FX Group Holdings Pty Ltd v Perpetual Trustee Company Limited as trustee of the CPEC 8 Trust a (formerly the CHAMP IV Trust A)

[2023] NSWSC 681

Supreme Court

New South Wales

Medium Neutral Citation:

FX Group Holdings Pty Ltd v Perpetual Trustee Company Limited as trustee of the CPEC 8 Trust A (formerly the CHAMP IV Trust A) [2023] NSWSC 681

Hearing dates:

15 June 2023

Date of orders:

21 June 2023

Decision date:

21 June 2023

Jurisdiction:

Equity - Commercial List

Before:

Stevenson J

Decision:

First and second cross-defendants’ Notice of Motion of 30 May 2023 is dismissed with costs

Catchwords:

EVIDENCE – client legal privilege – waiver of privilege – alleged inconsistency between allegations in Amended Commercial List Cross-Claim Statement and maintenance of privilege – where Cross-Claimants referred in their Amended Commercial List Cross-Claim Statement to giving email instructions to their solicitor concerning profit sharing arrangement to be included in share sale agreement – whether privilege over entire email chains thereby waived

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501; [1997] HCA 3

DSE (Holdings) Pty Ltd v InterTAN Inc [2003] 127 FCR 499; [2003] FCA 384

Federal Treasury Enterprise Sojuzplodoimport v Spirits International B.V. (No 6) [2019] FCA 337

TerraCom Ltd v Australian Securities and Investments Commission [2022] FCAFC 151

Category:

Procedural rulings

Parties:

FX Group Holdings Pty Ltd (Plaintiff/First Cross-Defendant)
Perpetual Trustee Company Limited as trustee of the CPEC 8 Trust A (formerly the CHAMP IV Trust A) (First Defendant/First Cross-Claimant)
P.T. Limited as trustee of the CPEC 8 Trust B (formerly the CHAMP IV Trust B) (Second Defendant/Second Cross-Claimant)
Perpetual Corporate Trust Limited as trustee of the CPEC 8 Trust C (formerly the CHAMP IV Trust C) (Third Defendant/Third Cross-Claimant)
The Trust Company (Australia) Limited as trustee of the CPEC 8 Trust D (formerly the CHAMP IV Trust D) (Fourth Defendant/Fourth Cross-Claimant)
David Swinden (Fifth Defendant/Third Cross-Defendant)
Georgina Gane (Sixth Defendant/Fourth Cross-Defendant)
Natalie German (Seventh Defendant/Fifth Cross-Defendant)
Sheldon Chapman (Eighth Defendant/Sixth Cross-Defendant)
Toby Tan (Ninth Defendant/Seventh Cross-Defendant)
Vincent Gross (Tenth Defendant/Eighth Cross-Defendant)
Xiaohong Yan (Eleventh Defendant/Ninth Cross-Defendant)
Xingjia Zhang (Twelfth Defendant/Tenth Cross-Defendant)
Daniel Poon (Thirteenth Defendant/Eleventh Cross-Defendant)
CPEC 8 Management Pty Ltd (Fifth Cross-Claimant)
Fiona Nancy Lock Rimmer (Second Cross-Defendant)
Vishal Ahuja & the other persons also named in Schedule A trading as King & Wood Mallesons (Twelfth Cross-Defendant)

Representation:

Counsel:
R A Dick SC with N D Oreb (Plaintiff/First and Second Cross-Defendants)
P D Herzfeld SC with A G Willoughby (First to Fourth Defendants/First to Fourth Cross-Claimants)
A Munro (Twelfth Cross-Defendant)

Solicitors:
Minter Ellison (Plaintiff/First and Second Cross-Defendants)
Arnold Bloch Leibler (First to Fourth Defendants/First to Fifth Cross-Claimants)
Webb Henderson (Fifth, Eighth to Tenth, and Thirteenth Defendants/Third, Sixth to Eighth and Eleventh Cross-Defendants)
Norton Rose Fulbright (Sixth Defendant/Fourth Cross-Defendant)
Colin Biggers & Paisley Lawyers (Twelfth Cross-Defendant)

File Number(s):

2022/311060

JUDGMENT

1. By a Share Sale Agreement dated 11 September 2018 (“the Agreement”), the first to fourth cross-claimants (“the Vendors”) agreed to sell their shares in FX HoldCo Pty Ltd to the first cross-defendant (“the Purchaser”).

2. There is a dispute as to the proper construction of the provisions in the Agreement concerning the calculation and the making of “Uplift Payments”.

3. On 18 October 2022, the Purchaser commenced these proceedings seeking declaratory relief to vindicate the construction of the relevant provisions for which they contend.

4. The Vendors contend that:

1. the Purchaser’s construction is erroneous;

2. alternatively, the Agreement ought be rectified by deleting particular words from the definition of “Equity Proceeds” in the Agreement.

5. In relation to their claim for rectification, the Vendors allege that they understood and intended that the Agreement provided for a “Profit Sharing Arrangement”, and that the Purchaser knew, or ought to have known, that the Vendors mistakenly understood that the Agreement made such a provision.

6. Alternatively, the Vendors contend that, if the Purchaser’s construction of the Agreement is correct, and if the Agreement is not to be rectified, they instructed their solicitors, King & Wood Mallesons (“KWM”), that the Agreement should provide for the Profit Sharing Arrangement and that in breach of KWM’s retainer and duty of care, KWM failed to ensure that the Agreement so provided.

7. In that context, in [63] of their Amended Commercial List Cross-Claim Statement, the Vendors allege:

“[The Vendors] instructed KWM to the effect that the [Agreement] should provide for the Profit-Sharing Arrangement.

                                                               Particulars

i. Those instructions were given in email correspondence and by telephone by, among others, Jeremy Stevenson, to, among others, Mark McNamara and Matthew Coull of KWM, between about July 2018 and September 2018.” (Emphasis omitted.)

8. Uniform Civil Procedure Rules 2005 (NSW), r 21.10(1), enables a party to require another to produce for inspection a document referred to in any originating process or pleading, or any other specific document that is clearly identified in the notice and that is relevant to a fact in issue.

9. On 28 March 2023, the Purchaser, by its solicitor, required the Vendors to provide:

“The email correspondence and any file notes of telephone conversations between your clients and their KWM representatives between July 2018 and September 2018 referred to in paragraph 63.”

10. The Vendors, by their solicitor, responded to that request on 27 April 2023 by providing redacted copies of six email chains, and their attachments. The redactions were stated to be by reason of, relevantly, client legal privilege.

11. Now, by Notice of Motion filed on 30 May 2023, the Purchaser ^[1] seeks production of the unredacted copies of the documents.

    1. As first cross-defendant; the second cross-defendant, Ms Fiona Rimmer, is also an applicant on the motion; Ms Rimmer’s role is not presently relevant.

12. There is no dispute that, but for the allegation at [63] of the Amended Commercial List Cross-Claim Statement, the documents would be privileged.

13. As is evident from the fact that the documents have been produced in a partially unredacted form, there is also no dispute that, by making the allegation at [63] of the Amended Commercial List Cross-Claim Statement, the Vendors have waived privilege over parts of those communications.

14. The question is whether, by making the allegation at [63] of the Amended Commercial List Cross-Claim Statement, the Vendors have waived privilege over the entirety of the email chains in question.

Decision

15. For the reasons that follow, the Vendors have not waived privilege beyond the unredacted portions of the documents. The Purchaser’s Notice of Motion should be dismissed with costs.

Principles

16. There is no dispute as to the relevant principles. They were summarised by Allsop J (as his Honour then was) in DSE (Holdings) Pty Ltd v InterTAN Inc ^[2] in an oft cited passage. A waiver will arise if:

“… the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication.”^[3] (Emphasis omitted.)

2. [2003] 127 FCR 499; [2003] FCA 384.

3. At [58].

17. Legal professional privilege does not attach to documents as such, but rather to the information they communicate. ^[4]

    4. See for example, Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501; [1997] HCA 3 at 515 (Dawson J) and at 569 (Gummow J).

18. Further, where a communication deals with a privileged subject matter in respect of which there has been a waiver of privilege, and also another privileged subject matter in respect of which there has not been a waiver, the question will be whether redaction of material relating to the latter subject matter might lead to the meaning or import of the former being distorted or inaccurately perceived. ^[5]

    5. By parity of reasoning with the observations in TerraCom Ltd v Australian Securities and Investments Commission [2022] FCAFC 151 at [21] (O’Callaghan, Jackson and Halley JJ), citing Federal Treasury Enterprise Sojuzplodoimport v Spirits International B.V. (No 6) [2019] FCA 337 at [25] (Stewart J).

19. If there be doubt as to where that line is to be drawn, the benefit of the doubt must go to the beneficiary of the waiver.

20. As I have said, here, there is no dispute that, on the face of it, the email chains in question are privileged.

21. Further, the Vendors accept that they have:

1. waived privilege over:

1. instructions given to KWM that the Agreement should provide for the Profit Sharing Arrangement; and

2. advice given by KWM about that matter;

2. by reason of their contentions concerning the posited rectification of the Agreement, laid open to scrutiny their state of mind in relation to the operation of the profit sharing provisions of the Agreement; and

3. therefore waived privilege over communications with KWM that are capable of affecting, or are material to, that state of mind.

22. What is in dispute is whether, as the Purchaser contends, the Vendors have waived privilege and laid open to scrutiny all instructions “as to” the Agreement and laid “open to scrutiny the whole of the [Vendors’] pre-execution instructions to KWM regarding the [Agreement]”. That is said to be so because “it is only upon review of the whole of those instructions that it is possible to determine whether the assertion at [63] is accurate”.

23. The Purchaser contends that, for that reason, it is entitled to see the entirety of the six email chains in question (including their attachments).

24. The Purchaser emphasised in submissions that, as I have said, client legal privilege is in respect of communications and not documents. But that rather begs the current question which is, what are the relevant communications in the email chains in question?

25. It appears to me that the relevant communications are:

1. the instructions the Vendors gave KWM that the Agreement should include the Profit Sharing Arrangement;

2. communications between the Vendors and KWM relating to those instructions; and

3. communications capable of relevance to the Vendors’ asserted state of mind about that issue.

26. As the Vendors accept, it would be inconsistent with the assertion made at [63] of the Amended Commercial List Cross-Claim Statement for the Vendors to maintain privilege over such communications.

27. But it cannot follow, without more, that there is a concomitant inconsistency, and thus waiver, in relation to whatever else happens to be in the email chains; no matter how remote the subject matter of those other matters be to the matter asserted at [63] of the Amended Commercial List Cross-Claim Statement.

28. If the redacted material relates to an entirely separate subject matter, not capable of relevance to the Profit Sharing Arrangement, I do not see how there could be requisite inconsistency.

29. I have been invited to look at an unredacted copy of the emails.

30. I have done so.

31. I am mindful of the fact that I do not have the detailed knowledge of the circumstances of this claim that is doubtless currently held by those advising the Purchaser. I am thus mindful of the fact that an aspect of the redacted material that might not strike a person, not deeply familiar with the detailed background of the matter, as being capable of relevance to the Vendors’ contentions concerning their intention that the Agreement contain a Profit Sharing Arrangement, might differently be viewed by, say, counsel preparing for the cross-examination of a witness in the proceedings.

32. However, having carefully looked at the portions of the email chains, and their attachments, that have been redacted, my conclusion is that it is clear beyond argument that they relate to entirely different aspects of the Agreement than the Profit Sharing Arrangement.

33. It is not possible to explain, email by email, the reason for my having come to that conclusion without revealing the contents of the redacted material. However, to take two examples that were the subject of a particular submission by senior counsel for the Purchaser, the redacted material in relation to the definition of “Equity Proceeds” and in the provision of the Agreement dealing with “Uplift Payment” has nothing to do with the formal substance of those provisions.

Conclusion

34. For these reasons, the first and second cross-defendants’ Notice of Motion of 30 May 2023 is dismissed with costs.

**********

Endnotes

Decision last updated: 21 June 2023