Hancock v Rinehart

PLAINTIFFS' NOTICE OF MOTION (T25) 1HIS HONOUR: By notice of motion filed in Court today the plaintiffs claim orders as follows: 1 The Fourth Defendant produce immediately to the Plaintiffs a copy of: 1.1 the documents numbered 1-49 in the Fourth Defendant's draft verified list of documents dated 7 October 2013; and 1.2 the previous correspondence between any representative of Rio Tinto and the Fourth Defendant referred to in the email from Phil Edmands to Terry Walsh dated 27 August 2013. 2 The Fourth Defendant provide the following further disclosure by 5pm today: 2.1 a copy of the Hope Downs Inter-Creditor Deed; 2.2 a copy of the 'new facility agreement' referred to in paragraph 7 of the letter from Jay Newby to the First Defendant dated 16 August 2011; 2.3 the previous correspondence between any representative of Rio Tinto and the Fourth Defendant referred to in the email from Phil Edmands to Terry Walsh dated 27 August 2013 and any other correspondence of this nature relied upon by the First Defendant and referred to in the opening submissions filed on the First Defendant's behalf. 2In the course of the hearing of the motion the fourth defendant, to whom for the convenience I shall refer to as "HPPL", produced the documents sought in claims 1.2 and 2.3 of the motion. Accordingly, the matters in issue have been reduced to the claims in paragraphs 1.1, 2.1 and 2.2. 3I shall deal first with the claim in paragraph 1.1. On 1 October 2013, I made an order that HPPL give discovery of documents falling within the following classes: (a) a copy of all drafts of the special resolution created or received by the fourth defendant or any representative of the fourth defendant, including Blakiston & Crabb, received during the period 1 January 2006 to 15 March 2006; (b) a copy of all documents recording any communication which refers to or attaches any drafts of the special resolution received or created by the fourth defendant; or by any representative of the fourth defendant, including Blakiston & Crabb, during the period 1 January 2006 to 15 March 2006; (c) a copy of any board minutes of the fourth defendant approving the special resolution. 4I did not give reasons at the time, because of the lateness of the hour and the course that the hearing of that application had taken. However, the rationale for the order I then made in that respect was as follows. The fourth defendant asserts a defence that the second plaintiff had given fully informed consent to the amendments to the constitution of the fourth defendant, which the plaintiffs now seek to impugn. In support of that defence, the fourth defendant relied on a letter which apparently expressed the second plaintiff's consent, but which did not identify the specific form of the amendments to which he was so consenting. The documents, disclosure of which was sought, would illuminate whether the second plaintiff's expressed consent was to amendments in the form ultimately adopted, or in some other form. 5In response to the order for discovery, HPPL provided a draft list of documents dated 1 October 2013, which has since been verified and filed in Court today. That list of documents discloses, in Part 1, one document in the open category and then, under the heading "Documents where privilege is claimed", some 49 particularised documents. Paragraph six of the covering affidavit deposes to the facts said to establish the existence of the privilege claimed: that HPPL retained Blakiston & Crabb to provide legal advice on amendments to the constitution, identifying two lawyers who worked on the retainer; and HPPL through Blakiston & Crabb briefed John Gilmore QC to provide legal advice on the amendments. 6The claim for privilege in respect of most of the documents in question is said to be under (NSW) Evidence Act 1995, s 118, that is to say that it is confidential legal advice. From inspection of the list of documents in the context of what is said in paragraph six of the covering affidavit, it can be seen that the documents in question were communications between HPPL (and more particularly, its corporate counsel), and Blakiston & Crabb, or internal communications of Blakiston & Crabb, or communications between Blakiston & Crabb and Mr Gilmore. 7From their timeframe the identity of the parties to them and the context of the order for discovery in response to which they are disclosed I am content to infer that their dominant purpose was the obtaining of and provision of legal advice. Indeed, since by the circumstance that they respond to the order for discovery in the terms to which I have referred, it is difficult to see what other purpose might have impelled their preparation. 8Some of the documents in question are said to be subject of "common interest privilege". These documents were communications between the lawyers for HPPL and the lawyers acting for the first defendant, at that time in her capacity as trustee of the HMH Trust. In truth, the claim of "common interest privilege" amounts to a contention that though there were additional parties to the communication, no waiver was involved because of their common interest. Again, I am content to accept that proposition in the present context. 9Accordingly, I conclude that the documents the subject of the claim for privilege are prima facie entitled to privilege, and the question becomes whether the plaintiffs have made out a case of waiver. 10The plaintiffs contend that any privilege in the documents has been waived on three grounds: first, that HPPL has impliedly waived privilege through an affirmative pleading of its state of mind in the proceedings; secondly, that the first defendant has impliedly waived privilege on behalf of HPPL through an affirmative pleading of her state of mind; and thirdly, that HPPL has sought to selectively deploy communications from its lawyers during the relevant period in a manner inconsistent with maintenance of the privilege. 11The first of these propositions is advanced on the basis of the pleading in paragraph 17(a) of HPPL's defence. It responds to paragraph 73 of the statement of claim, which is as follows: 73. Those amendments [being a reference to the disputed amendments to the HPPL constitution] purported to impose restrictions on the transferability of shares in HPPL so that only Hancock family group members may hold shares in HPPL... 12In response to that, HPPL pleads, in paragraph 17(a) of its defence, that the 2006 amendments: Were made to give effect to the Hope Downs Joint Venture Agreement dated 16 March 2006 and to protect the rights of HDIO under that agreement. 13The plaintiffs say, in their reply of 16 December 2013: In the event that amendments to the constitution of HPPL were necessary in relation to the Hope Downs Joint Venture and its financing (which is not admitted) the 2006 amendments were more disadvantageous to the beneficiaries of the trust and more advantageous to the first defendant and the fourth defendant than what was required by the arrangements between HPPL and Rio Tinto in relation to the HDJV. 14I accept that the pleading in paragraph 17(a) of the defence puts in issue the purpose for which the amendments were made and in that sense the state of mind of HPPL. Purpose is an element of state of mind, and a corporate state of mind may be relevant for the purposes of determining whether privilege has been waived [Ampolex Ltd v Perpetual Trustee (Canberra) Ltd (1995) 37 NSWLR 405, 407]. 15While it is correct that the assertion of a client's state of mind may found a waiver of privilege the position is that, unlike some cases of waiver, this is not clear-cut but involves questions of the fairness and reasonableness of insisting on the privilege in the circumstances. Thus, in Council of New South Wales Bar Association v Archer [2008] NSWCA 164; (2008) 72 NSWLR 236, Hodgson JA, with whom Campbell and Handley JJA agreed, said (at [48]): ...What would involve inconsistency and relevant unfairness is the making of express or implied assertions about the content of the privileged communications while at the same time seeking to maintain the privilege. In this respect it may be sufficient that the client is making assertions about the client's state of mind in circumstances where there were confidential communications likely to have affected that state of mind. 16The discretionary and balancing nature of the exercise is illuminated by the observations of Hodgson CJ in Eq, as he then was, in Wayne Lawrence Pty Ltd v Hunt [1999] NSWSC 1044 (at [12]), applied by Bergin J, as her Honour the Chief Judge then was, in Garratts Ltd v Thanga Thangathurai [2002] NSWSC 39: It does not seem to me that the assertion of a belief must, in all the circumstances, be taken as consenting to evidence being led of any legal advice or confidential communication that could be relevant to whether such belief was held or the reasonableness of such belief. It seems to me that factors relevant to whether that consent is to be considered as having been given or whether privilege is taken to have been waived would include the significance of the belief to the case as a whole, the relevance of the reasonableness of the belief to the case as a whole, the probability or otherwise of the legal advice being relevant to the holding of the belief or being relevant to its reasonableness, and in circumstances where the Court inspects the legal advice in question in order to make a decision, the extent to which the legal advice does in fact bear upon the holding of the belief or its reasonableness and the extent to which the legal advice relevant to those matters is inextricably bound up with the legal advice going to other questions as to which there has been no consent or waiver. It seems to me that on the basis of all those matters at least the Court has to make a judgment as to what is reasonable and what is fair in the particular case. 17That directs one to the question whether it is, having regard to those and any other relevant factors, fair or reasonable that HPPL should be able to maintain a claim for privilege in respect of the communications in question, when asserting a defence that the 2006 amendments were made for the purposes for which it alleges. In turn, that invites attention to the factors identified by Hodgson JA. 18Whether the amendments were made for the purpose alleged by HPPL or for some collateral purpose (such as, to completely hypothesize, to restrict the possibility of the beneficiaries of the trust realising their interests for value to a third party) is an important, if not determinative issue, in the case that the plaintiffs bring impugning the 2006 amendments. 19In this case it is not so much the reasonableness of the belief, but whether the belief was held at all that is in question. It is conceivable that the documents in question would cast light on whether or not that belief was held. Indeed, it is probable that they would do so, as they will illuminate the true purpose for which the amendments were being pursued. 20Although the Court has not inspected the documents, it seems likely that the advice in question is not inextricably bound up with advice going to other questions as to which there has been no consent or waiver. 21Accordingly, the factors identified by Hodgson JA appear to favour holding that it is not reasonable for HPPL to maintain the privilege in this context. 22Against that, I have taken into account the fact that the pleading does not overtly deploy, or even refer to, the legal advice or its effect. But the cases to which I have referred, and others to which reference has been made in submissions, show that the pleading of a state of mind, even in the absence of specific reference to legal advice, may, if the other factors warrant it, justify holding that it is unreasonable to maintain the privilege. 23For those reasons I have come to the conclusion that it would be unreasonable for the fourth defendant to maintain a claim for privilege in respect of documents 1 through 49 referred to in the verified list of documents under the heading "Documents in Respect of Which Privilege is Claimed". 24That conclusion relieves me of the necessity to consider in detail the other two arguments advanced and I shall deal with them only briefly. 25As to the contention that the fourth defendant's privilege has been waived in effect by the acts of the first defendant, there are two limbs to the argument and two answers to them. As to the documents said to be subject to common interest privilege it is said that their disclosure is "reasonably necessary" to enable a proper understanding of Mr Myers advice and brief for the purposes of Evidence Act s 126. However, there has been no attempt to identify anything in Mr Myers QC advice or brief which requires reference to the related communications in order properly or even better to understand them. In my view a waiver under s 126 in that context is not established. 26As to the contention that privilege in all the documents in question has been waived by the first defendant as agent for the fourth defendant, it seems to me that although in some respects the first defendant is undoubtedly the agent of the fourth defendant, it could not reasonably be said that in her conduct of the defence of these proceedings, and in particular by pleading her own state of mind in these proceedings, she was in that capacity acting as an agent of the fourth defendant or that she was authorised by the fourth defendant to waive privilege on its behalf, even implicitly. 27Finally, as to the contention that there has been a waiver by selective deployment of legal advice as referred to in Mr Price's affidavit at para 10, while the affidavit refers to documents in the plural, only one was identified in his affidavit or in the submissions, namely a letter of 20 January 2006 from Blakiston & Crabb to Mr Sceales. That letter was contemporaneously forwarded by Mr Sceales to HPPL's in-house corporate counsel, Mr Solomon, to "chairman's personal assistant" and only a few days later on 26 January to the second plaintiff, Bianca Rinehart. From the time when it had been provided to Ms Bianca Rinehart, it could no longer have properly been the subject of a claim for privilege, since the confidentiality in it was lost by provision to Ms Rinehart. 28Accordingly, I do not think its deployment in these proceedings in support of the stay application before the Chief Judge can be seen as an act of waiver. It was a deployment of a document that was already not privileged. In those circumstances it could not give rise to a waiver. 29Accordingly, the second and third waiver arguments would have failed. 30I turn to the question of the documents referred to in 2.1 and 2.2 of the motion. Pursuant to the order for discovery, to which I have referred, the fourth defendant disclosed a letter, dated 16 August 2011, from Mr Newby to the first defendant, one paragraph of which is as follows: In relation to your query on the Hope Downs cash flow distribution, the 25 per cent minimum is calculated on the basis of cash flow after tax and debts servicing in accordance with the cash flow waterfall in the original Inter-Creditor deeds. Although this deed has since been replaced, the new facility agreement includes a similar cash flow waterfall which allows for scheduled and voluntary loan repayments. Hence my statement that theoretically we could choose to make additional voluntary debt repayments that reduce the net cash flow available for distributions. This has not been pointed out in the beneficiaries' letter. 31On 2 October 2013, the plaintiffs' solicitors requested a copy of the Hope Downs Inter-Creditor Deed and of the new facility agreement referred to in that paragraph. The relevance is said to arise from certain provisions of the Hope Downs Deed, clause 1.1 of which defines "Hope Downs Net Flow After Tax" as "that amount of funds that is available for application as HDIO, HPPL determines in accordance with the provisions of Hope Downs Inter-Creditor Deed dated 16 March 2006 between HDIO, HM and various other parties ..." Clause 5 of the Hope Downs Deed entitled "Distribution Covenant", provides that in consideration of the matters recited in and the subject of the deed, including without limitation the undertakings and releases given in it: HPPL and the trustee covenant agree with each other and the other parties hereto that they will implement the following according to these terms: (a) to the extent that it is lawfully permitted and subject to sub-clause (f), HPPL shall pay dividends to holders of A-Class shares in HPPL based upon a proportion of the Hope Downs net cash flow after tax commencing 6 September 2011... 32In these proceedings the defendants plead the Hope Downs Deed and the releases in it, in bar to certain allegations of the plaintiffs. As I understand it, the plaintiffs seek production of the documents in question with a view to raising an issue as to whether the Hope Downs Deed is valid and enforceable if consideration for it has not been paid. There seem to me to be a number of difficulties with that contention. The first is that, on any view, the distribution covenant was not the only consideration moving from HPPL and the trustee for the deed; amongst other things there were mutual releases and undertakings. 33The second is that on the face of Mr Newby's letter in question, it appears that whether or not the original deed remains in force, the distribution calculations to which this letter referred were made in conformity with the original deed. Thirdly, it is far from clear that even if the original deed had been replaced by another deed to similar effect, as Mr Newby's letter suggests, that would have any impact on the enforceability of the Hope Downs Deed. 34As I understand it, although there is complaint about the payment or withholding of distributions after the commencement of these proceedings, in respect of which the response is a claim of a lien, I do not understand there to be a complaint in the proceedings that distributions have not been calculated in accordance with the requirements of the distributions covenant. In any event, there is simply no issue in the proceedings at present that the Hope Downs Deed is not valid and enforceable, although there are issues as to its construction and effect. From that point alone, it follows that the documents in question do not, at least for the purposes suggested, relate to an issue in the proceedings and, accordingly, they are not discoverable. It is not permissible to seek discovery for the purpose of ascertaining whether an amendment to the pleadings should be sought. 35In those circumstances I decline to make the orders sought in paragraphs 2.1 and 2.2. 36I make an order in accordance with paragraph 1.1 of the notice of motion.