Bengalla Mining Company Pty Ltd v MACH Energy Australia Pty Ltd

Issues in the proceedings

1. The primary issue of dispute in the substantive proceedings is whether or not MACH is in breach of s 76(1) of the EPA Act. The alleged breach, Bengalla contends, arises because condition 37 of the MPCP consent requires the holder of the consent, prior to carrying out development on the site, to enter into an agreement with the relevant Minister in consultation with the operators of the Bengalla Mine.
2. In summary, Bengalla contends that: 1. it was the operator of the Bengalla Mine; 2. it was not consulted in respect of: 1. the Deed of Undertaking entered into by Coal & Allied in July 2016; and/or 2. the Deed of Novation entered into by MACH in May 2017; and 1. accordingly, condition 37 of the MPCP consent has not been complied with.
3. Bengalla's claims are denied by MACH who contends: 1. there was consultation with the operators of the Bengalla Mine in respect of the Deed of Undertaking; 2. Bengalla (and the Addressees) were consulted in respect of the Deed of Undertaking; 3. Bengalla (and the Addressees) consented to the novation of the MCA to MACH; 4. the Addressees were informed that the Deed of Undertaking would be novated to MACH; and 5. the operators of the Bengalla Mine were consulted about the novation of the Deed of Undertaking to MACH.

Notice of Motion

1. The Notice and Subpoenas are in similar form and each seeks four separate categories of documents from both Bengalla and the Addressees. A copy of the schedule to the Subpoenas is attached as Annexure A to this judgment. A note recording the changes to the wording of the paragraphs proffered by MACH at the hearing on 12 July 2017 is Annexure B.
2. In summary, the categories of documents sought are: 1. category 1: documents constituting the joint venture arrangement and recording the terms of the joint venture; 2. category 2: documents constituting, evidencing or recording communications between various classes of persons (including any current or former shareholder of Bengalla and any person acting on behalf of the joint venture) relating to condition 37 of the MPCP consent, the Deed of Undertaking (and any draft), the subject matter of the Deed of Undertaking, or any novation of the Deed of Undertaking; 3. category 3: documents constituting, evidencing or recording the appointment or engagement of any person, whether formally or informally, as an operator or manager of the Bengalla Mine; and 4. category 4: all agendas, records, papers and minutes of meetings of the Board of Bengalla or meetings of any operating committee of the joint venture that refers to the terms of the joint venture or the matters identified in category 2 (being condition 37 of the MPCP consent, the Deed of Undertaking, and the Deed of Novation).
3. In the circumstances it is clear that the Notice and Subpoenas are directed towards Bengalla's allegations that it was not consulted on the Deed of Undertaking or the Deed of Novation.
4. The Notice of Motion seeks a confidentiality undertaking in respect of the documents sought in category 1, to set aside categories 2 and 4 in full, and to set aside category 3 except to the extent that it seeks documents relating to Bengalla's appointment as operator of the Bengalla Mine.
5. In support of the Motion, Bengalla relies on two affidavits of Alan Joseph McKelvey, solicitor for Bengalla, sworn 4 and 11 July 2017 respectively, which attest that the JV Deed appoints Bengalla as the 'operator' of the Bengalla Mine, and exhibits a (confidential) copy of the JV Deed. Mr McKelvey gives evidence as to the time and effort required in producing the documents sought, and the source of his instructions from Bengalla and each of the Addressees.
6. In support of the Notice and Subpoenas, MACH relies on an affidavit of Julia Green, solicitor for MACH, affirmed 10 July 2017, which annexes the Further Amended Points of Claim filed 30 June 2017, the Points of Defence filed 5 July 2017, a letter to Bengalla's solicitors dated 10 July 2017 seeking an admission that the negotiations regarding the MCA began in 2006, and a media release from New Hope Group dated 30 September 2015 in relation to its acquisition of a 40% interest in the Bengalla Mine.

Relevant principles

1. The principles regarding the setting aside of notices to produce and subpoenas are relatively clear. It is sufficient to note that the party who issues the subpoena/notice to produce bears the onus of establishing that it has a legitimate forensic purpose in seeking the documents (NSW Commissioner of Police v Tuxford [2002] NSWCA 139 ('Tuxford') at [20]). It must be shown that the documents sought will materially assist on an identified issue, or that there is a reasonable basis beyond speculation that they are likely to assist (ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWCA 307 at [9], [13]-[14]; In the matter of One.Tel Ltd (in liq) - SingTel Optus Pty Ltd v Weston [2010] NSWSC 1491 ('One.Tel') at [23]-[31]).

Bengalla's submissions

1. In relation to the Notice and Subpoenas generally, Bengalla submits relying on Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1952) 72 WN (NSW) 250 at 254, that it is relevant to note that a subpoena (and/or a notice to produce) cannot be used for a "fishing expedition", but rather the issuer must point to evidence from which it can be inferred that the documents sought actually exist (see also One.Tel per Ward J at [34]-[36]). Bengalla further submits that the process cannot be used by a party "to discover whether they had a case at all, or to discover the nature of the case of the defendant": Tuxford at [27] citing The Commissioner for Railways v Small (1938) 38 SR 564 at 574.
2. Bengalla submits that a subpoena cannot be used as a substitute for discovery, citing Tuxford at [19], but must identify a document by, as stated by Barrett J in Patonga Beach Holdings Pty Ltd v Lyons [2009] NSWSC 869 at [13], "cut[ting] the document out from the universe of documents by some description or specification".

Category 1

1. Bengalla's concerns in relation to category 1 arise given that MACH is a commercial competitor of Bengalla, and the documents in this category could contain sensitive information regarding the joint venture's affairs, feasibility and budgeting information, workforce and plans for the Bengalla Mine, which could give MACH a competitive advantage.
2. Bengalla originally submitted that it was willing to produce the JV Deed and the variations to the JV Deed to counsel and solicitors retained by MACH subject to their entry into a confidentiality undertaking in the form attached as Annexure A to the Notice of Motion. Bengalla submits that the confidentiality undertaking, if proffered, permits access to MACH's solicitors and counsel, and disclosure to MACH officers and employees of such parts of the produced documents as reasonably necessary to obtain instructions in relation to the proceedings, and accordingly satisfies Bengalla's confidentiality concerns.
3. On 15 September 2017, Bengalla submitted that it was prepared to accept some variation of that draft however the parties were unable to agree on the wording and I was provided with details of the parties' attempts to agree on a form of undertaking. Bengalla and MACH both made further oral submissions in relation to a further draft undertaking proffered to the Court (which became Exhibit D).

Category 2

1. Bengalla seeks to set aside category 2 as a whole for a number of reasons summarised as follows: 1. the documents sought are oppressive in scope; 2. given MACH denies that Bengalla was not consulted, Bengalla submits that MACH must have formed a view as to when Bengalla was consulted, and accordingly MACH must specify a narrower time period than that of 1 January 2006 to date. Relying upon Mr McKelvey's evidence, producing the documents currently sought would require extensive time and effort, as well as requiring translators; 3. it is within MACH's knowledge the extent to which there was consultation between Bengalla and Coal & Allied and/or MACH, and accordingly the documents need not be sought from Bengalla. Bengalla submits that, to the extent Coal & Allied has control of relevant documents, MACH should obtain those documents from Coal & Allied through either MACH's powers under the sale agreement or by subpoena; 4. correspondence between Bengalla and its current and former shareholders is irrelevant as, first, Bengalla is a separate legal entity from its shareholders, and the obligation under condition 37 of the MPCP consent was for MACH (or Coal & Allied) to consult with Bengalla, and second, given the obligation under condition 37, what may have passed between Bengalla and its current or former shareholders or the members of the joint venture is irrelevant to whether or not Bengalla was consulted; and 5. the category captures a range of documents unrelated to the Deed of Undertaking and the Deed of Novation.

Category 3

1. Bengalla submits that it is willing to produce the documents sought in this category only to the extent they relate to the appointment of Bengalla as the operator of the Bengalla Mine, a fact which Bengalla submits will be apparent upon production of the JV Deed.
2. Bengalla submits that it is mere speculation on MACH's part that anyone else was appointed an operator of the Bengalla Mine. Bengalla has pleaded that it was an "operator" for the purposes of condition 37 of the MPCP consent, and whether or not another person was also an "operator" or manager of the Bengalla Mine is irrelevant, and in fact does not assist MACH (as it broadens the scope of persons who should have been consulted under condition 37). Bengalla submits that if MACH's position is that Bengalla is not the operator, and another person is, MACH must have some understanding of who that person is, and it is therefore incumbent on MACH to narrow the category of documents sought.

Category 4

1. Bengalla seeks to set aside category 4 primarily for the same reasons as those relating to category 2, and additionally because it seeks documents referring to the terms of the joint venture, which Bengalla submits are irrelevant. Bengalla maintains that this is the case even if the category were narrowed, as now propounded by MACH, to documents relating to the appointment of an operator or manager of the Bengalla Mine. Bengalla also submits that category 4 is unnecessary given its willingness to produce the JV Deed and the variations thereto under category 1.

Category 1

1. MACH's primary submission is that an order for a confidentiality undertaking should not be made, however if the Court determines it is necessary, the order should not be made for an undertaking on the terms proposed in Annexure A to the Motion.
2. Relying on general principles, MACH submits that any documents produced by Bengalla or the Addressees will be subject to the implied Harman undertaking, meaning they can only be used for the purpose of these proceedings. Thus, MACH submits that the Court should exercise caution in imposing confidentiality orders over and above the Harman undertaking, relying on Terry Street Pty Ltd v Leichhardt Municipal Council [2006] NSWLEC 129; (2006) 145 LGERA 137 at [28] and Homemaker Hub Pty Ltd v Strathfield Council (No 2) [2009] NSWLEC 79 at [13].
3. In light of these general principles, MACH submits that Bengalla has not met the threshold required for the imposition of confidentiality orders, as it has failed to explain why the Harman undertaking is insufficient, or why MACH and Bengalla are competitors in a material sense such that disclosure of the documents sought would be material or would require disclosure to the ASX, particularly given the Harman undertaking would render the information confidential under the ASX Listing Rules.
4. MACH further submits that the confidentiality orders are highly problematic in that they do not permit MACH to discuss the joint venture documents with Coal & Allied, which is necessary given MACH was not involved in the MPCP until recently. MACH further submits that the proposed orders sought in the Notice of Motion are internally inconsistent, vague, and infringe the principle of open justice by seeking to restrict access even to those documents ultimately to be relied upon in the proceedings.
5. As noted above, on 15 September 2017, MACH and Bengalla made further oral submissions in relation to the further draft undertaking in a form tendered by MACH (which became Exhibit D).

Category 2

1. MACH submits that the forensic purpose of seeking the documents in this category is to test Bengalla's contention that it was not consulted by obtaining communications relating to condition 37, the Deed of Undertaking and the Deed of Novation. Accordingly, MACH submits that the documents have a forensic purpose as they have an "apparent relevance" and "have a bearing on an issue which is not unreal, fanciful or speculative"; Wong v Sklavos [2014] FCAFC 120; (2014) 319 ALR 378 at [12], and the communications themselves may be evidence of consultation for the purpose of condition 37 of the MPCP consent.
2. Further, one of the contentions raised by MACH in the substantive proceedings is that any breach of condition 37 of the MPCP consent is of such limited practical significance so as to warrant a denial of relief for discretionary reasons. Accordingly, MACH submits that the documents in this category are relevant to demonstrate that Bengalla did not view any non-compliance with condition 37 to be material.
3. In relation to Bengalla's submission regarding the time period of the documents sought, MACH submits that it is necessary to seek documents dating from 1 January 2006 as MACH understands that negotiations for the MCA commenced in or about 2006. Subsequent to the filing of the Notice of Motion however, MACH adjusted the date to 1 January 2008.
4. MACH submits that Bengalla has not made out that the category is oppressive in the sense described by Talbot J in Commonwealth of Australia v Randwick City Council [2000] NSWLEC 171; (2000) 109 LGERA 297 ('Randwick City Council') at [24]-[31] - noting that a subpoena may be oppressive "if great numbers of documents are called for and it appears that they are not sufficiently relevant" (emphasis added). MACH further noted Talbot J's comments at [30] that the size of an organisation is of significance in determining whether a subpoena is oppressive, with organisations that are highly organised and well-staffed being less likely to be considered burdened by the subpoena.
5. MACH also submits that Bengalla has not put on evidence from any person who can be meaningfully cross-examined in relation to the asserted oppressiveness, nor has it given evidence of the enquiries made to identify the likely quantum of documents that will need to be reviewed, or the time involved. In any event, MACH submits that the documents sought are sufficiently related to a forensic purpose, and are sought from commercial parties engaged in a large scale mining project who would be "highly organised and well-staffed".

Category 3

1. MACH submits that the forensic purpose of the documents sought in this category is to test Bengalla's contention that it was the sole operator of the Bengalla Mine at the relevant times. MACH submits that condition 37 does not assume that there is only one operator of the Bengalla Mine, and further the interpretation of "operator" should not be confined to matters of form such that a person is only an operator if so named in a written agreement such as the JV Deed.
2. Further, MACH disputes the contention that this category is oppressive, submitting that the scope of documents concerning the appointment of a person as operator or manager should not be large or hard to identify.

Category 4

1. MACH submits that the forensic purpose of the documents sought in this category, noting that the scope of this category has now been varied, is the same of those identified above in relation to the other categories, and further submits that Bengalla has not established that the category is oppressive.

Category 1 - joint venture documents

1. As noted above, Bengalla maintained that it was willing to produce the JV Deed subject to MACH entering into a confidentiality undertaking. During the further hearing on 15 September 2017, a further suggested confidentiality undertaking was proffered and I heard submissions from both parties as to whether it addressed the concerns expressed by Bengalla.
2. Although the parties noted that they did not require reasons, I gave short reasons ex tempore on 15 September 2017 recording that there had been further discussion and correspondence between the parties since the earlier hearing on 12 July 2017, and that each party had proffered variations to the form of the confidentiality undertaking that was Annexure A to the Notice of Motion. Having heard further argument, I found that par 3(a)(ii) should be deleted from the form of undertaking before the Court on 15 September 2017, which had become Exhibit D, and that in the circumstances, par 3(a)(iii) (which was in manuscript) was appropriate and would become 3(a)(ii) and, further, that the disjunctive "or" at the end of 3(a)(i) should become "and". Subsequent to the hearing and in accordance with my determination, on 19 September 2017 an agreed form of the confidentiality undertaking was provided to the Court and is Annexure C to these reasons.
3. Apart from the above, I record my view expressed on 15 September 2017 that what is now Annexure C is sufficient to satisfy any reasonable concern raised by Bengalla in relation to disclosure of what is said to be commercially sensitive information in category 1 of the Notice and Subpoenas.

Category 2 - Communications regarding condition 37 and deeds

1. In dealing with category 2 (and below category 4), I am conscious that although MACH is presently carrying out the development in relation to the MPCP, the MPCP consent was originally obtained by Coal & Allied, and MACH obtained the benefit of the consent only after acquiring the assets of the MPCP from Coal & Allied on 4 August 2016. It is clear therefore that any alleged consultation for the purpose of condition 37 of the MPCP consent would have occurred prior to MACH's involvement and would have been conducted with or by persons other than MACH.
2. In my view, the documents sought in category 2 go to a primary issue in the proceedings - being to test Bengalla's contention that there was no relevant consultation - and there is accordingly a legitimate forensic purpose in seeking the documentation. Given the centrality of this issue to the proceedings, I find that there is a reasonable basis, beyond speculation, that the documents sought will likely materially assist on this identified issue.
3. MACH also submits and I accept with some caution, that a further forensic purpose is to obtain communications evidencing that Bengalla does not view any non-compliance with condition 37 to be material and the objective facts underlying that view.
4. Despite Bengalla's concerns, I am satisfied that the time period for the documents sought (now adjusted to 1 January 2008) is appropriate given the factual evidence surrounding the date of entry into the Deed of Undertaking.
5. I do have a concern in relation to the breadth of the material that is sought, however I accept as noted in Randwick City Council per Talbot J at [26] (referring to the comments of Street CJ in The Commissioner for Railways v Small (1938) 38 SR 564 at 573) that whilst "great numbers of documents" may be a relevant matter, particularly if they are "not sufficiently relevant", the nature of the recipient of the subpoena is a matter to be taken into account. Given the sophistication of the parties in the present matter, I adopt also Talbot J's further comments, adopting the words of Smithers J in Lucas Industries Ltd v Hewitt (1978) ALR 555 at 570, that "[l]arge business entities may be thought to be highly organized and well staffed. What may be burdensome to lesser entities may be of small significance to a large one."
6. I note that the documents are sought from commercial parties engaged in a large mining project, and in any case, I accept MACH's submission that the evidence relied upon by Bengalla as evidence of oppression is not sufficiently compelling so as to support the contention.
7. While I have a concern that dealings with and communications between the Addressees may be at the periphery of relevance to the identified issues, I accept MACH's position that the type of document sought in category 2 may well constitute 'consultation', and that these communications could have occurred through Bengalla (as a distinct entity) or through the Addressees (as joint venture partners). As noted above at [2], the Addressees are the current shareholders of Bengalla and are parties to the JV Deed. To the extent the Addressees have any documents responsive to the category of documents sought, I consider these should be produced and, on the present evidence, I do not consider the search for such documents to be oppressive.
8. In the circumstances, I do not make the orders sought in 1(b) and 2(b) of the Notice of Motion.

Category 3 - documents evidencing appointment of operators/managers of Bengalla Mine

1. I accept that the forensic purpose of the documents sought in category 3 is to test Bengalla's contention that it was the sole operator of the Bengalla Mine at the relevant times. While I acknowledge Bengalla's submission that the historical situation may be clearer when the JV Deed (and material otherwise dealt with in category 1) is available to MACH, I accept MACH's submission that the wording of condition 37 does not assume there was only one operator of the Bengalla Mine. Moreover, I am also swayed by MACH's submission that the production of the JV Deed would only go to establishing the appointment of the operator by formal designation, however the argument could be made that a person could become an operator by operating the mine irrespective of any formal designation in an agreement. Accordingly, in the circumstances I find that the documents sought in category 3 retain some relevance.
2. In relation to Bengalla's contention that the documents sought would be oppressive, I do not consider the evidence of Mr McKelvey in this regard to be determinative, and find that, as MACH submits, the category is not likely to be oppressive as the documents concerning the appointment of a person as operator or manager should not be extensive or difficult to identify.
3. In the circumstances, I do not make orders sought in 1(c) of the Notice of Motion.

Category 4 - agendas, meeting minutes etc. regarding condition 37 and deeds

1. As noted above, sub-paragraphs (c) and (d) of category 4 have been (or will be) amended by MACH in accordance with Annexure B to these reasons.
2. In relation to paragraph 4(c), I find that MACH's proposal to confine that sub-paragraph so that it only seeks documents referring to the "terms of the Joint Venture" as they "relate to the appointment of an operator or manager of the Bengalla Mine" is an appropriate request, and there is no compelling evidence that the volume of documentation involved is of such magnitude as to be oppressive.
3. Whilst I have a residual concern in relation to 4(d) (even with the minor change in the time period of documents sought to commence from 1 January 2008) I find that the forensic purpose in relation to category 4(d) is similar to that raised by MACH in relation to category 2. Further, there is no compelling evidence as to why the class of documents comprising of agendas, records, papers and minutes of meetings of two specified bodies would be difficult to identify or review as submitted by MACH.

Conclusion

1. In summary, in relation to paragraph 1 of each of the Notice and Subpoenas, I am satisfied that the confidentiality agreement (Annexure C to these reasons) adequately addresses the concerns raised by Bengalla. Further, I am satisfied that MACH has satisfied the onus of establishing that the documents sought in paragraphs 2, 3 and 4 of the Subpoenas and Notice (as amended per Annexure B to these reasons) have been sought for a legitimate forensic application and the documents are described with such specificity as to allow for proper compliance.

ORDERS

1. The orders of the Court are: 1. In respect of the Notice to Produce issued by the respondent to the applicant on 31 May 2017: 1. Order that, in respect of the documents produced by the applicant under paragraph 1, access be restricted in accordance with the Confidentiality Undertaking at Annexure C. 2. Grant leave to amend paragraph 2 by substituting the words "1 January 2008" for "1 January 2006". 3. Grant leave to amend paragraph 4(c) to add the words "…that relate to the appointment of an operator or manager of the Bengalla Mine". 4. Grant leave to amend paragraph 4(d) by substituting the words "1 January 2008" for "1 January 2006". 5. Grant leave to amend the "Note" at the end of the description of the documents required to be produced by the deletion of the words "or any related body corporate of that corporation". 1. Pursuant to rule 33.4(1) of the Uniform Civil Procedure Rules 2005, in respect of the Subpoenas to Produce Documents directed to the Proper Officers of Wesfarmers Bengalla Limited, New Hope Bengalla Pty Ltd, Mitsui Bengalla Investment Pty Ltd and Taipower Bengalla Pty Limited issued by the defendant on 1 June 2017: 1. Order that, in respect of the documents produced by the Addressees under paragraph 1, access be restricted in accordance with the Confidentiality Undertaking at Annexure C. 2. Grant leave to amend paragraph 2 by substituting the words "1 January 2008" for "1 January 2006". 3. Grant leave to amend paragraph 4(c) to add the words "…that relate to the appointment of an operator or manager of the Bengalla Mine". 4. Grant leave to amend paragraph 4(d) by substituting the words "1 January 2008" for "1 January 2006". 5. Grant leave to amend the "Note" at the end of the schedule by the deletion of the words "or any related body corporate of that corporation". 1. Otherwise dismiss the Notice of Motion. 2. Costs reserved.

Annexure A - Schedule (183 KB, pdf) Annexure B - Changes to the wording of each of the Notice and Subpoenas (176 KB, pdf) Annexure C - Confidentiality Undertaking (202 KB, pdf) DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 September 2017