be legally bound by the supply arrangements set out in clause 12 of the Second Sale Agreement. The presence, or absence, of an intention to be legally bound by an agreement or arrangement, which may be express or implied, will depend on the facts of the particular case.[369] But having now canvassed the relevant evidence, I am not satisfied that the Holihan parties have demonstrated that APA, as opposed to ACB Co Vendor, manifested an intention to enter into a legally binding arrangement with Achilla in relation to the sale of the ACB Business.

296 The objective evidence is that APA did enter into a Sub-Lease of the Wetherill Park premises and a Charge in connection with the sale of the ACB Business. In that sense, APA clearly facilitated the sale by its subsidiary, ACB Co Vendor, of the ACB Business and manifested an intention to be legally bound by those arrangements, but it did not bind itself to any legally enforceable supply obligation of the kind set out in clauses 12.1 and 12.2.

297 The particulars given by the Holihan parties[370] rely on conduct by Mr MacPhail, but Mr MacPhail did not have any ability to bind APA, or indeed any other entity. His role was to document the agreement reached between the parties. To that end, he took his instructions primarily from Mr Barnes, but even Mr Barnes did not have the ability to commit APA to any legally enforceable arrangement. Where APA did intend to enter into legally binding arrangements concerning the ACB Business, it did so through Messrs Clayton (as director) and Lewis (as secretary) as officers of the company, not through Mr MacPhail or Mr Barnes who were not, and who lacked any relevant authority to act on behalf of APA. Indeed, so much is confirmed by the fact that in March 2005, when the Deed of Accession was entered into, it was Mr Clayton (as director) and Mr Lewis (as secretary) that executed the deed as officers of the company.

298 The Holihan parties also rely upon a number of documents passing between representatives of the Holihan parties and representatives of the Amcor parties as demonstrating that by the time the Second Sale Agreement was signed on 3 June 2003, at least Mr Parker, Mr Crouch, Mr MacPhail and Mr Ryan (of Allens Arthur Robinson) were acting on the assumption that following the sale, the ACB Business would be supplying, and purchasing from, APA. Further, they contend that the evidence given by Mr Joyce at the trial was consistent with that course.

299 In my view, when the objective evidence about the course of dealing that took place between the Holihan parties and the Amcor parties is examined, the clear impression conveyed is that each side intended that the OME work which had been routed through the ACB Business prior to the sale would continue to be routed through the ACB Business after the sale. Indeed, as the summary set out above records, it was Mr Holihan who said to Mr MacPhail, in response to his question about whether AFP was going to continue to do business after the sale, that '[i]t's going to be the same - it's going to be business as usual, it's going to be the same ... exact trading relationship as currently pertains between the entities or within the Amcor group.'[371] And Mr MacPhail said that he understood Mr Holihan's reference to 'business as usual' to be an apt description for the deal that was being done, in the sense that he understood that 'the legal ownership and management of the business unit would change ... [b]ut that the actual flow of product and the prices paid for it would remain exactly the same.'[372]

300 Pursuant to the direction given by Mr Hodgson to Mr Parker, representatives of AFP, such as Mr Joyce, were also involved in commenting on the proposed arrangements. This is not surprising given that the ACB Business had traditionally performed OME work for the AFP operations conducted at Smithfield and Revesby in New South Wales, which APA owned. But Mr Joyce said that 'the guiding principle [he] operated by at the time was that the work that was, and had historically been routed through Australian Corrugated Box would continue to be routed through that operation'.[373] Mr Joyce said that it was not his expectation that Mr Holihan's business was going to be the only supplier to Amcor following the sale of the ACB Business.[374] On the contrary, he 'saw no commercial reason' why any other outside manufacturing work that was previously going directly external 'needed to be channelled through the new Australian Corrugated Box Company'.[375] Mr Joyce also confirmed that the base material used by the ACB Business was corrugated sheet sourced from either the Smithfield or Revesby sites, and said the negotiations for the sale proceeded on the basis that that supply agreement should continue.[376]

301 Mr Holihan said that he took comfort from an assurance which he says was given by Mr MacPhail at their initial meeting, to the effect that clause 2.4 was a means by which he could be assured of the ongoing benefit of APA's OME business and for that reason he took no steps to ensure that APA became a party to the agreement or was named in clause 12.2. Mr MacPhail did not recall any discussion of clause 2.4 at the meeting. He did not make any record of any such discussion in his file note, which he accepted was not comprehensive,[377] but he explained why he thought it unlikely that any discussion of the kind contended for by Mr Holihan took place. In this regard, I prefer the evidence of Mr MacPhail to that of Mr Holihan. In circumstances where Mr MacPhail had not prepared the draft under discussion, it would be surprising for him to have referred Mr Holihan to clause 2.4 and opined as to its effect, particularly when he had not reviewed the document in detail in advance of the meeting and had not read clause 2.4 because it was not in the operative parts of the agreement on which he was concentrating. In my view, it is unlikely that at their first meeting Mr MacPhail would have given any such assurance on a matter of importance to Mr Holihan in his capacity as the counterparty to the transaction. And if such an assurance was given, it is likely that Mr MacPhail would have recorded it in his note. Mr Holihan says he regarded the assurance as an important matter but, it seems, he did not himself make a note or record of the assurance having been given, or convey the fact of the assurance having been given to Mr Roe, or reiterate it at some point later in the negotiations.

302 It follows that I am also not satisfied that the 'common intention' alleged by the Holihan parties in their particulars, that the effect of the Second Sale Agreement would be that APA would be the party bound by clause 12, is made out.

303 The Holihan parties also contend that the documents and other evidence referred to demonstrates that by the time the Second Sale Agreement was signed on 3 June 2003, at least Mr Parker, Mr Crouch, Mr MacPhail and Amcor's external solicitor, Mr Ryan, acted on the assumption that following the sale, the ACB Business would be supplying, and purchasing from, APA. In my view, the evidence does not demonstrate that. First, I do not regard the solicitor's correspondence as advancing the alleged implied supply agreement in any meaningful way. Secondly, to the extent that representatives of AFP, such as Mr Joyce and Mr Parker, were involved in the negotiations for the sale of the ACB Business to the Holihan parties, the objective intention demonstrated was that following the sale, it would be 'business as usual'. That is, following the sale, the ACB Business would continue to perform the work that was, and historically had been, routed through the ACB Business, including the work that it performed for the AFP operations conducted at the corrugated box manufacturing sites at Smithfield and Revesby in New South Wales. And other short run work from the Smithfield and Revesby plants would continue to be outsourced externally to other OME suppliers, including Thompson, JS Cutting, Northwest Packaging, Sainsbury, SPS Packaging, All Pack, Le Breton and Ubeeco.

304 In my view, the fact that all persons involved in the negotiations envisaged that following the sale of the ACB Business to the Holihan parties it would be 'business as usual', and that the ACB Business would continue to perform work for the AFP operations conducted at the Smithfield and Revesby sites in New South Wales, does not entail the consequence that APA would be the party bound by clause 12 of the Second Sale Agreement, and thus be required to ensure that all of AFP's OME work was performed by Achilla. Furthermore, I am not satisfied that there is any proper basis, or necessity, for the Court to imply an agreement between Achilla and APA of the kind contended for by the Holihan parties, containing terms identical to those set out in clause 12 (save that APA would have the rights and obligations that ACB Co Vendor has under clause 12). Indeed, to do so would be contrary to the notion of 'business as usual' that was evident throughout the negotiations.

305 Further, to the extent that prior to the sale of the ACB Business there were trading arrangements in place with 'Customers', the Second Sale Agreement contained a mechanism to facilitate the continuation of the 'business as usual' objective following the sale. It will be recalled that clause 9 of the Second Sale Agreement expressly provided for the 'assignment and novation' of 'Contracts' to which ACB Co Vendor was a party, which term embraced 'any contracts and agreements (whether written, oral or arising through a course of trading, or a combination of any of these) which relate to the Business' and 'including for the avoidance of doubt contracts and agreements for supply to Customers'. Accordingly, where there was a trading relationship in force prior to the sale, ACB Co Purchaser or Achilla could request that an assignment or novation take place, and pending same being obtained, could invoke the 'Practical arrangements' set out in clause 9.2, including requiring ACB Co Vendor to 'hold the benefit of the Contract for the Purchaser or Achilla, provided that the Purchaser performs the obligations of the Vendor under the Contract on its behalf.'

306 Notwithstanding the view I have formed about the sub-issues raised under issue 1, it is useful to record the arguments advanced by the parties lest the matter go further.

Issue 1(a): If ACB Co Vendor (and not APA), was to be the counterparty to Achilla under clause 12 of the Second Sale Agreement, would the clause have any commercial purpose?

307 The Holihan parties submit that, viewed from a commercial perspective, the most significant benefit they would obtain from entering into the Second Sale Agreement was the clause 12 supply arrangement and the ongoing work that was to come from that source. Mr Holihan gave evidence to the effect that in executing the Second Sale Agreement, and throughout the negotiations, he understood that Achilla was obtaining the benefit of the OME business that, prior to the execution of the agreement, AFP had provided to ACB Co Vendor, and that had he known APA was not bound by the clause 12 obligations, he would have negotiated so as to achieve that outcome.[378]

308 In his evidence-in-chief, Mr Holihan explained the importance of the clause 12 arrangements from a commercial perspective:

[MR MAIDEN:] Let's talk about the supply agreement part of that document?---Yes.

Was that important to you?---Yes, absolutely. I wouldn't have bought the business without a supply agreement two-fold. Ah, I needed to get product for my own customers, and it was important to understand what those conditions were, what those pricing levels were. On the other side the OME work was probably the existence why the ACB Business was there. Um, with 80 per cent of the volume going through the plant being that for Amcor public [sic.] packaging. If it had have been another arrangement I could have possibly picked up, not stayed at the site, not acquired those assets and had a different model. But as the Amor Fibre Packaging, the OME work was a significant part of the business, I saw it as an opportunity to - the business wasn't making money at the time, but I felt that under private ownership and with a lot of hard work and effort I could reduce those costs, boost the external sales to our customers and turn the business around which is what happened.

If those were your objectives why was what became clause 12 so important to you?---I think it was important to both sides, um, and I say that because I had discussions with Amcor representatives and people like Tony Joyce, Ken Parker, initially Barnes, and they were saying to me that it was important that they had an avenue, a place where this work could be made. So it was important to me to have that work, but with what I was being told it was important for them for that work to be made. And so the existing arrangements we had in place, um, it made sense as far as I could see for both parties to know that there was a secure place for their work to be made.

And what about from your perspective?---Well from my perspective it made - I was paying $1m for the business which included the assets. It was a business that wasn't making money, um, and so it was important for me to take on the OME work and to grow my own external sales on top of the work that I was doing work for Amcor. So that OME work was a significant part of why I bought that business.[379]

309 Against that background, the Holihan parties contend that in circumstances where it was APA, and not ACB Co Vendor, that required the OME work that was done by the ACB Business before the sale, clause 12.2 would have no real commercial utility if APA was not the party that was bound.[380]

310 Further, they say the Second Sale Agreement makes clear that the evident commercial purpose of clause 12.2 'would be defeated if ACB Co Vendor was to be the counterparty to Achilla.'[381] First, they point to the fact that the definition of 'Business' in clause 1.1 (set out above) expressly acknowledges the distinction between ACB Co Vendor and APA by confirming that the 'Business' does not include 'any part or parts of the businesses of Amcor Packaging (Australia) Pty Ltd or Amcor Ltd.' Secondly, they say the Second Sale Agreement was intended to sell a 'going concern': clause 2.2. To that end, they submit that under the Second Sale Agreement, by its operative terms:

ACB Co Vendor sold all of its assets (other than its premises, its corrugator and a few minor pieces of machinery) to ACB Co Purchaser. The premises were to be leased to APA and sub-leased to Achilla, and the corrugator was to be left with Achilla to be used in the conduct of its business. ACB Co Vendor was to terminate the employment of all of its staff, and pay out all of their entitlements, allowing ACB Co Purchaser or Achilla to offer them employment from the Completion Date. And it assigned to ACB Co Purchaser the benefit of all of its contracts. A non-compete clause was intended to prevent ACB Co Vendor from competing with ACB Co Purchaser and Achilla for any work or employees for three years after Completion.[382]

311 In effect, they submit that once completion of the sale took place, ACB Co Vendor was left as an 'empty shell', with 'no customer base to serve, no contracts to fulfil, no employees to do any work and no significant assets, and it had agreed not to compete with the Holihan companies for work.'[383] In terms of the clause 12 supply obligations, the practical reality is that there was no prospect of ACB Co Vendor, as an empty shell, having any requirements for OME work to be performed, and no obvious ability on its part to supply raw materials to ACB Co Purchaser and/or Achilla.

312 The Holihan parties point to other textual suggestions in the Second Sale Agreement which they submit indicate that APA was intended to be a party to the agreement, such as the sub-leasing arrangement under clause 5.4 that was to be entered into by 'the parties', and to clause 10.5 (Statutory actions) which refers to 'Vendors' in the plural.

313 The response of the Amcor parties is to point to the unprincipled nature of the Holihan parties' argument, in effectively seeking to discern from an allegedly 'uncommercial' outcome said to arise from a contract entered into between the parties that there is another contract to be implied between different parties that would render a more commercial outcome. They submit that the Court should not answer this question.

314 In my view, Issue 1(a) should not be answered. In circumstances where it is posed as the first issue to be considered, it puts the cart before the horse (so to speak) and operates to distort what would otherwise be the proper and principled, or orthodox, approach to the construction of the contract that was entered into between the parties. Accordingly, I do not propose to answer Issue 1(a).

Issue 1(b): In negotiations, did the parties express a common intention that Achilla would obtain the benefit of the business which was at that time provided to ACB Co Vendor by APA? (Alternatively, a common intention that the effect of that agreement would be that APA would be the party bound by clause 12?)

315 In the Joint Statement of Issues, Issue 1(b) is framed in terms of whether, during the negotiations that preceded the entry into the Second Sale Agreement, Achilla and APA expressed a 'common intention that the effect of that agreement would be that Achilla would obtain the benefit of the business which was at that time provided to ACB Co Vendor by APA?' That formulation of the alleged 'common intention' appears to relate to an earlier iteration of the particulars subjoined to paragraph 3AA of Achilla's counterclaim, that no longer appears in the current version.[384] In Achilla's Fourth Amended Counterclaim dated 16 February 2015, the alleged 'common intention' is framed in terms of Achilla and APA having 'expressed a common intention that the effect of that agreement would be that APA would be the party bound by clause 12.'[385] The common intention is said to be 'inferred from a conversation between Mr Holihan and Mr MacPhail on or about 20 September 2002' and a body of documentation set out in the particulars.

316 In their closing written submissions, in addressing Issue 1(b), the Holihan parties contend that in the negotiations that culminated in the sale of the ACB Business to the Holihan parties, both Achilla and APA expressed a common intention that Achilla would obtain the benefit of the business which was at that time provided to ACB Co Vendor by APA. In support of this contention, they rely, in particular, on essentially the same body of documentation that was set out in the particulars and tendered by them as demonstrating that the parties intended that it was APA, not ACB Co Vendor, whose business Achilla would obtain.[386]

317 In their closing submissions, the Amcor parties submit that Issue 1(b) need not be answered. They say even if (contrary to their submission) such a common intention were found to have existed, 'that common intention cannot lead to the conclusion that there is an implied collateral contract unless there was some evidence that there was to be an agreement additional to the Second Sale Agreement', and there is no evidence to that effect.[387] I agree with that submission, and do not propose to answer issue 1(b).

Issue 1(c): Following execution of the Second Sale Agreement, did APA and Achilla conduct themselves as if they were bound by clause 12 of that agreement?

318 The Holihan parties also rely on a body of correspondence and conduct post-execution of the Second Sale Agreement to demonstrate what they contend is 'the parties' mutual understanding' (but without specifying which relevant parties) and to support both the existence of the alleged implied supply agreement (and/or the alleged estoppel by convention) that they maintain precludes the Amcor parties from denying the implied agreement.

Other documentation and conduct (post-execution of the Second Sale Agreement) relied upon by the Holihan parties as evidencing a common intention on the part of Achilla and APA that Achilla would obtain the benefit of the business which at the time of sale was provided to ACB Co Vendor by APA

319 The document that the Holihan parties contend most clearly demonstrates that both parties intended that APA was the party bound by clause 12.2 is the agreement to issue 'recipient created tax invoices' (the 'RCTI agreement') made between Achilla and APA in late July 2003 for goods and services tax ('GST') purposes. The background to the RCTI agreement was that the Australian Tax Office had issued a GST Ruling No GSTR 2000/10 concerning the classes of tax invoices that a recipient of a taxable supply may issue (referred to in the ruling as 'recipient created tax invoices' or 'RCTIs). The ruling sets out the requirements that a recipient must follow when issuing an RCTI and the information that an RCTI must contain. Under the ruling, the recipient and the supplier were required to have a written agreement between them specifying the supplies to which it relates.[388]

320 By letter dated 29 July 2003 Mr Joyce, wrote to Achilla with a view to entering into an agreement to issue RCTIs. The letter, which was written on the letterhead of 'Amcor Fibre Packaging Australasia' (stated at the footer of the letter to be 'a Division of Amcor Packaging (Australia) Pty Ltd ABN 55 004 275 165'), commenced as follows:

As you know, from 1 August 2003 the fees for toll converting Amcor Fibre Packaging pays to you under the asset sale deed will be subject to GST.

The GST legislation imposes certain formalities in relation to the issuing of tax invoices. The purpose of this letter is to reach an agreement on how tax invoices for the Fee will be issued. The general rules in the GST legislation will require Australian Corrugated Box Co Pty Ltd [Achilla] to provide Amcor with tax invoices for the Fee. However, as Amcor is able to calculate the amount of the Fee, it will be more convenient and practical for both Australian Corrugated Box Co Pty Ltd and Amcor if Amcor issues the tax invoices on behalf of Australian Corrugated Box Co Pty Ltd. Fortunately, the GST legislation will allow Amcor to issue tax invoices for the Fee on behalf of Australian Corrugated Box Co Pty Ltd, provided certain conditions have been met and we have agreed certain things in writing.

...

If Australian Corrugated Box Co Pty Ltd does not sign and return the copy of this letter, Amcor will not be able to issue tax invoices on behalf of Australian Corrugated Box Co Pty Ltd and Australian Corrugated Box Co Pty Ltd will be required to issue those tax invoices to Amcor instead.

Agreement to Issue Recipient Created Tax Invoices

Amcor accepts the terms and conditions set out below and, by signing the copy of this letter, Australian Corrugated Box Co Pty Ltd also agrees to those terms and conditions.

(a) Amcor can issue GST tax invoices on behalf of Australian Corrugated Box Co Pty Ltd in respect of supplies made by Australian Corrugated Box Co Pty Ltd to Amcor under the asset sale agreement.

(b) Australian Corrugated Box Co Pty Ltd will not issue GST tax invoices in respect of supplies made by Australian Corrugated Box Co Pty Ltd to Amcor under the Asset Sale Deed. ...[389]

321 Mr Joyce inserted a notation at the end of the letter so that Achilla could acknowledge formally that it 'accepts the terms and conditions set out in this letter', but he instructed Achilla that it should not sign the letter until it is registered for GST. Some discussion and email correspondence took place between Mr Holihan and Ms Kerrin Niklas, one of AFP's administrative staff, as to the operation of the proposed agreement. In an email to Mr Holihan, Ms Niklas clarified that the RCTI agreement 'does not preclude ACB from raising invoices for other purposes' and she added that '[o]nce we move on to SAP[390] this agreement will obviously be redundant and tax invoices will be provided by ACB [Achilla] for work done for AFP.'[391] On 31 July 2003, Mr Holihan signed the RCTI agreement letter for and on behalf of Achilla.[392]

322 Mr Joyce explained the background to the parties entering into the RCTI agreement as follows:

MR MAIDEN: Do you recall why that [i.e., entry into the RCTI agreement] was done?---Yes I do.

Why?---As I mentioned earlier, because the - in the transition phase, the new company, the new Australian Corrugated Box Company [Achilla] was still embedded in Amcor's IT systems. We could no longer apply the standard integrated accounting and transaction reporting processes. Coupled with that, because there was a supply going to and from two external legal entities, we needed to put in place, to satisfy the GST legislation, an arrangement where Amcor Packaging and Australian Corrugated Box [Achilla] agreed that Amcor Packaging could issue a recipient created tax invoice. We did that in order to help make the settlement processes between the two companies more efficient.[393]

323 The oral evidence given by Mr Joyce confirmed that the RCTI agreement concerned supplies to be made by Achilla under the Second Sale Agreement.

324 At about the same time, Mr Joyce was also involved in establishing the 'weekly in arrears' payment arrangements that were to apply under clause 5.5 of the Second Sale Agreement for all trading activity for the first six months following the change of ownership. Mr Joyce and others met with Mr Holihan in late July 2003 and agreed the arrangements that were to apply with regards to Amcor, that is APA, 'settling accounts with ACB'. He then confirmed them a few days later by email to Mr Nellies and Ms Young, two operational people who worked for APA and were based in New South Wales, and copied it to Mr Holihan, Ms Niklas and others. In his email, Mr Joyce stated:

... For the period from August 1st 2003 to 31st January 2004 we [i.e., APA] will cut off transactions at close of business on each Friday. On the following Monday we need to run the various reports to determine the payment to be made to ACB - we will RCTI them for this work. (This is as per the agreed procedure that Kerrin [Niklas] and I have been discussing with ACB - Kerrin will walk you through the specifics of this once we have sign off from ACB).

Plus ACB may/will provide Amcor with an invoice for work that falls outside the scope of the above mentioned work - e.g.: rework done via hand etc.

You will then need to seek approval for payment of the RCTI and ACB invoices from Darren [Nellies] or his nominated deputy by Tuesday. We then need to ensure that payment via ABS is done via EFT to ACB's nominated bank account by Wednesday. (Craig or Nick will provide the account details by early next week).

Can you take this on board and give this the due priority each week to ensure that ACB's cash flow is maintained during the 6 month period please? [394]

325 In my view, the Holihan parties' reliance upon the RCTI agreement is misplaced. The RCTI agreement reflects the fact that under the ruling, the recipient customer and the supplier were required to have a written agreement between them specifying the supplies to which it relates.[395] In circumstances where, following the sale, the ACB Business under the new ownership would continue to perform work for existing customers of the business, such as the AFP operations conducted at the Smithfield and Revesby sites in New South Wales, it was necessary to ensure that proper tax invoicing arrangements were in place. As Mr Joyce explained, with the ACB Business under new ownership external to the Amcor group, each taxable supply made would be a supply between two external legal entities, and so the Amcor group could no longer apply the standard integrated accounting and transaction reporting processes. Once operating under that new regime, and with a view to making the settlement processes between the two external legal entities more efficient, they implemented the RCTI process so that APA as the recipient of a taxable supply, in its capacity as the owner of the business conducted by the AFP operations at the Smithfield and Revesby sites, could issue a tax invoice for the OME work performed by Achilla. Contrary to the Holihan parties' submission, the entry into the RCTI agreement by APA and Achilla does not demonstrate that both parties intended that APA was the party bound by clause 12.2 of the Second Supply Agreement.

Documentation that is said to demonstrate 'the parties' mutual understanding'

326 The Holihan parties also rely upon a body of further correspondence and internal documentation that came into existence following the execution of the Second Sale Agreement that is said to demonstrate 'the parties' mutual understanding' or 'mutual acceptance' that APA was the counterparty bound by clause 12.

327 Following a meeting on 27 June 2003, Mr Holihan sent an email to Messrs Joyce, Parker, Crouch and Barnes on 30 June 2003 regarding Amcor's proposal to cut-off Wetherill Park's access to the PICK system from 31 July 2003. Mr Holihan referred to the inconvenience and disruption this would cause to the logistical relationship between AFP and ACB on an ongoing basis and requested that the matter might be given further consideration. In particular, he mentioned the fact that 'manual, hand written delivery dockets would be required at AFP for all deliveries to ACB customers', 'orders into ACB from AFP would be via PCS' and 'ACB's work would not appear in PCS and AFP work would not appear in ACB's system.'[396]

328 On 10 July 2003, Mr Holihan emailed Mr Barnes and said he would like to 'work through a service level agreement' for the AFP and ACB businesses. On 12 July 2003, Mr Barnes responded by informing Mr Holihan that he was appointing Roger Bayley for these discussions and that he had already raised the matter with him.[397]

329 At a 'transition meeting' held on 25 July 2003 between representatives of Achilla (Mr Holihan and Mr Papadimatos) and AFP (Mr Joyce and Ms Niklas) regarding the Second Sale Agreement, Mr Joyce made notes on a whiteboard that were printed out at the end of the meeting. The notes recorded a reference to carton erecting work done for APA, expressed in terms of '[e]xisting carton erecting @ Bathurst, Batlow & Araluen - out of scope for ACBC'.[398] In his evidence-in-chief, Mr Joyce explained what this reference means. He said:

--- One of the normal arrangements would be that Amcor would provide carton erecting services in regional areas where Amcor's customers would be operating. Typically it could be in a fruit growing or a vegetable growing region or a wine bottling facilities. And so Amcor would produce completed blanks flat packed, and they would be sent to those specific regions, and Amcor had specialist machinery that would take those flat packed blanks and assemble them into a box that the product or material could be inserted into and then sealed for then on-shipping to their customers.

...

MR MAIDEN: And who owned those erecting operations?---Amcor owned the machinery. They would typically be operated out of leased premises.

When you say Amcor, are you referring to any particular part of Amcor?---Amcor Packaging Australia Pty Ltd.

And can you explain the last five words on that line?---"Out of scope for ACBC." Amcor - we believe we were retaining the activities of carton erecting and that that was not included in the asset sale agreement.[399]

330 On 15 August 2003, Mr Crouch sent an email to Mr Holihan (copied to Mr Joyce) attaching a 'comparison of Net D & D before and after the changes to cost for the new budget year' together with a spreadsheet headed 'Amcor Fibre Packaging - NSW'. Mr Holihan gave evidence that the spreadsheet lists ACB Customers (column C), sales to those customers (column H), and the margin above D & D that was charged to those customers for the period from July 2002 to June 2003 (column AA).[400] Mr Holihan said the average level above D & D is 79%.[401]

331 On 24 September 2003, Mr Holihan sent an email to Mr Sangster, copied to Mr Caldow and Mr Bayley, headed 'partition slotter'. Mr Holihan informed Mr Sangster that he had 'been asked by AFP estimating to look at setting up an area to do corrugated partitions' and was following up on 'a machine that's been pulled out of Spearwood that would be perfect and is not required anywhere.' He said that Mr Caldow told him that he would need to get approval from Mr Sangster before the machine could be released to anyone. Mr Holihan stated that 'the machine will be used to supply partitions to AFP and can be set up as a machine within Pick [sic.] and product supplied back at cost based on the supply agreement.'[402]

332 On 15 October 2003, a confidential memorandum from Mr Sutton (Managing Director, Amcor Australasia) and Mr Hodgson (Group General Manager, AFPA) entitled 'Update on AFPA Improvement Plans' was circulated to the board of Amcor Limited. Under the heading 'Forecast', the board paper gave an update on developments at Wetherill Park, as follows:

Our Wetherill Park site in New South Wales was focussed on short run orders and fitment work and we were considering relocation and/or selling the business. The sale was completed in July 2003, reducing total employees by 45. We have entered a long-term supply arrangement with the purchaser as predicted.[403]

333 On 23 October 2003, Mr Manser sent an email to Mr Holihan and others containing the agenda for the forthcoming Specialty Group IT solution meeting to discuss the IT requirements involved in moving off the PICK system to SAP. The agenda included discussion of the 'Vision from a management perspective' regarding the 'transactional relationship AFPA to Specialty Group' and 'feedback requirements AFPA to Specialty' businesses, which, so the Holihan parties contend, includes by inference, the ACB Business.[404]

Discussions regarding fixed costs (October 2004)

334 A year or so later, on 11 October 2004, an email exchange took place between Mr Crouch and Mr Holihan concerning a proposed change in invoicing method and the basis of the charges between AFP and ACB. Mr Crouch informed Mr Holihan that as from October 2004 (and adjusting July-September) he wanted to cease paying Mr Holihan 'for your work you do for your own product.'[405] He explained that:

The reason for doing this is we may charge you D & D (which is Lab & Var by machine) [i.e., labour and variable costs] and yet pay you Lab Var and Fixed [i.e., labour, variable and fixed costs]. Therefore costing AFP the fixed component for every sqm that is your own product.'[406]

335 Mr Crouch said that he was completing the analysis on the July-September period and would forward it to Mr Holihan so that they could sit down and discuss it. In essence, he said 'AFP is being detrimented' because under the current arrangement ACB was effectively being over paid 'by the fixed cost per machine for [its] own work.'[407] Mr Holihan responded in terms that he would await the analysis and be happy to discuss the matter but said he 'believes the problem goes back to AFP not adjusting the costing system to reflect the charged rates from ACB' and his 'understanding is, if the system reflected the correct charge, then the back and forward charging would net itself out.'[408] On 18 October 2004, Mr Holihan received a further email from Mr Crouch addressing this matter.[409]

336 The evidence that Mr Holihan gave at trial was to the effect that when this matter was raised, he was unwilling to change the charging mechanism to Achilla's detriment, but was amenable to discussing a broader set of changes to the arrangements that would include benefits to Achilla, and he sent an email to this effect to Mr Crouch on 19 October 2004.[410]

337 On 14 February 2005, Mr Crouch sent an email to Mr Beynon[411] providing 'some thoughts/issues on ACB Wetherill Park', which was a reference to Achilla. He mentioned the charging issue that he had raised with Mr Holihan, and described the current charging regime in terms of 'the charges from ACB to AFP ...' and for all work that AFP does for ACB 'AFP charges ACB ...'.[412] He pointed out to Mr Beynon that '[e]very month AFP has to wear the cost of 37k for Depreciation and 31k for rent' and 'the fixed costs of the corrugator are not being recovered' and foreshadowed that under the current arrangements they 'will be ultimately allowing an outside company the ability to produce board and compete against us'. He noted also that they 'use ACB for either Jumbo work, or closure/handwork' and said their 'costs are high due to the volume they have vs the costs they need to recover' and so 'the costs for our OME work are high'.[413]

338 The documentation referred to above is just a small part of the extensive body of communications that took place between representatives of the Holihan parties and the Amcor parties following execution of the Second Sale Agreement. Given the views I have expressed earlier in these reasons about the 'business as usual' objective of the arrangement entered into, and recorded in the Second Sale Agreement, I am not satisfied that these communications demonstrate any 'mutual understanding' or 'mutual acceptance' by the parties that APA was the counterparty bound by clause 12.

Steps taken towards de-registration of ACB Co Vendor

339 The Holihan parties also rely upon the 'winding down' of ACB Co Vendor immediately after the sale of the ACB Business took place, contending that it is '[a]nother stark indication of the Amcor Parties understanding that it was APA and not ACB Co Vendor that was bound to the Supply Agreement.'[414]

340 They refer to an email sent by Mr Lewis, the company secretary and director of APA, on 4 August 2003, immediately following the completion of the sale, with the subject 'Australian Corrugated Box Co Pty Ltd - Change of name'.[415] The email was sent to Mr Brown (then a director of ACB Co Vendor and APA, and the managing director of Amcor Australasia), Messrs Colin Clayton and John Crawford (then directors of ACB Co Vendor and APA), Mr Joyce, Mr Holihan and others.

Dear all

as you may be aware the business operating as Australian Corrugated Box has been sold effective 31 July 2003.

The assets of the business, not the shares, were sold to Achilla P/L. The business will continue to operate by the new owner from the existing site at 159 Newton Rd Wetherill Park NSW.

As a consequence of the sale the Amcor owned company will change its name as follows:

FROM: Australian Corrugated Box Co P/L (ACN 002 693 843)

TO: ACN002693843 Box P/L (ACN 002 693 843)

In addition the Achilla owned company will change its name as follows:

FROM: Achilla P/L (ACN 104 489 670)

TO: Australian Corrugated Box Co P/L (ACN 104 489 670)

The Amcor company ACN002693843 Box P/L still does have assets however it is planned to wind its few remaining activities down so that it basically becomes a non trading entity in due course.

Appropriate documentation has been lodged with ASIC and we are awaiting confirmation.[416]

342 Mr Lewis did not give evidence in the counterclaim proceeding. However, the Holihan parties rely upon evidence that he gave in the principal proceeding before Vickery J concerning the events that followed his email and culminating in the execution of the Deed of Accession in March 2005. They contend that it 'unequivocally demonstrates Amcor's understanding that ACB Co Vendor had become a defunct company.' Mr Lewis's testimony before his Honour was as follows:

Deed of Accession

[62] As part of my role at Amcor, I was at the relevant time and am still today responsible for preparing the necessary documentation in order to liquidate and deregister Amcor subsidiaries which are non-operating companies which hold no assets and are no longer trading.

[63] Before 1998, Amcor had hundreds of non-operating companies which were not trading and had no assets. In 1999/2000 there were still many companies in this position although there had been some efforts to deregister non-operating companies. It was decided by Amcor Tax Group (AGT) at about that time, that as those companies were no longer trading, it was not necessary for Amcor to keep those companies registered and a process was put in place to "clean up" those companies by liquidating and deregistering them.

[64] On 18 October 2004 I received an email from Vic Timos stating: "...you may recall me mentioning that AGT were looking at liquidating some of the Australasian companies. We have started some preliminary work on this and we are at a point where we need your assistance" (CB 6577, Vol 40). That email referred to ACB.

[65] Further to that email, in about December 2004, I identified ACB and another company not related to this proceeding, "AP Chase Pty Ltd", as unwanted companies which needed to be liquidated. I note that as part of the sale of the ACB Business to Craig Holihan, Achilla and ACB Packaging (Australia) Pty Ltd Amcor consented to Achilla changing its name to Australian Corrugated Box Co Pty Ltd and ACB became known as ACN002693843 Box Pty Ltd). However, when I refer to liquidating ACB I mean the shell that was left behind after the sale of most of the business' assets to Craig Holihan and his companies. This shell is also referred to as ACN Box.

[66] In keeping with Amcor's practice of cleaning up such shell companies, on 15 December 2004 I sent emails to Vic Timos and to Jim Mitsonis about the liquidations of a few companies, and in particular, asked whether there were any ongoing contracts of any nature with ACB and AP Chase Pty Ltd (CB 7017, 7066, 7067-7068, Vol 42).

[67] On 21 December 2004, I received an email from Tony Joyce advising that there was a clause in the contract (Second Sale Agreement) which stated in summary that where obligations were expressed to be carried out or property to be transferred by the vendor, the vendor could effect the transfer by or through a related body corporate, including APA or Amcor and Tony Joyce's reading of that was that ACB could be liquidated without any issue (CB 7066, 7067-7068, Vol 42).

[68] On 12 January 2005, I sent an email to Christina Cavallo, a secondee from Allens Arthur Robinson who was working at Amcor at that time, and asked her to prepare an appropriate document to proceed with a formal assignment by way of the Deed of Assignment (Amcor Discovery L691 and L692).

[69] On 14 January 2005 I received an email from Angelo Tenace, Taxation Manager Transfer Pricing, confirming the rationale behind the liquidation of ACN Box and other non-operating entities. He stated in the email that: "As you know AGT have identified potential saving (ie compliance costs and personnel/ admin time) from eliminating surplus legal entities in the worldwide Amcor Group, including Amcor Australasia, and as a result have proposed to liquidate the following companies...." The email went on to list eight companies including ACN Box (CB 7085, Vol 43).

[70] On 27 January 2005, I sent an email to Christina Cavallo attaching a copy of a deed of assignment previously used for property assignments which I suggested could be used for the ACN Box sale of business assignment (CB 7113, 7114-7122, Vol 43).

[71] On 29 January 2005, I received from Christina Cavallo a draft Deed of Accession (CB 7123-7125, Vol 43).

[72] On 16 February 2005, I sent an email to Craig Holihan stating that as ACB was no longer trading since the business was sold to his group and Amcor's continuing practice was to remove company structures which were no longer required, they wished to place ACB into voluntary liquidation and deregister it. I explained that in order to achieve that they ACB needed to assign any existing contractual obligations to APA. My email also stated that the Second Sale Agreement would need to be assigned and attached a copy of a document entitled "Deed of Accession" (Deed of Accession) (CB 7160, 7161-7168, Vol 43).

...

[74] Transferring assets of companies that were no longer operational through use of a deed of accession was a routine Amcor procedure put in place for internal efficiencies. It is not something I analysed or deliberated over - the focus was simply on eliminating unnecessary on-going reporting obligations for companies that were no longer serving any real purpose from Amcor's perspective.

[75] On 3 March 2005, I received an email from Craig Holihan forwarding on a copy of an email from David Roe to Craig Holihan in relation to the Deed of Accession which attached a marked up copy of the Deed of Accession with proposed changes (CB 7173, 7174-7182, Vol 43).

[76] On 21 March 2005, I executed the Deed of Accession on behalf of ACB and APA (CB 7198-7205, Vol 43).[417]

343 The Amcor parties rely upon the Deed of Accession as effectively putting paid to the notion that there could have been any mutual assumption that APA was the party bound by the clause 12 supply agreement. In effect, they submit that if APA was the party that was bound from the outset, there was no need for the parties to enter into the Deed of Accession. The Holihan parties dispute this and contend that the Deed of Accession simply reflected and formalised what had always been the case.

344 It will be recalled that in the principal proceeding, Vickery J discussed the Deed of Accession, finding that it was entered into on or about 21 March 2005, and made between ACB Co Vendor, APA, Mr Holihan, ACB Co Purchaser and Australian Corrugated Box Co Pty Ltd (formerly, Achilla). Relevantly, his Honour said:

Deed of Accession - Second Sale Agreement

[1752] On or about 21 March 2005, ACB, APA, Holihan, the ACB Purchaser and Australian Corrugated Box Co Pty Ltd (formerly, Achilla) entered into a transaction known as the "Deed of Accession" (the "Deed of Accession"). The Deed of Accession in effect substituted APA for ACB [ACB Co Vendor] in relation to "all capacities and for all purposes under or pursuant to the Second Sale Agreement". ...

[1753] The Accession Date is 21 March 2005.

345 The Holihan parties contend that the Deed of Accession had the effect, on and from 21 March 2005, of transferring to APA the rights and obligations that (according to the Second Sale Agreement) then bound ACB Co Vendor.[418] They allege that the transfer or assignment to APA was, from the Amcor Parties' perspective, 'a crucial requirement prior to the winding up of ACB Co Vendor, even if ACB Co Vendor was not a party to the Supply Agreement, because ACB Co Vendor was entitled to receive the $1,000,000 purchase price, $900,000 of which then remained unpaid.'[419] Counsel for the Holihan parties said their case is that once the Deed of Accession was entered into, 'the implied contract necessarily ceases to have effect because the circumstances of the parties no longer require it to exist' and the Second Sale Agreement 'subsumes the implied contract' between Achilla and APA. [420]

346 The Amcor parties do not dispute that the identity of the Vendor changed with effect from 21 March 2005 by operation of the Deed of Accession. They submit that this occurred 'as a result of a "tidying up" within head office which administered the corporate entities for statutory and accounting purposes and that the operating business within Amcor was not involved and had no knowledge of it.'[421] But the Amcor parties contend that the parties' entry into the Deed of Accession 'is flatly inconsistent with the existence of the alleged implied Supply Agreement'.[422] They plead in their defence that entry into the Deed of Accession effectively confirms that up to that point, the intention of the parties to the Second Sale Agreement was that the supply obligations under clause 12 would rest on ACB Co Vendor rather than APA.[423]

347 In response, the Holihan parties submit that the Amcor parties' reliance on the Deed of Accession is misconceived and wrong for at least four reasons:[424]

(a) having been initiated in or about January 2005,[425] the Deed of Accession can shed no light on the understanding of the parties at the time that the Second Sale Agreement was negotiated and executed, or in the period between that time and January 2005;

(b) as is made clear from Mr Lewis's testimony to Vickery J, the deed arose not because the parties wanted to move ACB Co Vendor's obligations to APA for operational reasons, but because Amcor had decided to clean its corporate register of "surplus legal entities" such as the "shell" that ACB Co Vendor had become;

(c) the importance of the Deed of Accession was in preserving an actionable right to recover the $900,000 outstanding purchase price as it fell due (a right that was not within the Supply Agreement, but was part of the sale machinery and which the parties agree was correctly expressed to be a right of ACB Co Vendor); and

(d) Mr Holihan's understanding of the relationship between the Second Sale Agreement, the Supply Agreement, and the Deed of Accession is best explained in his own words, given in answer to questions in cross-examination:

DR McNICOL: Mr Holihan, are you aware that in this case there is alleged on your behalf a reliance on a written deed which has got a supply agreement in it called the asset sale deed, but there's also a reliance on an implied supply agreement?---Yes.

This implied supply agreement has always been your position has it? You've always understood there to be an implied supply agreement as well as a written supply agreement? --- I wouldn't have used those words. I've come to understand what those words mean now in a legal sense. But I did not enter the contract thinking that it was an implied contract.

DR McNICOL: When you went into the written contract you did not think there was another contract which was implied? --- My understanding was that the supply agreement was covered by 2.4 of the asset sale deed and that supply agreement was dealt with - was between the parties of AFP under the company of APA and Achilla.

You didn't give instructions to your lawyers that there was another agreement other than the written agreement? --- I know - I now understand what an implied contract means and so at this point in time in doing this evidence - in evidence in my witness statement, yes they were my instructions.

When did you actually first understand that there was this other agreement? When did it first happen? --- At all times I knew that the supply was between different parties that weren't part of the written agreement. I understood that. I understood also that it was taken care of under the agreement, clause 2.4. And it became more apparent when the deed of accession came through from Ian Lewis.

It's always been important to you that there was this implied agreement?---Because the agreement operated independently of the written agreement I didn't need to turn my mind to it again because it was working well. Everybody understood how it worked. I didn't put my mind to the fact that there was not a mistake in the contract. It only became apparent after my first meeting with MacPhail, after my first meetings with MacPhail when the deed of accession came through and that then to me put in place what I'd been trying to explain to John MacPhail in our first meeting.[426]

348 The Deed of Accession appears to have had its origin in email correspondence from Mr Lewis, in his role as company secretary of APA, to Mr Jim Mitsonis, an accountant with AFP, headed 'Liquidations' in mid-December 2004. In his email, Mr Lewis said that '[i]n preparing for the liquidations of unwanted companies', he would like Mr Mitsonis to make inquiries and advise if he is aware of 'any ongoing contracts, of any nature, with: [relevantly] ACN002693843 Box P/L (formerly Australian Corrugated Box P/L).'[427] Mr Mitsonis followed up by email to Messrs Lewis, Joyce and Crouch a few days later enquiring whether there is a contract between 'ACBC and ACN# (Wetherill Park)?'[428] Mr Joyce responded by email the next day, 21 December 2004, as follows:

Yes and no. The Asset sale agreement was between ACN# and ACBC. However there is a clause in the contract that says:

"Where any obligations are expressed to be carried out or property to be transferred by the vendor (that's us), the vendor may where appropriate procure such carrying out or effect such transfer by or through a related body corporate, including for the avoidance of doubt Amcor Packaging (Australia) Pty Ltd and Amcor Ltd."

My reading of this says that we can liquidate ACN# without any issue.[429]

349 When Mr Joyce gave evidence, he said the intention to liquidate the company in due course did not surprise him because 'it was just normal commercial practice to try and keep the legal entity structures as clean and uncluttered as possible.'[430]

350 It appears that it was not until February 2005 that Mr Lewis progressed the matter further. Mr Holihan gave evidence that on 16 February 2005, he received an email from Mr Lewis regarding ACB Co Vendor which attached a draft 'Deed of Accession'.[431] In his email, Mr Lewis commenced by referring to the 'old company for ACBC' which he said Mr Holihan was aware 'is no longer trading since the business was sold to [his] group' and said:

Amcor's continuing practice is to remove company structures no longer required. As such we wish to place the old company into voluntary liquidation and deregister it. To achieve this we must assign any existing contractual obligations to the main Amcor company, namely Amor [sic] Packaging (Australia) Pty Ltd.

To this end, the Asset Sale Deed between our two groups will need to be assigned. Clauses 2.4 and 11.10[432] in the Deed already allow for this however the attached Deed formalises the process.

I will forward hard copies for execution in the next few days. Let me know if you have any concerns.[433]

The proposed Deed of Accession showed the parties as being ACB Co Vendor, ACB Co Purchaser, Achilla, Mr Holihan and APA (as transferee).

351 Mr Holihan referred the proposed deed to his solicitor, Mr Roe, for review. Mr Roe provided his comments by email on 3 March 2005, which Mr Holihan forwarded to Mr Lewis for his consideration the same day.[434] In his email to Mr Holihan, Mr Roe stated:

There are two aspects of the agreement which I question.

Firstly its affect [sic] seems to be that Amcor Packaging (Australia) Pty Ltd will become responsible for the former Australian Corrugated Box Co Pty Ltd obligations only as and from the date of the accession deed. It should be made clear that they accept any existing liabilities of that company. Particularly I suggest that amendments should be made to clause 2.3 and clause 3. I attached marked up changes which I think are appropriate.

Secondly, as you quite rightly point out, clause 6 which requires you to bear your own costs is unreasonable. The costs will not be high, but nonetheless Amcor should pay for them.

I enclose amended (and marked up) deed.[435]

352 As the letter or initiating email sent by Mr Holihan to Mr Roe is not in evidence, it is not known what matters Mr Holihan raised with Mr Roe when he sent the proposed Deed of Accession to him. But the response from Mr Roe does indicate that one matter Mr Holihan had raised for consideration by him was the issue of the costs involved. The reply from Mr Roe does not make any observation, or mention any comment having been made by Mr Holihan to the effect that the proposed Deed of Accession would formalise the practical effect of the existing arrangement, or would put in writing what was operating in practice between the Amcor parties and the Holihan parties concerning the ACB Business. In his oral evidence at the trial, Mr Holihan described the effect of the Deed of Accession as putting into writing what was operating in practice between the Amcor parties and the Holihan parties concerning the ACB Business and said that it was important to him that the true position was now being documented. He said:

---Um it was putting into place what was already existing. It was rectifying the conversations that I'd had with John MacPhail in the drafting of the asset sale deed and was really putting into place what I knew was existing practice. It was correcting a mistake.[436]

353 Mr Holihan said that on 7 March 2005, Mr Lewis sent to him by post, four copies of the Deed of Accession for execution.[437] On or around that date, Mr Holihan executed the Deed on behalf of both ACB Co Purchaser and Achilla and also in his own capacity.[438]

354 On 24 March 2005, Mr Lewis reported to Mr Timos, the Taxation Manager-Australasia/Asia, by email, copied to Mr Joyce, that the Deed of Accession had been finalised and '[t]ransfer ACN Box rights and obligations to APA. Nothing else I am aware of prohibiting liquidation'.[439] Mr Timos responded, saying that the 'only issue holding up any liquidation is potential stamp duty impost on transferring assets from ACB to APA' and that 'PWC are currently looking at this' and once he has a definitive position he 'will advise'.[440]

355 The Deed of Accession was also executed by the Amcor parties, being 'ACN002693843 Box Pty Ltd' (that is, ACB Co Vendor) as 'Vendor' and APA as 'Transferee,' in each case by affixing the common seal in the presence of Mr Lewis and Mr Clayton. Under cross-examination, Mr Roberts was asked about his role in relation to the Deed of Accession. He said he was not consulted about it, and was not involved in it, and that Mr Lewis and Mr Clayton would have had authority to execute the Deed without reference to him.[441]

356 Despite the Amcor parties' intention to liquidate ACB Co Vendor, the position is that it has not been liquidated and it remains a company within the Amcor group and is a party to this proceeding.

357 The recitals record the relevant background to the parties' entry into the Deed of Accession. Recital A refers to the 'Asset Sale Deed' and then recital B states:

Due to a corporate restructuring of the Amcor group and the Vendor, the parties to the Deed have agreed that the rights, covenants, undertakings and obligations set out in the Asset Sale Deed will be novated on the terms of this Deed with the result that:

(a) the Transferee [APA] will become a party to the Asset Sale Deed in place of the Vendor [ACB Co Vendor]; and

(b) the Vendor will be released from its obligations under the Asset Sale Deed.[442]

358 Clause 2 dealt with 'Novation' and provided as follows:

2.1 The Transferee as a party to the Asset Sale Deed

With effect on and from the Accession Date:

(a) the Transferee shall be substituted for the Vendor in all capacities and for all purposes under or pursuant to the Asset Sale Deed: and

(b) the Asset Sale Deed shall take effect as a deed on the same terms as previously except that references to the Vendor shall be read and construed as if they were references to the Transferee.

2.2 Assumption of benefits and obligations

With effect on and from the Accession Date, the Transferee shall observe, perform, be bound by and comply with the provisions of the Asset Sale Deed binding on the Vendor and shall enjoy all the rights and benefits of the Vendor under or pursuant to the Asset Sale Deed.

2.3 Consent

The Purchaser, ACB and CH hereby irrevocably and unconditionally consent to the Transferee becoming a party to the Asset Sale Deed on and from the Accession Date and assuming the obligations of the Vendor in accordance with Clause 2 of this Deed and acknowledges and agrees that the Transferee shall be entitled to exercise all of the rights, privileges and benefits of the Vendor and agrees to be bound by the terms of the Asset Sale Deed as if the Transferee were named therein as a party instead of the Vendor.

2.4 Release of the Vendor

With effect on and from the Accession Date, the Purchaser, ACB and CH release and forever discharge the Vendor from all its obligations and liabilities under the Asset Sale Deed and all actions, claims or proceedings, demands and liabilities that it may have against the Vendor under or in respect of the Asset Sale Deed which arise on or after the Accession Date in relation to an act, omission, event, matter or thing occurring on or after the Accession Date.

2.5 To avoid any doubt, the parties agree that by this deed, the purchaser assumes the obligations and obtains the rights, privileges and benefits of the vendor under the asset sale deed whether those exist at the Accession Date or come into existence after the Accession Date.

359 'Novation' is, as Windeyer J explained in Olsson v Dyson[443] a transaction by which all parties to a contract agree that a new contract is substituted for one that has already been made, such that a substituted obligation is created in place of that which has been extinguished. Whether or not a novation has been effected ultimately depends on intention,[444] but the novation may be express or implied from the circumstances. In Fightvision Pty Ltd v Onisforou,[445] the New South Wales Court of Appeal referred to the view expressed by Barwick CJ in Upper Hunter County District Council v Australian Chilling and Freezing Co Pty Ltd[446] to the effect that in searching for contractual intention, 'no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements', and said that such an approach 'equally applies, in our view, when searching for an intention that there be a novation.'[447]

360 To similar effect, in ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue (NSW),[448] the plurality of the High Court described 'novation' in the following terms:

A novation, in its simplest sense, refers to a circumstance where a new contract takes the place of the old: Olsson v Dyson [1969] HCA 3; (1969) 120 CLR 365 at 389. It is not correct to describe novation as involving the succession of a third party to the rights of the purchaser under the original contract. Under the common law such a description comes closer to the effect of a transfer of rights by way of assignment. Nor is it correct to describe a third party undertaking the obligations of the purchaser under the original contract as a novation. The effect of a novation is upon the obligations of both parties to the original, executory, contract. The inquiry in determining whether there has been a novation is whether it has been agreed that a new contract is to be substituted for the old and the obligations of the parties under the old agreement are to be discharged.[449]

It has been observed that, in cases involving the substitution of one debtor for another, some legal systems permit a succession to an obligation which remains, which is to say the obligation of the original debtor. But this is not the approach taken by English law, which has developed by reference to Roman law principles and looks to the creation of a new agreement.[450]

362 Accordingly, it is clear that the legal effect of the Deed of Accession was not to assign or transfer any rights and liabilities of ACB Co Vendor but rather was to extinguish the original contract and create a new agreement in its place.[451]

363 From a contract construction point of view, it is of significance that the novation effected by the Deed of Accession operates as a matter of law to extinguish the original contract and replace it with a fresh contract, whereby 'the [Second Sale Agreement] shall take effect as a deed on the same terms as previously except that references to the Vendor shall be read and construed as if they were references to the Transferee',[452] namely APA. Accordingly, the fresh contract falls to be construed according to its terms, with effect on and from 21 March 2005, and in the light of the objective circumstances existing at that time.

364 The Deed of Accession expressly records, in clause 2.3, the irrevocable and unconditional consent of each of the Holihan parties to APA, as Transferee, 'becoming a party to the Asset Sale Deed on and from the Accession Date' and to APA 'assuming the obligations of the Vendor in accordance with clause 2' of the Deed. Further, under clause 2.2, APA agreed to 'observe, perform be bound by and comply with the provisions of the Asset Sale Deed binding on the Vendor' with effect on and from the Accession Date. In my view, these provisions make clear that hitherto APA was not bound by the provisions of the Second Sale Agreement. And if, as the Holihan parties contend, the Deed of Accession was simply putting an existing implied contractual regime into express form, it is likely that the Deed of Accession would make mention of that arrangement, at least in the recitals to the agreement. The fact that it does not is telling. Moreover, if the Deed of Accession was recognising and formalising the existence of the alleged implied supply agreement, the operative clauses would not be drafted in terms of APA 'becoming a party' and 'assuming the obligations of the Vendor'. In my view, the parties' entry into the Deed of Accession is demonstrably at odds with the existence of the implied supply agreement contended for by the Holihan parties.

Issue 1(d): Did ACB Co Vendor, in its own capacity, ever supply Products (raw materials) to Achilla or purchase Products (OME supplies) from Achilla in the period from Completion to 21 March 2005?

365 The Holihan parties point to the absence of any evidence before the Court that ACB Co Vendor ever supplied Products, that is raw materials, to Achilla or purchased Products, that is OME supplies, from it. Rather, they say,[453] that as is demonstrated by the list of 'AFP jobs routed to ACB' that Mr Crouch produced late in August 2005, the jobs were purchased by APA,[454] and Mr Cichonski gave unchallenged evidence to the same effect: namely, that after the sale, AFP's estimating department continued to route work (albeit now to Achilla) in the same way that it had to ACB Co Vendor previously.[455]

366 Further, the Holihan parties contend that the pleaded allegation advanced by the Amcor parties to the effect that ACB Co Vendor supplied 'through' APA[456] is 'without foundation'.[457] They submit that for ACB Co Vendor to have purchased 'through' APA would have been contrary to the recipient created tax invoice regime and inconsistent with all of the parties' communications.

367 The Amcor parties' response is that there is no evidence to suggest that any such supply by ACB Co Vendor took place.

368 In the period between Completion and entry into the Deed of Accession, the evidence shows that orders were placed with the ACB Business using Amcor's PCS and PICK system, raw materials were supplied to Achilla, and Achilla performed OME work for the Amcor parties.

369 Achilla performed OME work for AFP during the term of the supply agreement. Mr Holihan gave evidence that the profit & loss statements for Achilla show that in the respective financial years during the term of the supply agreement, AFP purchased OME supplies totalling the amounts shown below:

(a) $4,467,723.53 for the financial year ending June 2004 (11 months only, from 1 August 2003);

(b) $5,213,986.73 for the financial year ending June 2005;

(c) $3,360,322.31 for the financial year ending June 2006;

(d) $1,925,474.82 for the financial year ending June 2007;

(e) $1,261,482.74 for the financial year ending June 2008; and

(f) $74,757.05 for the financial year ending June 2009 (month of July 2008 only).[458]

370 Mr Holihan said that in the first year the agreement seemed to be working, but he first noticed a drop in sales to AFP throughout the first half of 2005.

Issue 1(e): Do the Second Sale Agreement and the Deed of Accession preclude a finding that there was an Implied Supply Agreement between APA and Achilla?

371 This issue captures the defence pleaded by the Amcor parties that:

(a) the Deed of Accession and the entire agreement clause (contained in clause 15.11 of the Second Sale Agreement) are evidence of the parties' intentions that the clause 12(b) Purchase Obligation (i.e. obtain all its OME supplies of Products from Achilla ...) rested on ACB Co Vendor;[459] and

(b) the entire agreement clause precludes the existence of the alleged implied agreement.[460]

372 As will be apparent from the foregoing, the Holihan parties dispute that any such obligation rested on ACB Co Vendor. Rather, they say the clear intentions of the Amcor parties and the Holihan parties, as spelled out in their conduct and correspondence, was that APA was to be the party bound.

373 As to the clause 15.11 argument, they say that the clause, by its terms, only operates as between the parties to the written agreement, and as APA was not a party to that instrument, the clause cannot preclude the existence of an implied agreement between ACB Co Purchaser and APA.

374 Here again, with the separation and bifurcation of the central issues in the case into a set of discrete issues to be answered seriatim, there is a real risk of departure from the orthodox and principled approach that the Court should follow when interpreting a contract or ascertaining whether or not there is an implied contract. Accordingly, I do not propose to answer this question as a separate issue.

Issue 2: Is APA estopped from denying that it was bound by terms equivalent to the alleged implied supply agreement?

The estoppel by convention alleged by the Holihan parties

375 As noted earlier, the Holihan parties also advance an estoppel by convention argument in the alternative to their alleged implied contract. They rely on the parties' correspondence and conduct prior to execution of the agreement, and their correspondence and conduct after execution of the agreement, as discussed above, to support the existence of both the implied supply agreement and the estoppel by convention that they contend precludes the Amcor parties from denying the implied supply agreement.[461]

376 In paragraph 3AB of Achilla's counterclaim, the Holihan parties plead the alleged estoppel by convention in the following terms:

Estoppel by Convention

3AB Alternatively to paragraph 3AA above:

(a) during the negotiations that culminated in the execution of the Second Sale Agreement, and at all material times following the execution of that agreement:

(i) Achilla adopted the assumption that the effect of the Second Sale Agreement would be that APA would be the party bound by clause 12; and

(ii) APA adopted the same assumption;

(b) at all material times, Achilla and APA conducted their relationship on the basis of that mutual assumption;

PARTICULARS TO SUBPARAGRAPHS (a) AND (b)

Achilla repeats paragraphs (e) and (f) of the particulars to paragraph 3AA above.

(c) each of Achilla and APA knew that the other was conducting the relationship on that basis;

PARTICULARS

Achilla repeats paragraphs (e) and (f) of the particulars to paragraph 3AA above.

Further, APA was aware of:

(A) the fact that it was providing work to Achilla and being charged in the manner set out in clause 12.2 of the Second Sale Agreement; and

(B) the fact that Achilla charged higher margins to its other customers than it did to APA for most equivalent work -

because the 'PICK' computer system, which was operated by APA, contained Achilla's customer, job routing and pricing information;

(d) if APA is now permitted to depart from that assumption, it will cause Achilla detriment.

PARTICULARS

(i) Prior to the execution of the Second Sale Agreement, had Achilla not believed that APA was bound by the obligations created by cl. 12 of the Second Sale Agreement, Achilla would not have executed that agreement, but would have sought and obtained an amendment to the effect that APA had the obligations that ACB [i.e., ACB Co Vendor] had under cl. 12 of the Second Sale Agreement as written.

(ii) Following execution of the Second Sale Agreement, had Achilla believed that ACB and not APA had the rights and obligations of ACB under cl. 12.2 of the Second Sale Agreement as written, Achilla would not have allowed APA the benefit of the prices required by that clause, and so would have made greater profits on the sale of products to APA. Achilla charged higher margins to its other customers than it did to APA for most equivalent work.

(e) APA is therefore estopped from denying that it was bound by terms equivalent to those of the Supply Agreement [i.e., the implied supply agreement].[462]

377 The Holihan parties submit that at all material times, the Amcor parties and the Holihan parties 'acted as though APA was the party bound by the Purchase Obligation'[463] in clause 12.2 and that 'it was on the strength of that mutual assumption that Achilla entered into the Second Sale Agreement and continued to allow APA to purchase OME supplies of Products from it' at the prices prescribed by clause 12.2.[464] In those circumstances, they contend that the Amcor Parties are now estopped from denying the existence of the implied supply agreement.

378 In essence, they say '[t]he parties' correspondence and conduct, both before and after execution of the Second Sale Agreement, demonstrates that both APA and Achilla assumed that they were the parties bound by clause 12.2 of the Second Sale Agreement, that each understood the other to be operating on the basis of that assumption, and that both conducted their relationship on the basis of that assumption.'[465] Accordingly, they contend a conventional estoppel operates as between APA and Achilla, and that APA is estopped from denying that it was bound by terms equivalent to those alleged in the implied supply agreement.

379 There is no dispute between the parties as to the applicable legal principles. In Strategic Property Reservoir Pty Ltd v Condec Pty Ltd,[466] Almond J described estoppel by convention in the following terms:

[178] Estoppel by convention is founded on the conduct of relations between the parties on the basis of an agreed or assumed state of affairs (whether as to a matter of fact or a matter of legal effect), which both will be estopped from denying. The assumed state of affairs takes as a given the terms of the contract between the parties, but from which the parties have departed in the course of furthering their relationship under the contract.[467]

380 His Honour also endorsed the statement of principle enunciated by Lord Steyn in the India v India Steamship Co Ltd (The Indian Endurance and The Indian Grace) (No 2),[468] that:

an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared ... or made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption.[469]

381 Generally, in order for a plaintiff to establish a conventional estoppel, it must be demonstrated that:

(a) the plaintiff has adopted an assumption as to the terms of its legal relationship with the defendant;

(b) the defendant has adopted the same assumption;

(c) both parties have conducted their relationship on the basis of that mutual assumption;

(d) each party knows or intends that the other will act on that basis; and

(e) departure from the assumption will cause detriment to the plaintiff.[470]

382 The Holihan parties submit that the relevant assumption adopted can be as to the existence of a binding contract between the parties. [471]

383 If the elements of a conventional estoppel are satisfied, the Holihan parties say that it would have the same practical effect as the implied contract they contend for, in that it would treat APA as the party bound by clause 12.2, but it would do that without having to tackle some of the complexities raised by the implied contract. Counsel for the Holihan parties also noted that it would avoid the question of how the implied provisions sit alongside the express provisions of the Second Sale Agreement.[472] He explained that under the conventional estoppel argument, the parties are estopped from denying that clause 12 operates as if APA rather than ACB Co Vendor were the vendor named in that clause, rather than by imposing a second set of obligations that sits alongside the written contract.

384 As the doctrine of conventional estoppel precludes either party to a contract from denying an assumption which has formed the conventional basis of the relationship between them, it is necessary to determine whether the parties have in fact adopted such an assumption as the conventional basis of their relationship.

385 In my view, the Holihan parties' conventional estoppel argument suffers from the same essential vice as their implied contract argument. It proceeds on the footing that APA was involved in negotiations with Achilla that culminated in the Second Sale Agreement and that, in so doing, APA adopted the same assumption as that adopted by Achilla, namely that the effect of the Second Sale Agreement would be that APA would be the party bound by clause 12, and that each of them knew that the other was conducting their relationship on that basis. In other words, the pleaded claim treats APA as if it were a party to the Second Sale Agreement, and then asserts or intuits that APA was at all relevant times conducting its relationship with Achilla on the basis of the agreement set out in clause 12.

386 There is a distinct lack of clarity in the Holihan parties' case as to who on behalf of APA is said to have had the requisite authority to participate in the negotiations for the Second Sale Agreement and how it was that APA insinuated itself into that agreement and became a party such that, from Commencement, it was bound by the clause 12 obligations. Rather, the position is, as I have found in the context of the implied agreement argument discussed above, that prior to its entry into the Deed of Accession, APA was not a party to the Second Sale Agreement. The evidence is that before the sale, APA, in its capacity as owner of the AFP business operations conducted at the corrugated box manufacturing sites at Smithfield and Revesby in New South Wales, was a significant customer of the ACB Business conducted by APA's subsidiary, ACB Co Vendor. After the sale, the ACB Business was conducted on a 'business as usual' basis save that in March 2005, the Deed of Accession was entered into, whereupon APA became a party to the Second Sale Agreement in place of ACB Co Vendor.

387 As the Amcor parties point out, the Deed of Accession 'points firmly against there having been an adoption of the common assumption that APA was bound by clause 12 of the Second Sale Agreement from completion'[473] and '[i]t would be unnecessary to bind APA by the Deed of Accession if it had been assumed that APA was already so bound.'[474]

388 Further, to the extent that the estoppel by convention pleaded by the Holihan parties relies upon what is said to have transpired in pre-contractual negotiations, the Amcor parties also point to the threshold difficulty that they contend is well-established in Victoria, namely that pre-contractual negotiations cannot form the basis for an estoppel by convention that is inconsistent with the terms of the written contract. In Retirement Services Australia (RSA) Pty Ltd v 3143 Victoria St Doncaster Pty Ltd,[475] the Court of Appeal (Warren CJ, Harper JA and Robson AJA) endorsed[476] the following statement by McLelland J in Johnson Matthey v AC Rochester Overseas Corporation:

In substance an estoppel by convention is in the nature of an agreement. There is no less reason in principle that such an agreement be treated as superseded by the subsequent written contract than that any other agreement arrived at during pre-contract negotiations be so treated. Furthermore it would be subversive of the policy on which the parole evidence rule is founded, and would unduly shake the security of written contracts, if proof were permitted of such alleged estoppels.[477]

389 The Holihan parties submit that the passage in Retirement Services relied upon is obiter dicta in so far as it concerned estoppel by convention, and point to conflicting authorities on the point but say it is unnecessary for the Court to resolve them.[478] First, they contend that the bases upon which pre-contractual conduct is excluded from consideration do not require that non-parties be precluded from claiming estoppels in the face of such contracts. The Amcor parties also acknowledge that in the context of an alleged estoppel that relies on conduct between parties that pre-dated a binding contract between them, the rationale or bases on which pre-contractual conduct is excluded from consideration, such as preserving the integrity of the written contract, do not apply with the same force where non-parties are involved.

390 Secondly, the Holihan parties say it is well accepted that contracting parties can be bound by an estoppel by convention arising from post-contractual conduct, and that where the relevant conduct began prior to execution of the contract, there should be no reason precluding a court from considering the pre-contract conduct together with the post-contract conduct.

391 In the present case, for the Court to accept that the estoppel by convention advanced by the Holihan parties is made out would also involve the Court finding, at least implicitly if not expressly, that the parties intended to depart from the written contract that was entered into by the parties at the conclusion of those negotiations. Not only would that be subversive of the policy on which the parole evidence rule is founded, it would also call into question the efficacy of the later dealings between the parties in relation to the Deed of Accession which proceeded upon the basis of, and effectively re-affirmed, that their prior dealings were as set out in the written contract.

392 The Amcor parties acknowledge that 'how Mr Holihan and Amcor understood the Second Sale Agreement to operate' is properly able to be the subject of an estoppel by convention. But they contend that the evidence led by the Holihan parties has not been directed to what Mr Holihan and Amcor thought the Second Sale Agreement to mean as such, and say that the Holihan parties have provided no evidence from Mr Barnes, who was Amcor's principal negotiator, to establish what was Amcor's understanding. Rather, they submit, the evidence adduced by the Holihan parties has ranged more broadly, seeking to establish that some Amcor entity other than ACB Co Vendor had promised to obtain OME supplies from Achilla. Accordingly, they contend that there is no evidence before the Court supporting the mutual assumption pleaded by the Holihan parties.

393 The Amcor parties submit that the Holihan parties' failure to call Mr Barnes to give evidence is telling. At the time the negotiations for the sale were underway, Amcor was unaware that Mr Barnes had any business association with Mr Holihan and was to become a co-owner of the ACB Business with him following completion of the sale. It was only several years after the sale had taken place that Amcor became aware that Mr Barnes was actually a co-owner of the ACB Business with Mr Holihan, and had been from the outset. The Amcor parties contend that if a common intention of the kind contended for by the Holihan parties was expressed, then Mr Holihan should have called Mr Barnes and put that evidence before the Court. However, given the failure to call him, they submit 'the Court should draw the conclusion that no such common intention was ever expressed.'[479]

394 The Holihan parties do not accept that Mr Barnes was the principal negotiator for the Amcor parties in respect of the transaction. They accept that Mr Barnes had 'some involvement' but say that Mr Holihan did not 'negotiate the agreement' with him[480] because the evidence shows that Mr Parker, Mr Crouch, Mr Joyce[481] and Mr MacPhail were also directly involved.[482] Secondly, they say, the common intention relied upon is reflected in the body of documents set out in the particulars given of the implied agreement and the estoppel, and insofar as oral testimony about them was required, each of Mr Joyce, Mr MacPhail and Mr Holihan were called. They submit that Mr Barnes was not required, because Mr MacPhail took instructions from him and gave evidence about what Mr Barnes did. Indeed, they say the only useful evidence Mr Barnes could have given was that he instructed Mr Holihan to work with Mr MacPhail, and that was not in dispute. Further, the Holihan parties submit that Mr Parker, Mr Alvarez[483] and Mr Crouch were also involved in the email correspondence that evidences the common intention, and they could have been called by the Amcor parties had they wanted to rebut the common intention.

395 The evidence summarised earlier in these reasons shows that Mr Barnes was 'in the driving seat' from the outset. Mr MacPhail's evidence made clear that he was taking his instructions from Mr Barnes albeit subject to any views expressed by Mr Parker. Mr Holihan gave evidence about what he says transpired in his discussions with Mr Barnes but that evidence was not corroborated. I am not satisfied that there was any common intention of the kind contended for.

396 Finally, the Amcor parties challenge the alleged estoppel by convention at the level of detriment. As I have found that there was no common assumption between Achilla and APA of the kind alleged, namely that the effect of the Second Sale Agreement would be that APA would be the party bound by clause 12, it is not necessary to deal with this aspect, save perhaps to summarise the arguments advanced.

397 The Holihan parties pleaded the relevant detriment as being that if APA is now permitted to depart from the (common) assumption, it will cause Achilla 'detriment' as follows:

(i) Prior to the execution of the Second Sale Agreement, had Achilla not believed that APA was bound by the obligations created by cl. 12 of the Second Sale Agreement, Achilla would not have executed that agreement, but would have sought and obtained an amendment to the effect that APA had the obligations that ACB [ACB Co Vendor] had under cl. 12 of the Second Sale Agreement as written.

(ii) Following execution of the Second Sale Agreement, had Achilla believed that ACB and not APA had the rights and obligations of ACB under cl. 12.2 of the Second Sale Agreement as written, Achilla would not have allowed APA the benefit of the prices required by that clause, and so would have made greater profits on the sale of products to APA. Achilla charged higher margins to its other customers than it did to APA for most equivalent work.[484]

398 The Amcor parties contend that the first detriment pleaded 'cannot logically be a sufficient detriment to justify the finding of an estoppel by convention' because in form and in substance, it is effectively a claim that Achilla has lost the opportunity to formalise the alleged common assumption in a contract. They argue that that cannot be a sufficient detriment to attract the Court's assistance at common law because in every case, a detriment in that form could be alleged and the party alleging it 'could thereby bootstrap themselves into an estoppel.'[485]

399 As to the second detriment, the Amcor parties acknowledge that Mr Holihan gave evidence to the effect that 'Achilla (like the ACB Business before it) charged the [non-AFP] Customers significantly higher margins than it charged to AFP'[486] and that the margins he was charging to other customers were about 79 per cent above D & D[487] but they say it is 'insufficient to demonstrate detriment'. They contend:

A lost opportunity to charge a 79% margin assumes that Mr Holihan would have obtained the work from Amcor at that greater price. That premise, and the lost opportunity founded upon it, has not been demonstrated by any evidence. Indeed, the evidence shows that Holihan was already too dear for some work which is why it went to other OME suppliers.[488]

400 The Holihan parties responded by submitting that the alleged detriment was not so much a loss of opportunity as 'a loss of a right that the parties accepted would be granted.'[489] That is, they contend that the evidence relied upon, most tellingly the RCTI agreement and the Deed of Accession, creates an 'inescapable inference that the parties would have agreed to include APA as a party to the Second Sale Agreement and bind it to clause 12.2 had they properly turned their minds to the question.'[490] In oral submissions, Counsel for the Holihan parties summarised the position, stating:

The detriment allegation that's actually raised [...] is not related to the loss of an opportunity to negotiate a different contract. It's related to the loss of the certainty that the parties would have amended the written instrument so as to give effect to the actual that it's clear they'd entered into and, further, that the Holihan parties would not have acted as if they were so bound in allowing the pricing advantages to the Amcor parties that were allowed pursuant to the supply obligations had the mutual assumptions not been adopted.[491]

401 As will be apparent from the views expressed above, I am not satisfied that the parties would have agreed to include APA as a party to the Second Sale Agreement and bind it to clause 12.2 had they properly turned their minds to the question. Accordingly, the first alleged detriment is not made out. As for the second alleged detriment, the view I have formed is that the work performed by the ACB Business for the AFP businesses conducted at the Smithfield and Revesby sites operated by APA was to be, and was undertaken, on the basis of 'business as usual' and the costing that applied reflected that which had prevailed in the past. Accordingly, when taken in the context of the case as a whole, I do not accept the evidence given by Mr Holihan to the effect that Achilla would have charged higher prices to APA had he not believed it to have the benefit of clause 12. In my view, the prices charged by Achilla for work performed for the AFP businesses conducted at the Smithfield and Revesby sites operated by APA reflected the 'business as usual' arrangement that continued following the change of ownership of the ACB Business. Relevantly, there were differences between the arrangements that applied to the work performed for that customer, as opposed to other customers of the ACB Business generally, that were consistent with 'business as usual' rather than the contractual arrangements in place under clause 12. For example, the raw materials required for such jobs was not supplied to Achilla at prices based on D & D costs, as required under clause 12.1. Rather, Mr Holihan's evidence was that where work was required to be performed for the AFP businesses conducted at the Smithfield and Revesby sites, they supplied the corrugated board and cartons directly to Achilla, and they also arranged and paid for the freight associated with delivery of the raw materials to, and collection of finished product from Achilla's premises at Wetherill Park. In that sense, the D & D pricing mechanism set out in Annexure 5 to the Second Sale Agreement did not accord precisely with that which applied in the context of these 'business as usual' arrangements.

KEY ISSUE: What is the scope of clause 12 of the Second Sale Agreement, and the equivalent clause of any implied supply agreement?

402 In their recent decisions in Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd[492] and in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Limited,[493] the High Court reaffirmed that an 'objective approach' is to be adopted in determining the rights and liabilities of parties to a contract and that the approach to construction enunciated in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales[494] by Mason J, with whom Stephen and Wilson JJ agreed, is to be followed. In Codelfa, Mason J stated the 'true rule' of construction as being:

[T]hat evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties...[495]

403 In Mount Bruce Mining, French CJ, Nettle and Gordon JJ explained the approach to be adopted as follows:[496]

[46] The rights and liabilities of parties under a provision of a contract are determined objectively[497], by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose[498].

[47] In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean[499]. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract[500].

[48] Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning[501].

[49] However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating"[502]. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.

[50] Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.[503]

[51] Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption "that the parties ... intended to produce a commercial result".[504] Put another way, a commercial contract should be construed so as to avoid it "making commercial nonsense or working commercial inconvenience".[505]

404 In adopting an 'objective approach', the Court, when construing the terms of a commercial contract, will look to what a reasonable person in the position of the parties would have understood the contract to mean. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd,[506] the High Court said '[w]hat matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe'[507] and that normally requires 'consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.'[508] A few years later, in Electricity Generation, a differently constituted High Court also reiterated and endorsed the view expressed by Mason J in Codelfa that the ascertainment or understanding of the commercial purpose or objects of the contract 'is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating"'.[509] In their joint judgment, French CJ, Hayne, Crennan and Kiefel JJ explained that a commercial contract should be construed by considering 'the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract'[510] so as to avoid arriving at a result that could not have been intended. Further, their Honours endorsed the observations of Arden LJ in Re Golden Key Ltd (in rec)[511] to the effect that a court is entitled to approach the task of interpreting a commercial contract 'on the assumption "that the parties ... intended to produce a commercial result"' and stated that a court is to construe a commercial contract 'so as to avoid it "making commercial nonsense or working commercial inconvenience."'[512]

405 In seeking to give a commercial contract an interpretation that would promote and give effect to the notion that the parties intended to produce a commercial result, however, a court must also ensure that by having regard to the context and surrounding circumstances as an aid to construction, it does not impermissibly depart from the meaning of the words used by the parties merely because it regards the result as inconvenient or unjust.[513]

Clause 12.2 - the rival constructions advanced by the parties

406 Clause 12.2 of the Second Sale Agreement and/or the implied supply agreement relevantly provides as follows:

... The Vendor [i.e. Amcor party] will for [the period of 5 years from Completion] obtain all its OME supplies of Products from Achilla and will not during that period purchase or procure the supply of Products from any other party other than due to Achilla's inability to supply consistently and on a basis which is commercial and reasonably acceptable in terms of price, quality and availability.

407 The Holihan parties submit that the meaning of clause 12.2 is clear and unambiguous, and thus that the question of breach falls to be determined by reference to its terms. They contend that clause 12.2 required the relevant Amcor party to obtain all of its OME supplies of Products from Achilla. In the course of their oral closing submissions, however, the Holihan parties came to accept that there is relevantly 'ambiguity'[514] in the Second Sale Agreement, demonstrated for example when one seeks to ascertain the meaning of the word 'Product' as used in clauses 12.1 and 12.2 respectively.[515] In these circumstances, the Holihan parties readily acknowledged that in interpreting the clause, it was open to the Court to look beyond the express words of clause 12.2 and to consider surrounding circumstances in order to arrive at its meaning. Further, they said that the effect of their concession was that there would now be no real difference between the approach to be taken by the Court in the construction of the implied supply agreement and the construction of the written agreement, and confirmed it was open to the Court to consider the same extraneous circumstances when construing the written agreement as it would when construing the implied agreement.[516]

408 The Amcor parties contend that the purchase obligation in clause 12.2, on its proper construction, required Amcor to continue to obtain OME supplies from Achilla in cases where the previous ACB Business had already been producing those jobs for Amcor's customers, unless Achilla was unable to do so consistently and on a basis which was commercial and reasonably acceptable in terms of price, quality and availability. They point to the definitions of the 'Business', the 'Contracts' and the 'Customers' in clause 1.1 as lending support to such a construction.[517] So too, they submit, does the fact that Amcor, having sold or leased the machinery used in the ACB Business to the Holihan parties, no longer had the machinery available to do the OME work itself for its customers, and, as Mr Holihan well knew, the Amcor parties needed to have 'a secure place for their work to be made'[518].

409 Further, the Amcor parties contend that clause 12.2 did not require Amcor to re-route all existing work away from other OME suppliers and direct it to Achilla instead. Indeed, they said the Holihan parties, through Mr Holihan, 'understood and assumed that Achilla was obtaining the benefit of the OME business that, prior to execution of the Sale Agreement, AFP provided to ACB Vendor',[519] and knew that the ACB Business under Amcor ownership was using a variety of other OME suppliers. Accordingly, the Amcor parties submit that the purchase obligation in clause 12.2 did not require them to purchase all OME supplies from Achilla, but rather, required Amcor to obtain OME supplies from Achilla where those jobs had previously been made by the ACB Business. In other words, they submit that when viewed in the context of the Second Sale Agreement and the surrounding circumstances, it is clear that 'all' OME supplies does not mean 'all'.

410 In the circumstances, both the Amcor parties and the Holihan parties acknowledged that the proper construction of clause 12 is to be arrived at by considering not only the words used but also the surrounding circumstances known to the parties at the time and the purpose and object of the transaction.

The surrounding circumstances known to the parties and the purpose and object of the transaction

411 When one has regard to the surrounding circumstances, it is clear that the Second Sale Agreement sought to do two things: first, to sell the assets of the ACB Business (and sub-lease the Wetherill Park premises) to the Holihan parties[520] so that they could carry on the ACB Business, and secondly, to enter into trading arrangements[521] whereby the Amcor parties would supply (or continue to supply) raw materials to the ACB Business (under new ownership) and the ACB Business (under new ownership) would perform (or continue to perform) OME work for Amcor entities and others of the kind performed by the ACB Business (under Amcor ownership). It is also relevant to note that the ACB Business was being sold by the Amcor parties to Mr Holihan, who was at that time employed by Amcor and was the manager of the ACB Business.

412 ACB Co Vendor was the owner of the assets. It conducted the ACB Business from the Wetherill Park premises, and had its own workforce. Being part of the Amcor group of companies, ACB Co Vendor also had access to infrastructure and systems available for use by entities within the Amcor group. ACB Co Vendor performed OME work for entities within the Amcor group and for third parties. But the bulk of its OME work was sourced from the corrugated box plants at Smithfield and Revesby in New South Wales that were operated by AFP(NSW), a division of APA. APA was also relevantly the parent of ACB Co Vendor, and the head lessee of the Wetherill Park premises.

413 Generally speaking, the corrugated box plants operated by AFP(NSW) at Smithfield and Revesby ('AFP Smithfield' and 'AFP Revesby') supplied the corrugated board and cartons to ACB Co Vendor that was used by the ACB Business to perform the OME work required to fill orders that customers such as Arnotts and Kelloggs had placed with AFP Smithfield and AFP Revesby, as well as orders placed by third parties directly. In this way, APA's corrugated box plants had a ready avenue (or dedicated customer) for the supply of the raw materials they produced.

414 Viewed from an Amcor 'whole of business' perspective, there were obvious efficiencies and economies in AFP Smithfield and AFP Revesby supplying raw materials to the ACB Business on the one hand, and in the ACB Business performing the OME work on the other, and thereby keeping the OME work 'in-house'. However, AFP Smithfield and AFP Revesby did use other alternative suppliers to perform OME work on a regular basis. Sometimes alternative suppliers would be used to perform certain OME work because they had a particular specialty, or special equipment that was required for a particular job, or because the alternative supplier could perform 'fiddly' work well or manual labour tasks more cheaply than the ACB Business could. On occasions, OME work ordinarily performed by the ACB Business would be diverted to an alternative supplier (and vice versa) simply because the work was urgent or could not be performed on ACB Co Vendor's equipment within the requisite timeframe because other work was scheduled for those machines at that time.

415 The ACB Business, the corrugated box plants at AFP Smithfield and AFP Revesby and other entities within the Amcor group all had access to the PCS and PICK system.[522] PCS was a part of a package called 'KiwiPlan', that had a corrugator scheduling component called 'CSC' and a plant scheduling component called 'PCS'. Generally speaking, 'PCS' was a scheduling system that was used to determine where the particular OME job was to be sent out to be manufactured, and it would determine the order of manufacture of products through the plant, machine by machine. KiwiPlan and the PICK system had an interface, and they communicated with one another, so that once an order was placed in the PICK system it could then by uploaded into both CSC and PCS. PCS could be used to change the routing of a particular job but the preferable course was to make routing changes using the PICK system.

416 The PICK system had access to information about all of the Amcor machines available for use, including those used in the ACB Business.[523] Mr Holihan agreed that while Achilla was on the same system as the Amcor parties, Achilla was visible to the Amcor parties through the use of PICK and PCS. He said that PCS would show the machine line ups for a job, and once each of the machine rates was entered into PICK by Amcor, 'they then had a mechanism to know what it would cost to have a product produced by [Achilla] on any of these machines so they could quote their customers without having to contact us, ring us.'[524]

417 Information about the machines of the alternative suppliers was not contained within PICK but the estimators generally knew what machinery was available at each of the alternative OME suppliers and what work the respective suppliers could do or not do and at what price. Prior to the sale, the estimators would route new work to the ACB Business or to the alternative suppliers according to their respective availability and ability to perform the OME work.

418 The PICK system contained all of the specifications for the particular job, including the costings, pricing, accounting information, order histories, delivery information and invoicing information. The evidence was unclear as to whether, in cases where an alternative OME supplier was involved, the PICK system also disclosed the identity of the relevant OME supplier.[525] It appears that it was possible to 'drill down' into a particular order to determine which OME supplier had performed the work for that order, but it was not possible to run a report from PICK to determine where OME work had been sent.[526]

419 When a fresh order was placed by a customer with an Amcor sales representative, the sales representative would notify the estimator at the ACB Business of the new job and its internal dimensions, paper requirements (printed or plain), the quantity required, delivery details etc. The estimator would enter those details into the PICK system, and it would generate a best price for that job. The estimator would then supply a quotation to the customer and if the customer was happy, the work would be ordered by reference to the quotation. The estimator would create a 'master' on the PICK system using the quotation number which contained the requisite information. Where, however, the job was a 'repeat' job, that had been performed for the customer at an earlier point in time, the customer would simply supply the master number (i.e., no estimator was required to be involved because the costing etc was contained in the master) which enabled the ACB Business to access the relevant details through PICK.

420 Where tooling was required for a particular OME job, Amcor would usually supply the tooling to the OME supplier itself, so as to eliminate the prospect of any mark-up or margin on the manufacturing cost being charged to it.[527]

421 At a practical level, once an order was placed and a master created was for a job in PICK, subsequent orders for the same work from the same customer would be routed to the same OME supplier, particularly if special tooling was involved, and the finished work would be charged at the same price as before. But it was possible to change the job specification in PICK and re-route the work to another OME supplier if necessary or desirable to do so.

422 At the time of sale, the ACB Business was regarded by Amcor as an underperforming business in the sense that it was not meeting Amcor's 'return on funds employed' (ROFE) benchmark. When ACB Co Vendor sold the assets and undertaking of the ACB Business to the Holihan parties, it was the sale of a going concern, and it was envisaged on both sides that after the sale, the ACB Business would continue to do the OME work that historically had been routed through the ACB Business prior to the sale, using the same equipment and at the same premises. Further, raw materials required by the ACB Business (under new ownership) would (continue to) be supplied by ACB Co Vendor sourced from the corrugated box plants at AFP Smithfield and AFP Revesby at D & D prices agreed between them, and the ACB Business would (continue to) perform OME work for customers of the corrugated box plants at AFP Smithfield and AFP Revesby at D & D prices agreed between them, and the PICK and PCS systems would (continue to) be used for ordering, quoting and scheduling the work to be undertaken by the ACB Business (under new ownership). In that sense, the ACB Business (under new ownership) would operate in much the same way as it had in the past, and work for customers would be ordered and received in much the same way as before, and at the same or similar pricing. To facilitate that course, the Wetherill Park premises from which the ACB Business operated were to be sub-leased to the Holihan parties by APA and the ACB Business (under new ownership) would continue to have access to the corrugator located there. And the Holihan parties were permitted to offer employment to any of the 'Employees' (defined to mean the employees of the Vendor engaged in the Business as listed in Annexure 7) with effect from the Completion Date.

423 Under clause 2.1 of the Second Sale Agreement, ACB Co Vendor sold, and the Holihan parties agreed to purchase the assets of the ACB Business. The assets included:

(a) the 'Stock' (defined to mean 'all raw materials, supplies, packaging and containers, work-in-progress, finished products, parts and components and other inventory of the Business including items of stock in transit or on consignment to customers');

(b) the 'Plant and Equipment' (defined to mean 'all fixed and loose plant, equipment, machinery, furniture, fixtures and fittings, computer hardware, vehicles, and all other tangible assets listed and set out in Annexure 3');

(c) 'all of the interest of [ACB Co] Vendor under or arising out of the Contracts' (where 'Contracts' were defined to mean 'any contracts and agreements (whether written, oral or arising through a course of trading, or a combination of any of these) which relate to the Business and to which the Vendor is a party or by which the Vendor may be bound as at Completion, including for the avoidance of doubt contracts and agreements for supply to Customers');

(d) the 'Customers' (defined to mean 'the customers of the Business or other persons to which the Business supplies or supplied products or services at the Completion Date or during the period of 12 months before that date, and for the avoidance of doubt includes:

(a) customers of the Vendor appearing on its debtors ledger; and

(b) those customers with which the Vendor's sales team has dealt at any time during the 12 month period up to the Completion Date');

(e) the 'Books and Records' (defined to mean 'originals or copies (as appropriate) in machine readable or printed form of all registers, books, reports, correspondence, files, records, accounts, documents and other material, in the possession or control of the Vendor, about or used in connection with the Business and the Assets')

(f) the Business Name (defined to mean 'the business name Australian Corrugated Box Co'); and

(g) the 'Goodwill' (defined to mean 'the goodwill of the Business').

424 The 'Business' was defined to mean 'the business carried on by the Vendor of the sale and supply of corrugated packaging as at the date of this Deed and for the avoidance of doubt, does not include any part or parts of the business of Amcor Packaging (Australia) Pty Limited [i.e., APA] or Amcor Ltd'.

425 The purchase price for the 'Stock' (which was to be calculated pursuant to a stocktake) was payable 12 months from Completion and the purchase price for the Business (other than the Stock and the Accrual Amounts and Prepayment Amounts) of $1,000,000 was payable by five yearly instalments, the first commencing 12 months after Completion and ending 60 months after Completion.

426 Upon entry into the Second Sale Agreement, clause 4.2 required both ACB Co Vendor and, so far as practical and feasible, Mr Holihan as an employee of the Vendor, to 'conduct the Business in the ordinary course and in substantially the same manner as it was conducted' prior to entry into the agreement. The Holihan parties were also required to enter into a fixed and floating charge in favour of ACB Co Vendor and APA as Chargee, effectively to secure the payment of the instalments of the purchase price.

427 Under clause 9.1 of the Second Sale Agreement, provision was made for ACB Co Vendor to assign the Vendor's interest in, or obtain novation of, the Contracts to or in favour of ACB Co Purchaser or Achilla (or both), and to ensure that for a period of up to 12 months following Completion, the ACB Business (under new ownership) could so far as practicable obtain supplies of starch, inks, energy etc on terms which were no worse than those upon which ACB Co Vendor obtained them, Clause 9.2 made provision for certain 'practical arrangements' (by way of sub-lease or sub-licence or ACB Co Vendor holding the benefit of any such Contract for the Holihan parties) to apply in the interim until any novation or assignment under clause 9.1 took place. Importantly, clause 9.3 made provision for the ACB Business (under new ownership) to continue to use the 'Computer ordering system', as follows:

9.3 Computer ordering system

The Vendor will at no cost to the Purchaser or Achilla and subject always to the terms of any licence in force for use of the same:

(a) leave intact the existing computer system by which orders are placed direct into the manufacturing system, use of which (and any related software) is pursuant to a licence from the Vendor, and no ownership or title therein is conferred on the Purchaser or Achilla, but upon replacement by the Vendor of the existing system with another system (as it is acknowledged is currently contemplated), the parties will meet to discuss and agree upon an effective and efficient process for achieving the same or essentially the same results; and

(b) make available to the Purchaser or Achilla an effective order processing and tracking system similar to that available to other customers of the Vendor by which the Purchaser may place and track orders in the Vendor's manufacturing system.

428 The ability of the ACB Business (under new ownership) to continue to use the PCS and the PICK system facilitated the conduct of the 'business as usual' following the sale, in the sense that those systems effectively recorded the OME work that historically was performed by the ACB Business whilst under Amcor ownership. The Second Sale Agreement did not guarantee or specify a 'minimum' amount of OME work that the ACB Business (under new ownership) would receive under clause 12.2 or a 'minimum' amount of raw materials that the ACB Business would purchase from ACB Co Vendor under clause 12.1. But given the way the PCS and the PICK system operated to generate quotations and route OME work to the ACB Business and the alternative suppliers, the work formerly performed by ACB Co Vendor would in the ordinary course continue to be performed by the ACB Business (under new ownership). That is because the OME work that was performed historically by the ACB Business whilst ACB Co Vendor was running it was identified on the PCS and the PICK system by the numerical denotation in the 'master' for the job. When further quantities of the particular OME job were required and ordered for that customer, the job would continue to be routed to the ACB Business because it was denoted in the master coding as the OME supplier for that job. In the case of new work, the estimator could use the PCS and the PICK system to ascertain the price at which the ACB Business could perform the OME work and prepare a quotation for the customer, which if accepted, would see the job routed to the ACB Business. Similarly, if a fresh supply of an existing OME job was required on an urgent basis, but the alternative supplier who usually performed that work was unable to complete it within the requisite time frame, the estimator could use the PICK system to ascertain whether the ACB Business could perform the work, and at what price, and if acceptable to the customer, the work would be routed to the ACB Business.

429 The D & D costing mechanism used in the Second Sale Agreement was developed by the parties in consultation with each other in the manner outlined in the factual chronology earlier in these reasons. The acronym 'D & D' (a reference to the 'direct and distribution costs') was defined in clause 1.1 to mean 'the applicable costing base of products for the purposes of calculating costs in relation to clause 12 as shown in Annexure 5'. While Annexure 5 specified the discrete cost elements that were to be included in arriving at the 'D & D rates' formula, it expressly left open some scope for adjustment to the D & D insofar as it stated that 'D & D changes will be agreed between CH and the Vendor's commercial manager.'[528] Further, clause 12.3(ii) provided that:

[ACB Co Vendor] and Achilla will in writing or in meetings, or as otherwise deemed appropriate, verify and confirm the basis of D & D, to ensure that this is a true and accurate reflection of costs, such process to be carried out at or shortly before Completion, and upon each anniversary of Completion, or as otherwise agreed between the Purchaser and the Vendor.

430 The objective of the D & D costs mechanism was to allow the Vendor, or Purchaser or Achilla (as the case may be) to recover their respective 'direct and distribution costs' involved in the supply of raw materials on the one hand, and the supply of finished products on the other, on the basis of an effectively agreed pricing.

431 Generally speaking, it was through the D & D pricing mechanism that ACB Co Purchaser/Achilla would recover its fixed costs of operating the ACB Business. However, as the Second Sale Agreement did not specify any minimum quantity of OME work (or raw materials) that was required to be ordered and supplied under either clause 12.2 (or clause 12.1), the practical reality was that Achilla was required to be ready to provide all of the anticipated work that the Amcor parties might want across the year, and that necessarily involved it carrying the fixed costs of having the requisite capacity available to do so, irrespective of whether or not it received the benefit of that work.

432 The pricing that was to apply in the first year of operation of the ACB Business (under new ownership) was to be arrived at by reference to the pricing that applied to the historical actual throughput from the Wetherill Park plant as operated by ACB Co Vendor preceding the sale, and ratcheted up in each contract year by the agreed margin(s) specified in clause 12. In that way, with the D & D pricing mechanism in place under the Second Sale Agreement, an estimator who was quoting on a job or order to be placed with the ACB Business, could enter the job details into the PICK system and the PICK system would generate a costing or quote for the item of proposed work.

433 Against that background, it will be seen that clause 12 of the Second Sale Agreement established the reciprocal supply and purchase obligations that applied to ACB Co Vendor, as Vendor, and to ACB Co Purchaser (and Achilla), as Purchaser, of the ACB Business. Under clause 12.1, ACB Co Vendor agreed it would supply corrugated board and corrugated cartons to ACB Co Purchaser and Achilla at prices based on D & D costs to ACB Co Vendor. And Achilla (and if appropriate ACB Co Purchaser) undertook to 'obtain all supplies of' such Products from ACB Co Vendor at the D & D prices specified, save for those that Achilla manufactures for itself (or ACB Co Purchaser), and agreed it would not purchase or procure the supply of Products from any other party other than due to ACB Co Vendor's 'inability to supply consistently...' etc. Accordingly, for a period of five years, ACB Co Purchaser and Achilla were required to obtain their raw materials from ACB Co Vendor and not from any other source. Further, such supplies by ACB Co Vendor and acquisitions by Achilla were to be made on APA's 'standard terms and conditions applying for substantially similar supplies from time to time.'

434 Similarly, under clause 12.2, Achilla undertook to supply 'Products' (in context, that must be construed to mean finished products and not corrugated board and cartons) to ACB Co Vendor at prices based on D & D costs to Achilla. ACB Co Vendor agreed that during the five year period it would 'obtain all its OME supplies of Products from Achilla' and would not 'purchase or procure the supply of Products from any other party other than due to Achilla's inability to supply consistently...' etc.

435 Clause 2.4 of the Second Sale Agreement provided that where any obligations are expressed to be carried out or property to be transferred by ACB Co Vendor, 'the Vendor may where appropriate procure such carrying out or effect such transfer by or through a Related Body Corporate,' including APA or Amcor. Clause 12.4 conferred a similar power on ACB Co Purchaser to 'nominate another company in lieu of Achilla to carry out and fulfil all (but not some only) of its obligations and responsibilities and obtain the benefit of all (but not some only) of the rights and privileges' pursuant to clause 12 on the proviso that such company at all times be a Related Body Corporate of ACB Co Purchaser and under the control of Mr Holihan.

The proper construction of ACB Co Vendor's obligation under clause 12.2

436 In my view, when the provisions of clause 12 are viewed in the context of the whole agreement and the surrounding circumstances, the obligation imposed on ACB Co Vendor under clause 12.2 to obtain 'all its OME supplies' from Achilla is to be construed as an obligation on the part of ACB Co Vendor to continue to provide to Achilla after the sale all of the same sort of work that the ACB Business had been doing prior to the sale, save in circumstances where the exception was enlivened. That is, notwithstanding the sale, the ACB Business (under new ownership) would effectively continue on the same basis as before (i.e., when conducted by ACB Co Vendor). Thus, in the ordinary course, customers' work that was entered in the PICK system with a master denoting the ACB Business would be routed to Achilla notwithstanding the change in ownership. Similarly, in the case of new jobs that involved work of the kind that was performed by the ACB Business prior to the sale, in the ordinary course a quote would be generated using the PICK system, and work would be routed to Achilla unless the exception was enlivened. In this way, Achilla would continue to perform the work that historically had been undertaken by the ACB Business, and essentially on the same basis as before, including that its supplies of raw material would continue to be sourced from the AFP businesses conducted at the Smithfield and Revesby sites in New South Wales.

The proper construction of APA's obligations as 'Vendor' under clause 12 of the Second Sale Agreement

437 Turning then to the fresh Second Sale Agreement that came into effect on and from 21 March 2005, with APA as the named 'Vendor', it will be seen that clause 12.2 relevantly provides as follows:

Achilla will for a period of 5 years from Completion supply Products to the Vendor [now APA] at prices based on D&D costs to Achilla. The Vendor [now APA] will for that period obtain all its OME supplies of Products from Achilla and will not during that period purchase or procure the supply of Products from any other party other than due to Achilla's inability to supply consistently and on a basis which is commercial and reasonably acceptable in terms of price, quality and availability. ...

438 The plain meaning of clause 12.2 is relevantly that APA will obtain all its OME supplies of Products from Achilla, save where the exception operates.

439 The Amcor parties acknowledge that 'the parties were content to substitute APA for ACB Co Vendor when entering into the Deed of Accession (even if those in the AFP business were unaware of it)' but observe that that 'says nothing about whether or not the term "APA" itself requires construction.'[529] That is, they say that even though the parties named the legal entity 'APA', they nevertheless recognised that the substitution of APA for ACB Co Vendor was not intended to render all of the businesses operated by APA across Australia and New Zealand subject to the clause 12 obligations. Indeed, the Holihan parties admit (albeit for the purposes of their estoppel by convention claim) that the obligation 'would not extend to all of the businesses operated by APA across Australia and New Zealand.'[530]

440 As noted earlier, in closing submissions, the Amcor parties submitted that entry into the Deed of Accession did not expand the obligations under the Second Sale Agreement but rather, that APA simply 'stepped into the shoes of' ACB Co Vendor. Further, they say, APA's business unit known as Amcor Displays was not part of the Second Sale Agreement as made in 2003, and it was not inadvertently included from 21 March 2005 as a result of the Deed of Accession.

441 The Holihan parties accept that the effect of the Deed of Accession was that APA stepped into ACB Co Vendor's shoes 'for all purposes',[531] but they do not accept that the Amcor Displays' work was not encompassed within clause 12.2.

Is Amcor Displays' work captured within the clause 12.2 obligation?

442 As was the case with AFP, Amcor Displays was simply a business name (rather than a corporate entity), that was owned and used by APA. The Amcor Displays business occupied a prominent and important position in the conduct of the trial, primarily because the work performed for this business during the five year period forms a significant part (about half, by value) of the quantum of the Holihan parties' claim that is contested by the Amcor parties.

443 As noted earlier, the Holihan parties contend that clause 12.2 unambiguously required APA 'to obtain all of its OME supplies of Products from Achilla for a period of five years. Accordingly, the Holihan parties submit that there was no 'carve-out' from the clause 12.2 purchase obligation for the Amcor Displays' work, such that any OME work done by the alternative suppliers for Amcor Displays was prima facie in breach of clause 12.2, such that they are entitled to claim loss and damage in respect of that work. Alternatively, the Holihan parties submit that if the Court were to find that there is ambiguity, such that regard may be had to the surrounding circumstances, it is clear that clause 12.2 extended to Amcor Displays' work, except work that was subject to a third party agreement with ACE Print.

444 In that regard, the evidence was that prior to the Second Sale Agreement being entered into, AFP had entered into a supply agreement with ACE Print in relation to Amcor Displays' work.[532] As noted earlier, Mr Holihan knew, at the time the Second Sale Agreement was entered into, that there was an agreement in place with ACE Print for it to do work for Amcor Displays[533] because Mr Alvarez had sent an email to him on 22 January 2002, enclosing a copy of the ACE Print contract 'as approved'.[534] That agreement apparently began sometime in 2001 and came to an end in February 2004 following the purchase of ACE Print by Visy.

445 The relevant agreement refers to ACE Print doing work 'in response to orders from AMCOR Pty Ltd (ABN 55 004 275 165) ("Amcor") on behalf of Amcor's customers.'[535] The Holihan parties rely upon this statement as demonstrating that Amcor has only one class of customer, and that there is not a separate class of 'Displays' customers. They say that this is also apparent from the sales and customer listing for the financial year ending 30 June 2003[536] discovered by Amcor.[537] Mr Nellies did not recognise this document, but under cross-examination he agreed that customers of Amcor Displays were customers of Amcor.[538]

446 It is common ground that at the time of entry into the Second Sale Agreement and at Completion, Amcor Displays was contractually obliged to use ACE Print as its supplier of OME work. But the Holihan parties do not accept that during the period when the ACE Print agreement was in place that ACE Print was doing all of the Amcor Displays' work. Rather, they say, while that agreement was on foot, some of the Amcor Displays work (including corrugated point of sale displays and litho lamination) was being done by ACB Co Vendor, either at the request of Amcor Displays directly or at the request of Amcor for Amcor Displays.[539] In this regard, they rely upon evidence given by Mr Holihan, Mr Silva and Mr Cichonski and the June 2003 profit & loss statement for the Wetherill Park operations of the ACB Business.[540]

447 Against this background, the Holihan parties claim that the work requirements of the Amcor Displays business fell within, or were encompassed by, the obligation under clause 12.2 of the Second Sale Agreement (or the implied supply agreement). In effect, they submit that once the ACE Print contract came to an end, the Amcor Displays' OME work was captured by the clause 12.2 requirement that APA 'obtain all its OME supplies' from Achilla, because Amcor Displays was relevantly a business operated by, or under, APA. In their closing oral submissions, Counsel for the Holihan parties submitted that when regard is had to the Amcor parties' defence and the way the case was opened 'it is still not clear on what basis precisely' the Amcor parties challenge or resist the claim for the Amcor Displays jobs or in respect of which of the jobs their Amcor Displays' defence is said to apply.[541]

448 The Amcor parties' pleading of their defence to the Holihan parties' case as it concerns Amcor Displays is summarised earlier in these reasons. The pleaded defence related to Service Containers but that position was not actively pursued and their defence was refined, initially during the Amcor parties' opening, and further throughout the running of the trial.[542] In essence, the Amcor parties now contend that Amcor Displays was a distinct and discrete business within Amcor, that was run separately from the businesses conducted by AFP at its Smithfield and Revesby sites in New South Wales, at a different location and with different management.[543] Accordingly, they contend that the clause 12.2 obligation did not extend to the Amcor Displays business.

449 The Amcor parties effectively contend that the OME work requirements of Amcor Displays were not encompassed within the clause 12.2 obligation because Amcor Displays was at all relevant times a discrete and distinct business that was conducted separately from 'the AFP business' at the Smithfield and Revesby sites in New South Wales. Further, they say, as a matter of interpretation, the clause 12.2 obligation did not extend to the Amcor Displays business.

Prior to the sale, Amcor Displays was located at Revesby

450 Amcor Displays was a graphics and displays business, that sold and supplied cardboard-based point of sale products such as display stands and storage bins of the kind seen in chemist stores and supermarket aisles. The Amcor Displays business was initially located at Milperra Road, Revesby, but it was relocated to Wetherill Park in mid-2004 and then to Enfield after that.

451 In the principal judgment, Vickery J found that prior to entry into the First Sale Agreement on 1 February 2002, the Amcor Displays business was a component part of the Service Containers Business but, being profitable, it was retained by Amcor and did not form part of the sale of the Service Packaging Business that was sold to Mr Hottes. Prior to the sale of the Service Packaging Business, Mr Hottes was engaged as an independent contractor by Amcor to operate both the Service Packaging Business and the 'Displays Business'. After the sale, Amcor extended Mr Hottes' consultancy. Following the death of Mr Hottes in August 2004, however, a separate arrangement was entered into with the Holihan parties for Mr George Daaboul, an employee of the ACB Business, to go across to Amcor Displays and run that business as a manager.

452 Mr Holihan gave evidence as to how that arrangement for the ACB Business (under new ownership) to provide a manager for Amcor Displays was reached. He said that in November 2003, Mr Alan Caldow, who was the National Specialty Manager for AFP, telephoned him and asked whether he would be happy to enter into some sort of arrangement for Amcor Displays to relocate to Wetherill Park and for Mr Daaboul to be seconded to AFP to manage the Amcor Displays business.[544] Mr Holihan said he knew that Mr Caldow knew Mr Daaboul because previously they had all worked together at Visy Board. He said Mr Caldow told him that the work that AFP was doing for Amcor Displays in-house at its Revesby and Smithfield factories would now be routed to Achilla, and he could send Mr Holihan a fax of some notes that he had made about his current thinking.[545] On 17 November 2003, Mr Holihan received a fax from Mr Caldow regarding Amcor Displays, setting out the details of the proposal that he and Mr Caldow had discussed.[546]

453 In his 'draft' proposal, Mr Caldow outlined the proposal as follows:

1. Relocate business from Milperra Road, Revesby to the ground floor of the ACB Building at Newton Road, Wetherill Park.
2. Route ALL flexo and converting operations that would normally go through Smithfield, through the ACB operation.
3. Source ALL external OME work from the open market on the basis of "ONE QUOTE---BEST OFFER" principle.
4. Appoint a General Manager to manage the operation which would involve the transfer of the current employees to the new site. ...

1. The planned timetable I have in mind would see this operating from 1st January 2004.
2. The person that has been nominated to Manage this operation is a current employee of ACB - George Daaboul. ...
3. As a matter of political correctness, ACE Print and Packaging should be notified of the manner in which we intend doing business in the future.
4. Ian Hotties (sic.) or a member of his business needs to be advised, and agreement reached on the allocation of lease costs, and shared services.[547]

454 Mr Holihan said he saw this invitation as a tremendous opportunity for Achilla because it would give Achilla some real insight into the OME work that Amcor Displays had.[548] Mr Holihan said that having sat in on the monthly AFP management meetings, and being familiar with the work required in producing corrugated cardboard displays of the kind sought by Amcor Displays, and having visited the Amcor Displays site, he knew Achilla was able to perform all of the operations involved in the manufacture of displays except for screen printing.[549]

Relocation of the Amcor Displays team to Wetherill Park (mid-2004)

455 In or around early 2004, Mr Caldow left Amcor. Mr Holihan said that Mr Manser called him to let him know that he was now the acting Specialty Manager for AFP, and was aware of the discussions that had taken place with Mr Caldow regarding Amcor Displays, and he supported and wanted to move forward with the proposal to move Amcor Displays to Wetherill Park with Mr Daaboul as manager.[550] During that conversation, Mr Manser also informed Mr Holihan that ACE Print had been bought by Visy Board, the contract with ACE Print had been terminated, and he was keen to move the existing ACE Print work across to Achilla as soon as possible.[551] Some time after that conversation, Mr Holihan met with Mr Manser at Achilla's premises at Wetherill Park to discuss Amcor Displays and the physical space it would require for its sales team and customer service support.[552]

Achilla enters into a management agreement with APA regarding Amcor Displays

456 In or around mid-2004, Achilla entered into an agreement with APA whereby Achilla agreed to undertake the management of 'a Division of Amcor Displays Australasia in New South Wales' on a 'fee for service' basis to be paid by APA.[553] The management agreement was executed by Mr Bayley on behalf of APA[554] and by Mr Holihan on behalf of Achilla. Under the management agreement, Achilla's employee, Mr Daaboul, was designated as 'the person responsible for carrying out the management duties' and he was required to devote an average of 20 hours per week to that role. The agreement was to commence to operate from 1 July 2004 and cease on 30 June 2005 unless extended by agreement.[555] In or around mid-2004, Achilla confirmed Mr Daaboul's terms of employment by letter, drafted mainly by Mr Manser, with input from Mr Holihan.[556]

457 Amcor Displays moved in to Wetherill Park in about July 2004 and Mr Daaboul took up the role of running the business.[557] However, the position was soon reached whereby Mr Daaboul was spending more time working on the Amcor Displays business than first anticipated, and on or around 26 August 2004, ACB Co Purchaser and APA agreed to vary the management agreement in relation to Amcor Displays with effect from 1 September 2004. [558]

458 Mr Holihan said that the work that Achilla did for Amcor Displays increased markedly from around the time Amcor Displays relocated into the Wetherill Park site and it remained steady until late 2004. However, notwithstanding that the contract with ACE Print had been terminated, Achilla did not immediately get the work that ACE Print had been doing.[559] ACE Print had apparently been asked to return the films and other tooling it held, but it was not until around September 2004 that the remaining material was returned to Amcor Displays at Wetherill Park.[560]

Decline in OME work - Amcor Displays relocates

459 During the first quarter of 2005, Mr Holihan first noticed a decline in the volume of OME work being received by Achilla from AFP. At about this time, Mr Manser told Mr Holihan that Amcor Displays would not be signing the deed to lease space from Achilla and that it would be moving out, which it later did. Mr Manser had also informed him that he was going to relocate the purchasing functions of Amcor Displays NSW to Victoria and have them run from a Service Containers business. [561] The management agreement with Mr Daaboul was not extended and came to an end by effluxion of time on 30 June 2005.

460 Mr Joyce gave evidence that in a corporate sense, responsibility for the Amcor Displays business was part of his role as Commercial Manager Operations for AFP, based in Melbourne.[562] Mr Joyce described the Amcor Displays business as being essentially a 'point of sale' business that lacked any manufacturing capability. He said:

Amcor Displays was a small sales organisation. It had no manufacturing capability sitting behind it. It was - all its material that it sold was supplied out of the main manufacturing operations that Amcor owned in and around Sydney, and that also included some outsourcing of specialist activities. The displays business produced cardboard based point of sale shelving, advertising that could go for example into stores or into any other sort of retail environment.[563]

461 Mr Joyce explained that the base material for the Amcor Displays work was sourced 'from one of the two large manufacturing plants at Smithfield and Revesby'[564] and he believed that it was the sales staff for the Amcor Displays business who managed the process of determining where the work required was to be directed, by reference to the product specification. Under cross-examination, he explained the basis for his belief:

And why do you believe that to be the case?---Um, because they had the intimate and unique understanding as to what the customer requirements were and, therefore - and also, um, needed to manage the commercial relationship with the customer and, therefore, could not afford to be disappointed if that manufacturing step, or one or many of the manufacturing steps, did not take place in the appropriate timeline.[565]

462 Mr Anthony Cichonski, who was the New South Wales Regional Operations Manager of Amcor from June 2000 to January 2005, gave evidence that before the sale in July 2003,[566] Amcor Displays was a separate business to that conducted at Smithfield and Revesby, and that Amcor Displays had its own sales team and estimating department and a different product.[567] Mr Cichonski said that during his time with ACB Co Vendor, in the period prior to the sale to the Holihan parties, the ACB Business did work that included making boxes and displays and other corrugated product[568] and Amcor Displays used the Smithfield and Revesby facilities for production of components of its work (but they did not perform the OME work itself).[569] Orders for Amcor Displays were placed on the PICK system, the system would 'divvy up' how the work was to be done and, as part of that, the Smithfield or Revesby plants would manufacture the corrugated cardboard component of a Displays job.[570] He said that those plants may also have die-cut the work depending on volume.[571]

463 Mr Cichonski said that in January 2005, when he commenced employment with ACB Co Purchaser/Achilla as its Operations Manager, the ACB Business could do a similar range of work, including the 'assembly, bundling, folding, gluing, stitching, slitting, slotting, strapping, palletising, wrapping and packing of corrugated boxes and other corrugated products such as displays' and 'laminating of corrugated products, including litho lamination.'[572]

464 Mr Joyce was less certain about whether, before the sale, the ACB Business had performed work for Amcor Displays. In giving his evidence, he agreed initially that when he was the Commercial Manager Operations at AFP, one of the businesses that the ACB Business serviced in and around Sydney was Amcor Displays.[573] However, when asked if he could remember whether or not Amcor Displays had work done by the ACB Business prior to the sale he clarified the position and said '[i]t was possible that work could go through the Wetherill Park site of Australian Corrugated Box, in order to produce product for Displays New South Wales'.[574] He did not recall whether he anticipated that position might continue after the sale.

465 Under cross-examination, Mr Joyce explained what he meant when he said it was 'possible':

Now, you said earlier that it was possible that the ACB business did work for Amcor Displays. Why did you say that it's possible?---Ah, because depending on the nature of the product as it was specified, um, it could have required some of the converting machinery that resided within the Australian Corrugated Box plant at Wetherill Park.

And at the time - this is again presale - ACB business was an internal company - isn't it?---That is correct.

So Amcor's policy at the time would be to do whatever work could be done internally, is that right?---Absolutely.

That way the profits would be kept in-house?---It would retain the margin internally.

So it's for that reason it may well be possible that ACB business did work for Amcor Displays where they had the machines?---Correct. That is correct.[575]

466 Mr Garcia, who was called as a witness by the Amcor Parties, gave evidence about the separate estimating workforce in place at Amcor Displays. Mr Garcia, who is currently employed by Orora Australasia as a Regional Estimator, has worked for about 35 years in the estimating departments of several of the companies operating in the corrugated fibre packaging industry. Mr Garcia described the role of an estimator as having two aspects - he said the main role is to give a price to the customer and the other is 'to route the job', that is, to determine how you are going to manufacture it in the factory.[576] He explained that the estimator is involved where the particular work is requested by the customer for the first time. Once the estimator has created a 'master' number for the job, the customer uses that master number when re-ordering the job. He said that when it came to OME jobs, he knew all of the OME vendors' limitations, in the sense of what machinery they had and what work they can or cannot do, and what prices they charged.[577]

467 Mr Garcia said he knew of Amcor Displays, describing it as 'another division'.[578] He said that he did not do estimating work for Amcor Displays and he did not have interaction with their staff. He said he thought that Mr Walter Dailey and Mr Bret Roddy did the estimating work and the routing work for Amcor Displays.[579]

468 Mr Nellies, who was called by the Amcor parties, also gave some general evidence about the estimators at Amcor Displays. He said that the estimators in Amcor Displays did not report to him, nor did they report to Mr Azzopardi (who reported to him).[580] Mr Nellies said that he knew that Mr Dailey was an estimator and customer service person at Amcor Displays, he having originally started at Amcor and then later moved across to Amcor Displays.[581] Mr Nellies said that Mr Dailey, in his role at Amcor Displays, 'would have reported into the Amcor Displays hierarchy,' but he was not privy to knowing what that was, whereas the estimators who were working for Amcor reported to Mr Vince Azzopardi, who in turn reported to Mr Nellies.[582]

469 Mr Nellies, in giving his evidence, also described Amcor Displays, saying 'technically, Amcor Displays was a customer' so that they should have been placing orders with Amcor in the same way that a customer would place orders.[583] He explained this further, saying:

- - - Because they were a different division. So we had Amcor Cartons, we had other divisions of Amcor that would place orders within ourselves, so we would - they would place a purchase order to do that.[584]

470 He was then taken to Exhibit H423, which is a listing of Amcor's Sales & Customers for 2003. The listing was separated into customers of AFP, which commenced with Amcor Cartons and ended with Amcor Aerosols, and customers of ACB, which commenced with ARK Relocations Pty Ltd and ended with Pack & Send South Brisbane, and it showed the volume of product purchased (in sqm) and the 'Sales $' by amount for each customer. Mr Nellies said that Amcor Aerosols was a division of Amcor that was a client of AFP New South Wales.[585] He then explained what he meant by the expression 'a client of AFP' saying that they purchased cartons from AFP as a division of Amcor, and they would 'place a purchase order for us to manufacture goods on their behalf.'[586]

471 Mr Nellies confirmed that Amcor Displays was not shown in the listing of customers of ACB.[587] In the listing of customers of AFP, however, there was a line item recording an 'Amcor Displays-cash sale'. Mr Nellies explained that this could be anything but said it likely referred to invoicing 'for a product that would have been sold to a client that didn't have an account with Amcor Displays'.[588] He added that Amcor Displays 'as a division of Amcor it was part of the Amcor sales. So there was a Revesby and a Smithfield ... - and a Displays.'[589]

472 The Holihan parties say that Mr Nellies, who was responsible for estimating, gave evidence that the New South Wales estimating department received the email instruction from Mr Azzopardi to direct all OME to Achilla and that the Amcor Displays' estimators were included as recipients of that email.

473 Mr Paul Silva, who prior to the sale was the 'Logistics Manager' with the ACB Business and responsible for distribution and planning at Wetherill Park, was re-employed by Mr Holihan's company after the sale and continued in essentially the same role. Mr Silva said that after the sale of the ACB Business to the Holihan parties the work that the ACB Business received from AFP was the same, 'at least for a while.'[590] He said that the ACB Business 'continued to do litho lamination work, including for another AFP Business, Amcor Displays', and he confirmed that the ACB Business made displays for Amcor Displays both before Mr Holihan bought the business and 'for a short period of time' after that.[591] He said that 'Amcor Displays was on the PICK system until early 2005.'[592]

474 In respect of Amcor Displays, the evidence was that the 'AFP NSW Displays' or 'Amcor Displays' work is clearly identified on invoices and the like by the prefix 'SX'. Mr Phillips, who worked on the transition from the PICK system to SAP and was very familiar with the codes used by the various businesses to place orders in the system gave evidence that any invoice listed or identified or discovered where the jobs commence with the SX prefix must be accepted to be an Amcor Displays job.[593]

475 The Holihan parties contend that documentary evidence, primarily the June 2003 profit & loss statement, confirms that notwithstanding the contract with ACE Print, the ACB Business nevertheless performed work for Amcor Displays prior to the sale. The profit & loss statement records the revenue that ACB Co Vendor earned from Amcor entities in the notes to the line entry headed 'RESALE PURCHASES / COST OF CORR / RECOVERY'. Mr Holihan said that this item was treated as a 'negative expense' because it was the 'recovery' by the ACB Business of costs incurred in producing that work, and so that two Amcor business units did not record the same sale in each of their accounts.[594] He explained that as at June 2003, those OME sales to Amcor entities totalled $3.683 million, and were comprised of the recovery of the cost of work done for AFP and Amcor Displays by machine hour ($2.622m), the recovery of the cost of manufacturing single face fanfold cardboard for AFP ($785,000) and the recovery of costs associated with carton erecting (fruit and vegetable boxes, known as 'P84s') ($376,000).

476 There was also unchallenged evidence that the machine rates agreed between the parties for the purpose of the D & D calculation included some Amcor Displays' volume. The data tables accompanying the June 2003 profit & loss statement, headed 'Amcor Fibre Packaging - Recovery of Wetherill Park Labour, Variable and Fixed Costs Based on Machine Hours, MTD June 03', give the detail for the components of the $2.622m that is referable to the recovery of the cost of work done for AFP and Amcor Displays by machine hour, and confirm that the sum of $172,097.83 represents 'Management Unit C' being 'Amcor Displays' and the remaining sum of $2,450,225 represents 'Management Unit A' being 'NSW Box'.[595]

477 The Amcor parties acknowledge 'that it cannot be ruled out' that the ACB Business did some work for Amcor Displays prior to the sale, essentially for reasons agreed to by Mr Joyce.[596] Under cross-examination, he acknowledged that as the ACB Business was Amcor-owned before its sale to Mr Holihan, if its machines could do the work, then Amcor Displays may well have run work through those machines to keep profits internal to the Amcor group.[597] But the Amcor parties say that it is a matter for the Holihan parties to establish that Amcor Displays' work was captured by the clause 12.2 obligation. They also dispute the suggestion that Amcor Displays was part and parcel of AFP and thereby bound by clause 12.2.

478 Against that background, the Holihan parties submit that it is open to the Court to infer that there must have been Amcor Displays' work that fell outside the contract with ACE Print which the ACB Business received and did. Thus, they say it follows that even on the Amcor parties' 'business as usual' construction, whenever there was Amcor Displays' work that fell outside the ACE Print contract, the ACB Business or Achilla should have received that work.

479 On the evidence presented, it seems clear that while the ACB Business was doing some 'work' for Amcor Displays prior to the sale, it was not doing all or even a significant proportion of the Amcor Displays' OME work. The data tables accompanying the June 2003 profit & loss statement suggest that a small component of the Amcor Displays' work was being performed by the ACB Business notwithstanding the arrangement in place with ACE Print, and that it was being recorded separately from the other work performed for the businesses conducted by AFP at its Smithfield and Revesby sites. Accordingly, I am satisfied that on a 'business as usual' construction of the clause 12.2 obligation, Achilla would likely have received some small amount of Amcor Displays' work, unless the exception was enlivened.

480 The Second Sale Agreement does not specifically mention or deal with the Amcor Displays' work. Mr Holihan and Mr MacPhail, who drafted the Second Sale Agreement, did not discuss any specific limitations on the work to be provided under clause 12.2.[598] Mr MacPhail conceded in cross-examination that it would have been a relatively easy process for him to draft further carve-outs to clause 12.2 had he been instructed to do so.[599] In this regard, the Holihan parties relied upon a notation made by Mr Joyce who reviewed a draft of the Second Sale Agreement in January 2003 for Mr Parker, the General Manager, Commercial. In his notes Mr Joyce observed in relation to the proposed clause 12.2:

• Says that AFPA will obtain ALL OME from CH for 5 years and that CH has an option to extend this for a further 5 years. Similar D&D percentages are to apply. Do we need access to CH's records or any guarantees of efficiencies from him re D&D? The way this is set up we pay all his costs at the D&D level and guarantee him a margin on top of that to cover overheads. Where is his obligation to be efficient?
• We also need to define OME to exclude e.g. silk screening - any others?[600]

481 As noted in the chronology above, Mr Joyce gave evidence about this notation. He said:

the definition around OME ... didn't have any specific exclusions as to what types of OME should be carved out of the agreement, and at the time I could think of one being silk screening and proposed to have a further conversation about where [sic.] there any others that should have been specifically carved out.'[601]

482 The Holihan parties submit there is no evidence of any further such conversations, and Mr Parker was not called to give evidence.

483 Later in the piece, however, in the period immediately before Completion, Mr Joyce made a further notation on a whiteboard at a transition meeting with AFP representatives held on 25 July 2003, which Mr Holihan attended. The notation suggested that certain work, namely 'Carton erecting, Bathurst, Batlow, Araluen' was 'out of scope for ACBC'.[602] Under cross-examination, Mr Joyce said, by reference to his whiteboard notes_,_ that it was intended to exclude the carton erecting work (the 'P84s') from the scope of work to which the Holihan parties were entitled under the supply agreement.[603] The Holihan parties observe that he did not, however, say that there was any negotiation about other exclusions from the definition of OME work and he was not re-examined about it.[604]

484 The Holihan parties contend that the Amcor Displays' work was encompassed within the clause 12.2 obligation but they acknowledge that for so long as APA was contractually obliged to send certain work to ACE Print, it would not be commercially reasonable and acceptable in terms of price, quality and availability to send the work to Achilla, because to do so would have involved APA in a breach of that contractual arrangement.[605]

485 The Holihan parties also led evidence from Mr Holihan[606] to the effect that when the Second Sale Agreement was being negotiated, he made a handwritten notation pertaining to the clause 12 purchase obligation alongside Mr Joyce's comments on the agreement (prepared by him for Mr Parker), specifically addressing the existence of the ACE Print contract stating: 'With exception, where any other contract to supply exists at the time of completion.'[607] His handwritten notes were engrossed in typewritten form and sent to Mr Barnes by email.[608] In the typed form, Mr Holihan's comment was 'I would not expect Amcor to have any OME made by the new business that was under contract or where it could manufacture it more competitively itself.' It is not clear whether Mr Holihan's comment was passed up the line to Mr Parker or otherwise communicated to Amcor or its legal representatives during the negotiations - e.g., to Mr MacPhail etc. If, as Mr Holihan suggests, he was only prepared to allow work to be performed by ACE Print for so long as the contract was in place, and envisaged that it might later come across to the ACB Business when that contract came to an end, it is a little surprising that this was not more of a focal point in discussions and the subject of drafting discussions with Mr MacPhail and Mr Barnes. The Holihan parties say that that was not necessary because the phrase 'all its OME supplies' encompassed the Amcor Displays' work save where the exception was engaged.

486 In closing submissions, the Holihan parties advanced an argument based on comments made by Mason J in Codelfa[609] to the effect that where there is evidence that the parties have refused to include a particular provision in the instrument - here said to be a carve out from the absolute obligation to procure all OME supplies of products from Achilla - then evidence of that refusal is admissible to negative an inference that might otherwise be sought to be drawn from the surrounding circumstances. The Holihan parties contend that having turned their minds to the prospect of narrowing the definition of OME so as to exclude some aspects of OME and having not so narrowed it, the parties' objective intention can be discerned as not intending that there be any narrowing of that definition.

487 I do not accept that the evidence in the present case would permit the Court to make such a finding, particularly in a context where the agreement being negotiated was between ACB Co Vendor and ACB Co Purchaser and Achilla, and did not involve APA as a party.

Period before the Deed of Accession was entered into

488 In my view, it is clear that at the time the Second Sale Agreement was entered into, the requirements of Amcor Displays were not encompassed by the clause 12.2 obligations.

489 As a matter of construction, the Amcor Displays' work is not captured by the express language of clause 12.2. Amcor Displays was not part of ACB Co Vendor, and so the Amcor Displays' work did not form part of 'its' OME supplies. In my view, when one looks to the surrounding circumstances in order to arrive at the proper construction of clause 12.2, the objective evidence confirms that the entirety of the OME requirements of Amcor Displays was not encompassed by the clause 12.2 obligations. Relevantly, at the time the Second Sale Agreement was entered into, there was a separate arrangement in place with ACE Print to perform work for Amcor Displays, of which Mr Holihan was aware. Amcor Displays was operated and conducted separately from the ACB Business (operated and conducted by ACB Co Vendor) and also separately from the AFP corrugated box plants at Revesby and Smithfield. In the period immediately prior to the sale of the ACB Business, Amcor Displays was not being managed by a staff member of AFP, but by Mr Hottes who was doing so on contract. Amcor Displays had its own estimating staff who would quote and arrange the routing of work. Amcor Displays also had access to the PICK system but, as Mr Nellies observed, 'technically, Amcor Displays was a customer' so that they should have been placing orders with Amcor in the same way that a customer would place orders.[610]

490 While the evidence shows that the small amount of work that was performed by the ACB Business for Amcor Displays prior to the sale was, however, taken into account in estimating the volume of work that would likely be performed by the ACB Business in the first contract year, and thereby in arriving at the D & D rates that would apply, that scintilla of evidence does not entail the consequence that all of the Amcor Displays' work was captured and brought within the scope of the clause 12.2 obligation. Mr Joyce's evidence gave some indication of the type of Amcor Displays' work that would be sourced from the ACB Business while under Amcor ownership, and on a 'business as usual' scenario, it is likely that work would continue.

Period following execution of the Deed of Accession

491 Following the entry into the Deed of Accession, from 21 March 2005, APA became the party that was bound by the Second Sale Agreement. The Holihan parties contend that on a plain reading of clause 12.2 following entry into the Deed of Accession, APA (as the named Vendor) was required to obtain all its OME supplies of Products from Achilla save where the exception ('...other than due to Achilla's inability ...') was enlivened. The Amcor parties accept that the effect of the Deed of Accession is that from the accession date onwards, APA is the named party in the Second Sale Agreement.[611] However, the Amcor parties do not accept that the novation gave rise to any enlarged operation of the Second Sale Agreement and they dispute that on and from 21 March 2005, the effect of the Deed of Accession (and in particular, clause 2.1) was to bring the Amcor Displays' work within the clause 12.2 obligations. The Amcor parties submit that it is a question of construction as to what is meant by the expression 'obtain all its [APA's] OME supplies of Products from Achilla' in clause 12.2 of the Second Sale Agreement, and that one must look at the course of conduct that took place beforehand in determining whether or not Amcor Displays was also effectively bound by the clause 12.2 obligations.

492 I am satisfied that there is relevantly ambiguity as to the meaning of clause 12.2 of the Second Sale Agreement following entry into the Deed of Accession. In the first place, the legal effect of the novation was to give rise to a fresh contract between APA (as Vendor) and ACB Co Purchaser, Achilla and Mr Holihan. That contract falls to be interpreted by the Court, against a background where the Court has rejected the implied supply agreement and the conventional estoppel contended for by the Holihan parties, and they now rely upon the terms of the Second Sale Agreement as written, and as amended by the Deed of Accession, for the relief they seek in respect of the period on and from 21 March 2005. However, the Second Sale Agreement was entered into for a term of five years, and matters such as the 'D & D pricing' that was to apply to both the supply of raw materials and the supply of finished products for the whole five year term of the contract were negotiated at the outset of the original contract. In circumstances where some 20 months or so had elapsed before the Deed of Accession was executed, it is unclear whether the requirement for the Vendor to obtain 'all its OME supplies of Products from Achilla' was to be construed as a reference to APA's OME requirements or by reference to the OME requirements that pertained under the original contractual arrangements.

493 In summary, the Amcor parties contend that following the substitution by novation of APA for the 'Vendor' in all its capacities and for all purposes under the Second Sale Agreement, there was no enlargement in the scope of the contractual undertaking or obligation in clause 12.2, and it remained the case that the Amcor Displays' work was not encompassed within the supply obligation in clause 12.2, save to the extent that the notion of 'business as usual' might continue to capture the small amount of work that the ACB Business performed historically for Amcor Displays.[612]

494 In closing submissions, the Amcor parties contended that it remains the case that the Amcor Displays' work is not included because as a matter of construction, the meaning of APA and the words 'all its OME supplies', and in particular the possessive pronoun, refer to parts only of APA.[613] The Amcor parties accept that 'the only contractual hook for that proposition' lies in the Charge, which was made between ACB Co Purchaser, ACB Co Vendor and APA contemporaneously with the Second Sale Agreement. The Amcor parties contend that because APA is identified as a party to the Charge in terms of 'Amcor Packaging (Australia) Pty Ltd (trading as Amcor Fibre Packaging)' it demonstrates the objective contemplation of the parties as being 'that there were business divisions beneath and operating within the umbrella of the corporate vehicle APA.'[614] Further, in support of that construction, they call in aid the background and surrounding circumstances that they rely upon to resist the Holihan parties' claim of an implied contract and estoppel by convention, in particular, the alleged differences between Amcor Displays and the rest of AFP in terms of its staffing, its budgeting and its financing.

495 Between the time of entry into the Second Sale Agreement and the Deed of Accession being executed, the position concerning Amcor Displays had changed. Importantly, the contractual arrangement with ACE Print had been terminated, and the Amcor Displays' OME work was being routed by the estimators at Amcor Displays (and not the AFP estimators) and performed variously by one or other of the alternative suppliers and in some cases by Achilla. Further, the Holihan parties (via Achilla) had entered into a management agreement with APA whereby Achilla's employee, Mr Daaboul, was undertaking the management of 'the NSW Displays Division' of APA. However, Mr Manser had informed Mr Holihan that the arrangement would not be extended beyond 30 June 2005 because he was going to relocate the purchasing functions of Amcor Displays NSW to Victoria and have them run from a Service Containers business. Accordingly, at the point at which the Deed of Accession was entered into, the arrangements pertaining to the Amcor Displays' work were markedly different to those in place concerning the OME work then being performed by Achilla under the Second Sale Agreement.

496 The evidence given by the respective parties concerning the entry into the Deed of Accession, which is summarised earlier in these reasons (under Issue 1(c), 'Background to the Deed of Accession'), is of limited assistance. The evidence is that it was initiated by the Amcor parties, having been discussed internally at a management level before being communicated to Mr Holihan on 16 February 2005, when he received an email from Mr Lewis regarding ACB Co Vendor which attached a draft 'Deed of Accession'.[615] In the covering email, Mr Lewis referred to Amcor's continuing practice of 'remov[ing] company structures no longer required' and said that they wish to place ACB Co Vendor in voluntary liquidation and deregister it, and to facilitate that course it was necessary to 'assign any existing contractual obligations to the main Amcor company, namely Amor [sic] Packaging (Australia) Pty Ltd liquidation.'[616] Mr Holihan referred the proposed deed to his solicitor, Mr Roe, for review and once his comments were to hand, Mr Holihan forwarded them to Mr Lewis for his consideration the same day.[617] The Deed of Accession was executed by the parties a few days later.

497 The Holihan parties submit that the Deed of Accession was correcting a mistake and really putting into place or formally recording what was the existing practice between the parties. In my view, the objective evidence does not support that position. It is not one that is recorded or otherwise evident in either the contemporaneous correspondence exchanged between the parties or the recitals to the Deed, and does not reflect what was the (then) existing practice between the parties. Furthermore, there was no discussion between the parties about enlarging the scope of the contractual undertaking so as to encompass all of Amcor Displays' OME requirements within the clause 12.2 obligation. Were that proposed to occur, it was necessary for the Amcor parties to discuss the matter with Achilla. That is because any change to the scope of the clause 12.2 obligations would have implications for Achilla, particularly in circumstances where it was required to supply finished products to the Vendor 'at prices based on D & D costs to Achilla'.

KEY ISSUE: Did APA breach the Second Sale Agreement or any implied supply agreement and if so how is any loss suffered by Achilla to be quantified?

The Holihan parties' claim for breach of the implied supply agreement and/or Second Sale Agreement

498 The Holihan Parties claim that in breach of the agreement (relevantly either the implied supply agreement and/or the Second Sale Agreement), APA did not purchase or procure the supply of all its OME work from Achilla, and purchased or procured supplies of products from parties other than Achilla, for reasons other than Achilla's 'inability to supply consistently and on a basis which is commercial and reasonably acceptable in terms of price, quality and availability' within the meaning of clause 12.2[618]

499 The Holihan parties contend that between about 30 July 2003 and 31 July 2008, there were 1,913 instances where OME work was performed by persons or entities other than Achilla, in breach of the implied supply agreement and/or the Second Sale Agreement. Achilla has not made a claim for any work done for any business other than an AFP business, and no claim is made for any work done for any of the non-Sydney arms of the business. Particulars of the alleged breaches are contained in their liability particulars dated 3 May 2013, where they set out in relation to each of the 1,913 jobs the nature of the work done by the alternative OME supplier for the particular job, the equipment required to perform that work and the equipment that Achilla had available to it to do that work.[619] In essence, the Holihan parties contend that Achilla was ready, willing and able to perform that OME work but was denied the opportunity to do so, in breach of the agreement.

500 The response of the Amcor parties is four-fold. First, they deny that there was any relevant breach.[620] Secondly, they say that screen printing work and/or services are excluded from the scope of the clause 12.2 allegation.[621] Thirdly, they say that in all cases, the purchase or procurement of supplies of OME products from an alternative supplier was made in accordance with clause 12.2 (but where necessary, relying positively upon the contractual carve-out in clause 12.2).[622] In that regard, at the trial the Amcor parties also contended for the first time that 'repeat orders', being orders where the OME work required to be done was work of a kind for which that customer had placed orders on prior occasions, are 'a kind of job that Achilla was unable to supply consistently and on a basis which is commercial and reasonably acceptable in terms of price, quality and availability'.[623] Fourthly, the Amcor parties plead that a conventional estoppel operates in relation to all supplies of products procured from alternative OME suppliers throughout the period from July 2003 to October 2005 (when the PICK system was decommissioned) in that the parties at all relevant times operated on the basis that APA was entitled to procure the supplies that it did from the alternate OME suppliers.[624] In particular, the Amcor parties rely upon Achilla having had the ability to access the PICK system in that period, Mr Holihan's role as General Manager of the ACB Business before its sale and, in relation to Amcor Displays, the role of Mr Daaboul within that business in the period from 1 July 2004 to 30 June 2005, and Amcor Displays co-occupation of the Wetherill Park premises for that period.[625] The Amcor parties provided a 'job by job' response to the Achilla liability particulars, also in the form of an electronic document, setting out reasons why each of the 1,913 jobs did not, in their submission, amount to a breach of the relevant implied supply agreement and/or clause 12.2 of the Second Sale Agreement.[626]

501 Achilla responded to the Amcor parties' 'job by job' response to the liability particulars. Achilla's response was prepared in a table format that synthesised each of the (essentially pro forma) allegations made by the Amcor parties in respect of each contested 'job', the number of jobs that utilised the relevant pro forma allegation, and the total value of those jobs.[627] However, many of the 1,913 jobs were the subject of more than one set of pro forma allegations. Further, Achilla's summary document did not deal with the new issues of 'repeat orders' or the conventional estoppel ground because these were only raised for the first time after the document was filed.

502 During the trial, the Court requested the parties to undertake a breakdown (by reference to invoice date as contained in the summary spreadsheets/invoices) of where the contested jobs fell in terms of dates referable to the various allegations made in the case. To assist the Court, the parties prepared a document, on an 'indicative basis' only, designed to give a general indication of the jobs that were alleged to be performed by alternative suppliers in breach of the agreement(s) and how they were spread over the relevant time period. The document, headed 'Schedule of job numbers claimed by reference to requested dates', gives a useful indication of the (approximate) relative volumes or number of jobs that form the 'Displays'[628] and 'Non-Displays' components of Achilla's claim at various intervals, such as before the Deed of Accession was entered into.

503 In general terms, and on an indicative basis only, the document shows that of the 1,913 occasions during the period when it is alleged jobs were given to OME suppliers other than Achilla to perform, approximately 757 of the 1,913 jobs alleged relate to the period prior to the entry into the Deed of Accession, and of those 757 jobs, 120 were for work required by Amcor Displays[629] and 637 were for work required by other Amcor entities. The balance, namely 1,156 jobs, relate to the period after entry into the Deed of Accession, and of those 1,156 jobs, 553 were for work required by Amcor Displays and 603 were for other Amcor entities.

504 During closing submissions, however, concessions were made by both parties in the sense that the Holihan parties conceded some of the claims made by the Amcor parties and the Amcor parties effectively abandoned, or did not actively pursue, some of the arguments they had earlier advanced or indicated that they would rely upon.

Approach to be taken in light of the proper construction of clause 12.2

505 As the Court has now determined that there is no implied supply agreement or estoppel by convention of the kind contended for by the Holihan parties, and that ACB Co Vendor's obligation under clause 12.2 on its proper construction meant 'business as usual' for the ACB Business notwithstanding the sale, and did not encompass all of the Amcor Displays' work, it is clear that many of the instances of breach alleged and relied upon by the Holihan parties will simply not be made out. Nevertheless, lest the matter go further, it is convenient to outline the essence of the claims made and the arguments advanced, as itemised in the List of Issues.

506 In the context of this case, the determination of which party bears the burden of proof is an especially important one because there is a paucity of direct evidence concerning each of the 1,913 instances of alleged breach.

507 The Holihan parties accept that they bear the burden of proving that OME work was sent to others when it should have been sent to Achilla (i.e. that Achilla could do the work done by others). They say that as no general issue has been raised about Achilla's manufacturing capacity, the issue falls to be determined by reference to the equipment and skills of Achilla at Completion and throughout the Relevant Period. Further, they say, once breach is shown, the burden of proof shifts to the Amcor parties to adduce any evidence directed to preventing the inference of breach being drawn in the case of each job.[630]

508 The Amcor parties, however, point to the carve-out contained in clause 12.2, and contend that a breach of clause 12.2 is not complete merely by observing that OME supplies were obtained from elsewhere.[631] Rather, the Amcor parties submit that the Holihan parties must show that it was a breach of the promise to 'obtain all its OME supplies of Products from Achilla' and not to 'purchase or procure the supply of Products from any other party other than due to Achilla's inability to supply consistently and on a basis which is commercial and reasonably acceptable in terms of price, quality and availability' for Amcor to obtain OME supplies from others.[632]

509 Achilla, on the other hand, contends that the words of exception (or carve-out) in clause 12 are a true exception or proviso for which the Amcor parties bear the burden of proof. They contend that it sets in operation an exception to the primary promise by APA to obtain all OME supplies of products from Achilla.

510 In my view, essentially for the reasons advanced by the Holihan parties, the carve-out in clause 12.2, on its proper construction, operates as an exception to the primary supply obligation, by defining the circumstances in which the relevant Amcor party was entitled to place orders with alternate suppliers without breaching the primary obligation to obtain all of its OME supplies of Products from Achilla. Having said that, however, the carve-out will only have work to do in those instances where the relevant order was an OME supply that, on a 'business as usual' scenario, would, in the ordinary course, have been routed to the ACB Business.

Burden of proof concerning the carve-out in clause 12.2 - applicable legal principles

511 In McLennan v Insurance Australia Ltd,[633] the New South Wales Court of Appeal endorsed the approach that Jordan CJ had taken to the question of onus some 70 years earlier in two cases, Kodak (A/asia) Pty Ltd v Retail Traders Mutual Indemnity Insurance Association[634] in the context of a clause in an insurance policy, and in Gordon v Australian & New Zealand Theatres Ltd[635] in the context of a clause allowing for the termination of a contract of employment.

512 In Kodak, the appellant, the insured, had claimed under a Workers' Compensation policy seeking an indemnity for sums which it had become liable to pay and had paid by way of compensation to an employee. The policy provided that the insurer would 'indemnify the employer against all such [compensation] sums for which the employer shall be so liable' subject to certain specified conditions. The sixth condition specified was relevantly that the 'employer shall take all reasonable precautions to prevent injuries.' The trial judge held that the onus of proof was on the insurance company to establish that the employer had not complied with condition 6, and held that it had discharged this onus to his satisfaction. On appeal, it was contended that the trial judge's decision was wrong in law because there was no evidence that the employer had failed to comply with condition 6. The Full Court allowed the appeal, finding that the condition was a condition precedent and that it was a matter for the employer to prove compliance with.

513 Jordan CJ delivered the judgment of the Full Court. In dealing with the question of onus, his Honour commenced by observing that 'the question of where the onus lies must in every case depend primarily upon the nature of the condition and the provisions of the policy.'[636] His Honour then made reference to and relied upon the following passage from Williston, A Treatise on the Law of Contracts, as usefully summarising the relevant principles:

The test [as to which party bears the burden of pleading and proving a qualification or proviso in an insurance or transportation contract] no longer depends upon whether the limitation upon the promise is to be found in a separate clause or not, but, instead, on whether the exception is as wide as the promise and thus qualifies the whole promise, or whether it merely excludes from the operation of the promise particular classes of matters which but for the exception would fall within it, leaving some part of the promise unqualified and absolute. In the case of a qualified promise, that is, where the exception would defeat the whole promise, a plaintiff cannot make out a prima facie case unless he alleges the promise and negatives the exception as of old, whereas, if the promise is simply subject to some exceptions, it is sufficient for the plaintiff to bring himself within the general terms of the promise, leaving it to the defendant to allege and prove that the plaintiff's claim in fact falls within an excluded exceptional class.[637] [Footnotes omitted]

514 When considering the terms of the policy in question in Kodak, Jordan CJ observed that some of the conditions were clearly conditions precedent to the insurer incurring a liability to pay, whereas others were essentially conditions subsequent. In the case of condition 6, being the condition in question, there was an issue as to whether the insured had to prove fulfilment of the condition before the insurer's liability would accrue. The Full Court found that it was a condition precedent and that it was for the employer to prove compliance with it. In the context of dealing with the question of onus, Jordan CJ explained the practical application of the principles that apply in the situation where a condition creates an exception to the insurer's obligation to indemnify, as follows:

Again, a plaintiff seeking to enforce an obligation qualified by a general exception which is applicable to all cases must negative the exception; but if the obligation is general and qualified only by particular exceptions, a person seeking to rely on an exception must prove himself within it: Munro Brice & Co v War Risks Association; Pye v Metropolitan Coal Co Ltd; Willeston on Contracts (1936) III, p 1939. Similarly a person who seeks to escape an accrued liability by a claim that it has been discharged by breach of a condition subsequent must prove the breach; and a person who contends that a contract has been rescinded in pursuance of a resolutive condition must produce evidence in support of his contention ...[638] [Footnotes omitted]

515 In their later decision in McLennan, the Court of Appeal noted these were the same principles that Jordan CJ had earlier applied in Gordon to the issue of onus arising in the context of the termination of a contract of employment.

516 In McLennan, the Court of Appeal was faced with the task of construing the provisions of a home and contents policy of insurance, in circumstances where the appellant's home and contents had been severely damaged by fire. The policy provided that if the home or contents suffered loss or damage caused by fire, the insurer would repair or replace the damaged contents or re-build the damaged part but would not cover loss or damage as a result of a fire started by the insured (or someone who lives in the insurer's home) with the intention of causing damage.

517 The insurer denied liability, contending that the insured had not proven that the fire was not deliberately started. The primary judge agreed, finding that the insured bore the burden of proving that the fire was not deliberately lit by her or someone who had entered her home without her consent. On appeal, the Court of Appeal allowed the insured's appeal. The Court held, following Kodak and Munro Brice & Co v War Risks Association,[639] that the insurer had the onus of establishing that the fire was deliberately started because the qualification it sought to rely upon operated as an exception that excluded from the insurer's promise a particular class of case which would otherwise be within it (as opposed to qualifying the whole of the general promise). The Court said that the qualification set out in the clause described 'the limited circumstances in which the insurer's promise is not to apply', noting that '[t]hose limited circumstances are not all of the circumstances in which the promise applies and the qualifications do not apply in all of the circumstances.'[640]

Conclusion - the Amcor parties bear the burden of proof concerning the carve-out in clause 12.2

518 In the present case, under clause 12.2, the primary promise given by the relevant Amcor party was to (continue to) obtain all its OME supplies of products from Achilla. What the words of the carve-out do is to set in operation a specific exception to the primary promise that will apply to only a subset of those circumstances, namely where there is an inability on the part of Achilla 'to supply consistently and on a basis which is commercial and reasonably acceptable in terms of price, quality and availability.' At a practical level, what this means is that Achilla is required to bring itself prima facie within the terms of the promise, by demonstrating that the work in question was the sort of work that the ACB Business had been doing for customers of AFP Smithfield and AFP Revesby prior to the sale, leaving it to the Amcor parties to prove that although prima facie within its terms, the alleged instance of breach falls within the words of exception in the carve-out.

The carve-out in clause 12.2 - what must be shown?

519 It is common ground between the parties that the carve-out was for the benefit of the Amcor parties, and that it was a matter for the Amcor parties to determine whether there was an inability on the part of Achilla to supply consistently and on a basis which is commercial and reasonably acceptable, etc.[641] The evidence was that the provision was drafted and inserted by Mr MacPhail after Mr Ken Parker expressed concern to him about the possibility of Amcor 'being tied to unfavourable pricing terms'[642] in terms of the product that Amcor was obliged to purchase from Achilla.

520 The Amcor parties contend that the cognate expression 'other than due to Achilla's inability to supply etc.' contains three different concepts. The first concept is 'consistent supply'. The second concept is 'commercial basis'. The third concept is whether it is 'reasonably acceptable in terms of price, quality and availability'. Further, it was said, as a matter of construction, the notion of 'commerciality' has a broad meaning and goes further than, and is not limited to, what is reasonably acceptable in terms of price, quality and availability.[643] The Amcor parties cited the Amcor Displays' contract with ACE Print as being perhaps 'the clearest example' arising on the evidence that demonstrates the notion of commerciality in the context of clause 12.2 is not captured by considerations of price, quality and availability alone.

521 Accordingly, the Amcor parties contend,[644] as a matter of construction of clause 12.2, first, that the three elements, namely consistency, commerciality, and reasonable acceptability in terms of price, quality and availability, are separate and not cumulative. Secondly, they say, a 'commercial' basis is not confined to that which is informed by price, quality and availability, but rather it goes beyond those three things. Thirdly, whether the 'exception' is enlivened is a matter to be determined in the opinion of Amcor.

522 The Holihan parties accept that the exception exists for Amcor's benefit but say it does not allow APA to avoid the clause 12.2 purchase obligation on arbitrary or non-commercial bases. They say the question of whether or not supplies are commercial and reasonably acceptable is to be answered by reference to three specific criteria that are set out in a single compound expression, namely, price, quality and availability. They submit that the distinct elements of that compound expression do not work independently and there is no standalone 'commerciality' ground. Further, they contend that in order to trigger the exception, there must first be demonstrated a consistent inability on the part of Achilla to provide supplies that are commercial and reasonably acceptable.

523 In my view, the construction of the words of exception advanced by the Holihan parties is to be preferred. The words of exception appear in both clause 12.1 and clause 12.2. They are a compound expression that is to be interpreted as a whole. Read together, they serve to define the circumstances in which the vendor, or purchaser as the case may be is permitted to seek an alternate source of supply. That is, the parties agreed that in circumstances where the contracted supplier has demonstrated an inability to supply consistently and on a basis which is commercial and reasonably acceptable in terms of price, quality and availability, the vendor, or purchaser as the case may be, is permitted to seek the supply of products from an alternative source.

524 During closing submissions, the Holihan parties contended that the Amcor parties were obliged to ensure that Achilla could not do the work before they could rely on the exception. I do not accept that the words of exception, on their proper construction, embodied any notion that Achilla was required to be given a first opportunity to supply, or a last right to match any competitor's pricing. Under clause 12.2, Achilla was entitled to receive from APA the sort of work that the ACB Business had been doing prior to the sale. APA was obliged to continue to procure that work from Achilla after the sale. But if Achilla demonstrated an inability to supply finished product consistently and on a basis which was commercial and reasonably acceptable in terms of price, quality and availability, APA was permitted to seek the supply of such product from an alternative source. In the case of 'repeat order' work that, prior to the sale, was being performed by an alternative supplier such as Le Breton, APA was not required, following the sale, to provide an opportunity for Achilla to effectively 'price match' Le Breton's pricing.

The Holihan parties contend they have discharged their onus re breach

525 The Holihan parties rely upon five points to discharge their onus. First, they say Achilla has demonstrated that it had the necessary machines to do the OME jobs. Secondly, they say Achilla had the necessary capacity to do the work. Thirdly, they say that in any event, Achilla could get others to do the work by 'outsourcing', and fourthly, Achilla had the 'know how'. The fifth point the Holihan parties rely upon is the fact that there were no unresolved complaints about Achilla's lack of capacity, there was an absence of any non-conformance reports identifying issues with quality or timeliness of delivery, and no attempt was made to have Achilla 'price match' or better prices that were offered by alternative suppliers.

526 The Holihan parties contend that that evidence is evidence of circumstances that raise a more probable inference in favour of the Holihan parties, namely that the alternative suppliers were not used because Achilla was unable to supply consistently and on a commercial and reasonably acceptable basis. In those circumstances, they submit that the evidence gives rise to 'a reasonable and definite inference, and the Court can be reasonably satisfied that the exception in clause 12.2 did not apply to the supplies'[645] such that the evidential burden shifts or falls on the Amcor parties to prove that the exception applied in the case of each supply.

527 The Holihan parties also point to, and call in aid, the fact that the Amcor parties, and not Achilla, were the ones that had the means from which to assess whether or not Achilla was unable to supply consistently and on a commercial and reasonably acceptable basis. That is, APA, not Achilla was privy to the requirements of its customers, in terms of price, quality and availability (in the sense of delivery dates), and, as the Amcor parties contend, whether the 'exception' is enlivened is a matter to be determined in the opinion of Amcor. The Holihan parties submit that the fact that these were matters which Amcor alone was to determine serves to confirm that the Amcor parties bear the onus of proof.

528 Generally speaking, there is a lack of evidence addressing the matters the subject of the exception and whether, and if so when, it was enlivened. The fact is that Amcor did obtain OME supplies of products from alternative suppliers during the relevant period, but they contend they were permitted to do so because under clause 12.2, the Holihan parties only contracted to receive the business that was being done by the ACB Business prior to the sale.

529 In closing submissions, the Amcor parties acknowledged that there were:

good commercial reasons why Amcor should have gone to Achilla for work. So the PICK system made it easier to obtain those supplies, as Ms Murphy points out in her closing submissions. And an increase in volume would result in a decrease in prices later on. Amcor had some familiarity with the machines, which the Achilla business had and there was evident familiarity, in terms of the personnel. So all of these would make Achilla an attractive commercial proposition,...[646]

However, the Amcor parties submit that in circumstances where Amcor was demonstrably carrying on business with a view to profit, if there were sound commercial reasons (of the kind acknowledged above) for Amcor to get work done by Achilla, yet it did not do so, then a countervailing inference arises, namely that it just simply wasn't commercial, for whatever reasons known to Amcor, for it to obtain those supplies from Achilla.[647] The Amcor parties contend that unless the Achilla parties can show some perversity on the part of Amcor, or a vendetta or something of that nature against Achilla and Mr Holihan, then the Holihan parties will have failed to displace what is otherwise a countervailing inference.

530 The Amcor parties contend that the Holihan parties' breach claim involves 1,913 separate instances that are said to be OME supplies made in breach of the agreement. In some cases, where specific evidence has been adduced, such as in the case of work performed for the customer named 'RTS Imaging', it may be possible for the Court to make findings, but the Amcor parties submit that in the case of many of the jobs, there is an absence of discrete evidence specific to the job from which the Court could reasonably infer that there has been a breach. The Amcor parties contend that, for the most part, an inference of breach could not be drawn because there is 'at the very least an equally probable inference ... [a]n equally available inference that it just simply wasn't commercial to give it to Achilla, because had it been commercial, Amcor would have done it.'[648] I do not agree. It is only an equally available inference that would justify the Court reaching that conclusion if there are facts from which it can be drawn. And an obvious difficulty with this submission, is that it was not the subject of evidence adduced by the Amcor parties.

531 The Holihan parties contended that the Amcor parties' approach, of merely asserting that the Court should draw an inference that there was some good commercial reason to withhold the work from Achilla, really just begs the question of whether that unexplored commercial reason satisfied the exception in clause 12.2.

532 A more fundamental difficulty with the issue of breach, however, is to identify, many years after the event, which (if any) of the 1,913 particular jobs would have been routed to the ACB Business in the ordinary course, on a 'business as usual' basis. The Holihan parties submit that the Amcor parties have caused or contributed to this difficulty because they failed to keep the PICK system operational after it was replaced by SAP in November 2005 or thereabouts, with the result that the historical records of the ACB Business contained within the PICK system are no longer accessible. In these circumstances, the Holihan parties rely upon the 'Document Unavailability' provisions contained in Division 9 of Part III of the Evidence (Miscellaneous Provisions) Act 1958 and seek an order under section 89B to redress the unfairness that they contend would otherwise result. This aspect is addressed under Issue 4 below.

Particulars of the 1,913 alleged supply breaches

533 Achilla seeks compensation totalling $4,091,022.55 in respect of the 1,913 jobs that the Amcor Parties sent to suppliers other than Achilla. Achilla contends that in each case, the Amcor parties' conduct in sending such jobs to other suppliers constitutes a breach of the Second Sale Agreement and/or the implied supply agreement. Details of these alleged breaches are set out in Achilla's particulars, which are contained in an electronic file that is some 2,000 pages long (reproduced at section C of the electronic Court Book).

534 Mr Holihan prepared and produced the Achilla liability particulars using as a base the information that was set out in a document that was created by the Amcor parties for the purposes of these proceedings, the Court having ordered the Amcor parties to identify all of the OME supplies that it obtained from the eight non-Achilla suppliers during the term of the Second Sale Agreement or the implied supply agreement.

535 The Achilla liability particulars (as amended) were set out in a table format in columns under the following headings:

536 The detail set out in column F ('work done') of the Achilla liability particulars is Mr Holihan's description of the work that was involved in each relevant supply performed by a non-Achilla entity, as extrapolated from invoices he inspected, and columns G ('purchasing entity') and H ('invoiced entity') are taken from source documents, where available,[649] that sit behind the Amcor schedule. Achilla then created and supplied, in column I, its liability particulars for each of the 1,913 alleged instances of breach, explaining how it is that the work identified in column F falls within the scope of the Second Sale Agreement or the implied supply agreement.

537 The Amcor parties responded to the Achilla liability particulars, by adding an additional column, column J, setting out their response to each alleged instance of breach. Achilla then filed a separate document headed 'Reply to Liability Particulars of the Amcor Parties' dated 8 October 2014 ('Summary Particulars'),[650] responding to the matters set out in the Amcor parties' column J. In its Summary Particulars, Achilla has collated the Amcor parties' responses under thematic headings, and those headings have found their way into the parties' Agreed Issues List under Issue 3. In the Summary Particulars, Achilla has also ascribed a 'value' for the jobs listed under each of those thematic headings.

538 In summary, the 1,913 jobs in contention have been grouped under these thematic headings or issues and 'valued' by the Holihan parties for the purposes of their claim as follows:

Inability to supply consistently on a basis which was commercial and reasonably acceptable

[Work prior to the commencement of the implied Supply Agreement]

[Inability to supply consistently on a basis which was commercial and reasonably acceptable (Alternative 1)]

[Inability to supply consistently on a basis which was commercial and reasonably acceptable (Alternative 2)]

[No basis to say commercially and reasonably acceptable where insufficient documentation]

[Achilla knew that the work was supplied by the alternate OME supplier]

Particular types of work said to be unable to be completed by Achilla

[Printing not work which Achilla could do. No contracting out]

[Screen printing excluded from the Supply Agreement]

[Litho laminating RTS work not able to be done until October 2004]

[Work involved various types of work which Achilla could not do. No contracting out]

[Work required slotting. Achilla did not purchase a partition slotter until October 2004]

[Work required Kellogg's pallets. Achilla could not do this until May 2004]

[Work required Kellogg's pallets. Achilla did this only between July 2004 and July 2006]

Work not same or similar as work done by ACB prior to execution

[Work was not part of or the same or similar as business prior to execution]

Evidence (Miscellaneous Provisions) Act

[Pleadings as to the application of s 89B of the Evidence (Miscellaneous Provisions) Act 1958]

Miscellaneous comments made by the Amcor Parties in the body of Achilla's particulars

[Pleadings as to the invoice being available and discovered]

[Pleadings as to the purchase order being available and discovered]

[Pleadings as to the product specification information being available and discovered]

[Pleadings as to the work not being described in the invoice]

539 Achilla also prepared quantum particulars in a separate spreadsheet document, but adopting some of the columns used in the liability particulars and the same line items in the same order, so that they could be cross-matched easily.[651]

Cost to ACB/APA to obtain supply, and revenue to Supplier

Costs Achilla would have incurred to provide the supply[652]

Evidence concerning the 1,913 instances of alleged breach

540 The 1,913 jobs that the Holihan parties contend are the instances of alleged breach for which they claim damages, were performed by eight alternative OME suppliers during the relevant five year period. The alternative suppliers are relevantly:

(a) All Pack;

(b) Northwest Packaging;

(c) Le Breton;

(d) JS Cutting;

(e) Thompson;

(f) SPS Packaging;

(g) Ubeeco; and

(h) Sainsbury.

541 The Holihan parties called evidence from each of the alternative suppliers, save for Sainsbury. Sainsbury was purchased by APA upon the recommendation of Mr Powell in 2008, and as part of that sale/purchase process, APA acquired its business records.

542 At the trial, the approach adopted by both sides was not to lead specific evidence on, or cross-examine about, each individual job. Had that course been adopted for each of the 1,913 alleged instances of breach, the trial would have occupied months instead of weeks. Instead, the body of documentation pertaining to the OME work performed by each of the respective alternative suppliers for the Amcor parties during the relevant period was tendered, and in each case, the representative of the alternative supplier was examined, and cross-examined, about examples of the work performed. The result is, however, that there is not a body of detailed evidence about each individual job.

543 The Holihan parties have presented their case as 1,913 instances of the alleged breach of clause 12.2. The Amcor parties, on the other hand, contend that in determining breach, each individual job is to be regarded as being a separate cause of action. I do not agree.

Work performed by the alternative suppliers during the relevant period

544 Mr Christopher Prasad, who has been a manager at All Pack since 1994, gave evidence about the type of work that All Pack performed for the Amcor parties between 1 August 2003 and 31 July 2008, the equipment used and his knowledge of the type of work that ACB Co Purchaser did at that time.

545 During the relevant period, All Pack's business involved the packaging and assembling of cardboard products of various types, mainly large cartons and cardboard display stands. Its main customer was Amcor. Mr Prasad identified a body of invoices rendered by All Pack to Amcor and related purchase orders for work performed during the relevant period. The type of work performed was essentially manual labour, and generally involved the assembly of corrugated cardboard cartons (either printed or plain), gluing them (by hand with a hand-held glue gun or a sauce bottle filled with glue), and in some cases 're-palletising' them. 'Re-palletising' involved taking pieces of cardboard of different sizes, putting them on a separate pallet in bundles of about 20 and then strapping them with polyethylene straps (using a machine) and shrink wrapping them (by hand) ready for delivery.

546 Some of the work performed by All Pack was the preparation of 'display stands'. This work involved the assembly of bits and pieces of different shaped pieces of pre-cut cardboard. An example of the type of work performed by All Pack was in respect of the Arnott's waterfall units. Mr Prasad said that All Pack would assemble all the pieces and send them back, or glue them and put them in a separate box and send them back. Another example he gave was the display stands prepared for Mortein Outdoor Professional. For that work, All Pack was required to print boards that they would assemble and glue together ready to go to stores for use as displays. The finished work would usually be collected by Amcor, but occasionally it was required to be delivered by All Pack direct to the customer, and in that event, a freight cost would also be charged. Mr Prasad said that sometimes the work was required to be performed with a turnaround time of one day, and they 'were actually quite well known for on time delivery.'[653]

547 All Pack employed a workforce comprising four full-time employees and two casuals. Mr Prasad said that they were experienced at this sort of manual work and were able to do jobs as required. He added that the casuals 'were just as good' and that 'these are pretty easy, simple jobs.'[654]

548 Mr Prasad said that they would often do a number of similar jobs over time, and once they had quoted a price, the repeat jobs would keep coming and they would stay with that price.

549 Some of the work performed by All Pack was for Amcor Displays, which Mr Prasad described as 'just another division of Amcor where they did the display work.'[655] The people he dealt with at Amcor Displays were Joe Formosa, Walter Dailey and George Daaboul.

550 Mr Prasad said that during the period, they also performed gluing work for ACB Co Purchaser. He said they used to glue (by hand) very small boxes that would not run through their machines.

551 Mr Robert Pellizzari, a director of Pandapak Pty Limited, which trades as 'Northwest Packaging', gave evidence about the type of work Northwest Packaging performed for the Amcor parties between 1 August 2003 and 31 July 2008, and the equipment used to perform that work. Mr Pellizzari has been the managing director of Northwest Packaging for 20 years, in addition to holding an external sales role with Northwest Packaging for approximately 30 years.[656] Prior to joining Northwest Packaging, Mr Pellizzari had worked for Amcor (variously with Hardy Containers, APM Containers and AFP) and as a sales executive with Visy Board.

552 Mr Pellizzari said that during the relevant period, Northwest Packaging was doing business with Amcor and it would probably have been one of Northwest Packaging's main clients. The work was done on, or using, corrugated cardboard. He said it was predominantly partitions work and single face pads, corrugated pads and possibly some short runs in cartons, some flexographic printing, stitching work, die-cutting and gluing. Mr Pellizzari said that in most cases, '99 per cent of the time we would buy the material from Amcor'[657] either in blank size, which Northwest would carry in stock for the smaller runs, or cut to size in length by width for the larger volume runs (which meant there were two less machines processes to go through).

553 Mr Pellizzari explained that 'single face pads' are made using a machine called a 'single facer'. Two reels of paper are loaded on to mill stands and fed through a heated roll so that a corrugation effect is created on one piece of paper and the other piece is laminated to it using a starch based adhesive whereby the corrugated peaks cause the adhesion. The end product is a single faced roll of about 75 metres in length (or as required) with a layer of paper on one side and a corrugated piece on the other.

554 In the case of 'corrugated pads', the process is similar but the end result has corrugated boards on both sides. The production of corrugated pads involves the use of more equipment, usually requiring the use of a slitter to cut the pad to the right width and a bandsaw to cut it to the right length, or vice versa depending on which way the customer requires the corrugations to run.

555 Mr Pellizzari explained that partitions are made in several different ways depending on how many cells each partition required, and some handwork is also involved. To make partitions, stock sheets of cardboard are put through a slitter and then cut to the required width using a bandsaw, before the partitions themselves are assembled by hand.[658] The short run boxes are also made using both the slitter and a vertical slotter, before they being hand or machine glued depending on volume. If printing was required, a flexographic printer was also used.[659] Die-cutting was done with a 'flat-bed' die-cutter, also known as a 'clamshell' die-cutter which was approximately 900mm in length by 700mm in width.[660] Finally, stitching to boxes was done manually, by use of a foot-pedal operated machine.[661] Mr Pellizzari added, however, that Northwest Packaging did later purchase a Bahmueller stitcher gluer which is an automatic machine that stitches at a faster rate.[662]

556 During the relevant period, Northwest Packaging was located in South Windsor, New South Wales. In the majority of cases where work was performed for Amcor, the completed work was delivered to the relevant Amcor address, either at Smithfield or Revesby, and the delivery or freight cost was included in the price quoted.[663] Occasionally, however, work was required to be dispatched elsewhere if some additional work was required to be undertaken. Some of the invoices for work performed by Northwest Packaging showed that delivery was required to be made to the addresses of other OME suppliers such as Le Breton Graphics in Hornsby, All Pack or Thompson in order for particular work to be done.

557 Mr Pellizzari was familiar with the expression 'OME work'. He said that outside manufacturing refers to '[a]ny work that the manufacturing company deems to be not viable for them to produce or they don't have the equipment to produce it, they would have it sent out to a company that most probably has the equipment to make it much more efficiently.'[664] He said that Northwest Packaging had been performing work for Amcor for many years; indeed, when he was working with Amcor in 1986, he used to deal with Northwest Packaging as they made partitions for Amcor.

558 During the relevant period, Amcor placed orders with Northwest Packaging on a regular basis. Where the order was for an existing product, where Northwest had quoted, orders would just come through, but if it was for a new job or a new quotation, then they would have to go through the quotation process first. Mr Pellizzari explained that in the period from 2003 to 2008, Northwest Packaging had a costing system:

we would go along and cost and it would go through the process depending on whatever the request was, and we'd allocate the machines that would be best suited for that particular style of product that they wanted made, and then they would shell [sic] a bottom on price. If we had distributors we would classify Amcor as a distributor. We would leave a margin there for them to be able to allow a mark-up there to sell on.[665]

559 Invoices were rendered by Northwest Packaging following completion of the work, usually one or two days after the work was done. Mr Pellizzari said they were a cost effective small operation, with a small footprint and comparatively low labour costs. They had particular expertise in partition making and were very cost effective at doing that work, and had built their business around that work. Also, in the case of single face pads, they had low overheads and used high quality machines to process the cardboard through in an efficient way. For example, to produce the single face pads, Northwest Packaging used a quality German machine called the Gopfert rather than the French built Mechani-Lek. Mr Pellizzari said he regarded the Mechani-Lek as the 'Hyundai' of the cardboard converting machines whereas the Gopfert was the 'Mercedes' model.[666] He said that while the Mechani-Lek could produce corrugated pads, it could not produce single face pads efficiently and would be likely to jam the machine and be too slow.

560 During cross-examination, Mr Pellizzari was also taken to an order for a job, Item No. 50751-170 on Invoice No. 00039430,[667] for the supply of 1,660 assembled partitions made using double white lined board (white rather than brown on the outside and on the inside).[668] Mr Pellizzari said these partitions were made using a large hybrid slotter and a bandsaw and the 1,660 partitions were then assembled by one lady who was experienced in doing that manual job. Mr Pellizzari doubted that a Mechani-Lek could have been used to cut partitions of the size required, namely 247 by 127 and 200 by 137. He said that he has not used a Mechani-Lek himself, but he understands that while a Mechani-Lek could do partitions work of certain sizes it wasn't practical for doing these particular partitions - he believed that they 'would just drop through the middle of the machine or create an issue and hamper the machine processing it.'[669] He said that he has not seen a Mechani-Lek being used to make single face pads.[670]

561 Northwest Packaging employed a staff of about 15 to 20 experienced operators. The staff performing the machine-based tasks were multi-skilled and able to move from one machine to another, as required. The staff performing the assembly work were also experienced. On occasions, casual staff would also be employed for hand work assembly type tasks but they did not work on the machines.

562 Mr Pellizzari verified invoices[671] issued by Northwest Packaging to Amcor, and the purchase orders[672] placed by Amcor on Northwest Packaging, in the relevant period. Much of the work that Northwest Packaging performed for Amcor was 'repeat order' work. In those cases, Northwest Packaging often pre-empted the order coming through in the sense that they carried finished stock on hand so that they could supply it quickly. That was part of the service they offered to their customers. Where dies were required, they were usually sourced from an external supplier such as Stan's Die Cutting Formes. Mr Pellizzari said that in some instances, the die or knife would be supplied, but in the majority of cases, they would seek permission to order a new knife (based on the drawing or information given to them) in conjunction with the material.[673]

563 Northwest Packaging did perform some work for Amcor Displays. Mr Pellizzari said that the business of Amcor Displays was basically the supply and manufacture of displays items for their clients, which was treated as 'a separate business'. He explained that: