Coronar (Australia) Pty Ltd v Lake Vermont Marketing Pty Ltd [2017] QSC 120

[1] Both the applicant (Coronar) and the respondent (LVM) have relied on confidential affidavits and exhibits. During the course of the hearing and in the preparation of these reasons I reviewed that material. It has otherwise been made the subject of orders that it be be sealed and marked, "Confidential. Not to be opened except with the order of the court first had and obtained."

[2] This imposes a constraint upon the way in which I formulate these reasons. The approach which I have taken is that authorized by David Syme & Co Ltd v General Motors-Holden's Ltd [1984] 2 NSWLR 294.

[3] Accordingly, I have sought to formulate a statement of reasons:

• (a) which conveys an adequate account of the litigation and the reasons underlying the orders which I will make;
• (b) which is expressed in terms which seek to ensure that any confidentiality which a party may be entitled to have protected is protected; and
• (c) which, because it will be available to the public, will give effect to the public's right to know what orders are being made in the courts.

[4] To the extent I have found it necessary for the reasons to reference confidential material, I have done so by footnoted reference to a confidential appendix. One of the orders I will make is that the confidential appendix be placed in a sealed envelope on the Court file and marked "Confidential. Not to be opened except with the order of the court first had and obtained."

[5] Coronar and other joint venture participants are parties to a Joint Venture Agreement for carrying out the Lake Vermont Project, which (amongst other things) covers mining operations at the Lake Vermont coal mine. Each of the joint venture participants has entered into a Management Agreement which appoints a company to manage the mine. Each of them has also entered into a Marketing Agreement with LVM in virtually identical terms.

[6] By an originating application filed in this court, Coronar seeks a final order enforcing the contractual obligation[1] of LVM in the Marketing Agreement between Coronar and LVM to permit Coronar to inspect and to obtain copies of certain documents under the control of LVM and which relate to the activities which LVM undertook to perform pursuant to the Marketing Agreement.

[7] Coronar contended that LVM was in breach of its contractual obligations pursuant to the Marketing Agreement and a related contract,[2] and that it needed to exercise its right to inspect documents in order to assess the extent of LVM's breaches and to take appropriate action to recover loss.

[8] The parties are not in dispute in relation to the fact and terms of the contractual instruments to which I have referred.[3] However both parties agree that all of the instruments are to be kept confidential and to that end, they are in evidence before me as part of a confidential exhibit to the affidavit of the applicant's director, Mr Clifford.

[9] Coronar placed before me correspondence, most of which is contained in confidential exhibits, which identify the development of the dispute between it and LVM in relation to the inspection which it seeks and which culminated in the commencement of this proceeding.[4] LVM has provided some documents to Coronar, but has redacted them to such an extent that Mr Clifford considered them devoid of any useful information to Coronar.

[10] Before me LVM did not dispute Coronar's entitlement to inspect or to copy documents pursuant to the contractual obligation, in principle. The limit of the dispute was whether or not the accepted contractual right should be made conditional upon Coronar being required (whether by an undertaking or by the terms of a Court order) to accept explicit limitations on its use of the documents.

[11] LVM placed evidence before me in the form of a number of confidential affidavits and parts of affidavits articulating matters of confidential commercial sensitivity which were said to justify such a requirement. I am satisfied that the evidence reveals that many of the documents which Coronar seeks to inspect and to copy do contain commercially sensitive information which would, if Coronar was so motivated, be capable of being used by Coronar's parent company (or companies related to it) to the commercial disadvantage of LVM in relation to the marketing and sale of metallurgical coal in the areas in which they compete with LVM. Especially might that be so if Coronar disclosed that commercially sensitive information to the individual who is the president and ultimate owner of Coronar's parent company, Mr Mende.

but reserved the right to seek access to the documents without such an undertaking if the offer was not accepted.

[13] LVM did not accept the offer and Coronar pursues its claim for an order enforcing its contractual rights, unconditioned in any way.

[14] For its part, LVM contended that the appropriate form of order would be that the documents be inspected by Coronar's director Mr Clifford, and its company secretary, Mr Smith, and, either by way of order or undertaking, that those two individuals not show the documents to any other person other than legal advisers without a further order of the Court, and that they not disclose the information contained in the documents to any person other than legal advisers without a further order of the Court. LVM also suggested that any such undertaking or condition should adopt the second and third of the three undertakings which had been expressed in the open offer.

Should any condition be imposed on Coronar's contractual entitlement?

[15] The contractual entitlement which Coronar seeks to enforce against LVM does not exist in a vacuum. It exists in the context of a suite of contracts which were all entered into on the same day. The parties to the contracts were all sophisticated parties and the contracts were sophisticated in their structure and in the manner of their expression.

[16] Coronar and LVM must each have known of the fact and terms of those contracts. And the other joint venture participants must have known of the fact and terms of the Marketing Agreement as between Coronar and LVM which contained the right to inspect and to copy documents in LVM's hands. Indeed the other joint venture participants had all entered into a similar contract with LVM which gave each of them a similar right. The contracts themselves recognized this.

[17] The parties were evidently alert to the possibility that the performance of their contracts could result in their obtaining information which might be regarded as confidential and commercially sensitive. To that end, each of the contracts contained contractual terms addressing and regulating the circumstances in which confidential information might be disclosed, to whom it might be disclosed, and subject to what conditions it might be disclosed.

[18] The parties were nevertheless evidently content to express in the terms that they did the unconditioned right to inspect and to copy documents in the hands of LVM. Coronar has regularly insisted on its rights. In my view Coronar has a prima facie right to have LVM fulfil its existing contractual obligations.[7] It was common ground that, subject to the considerations next discussed, the Court had jurisdiction to make an order requiring LVM to comply with its promise. There was no submission that damages would be an adequate remedy, or that Coronar had overreached in the documents which it had sought to inspect and to copy.

[19] On what basis then, might it be appropriate to impose any condition at all on Coronar as a pre-condition to it being able to insist on performance by LVM of the express contractual right which it had secured to itself?

[20] The elements of LVM's argument were as follows.[8]

[21] First, the contractual entitlement of Coranar to inspect and to copy documents was to be construed as subject to a purpose constraint, having both positive and negative aspects. As to the positive, it was an entitlement which could only be exercised for the purpose of Coranar satisfying itself as to the performance of LVM as its marketing agent. As to the negative, it was an entitlement which could not be exercised by Coranar for extraneous or ulterior purposes, such as making information available to related corporations to Coronar who were competitors of LVM.

as to warrant the imposition of conditions such as those sought by LVM.

[27] I have indicated already that Coronar relied on the affidavit of its director, Mr Clifford.

[28] Amongst other things, he deposed (and I accept):

• (a) that he had given the instructions to Coronar's solicitors to make the initial request to LVM that it comply with its contractual obligation to permit inspection and copying of documents:
• (b) that he gave instructions to Coronar's solicitors to serve the formal notices (signed by him) from Coronar to LVM requiring LVM to permit inspection and copying of documents;
• (c) that he had reviewed the redacted documents produced by LVM and found them to be devoid of any useful information to the applicant; and
• (d) to his reasons for forming that view.

[29] Mr Clifford was cross-examined and his evidence (which I accept) included the following:

• (a) He is the sole director of Coronar. The only other officer of Coronar is its secretary, Mr Smith. Coronar has no employees.
• (b) He also served as an officer for a number of different companies in the group of which Coronar is a part and which LVM had identified by company search and, to the best of his knowledge, none of those companies were engaged in the sale of metallurgical coal.
• (c) No aspect of his role involved decision-making as to the purchase of metallurgical coal.
• (d) No aspect of his role involved decision-making as to the marketing or sale of metallurgical coal. His relationship with that subject matter was limited to ensuring the proper performance of the agents who were engaged to market and sell metallurgical coal.
• (e) He and Mr Smith were the people who would inspect and review any documents produced by LVM as a consequence of Coronar's application.
• (f) He did not propose to inform any other person about the information contained in the documents because, to his understanding, the information was highly sensitive and must be retained "within Coronar", by which he meant he and Mr Smith.
• (g) He would not show the documents to the individual who was the owner and controller of the group of companies of which Coronar was a part, namely Mr Mende.
• (h) If he thought the information revealed any performance issues (in the sense of showing a breach of the Marketing Agreement), that should be flagged to the relevant shareholder. In this respect he was drawing a distinction between the information which was the content of the documents and whether they showed a breach. He said he would not give any information about the content of the documents to Mr Mende.

He who comes to equity must do equity, and parties who seek equitable relief by injunction to enforce a covenant in restraint of trade "cannot obtain such relief unless they allege and prove that they have performed their part of the bargain hitherto and are ready and able also to perform their part in the future".

[32] However given:

• (a) the fact that in the lengthy exchange of correspondence to which I have earlier referred that issue was not raised as being a concern held by LVM;
• (b) Mr Clifford's evidence that he was conscious of the sensitive nature of the information that Coronar would obtain and proposed that if Coronar obtained the documents, only he and Mr Smith would look at them; and
• (c) the observations I have made as to the course of the cross-examination,

I am prepared to infer that at Coronar is in fact ready, willing and able to comply with its contractual obligations concerning the maintenance of confidentiality. I make that finding. That conclusion is supported by the open offer made.

[33] The result is that there is no factual basis to warrant the imposition on Coronar's contractual entitlement to inspect and copy documents of the conditions for which LVM contends, even if the entitlement is to be regarded as constrained by the considerations of purpose or good faith suggested by LVM. It is not enough that the imposition of such a condition would not harm Coronar. It is irrelevant that at one stage Coronar was prepared to settle the dispute by making the offer it did. The need for Coronar to do equity could not justify my requiring an undertaking (or imposing a condition) that contractual obligations be complied with, when there is no suggestion whatsoever that they would not be. In order to justify the imposition of a constraint on an express contractual right, I would have to be satisfied that there was some affirmative need to do so, some equity which needs be protected by so doing.[9] Given Mr Clifford's evidence and the course of his cross-examination, I am not so satisfied.

[34] In light of that conclusion, it is not necessary to consider whether Coronar's express entitlement to inspect and to copy is properly to be regarded as constrained in the way for which LVM contends, or the extent to which (if at all) the considerations to which I have adverted at [15] to [18] above might have proved an obstacle to accepting those contentions.

[35] My conclusion that there is no justification for the imposition on Coronar's contractual entitlement to inspect and to copy documents of the conditions for which LVM contends means that Coronar should obtain the orders it seeks. LVM did not develop any submission which sought to persuade me to as to the inappropriateness of the orders sought by Coronar's amended originating application.

[36] I make the following orders:

1. The appendix to my reasons for judgment be placed in a sealed envelope on the Court file and marked "Confidential. Not to be opened except with the order of the court first had and obtained."
2. Within 14 days of the date of this order, the respondent permit the applicant, by its servants or agents, at the sole cost of the applicant, to inspect and to obtain unredacted copies of all those documents previously provided by the respondent to the applicant (in redacted form) in response to the applicant's letters to the respondent dated 23 May 2016.
3. Within 14 days of the date of this order, the respondent permit the applicant, by its servants or agents, at the sole cost of the applicant, to inspect and to obtain unredacted copies of any other documents, records and Accounts under the control of the respondent relating the marketing activities of the Lake Vermont Project and listed in the schedule to:

(a) the letter from the applicant's solicitors to the respondent dated 7 April 2016; and

(b) the applicant's letters to the respondent dated 23 May 2016.

(a) permitting the inspection and copying to occur at the respondent's office located at Level 7, Comalco Place, 12 Creek Street, Brisbane; and

(b) making available to the applicant at that location the photocopying facilities necessary to enable the applicant to create a legible copy of the materials which are the subject of orders 2 and 3.

[6] See the affidavit of Liam Prescott sworn 7 November 2016 at exhibit LTP-02 at pp 1-6.

[7] Coronar also sought to justify its entitlement to the documents by reference to the duty of an agent at common law to keep accounts of transactions related to the principal's business and to produce to the principal the accounts and any documents relating to the principal's business. It is unnecessary to consider that line of argument as the express contractual entitlement sufficed, and, in any event, the prima facie right to the documents was not challenged.

[8] LVM's written submissions contained the contention that the provision of documents to Coranar in an unconditioned way created the risk that LVM would be found to have contravened competition law in China and/or Japan, with attendant risk of harm to LVM. However that argument was not pursued by LVM and the factual basis on which it would depend was not demonstrated. That submission may be ignored.

[9] Gibson v Goldsmid [1854] EngR 907; (1854) 5 De G M & G 757; 43 ER 1064 at 1067-1068; Langman v Handover [1929] HCA 42; (1929) 43 CLR 334 at 351-352; Edman v Ross [1922] NSWStRp 15; (1922) 22 SR (NSW) 351 at 360-361; Conway v Petronious Clothing Ltd [1978] 1 WLR 72 at 88-90.