Coal Hub Pty Ltd v NSL Consolidated Ltd

[2016] WASC 203

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   COAL HUB PTY LTD -v- NSL CONSOLIDATED LTD [2016] WASC 203

CORAM:   LE MIERE J

HEARD:   ON THE PAPERS

DELIVERED          :   5 JULY 2016

FILE NO/S:   CIV 1202 of 2015

BETWEEN:   COAL HUB PTY LTD

Plaintiff

AND

NSL CONSOLIDATED LTD
Defendant

Catchwords:

Discovery - Whether sufficient information given to establish privilege - Whether joint privilege - Whether the defendant waived privilege - Where documents have been produced - Plaintiff's application dismissed in part - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA), O 26 r 4, O 36B r 9

Result:

Plaintiff has leave to inspect documents in category 1.3
Plaintiff's application otherwise dismissed

Category:    B

Representation:

Counsel:

Plaintiff:     No appearance

Defendant:     No appearance

Solicitors:

Plaintiff:     Bennett + Co

Defendant:     Cardinal Litigation + Dispute Resolution

Case(s) referred to in judgment(s):

Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd [2011] SASCFC 64; (2011) 296 ALR 465

Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd [2011] SASC 90

Carey v Korda [2012] WASCA 228; (2012) 45 WAR 181

Farrow Mortgage Services Pty Ltd (In Liq) v Webb [1996] NSWSC 259; (1996) 39 NSWLR 601

Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1

LE MIERE J: 

Summary

1. The defendant, NSL, entered into an agreement with Birmanie Nominees Pty Ltd (Birmanie) to sell tenements and mining information.  The plaintiff says that NSL breached the agreement by failing to pay certain amounts or by failing to use best or reasonable endeavours to obtain the grant of exploration permits for coal or to obtain unfettered access to the tenements.  The plaintiff claims that Birmanie assigned to it the moneys due and owing by NSL to Birmanie.

2. NSL engaged McCullough Robertson Lawyers to deal with the matters related to the grant of the tenements to Birmanie and the transfer of Birmanie's interest in the tenements to NSL.  The plaintiff issued a subpoena to McCullough Robertson to produce five classes of documents.  McCullough Robertson answered the subpoena by producing documents for which NSL claims legal professional privilege as well as documents for which no privilege is claimed.  The plaintiff does not accept the documents are privileged and has applied for leave to inspect documents falling within three categories of documents specified by the plaintiff.

3. NSL has conceded that the documents in the list provided by McCullough Robertson for which privilege is claimed and described as 'Recording or Evidencing Legal Work Undertaken' are not privileged.  Furthermore, NSL has produced to the plaintiff the documents which it says falls within the third category specified by the plaintiff.  I find that the remaining documents in the list are privileged and will not order that the plaintiff have leave to inspect them.

The action

1. The defendant, NSL, purchased tenements and mining information from Birmanie.  The tenements consisted of exploration permits for coal applications (EPCA) 2198, 2336, 2337 and 2338 together with any other exploration permits for coal (EPC) which may be granted in lieu of or related to the same ground as the EPCAs.  NSL promised to pay Birmanie in six portions.  The last two portions, each of $1.25 million, are payable on establishment of a JORC inferred resource of coal of at least 500 million tonnes across any or all of the tenements and establishment of a JORC indicated resource of coal of at least 250 million tonnes across any or all of the four tenements respectively.  NSL covenanted to spend a minimum of $500,000 on drilling the tenements over the 12 months immediately following the date that NSL had unfettered access to commence drilling on all the tenements, that is when all of the tenements had been granted and NSL had received all native title, cultural heritage and landowner access approvals. 

2. The plaintiff claims that in breach of the agreement NSL has failed to commence and continue a drilling programme after obtaining unfettered access to the tenements, spend a minimum of $500,000 on a drilling programme and take reasonable and necessary steps to achieve the commercial objectives of the agreement.  The plaintiff says that by reason of those breaches NSL is obliged to make the two payments of $1.25 million and NSL breached the sale agreement by not making those payments.  The plaintiff says that if NSL did not have unfettered access or did not assume the obligations to commence a drilling programme then in breach of expressed or implied terms of the sale agreement NSL failed or neglected to use its best endeavours or reasonable endeavours to obtain the grant of EPC 2336 at the same time as the grant of EPC 2198, EPC 2337 and EPC 2338 or alternatively in a timely manner, do all things necessary to obtain unfettered access to the tenements and take reasonable and necessary steps to achieve the commercial objectives of the agreement in a timely manner.  Further, the plaintiff says that NSL has repudiated the agreement which Birmanie accepts and Birmanie has suffered loss and damage being the loss of the two payments of $1.25 million or the loss of a chance or opportunity to receive a payment of the two payments of $1.25 million.  The plaintiff claims that Birmanie assigned to it the moneys due and owing by NSL to Birmanie. 

McCullough Robertson

1. NSL engaged McCullough Robertson Lawyers and Steinepreis Paganin Lawyers to deal with any government agency or other entity on behalf of Birmanie to manage all matters related to the grant of the tenements to Birmanie and the transfer of Birmanie's interest in the tenements to NSL.

The subpoena

1. The plaintiff issued a subpoena to McCullough Robertson to produce all documents recording or evidencing:

   (1)the client file maintained by McCullough Robertson on behalf of NSL in relation to the tenements;

   (2)correspondence between NSL and McCullough Robertson in relation to the tenements;

   (3)correspondence between McCullough Robertson on behalf of NSL with any third party in relation to the tenements;

   (4)agreements between NSL and other parties in relation to the tenements; and

   (5)correspondence between McCullough Robertson on behalf of NSL and the Mardigan people in relation to the tenements.

2. McCullough Robertson answered the subpoena by producing documents falling within the scope of the subpoena under two categories - those subject to legal professional privilege and those not subject to legal professional privilege.  With respect to the documents for which privilege was claimed, McCullough Robertson stated 'we object to those documents being inspected by a party to the proceeding or any other person on the basis that those documents are subject to legal professional privilege and we are instructed by our client that privilege in those documents is not waived'.  McCullough Robertson produced four lists of documents over which privilege is claimed.  The list is under the sub‑headings 160692‑1 EPCA General, 159181‑2 Project Sequel, 159181‑3 Acquisition of EPC Applications and 159181‑4 PPCA General.  Each list contains the following information:  the document number, a description of the document, the person who made the document, the date and the basis for the claim for privilege.

Application to inspect documents

1. The plaintiff does not accept that the claimed privileged documents are privileged and has applied for leave to inspect the following categories of documents produced by McCullough Robertson which are the subject of a claim for legal professional privilege by NSL:

   (1)documents recording or evidencing steps taken by the defendant, its officers and agents to obtain the grant of EPC 2198, EPC 2336, EPC 2337 and EPC 2338;

   (2)documents recording or evidencing steps taken by the defendant, its officers and agents to negotiate and obtain native title, cultural heritage, exploration, land access and drilling approvals; and

   (3)documents recording or evidencing the matters referred to in pars 39 to 41, 71 and 73 of the witness statements of Mr Cedric Goode dated 26 February 2016.

2. NSL has provided the plaintiff with four documents which it says are the documents which fall within category 3.  Furthermore, NSL does not maintain its claim of legal professional privilege over the documents in list 1 described as 'Recording or Evidencing Legal Work Undertaken', being the documents highlighted yellow in annexure A to Coal Hub's written submissions dated 17 June 2016.

3. The plaintiff notes that in the lists provided by McCullough Robertson in the column headed 'Basis for Claim for Privilege' three broad bases are advanced for privilege:

   (1)documents or communications provided or created for the purpose of providing advice;

   (2)documents or communications provided or created for the purpose of providing legal advice; and

   (3)documents created or provided which detail legal work undertaken.

4. The plaintiff submitted that McCullough Robertson deliberately distinguished the descriptions of various documents in list 1 between those documents they considered recorded legal advice and those they did not.  The plaintiff says a communication between a solicitor and a client that involves a request for information or seeks non‑legal advice is not privileged and hence the documents described by McCullough Robertson as 'documents or communications provided or created for the purpose of providing advice' are not privileged.

5. NSL has put on an affidavit by Ivan Armeli, the solicitor with the conduct of the matter on behalf of NSL.  Mr Armeli says that there was no intentional differentiation between the use of the word 'advice' and 'legal advice' in the descriptions contained in the index of privileged documents provided by McCullough Robertson.  Mr Armeli says that the use of the word 'advice' in the list 1 descriptions as opposed to 'legal advice' which appeared in the description of other documents is purely due to the different persons involved in reviewing the documents for privilege and each of the relevant descriptions should have referred to 'legal advice'.  That is, each of the references to 'advice' should read 'legal advice'.

6. NSL has now withdrawn its claim of legal privilege over the documents described as 'recording or evidencing legal work undertaken'.  The plaintiff is entitled to inspect those documents.  The documents that remain in contention are those for which privilege is claimed on the basis that they are 'documents or communications provided or created for the purpose of providing legal advice'.

Sufficiency of claim to privilege

1. Order 36B rule 9 deals with inspection of, and dealing with, documents produced in answer to a subpoena. Rule 9(6) provides that if a party or person having a sufficient interest objects to a document being inspected by a party to the proceeding, the objector may notify the registrar in writing of the objection and of 'the grounds of the objection'. The rule is similar to O 26 r 4(2) of the Rules of the Supreme Court 1971 (WA) which provides that if it is claimed that any documents in a list of discovered documents are privileged from production the claim must be made in the list of documents with a sufficient statement of 'the grounds of the privilege'.

2. The plaintiff says that McCullough Robertson has not provided sufficient information upon which a court can be satisfied that the claims for privilege have been properly made.  The plaintiff says that the lists of documents for which privilege is claimed do not include a column setting out the topic or purpose of the document or communication which would enable the court or the plaintiff to assess whether that documents meet the criteria for what constitutes a legally privileged document. 

3. The legal onus of proving that documents are privileged is on the party claiming privilege, but an evidential onus may be cast upon the party seeking inspection if the claim for privilege is 'apparently proper'.  In Carey v Korda [2012] WASCA 228; (2012) 45 WAR 181, Murphy JA, with whom Martin CJ and Newnes JA agreed, said:

   In Schreuder v Murray [No 2] [2009] WASCA 145; (2009) 41 WAR 169, Buss JA (McLure JA concurring) said [60] - [62]:

   The person claiming legal professional privilege must prove that the information or documents in question are privileged.  See Grant v Downs [1976] HCA 63; (1976) 135 CLR 674, 689 (Stephen, Mason & Murphy JJ).

   A claim of legal professional privilege is not established conclusively by the use of a verbal formula.  See Esso [52]. A court may examine documents where there is a disputed claim. It should not be hesitant to exercise the power. Also, in appropriate cases, a court may permit cross-examination of a deponent of an affidavit claiming privilege. See Esso [52]; Grant, 689.

   However, a party who claims legal professional privilege must properly identify the basis on which the privilege is claimed.  It is not appropriate for the party merely to assert the existence of the privilege, deliver the documents to the presiding judicial officer and request him or her to analyse them and determine whether there is a proper basis for the claim.  In the present case, the learned judge, appropriately, refused the invitation of counsel for the appellant to embark on this task.

   Whilst the ultimate legal onus remains on the party claiming privilege, an evidential onus may be cast upon the party seeking inspection if the claim for privilege is 'apparently proper':  CTC Resources NL v Australian Stock Exchange Ltd [2000] WASCA 19; (2000) 22 WAR 48 [33] - [34]. In that case the party claiming the privilege had, in affidavits, 'clearly address[ed] all the issues required for such a claim'. The court is not confined to considering a contentious affidavit of the party seeking inspection, and is entitled to look at any evidence before the court which may be capable of raising doubts as to the authenticity of the privilege claim: CTC v Australian Stock Exchange [39]. 

   What is required, for the purposes of establishing a privilege claim, will vary depending on the nature of the document and the particular ground on which privilege is claimed:  Kadlunga Proprietors v Electricity Trust of South Australia (1985) 39 SASR 410, 415. Thus, for example, if in an affidavit claiming privilege, a document were described as a confidential communication from the lawyer to the client, it would be readily capable of sustaining a claim for legal professional privilege on the ground that it was made for the dominant purpose of giving legal advice. On the other hand, eg, a claim would not, generally, be apparently proper if it involved a bare assertion of a protected dominant purpose, in relation to a document which, by the description given to it in the affidavit, had no apparent connection with giving or receiving legal advice or actual or anticipated litigation. Each claim will need to be considered on its merits. Also, the sufficiency of the evidence relied on by a party disputing the claim for privilege for the purpose of meeting its evidential onus will no doubt vary according to the ground of privilege claimed and the description of the document given [69] - [71].

4. The author or recipient of the documents over which NSL claims privilege is a lawyer with McCullough Robertson.  In the passage from Carey v Korda that I have set out above, Murphy JA observed that if in an affidavit claiming privilege a document were described as a confidential communication from the lawyer to the client it would be readily capable of sustaining a claim for legal professional privilege on the ground that it was made for the dominant purpose of giving legal advice.  In the lists proved by McCullough Robertson the documents for which privilege is claimed are stated to be communications between the client and McCullough Robertson for the dominant purpose of seeking instructions or seeking or providing legal advice or drafts of documents and other papers, diary notes and memoranda which have come into being for the dominant purpose of providing legal advice.  Those documents are readily capable of sustaining a claim for legal professional privilege on the ground that they were made for the dominant purpose of giving or obtaining legal advice.  The descriptions that appear in list 1 are sufficient to establish a claim for legal professional privilege.  It is not necessary to set out the subject or topic or purpose of the communication beyond the descriptions in the list.

Joint privilege

1. A privilege may be shared by two or more persons.  The holders of a joint privilege retain no confidence against each other; they cannot claim privilege against each other although they can maintain privilege against the rest of the world.

2. The plaintiff asserts a joint privilege with NSL in respect of the documents which it summaries as documents or communications between NSL and McCullough Robertson going to steps taken or required to be taken by NSL to obtain the grant of the EPC applications, approvals, the requirement to commence and spend $500,000 on a drilling programme on the tenements.  The plaintiff's case is as follows.  The commercial purpose of the Agreement was that Birmanie agreed to sell four EPC applications to NSL and NSL agreed to purchase the EPC applications by paying consideration in tranches triggered at different times and events which events were to be achieved in a timely manner.  The primary obligation imposed upon NSL which was designed to lead to a trigger for the payment of the last two tranches required NSL to obtain in a timely manner all relevant approvals in relation to the EPC applications and thereafter spend a minimum of $500,000 on a drilling programme for the establishment of a JORC inferred resource of coal of at least 500 million tonnes and the establishment of a JORC indicated resource of coal of at least 250 million tonnes.  Birmanie and NSL had a mutual interest in the steps NSL was required to take in order to obtain all relevant approvals and thereafter spend a minimum of $500,000 on a drilling programme.  To facilitate NSL to secure all relevant approvals and advance the EPC applications in a timely manner, Birmanie provided NSL and its solicitors with specific written authority to act on behalf of Birmanie to ensure that NSL was able to engage with all relevant parties.  Birmanie and NSL shared a common interest or a mutual interest in ensuring that all relevant approvals were sought and obtained in a timely manner.  If, as NSL accepts, communications between its solicitors and third parties regarding relevant approvals should be made available to Birmanie, then necessarily the communications between NSL and McCullough Robertson should also be made available to provide a complete picture of the process undertaken by NSL.  It is irrelevant that NSL engaged McCullough Robertson or paid for the legal services.  It was not necessary for Birmanie and NSL to be in a formal legal relationship such as a partnership or trust in order for the joint privilege to arise.  In any event, Birmanie held and continues to hold the four EPC's on trust for NSL.  Birmanie's legal interests or rights under the Agreement have now been assigned to the plaintiff.

3. I do not accept the plaintiff's argument.  In Farrow Mortgage Services Pty Ltd (In Liq) v Webb [1996] NSWSC 259; (1996) 39 NSWLR 601, 608 Sheller JA explained the basis of joint legal professional privilege:

   Two or more persons may join in communicating with a legal adviser for the purpose of retaining his or her services or obtaining his or her advice. The privilege which protects these communications from disclosure belongs to all the persons who joined in seeking the service or obtaining the advice.  The privilege is a joint privilege.  So is it also if one of a group of persons in a formal legal relationship communicates with a legal adviser about a matter in which the members of the group share an interest. Communications by one partner about the affairs of the partnership or a trustee about the affairs of the trust are examples.  Implicit in the relationship is the duty or obligation to disclose to other parties thereto the content of the communication.  Accordingly no privilege attaches to such communications as against others who, with the client, share an interest in the subject matter of communication.  But the parties together are entitled to maintain the privilege 'against the rest of the world': Phipson, par 20-28 and par 20-29.  Logically the joint nature of the privilege means that all to whom it belongs must concur in waiving it.  Theirs is one inseverable right.

1. NSL says that this case is similar to that considered by the Supreme Court of South Australia in Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd [2011] SASC 90 and Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd [2011] SASCFC 64; (2011) 296 ALR 465. Alliance and Heathgate entered into a mining exploration joint venture. Heathgate transferred its interest in the joint venture to an associated entity, Quasar. Since Quasar did not have any full time employees it acted through its directors and occasionally employed Heathgate to carry out specific tasks on its behalf. Heathgate and Quasar (the respondents) entered into a native title mining agreement (NTMA) on behalf of the joint venture after receiving legal advice. Alliance brought proceedings against Quasar. In the course of the proceedings Alliance claimed access to communications between the respondents and their legal advisers. All but five of these documents were created in the period leading up to the execution of the NTMA. The respondents contended that the documents were subject to client legal privilege. The primary contention in this proceeding was the claim that Alliance had a right to access the documents because Heathgate had acted as the agent of Alliance or the joint venture when negotiating the NTMA. The court observed that Sheller JA in Farrow Mortgage Services Pty Ltd (In Liq) v Webb established that there are two circumstances in which joint privilege can arise:  (1) when two or more persons join in communicating with their legal advisers for the purpose of retaining their services or obtaining their advice; or (2) when one of a group of persons in a formal legal relationship communicates with the legal adviser about a matter in which the members of the group share an interest.

2. The primary judge and the Full Court held that in order to establish the second limb of joint privilege the relationship between the group members must include a duty or obligation to disclose to the other members the content of the communication. 

3. The evidence does not support any contention that Birmanie joined with NSL in communicating with McCullough Robertson for the purpose of retaining their services or obtaining advice.  NSL's engagement of McCullough Robertson was not as agent for, or for the benefit of, Birmanie.  The authority given by Birmanie to NSL was not to engage McCullough Robertson but to deal with third parties to obtain the grants and effect a transfer to NSL.  NSL was responsible, at its own costs, for pursuing the grants.  Birmanie did not join in retaining or instructing McCullough Robertson.  Birmanie has no joint privilege on the basis of the first category of joint privilege described by Sheller JA in Farrow Mortgage Services Pty Ltd (In Liq) v Webb.

4. Birmanie does not have a joint privilege on the basis of the second category identified by Sheller JA for three reasons.  First, there is no formal legal relationship between NSL and Birmanie.  Secondly, communications between NSL and McCullough Robertson were not for the purpose of obtaining or receiving legal advice about a matter in which Birmanie shared an interest as members of a group in a formal legal relationship or at all.  Thirdly, neither NSL nor McCullough Robertson was under a duty or obligation to disclose to Birmanie as members of a group in formal legal relationship or otherwise the content of the communications between NSL and McCullough Robertson.  Any duty of disclosure by reason of Birmanie conferring its authority in accordance with cl 8.12 of the agreement was limited to communications with outside third parties such as the Mines Department. 

5. There is no joint privilege.

Waiver

1. The plaintiff submits that by its amended defence dated 13 October 2016 (pars 4 ‑ 7, 14 and 15) and the witness statement of Mr Cedric Goode dated 26 February 2016 (pars 39 ‑ 41, 70 and 73) NSL waived privilege in that NSL's defence is inconsistent with the continued maintenance of the claim for legal professional privilege in respect of documents which evidenced the state of affairs in relation to the processes taken by NSL in trying to secure appropriate approvals which were necessary to prove up the coal resources.

2. In Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 the High Court held that inconsistency between the client's conduct and the maintenance of the confidentiality of communications between the lawyer and the client effects a waiver of the privilege. Where a particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect, waiver is imputed by the operation of law.

3. There is no issue waiver by NSL in its defence or the witness statement of Mr Goode.  Paragraphs 4 to 7, 14 and 15 of the defence contain, relevantly, an allegation to the effect that NSL could not commence drilling because it did not have unfettered access.  That raises a matter to be determined as a matter of fact and does not depend upon the state of mind of NSL or any legal advice received by NSL.  This is not a case where waiver arises in relation to the legal advice because it influenced someone's state of mind which is relevant on the pleadings.

Category 1.3

1. NSL says that the documents falling within proposed Category 1.3 have been produced.  The plaintiff submits that an order of the court should be made requiring production for inspection of documents in Category 1.3 and an order to file an affidavit to confirm the documents produced to the plaintiff are the only documents falling within Category 1.3 to ensure compliance.

2. The order proposed by the plaintiff is not an order sought that it have leave to inspect Category 1.3 of the documents produced by McCullough Robertson which are the subject of a claim for legal professional privilege by NSL.  If, as appears likely, the documents were produced by NSL and not McCullough Robertson, as part of NSL's continuing discovery obligation then on being requested by the plaintiff's solicitors to do so NSL should verify its further discovery by affidavit.  However, that is not the application with which I am dealing.

Conclusion

1. NSL does not maintain its claim of legal professional privilege over the documents in list 1 described as 'recording or evidencing legal work undertaken', being the documents highlighted yellow in Annexure A to the plaintiff's submissions dated 17 June 2016.  It should be ordered that the plaintiff has leave to inspect those documents.  Otherwise the plaintiff's application should be dismissed.