When these transmissions are worked hard and get hot,like when towing on a hot day,they can blow out the dipstick under pressure and spew trans fluid out of the dipstick hole,which can cause a fire.This was a problem that first came up on the early VR's I think it was, and holden recalled them and fitted the locking type dipstick on the transmissions to fix the problem and reduce the fire risk..I think the later VR and VS with towing packages had an auxilliary transmission cooler fitted in front of the radiator to help dissipate heat out of the trans..These locking type dipsticks can wear out and loose their tightness in the trans tube.Its probably best to replace them if they are worn and loose..
Your young bloke must have been giving it a bit of a hard time to get it hot like that,if thats what it was caused from,maybe from pulling the odd burnout perhaps..Id get a transmission filter service kit for $25 and 5 litres of dexron 111(3) type trans fluid for another $25 and give the transmission a good service.