In the matter of Timor Sea Oil and Gas Australia Pty Ltd (in liq) (No 2)

[2020] NSWSC 1875

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Timor Sea Oil & Gas Australia Pty Ltd (in liq) (No 2) [2020] NSWSC 1875

Hearing dates:

On the papers

Decision date:

18 December 2020

Jurisdiction:

Equity - Corporations List

Before:

Leeming JA

Decision:

1. The Notice to Produce dated 30 November 2020 be set aside.

2. The First Defendant pay the Plaintiff’s costs of the Notice of Motion dated 10 December to set aside the Notice to Produce.

Catchwords:

COSTS – public interest immunity – Cabinet document – Commonwealth sought to rely on evidence not provided to other side in order to support claim of public interest immunity – basis of claim not otherwise disclosed – other side promptly conceded claim of public interest immunity once basis disclosed – appropriate order as to costs

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW), r 42.1

Cases Cited:

In the matter of Timor Sea Oil & Gas Australia Pty Ltd (in liq) [2020] NSWSC 1832

Keddie v Foxall [1955] VLR 320

Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11

Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306

Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256; 288 ALR 385

Category:

Costs

Parties:

Castleton Commodities Merchant Asia Co Pte Ltd (Plaintiff/Respondent)
Commonwealth of Australia (First Defendant/Applicant)
Timor Sea Oil & Gas Australia Pty Ltd (in liq) (Second Defendant)
Northern Oil & Gas Australia Pty Ltd (in liq) (Third Defendant)

Representation:

Counsel:
I M Jackman SC (Plaintiff/Respondent)
G Kennett SC, N Kirby (First Defendant/Applicant)

Solicitors:
Gilbert + Tobin (Plaintiff/Respondent)
Clayton Utz (First Defendant/Applicant)

File Number(s):

2020/335251

Publication restriction:

Nil

Judgment

1. For reasons described in my earlier judgment in In the matter of Timor Sea Oil & Gas Australia Pty Ltd (in liq) [2020] NSWSC 1832, I refused the Commonwealth’s application to adduce five paragraphs of an affidavit made by Ms Leonie McGregor on a basis which would not permit the plaintiff or anyone acting on its behalf from seeing that evidence. Instead, I directed that it be provided, confidentially, to senior counsel and a named partner of the law firm instructing him, and only to them. Those paragraphs sought to explain why a document called for by a notice to produce, and known as the “Woodside Report”, was a Cabinet document.

2. Promptly after limited confidential access was given to those paragraphs, the plaintiff accepted that the document was a Cabinet document which attracted public interest immunity, and that the appropriate order in the present case was that its notice to produce should be dismissed. Such an order will be made, by consent.

3. However, the plaintiff seeks an order that the Commonwealth pay its costs of the notice of motion. The Commonwealth seeks an order that the plaintiff pay its costs. This judgment resolves that controversy.

The parties’ submissions

4. The Plaintiff seeks its costs on the following grounds (I am very substantially drawing upon its written submissions of 16 December 2020, and the paragraphs in quotations are taken verbatim from those submissions):

1. “The Plaintiff sought access to the redacted passages of the McGregor affidavit and the affidavit of Ms Gillies dated 10 December 2020 (the Gillies affidavit) at 8:49am on Friday 11 December 2020”.

2. “The Plaintiff offered to enter into appropriate confidentiality undertakings in relation to receiving unredacted copies of the affidavits. The representatives for the Commonwealth rejected the request made by the Plaintiff for unredacted copies of the McGregor affidavit and the Gillies affidavit. Legal representatives for the Commonwealth said in terms;

‘For the avoidance of doubt, we do not intend to provide you with copies of the affidavits of Ms Gillies and Ms McGregor.’”

3. Senior Counsel for the Commonwealth properly conceded that the connection between the Woodside report and the Cabinet process was not apparent without the confidential material.

4. “Senior Counsel for the Commonwealth properly conceded that the redacted affidavits did not address the reasons for the redacted paragraphs in the McGregor and Gillies affidavits to themselves be kept confidential.”

5. “It is clear that the redacted evidence in the McGregor and the Gillies affidavits are the types of evidence which should have been disclosed in advance of the hearing, subject to an appropriate confidentiality undertaking. That was offered by the legal representatives of the Plaintiff, and was rejected by the legal representatives of the Commonwealth.”

6. “Most tellingly, the Commonwealth was unable to articulate any basis for this stance when invited to do so at the hearing.”

7. “Upon Senior Counsel for the Plaintiff and the legal representative of the Plaintiff being given access to the redacted paragraphs of the McGregor affidavit, the Plaintiff has consented to the Notice to Produce being set aside and accepted the public interest immunity claim made by the Commonwealth in the Woodside report.”

8. “It is reasonable to infer that had the unredacted material in the affidavits been provided when requested in the early morning of Friday 11 December 2020 (the redacted affidavits having been served on the Plaintiff[’]s legal representatives at 5.00pm on 10 December 2020), the work associated with the Commonwealth’s Notice of Motion dated 10 December 2020 and the ultimate hearing on 14 December 2020, would not have needed to take place.”

5. The factual matters stated in subparagraphs (1)-(7) above are accurate. The conclusion in subparagraph (5) is disputed, and I shall return to this.

6. But the main area of dispute is the inference I have been invited to draw in subparagraph (8) that had the Commonwealth provided the material on which it sought to rely in advance of the hearing, the hearing would not have needed to take place. The Commonwealth submits that that is “not the only available – or even the most likely – inference”.

7. The Commonwealth makes the following submissions:

“The Commonwealth submits that the Court’s ex tempore impression that the paragraphs 31 to 34 of the McGregor affidavit prima facie afforded the Woodside Report ‘a relatively high degree of protection’ is likely to have been a catalyst for the Plaintiff’s concession.

That inference is strengthened by the fact that the Commonwealth had, since 4 December 2020, informed the Plaintiff that the Woodside Report attracted public interest immunity as a cabinet document. Mr Chami in the directions hearing before Black J on 7 December 2020 (see Exhibit CAP3 to the Affidavit of Colleen Anne Platford sworn 11 December 2020 at p.104), said:

‘That particular document is, we say, protected by privilege, that is public interest immunity … The particular document is one that we say is protected by public interest immunity, on the basis that it is a cabinet document. The Plaintiff has been aware of this since Friday [4 December 2020]’.

Paragraphs 31 to 34 of the McGregor affidavit simply provided some evidence to substantiate what the Commonwealth had already said to the Plaintiff and the Court.

Following the admission of that evidence, there were arguments that could have been put (and had been put, in an anticipatory fashion) going to the balancing exercise called for by s 130 of the Evidence Act 1995. The abandonment of those arguments seems unlikely to be explained solely by the content of the evidence. The natural inference is that the Plaintiff’s capitulation was informed at least to some degree by the preliminary views expressed by the Court.

In those circumstances, noting that the Plaintiff has now had the benefit of the preliminary views expressed by the Court in the course of the hearing, the Commonwealth submits that the Court cannot confidently conclude that the Plaintiff would have abandoned the motion had the redacted materials been provided to the Plaintiffs immediately prior to the hearing.”

8. The Commonwealth also disputes that the paragraphs of Ms McGregor’s affidavit should have been disclosed in advance of the hearing. It states that “[i]t was not suggested that the Commonwealth’s submission proceeded upon anything other than an honest and reasonable (if, ultimately, rejected) interpretation of the authorities” and a view that this was a case where the material founding the claim for public interest immunity could be adduced without providing the material to the other side.

9. The Commonwealth’s submission concludes that:

“in the circumstances of the compressed timetable, where the Plaintiff’s offer of undertakings was made on Friday, 11 December 2020 and the hearing was on Monday, 14 December 2020, there is no disentitling or unreasonable conduct associated with any aspect of the Motion, including its prosecution of the Confidentiality Application, which would justify a departure from the ordinary position that costs follow the event.”

Consideration

10. The “usual order as to costs”, now found in UCPR r 42.1, is that costs follow the event. The underlying principle is articulated in Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [67]. The “event” is the setting aside of the plaintiff’s notice to produce, as sought by the Commonwealth. The starting position is that the unsuccessful plaintiff should pay the Commonwealth’s costs of its notice to produce.

11. But that is merely the starting point. It is open to the plaintiff to make out a case for a costs order which is different from the usual costs order. Indeed, in an appropriate case, it is open for a wholly unsuccessful party to seek an order that the other side pay its costs. This was regarded as “well established” and “does not require any discussion of the case law” in Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 at [24]. Presently apposite is the proposition endorsed by McHugh J in Oshlack at [69] and by the Court of Appeal in Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256; 288 ALR 385 at [97]:

“the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation.”

12. Bearing those principles in mind, I approach the exercise of discretion as follows.

13. First, the Commonwealth had a relatively powerful claim to set aside the notice to produce. The Woodside Report was more closely connected with the processes of Cabinet than anyone would reasonably infer, based on the publicly available information and what was disclosed by the Commonwealth when the dispute arose.

14. Secondly, articulation of the basis of that claim was easy. It was done by Ms McGregor in four sentences.

15. Thirdly, the Commonwealth chose not to disclose that basis in advance of the oral hearing. Indeed, it was not disclosed until after the conclusion of the oral hearing.

16. Fourthly, the question is not whether the Commonwealth’s position was other than “honest and reasonable”. The question is not whether some special costs order should be made for conduct which is other than honest and reasonable. The Full Court of the Supreme Court of Victoria rejected the submission that some misconduct was required in Keddie v Foxall [1955] VLR 320, holding that “a Judge may have regard to conduct – not necessarily misconduct – of any party which is calculated to occasion unnecessary expense”: at 324.

17. The question is merely whether the plaintiff has established a proper basis to depart from the usual order as to costs. The fact that the Commonwealth was incorrect to proceed on the basis that its application should be determined by a Court on the basis of evidence not supplied to the other side is a relevant consideration bearing upon the discretion as to costs.

18. Fifthly, I do not accept that there is any great force in the Commonwealth’s submission that paragraphs 31-34 “simply provided some evidence to substantiate what the Commonwealth had already said” to the plaintiff. Contested applications are ordinarily decided on the basis of evidence, not assertions. Further, the notion of what is a “Cabinet document” extends to a wide range of documents, some deserving of lesser protection, others deserving of greater protection. Merely asserting that the Woodside report was a “Cabinet document” fell short of explaining the gravamen of the Commonwealth’s opposition to production.

19. Sixthly, I accept what emerged during the course of the hearing, namely, that no one on behalf of the Commonwealth had given attention to the question as to how the Court would receive the evidence which was central to the Commonwealth’s case.

“HIS HONOUR: I will need to hear from Mr Jackman, but I would have thought it would be possible to supply some evidence that can be seen by the other side in support of the only claim that matters, which is that the Woodside report shouldn’t be seen.

Is there any aspect of the confidential evidence that you are ready today to ask me to make an order under the Court Suppression and Non Publication Orders Act?

KENNETT: No, your Honour.

HIS HONOUR: Have you given any thought to the terms of the order that you want made? In particular, what its duration should be? Section 12(2), the order has to say on its face how long it is suppressed for and it has to be no longer than necessary.

KENNETT: We have not worked through that, your Honour, or formulated anything. We would be very grateful if you would bring us back tomorrow with either some different instructions or some evidence in support of that application for suppression.”

20. Had I taken the course sought by the Commonwealth in the passage I have reproduced above, and granted an adjournment, the plaintiff would have had a powerful case for costs. The Commonwealth, seemingly having gambled on the hope that I would permit evidence to be adduced by it without providing access to the other side, thereby leading to unfairness to the plaintiff and denying to the Court the advantage of submissions, was unprepared to deal with the prospect that I might approach the application in a different way. I think the foregoing falls within the principle enunciated above.

21. I did not grant an adjournment, because it seemed prima facie, immediately upon reading the material in Ms McGregor’s affidavit, that this was a clear case.

22. Seventhly, I turn to the Commonwealth’s submission concerning the impression conveyed by my tone and expression when I read paragraphs 30-34 of Ms McGregor’s affidavit. That occurred in the following way.

23. Senior counsel for the Commonwealth had started with his application to suppress paragraphs 9-12 of the other affidavit. While he was seeking to obtain instructions (which, sensibly albeit belatedly, were obtained), I said this:

“HIS HONOUR: I’ve just opened up Ms McGregor’s affidavit. Mr Kennett, I will give you a chance to explain, but I do not understand why we are bothering with paragraphs 9 to 12, I really don’t.”

24. When shortly thereafter counsel turned to Ms McGregor’s affidavit, the following exchange took place:

“HIS HONOUR: Mr Kennett, while that is being digested, what is said in Ms McGregor’s affidavit, which is suppressed at the moment, is short and is of a very different character. I think we might be better dealing with it.

KENNETT: Yes, your Honour, that was where I was going to go next.

Paragraph 34 your Honour will see is a conclusion that she draws from certain material. Paragraphs 30 to 33 draw the link which we need to draw between the Woodside Report and a cabinet process. Disclosure of that would be to disclose that process, which prima facie is entitled to be secret.

HIS HONOUR: If I may say so, this is in a completely different category from paragraphs 9 to 12 of Ms Gillies’ affidavit. To be perfectly candid, it’s much more powerful evidence than a litigant might expect to encounter when faced by a claim for public interest immunity. It is much more powerful evidence than what’s contained in paragraphs 9 to 12 of Ms Gillies’. It is the sort of evidence where, perhaps, if it had been disclosed in advance we might not have this hearing. And it is quite different in the sense that it doesn’t need for counsel to have the benefit of taking instructions. It’s very factual, if I could put it like that, about what happened in relation to the cabinet process.”

25. I granted a short adjournment for the purpose of taking instructions.

26. On returning, I said this:

“HIS HONOUR: Very well. What we need to do to resolve this application falls in three phases I think. First of all, I am going to rule on the application that McGregor 30-34 be received in evidence without access to the other side and subject to an order under the Court Suppression and Non Publication Orders Act. Secondly, because I am against the Commonwealth on that application and rather I am going to let it be read but subject to two representatives, Ms Platford and Mr Jackman, having access to those six sentences, which occupy less than half a page, it will be necessary to give them an opportunity to be heard further as to why that evidence, which they haven’t hitherto seen, isn’t sufficient to make out a claim for public interest immunity and then, thirdly, I need to rule on the claim.

But since I have seen this and as best I am aware, there is no basis for challenging the factual matters concerning the Cabinet process that are disclosed there. To my mind at the moment, subject to hearing from both of you if necessary, that is going to be sufficient to resolve the application.”

27. I accept the Commonwealth’s submission that the view I expressed above subject to hearing from the parties, suggested a preliminary conclusion that the Commonwealth’s application would succeed. I also accept that that view may well have been appreciated by the plaintiff, and may have contributed to the decision to concede to setting aside the notice to produce. But it does not follow that I should reject the inference propounded by the plaintiff that had there been disclosure in advance of the hearing, the hearing would not have run. The two contentions are not mutually exclusive alternatives.

28. Any lawyer reading the redacted paragraphs would appreciate that the claim for protection was stronger than what is sometimes conveyed by a document being a “Cabinet document”. I regret I am forced into opacity, but I draw attention to the 32^nd word in paragraph 32 and the 10^th word in paragraph 34 of Ms McGregor’s affidavit. Conversely, the considerations favouring production were relatively weak. The plaintiff is required to adduce evidence as to the cost of undertaking various steps to remediate the vessel in support of its claim, and to do so over the next few weeks, and it is understandable that it would be advantageous for that to occur with the benefit of a report commissioned by the company which was familiar with the vessel and which was directed to substantially the same topic. But the plaintiff, very properly, has at no time suggested that the document is necessary in order for it to make out its claim.

29. In short, the Commonwealth was wrong (and it concedes that it was wrong) to say that the connection between the Woodside report and the Cabinet process was apparent from what had been supplied in advance of the hearing. The Commonwealth was wrong to proceed on the basis that the material which supplied that connection should not be supplied to any representatives of the plaintiff, who offered undertakings as to confidentiality. I am comfortably satisfied that had the Commonwealth done so, the hearing would not have taken place, because those advising the plaintiff would have reached the view that the Commonwealth’s claim for public interest immunity was well-founded. This is a case falling within the principle endorsed by McHugh J in the High Court and by the Court of Appeal reproduced above.

30. The appropriate order is that the Commonwealth pay the plaintiff’s costs of the notice of motion.

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Decision last updated: 18 December 2020