G&S Engineering Services Pty Ltd v MACH Energy Australia Pty Ltd

Supreme Court of NSW|2023-09-06|Before: Stevenson J

Solicitors: HFW Australia (Plaintiffs/Cross-Defendants) Corrs Chambers Westgarth (Defendants/Cross-Claimants) File Number(s): 2019/71358

JUDGMENT

The background to this matter is set out in earlier judgments of the Court, including my judgment of 17 May 2022. [1]
This is the Court's ninth interlocutory judgement in the proceedings.
The case is now set down for hearing for eight weeks commencing on 19 August 2024.
The proceedings relate to a contract made in March 2017 whereby the defendants/cross claimants ("MACH") contracted with the plaintiff/cross-defendants ("CDJV") to design, construct and commission a coal handling and processing plant and train load-out facility at Mount Pleasant.
On 6 September 2023, I heard argument in relation to applications brought by both MACH and CDJV for further and better discovery. Those applications have been resolved, at least for the moment, by orders I made that day.
What remains for consideration is a challenge by MACH to a claim of legal client privilege made by CDJV over some 600 documents.
483 of those documents were what the parties called the "Janson Documents" being documents received or sent by a lawyer, Ms Ami Janson. During argument, CDJV clarified the basis on which privilege was claimed in relation to those documents, and I have made directions for an exchange of submissions in relation to that matter which will, hopefully, resolve or at least significantly narrow the dispute in relation to these documents.

The Consequential Loss Advice documents

The first category comprises 73 documents in respect of which CDJV has claimed privilege on the basis that the documents are communications with McCullough Robertson, solicitors, concerning CDJV's liability for consequential loss under the contract.
In its reply submissions, MACH contended, for the first time, [2] that CDJV had not sustained its onus of adducing evidence of facts from which the Court would be able to determine that privilege has properly been claimed. [3]
Mr Porter, who appeared for CDJV submitted that, in effect, this took CDJV by surprise and that he was not ready to deal with the point. Whether or not CDJV should, in any event, have been alive to the need to adduce such evidence, it was a matter that should have been raised by MACH in its submissions in chief. In the circumstances, I did not require Mr Porter to meet it.
The point is, in any event, moot in view of the conclusion I have come to in relation to MACH's alternative argument that CDJV has impliedly waived privilege by reason of the making of allegations in the proceedings which are said to be inconsistent with the maintenance of the privilege claimed.
CDJC has made allegations in its Third Further Amended Cross-Claim List Response concerning its understanding of the legal effect of the contract, and in particular whether it was liable under the contract for consequential loss.
In particular, CDJV alleges that MACH represented to it that if it entered the subject contract, it would not be liable for consequential loss. CDJV alleges that it relied on that representation to procure insurance which did not include cover for consequential loss claims and to enter into the contract without such cover. CDJV also alleges that had it known that these representations were false, it would not have entered the contract. [4]
Further, CDJV has served witness statements from three members of its JV Management Committee to the effect that they each believed or understood that CDJV would not be liable for claims for consequential loss, and that they would not otherwise have caused CDJV to enter the contract.
In those circumstances, CDJV has made its belief or understanding as to its liability for consequential loss, and whether that belief or understanding was reasonably formed as a result of the making of the alleged representations, a central element of its defence to the Cross-Claim.
There is obviously a distinction between CDJV's officers' belief or understanding that CDJV did not need insurance to cover consequential loss and a belief or understanding that CDJV was not, as was allegedly represented, liable for claims for consequential loss.
But, as MACH has pointed out, CDJV's case is that it did not need insurance cover for consequential loss because of the beliefs or understandings that its relevant officers allege they had by reason of the representations attributed to MACH.
In the circumstances, my conclusion is that CDJV has laid open to scrutiny its communications with its lawyers on that subject. That is because it would be inconsistent with CDJV asserting that its officers had the belief and understanding to which I have referred but also to maintain privilege on any advice received on that subject. [5]
The 73 documents in respect of which CDJV claim privilege are grouped under the heading "Consequential Loss Advice". To the extent that those documents deal with advice given or sought on the questions of whether CDJV was liable for consequential loss under the contract and/or did not for that reason require consequential loss insurance, privilege has been waived and the documents should be discovered.

The Holding Redlich advice

The next category of documents comprised communications between a CDJV entity, DRA and Holding Redlich.
MACH submits that it has not been shown that these documents were created for the dominant purpose of DRA obtaining legal advice.
The parties agree that I may look at the documents in question to determine whether they were prepared for such dominant purpose. I have done so and am satisfied that the documents are privileged.

Clayton Utz advice

These documents comprise a single email dated 2 May 2018 with two attachments. The email was sent by Mr Frank Bannon, a partner at Clayton Utz, four representatives of G&S Engineering Services Pty Ltd (a member of the CDJV) and two lawyers at PwC. PwC were the lawyers for Calibre Group Ltd, then the parent of G&S.
Several weeks earlier, the board of Calibre resolved to seek advice from Clayton Utz about "litigation strategy re-potential claim against DRA under JV agreement" and stated that "PwC be given authority to deal with this negotiation".
Thus, on the face of it, the advice given by Clayton Utz was sought jointly by Calibre and G&S and was a subject of common interest privilege. [6]
Again, the parties agree that I may look at the document. I have done so and am satisfied that the document is privileged.

Insolvency Documents

These documents comprise communications to and from K&L Gates and a member of the CDJV. That firm was giving advice to DRA Group Holdings in respect of the acquisition of G&S.
The documents were sent to DRA via Azure Capital Limited. Azure had been engaged by DRA as corporate advisers in respect of that acquisition.
CDJV contend that Azure was an "agent to communicate" advice given by K&L Gates on to DRA and that the fact that K&L Gates' advice was forwarded to Azure and thence to DRA did not involve any waiver of privilege.
Again, the parties have agreed that I may look at the documents. I have done so and am satisfied that their privilege has not been waived.

Endnotes

G&S Engineering Services Pty Ltd v MACH Energy Australia Pty Ltd (No 6) [2022] NSWC 628.
Mr Miller SC, who appeared before me with Mr Doyle for MACH, and who wrote those submissions, was not the author of MACH's submissions in chief.
As explained in, for example, Barnes v Commissioner of Taxation [2007] FCAFC 88 at [18] (Tamberlin, Stone and Siopis JJ).
Cross-Claim Response at 71P, 71CC, 71DD and 71MM.
See, for example, GR Capital Group Pty Ltd v Xinfeng Australia International Investment Pty Ltd [2020] NSWCA 266 at [57] (Macfarlan JA; McCallum JA and Simpson AJA agreeing).
See, for example, Farrow Mortgage Services Pty Limited (in liq) v Webb (1996) 39 NSWLR 601 at 608 (Sheller JA, Waddell AJA agreeing). 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: 08 September 2023

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