Sundance Resources Ltd v AustSino Resources Group Ltd - [2022] WASC 108

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   SUNDANCE RESOURCES LTD -v- AUSTSINO RESOURCES GROUP LTD [2022] WASC 108
CORAM:   TOTTLE J
HEARD:   15 MARCH 2022
DELIVERED          :   31 MARCH 2022
FILE NO/S:   CIV 2043 of 2021
BETWEEN:   SUNDANCE RESOURCES LTD
Plaintiff
AND
AUSTSINO RESOURCES GROUP LTD
First Defendant
CHUN MING DING
Second Defendant

Catchwords:

Practice and procedure - Application for pre-action discovery - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 127
Property Law Act 1969 (WA), s 9
Rules of the Supreme Court 1971 (WA), O 26A r 4

Result:

Plaintiffs' application for pre-action discovery allowed

Category: B

Representation:

Counsel:

Plaintiff	:	J Garas SC
First Defendant	:	G M Slattery
Second Defendant	:	G M Slattery

Solicitors:

Plaintiff	:	Clifford Chance
First Defendant	:	Squire Patton Boggs
Second Defendant	:	Squire Patton Boggs

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

BWS v ARV [No 2] [2021] WASCA 62
Jones v Great Western Railway Co (1931) 144 LT 194
Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14 (S)
Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14; (2016) 49 WAR 374
Pollock v Piggott [2017] WASCA 220
Roe v The State of Western Australia [2013] WASC 130
Seltsam Pty Ltd v McGuiness [2000] NSWCA 29; (2000) 49 NSWLR 262
Waller v Waller [2009] WASCA 61

TOTTLE J:

Introduction

This is an application for pre-action discovery.[1] The plaintiff (Sundance) considers it may have causes of action against the first defendant (AustSino) and one of its directors, the second defendant (Mr Ding) arising out of their involvement in a substantial resources project developed by Sundance in Africa. Sundance maintains that it has not been able to obtain sufficient information to make a decision as to whether to commence proceedings. On that basis Sundance seeks orders that the defendants discover the documents to which I refer later in these reasons.
[1] The application was commenced by an originating summons issued on 7 October 2021.
The defendants oppose the application on the ground that Sundance has not discharged the burden of showing that it may have the causes of action it has identified for the purposes of the application. Alternatively, the defendants argue that the categories of documents sought by Sundance are too broad.
For the reasons developed below orders for pre-action discovery should be made.

Evidence of the parties

Sundance has adduced documentary evidence extending to over 6,000 pages. The documents relied on by Sundance are annexed to three affidavits sworn by Mr Giulio Casello.[2] Mr Casello was the Chief Executive Officer and Managing Director of Sundance between November 2010 and July 2021 and is currently a non-executive director of Sundance. Mr Casello was closely involved in the project and in Sundance's dealings with the defendants.
[2] Affidavit of Giulio Casello, sworn on 6 October 2021; affidavit of Giulio Casello, sworn on 7 January 2022; affidavit of Giulio Casello, sworn on 10 March 2022.
The defendants rely on three affidavits from:
·Mr Philip McKeiver, a former director of AustSino;[3]
·Mr Michael Keemink, a current director of AustSino;[4] and
·Mr Jonathan Baker, a solicitor for AustSino.[5]
[3] Affidavit of Philip James McKeiver, sworn on 17 December 2021.
[4] Affidavit of Michael Jon Henrick Keemink, affirmed on 17 December 2021.
[5] Affidavit of Jonathan Fitzgerald Clarke Baker, sworn on 15 November 2021.
In Mr McKeiver's affidavit he takes issue with two relatively minor aspects of Mr Casello's account of the background facts. In addition, Mr McKeiver deposed, in effect, that he was not aware of any plan on the part of the defendants to exclude Sundance from the project. Rather, his recollection was that it was Mr Ding's view that completing a transaction with Sundance was the preferred method of securing the project. Mr Keemink's affidavit consisted largely of submissions many of which were directed to the effect of the Transition Agreement - an agreement to which I will refer in greater detail below. Additionally, Mr Keemink denied, in effect, that there was any plan on the part of the defendants to exclude Sundance from the project. Mr Baker's affidavit was sworn in support of an application for security for the costs of the application for pre‑action discovery.
Much of the evidence about the development of the project is not controversial. To the extent to which there are factual controversies it is neither possible nor appropriate to attempt to determine them on an application such as this. I will outline the background only to the extent necessary to explain my disposition of the application. In doing so I draw heavily on the summary of Sundance's evidence contained in the written submissions filed in support of the application. I emphasise I am not making factual findings in Sundance's favour but setting out (primarily) the facts Sundance contends are established by its evidence. In that respect the account that follows is an abbreviated version of the extensive and detailed history given in Mr Casello's affidavits.

Factual background

Sundance developed an iron ore project in Africa on the border between the Republic of Cameroon and the Republic of Congo, known as the Mbalam-Nabeba iron ore project. The project involved:
(a)The exploitation of a resource in the Republic of Cameroon, the Mbalam deposit, held by Sundance's subsidiary Cam Iron SA (Cam Iron). The exploitation rights were conferred by an exploration permit (numbered EP92) and governed by a contract with the Cameroon Government known as the Mbalam Convention, which was subsequently replaced with the Restated Mbalam Convention and later adjusted by an agreement termed the Transition Agreement made in 2015.
(b)The exploitation of a resource in the Republic of Congo known as the Nabeba deposit held by Sundance's subsidiary, Congo Iron SA (Congo Iron). The exploitation rights were conferred by an exploration permit (numbered MEP2013-45) governed by a contract with the Congo Government known as the Nabeba Convention. The initial term of the permit was 25 years from 6 February 2013.
(c)The construction of suitable port facilities and a rail line extending over 540 km from the location of the deposits to the port of Lolabé on the coast of Cameroon.
Sundance claims that the project has cost over $400 million and that the work undertaken by it included:
(a)extensive geological, engineering, technical and environmental work and the construction of a database, including infrastructure plans for the proposed port, rail and mines that contain hydraulic and structural analyses on the railway alignment;
(b)conducting and commissioning feasibility work, including pre‑feasibility studies and a definitive feasibility study for Stage 1 (the first 13 years) in 2011 (2011 DFS);
(c)negotiating and obtaining a favourable off‑take agreement for the ore;
(d)obtaining exploitation rights in relation to the deposits;
(e)negotiating and executing port and rail concession agreements with the Cameroon Government; and
(f)negotiating and obtaining licences for the railway corridor in Cameroon and for the land at Lolabé which is the subject of the proposed port.
Sundance maintains that the documents and technical know‑how generated by these activities and by subsequent 'optimisation studies' are both confidential and commercially sensitive.
In 2012 an accountancy firm placed a 'mid‑point' valuation of $1.374 billion on the project.[6]
[6] Affidavit of Giulio Casello, sworn on 6 October 2021, Attachment GC-29, p 2,625.
Sundance and Cam Iron entered into the Transition Agreement with the Cameroon Government and various other parties to restructure the Cameroon side of the project. In their evidence the defendants refer to various provisions of the Transition Agreement to highlight that its apparent purpose was to transfer to the Cameroon Government the construction and operation of the rail and port facilities.[7] For that purpose Cam Iron (as either the owner or licensee) would assign or license to the Cameroon Government to use what was referred to as the Infrastructure Data for the purposes of providing access to prospective Engineering Procurement and Construction contractors.[8]
[7] Affidavit of Giulio Casello, sworn on 6 October 2021, Attachment GC-34, p 3,359.
[8] Affidavit of Giulio Casello, sworn on 6 October 2021, Attachment GC-34, pp 3,359, 3,361.
The price of iron ore dropped and reached an all‑time low in early 2016. This created funding difficulties for Sundance and seemingly was the cause of some reluctance on the part of the Cameroon Government to extend the Mbalam Convention.[9] In July 2017, however, Sundance and the Cameroon Government reached an agreement to extend the Mbalam Convention by six months to 26 January 2018 with the possibility of a further six-month extension if Sundance could show progress on funding the project either by itself or with a creditable partner.[10] Ultimately the Mbalam Convention was extended to 14 September 2018.[11] Sundance maintained that the extension to the Mbalam Convention, and an application by Cam Iron for a mining permit conferred priority on Cam Iron for the grant of a mining permit.[12]
[9] Affidavit of Giulio Casello, sworn on 6 October 2021, Attachment GC-110, pp 5,478 - 5,479; ts 117.3.
[10] Affidavit of Giulio Casello, sworn on 6 October 2021, Attachment GC-44, p 4,432.
[11] Affidavit of Giulio Casello, sworn on 6 October 2021, Attachment GC-46, p 4,436.
[12] Affidavit of Giulio Casello, sworn on 6 October 2021, Attachment GC-44, p 4,432; ts 106.5
In 2018 the iron ore price began to improve and Sundance received approaches from businesses who were interested in participating in the project. These included an approach from a Hong Kong based company, Aust-China Resources Group Limited (ACR). ACR was a company associated with Mr Ding. ACR initially offered to provide funding to Sundance, however, in August 2018 an agreement was reached with AustSino instead, which at the time was listed on the Australian Stock Exchange. As part of the agreement, AustSino was to provide equity funding by taking a placement of shares in Sundance.
In August 2018 there were discussions between Sundance and AustSino about a plan by Mr Ding to bring together a consortium of Chinese companies to work with Sundance and AustSino. The plan included taking members of that potential consortium to Cameroon for Mr Casello to introduce to members of the Cameroon Government (with the intention of securing an extension of the Mbalam Convention). In August 2018, Mr Casello wrote to the Prime Minister of Cameroon, and other senior members of the government about a planned visit to introduce Mr Ding. Mr Casello also wrote a similar letter to the Prime Minister of Congo and the Minister for Mines about arranging an introduction to Sundance's new project partners -AustSino, Mr Ding and potential consortium parties.
On 28 August 2018, Sundance and AustSino entered into a confidentiality deed which included a term as follows:[13]
The Recipient may only disclose the Confidential Information to its directors, employees, advisers, beneficial interest holders or investors (Third Party Recipients), and must ensure that the Third Party Recipients only use it or disclose it as required in connection with the Purpose, and then only on a confidential and 'need to know' basis. The Recipient must ensure that any person to whom it discloses the Confidential Information complies with the terms of this deed. This deed does not give the Recipient or any person to whom it discloses the Confidential Information any right, title or interest in the Confidential Information.
The 'Purpose' was defined as 'a potential transaction involving Sundance's securities'.[14]
[13] Affidavit of Giulio Casello, sworn on 6 October 2021, Attachment GC-61, p 4,673.
[14] Affidavit of Giulio Casello, sworn on 6 October 2021, Attachment GC-61, p 4,672.
In September 2018 Mr McKeiver, who in addition to being a director of AustSino practised as a lawyer, asked Mr Casello to sign a letter prepared by AustSino on Sundance's behalf which, among other things, nominated Mr Ding as Sundance's representative. Mr Casello prepared a letter in substantially the same terms of the draft prepared by Mr McKeiver and sent it to him (the September 2018 letter). The material parts of the letter read as follows:[15]
[15] Affidavit of Giulio Casello, sworn on 6 October 2021, Attachment GC-67, pp 4,708 - 4,710.
As you are aware, Sundance Resources Ltd (Sundance) has recently agreed the key commercial terms of a transaction between Sundance, AustSino Resources Group Ltd (AustSino) and various parties who currently hold convertible notes in respect of Sundance.
The primary purpose of the above transaction is for AustSino to make an investment of approximately A$58 Million in Sundance (which will give AustSino effective control over Sundance) and for AustSino and its Chinese project partners to facilitate significant further investment and funding for the development of the Mbalam-Nabeba Iron Ore Project and related port and rail infrastructure, in the Republics of Cameroon and Congo.
The Board of Sundance and the various noteholders of Sundance are very supportive of AustSino's proposed investment into Sundance. The key commercial terms of the transaction between AustSino, Sundance and various Sundance noteholders are that:
·AustSino (or a wholly owned subsidiary nominated by AustSino) will acquire more than 50% of the total issued shares in Sundance along with approximately 10.5 Billion share options (which would give AustSino effective control of Sundance); and
·up to $132M in redemption value currently held by various convertible note holders will be cancelled/converted in consideration for those noteholders sharing in a total consideration package of approximately $50M cash, approximately $8M in shares (i.e. 2 Billion shares) and approximately 10 Billion share options.
…
Subject to finalisation of the above transactions, we also hereby nominate Mr Ding Chunming as our representative to initiate and facilitate formal discussions between Sundance, AustSino's Chinese project partners, and the Chinese Government in relation to potential further investment and funding for the development of the Mbalam-Nabeba Iron Ore Project and related port and rail infrastructure.
In October 2018 Mr Casello provided Mr Keemink with copies of the Mbalam Convention, the Nabeba Convention, the 2011 DFS, the 2015 optimisation studies and the financial model for the project and other documents. These documents included:
(a)a detailed financial model of the project, which defined the project's net present value, and included a detailed breakdown of projected capital expenditure, project expenses, revenue, and government receipts;
(b)a detailed financial model of projected mining operating expenditure and capital expenditure for the Mbalam mine including a detailed breakdown of labour rates, equipment capital costs, leasing costs, and mining, crushing, and haulage costs;
(c)a detailed financial model of projected mining operating expenditure and capital expenditure for the Nabeba mine, including a detailed breakdown of labour rates, equipment capital costs, leasing costs, and mining, crushing, and haulage costs;
(d)detailed production models that outline the projected quantity and quality of 'DSO' (direct shipping ore - high grade hematite ore) to be mined from the project (by quarter and month) for Stage 1;
(e)a simplified financial model of the project, showing a number of economic scenarios with and without the Transition Agreement;
(f)detailed power point presentations on the project that cover Sundance's drilling results, project economics (including the delivered cash cost of getting DSO to China), the port and rail financials, a detailed summary of plans for the rail corridor (including bridge specifications and pit to port dynamic simulation modelling), and a detailed summary of the proposed operations for the port; and
(g)a 2018 Sundance Mbalam-Nabeba Iron Project Summary which provided a detailed overview of the project.
Further technical documents and agreements were provided by Sundance to AustSino in November 2018.
In November 2018, AustSino informed Sundance that it would not complete the AU$58 million placement by the completion date (31 December 2018), and that date was extended to 31 March 2019.
A meeting was held in Dubai in December 2018 between a senior advisor on mining to the Prime Minister of Cameroon, and representatives of Sundance and AustSino. At that meeting Mr Ding proposed, for the first time, that a new company named China Cameroon Resources Limited (CCR) be incorporated and used as the vehicle to hold the underlying mining rights for the Cameroon-side of the project (rather than Cam Iron), with 50% of CCR to be owned by the proposed Chinese consortium partners and the other 50% owned by AustSino (which would by then own Sundance). Mr Casello's evidence is to the effect that Mr Ding's proposal for the involvement of CCR had not been discussed with Sundance's management and took them by surprise.
In February 2019 Sundance's solicitors, Gilbert + Tobin, prepared a further draft confidentiality deed to govern the terms on which Sundance was providing confidential information to AustSino. This was sent to Mr McKeiver for his consideration but no further deed was executed, although Mr Casello had asked for one to be executed.[16]
[16] Affidavit of Giulio Casello, sworn on 6 October 2021, 59.
AustSino continued to request further technical information with further information and documents provided by Sundance.
The effect of Mr Casello's evidence is that in 2019 Mr Ding took over negotiations with the Cameroon Government and the Chinese companies that were prospective participants in the project.
In February 2019, Sundance and AustSino entered into a memorandum of understanding with a consortium of Chinese companies. The memorandum contained an acknowledgement in general terms that a consortium had been formed and had accepted an invitation to meet the Cameroon Government to demonstrate their 'strong interest and capability to fund and develop the Project'.[17] The memorandum included terms as follows:[18]
4.The parties agree to treat this document, their discussions with the Cameroon Government and any shared information, as confidential and not to use such information for any other purpose.
5.A party may disclose information to their employees, related bodies corporate and professional advisors for legitimate purposes connected with the activities of the AustSino-Sundance Consortium, if required by law or the rules of a securities exchange or if the information has become publicly available except due [to] a breach of this document by that Party.
6.The parties intend to use their reasonable endeavours to complete all necessary commercial negotiations, due diligence and legal documentation for funding and developing the Project as soon as possible after meeting with the Cameroon Government.
7.The obligations of confidentiality in this document are legally binding under the laws of Western Australia. The remainder of this document represents the parties' statement of intentions only.
[17] Affidavit of Giulio Casello, sworn on 6 October 2021, Attachment GC-138, p 5,578.
[18] Affidavit of Giulio Casello, sworn on 6 October 2021, Attachment GC-138, p 5,579.
As contemplated by the memorandum of understanding, meetings were held in Cameroon but they did not result in a reinstatement of the Mbalam Convention.

The placement agreement between Sundance and AustSino came to an end on 30 June 2019. A further placement agreement was entered into by the parties but the amount of the placement was reduced to $29 million.[19] The rationale for the reduction in the amount to be raised by the placement was that it reflected the value of the Congolese portion of the project.[20] Completion of the placement was scheduled to take place on 31 December 2019 but the completion date was repeatedly postponed with the date being extended to 30 November 2020.
[19] Affidavit of Giulio Casello, sworn on 6 October 2021, 70.
[20] Affidavit of Giulio Casello, sworn on 6 October 2021, 68.
In the interim, representatives of the Cameroon Government visited China in late October-November 2019 and held meetings with AustSino's Chinese project partners. Sundance's representatives were not invited to attend these meetings. A briefing note summarising discussions held in these meetings recorded that one of the Chinese companies was aware that the 'previous company' (inferentially - Sundance) had undertaken various engineering studies and designs which that company would aim to review and update, as required, rather than starting again. The Chinese company requested that AustSino and Sundance provide as much technical detail about the project as possible, as quickly as possible and AustSino confirmed it would do so.
In November 2020, Sundance terminated the placement agreement with AustSino.
In November 2020, the Congolese Government expropriated the project exploitation permit in Congo. In December 2020, that permit was granted to a Congolese company called Sangha Mining Development SASU (Sangha), which is owned by a Hong Kong company called Bestway Finance Ltd (Bestway). Sangha was incorporated roughly one month earlier on 25 October 2020, and Bestway was incorporated some six months earlier on 23 June 2020.
In December 2020, the Cameroon Government announced that it was to 'collaborate with a "consortium of five Chinese state-owned companies" for the development of the Mbalam mining project'.[21] The government referred to finalising procedures for the selection of technical and financial partners for the operation of the mine, as well as completing processes for the selection of partners who will buy the iron ore from the Mbalam mine in Cameroon and the Nabeba mine in Congo.[22]
[21] Affidavit of Giulio Casello, sworn on 6 October 2021, 100, Attachment GC-253, p 5,956.
[22] Affidavit of Giulio Casello, sworn on 6 October 2021, 100, Attachment GC-253, p 5,956.
Mr Keemink deposed that the defendants were unaware of Sangha or Bestway until mid-December 2020 and that AustSino was not approached by Bestway until late December 2020.[23]
[23] Affidavit of Michael Jon Henrick Keemink, affirmed on 17 December 2021, 18 - 19.
A briefing document prepared on behalf of Bestway in March 2021 set out details of an iron ore project in the Republic of Congo which founded upon the exploitation of the Nabeba deposit and two other deposits. The briefing document included statements that:[24]
[24] Affidavit of Giulio Casello, sworn on 6 October 2021, Attachment GC-268, pp 6,032, 6,036, 6,039.
Extensive geophysical explorations, mapping, and topographic surveys were conducted at these sites, indicating forecasted iron production of approximately 100 million tons per year for at least 25 years
The success of this endeavour is thanks to our:
Highly skilled & experienced team
Meticulous exploitation plan
Powerful resources & tools
…
Sangha was awarded the Mining Conventions in record time
…
The previous permit owners conducted extensive geophysical explorations, mapping, and topographic surveys and collected geochemical data.
Bestway Finance Ltd intends to launch an extensive drilling program to expand the deposits JORC-compliant MREs and update their feasibility studies.
The document identifies five Chinese companies as consortium members. At least three of these companies appear to be related to signatories to the memorandum of understanding referred to earlier in these reasons.[25]
[25] Affidavit of Giulio Casello, sworn on 6 October 2021, 105, Attachment GC-268, pp 6,032, 6,036, 6,039.
The briefing document also recorded that construction was planned to start in the fourth quarter of 2021 and end before the fourth quarter of 2023, with exploitation planned to commence around September 2023. In his affidavit Mr Casello expressed the opinion that these proposed project time frames would not be possible without the confidential information generated and owned by Sundance; and any other party would need at least three years and hundreds of millions of dollars to get to the same position as Sundance.[26]
[26] Affidavit of Giulio Casello, sworn on 6 October 2021, 112 - 113.
In May 2021, Cameroon and Congo issued a joint statement that they were in discussions to revive the Mbalam-Nabeba iron ore project and run it on a joint basis.
In June 2021, AustSino announced that it had entered into a memorandum of understanding with the Cameroon Government and Bestway, which contemplates undertaking project development studies and other work with the aim of negotiating and executing binding agreements for:[27]
[T]he construction and operation of a Railway linking Mbalam and the Port of Kribi, together with multimodal mineral harbour infrastructure that has a capacity of efficiently transporting, handling and processing approximately 100mt of iron ore per annum.
[27] Affidavit of Giulio Casello, sworn on 6 October 2021, Attachment GC-274, p 6,090.
Mr Casello annexed to his affidavit sworn on 10 March 2022 a photograph of the front cover page of a document entitled 'Synthetic Feasibility Study'.[28] The cover page states the document was prepared for Bestway Finance Ltd and AustSino Resources Group Limited.[29] Mr Casello also annexed a page of this document headed 'Executive Summary':[30]
Sangha Mining Development SASU, by presidential decree of November 30, 2020 has been granted in the Republic of Congo the said deposits … the company obtained from the Republic of Congo the freedom to choose the initial extraction route of the ores whose exploitation is its responsibility. It is for this reason, in partnership with the company AustSino Resources, that Sangha Mining Development SASU has carried out feasibility studies for railway and port infrastructure, commonly with a processing capacity of more than 100 million tons of iron per year, in the Republic of Cameroon. It should be noted that these infrastructures will be fully financed by our companies and the members of the consortium they have assembled.
[28] Affidavit of Giulio Casello, sworn on 10 March 2022, Attachment GC-303, p 46.
[29] Affidavit of Giulio Casello, sworn on 10 March 2022, Attachment GC-303, p 46.
[30] Affidavit of Giulio Casello, sworn on 10 March 2022, Attachment GC-304, p 47.
There are arbitral proceedings on foot between Cam Iron and the Cameroon Government and between Congo Iron and the Congolese Government.

The relevant rule and guiding principles

Applications for pre-action discovery are governed by O 26A r 4 of the Rules of the Supreme Court 1971 (WA) (RSC) which is in the following terms:
4.Discovery from potential party
(1)This rule applies if a person who may have a cause of action against a person whose description has been ascertained (the potential party) wants -
(a)to commence proceedings against the potential party; or
(b)to take proceedings against the potential party in the course of an action to which the person is a party,
but the person, after reasonable enquiries, has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take the proceedings.
(2)If there are reasonable grounds for believing that the potential party had, has, or is likely to have had or to have, possession of documents that may assist in making the decision, the person may apply for an order under this rule.
(3)The application shall be supported by an affidavit and a copy of both shall be served on the potential party.
(4)On the application the Court may order the potential party to give discovery of all documents that are or have been in the potential party's possession and that may assist the applicant in making the decision.
In BWS v ARV [No 2],[31] the Court of Appeal summarised the applicable principles as follows:[32]
[31] BWS v ARV [No 2] [2021] WASCA 62.
[32] BWS v ARV [No 2] [31] - [34] (Murphy, Mitchell & Vaughan JJA).
The requirement that an applicant for a pre-action discovery order establish that he or she 'may have a cause of action against' the potential party has been described as a 'jurisdictional question' in the sense that it must be answered affirmatively to enliven the court's jurisdiction. However, the purpose of the rule is to enable a prospective litigant to obtain documents that may assist in making a decision whether to commence proceedings. It would defeat the purpose of the rule to require an applicant to demonstrate the actual existence of a cause of action as a condition to the exercise of the power - meaning that it is incorrect in principle to approach the rule with an undue emphasis on the demonstration of the prospective cause of action.[33]
[33] Waller v Waller [2009] WASCA 61 [2], [4] (cited with approval in Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14; (2016) 49 WAR 374, 387 (Mitchell J)).
It is accepted that the words 'may have a cause of action against' the potential party in O 26A r 4(1) RSC:
1.Refer to a 'cause of action' as ordinarily understood, ie in the sense of facts or a combination of facts which give the right to sue.[34]
[34] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd (387).
2.Require an objective test - the court must make its own evaluation of the evidence and form an opinion as to whether, on the evidence, the applicant may have a cause of action against the potential party.[35]
[35] Waller v Waller [75] (cited with approval in Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd (386)).
3.Do not require that the applicant have a prima facie cause of action.[36]
[36] Waller v Waller [75] (cited with approval in Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd (386)). See also Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd (377) (Martin CJ).
There must, however, be some tangible backing or objective foundation that takes the existence of the cause of action beyond a mere allegation, suspicion or assertion.[37] The applicant 'must demonstrate more than mere assertion, conjecture or suspicion, but does not have to positively establish the existence of a cause of action. What the applicant must produce is evidence showing that he, she or it may have a cause of action'.[38] There must be evidence objectively indicating - beyond the mere assertion, conjecture or suspicion of the applicant - that all facts necessary to give rise to a right to curial relief may be able to be established.[39]
[37] Waller v Waller [75].
[38] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd (387). See also Waller v Waller [4]; Pollock v Piggott [2017] WASCA 220 [68] (Murphy & Mitchell JJA & Chaney J).
[39] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd (387).
Having regard to the principle of proportionality embodied in O 1 r 4B RSC, in applying O 26A r 4 RSC the nature and extent of the evidence reasonably required to establish that an applicant 'may have' a cause of action is to be assessed in the context of the character and the ambit of the relief sought.[40]
[40] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd (376 - 377).
The discretion to order pre-action discovery is not exercised as a matter of course.[41] The court will commonly consider whether the order is reasonably necessary to achieve the proper administration of justice.[42] In Central Exchange Ltd v Anaconda Nickel Ltd a number of non‑exhaustive factors were identified as relevant to the exercise of the discretion:[43]
[41] McCarthy v Dolpag Pty Ltd [2000] WASCA 106 [13]; Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94; (2002) 26 WAR 33, 56 - 57 (Steytler J); Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd (395 - 396).
[42] McCarthy v Dolpag Pty Ltd [13]; Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd (395 - 396).
[43] Central Exchange Ltd v Anaconda Nickel Ltd (56 - 57). See also Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd (395 - 396).
1.The likelihood that a cause of action of the kind suggested will be found to exist.
2.The nature and significance of the potential cause of action.
3.The likely effect of an order of the kind contended for on the potential party.
4.Whether the applicant has any other adequate means of obtaining the information.
5.The nature and confidentiality of the documents proposed to be obtained.
6.The possible significance of the information in the documents to the decision whether to commence the contemplated proceedings.
7.Whether the applicant is able to compensate the potential party for its cost of complying with the order.
8.Whether there is any evidence of bad faith on the part of the applicant.
In Kelbush Mitchell J (Martin CJ and Buss JA agreeing) added to this non-exhaustive list of relevant factors. Also relevant is the extent to which the cost and effort involved in undertaking the proposed discovery and inspection is proportionate to the likely value of the claim if successful.[44] The notion of proportionality is central to the exercise of the discretion to order discovery within existing proceedings;[45] it has no lesser role in the application of O 26A r 4. The cost and delay involved in the provision of the pre-action discovery as sought should be proportionate to the forensic benefit likely to be derived and to the value and importance or complexity of the subject matter of the contemplated proceedings.[46]
[44] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd (396). See also Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd (377 - 378).
[45] Roe v The State of Western Australia [2013] WASC 130 [10] - [11] (Martin CJ).
[46] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd (377 - 378).

The threshold question - potential causes of action identified by Sundance

The controversy on this application revolved around whether Sundance had established that it had potential causes of action. Sundance contends it may have one or more of the following causes of action against the defendants:
(a)breach of contractual obligations of confidentiality;
(b)breach of confidence in equity;
(c)breach of fiduciary obligations by the diversion of a commercial opportunity; and
(d)inducing a breach of contract.

Breach of confidence

It is convenient to deal with Sundance's potential breach of confidence causes of action together. The prospective breach of contractual obligations of confidentiality claim rests on the 28 August 2018 confidentiality deed and the subsequent provision of a large volume of confidential technical and commercially sensitive material to AustSino. In support of the prospective equitable breach of confidence claim Sundance relies on the contention that the information provided to AustSino was confidential, that it was imparted in circumstances importing an obligation of confidence and that there is material to suggest that the information has been or will be used for purposes other than the limited purpose for which it was disclosed.
In this last respect Sundance stresses that the confidential material was provided to AustSino for the limited purpose of the equity funding to be achieved by a placement to AustSino of shares in Sundance. Sundance contends that it appears that AustSino has used the confidential information for the purpose of Bestway's iron ore project, including the construction of rail and port facilities being developed by Bestway. It points to the various public statements about that project and the Bestway briefing document and Mr Casello's evidence that the time frames proposed for the development of the Bestway project could not be achieved without reliance on the materials developed by Sundance. Sundance points also to the involvement in the Bestway project of some of the same Chinese companies who were to be involved in its project.
The defendants make an overarching point in respect of all the potential causes of action identified by Sundance that it treats the iron ore project as one project and fails to distinguish between the three components - the exploitation of the Cameroon deposit, the exploitation of the Congo deposit and the construction of the rail and port facilities. I understand the defendants' contention to be that Sundance's claims should not be analysed as if there was only one project but there must be an assessment of whether a cause of action may exist (relevantly for the purposes of the breach of confidence claims) in relation to the (misuse) of particular information in the context of each of the three projects separately.
The defendants make a related point that it is not clear that Sundance is the owner of information relating to the rail and port facilities when regard is had to the provisions of the Transition Agreement and the apparent transfer or licensing of the Infrastructure Data to the Cameroon Government. The defendants point to the Cameroon Government as a potential discloser of confidential information in respect of the port and rail facilities and identify it as one of the matters that negates any inference that there has been an improper use of confidential information by AustSino.
At a more general level the defendants contend that Sundance has failed to engage with the requirements of a breach of confidence claim because it has failed to identify with specificity what documents were confidential and how they have been misused. Further, the defendants contend that there is no direct evidence of any misuse of confidential information and Sundance's case does not rise above the level of suspicion and conjecture.
Finally, in respect of the contractual breach of contract claim the defendants contend that the 28 August 2018 deed was not executed in conformity with the applicable legislative provisions.[47]
[47] Corporations Act 2001 (Cth) s 127; Property Law Act 1969 (WA) s 9.
I am satisfied that Sundance has established that it may have a cause of action for misuse of confidential information in breach of obligations of confidence be they contractual or equitable in nature. Mr Casello's evidence is sufficient to establish that the information provided to AustSino included technical and commercial information that might be regarded as confidential and that it was provided in circumstances that might be regarded as attracting obligations of confidentiality such that it was only to be used for the purposes of developing a project in which Sundance was a participant. Speculation, suspicion, conjecture and inference are on a continuum and in practice very fine lines may separate what falls within the ambit of each of these concepts.[48] I am satisfied, however, that the material relied on by Sundance is sufficient to establish a potential misuse of its confidential information - Sundance's case rises above the level of suspicion and conjecture.
[48] Seltsam Pty Ltd v McGuiness [2000] NSWCA 29; (2000) 49 NSWLR 262, 275 (Spigelman CJ); Jones v Great Western Railway Co (1931) 144 LT 194, 202 (Lord MacMillan).
In my assessment, the defendants' contentions in relation to the prospective breach of confidence causes of action address matters that might form the basis for defences should proceedings based on them be commenced and the evidence remain the same but they are not sufficient to negate the existence of potential causes of action for breach of confidence.

Fiduciary duty claim

In its written submissions Sundance put its case that it may have a cause of action against AustSino and Mr Ding for breach of fiduciary duties as follows:
78.Here, the evidence suggests that AustSino, and specifically Mr Ding, owed fiduciary duties to Sundance, in particular because:
(a)Sundance provided AustSino and Mr Ding with valuable confidential information concerning the Project, and introduced them to senior representatives of the Governments of Cameroon and Congo, for the purpose of furthering the interests of Sundance (and AustSino as Sundance's project partner);
(b)at the request of AustSino and Mr Ding, on 6 September 2018, Sundance issued the [September 2018 letter] to Mr Ding as Chairman of AustSino nominating Mr Ding as Sundance's representative. Pursuant to the [September 2018 letter], Mr Ding (and AustSino) liaised with prospective Chinese project partners to finance the development of the Project as Sundance's agent;
(c)Mr Ding was, in effect, in control of negotiations with the Cameroon Government from mid-2019 regarding re-instatement of the Mbalam Convention, and the successful development of the Project. Sundance was depending on the success of those negotiations; and
(d)Sundance reposed trust and confidence in AustSino and Mr Ding, and reasonably believed and expected the Defendants to act in Sundance's interests in respect of the Project (or the parties' common interests) and Project funding.
79.The evidence (including the matters discussed in the context of breach of confidence) suggests that AustSino and Mr Ding, by using (or by reason of) their fiduciary position as Sundance's project partner and agent, and by using and leveraging the project opportunity, introductions, knowledge and information made available to them, may have diverted the project opportunity to AustSino and Mr Ding (as well as the Chinese consortium parties and Bestway), to the exclusion of Sundance.
The defendants argue that Sundance has not established it may have a cause of action in respect of the Nabeba deposit. The defendants' contentions were to the following effect:
(a)the permit in respect of the Nabeba deposit was held by Congo Iron which is not a party to the proceedings;
(b)there is no evidence that Congo Iron was a subsidiary of Sundance under Congolese law;
(c)there is no evidence that AustSino or Mr Ding were involved in the Congolese government's revocation of the permit for the Nabeba deposit. No weight should be attached to the Bestway briefing document as its authenticity has not been established and, even if its authenticity is accepted, the document does not establish any breach of duty on the part of the defendants, assuming such any duty was owed, an assumption that the defendants contend should not be made; and
(d)the September 2018 letter does not provide a foundation for the imposition of a fiduciary duty on the defendants because the appointment of Mr Ding was expressed to be conditional on the finalisation of transactions which were not finalised.
The conclusion I have reached in respect of the potential breach of fiduciary duty claim reflects the conclusion reached in respect of the potential breach of confidence claims. I am satisfied that the materials relied on by Sundance establish that it may have a breach of fiduciary duty claim and that the defendants' contentions in respect of the legal merits and present evidentiary foundation for such a claim are matters that may constitute defences should such a claim be made but do not negate the existence of a potential cause of action.

The inducing breach of contract claim

The conclusions I have reached in respect of the breach of confidence claims and the fiduciary duty claim are sufficient to decide this application and were the focus of Sundance's submissions. That being so, it is unnecessary for me to reach a conclusion on the inducing a breach of contract claim.

One project or three?

Because it is relevant to the scope of the orders I record that I am not persuaded that, for the purposes of this application, the Mbalam‑Nabeba iron ore project should be regarded as being constituted by three separate projects as contended for by the defendants.

Remaining O 26A r 4 criteria

Though not formally conceded, there was no argument to the effect that Sundance had not satisfied the other O 26A r 4 criteria of the RSC. I am satisfied that Sundance wants to commence proceedings against the defendants, that it has made reasonable enquiries for the purposes of obtaining sufficient information to enable them to decide whether to commence the proceedings, that it has not been able to obtain sufficient information to enable it to make the decision to commence proceedings and there are reasonable grounds for believing that the defendants have relevant documents in their possession.

Discretionary factors including costs

In his affidavit Mr Keemink deposed that AustSino has identified that there are over 24,300 documents in its possession that would be required to be reviewed in response to any pre-action discovery orders and that the cost of complying with such orders will be in the range of $70,000 to $100,000.[49] The defendants contend that when applied properly the 'proportionality test' weighs against making orders in Sundance's favour.
[49] Affidavit of Michael Jon Henrick Keemink, affirmed on 17 December 2021, 20.
If Sundance commences proceedings in respect of the potential causes of action identified by it and if those proceedings are successful, given the size and the value of the project, and the funds expended by Sundance in developing it, Sundance may be awarded substantial damages or compensation. Further, the subject matter of the potential proceedings is serious and of great significance to Sundance. Considerations of proportionality do not weigh against the making of the orders sought by Sundance.
The defendants contend that Sundance may be able to obtain the documents it seeks in the arbitral proceedings with the governments of Cameroon and Congo. Even were that possible, it is not a principled basis for refusing the orders sought by Sundance. I am satisfied that if the application for pre-action discovery were refused, Sundance would be without remedy to obtain the documents. Further, I am satisfied that refusing to make the pre-action discovery orders may well deprive Sundance of the opportunity of pursuing its claims against the defendants.
In my judgment none of the discretionary factors that do not concern legal costs weigh against the making of the orders for pre-action discovery. I turn now to the question of costs.
Sundance has provided $50,000 as security for the costs of this application. In oral submissions there was considerable debate as to the approach that should be taken to costs, that is, both to the costs of this application and to the costs of complying with orders for pre-action discovery. The costs of both the application and the costs of compliance are within the discretion of the Court. That said, unless there is something in the circumstances of the case that justifies a different approach, the approach to be followed is that stated by Martin CJ (with whom Buss JA and Mitchell J agreed) in Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd[50] as follows:[51]
[T]he proper course in proceedings of this nature is to order, in the absence of any reason to the contrary, that the applicant for the indulgence of pre-trial discovery pay both the respondent's costs of the application and the respondent's reasonable costs of complying with any order for discovery made. Further, it is my view that the obligation to pay costs should not be deferred indefinitely merely because proceedings are subsequently commenced by the applicant against the respondent.
However, as a matter of principle, there should be a mechanism by which such an applicant can recoup not only the costs that it is ordered to pay to such a respondent, but also its own costs of the pre-trial discovery application if it commences proceedings against the respondent and it appears to the court responsible for those proceedings that such costs should be ordered to be paid to the applicant. In the present case, the best way of achieving this is to order that, subject to an order enabling recoupment of those costs, the current appellant pay the respondent's reasonable costs of compliance with the order for discovery and also the respondent's costs of the application before the master.
The mechanism by which those costs can be recouped would be by way of an order empowering the current appellant to make an application in the course of any subsequent proceedings for orders with respect to not only the costs that it is ordered to pay the respondent today, but also with respect to its own costs of the application before the master.
[50] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14 (S).
[51] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14 (S) [2] - [4] (Martin CJ), [8] (Buss JA), [9] (Mitchell J).
There is nothing in the circumstances of this case that warrants a departure from the approach described in Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd in the passage above.
Having regard to Mr Baker's evidence about Sundance's financial position it is appropriate that Sundance provide security for the defendants' reasonable costs of complying with the pre-action discovery orders.

Conclusion and orders

I have concluded that orders for pre-action discovery should be made that incorporate the substance of the categories of documents set out in Sundance's originating summons. Those categories were as follows:
(a)the [memorandum of understanding] entered into on 26 June 2021, between the First Defendant, the Government of Cameroon and Bestway Finance Ltd for development of an iron ore project in Mbalam-Nabeba, West Africa (Cameroon/Bestway MOU);
(b)all documents, including handwritten notes and diary entries, created or received by the First Defendant and/or the Second Defendant relating to the Cameroon/Bestway MOU;
(c)all communications, including emails and electronic messages, dated after June 2020, between the First Defendant, the Second Defendant (or any entity controlled by him), Bestway and any representative or agent of Cameroon leading to or relating to the Cameroon/Bestway MOU;
(d)all documents, including handwritten notes, diary entries, and communications (including emails and electronic messages) dated after 2 August 2018, between the First Defendant, and/or the Second Defendant (or any entity controlled by him) on the one hand, and any of the following parties (including their officers, employees and agents) on the other hand, in relation to the Sundance Iron Ore Project or the mining tenements granted to Sangha in Congo:
(i)the Government of Cameroon (including its respective agencies, instrumentalities, State-owned enterprises, officials and representatives);
(ii)the Government of Congo (including its respective agencies, instrumentalities, State-owned enterprises, officials and representatives);
(iii)Bestway; and/or
(iv)Sangha Mining Development SASU (Sangha); and
(e)all documents, including deeds, agreements, declarations, notes of conversations, diary entries and correspondence (including emails and electronic messages) dated after 2 August 2018, evidencing or relating to any interests or rights, contingent or otherwise, of the First Defendant, the Second Defendant (or any entity controlled by him) or Bestway in relation to the development of the Sundance Iron Ore Project comprising a transboundary integrated iron ore project known as the Mbalam‑Nabeba Iron Ore Project.
At the hearing of the application various issues were identified with the descriptions of the categories of documents. Sundance's solicitors and counsel should prepare an amended list of categories that address those issues and confer with the defendants' solicitors and counsel to attempt to reach agreement in relation to them. No doubt, legitimate areas of controversy may remain and, if so, a consolidated minute should be filed that identifies any issues on which a ruling is required.
As discussed at the hearing, there should also be conferral in relation to the implementation of a confidentiality regime.
Finally, the costs orders should reflect the approach in Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd and Sundance should provide security. If agreement cannot be reached, I will hear the parties in relation to the question of the quantum of security for the costs of compliance with the orders.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
OK
Associate to the Honourable Justice Tottle
31 MARCH 2022