Hongkong Xinhe International Investment Company Ltd v Bullseye Mining Ltd [No 5]
[2022] WASC 245
•2 AUGUST 2022
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: HONGKONG XINHE INTERNATIONAL INVESTMENT COMPANY LTD -v- BULLSEYE MINING LTD [No 5] [2022] WASC 245
CORAM: HILL J
HEARD: 22 JULY 2022
DELIVERED : 25 JULY 2022
PUBLISHED : 2 AUGUST 2022
FILE NO/S: COR 83 of 2020
BETWEEN: HONGKONG XINHE INTERNATIONAL INVESTMENT COMPANY LTD
Plaintiff
AND
BULLSEYE MINING LTD
First Defendant
PETER JOSEPH BURNS
Second Defendant
PETER GERARD BURNS
Third Defendant
DARIENA CATHERINE ANN MULLAN
Fourth Defendant
Catchwords:
Practice and procedure - Discovery - Application by plaintiff for production of documents over which privilege is claimed by defendant - Waiver of privilege during evidence of the directors of the first defendant - Extent of waiver - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA), O 26, r 9 and r 12
Result:
Application granted in part
Category: B
Representation:
Counsel:
| Plaintiff | : | M L Bennett & A J Tharby |
| First Defendant | : | M C Goldblatt |
| Second Defendant | : | C P K Russell |
| Third Defendant | : | C P K Russell |
| Fourth Defendant | : | C P K Russell |
Solicitors:
| Plaintiff | : | Bennett |
| First Defendant | : | Murcia Pestell Hillard |
| Second Defendant | : | McNally & Co |
| Third Defendant | : | McNally & Co |
| Fourth Defendant | : | McNally & Co |
Cases referred to in decision:
Archer Capital 4A Pty Ltd v Sage Group Plc (No 2) [2013] FCA 1098; (2013) 306 ALR 384
AW v Rayney [2010] WASCA 161
AWB Ltd v Cole [2006] FCA 571; (2006) 152 FCR 382
AWB Ltd v Cole (No 5) [2006] FCA 1234; (2006) 155 FCR 30
Balabel v Air-India [1988] 1 Ch 317
Bennett v Chief Executive Officer, Australia Customs Service [2004] FCAFC 237; (2004) 210 ALR 220
Carey v Korda [2012] WASCA 228; (2012) 45 WAR 181
Commissioner of Australian Federal Police v Propend Finance Pty Ltd [1997] HCA 3; (1997) 188 CLR 501
Commissioner of Taxation (Cth) v Pratt Holdings Pty Ltd [2005] FCA 1247; (2005) 225 ALR 266
Commissioner of Taxation (Cth) v Spotless Services Ltd [1996] HCA 34; (1996) 186 CLR 404
Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86; (2006) 151 FCR 341
Commonwealth v Temwood Holdings Pty Ltd [2002] WASC 107
CTC Resources NL v Australian Stock Exchange Ltd [2000] WASCA 19; (2000) 22 WAR 48
Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325
Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 213 CLR 543
DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384; (2003) 127 FCR 499
DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 1191; (2003) 135 FCR 151
Esso Australia Resources Ltd v Commissioner of Taxation (Cth) [1999] HCA 67; (1999) 201 CLR 49
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management & Marketing Pty Ltd [2013] HCA 46; (2013) 250 CLR 303
Galway v Constable [2001] QSC 180; [2002] 2 Qd R 146
Grant v Downs [1976] HCA 63; (1976) 135 CLR 674
Kennedy v Wallace [2004] FCAFC 337; (2004) 142 FCR 185
Lanco Resources Australia Pty Ltd v Griffin Energy Group Pty Ltd [No 3] [2017] WASC 51
Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1
National Crime Authority v S (1991) 29 FCR 203
New South Wales v Betfair Pty Ltd [2009] FCAFC 160; (2009) 180 FCR 543
Nine Films & Television Pty Ltd v Ninox Television Ltd [2005] FCA 356; (2005) 65 IPR 442
Rayney v AW [2009] WASCA 203
Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [No 2] [2009] WASC 150
TEC Hedland Pty Ltd v The Pilbara Infrastructure Pty Ltd [2020] WASC 364
HILL J:
By its minute of proposed orders dated 23 June 2022, the plaintiff contends the first defendant has waived privilege in respect of legal advice it received in respect of certain matters. The plaintiff seeks an order that the first defendant provide discovery and inspection of instructions given to their solicitors and correspondence between the directors of the first defendant (being the second to fourth defendants) in relation to these categories of advice. In addition, the plaintiff seeks an order for inspection of certain documents in Pt 1B of the list of documents annexed to the affidavit of discovery of the first defendant filed 9 June 2022.
The trial in this matter is currently listed before His Honour Justice Solomon and will recommence on 1 August 2022. Given the nature of the application, which may require the inspection of documents over which a claim for privilege is maintained, this application was referred to me for hearing and determination as the previous case manager of the matter.
In support of its application, the plaintiff relied on the fifth affidavit of Peter Glen Klauz filed 28 June 2022. In opposing the application, the first defendant relied upon the affidavits of discovery of Anthony Short filed 9 June 2022 and 4 July 2022, together with an affidavit of Nigel Geoffrey Pakes filed 20 July 2022.
Given the urgency of the matter, at the conclusion of the hearing on 22 July 2022, I reserved my decision until the morning of 25 July 2022 when I delivered oral reasons for my decision. At the time, I said that I would produce more fulsome reasons for my decision. These are those reasons.
Legal principles
The legal principles governing this application were not significantly in dispute. Many of these principles were summarised by me in TEC Hedland Pty Ltd v The Pilbara Infrastructure Pty Ltd.[1] Broadly speaking these principles are as follows.
Legal professional privilege
[1] TEC Hedland Pty Ltd v The Pilbara Infrastructure Pty Ltd [2020] WASC 364 [14] - [41].
Legal professional privilege takes one of two forms: advice privilege or litigation privilege.
In considering whether a communication is privileged, the relevant issue is the dominant purpose for which the communication was made.[2] Dominant purpose does not mean the primary or substantial purpose,[3] but the prevailing or most influential purpose.[4] If there are two purposes for which a document came into existence which are of equal weight, neither is dominant and the document is not privileged from production.[5]
[2] Esso Australia Resources Ltd v Commissioner of Taxation (Cth) [1999] HCA 67; (1999) 201 CLR 49 [61] (Gleeson CJ, Gaudron and Gummow JJ), [173] (Callinan J).
[3] Grant v Downs [1976] HCA 63; (1976) 135 CLR 674, 678 (Barwick CJ).
[4] Commissioner of Taxation (Cth) v Spotless Services Ltd [1996] HCA 34; (1996) 186 CLR 404, 416.
[5] AWB Ltd v Cole [2006] FCA 571; (2006) 152 FCR 382 [106] citing with approval Commissioner of Taxation (Cth) v Pratt Holdings Pty Ltd [2005] FCA 1247; (2005) 225 ALR 266 [30] (Kenny J).
In determining the dominant purpose of a document, the starting point is to ask what was the intended use or uses of the document and why it was brought into existence. Legal professional privilege can attach to a copy of a non-privileged document if the purpose of bringing the copy into existence is different from the original purpose.[6]
[6] Commissioner of Australian Federal Police v Propend Finance Pty Ltd [1997] HCA 3; (1997) 188 CLR 501, 507 (Brennan CJ), 544 (Gaudron J), 553 - 554 (McHugh J), 571 (Gummow J), 587 (Kirby J); AWB Ltd v Cole [107].
Ordinarily, the relevant purpose is that of the author of the document although this is not invariably the case.[7] In most cases, the time for considering the dominant purpose of the document is the time the document was brought into existence.[8] However, in some cases, a time later than the date on which the document came into existence may be relevant. This is because it is the communication and not the document that is the subject of the claim of privilege.[9]
[7] Grant v Downs 677 (Barwick CJ).
[8] AWB Ltd v Cole [111].
[9] Galway v Constable [2001] QSC 180; [2002] 2 Qd R 146 [35] (Holmes J).
In considering whether a communication is seeking or giving legal advice, the court should not take a narrow view.[10] Legal advice is not confined to providing advice on the law but includes advice 'as to what prudently and sensibly should be done in the relevant legal context'.[11] As Allsop J stated in DSE (Holdings) Pty Ltd v Intertan Inc, it will be rare that a communication between a client and lawyer, once retained, is not connected with the request or provision of legal advice.[12]
Waiver
[10] Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325, 333.
[11] Balabel v Air-India [1988] 1 Ch 317, 330; cited with approval in DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 1191; (2003) 135 FCR 151 [21], [25] - [71] (Allsop J). See also Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [No 2] [2009] WASC 150 [24] - [25] (Beech J).
[12] DSE (Holdings) Pty Ltd v Intertan Inc [51] - [52], [71]; cited with approval in AWB Ltd v Cole (No 5) [2006] FCA 1234; (2006) 155 FCR 30 [48].
Legal professional privilege is a rule of substantive law and an important common law right or immunity.[13] As a result, it is not waived unless there is clear conduct or language which ‘evidences an intention to waive the privilege either expressly or by necessary implication'.[14]
[13] Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 213 CLR 543 [9] - [11].
[14] Nine Films & Television Pty Ltd v Ninox Television Ltd [2005] FCA 356; (2005) 65 IPR 442 [5].
The onus of establishing waiver lies upon the party seeking to displace the existence of the legal professional privilege - in this case, the plaintiff.[15]
[15] Archer Capital 4A Pty Ltd v Sage Group Plc (No 2) [2013] FCA 1098; (2013) 306 ALR 384 [100] (Wigney J), citing with approval New South Wales v Betfair Pty Ltd [2009] FCAFC 160; (2009) 180 FCR 543 [54]. See also Lanco Resources Australia Pty Ltd v Griffin Energy Group Pty Ltd [No 3] [2017] WASC 51 [37].
Waiver occurs where there is conduct which is inconsistent with the maintenance of the privilege.[16] It is an objective test; the law may impute waiver even if this was not intended by the party claiming the privilege. The intention will be imputed where the actions of a party are 'plainly inconsistent with the maintenance of the confidentiality which the privilege is intended to protect'.[17]
[16] Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 [28] - [29].
[17] Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management & Marketing Pty Ltd [2013] HCA 46; (2013) 250 CLR 303 [30].
For there to be an implied waiver of legal professional privilege in advice, the gist or substance of the advice must be disclosed; it is insufficient that the existence of advice is disclosed or the fact that advice has been received and considered. If the conclusion of the advice is disclosed together with the effect of it to 'emphasise and promote the strength and substance of the case', there will be an implied waiver of the privilege.[18]
[18] Bennett v Chief Executive Officer, Australia Customs Service [2004] FCAFC 237; (2004) 210 ALR 220 [5] - [6].
As was noted by Tamberlin J in Nine Films & Television Pty Ltd v Ninox Television Ltd:[19]
Whilst I accept that, in some circumstances, a clear disclosure of the 'bottom line' of the advice, and the course of conduct taken thereafter, may be sufficient to amount to waiver of legal professional privilege, I do not think these matters have been established in the present case. On a fair and reasonable reading, the statement to the effect that senior counsel had been engaged and that he had reviewed matters in detail and that steps were being taken based on his recommendations is not sufficient to amount to a waiver of the legal advice. The substance or content of the advice is not disclosed with specificity or clarity. Questions of waiver are matters of fact and degree and, in this instance, I am not persuaded that the conduct, assertions or admissible evidence are sufficient to warrant the necessary implication that legal professional privilege has been waived. (original emphasis)
[19] Nine Films & Television Pty Ltd v Ninox Television Ltd [26].
Where a party, by its pleadings or evidence, expressly or impliedly makes an assertion about the contents of its legal advice, this may constitute a waiver of privilege. However, a pleading of a state of mind to which legal advice is, or might be, materially relevant will not, of itself, be sufficient; there must be inconsistency between the pleaded case and the maintenance of privilege which causes privilege to be lost.[20] This requires a 'fact-based inquiry' as to whether the contents of otherwise privileged communications have been directly or indirectly put in issue in the litigation by making a claim or by way of defence.[21] It is the acts of the party claiming the privilege that must be considered. A denial or joinder of issue on a question of fact or matter raised by another party will not constitute an implied waiver of privilege.[22]
Challenge to claim of privilege
[20] DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384; (2003) 127 FCR 499 [95].
[21] Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86; (2006) 151 FCR 341 [61].
[22] DSE (Holdings) Pty Ltd v Intertan Inc [115], [121] citing with approval Commonwealth v Temwood Holdings Pty Ltd [2002] WASC 107 [10] (Wheeler J).
A party who is claiming legal professional privilege carries the onus of establishing the claim is well founded. In claiming privilege, they are required to:
(a)list each communication the subject of the claim for privilege;
(b)state the form in which each communication is contained, stored or recorded, whether it is an original or a copy and the date when each was made;
(c)identify the persons between whom the communication or communications were made; and
(d)provide evidence as to the basis of the claim for legal professional privilege.[23]
[23] Rayney v AW [2009] WASCA 203 [42] citing with approval National Crime Authority v S (1991) 29 FCR 203, 212; Kennedy v Wallace [2004] FCAFC 337; (2004) 142 FCR 185 [13].
Pursuant to O 26 r 9 of the Rules of the Supreme Court1971 (WA) (Rules), the court, on an application by a party, may make an order for inspection of documents. Under O 26 r 12 of the Rules, the plaintiff bears the evidentiary onus of showing that the first defendant's claim of privilege is unfounded or mistaken.[24] In discharging this onus, the plaintiff is not restricted to their own affidavits; they may rely on all of the evidence that is before the court.[25] What is required to establish a claim for privilege varies depending on the nature of the document and the basis for the claim. Where a document is described as being a confidential communication between a party and their solicitor, this will be capable of sustaining a claim for legal professional privilege.[26]
[24] CTC Resources NL v Australian Stock Exchange Ltd [2000] WASCA 19; (2000) 22 WAR 48 [33] - [34].
[25] Carey v Korda [2012] WASCA 228; (2012) 45 WAR 181 [70].
[26] Carey v Korda [71].
Where a claim for legal professional privilege is in dispute, a court may inspect the documents in question. As was stated by the Court of Appeal in AW v Rayney:[27]
Although a court should not be hesitant to exercise its power of inspection, ordinarily this power is exercised after the court has examined the material filed by the person claiming the privilege and served on the other party or parties, and the court entertains a doubt as to whether the claim for privilege has been made out or wishes to inspect the documents for the purpose of confirming its view.
[27] AW v Rayney [2010] WASCA 161 [138].
In the absence of any evidence to support the challenge to the claim of privilege, it is not sufficient for a party to challenge the claim and have the court inspect documents to determine whether the claim is valid.[28] In these circumstances, the claim for privilege will be sustained.[29]
[28] CTC Resources NL v Australian Stock Exchange Ltd [37].
[29] Rules of the Supreme Court 1971 (WA), O 26 r 12(1).
Matters for determination
In this case, the plaintiff contends that the first defendant has waived privilege in respect of five separate categories of documents namely:
(a) advice relating to frustrating action, in the context of the takeover offer made by Red 5;
(b) the optionality period in relation to the Red 5 bid;
(c) advice as to the facilitation of grey market share trading;
(d) advice as to the terms governing change of control and board composition in certain agreements; and
(e) advice regarding related party transactions under the Corporations Act 2001 (Cth) (Act).
In addition, the plaintiff sought production of unredacted copies of a number of documents listed in Part 1B of Annexure A of Mr Short's affidavit of 9 June 2022.
Category 1 - Advice in relation to Frustrating Action
In their written submissions filed prior to the hearing before me, both the plaintiff and first defendant agreed that Mr Burns Snr in his cross-examination gave evidence which had the effect of waiving privilege in respect of certain legal advice provided to the first defendant. The dispute between the parties was the extent of the waiver.
The plaintiff contended that Mr Burns Snr's evidence constituted a waiver of any instructions given or advice received in relation to whether the Loan Facility Agreement and/or Subscription Agreement with Mr Mullan and/or the conversion of the directors' performance rights into shares would constitute frustrating action or breach the defeating conditions of the Red 5 takeover bid. The first defendant disputed this characterisation of the extent of the breach and contended that the waiver only extended to whether it received advice it could engage in this conduct without shareholder approval.
In oral submissions before me, counsel for the first defendant was more equivocal and did not accept that Mr Burns' evidence waived privilege over the legal advice obtained by the first defendant.
Both parties agree that the relevant evidence was given by Mr Burns Snr on 15 March 2022 at ts 4261. Specifically, Mr Burns' evidence was as follows:
Well, that's exactly right. You weren't tied up. You wouldn't have been worried if it was defeated?---Well, we were - our advice from the lawyers was - it was we couldn't - we were restricted in what we did for 14 months.
You weren't restricted to take a million dollar loan, a three million dollar share place and issue eight million shares, were you?---Well, we - - -
And you did all of that without shareholder approval?---We got - we got our lawyers advice. We were told we could do it.
I do not accept the submission by counsel for the first defendant that this evidence does not constitute a waiver of privilege, nor that any waiver is limited to whether or not actions could be taken without shareholder approval. However, I also do not accept the contention of the plaintiff that Mr Burns has waived privilege in any instructions given or advice received in relation to whether entry into the Loan Facility Agreement and/or the Subscription Agreement with Mr Mullan, and the conversion of the performance rights of the directors into shares would constitute frustrating action or breach the defeating conditions of the Red 5 bid.
In my view, on a fair reading of the evidence of Mr Burns Snr, his evidence addresses two matters. First, at or about the time Red 5 made a takeover offer, the first defendant sought and obtained advice from their solicitors about what they could do and what may constitute a frustrating action. The advice was that the first defendant was restricted in what it could do. Second, in relation to entry into the Loan Facility Agreement, the Subscription Agreement and the conversion of performance rights without shareholder approval, the evidence of Mr Burns Snr was that the first defendant sought and obtained legal advice which was to the effect that they could do any of these transactions without shareholder approval.
In my view, the evidence of Mr Burns Snr is sufficiently clear and unequivocal to amount to a waiver of legal professional privilege. In relation to the first matter, I consider that Mr Burns' evidence is not just that the first defendant received legal advice in respect of frustrating action but also discloses the content of that legal advice. In doing so, this constitutes a waiver of any privilege in the advice received by the first defendant. In respect of the second matter, I consider that Mr Burns' evidence is not just that legal advice was received in relation to entry into these agreements and conversion of shares, but also discloses the contents of this advice.
For these reasons, I consider that the first defendant is required to produce for inspection, advice that it received in respect of each of these matters.
The evidence before me is that the first defendant has produced for inspection an unredacted memorandum of advice it received from DLA Piper Australia on 24 January 2018 (Doc 2351) but has redacted the covering email as well as a separate email dated 9 January 2018 (Doc 2349), and a file note of a telephone conference between a solicitor at DLA Piper and Mr Burns on 15 January 2018 (Doc 2350).
These matters are the subject of specific challenge and I address them in more detail below.
In relation to the second matter, it was not clear in the submissions before me whether the first defendant had produced for inspection the legal advice it obtained that it could undertake these matters without shareholder approval. Given that the agreements were entered into in or about May 2018 and the performance rights converted in April 2018, it is possible that advice was provided in or about this time. The only document which is listed in Part 1A of the List of Documents of Mr Short's affidavit of 9 June 2018 which is dated April 2018 is in relation to a different issue.
I will hear from the parties as to what further orders may be required to address this.
Category 2 - Optionality period in relation to the Red 5 bid
Both parties agreed that Ms Mullan, in her examination-in-chief, gave evidence which waived privilege in some of the legal advice received by the first defendant. However, once again, there was disagreement as to the extent of any such waiver.
The second category arises from the examination-in-chief of Ms Mullan on 6 April 2022 at ts 5136. Ms Mullan's evidence was that:
Did you discuss at the meeting, the timing of the investment - when it could go ahead?---Yes. Well, my understanding of that time was that we had received that announcement from Red 5 on 19 February. This board meeting was on 6 March. So my understanding was that their bidder statement would be due out within a number of weeks. So, like, early - late March/early April. That type of timeframe. And then whenever that bidder statement went up, then, we had, I guess, like, a period of time upon which we needed to respond with the target statement. But in all likelihood, that should be completed by the end of April. And then, thereafter then, shareholders will be deemed to be fully informed under both - under the Red 5 bid. And then there would be so - so that would constitute a period of optionality. So a number of weeks where they could consider that. My understanding of period of optionality was - I remember asking a bit more about that to Bullseye - to DLA Piper, and also to Allion, who Bullseye subsequently engaged to assist with the target statement. And they told me that there was no real strict definition for a period of optionality, that it really depended upon deeming when shareholders were fully informed. So sometimes, in takeovers, there's supplementaries that come out afterwards - bidder statements, target statements. Sometimes, it can drag on if there's new information coming out all the time, then shareholders have to take that information on board. And it can go on - you know, a period of optionality can go on for six months. Alternatively, sometimes there's not much else to say and it's a short time. But that was my understanding, that you had to give them at least a courtesy minimum - you know, a few weeks at the bare minimum - so that they could be deemed to have read the information provided through the bidder statement, target statement, and then be informed.
The plaintiff submits that by her evidence, Ms Mullan waived privilege in 'all advice relating to the optionality period in relation to the Red 5 bid'. In contrast, the first defendant contends that any waiver is limited to the definition of 'the period of optionality'.
Ms Mullan's evidence was that legal advice was received from DLA Piper and Allion Legal as to the period of optionality and that their advice was that there was no strict definition of this as it was fact dependant. In my view, the waiver of privilege is limited to the advice received from DLA Piper and Allion on the meaning or definition of the period of optionality. I do not accept that the waiver is in the broader terms contended by the plaintiff.
As I understand the position, the first defendant has produced copies of this advice. If this is correct, no further orders are required to be made. However, I will hear from the parties in relation to any orders that are required to reflect the position I have found.
Category 3 - Advice as to the facilitation of grey market share trading
Category 3 also arises from evidence given by Ms Mullan in respect of legal advice that was received from Phil Lucas of Allion Legal. Ms Mullan's evidence (at ts 5150) was that:
[W]e had spoken to Allion Legal at that time, who were representing Bullseye, and Phil Lucas was the partner in there who was working with us, and he explained to us that the - - -
Sorry, was this - is this oral advice he gave you?---Again, yes. Orally. Yes.
Yes?---Yes. But - and we talked about the situation of Bullseye not being listed, and whilst there's live bid in place, the difficulty and the need to not be creating your own market for shares. That Bullseye's directors - you know, if shareholders contact us and say they want to sell, or if we come across investors who say they want to buy, we can put them into contact with one another, but we're not to participate in any kind of market scenario. So with the Red 5 bid at play, Phil had to have a conversation with me and other directors, but I can speak for myself that it would be very difficult to try to orchestrate or create this opportunity for liquidity for shareholders without getting into further difficulty with Red 5, because Red 5 were hostile, you know. And just - it just wasn't an easy thing to do.
Once again, both parties agree that by her evidence, Ms Mullan waived privilege in the advice obtained by the first defendant, but disagree as to the extent of the waiver.
The plaintiff says that, by the evidence of Ms Mullan, the first defendant waived privilege in all advice received by the first defendant as to whether and the extent to which the directors could facilitate the sale and purchase of shares in the first defendant. The plaintiff contends the redacted copies produced by the first defendant are insufficient. In contrast, the first defendant says the waiver is more limited, extending only to the oral legal advice provided by Mr Lucas and Allion in or about April 2018.
In my view, neither of the parties' positions reflects the evidence that was given by Ms Mullan. Ms Mullan's evidence is that Mr Lucas gave oral advice to the directors to the effect that it would be difficult to create liquidity for shareholders without causing issues with Red 5. In my view, this evidence waives privilege over any documents which record the oral advice given by Mr Lucas, including any notes or emails which record the advice, as well as any written communications received by the first defendant from Mr Lucas which confirms his oral advice.
The first defendant has already provided inspection of the email advice received from Mr Lucas on 11 April 2018. If there are any other documents which record the oral advice given by Mr Lucas, it is my view that these documents should be produced for inspection by the plaintiff.
Category 4 - Advice as to terms regarding change of control and board composition in agreements
Category 4 arises from the evidence-in-chief of Ms Mullan on 7 April 2022. In the course of her evidence, Ms Mullan stated (at ts 5202 - 5203) that:
And what did you conclude?---I concluded that weighing up the fact that it was a condition of the investment that they - that Barney and Des made it clear that they wanted some line of sight or continuity with their investment, that they wanted some ability to have some say over who was on the board. And that was condition of the money, and without that there would be no money. So that was a big part of it. And then with - with speaking with Corrs and, you know, they said to us, myself, Peter and Peter, that - that it wasn't unreasonable and - and it was common that that type of provision be in agreements like especially for a quantum of funding of $27 million. So in view of that, then I - I formed my own view that is as reasonable you know I thought it was very reasonable at this - you know, I thought it was very reasonable.
The plaintiff contends that Ms Mullan's evidence waived privilege in advice received by the first defendant in relation to terms contained in funding agreements dealing with change of control and board composition and whether these terms are reasonable and/or common. The first defendant submits that Ms Mullan's evidence is more limited and that she only waived privilege in relation to the advice received as to whether a term such as cl 6.1(a) of the proposed convertible note was not unreasonable and was common.
Counsel for the first defendant submitted that in considering the evidence of Ms Mullan, it was important to review her evidence in context. The context for this evidence commenced at ts 5201 when Ms Mullan was asked whether any concerns were expressed about the proposed investment and the composition of the first defendant's board. She was then asked about what those concerns were (ts 5201 - 5202) and whether any solutions were discussed (ts 5202), before being referred to cl 6.1(a) of the convertible note deed (Ex 231). Ms Mullan was asked whether she considered this was reasonable and then gave the evidence referred to at [45]. After giving this evidence, Ms Mullan was then asked whether Mr Mullan or Mr Curley expressed any concern about the composition of the first defendant's shareholders.
Given this context, I accept the submission of the first defendant that Ms Mullan's evidence is limited to the term concerning the composition of the board and does not extend to terms governing change of control. However, while Ms Mullan was directed to cl 6.1(a), in her evidence, Ms Mullan specifically referred to advice received from Corrs Chambers Westgarth that it was not unreasonable and was common for 'that type of provision' to be in funding agreements, particularly where the quantum is $27 million. For this reason, I do not accept that the waiver is as limited as contended by the first defendant. That is, Ms Mullan's evidence was not limited to a statement that the first defendant had received advice that it was not unreasonable for cl 6.1(a) to be in the agreement. Rather her evidence was that it was not unreasonable for a clause of this type (i.e. a clause which concerns the composition of the board of the party) to be in funding agreements of a relatively significant quantum.
The evidence before me is that redacted copies of advice of Corrs Chambers Westgarth have been produced by the first defendant. These redactions have been done on the basis of the first defendant's view as to the extent of the waiver. On this basis, it is possible that fewer redactions should have been made to these documents given the broader view I have taken as to the extent of the waiver.
At the hearing before me, it was agreed that in the event I did not agree with the position advanced by the first defendant, prior to inspecting the documents, the first defendant should be given an opportunity to review the documents and consider whether different redactions should apply.
For this reason, I have not, at this stage, inspected these documents. I propose to direct the first defendant to re-review the documents on the basis of the conclusion I have reached and provide copies of any additional documents (or parts thereof) to the plaintiff within a short time period. If there remains a dispute between the parties, I will hear from the parties in relation to that.
Category 5 - Advice regarding related party transactions under the Act
In contrast to the other categories, there was a dispute in respect of Category 5 as to whether Ms Mullan waived the content of legal advice received by the first defendant. Ms Mullan's evidence (at ts 5242) was that:
Were you involved in the preparation of the response?---Yes, because Bullseye, we had spoken with Corrs, got Corrs to give us advice. All along whenever the - these funding contracts were being negotiated, Corrs were an integral part of it. And from their advice, I formed the view that a - the - the - the problem with the related party wasn't an issue because the funding agreements were on arm's length terms and - -
The plaintiff submits that Ms Mullan gave evidence of the written advice and of her understanding of a legal concept which was informed by the legal advice. In contrast, the first defendant contends that the evidence given by Ms Mullan was that advice had been received by the first defendant from Corrs Chambers Westgarth and that she formed the view there was not a related party issue as its terms were at arm's length.
In relation to this category, I accept the first defendant's submission. While Ms Mullan gives evidence that advice was received from Corrs Chambers Westgarth, she does not refer to the content, substance or conclusion in the legal advice. Rather her evidence is that from this advice, she formed a view. Consistent with the authorities I have summarised earlier, this is not sufficient enough to constitute a waiver of privilege in the context of the advice that was obtained.
Inspection of redacted documents
The first defendant has produced for inspection 12 documents which have been heavily redacted. The first defendant has set out the basis for the redactions in the two affidavits of Mr Short that were filed. The first defendant has also filed an affidavit of Mr Pakes which provides further details in respect of those matters.
The first defendant says that these affidavits on their face establish the basis for the claim for privilege and that, as a result, an evidentiary onus has passed to the plaintiff as to why it contends the claim for privilege cannot be sustained. In this regard, the only evidence that has been adduced by the plaintiff is an affidavit of Mr Klauz which annexes copies of each of the redacted documents that are in dispute.
Document 2349 (PGK44)
The first defendant objects to any order for production of this document. The evidence before the court is that this document was produced by the first defendant's solicitors on 4 April 2022 in response to an email from the plaintiff's solicitors dated 25 February 2022. Mr Pakes has deposed that he has reviewed this document and that it does not contain a request for legal advice.
The ground on which the first defendant objected to production of this document was initially described in Mr Short's affidavit of 9 June 2022 as:
Legal professional privilege on the basis that part of this email chain has been redacted to mask communications of a confidential nature passing between the officers of the first defendant and the first defendant's legal advisors which have been brought into existence or made for the dominant purpose of obtaining legal advice.
In his supplementary affidavit of 4 July 2022, the redacted portion of the document is described by Mr Short as 'emails between 7 and 8 January 2018 between representatives of the first defendant (Peter G Bums and Dariena Mullan) and its legal advisers, DLA Piper (Michael Bowen and Chris Seotis)'.
The grounds for redaction are more particularly described in the following terms:
This document is partially redacted to mask:
1.emails, in a chain of emails between representatives of the first defendant and DLA Piper Australia (DLA Piper), its legal advisers, in the period 7 to 8 January 2018, which contain information, which does not relate to any matter in question in this action and does not constitute an Advice Document; and
2.an email, dated 7 January 2018 at 4:08pm, from Mr Burns Jnr to Michael Bowen, of DLA Piper, the first defendant's legal advisers, which contains communications of a confidential nature, brought into existence and sent by Mr Burns Jnr for the dominant purpose of the first defendant obtaining legal advice from DLA Piper, its legal advisers.
What is not clear from any of the evidence filed by the first defendant is why, on 9 January 2018, Mr Seotis sent a copy of the Takeovers Panel Guidance Note 12 to Mr Burns. The covering email does not refer to a telephone conversation and from the subject line which is 'RE: Bullseye Mining Intro - Red 5 Limited', it is clear that the email is sent by way of reply to an earlier email received from Mr Burns.
In these circumstances, while I accept the email was originally subject to a claim for legal professional privilege (as it is a communication between a client and their solicitor), there remains a question as to whether this claim has been waived by the evidence of Mr Burns, as set out above in relation to Category 1.
The first defendant has not adduced any evidence as to what DLA Piper was providing advice on, or why a copy of the Guidance Note was attached. In these circumstances, and given my conclusion in respect of Category 1, I inspected the document before making a final ruling on it.
Having inspected the document, most of the document is an exchange of emails between the solicitors at DLA Piper and Mr Burns in relation to timing of a meeting between them. The initial email is, however, an email from Mr Burns to Mr Bowen which encloses correspondence the first defendant had received. While I accept that this email does not contain an express request for advice in relation to this correspondence, it is my view that this can be inferred from the email. For this reason, I consider that the original email from Mr Burns dated 7 January 2018 to his legal advisors should be produced for inspection by the plaintiff.
Document 2350 (PGK45)
Mr Pakes' evidence is that he has reviewed this document and that the parts of the document that have been redacted fall under the headings 'register of members', 'notice of meeting', 'shareholders letter' and 'travel'. The first defendant contends that there has been no waiver of any legal advice given in relation to these matters and that, for this reason, no order should be made for inspection of this document.
Given this evidence, which has not been disputed, I do not consider the plaintiff has discharged its evidentiary onus to show the first defendant's claim for privilege over the redacted portions of this document is mistaken or ill-founded.
Documents 2354 (PGK47), 2355 (PGK48), 2357 (PGK49), 2358 (PGK50), 2359 (PGK51) and 2360 (PGK52)
The first defendant accepts that the redactions to these documents have been made on the basis that its contentions as to the limited nature of the waiver are accepted by the court. This is not the case and accordingly these redactions will need to be revisited.
As set out above, at the hearing the parties agreed that if I did not agree with the first defendant's position, the first defendant should have an opportunity to review the documents and consider whether different redactions should apply.
The first defendant should have a short timeframe within which to re-review the documents consistent with the conclusion I have reached on Category 4 and to provide copies of any additional documents (or parts of documents) to the plaintiff. If there remains a dispute between the parties, I will hear from the parties in relation to that.
I will hear from the parties as to the precise orders that should be made.
Document 2361 (PGK53)
Mr Pakes' evidence is that he has reviewed this document and that the sentence that has been redacted concerns advice regarding FIRB approval. The first defendant says there has been no waiver of privilege in respect of this advice and that no order for production should be made.
Given this evidence, which has not been disputed, I do not consider the plaintiff has discharged its evidentiary onus to show the claim over this document is mistaken or ill-founded.
Conclusion
For the reasons set out above, I consider that the first defendant has waived privilege in:
(a)the legal advice it obtained that it could enter into the Loan Facility Agreement, the Subscription Agreement and conversion of performance rights into shares without shareholder approval;
(b)the advice received by the first defendant from DLA Piper and Allion on the meaning or definition of the period of optionality;
(c)the oral advice given by Mr Lucas in or about April 2018 regarding the facilitation of sale and purchase of shares in the first defendant. This extends to any notes or emails which record the advice, as well as any additional written communications received by the first defendant from Mr Lucas which confirm his oral advice; and
(d)cl 6.1(a) of the funding agreement and whether terms relating to board composition in funding agreements were reasonable and/or common.
In relation to the specific documents:
(a)in document 2349, the initial email from Mr Burns dated 7 January 2018 should be produced for inspection; and
(b)documents 2354, 2355, 2357 - 2360 should be reviewed in light of these reasons to consider whether further parts of these documents need to be produced for inspection by the plaintiff.
Otherwise, the remainder of the plaintiff's application should be dismissed.
I will hear from the parties as to the precise orders that should be made, as well as to the costs of the application.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
FD
Associate to the Honourable Justice Hill
2 AUGUST 2022
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