Perdaman Chemicals and Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [No 4] - [2012] WASC 157

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: PERDAMAN CHEMICALS & FERTILISERS PTY LTD -v- THE GRIFFIN COAL MINING COMPANY PTY LTD [No 4] [2012] WASC 157

CORAM: MARTIN CJ

HEARD: 26 APRIL 2012

DELIVERED : 10 MAY 2012

FILE NO/S: CIV 1925 of 2011
CIV 2422 of 2011
CIV 2423 of 2011
CIV 3201 of 2011
Consolidated by orders dated 18 August 2011 & 14 November 2011

BETWEEN: PERDAMAN CHEMICALS & FERTILISERS PTY LTD
Plaintiff
AND
THE GRIFFIN COAL MINING COMPANY PTY LTD
First Defendant
LANCO INFRATECH LTD
Second Defendant
LANCO RESOURCES AUSTRALIA PTY LTD
Third Defendant
RUSSELL CONLEY
Fourth Defendant
MANOJ AGARWAL
Fifth Defendant
LAGADAPATI MADHUSUDHAN RAO
Sixth Defendant
KANDIMALLA K V NAGA PRASAD
Seventh Defendant
LANCO RESOURCES INTERNATIONAL PTE LTD
Eighth Defendant
S AMARENDRAN
Ninth Defendant

Catchwords:

Evidence - Privilege - Legal professional privilege - Waiver - Reference to earlier legal advice to non-party financiers in advice disclosed to plaintiff - Whether this disclosure is inconsistent with claim for privilege in relation to earlier advice - Held to not constitute waiver of privilege

Evidence - Privilege - Joint privilege between plaintiff and financiers - No waiver of privilege by financiers

Legislation:

Nil

Result:

Defendants' claims to inspect documents dismissed on the basis of legal professional privilege

Category: B

Representation:

Counsel:

Plaintiff:     Mr M L Bennett
First Defendant             :     Mr C G Colvin SC & Mr N J Landis
Second Defendant         :     Mr C G Colvin SC & Mr N J Landis
Third Defendant           :     Mr C G Colvin SC & Mr N J Landis
Fourth Defendant          :     Mr C G Colvin SC & Mr N J Landis
Fifth Defendant            :     Mr C G Colvin SC & Mr N J Landis
Sixth Defendant            :     Mr C G Colvin SC & Mr N J Landis
Seventh Defendant        :     Mr C G Colvin SC & Mr N J Landis
Eighth Defendant          :     No appearance
Ninth Defendant           :     Mr C G Colvin SC & Mr N J Landis
Sumitomo Mitsui Banking Corporation    :        Mr D R Sulan
Mizuho Corporate Bank Ltd :     Mr D R Sulan
King & Wood Mallesons :     Mr D R Sulan

Solicitors:

Plaintiff:     Bennett & Co
First Defendant             :     Clifford Chance
Second Defendant         :     Clifford Chance
Third Defendant           :     Clifford Chance
Fourth Defendant          :     Clifford Chance
Fifth Defendant            :     Clifford Chance
Sixth Defendant            :     Clifford Chance
Seventh Defendant        :     Clifford Chance
Eighth Defendant          :     Tottle Partners
Ninth Defendant           :     Clifford Chance
Sumitomo Mitsui Banking Corporation    :        King & Wood Mallesons
Mizuho Corporate Bank Ltd :     King & Wood Mallesons
King & Wood Mallesons :     King & Wood Mallesons

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

British American Tobacco Australia Services Ltd v Cowell [2002] VSCA 197; (2002) 7 VR 524
Farrow Mortgage Services Pty Ltd v Webb (Unreported, NSWSC, 16 August 1995)
Global Funds Management (NSW) Ltd v Rooney (1994) 36 NSWLR 122
Lukies v Ripley (No 2) (1994) 35 NSWLR 283
Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1

MARTIN CJ: This decision is concerned only with a claim for legal professional privilege in respect of three documents produced on subpoena. The claim for privilege is made by the parties producing the documents - namely, Sumitomo Mitsui Banking Corporation (Sumitomo), Mizuho Corporate Bank Ltd (Mizuho) and Mallesons Stephens Jacques (now King & Wood Mallesons) (the subpoenaed parties). The claim for privilege is contested by the defendants, who seek to inspect the documents. For the reasons which follow, I have concluded that the defendants are not entitled to inspect the documents in question.

The substantive proceedings

The substantive proceedings involve a number of disputes that have arisen in connection with a Coal Supply Agreement (the CSA) entered into by the plaintiff, Perdaman Chemicals and Fertilisers Pty Ltd (Perdaman) and the first defendant, The Griffin Coal Mining Company Pty Ltd (Griffin). Under the CSA, Griffin is to supply coal from its coal mine at Collie to Perdaman for use by Perdaman in the manufacture of urea. Griffin has purported to terminate the CSA. Perdaman asserts that various actions of Griffin, including alleged breaches of the CSA, have resulted in the loss of its urea project. Perdaman's urea project had not developed to the point where financiers had committed to the provision of project finance to enable the project to proceed at the time of the conduct which Perdaman alleges resulted in the loss of the project.

The context of the claim for privilege

Perdaman engaged a number of law firms to assist in its development of the urea project. They included King & Wood Mallesons (KWM) and Freehills.
KWM was engaged to provide legal services in two phases. The first phase involved the provision of advice to Perdaman and prospective lenders to the project in relation to the preparation of the initial bankability review. The second phase included the provision of legal advice to lenders to the project in relation to all other work. The first phase ran from October 2009 until 3 May 2011. During this period KWM were providing legal advice to both Perdaman and the potential financiers, including Sumitomo and Mizuho. The legal services provided by KWM during the second phase of its work were provided under a retainer from only the prospective financiers. That phase commenced in March 2011, and is continuing.
Accordingly, there was a period between March 2011 and 3 May 2011, when KWM were providing services under both retainers - namely, the first retainer to provide joint services to Perdaman and the prospective financiers, and the second retainer from only the prospective financiers. By 3 May 2011, KWM were acting only on retainer to the prospective financiers.
Freehills provided legal services to Perdaman at all material times.

The disputed documents

The subpoenaed parties claim privilege from inspection in respect of three documents produced under subpoena, being a memorandum of legal advice dated 20 April 2011, another memorandum of legal advice dated 4 May 2011, and a document described as a List of Issues dated 21 February 2011. It is convenient to deal with the first two documents together, as the issues which arise in relation to those documents are identical (as indeed is the text of the documents).

The memoranda of advice of 20 April & 4 May 2011

The defendants accept that the memoranda of legal advice dated 20 April and 4 May 2011 were prepared for the dominant purpose of providing legal advice and therefore fell within the scope of legal professional privilege at the time those documents were produced. However, they assert that the privilege has been lost, as a result of the provision of a memorandum of legal advice dated 26 May 2011, prepared by KWM for the financiers it was advising, and which was also sent by KWM to Perdaman's financial advisors and lawyers. They assert that the waiver of privilege which accompanied the communication of the advice of 26 May 2011 to persons other than KWM's then clients extends to and includes the earlier advice given in the memoranda dated 20 April and 4 May 2011. It is therefore necessary to identify the terms of the advice of 26 May 2011 which are said to have this consequence.

The advice of 26 May 2011

The advice of 26 May 2011 is addressed to various financiers, including Sumitomo and Mizuho. It commences by referring generally to the earlier memoranda of advice dated 20 April and 4 May 2011 which are together described as the 'Initial CSA Advice'.
The advice of 26 May 2011 then refers to the new owner of Griffin, Lanco Infratech Ltd (Lanco), having recently requested amendments to the CSA to remove Perdaman's step‑in right, because the existence of that right restricted their ability to obtain project finance for Griffin's coal operations. The term 'step‑in right' is a general description of a series of rights conferred upon Perdaman under the CSA whereby, in certain circumstances, in order to protect its right to the supply of coal, Perdaman is authorised to take over coal mining operations at Collie.
The advice of 26 May 2011 continues:
As referred to in our Initial CSA Advice, we have requested a number of amendments to the CSA and related security to ensure that Perdaman's step‑in rights can be properly exercised. These amendments have been discussed with Freehills and Perdaman has agreed to request these amendments from Griffin.
In light of Lanco's recent statements regarding the CSA, we think it will be more difficult to agree our proposed changes with Griffin. Therefore, as discussed with you, we have set out in Section 2 below a further explanation of the requested amendments and our concerns if these issues are not addressed.
The memorandum goes on to identify a number of other unrelated issues which had arisen, and which were also to be the subject of advice in the memorandum.
The portion of the memorandum of advice dealing with Perdaman's exercise of its step‑in right commences with a paragraph in the following terms:
As referred to in our Initial CSA Advice, we have requested a number of amendments to the CSA and related security. Two of these amendments are particularly important in relation to Perdaman's ability to exercise its step‑in right. If these amendments are not accepted, this will adversely effect Perdaman's ability to step‑in to Griffin's operations.
The memorandum then addresses the two identified aspects relevant to the step‑in right - namely, Perdaman's obligations during step‑in, and the nature of the obligations secured by the security granted to Perdaman under the CSA.
There is no evidence that the memoranda of advice of 20 April or 4 May 2011 were ever provided to Perdaman or its advisors. Although a submission to the contrary was originally advanced by the defendants, in reliance upon a document described in Perdaman's affidavit of discovery, that submission has now been withdrawn. It is a fair inference from the documents (which I have inspected, with the consent of the parties), that the memoranda of 20 April and 4 May 2011 were prepared by KWM under the second phase of its instructions, and provided only to the financiers it was advising.
Accordingly, the financiers, including Sumitomo and Mizuho, receiving KWM's memorandum of 26 May 2011 would have read that memorandum in conjunction with, and in the light of the earlier advices which they had received, being the memoranda of 20 April and 4 May 2011. However, neither Perdaman nor its advisors would have had that capacity.
The critical question is whether the reference to the earlier memoranda of advice in the advice of 26 May 2011, constitutes a waiver of the privilege which would otherwise attach to the earlier memoranda. That will only be so if it would be inconsistent for the parties claiming privilege (in this case the subpoenaed parties) to maintain their claim for privilege in the earlier memoranda, having waived privilege in respect of the advice recorded in the memorandum of 26 May 2011 (see for example British American Tobacco Australia Services Ltd v Cowell [2002] VSCA 197; (2002) 7 VR 524 [121]; Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1, [29]). Such inconsistency may arise if, for example, a party to litigation waives privilege in respect of legal advice for the purposes of that litigation, but maintains the claim for privilege in respect of advice which is necessary for a proper understanding of the advice in respect of which privilege is waived (see for example Mann v Carnell, [28] ‑ [29], [34]).
However, the financiers are not parties to this litigation. They do not seek to derive any forensic advantage from their waiver of privilege in respect of the advice given in the memorandum of 26 May 2011.
Further, when the subpoenaed parties waived privilege in respect of the advice given in the memorandum of 26 May 2011, by providing that advice to Perdaman's advisors and thereby to Perdaman, they did not expressly waive privilege in the memoranda of advice dated 20 April or 4 May 2011. It is not suggested that either of those memoranda were given to Perdaman or its advisors. Accordingly, it seems clear that, to the extent that the subpoenaed parties wished Perdaman and its advisors to act upon the matters set out in the memorandum of 26 May 2011, they did not consider it necessary for those matters to be read in the context of, or in conjunction with the advice earlier given. No doubt that is because the advice given in the memorandum of 26 May 2011 is quite intelligible and comprehensible read on its own.
Having read the relevant portions of the earlier advices, being the portions dealing with Perdaman's obligations during step‑in, and the nature of the obligations secured by the security granted to Perdaman under the CSA, I have concluded that access to those portions is not necessary for a clear understanding of the advice given in the memorandum in respect of which privilege has been waived. To the contrary, the memorandum of advice in respect of which privilege has been waived repeats the material components of the earlier advice, albeit in slightly different terms, and then expands upon it. Put another way, the relevant portions of the earlier advice are essentially a subset of the advice given in the memorandum in respect of which privilege has been waived.
I am of course aware that this description of the content of the earlier memoranda provides some indication of the content of privileged documents. However, the generality of the terms I have used, and the somewhat unusual circumstances, being in particular the later waiver of privilege, lead me to conclude that the subpoenaed parties will suffer no prejudice from the terms in which these reasons are expressed. However, in case the subpoenaed parties have a different view I will first publish these reasons to them and invite submissions on the question of whether publication of any part of these reasons should be suppressed.
Accordingly, I conclude that the waiver of privilege with respect to the memorandum of advice dated 26 May 2011 does not give rise to any waiver of privilege in respect of the earlier memoranda of advice.

The List of Issues

The List of Issues is a document brought into existence on or about 21 February 2011, when KWM were providing services under phase one of its retainer. Those services were provided both to Perdaman and to prospective financiers. It is clear that the List of Issues was made available to Perdaman and its legal advisors Freehills. It is also clear that the document was brought into existence for the dominant purpose of providing legal advice both to Perdaman and to its prospective financiers. KWM was acting for both.
Nevertheless, the defendants assert that they are entitled to inspect the List of Issues because it was attached to an email sent by a lawyer at Freehills to a lawyer at KWM on 9 May 2011. By this stage, KWM were acting only for the financiers and Freehills were of course continuing to act for Perdaman.
Given the provenance of the document, at a time when Perdaman and the financiers were jointly represented, and the context in which the re‑communication of the document on 9 May 2011 occurred, and the implications of confidentiality which attended that communication, there is I think a very real question as to whether that communication was capable of giving rise to any waiver of Perdaman's privilege in the List of Issues. However, that is not the question, because the advice recorded in the document was provided jointly to Perdaman and to the financiers. The privilege was therefore joint. Before the privilege in the List of Issues could be lost, each of the parties entitled to the privilege must consent to waiver (see Farrow Mortgage Services Pty Ltd v Webb (Unreported, NSWSC, 9 and 16 August 1995) (Young J); Global Funds Management (NSW) Ltd v Rooney (1994) 36 NSWLR 122; Lukies v Ripley (No 2) (1994) 35 NSWLR 283).
Freehills have never acted for the subpoenaed parties. Nothing done by a lawyer at Freehills could give rise to any waiver of the privilege which the subpoenaed parties have in respect of the documents to be produced on subpoena. Whether or not Perdaman has waived privilege in respect of documents in its possession and which it is obliged to discover is a different question, although if and to the extent that privilege in the document is held jointly with other parties, the questions may be related, as I have indicated. At all events it is clear that the subpoenaed parties have done nothing which could give rise to a waiver of their privilege in the List of Issues.
For these reasons the defendants' claims to inspect the documents should be dismissed.