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[2017] VSC 126
procedural. The applications were allowed in part. The proposed orders required production of documents recording the knowledge of the clause 31.15 personnel, documents made to further or conceal the...
The ruling concerned access to documents, not the final merits of Cargill's claims. The Court found that the defendants' third-party case made their knowledge of the alleged practices a central issue, so some otherwise privileged communications had to be examined and produced. It limited that waiver to the knowledge of four people named in the sale agreement and a defined period. The Court also found reasonable grounds to treat documents supporting or concealing altered customer certificates as outside privilege, and reached a similar preliminary conclusion for material prepared to frame the October 2013 responses. It rejected broader production claims, found Mr Fitzgerald sufficiently independent as in-house counsel, and held that former executives did not gain a right to privileged documents merely because they had once received them.
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1 cited instrument linked from this judgment.
Cargill Australia Ltd v Viterra Malt Pty Ltd & Ors [2017] VSC 126 was an interlocutory ruling about legal professional privilege. It did not decide whether Cargill's substantive claims were made out. Daly AsJ considered four summonses seeking documents over which the defendants claimed privilege under ss 118 or 119 of the Evidence Act 2008 (Vic). The defendants claimed privilege over approximately 16,700 documents, and an agreed preliminary review had considered a subset of those documents ([1]).
The underlying litigation arose from Cargill's purchase of the Joe White Maltings business (JWM) for $420 million under an agreement dated 4 August 2013, with completion on 31 October 2013 ([6]-[8], [16]). Cargill alleged that JWM had supplied malt that did not meet customer specifications, used barley or additives contrary to some customer requirements, and issued Certificates of Analysis that did not accurately report laboratory results. Cargill referred to the alleged conduct as the “Viterra Practices” and the relevant written procedures as the “Viterra Policies” ([9]-[12]).
During October 2013, Cargill raised concerns and requested information before completion. Viterra replied on 25 and 30 October. Among other things, its responses described some departures from customer requirements but presented other concerns as unfounded or limited ([12]-[16]). Cargill later alleged that the sale-process representations and warranties, and the October responses, were misleading or inaccurate. The defendants denied liability and brought third-party claims against JWM and former JWM executives, alleging that they had made representations to Viterra and failed to disclose the relevant matters ([17]-[23]).
The privilege applications sought, among other things, documents about the practices and policies, the defendants' knowledge, the October investigations, and communications involving former executives. The Court grouped the disputes into issue waiver, contractual clause 31.15, disclosure waiver, in-house counsel independence, the fraud exception under s 125, and former employees' access to communications they had once received ([29]-[33]).
The ruling's central conclusion was that the third-party pleadings put the defendants' knowledge in issue. In claiming that JWM and its executives had misled them or failed to tell them about the practices, the defendants made their own knowledge relevant to whether they relied on the alleged representations. The Court accepted that simply pleading reliance would not itself waive privilege. The significance came from the structure and substance of the third-party claims, where knowledge was central and the alleged representations included silence or non-disclosure ([139]-[141]).
The Court applied the inconsistency approach to waiver: the question was whether maintaining privilege over communications bearing on the defendants' knowledge was inconsistent with the way they had advanced their case. It also considered forensic unfairness. If Viterra could rely on the alleged failure of JWM and its executives to inform it, while withholding material bearing on what Viterra did know, the third parties would be disadvantaged in testing that case ([140]-[143]).
The waiver was not unlimited. The Court confined it to documents recording or evidencing the knowledge of the four people named in clause 31.15 of the Acquisition Agreement, and to the period from May 2013 to 31 October 2013. It declined to require production simply because a document recorded the existence or extent of the practices. The question of what the practices were and how extensive they were remained for trial. The Court also excluded documents created for the litigation from the relevant scope ([144]-[147]).
Clause 31.15 mattered, but did not itself waive privilege. It identified whose knowledge counted for certain warranties. The Court rejected the proposition that naming Mr Fitzgerald, the in-house lawyer, automatically exposed every privileged communication involving him. The clause helped identify the relevant corporate knowledge for the scope of the pleadings-based waiver; standing alone, it was not inconsistent with maintaining confidentiality ([149]-[151]).
The Court separately rejected the contention that the October 2013 responses disclosed the substance of legal advice. Those responses stated factual positions, made no reference to advice, and were not a knowing and voluntary disclosure of legal advice under s 122(3)(a) ([152]-[154]). The handover of Schedule D documents at completion did not automatically waive privilege in every related document. Although the Court considered privilege in the handed-over documents lost in the circumstances, it found Cargill had not shown generally which further documents were reasonably necessary under s 126 to understand documents it already possessed. Missing portions and attachments were treated differently: if absent, they were to be produced ([155]-[158]).
The findings under s 125 turned on the distinction between breach and concealment. The alleged use of off-specification barley and additives, even if frequent and intentional, was characterised as contractual non-performance. Without more, that did not establish fraud for the privilege exception ([180]-[183]). Altered Certificates of Analysis were different. The evidence supported reasonable grounds to believe that the alterations were intended to conceal contractual departures from customers, potentially depriving them of opportunities to reject product or seek remedies. Documents created to further or conceal that conduct were therefore not protected by privilege ([184]-[188]).
The Court also found reasonable grounds to treat documents prepared for the October 2013 responses as furthering an alleged deception of Cargill. Cargill had squarely raised the concerns, completion was imminent, and the evidence suggested that the responses presented the practices as less extensive than internal material indicated ([193]-[196]). This was only a preliminary assessment for the privilege application, not a final finding that any individual, including a lawyer, had acted dishonestly.
On in-house counsel independence, the Court acknowledged that the legal position was not settled. It nevertheless applied the approach that independence concerns the relationship between lawyer and employer and the capacity in which the lawyer was consulted. Mr Fitzgerald's remuneration and reporting lines counted against independence, but his predominant role was legal, and he described deferring to commercial and operational personnel on those issues. The Court found he had sufficient independence for privilege purposes, subject to waiver and s 125 ([160]-[168]).
The judgment applied existing principles rather than announcing a general new test. For issue waiver, it relied on the established focus on inconsistency between a party's conduct and continued confidentiality, with fairness informing that inquiry. Its contribution was a fact-specific application: a party's third-party case about what it was told, and what it knew, could put privileged communications bearing on that knowledge under scrutiny even without an express pleading about the contents of legal advice ([138]-[143]).
The decision also illustrates that waiver has a scope. Even where a party's conduct is inconsistent with maintaining confidentiality on a particular issue, the resulting production need not extend to every document about the wider dispute. Here, the Court confined the inquiry to specified personnel, relevant knowledge, and a defined period. It separated that issue from documents about the practices themselves and from litigation-created material ([144]-[147]).
For s 125, the judgment drew a practical boundary between deliberate contractual breaches and the use of altered certificates to conceal those breaches. It did not finally determine whether “fraud” in s 125 includes every form of equitable fraud, warning that an overly broad interpretation could undermine privilege beyond what the provision was intended to do ([171]-[179]). The decision therefore presents a contextual application, not a comprehensive definition of fraud for all privilege disputes.
The ruling also declined to settle whether independence is a distinct statutory requirement under ss 117-118. It noted competing authority and reservations, then decided the application without departing from the approach used in Victoria ([160]). The material supplied contains no later judgments or subsequent appellate treatment of Cargill. It therefore does not establish how later courts treated this ruling.
At [139], the Court held that the defendants' third-party pleadings put their knowledge of the practices and policies in issue. In plain English, a party's claim about what others failed to tell it can make its own knowledge relevant, including knowledge recorded in otherwise privileged communications.
At [140], the Court said that pleading reliance alone does not create issue waiver. In plain English, a bare statement that a party relied on a representation is not enough by itself; the pleaded case and the role of knowledge must be examined.
At [144]-[147], the Court limited the relevant production to knowledge of the clause 31.15 personnel during the relevant pre-completion period. In plain English, a waiver about one issue does not automatically open every document about the underlying business practices.
At [153]-[154], the Court distinguished factual assertions from disclosure of legal advice. In plain English, a party's account of its factual position is not necessarily a waiver of advice that may have informed that position.
At [180]-[185], the Court distinguished non-compliance from concealment through altered certificates. In plain English, the alleged breach of customer contracts was not, by itself, the relevant fraud for s 125; the evidence about disguising the breach from customers supported the exception.
At [196], the Court made clear that the preliminary s 125 finding did not establish that a person, including a lawyer, acted dishonestly. In plain English, the privilege ruling determined access to documents at an interlocutory stage, not final liability or personal wrongdoing.
The issue-waiver reasoning is most relevant where a litigant advances a claim against another party based on what it was told or not told, and the litigant's own knowledge is central to the pleaded causal case. The decision indicates that the court may examine whether the pleading, in context, places privileged communications bearing on that knowledge under necessary scrutiny. It does not say that any pleading of reliance will do so ([139]-[143]).
The ruling is also relevant where an agreement identifies specific individuals whose knowledge is attributed to a company. That contractual definition may help identify which people's knowledge matters and limit the scope of waiver, but the clause does not automatically waive all privilege in communications involving those people ([144]-[151]).
For s 125, the material fact pattern involved documents and procedures that allegedly altered customer-facing test certificates to conceal non-compliance. The Court distinguished that from a case involving only intentional breach of contract. The reasoning points to the purpose and effect of the documents, including whether they furthered or concealed the alleged misconduct, as important to the statutory inquiry ([180]-[188]).
The decision also addresses advice and internal communications created in response to serious allegations shortly before completion of a transaction. The Court treated documents prepared to formulate the October responses as potentially within s 125 on the evidence before it, while cautioning that this was not a final finding of dishonesty ([193]-[196]).
The supplied judgment does not discuss any later court's treatment of Cargill, which was decided on 30 March 2017. The material provided therefore does not support conclusions about whether it was later followed, distinguished, criticised, or overruled.
Within this judgment, Daly AsJ considered earlier authorities on waiver, in-house counsel, fraud, and former employees' access to privileged material. The Court applied the inconsistency approach associated with Mann v Carnell, and referred to DSE (Holdings), Rio Tinto, and Vic Hotel in applying it ([138]-[143]). It considered Archer Capital 4A v Sage Group (No 2) in assessing Fitzgerald's independence and distinguished Rich v Harrington on its particular facts ([165]-[167]). The treatment of those authorities does not establish how later courts treated Cargill itself.
The Court expressly left open the precise boundaries of “fraud” under s 125, including whether it encompasses all forms of equitable fraud. It recognised that the issue could matter in other cases, but found it unnecessary to resolve it to determine these applications ([171]-[179]).
The judgment also left unsettled whether ss 117-118 impose a separate independence requirement for in-house lawyers. The Court noted the debate, applied the jurisdiction's existing approach, and decided Fitzgerald's position on the evidence ([160]-[168]).
The substantive questions remained for trial: what the Viterra Practices were, their extent and impact, what the defendants knew and when, whether the sale-process or pre-completion statements were misleading, what Cargill relied on, and whether any relevant loss followed. The Court expressly said those matters were not finally determined by the privilege ruling ([144], [190]-[196]).
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[2017] VSC 126 Revised 29 August 2017
EVIDENCE - Section 122 of the Evidence Act 2008 (Vic) - Challenges to claims for legal professional privilege - Issue waiver by reason of pleadings in third party notice - Waiver by reason of reference to internal lawyer in commercial contract - Waiver by reason of disclosure of substance of privileged communications - Waiver by reason of disclosure of selective documents - Whether vendor's privilege in documents handed over upon completion of a sale of a business without any express reservation of privilege capable of being maintained - Whether s 126 can be used to compel the production of documents related to documents already produced.
EVIDENCE - Section 117 and s 118 of the Evidence Act 2008 (Vic) - Challenge to claims for legal professional privilege - Whether internal lawyer had requisite independence - Whether the author or recipients of privileged documents entitled to access after they ceased employment with privilege holder.
EVIDENCE - Section 125 of the Evidence Act 2008 (Vic) - Whether documents produced in furtherance of a fraud - Meaning of 'fraud' within s 125 of the Evidence Act 2008 (Vic).
Mr A J Myers AC QC with Mr S H Parmenter and Mr O Wolahan
For the Fourth, Fifth and Seventhnamed third parties
1 The plaintiff ('Cargill') and the third parties in this proceeding (together, the 'applicants') have issued four summonses seeking production of documents by the defendants which are subject to claims by the defendants for immunity from disclosure by reason of legal professional privilege under s 118 or s 119 of the Evidence Act 2008 (Vic) ('Act'). In the proceeding, the defendants claim legal professional privilege over approximately 16,700 documents.[1] As a result of a non-binding process agreed between the parties and the managing judge,[2] approximately 4,900 documents have been reviewed by an independent senior counsel ('independent counsel') in order to assess whether the documents appeared, on their face, to be privileged. This part of the process is now complete. The applications before me do not seek to go behind the preliminary determinations made by independent counsel. Conversely, independent counsel did not consider any issues of 'principle' concerning the claims for legal professional privilege: these are the subject of the current applications.
2 Cargill is the Australian subsidiary of Cargill Inc, a major international food, agricultural, financial and industrial products and services business. The first to third defendants ('Viterra parties') up until 31 October 2013 owned and operated a malting business, Joe White Maltings ('JWM business'). The JWM business was owned by Joe White Maltings Pty Ltd ('JWM'). The first defendant, Viterra Malt Pty Ltd, owned all of the shares in JWM. The second and third defendants, Viterra Operations Pty Ltd and Viterra Pty Ltd, owned certain assets used by JWM Pty Ltd to operate the JWM business. The fourth defendant, Glencore International AG ('Glencore'), which is incorporated in Switzerland, is the ultimate holding company of the Viterra parties.
3 The various third parties were joined by the defendants to the proceeding on or about 4 February 2015. The first third party, Cargill Inc, is incorporated in the United States, and is the ultimate holding company of Cargill. The second third party is JWM. Since 31 October 2013, it has been a wholly owned subsidiary of Cargill. The sale of the JWM business is the subject of this proceeding.
4 The third to seventh third parties were at all material times senior managers of JWM ('JWM executives'). The third third party, Mr Gary Hughes, was the Executive Manager of JWM, and between December 2011 and December 2012 a director of JWM. The fourth third party, Mr Peter Youil, was the General Manager - Operations of JWM. The fifth third party, Mr Robert Wicks, was the General Manager - Commercial of JWM. The sixth third party, Dr Douglas Stewart, was the General Manager - Technical of JWM. The seventh third party, Mr Scott Argent, was the Financial Controller of JWM. Messrs Youil, Wicks and Argent ('YWA parties') are represented by the same solicitors and counsel, while Mr Hughes and Dr Stewart are separately represented.
5 As noted above, this proceeding arose out of the sale of the JWM business by the Viterra parties to Cargill in 2013. The defendants, with the assistance of their sale advisor, Merrill Lynch Markets (Australia) Pty Ltd, invited bids for the JWM business in May 2013. Cargill was provided with an Information Memorandum, and the Viterra parties provided further financial and operational information concerning the JWM business via an online data room between 14 June 2013 and 3 August 2013.
6 The sale of the JWM business was effected pursuant to an agreement dated 4 August 2013 ('Acquisition Agreement'). The sale price was $420 million. The Acquisition Agreement contained a number of warranties concerning, among other things, JWM's records, JWM's compliance with its contracts and applicable laws, and the accuracy and the materiality of the information in the Information Memorandum and the online data room ('Warranties'). Certain Warranties were qualified as being 'to Viterra's knowledge and awareness'. Relevantly, clause 31.15 of the Acquisition Agreement provided that:
Where a warranty is given to a Seller's awareness or knowledge, including to the best of its knowledge or awareness or so far as the seller is aware, the seller will be deemed to know or be aware of a particular fact, matter or circumstances only if one or more of Jason Rees, Damian Fitzgerald, Matt Mann or David Mattiske are actually aware of that fact, matter or circumstances on the date the Warranty is given or would have been aware had they made reasonable enquiries on the date the Warranty is given. The individuals referred to in this clause 31.15 are not in any way personally responsible for the accuracy of the Warranties and will not be personally liable for any claim.
7 Clause 13.1 of the Acquisition Agreement provides as follows:
The Sellers represent and warrant to the Buyer that each Warranty is correct and not misleading on the date of this agreement and will be correct and not misleading on the Completion Date as if made on and as at each of those dates except where otherwise provided in the Warranty.
8 The applicants contend that the effect of this clause is that the Warranties were ongoing up to and including the completion date, being 31 October 2013. The defendants do not appear to dispute this.
9 The proceeding concerns the alleged failure of the defendants to disclose to Cargill, prior to the completion date of 31 October 2013, the existence of what are described as the 'Viterra Practices' and the 'Viterra Policies'. The substance of Cargill's allegations concerning the Viterra Practices and the Viterra Policies are conveniently summarised in the YWA parties' 'Relevant Background' submissions, as follows:
The plaintiff alleges that the 'Viterra Practices' were that JWM routinely, and without informing customers:
(a) supplied malt to customers that did not comply with contractual requirements and specifications; and
(b) supplied certificates of analysis to customers that misstated the results of analytical testing on the malt, so that the certificate reported that the malt complied with contractual requirements and specifications when it did not.
The plaintiff alleges that the Viterra Practices were recorded in and endorsed by written policies entitled 'Viterra Malt Certificate of Analysis Generation Procedure' and 'Malt Blend Parameters Procedure', which it collectively defines in the FASOC as the 'Viterra Policies'. The Viterra Policies are exhibited to the Phillips Affidavit as SMP2 and SMP3, and, significantly, bear the 'Viterra' logo.
In essence, the plaintiff alleges that as a consequence of the Viterra Practices and the Viterra Policies, JWM was deliberately selling malt to customers which did not meet the specifications required by those customers' supply contracts, and was deliberately falsifying certificates of analysis which it provided to those customers so as mislead those customers as to whether the malt met those contractual specifications. Moreover, the plaintiff alleges that these practices were the formal policy of JWM, rather than being undertaken by JWM on an ad hoc basis.
10 The claims made by Cargill in its Further Amended Statement of Claim ('FASOC') are based upon the defendants' failure to disclose the Viterra Practices and Viterra Policies to Cargill, and are summarised in paragraph 12 of the amended statement of claim on third party notice of the defendants dated 6 June 2015 ('third party notice'), as follows:[4]
In the statement of claim, Cargill Australia alleges, amongst other things, that:
(a) Glencore and/or Viterra engaged in misleading or deceptive conduct in contravention of s. 18 of the ACL (the Misleading or Deceptive Conduct Claims);
(aa) Glencore and/or Viterra engaged in conduct amounting to deceit (the Deceit Claims);
(b) Viterra breached the Acquisition Agreement (the Contract Claims);
(c) Glencore and/or Viterra engaged in conduct amounting to negligent misrepresentation (the Negligence Claims, with the Misleading or Deceptive Conduct Claims, the Deceit Claims, the Contract Claims and Negligence Claims defined collectively as Cargill Australia's Claims);
(d) the Misleading or Deceptive Conduct Claims, the Deceit Claims, and the Negligence Claims arise from representations made by Glencore and/or Viterra, namely the Representations and (in the case of the Misleading or Deceptive Conduct Claims and the Negligence Claims) the CBH Representations;
(e) the Representations comprise:
(i) the Financial and Operational Performance Representations conveyed by Glencore and/or Viterra;
(ii) the Warranty Representations conveyed by Viterra (paragraphs 28) and
(iii) the Pre-Completion Representations conveyed by Glencore and/or Viterra;
(f) the Financial and Operational Performance Representations were conveyed by Glencore and/or Viterra;
(i) making the Information Memorandum Statements;
(ii) disclosing the Financial and Operational Information;
(iii) making the 18 July 2013 Statements;
(iv) making the 19 July 2013 Statements;
(v) failing to disclose the Undisclosed Matters;
(g) the Warranty Representations were conveyed by Viterra providing the Warranties;
(h) the Pre-Completion Representations were conveyed by Glencore and/or Viterra providing the October 2013 Responses;
11 The 18 and 19 July 2013 statements were said to have been made in telephone calls between one or more of the JWM executives and representatives of Cargill and its advisors. The pre-completion representations were said to have been made in October 2013, in circumstances of significant relevance to the current applications.
12 As noted above, Cargill alleges that the failure of the defendants to disclose any information and documents concerning the Viterra Practices and the Viterra Policies during the due diligence period caused the defendants to breach the Warranties, and amounted to misleading and deceptive conduct. Further, the pre-completion representations concern statements made by the Viterra parties during the course of what the parties describe as the 'October 2013 investigations'. These investigations came about as a result of an 'integration' meeting between representatives of Cargill and managers of the JWM business on 15 October 2013, during which some disclosures were made concerning the Viterra Practices. On 22 October 2013, Cargill sent the following letter ('22 October letter') to Mr Damian Fitzgerald, who, among other things, was the company secretary of each of the Viterra parties:
As part of our agreed-upon transition process for the acquisition of the Joe White Maltings business, an integration meeting was held on 15 October between Cargill executives (Mark Viers and Steven De Samblanx) and Joe White executives (Gary Hughes, Rob Wicks, Peter Youil and Doug Stewart). At the meeting, the Joe White executives disclosed that the Joe White Maltings business had engaged in the following practices:
Our discussion with the Joe White Maltings team regarding these practices was limited and we have not determined whether these practices have occurred and, if they have occurred, whether they have been sporadic or widespread, which customers are affected and whether the practices are ongoing. However, the potential ramifications of these practices, should they have occurred, may be significant in terms of business operations and the rights and obligations of the parties.
Bearing in mind that completion is currently scheduled for 31 October 2013, we need your cooperation in investigating and remedying the matters raised in this letter prior to our taking control. Hopefully, we can work together to minimise any potential adverse impact. In particular, please let us know whether one or more of these practices has occurred and, in that event, the respective frequency of each. And if you identify that any of the practices are ongoing please describe:
As you appreciate, to the extent necessary, we reserve all our rights in relation to these matters.
13 Following certain enquiries, the following response was sent by the Viterra parties on 25 October 2013:
I refer to your letter dated 22 October 2013 and our subsequent discussions on 23 October 2013 and 24 October 2013. As discussed, Glencore was surprised by your letter and had no knowledge of Joe White Maltings (JWM) engaging in the practices referred to. Glencore has since made enquiries of JWM management and can advise as follows:
We understand that you are concerned that the plant is not sufficient to meet the specifications set out in customer contracts. This concern is unfounded. We have confirmed that the plants are adequate to deliver malt that meets customer specifications and have been audited and approved by customers as required.
JWM issues certificates of analysis in compliance with its ISO accredited quality system and is a documented procedure. It is well understood within the industry that significant variations exist between laboratories and also arise when the same sample is repeatedly tested within the same laboratory.
There have been instances where barley other than that specified in a particular contract has been used. However, the malt delivered has, as far as we are aware, always met the technical needs of the customer. We are not aware of any complaints or claims from customers about this.
There has been non-compliance with customer requirements around GA3. However, we are not aware of any complaints or claims in relation to this and JWM management has confirmed that they are able to produce the specification of malt required to meet customer demands without adding GA3 although modified production conditions may be required.
JWM manages each customer's expectations carefully and as far as we are aware no customer has ever rejected malt due to the issues raised in your letter. The senior managers of JWM have made it clear that they operate within parameters that are consistent with industry practice.
14 Cargill was not satisfied with this response, and sent another letter on 29 October 2013. An extract of the response follows:
We are concerned that Viterra Ltd (Viterra) has not addressed adequately the matters raised in our letter dated 22 October 2013 with the result that the impact or potential impact of those matters on Joe White Maltings' business (JWM) remains uncertain. In particular:
We would be grateful if you would let us have your response concerning these questions as a matter of urgency.
You will appreciate that we are particularly concerned about the impact these practices may have on our ability to conduct JWM's business operations immediately after completion in compliance with JWM's customer contracts and all applicable laws. As such, please ensure that adequate measures are put into place before completion to ensure that:
Please inform us prior to completion of the measures you take to secure these ends.
15 On 30 October 2013, Mr Mattiske of the Viterra parties replied to Cargill. An extract of the reply follows:
I refer to Philippa Purser's letter dated 29 October 2013 and my letter in reply to her dated 25 October 2013. As noted in my letter to Philippa, Glencore had no knowledge of Joe White Maltings (JWM) engaging in the practices referred to by Philippa in her letter. As such, we have had limited time to explore the matters raised by Philippa with JWM management. Having said that, we have made further enquiries and can advise as follows:
Certificates of analysis have been issued in compliance with JWM's ISO accredited quality system and JWM's documented procedures.
It is common knowledge within the industry that there is a short term shortage of certain barley varieties. JWM management are currently considering how to manage this shortage.
JWM management have taken steps to ensure that going forward no GA3 is added to malt where customers require that it not be used in production.
I disagree that JWM and Cargill will suffer significant loss and damages [sic] from the above practices and the remedial measures required to correct and otherwise address them.
16 The sale of the JWM business was completed the following day, on 31 October 2013.
17 On 23 April 2014, Cargill issued a notice under clause 15.1 of the Acquisition Agreement ('Notice'), which provides for notification of claims arising under the sale transaction, including breach of any Warranties. The Notice claimed that the Viterra parties had, by engaging in the Viterra Practices and the Viterra Policies, breached various Warranties, and, to the extent that the Warranties were made 'to the best of Viterra's knowledge', the relevant officers of the Viterra parties knew or ought to have known of the Viterra Practices and the Viterra Policies. Further, in relation to the October 2013 investigations, the Viterra parties were said to have engaged in misleading and deceptive conduct, being the precompletion representations, upon which Cargill relied in completing the acquisition of the JWM malting business on 31 October 2013.
18 The FASOC expands upon, but largely mirrors the allegations in the Notice. In particular, in respect of the allegations that the Viterra parties knew of the Viterra Practices and the Viterra Policies from around early 2010, or alternatively, as a result of the October 2013 investigations, Cargill relied upon, among other things, documents concerning the JWM business handed over by the Viterra parties to Cargill at around the time of completion ('Schedule D documents').[5]
19 Cargill claims, among other things, the following loss and damage, being:
(a) the difference between the purchase price paid by Cargill and the true value of the JWM business, or alternatively, the difference between the purchase price and the price Cargill would have offered to pay had it known of the Viterra Practices and the Viterra policies; or
(b) the ongoing losses suffered by JWM by reason of lost production and additional costs incurred in order to comply with JWM's contractual obligations to its customers. Cargill may be able to offset those losses by embarking upon substantial capital expenditure, in the order of $30 million.
20 In their defence to the FASOC and amended counterclaim dated 5 May 2015 ('defence') the defendants, relevantly for the purpose of the current applications:
(a) denied that the Information Memorandum contained misrepresentations, and referred to various disclaimers and confidentiality obligations contained in the Information Memorandum and other documents associated with the sale process ('sale process disclaimers');
(b) referred to the terms upon which Cargill engaged in the due diligence process;
(c) referred to telephone discussions between personnel of Cargill Inc, its advisor Goldman Sachs, and senior executives of JWM on 18 and 19 July 2013;
(d) complained that the allegations in the FASOC concerning the alleged nondisclosure of the Viterra Practices and the Viterra Policies, and the impact upon the financial performance of the JWM business were inadequately particularised, and, under cover of that objection, said that if these allegations were correct, by reason of the sale process disclaimers, there was no requirement for disclosure of any of these matters to Cargill, or any consequences of nondisclosure, and no requirement to withdraw or qualify statements made in the Information Memorandum during the course of the due diligence process;
(e) they referred at some length to the terms of the Acquisition Agreement, including terms qualifying the Warranties, certain acknowledgements made by Cargill, and terms capping the liability of the Viterra parties and excluding liability for indirect losses arising out of any breach of the Acquisition Agreement;
(f) in relation to the October 2013 investigations, they repeat their assertions regarding the effect of the sale process disclaimers and the terms of the Acquisition Agreement;
(g) they do not admit that Viterra knew of the Viterra Practices and Viterra Policies, and deny that any of the persons referred to in clause 31.15 of the Acquisition Agreement knew of the Viterra Practices or the Viterra Policies prior to 22 October 2013, and do not admit that they knew of these matters after 22 October 2013;
(h) deny that they have breached any of the relevant Warranties, or engaged in negligent misrepresentation;
(i) alternatively, if the Viterra parties have engaged in conduct which contravened s 18 of the Australian Consumer Law ('ACL'), then Cargill suffered any loss or damage partly as a result of Cargill's failure to take reasonable care; and
(j) further, if the Viterra parties are found liable for any economic loss under s 18 of the ACL, each of JWM, Gary Hughes, Peter Youil, and/or Cargill Inc are concurrent wrongdoers within the meaning of s 87CB(3) of the ACL.
21 On 2 June 2015, the defendants filed the third party notice against Cargill Inc, JWM, and the JWM Executives. The claims against Cargill Inc are not relevant to the current applications. However, the claims against JWM and the JWM executives are of particular significance to the current applications, and as such are reproduced in full below:
(a) all Information Memorandum Statements were true and correct;
(b) the Financial and Operational Information was true and correct;
(c) the 18 July 2013 Statements were true and correct;
(d) the 19 July 2013 Statements were true and correct;
(e) the Undisclosed Matters did not exist; and
(f) the Warranties were true and correct,
(collectively, the JWM Representations).
Particulars
(i) Hughes and Argent participated in the preparation of the Information Memorandum and, on or about 23 and 24 April 2013, prior to the finalisation of the Information Memorandum, Hughes and Argent informed Glencore and Viterra that the Information Memorandum Statements were accurate, including by:
(A) Argent sending an email to Saurabh Thaper and Thomas Nicholls of Merrill Lynch, copied to Hughes, on 23 April 2013 at 1:35pm which attached Hughes' and Argent's comments on a draft of the Information Memorandum; and
(B) Hughes and Argent signing a document entitled 'Verification Table for Information Memorandum' on or about 24 April 2013.
(ii) In relation to the Financial and Operational Information:
(A) Hughes and Argent participated in the preparation of the Information Memorandum and, on or about 23 and 24 April 2013, prior to the finalisation of the Information Memorandum, Hughes and Argent informed Glencore and Viterra that the Financial and Operational Information was accurate, including by taking the steps referred to in sub-paragraph (i) above; and
(B) Hughes and Argent were responsible for providing, and provided, the Financial and Operational Information to Glencore and Viterra for disclosure during Due Diligence.
(iii) On 18 July 2013, Hughes and/or Youil made the 18 July 2013 Statements, and a note of the discussion during which the 18 July 2013 Statements were made was verified by Hughes and Youil on or about 26 July 2013, prior to the finalisation of the Acquisition Agreement. The note of the discussion was subsequently included as part of Annexure E to the Acquisition Agreement.
(iv) On 19 July 2013, Hughes made the 19 July 2013 Statements, and a note of the discussion during which the 19 July 2013 Statements were made was verified by Hughes and Argent on or about 1 August 2013, prior to the finalisation of the Acquisition Agreement. The note of the discussion was subsequently included as part of Annexure E to the Acquisition Agreement.
(a) Glencore and Viterra made the Representations; and
(b) Viterra gave the Warranties.
(a) Glencore and/or Viterra engaged in misleading or deceptive conduct in contravention of s 18 of the ACL;
(aa) Glencore and/or Viterra engaged in conduct amounting to deceit;
(b) Viterra breached the Acquisition Agreement; and/or
(c) Glencore and/or Viterra engaged in conduct amounting to negligent misrepresentation,
then the JWM Representations were misleading or deceptive or likely to mislead or deceive.
Particulars
Any liability for damages and costs which, contrary to Glencore and Viterra's case, Glencore and Viterra are held to have to Cargill Australia in respect of the Representations or Warranties, and Glencore and Viterra's costs of this proceeding.
(a) damages pursuant to s 236 of the ACL; alternatively
(b) orders under s 237 of the ACL to compensate Glencore and Viterra for the loss or damage suffered or to prevent Glencore and Viterra from suffering that loss or damage.
Glencore and Viterra's claims against the JWM Executives
(a) the Information Memorandum Statements were true and correct;
(b) the Financial and Operational Information was true and correct;
(c) the 18 July 2013 Statements were true and correct;
(d) the 19 July 2013 Statements were true and correct;
(e) the Undisclosed Matters did not exist; and
(f) the Warranties were true and correct,
(collectively, the Hughes Representations).
Particulars
Glencore and Viterra refer to and repeat the particulars to paragraph 45 above.
(a) the 18 July 2013 Statements were true and correct;
(b) the Undisclosed Matters did not exist; and
(c) the Warranties were true and correct,
(collectively, the Youil Representations).
Particulars
Glencore and Viterra refer to and repeat the particulars to paragraph 45 above.
(a) the Undisclosed Matters did not exist; and
(b) the Warranties were true and correct,
(collectively, the Wicks Representations).
Particulars
Glencore and Viterra refer to and repeat the particulars to paragraph 45 above.
(a) the Undisclosed Matters did not exist; and
(b) the Warranties were true and correct,
(collectively, the Stewart Representations).
Particulars
Glencore and Viterra refer to and repeat the particulars to paragraph 45 above.
(a) the Information Memorandum Statements were true and correct;
(b) the Financial and Operational Information was true and correct;
(c) the 19 July Statements were true and correct;
(d) the Undisclosed Matters did not exist; and
(e) the Warranties were true and correct,
(collectively, the Argent Representations).
Particulars
Glencore and Viterra refer to and repeat the particulars to paragraph 45 above.
(a) Glencore and Viterra made the Representations; and
(b) Viterra gave the Warranties.
(a) Glencore and/or Viterra engaged in misleading or deceptive conduct in contravention of s 18 of the ACL;
(aa) Glencore and/or Viterra engaged in conduct amounting to deceit;
(b) Viterra breached the Acquisition Agreement; and/or
(c) Glencore and/or Viterra engaged in conduct amounting to negligent misrepresentations,
then the JWM Executives' Representations were misleading or deceptive or likely to mislead or deceive.
Particulars
Glencore and Viterra refer to and repeat the particulars to paragraph 45 above.
22 In their amended defence to the third party notice dated 14 September 2015, the YWA parties:
(a) deny that JWM made the JWM Representations to the Viterra parties;
(b) deny that the JWM Executives made the representations alleged in the third party notice;
(c) alleged that from at least September 2009, when the Viterra Parties acquired the JWM business, JWM had a practice of, on an ad-hoc basis, buying offgrade barley and blending it with first grade barley, and documenting the entire lot as first grade barley, and supplying certificates of analysis that differed, in minor respects, from the specifications generated from JWM's laboratory testing;
(d) alleged that the Viterra parties knew and approved of the practices referred to in (c) above by reason of, among other things, Mr Hughes' knowledge of these practices, the Malt Cost Review component of the Transformation Project, the development of the 'Viterra Malt Certificate of Analysis Procedure' in February 2011, and the October 2013 Investigations; and
(e) the Viterra parties did not rely upon the YWA parties, or any of them, to inform them of the existence of the Viterra Practices or the Viterra Policies.
23 The defences filed by Mr Hughes and Dr Stewart were, for the purposes of the current application, similar in all material respects to the defences of the YWA parties.
24 In its reply to the amended defence and defence to the amended counterclaim, Cargill relevantly alleged that:
(a) the binding offer submitted by Cargill to purchase the JWM business expressly stated that the offer was based upon the information provided by the defendants during the sale process;
(b) the financial and operational information concerning the JWM business was solely within the control and possession of the defendants;
(c) Cargill relied upon the accuracy of the financial and operational information provided in the sale process, and this was known to the defendants;
(d) to the extent that the sale process disclaimers purport to entitle the defendants to engage in misleading and deceptive conduct in contravention of the ACL, they are void and unenforceable;
(e) to the extent that the terms of the Acquisition Agreement entitle the defendants to engage in misleading and deceptive conduct, they are void and unenforceable; and
(f) the pre-completion representations did not fall within the terms of the sale process disclaimers or the terms of the Acquisition Agreement relied upon by the defendants.
25 The 'Transformation Project' referred to in paragraph 22(d) above was a project launched by the Viterra parties in May 2010 with the objectives of increasing the profitability of the JWM business. The Malt Cost Review was a component of the Transformation Project. While the purpose and outcomes of the Transformation Project and Malt Cost Review are ultimately a matter for trial, it appears that one cost saving measure adopted by the JWM business was an increased use of 'off-specification' barley in the malting process, that is, the use of cheaper varieties of barley, regardless of customer specifications.
26 The 'Viterra Malt Certificate of Analysis Procedure' referred to in paragraph 22(d) above refers to a document setting out a procedure for modifying test results from the JWM laboratories on the Certificates of Analysis provided to customers. Cargill contends that this practice was engaged in in order to disguise the use of 'off specification' barley and prohibited additives from customers.
27 Further detail concerning the Transformation Project, the Malt Cost Review, and the Viterra Certificate of Analysis Procedure is contained in the appendix to the Cargill Parties' written outline of submissions. The appendix also refers to documents relied upon to support the Cargill parties' contentions that, as a result of the Transformation Project and the Malt Cost Review, which was initiated by the Viterra parties in order to improve the profitability of the JWM business, JWM:
(a) adopted a policy of using 'off-specification' barley in the malting process;
(b) adopted (and documented) a policy for modifying the test results in the Certificate of Analysis provided to customers, and implemented this policy on a widespread basis;
(c) was aware of employee objections to the adoption of this policy; and
(d) took active steps to conceal the existence of these practices and policies from customers and auditors;
28 The appendix also refers to the October 2013 investigations, and documents said to evidence Cargill's contention that the pre-completion representations were made in circumstances where the Viterra parties must have known the pre-completion representations were false.
29 In their summons filed 14 February 2017, Cargill and JWM ('Cargill parties') seek the following categories of documents:[6]
(a) All documents constituting, evidencing or recording the existence and/or extent of the Viterra Practices and the Viterra Policies, and/or the accuracy of the Warranties, including but not limited to:
(b) All documents created by or sent to or from Damian Fitzgerald, Jason Reece and/or David Mattiske from 1 January 2010 until 31 October 2013 constituting, evidencing or recording the existence and/or extent of the Viterra Practices and the Viterra Policies, and/or the accuracy of the Warranties, including but not limited to:
(c) All documents created by or sent to or from Damian Fitzgerald, Jason Reece and/or David Mattiske after 31 October 2013 constituting, evidencing or recording the knowledge of any of them as at 31 October 2013 of existence and/or extent of the Viterra Practices and the Viterra Policies, and/or the accuracy of the Warranties, including but not limited to:
(d) All documents constituting, evidencing or recording communications from Hughes, Stewart, Argent, Youil, or Wicks to other officers or employees of any of the defendants from 1 January 2010 until 31 October 2013 evidencing or recording the existence and/or extent of the Viterra Practices and the Viterra Policies, and/or the accuracy of the Warranties, including but not limited to [documents concerning the October 2013 investigations and the October 2013 responses.]
(e) ...
(f) All documents from 1 January 2010 to 31 October 2013 where the asserted basis of privilege is that the document was created for the dominant purpose of Damian Fitzgerald giving legal advice.
(g) All documents constituting evidencing or recording the financial and operational performance of JWM created or provided for the purposes of preparing the Information Memorandum, and/or of determining and considering the documents to be included in the Data Room and the Due Diligence Disclosures, ...
30 The YWA parties seek the following categories of documents:
(a) all documents brought into existence before completion of the Acquisition Agreement and which concern:
(i) the transformation project referred to in paragraph 54C of the [YWA Parties] amended defence;
(ii) the Viterra Practices referred to in paragraph 19(a) of the further amended statement of claim;
(iii) the Viterra Policies referred to in paragraph 19(b) of the further amended statement of claim;
(iv) the accuracy or otherwise of the Warranties referred to in paragraph 22 of the further amended statement of claim;
(b) all documents [concerning the October 2013 investigations and the October 2013 responses.]
(c) [as above]:
31 The third party (Mr Hughes) seeks the following categories of documents:
a. documents which Hughes was the author, sender, or recipient of;
32 The sixth third party (Dr Stewart) seeks the following categories of documents:
(a) all records of communications of which [he]is author or recipient; and
(b) all documents relevant to:
(i) the existence of the [Viterra Practices and the Viterra Policies];
(ii) falsity of any Warranties; and
(iii) the Defendants' reliance on the alleged conduct of the Third Parties in deciding to make the Representations and give the Warranties to the Plaintiff.
33 As can be seen from the above, there is considerable overlap between the categories of documents, and indeed, the arguments advanced by the applicants in support of their applications. For convenience, the issues in the applications can be grouped under the headings utilised by the defendants in their written outline of submissions, as follows:
(a) issue waiver by reason of the allegations made by the defendants in the third party notice ('Issue Waiver-Pleadings');
(b) issue waiver by reason of the terms of clause 31.15 of the Acquisition Agreement ('Issue waiver: clause 31.15');
(c) disclosure waiver by reason of the provision by the Viterra parties to Cargill documents at completion (being the Schedule D documents), and disclosure waiver by reason of the Viterra parties having disclosed the substance of legal advice by the reason of the October 2013 responses ('disclosure waiver');[8]
(d) whether Mr Damian Fitzgerald (in house legal counsel for the Viterra parties) held the requisite degree of independence from the Viterra parties such as to keep confidential legal advice provided by him to the Viterra parties ('independence issue');
(e) documents which are asserted to have come into existence for the furtherance of a fraud ('s 125 issue'); and
(f) documents where Mr Hughes and Dr Stewart, when in the employ of the Viterra parties, was an author or recipient of an otherwise privileged communication ('third party issue').
34 The Cargill parties relied upon the evidence of the solicitor with the conduct of this proceeding on their behalf, Ms Janet Whiting, sworn on 14 February 2017. This affidavit exhibited a substantial amount of transactional documents, such as the Acquisition Agreement, documents concerning the Viterra Practices and the Viterra Policies, and documents said to be relevant to the Viterra parties' knowledge of the Viterra Practices and the Viterra Policies. Some portions of this affidavit were objected to by the defendants on the basis that the commentary upon some of the documents amounted to submissions and/or conclusions rather than evidence. I agreed, and have disregarded these portions of the affidavit.
35 In her affidavit, Ms Whiting deposed, in summary, as follows:
(a) she deposed as to the background to the proceeding and the applications;
(b) she deposed, at a summary level, as to the malting process, and the different varieties and grades of barley used in the malting process;
(c) she deposed as to the process for the sale of the JWM business, and the information provided by the Viterra parties to Cargill during the sale process;
(d) she deposed as to the relevant terms of the Acquisition Agreement;
(e) she deposed as to the allegations made by the defendants in the third party notice;
(f) she deposed as to the circumstances in which Cargill came into possession of the Schedule D documents, and the reference made to the Schedule D documents in the Notice and the FASOC, and the absence of any objection by the defendants to Cargill's reference to these documents;
(g) she deposed as to documents she has reviewed which supported her contentions concerning Mr Fitzgerald's involvement in the business of the Viterra parties and the JWM business;
(h) she deposed, based upon her review of certain documents, as to the history of the Transformation Project and the development of the Viterra Practices and the Viterra Policies;
(i) she deposed as to Cargill's contention that the existence of the Viterra Practices and the Viterra Policies was not disclosed to Cargill during the sale process;
(j) she deposed as to her knowledge of the October 2013 investigations; and
(k) she deposed as to the privilege claims made by the defendants in this proceeding, and the process undertaken by the parties to deal with the defendants' privilege claims.
36 The JWA parties relied upon the affidavit sworn by their solicitor, Ms Susan Phillips. This affidavit summarised the steps undertaken by the parties with respect to the defendants' claims for privilege, exhibited a spreadsheet summarising the documents for which a claim for privilege is made, and disaggregating the list into fifteen subject matter categories. Category 13 is described as comprising 'Advice on responses to October correspondence ('pre-completion'). Ms Phillips referred to a letter from the solicitors for the defendants which further described the claims for privilege in category 13, as follows:
Upon receipt of Cargill's letter dated 22 October 2013 informing Viterra and Glencore of the alleged Viterra Practices, and reserving their rights regarding the matters raised in the letter, Viterra and Glencore anticipated a legal dispute and associated proceedings.
37 Ms Phillips also referred to the existence of documents evidencing the October 2013 investigations, and Mr Fitzgerald's involvement in these investigations.
38 The defendants relied upon the following affidavits:
(a) an affidavit of Monique Carroll, a solicitor with King & Wood Mallesons ('KWM'), the solicitors for the defendants, affirmed on 16 February 2017;
(b) an affidavit sworn by Joshua Wilson-Smith, a senior legal counsel employed by the second defendant, Viterra Operations Pty Ltd;
(c) an affidavit sworn by Victoria Oh, another solicitor with KWM, on 21 February 2017;
(d) an affidavit of Damian Fitzgerald, General Counsel of the second defendant, sworn 21 February 2017; and
(e) an affidavit of Bryce Williams, another solicitor of KWM, sworn 24 February 2017.
39 Ms Carroll's affidavit largely concerned the process by which the parties had dealt with the defendants' privilege claims, including the determination of the privilege claims by independent counsel, who has upheld the privilege claims in 98 per cent of the documents reviewed by her. Ms Carroll deposed that some of the documents exhibited to Ms Whiting's affidavit were documents over which the defendants claim privilege, and that Cargill and the defendants are in dispute over the appropriate treatment of these documents.
40 Mr Wilson-Smith's affidavit concerned the handover of certain documents by the first defendant, Viterra Malt Pty Ltd to Cargill upon completion pursuant to the terms of the Acquisition Agreement. He deposed as to the relevant terms of the Acquisition Agreement, the entry by Viterra Ltd and Cargill into a Transition Services Agreement on 4 August 2013, pursuant to which Viterra Ltd would continue to provide certain services to Cargill after the completion date.
41 Mr Wilson-Smith also gave evidence about the handover process and his role within it. He deposed, in summary, as follows:
(a) he liaised with Ms Tina Savona, Cargill's legal counsel, regarding the handover of the legal files. He arranged for all hard copy legal files concerning the JWM business to be placed in a locked cupboard in an area allocated for use by Cargill under the Transition Services Agreement. A CD of all electronic legal files relating to the JWM business was placed in the same cupboard;
(b) all other hard copy records of JWM that had not been archived were left at JWM's premises, or Viterra's premises, at the direction of Cargill's legal advisors. The account at the archives was transferred to JWM. All electronic files at JWM were placed on a USB and provided to Cargill at completion; and
(c) further electronic and hard copy records were transferred to Cargill in April 2015, July 2015 and November 2015.
42 Mr Wilson-Smith deposed as to the provenance of a document referred to in Ms Whiting's affidavit, being the 'Cargill Customer Review', which Ms Whiting believed came into existence from at least July 2013. Mr Wilson-Smith deposed that based upon his searches of the electronic discovery data base, different versions of this document existed from at least 2012, 'which documents were not related to the sale of JWM to Cargill'.
(a) he holds a Bachelor of Laws, and was admitted to practice in September 1997. He has held a practising certificate since that time; and
(b) between 1 January 2010 and 10 March 2010 he had been employed by Viterra Ltd as a commercial contracts manager. On 10 March 2010 he was promoted to the position of Director-Legal, the equivalent of a general counsel role. His title changed to General Counsel on or about 1 March 2016.
In this position, my responsibilities included:
(a) being the lead lawyer for Viterra (which includes Viterra Limited and its subsidiaries, as well as other operating companies), supervising the legal team including, at the relevant time, Joshua Wilson-Smith and Alicia Burgemeister and paralegals/law clerks and providing legal review and input into the legal services provided by them to the business;
(b) managing Viterra's Legal Panel of external law firms, including reviewing and determining what matters should be briefed, the nature of the legal service required, the provision of instructions and the advice or other legal service ultimately provided;
(c) managing all legal expenditure, including setting the annual legal budget and approving all invoices from external firms;
(d) advising on and leading legal aspects of transactions, including mergers and acquisitions, joint ventures and other partnerships with external companies;
(e) providing legal advice on regulatory, governance and compliance matters, including foreign investment regulation and competition law issues;
(f) setting legal policies for Viterra and providing training in respect of those policies;
(g) advising traders in relation to contract disputes with customers;
(h) advising on litigation, mediation and settlement negotiations arising from operational and employment contract claims;
(i) advising the human resources department on investigations into employee issues, including bullying and harassment, fraud, work health and safety;
(j) advising the business on contract negotiations and interpretation issues;
(k) preparing submissions for regulatory inquiries into the grain industry at Commonwealth and State levels;
(l) advising the Executives on legal issues ... in particular, their Directors' and Officers' duties and their obligations under WH&S and Chain of Responsibility legislation; and
(m) supervising Viterra's corporate governance, including preparing agendas and ensuring the correct materials were tabled before Executive meetings, and attending Executive meetings.
45 Mr Fitzgerald deposed as to his reporting arrangements. Until December 2012, he reported to the General Counsel of Viterra Inc in Canada. After the acquisition of Viterra Inc by Glencore in December 2012, he reported to Mr David Mattiske, the country manager of the Viterra parties.
In performing the roles and carrying out the responsibilities to which I have referred in paragraphs 9 to 15 above, I acted as an independent legal advisor. On no occasion did I alter my legal advice at the request of the business. The legal advice that I provided to the business was not subject to vetting or amendment by any other person.
As was standard for employees across Viterra, part of my annual bonus was linked to the performance of the Viterra business more generally. I was not offered any financial incentive or bonus linked with the sale of JWM. At the end of the 2013 financial year (ending December 31), I received an unexpected discretionary bonus for my contribution to the restructuring of Viterra, including the sale of JWM, and two other large divestments which occurred in that financial year.
The hard copy and electronic files of the legal team I managed at Viterra were at all times protected and separated from the remainder of the Viterra business, and access was limited to the legal team and its administrative support team (including IT support). The legal team was located in offices on level 4 of the Viterra headquarters in South Australia, separated from the other parts of the Viterra business located at the headquarters.
48 Mr Fitzgerald also deposed as to his role as company secretary for a number of entities within the Viterra group, including JWM, between 10 March 2010 and 31 October 2013.
49 He deposed that he was involved in the sale of JWM solely in his role as Director-Legal of Viterra Ltd. This included his membership of a working group established by Glencore for the purpose of the sale process, as the Viterra legal team was going to be involved in reviewing and compiling information for the data room and running the Q & A process for the sale. He sought advice from KWM as to what information could be provided to bidders in the sale process, and confidentiality issues in the sale process. He was also the Viterra contact point for the various regulatory approvals connected with the sale. He deposed as follows:
In my participation in the sale process for JWM, I acted as an independent legal advisor. On no occasion did I alter my legal advice at the request of the business. The legal advice that I provided to the business was not subject to vetting or amendment by any other person.
50 Mr Fitzgerald deposed as to his role in the executive team at Viterra. He deposed as follows:
I did not actively participate in any operational or financial discussions at these meetings, but was able to offer legal advice on issues such as potential litigation or disputes, contracts, competition and regulatory issues. I was also given 15-20 minutes to speak about matters of note in the legal department.
I consulted with the CEO and other Executive member around setting the dates of the meetings, about the contents of the agenda, and then distributed a consolidated bundle of documents that were relevant to the meeting such as safety reports, financial reports and documents concerning any other issues or topics considered relevant. I was generally the point of contact for any documents that needed to be distributed.
51 Mr Fitzgerald deposed as to his role in the Transformation Project (which is alleged by the Cargill parties to be the genesis of the Viterra Practices). He was the nominated legal expert on the storage and handling steering committee, which did not deal with issues raised in this proceeding. He was not involved in the Malt Cost review.
52 Finally, as for his role in the October 2013 investigations, Mr Fitzgerald deposed as follows:
Upon receipt of Cargill's letter dated 22 October 2013 informing Viterra of the alleged Viterra Practices, and reserving Cargill's rights regarding the matters raised in the letter, I anticipated a legal dispute and associated proceedings.
That same day, I instructed KWM to represent Viterra and Glencore in relation to the anticipated dispute.
Communications within Viterra and Glencore took place regarding this letter and subsequent correspondence in order to provide information and instructions to enable the legal teams at Viterra, Glencore and KWM to advise on:
(a) how to respond to the correspondence;
(b) the substance of claims made; and
(c) strategy in respect of the anticipated legal proceedings.
53 Mr Fitzgerald was cross-examined by senior counsel for the Cargill parties on matters relevant to the question of whether he held the requisite independence from the Viterra parties, such that any advice provided by him to the Viterra parties would not be subject to a valid claim for legal professional privilege. Mr Fitzgerald gave evidence, in summary, concerning the following matters:
(a) his attendance at board meetings of the Viterra parties during the course of 2012;
(b) his reporting arrangements, including the performance review process. Prior to Glencore purchasing the Viterra parties in December 2012, his performance review was conducted by the General Counsel for Viterra Inc, and from that time, by Mr Mattiske, although the process was not as diligently followed as it is now;
(c) he agreed that his contract of employment with the Viterra parties did not contain any special terms referable to his general counsel role, but said that his 'obligations of professional responsibility and independence' were 'covered off' in documents he described as 'Performance Development Reviews';
(d) he described the location of the legal team, and explained the ways in which the in-house legal team would provide advice to the Viterra parties. He would not always open a file, although the legal team would open hundreds of files, usually electronic files, each year;
(e) he stated 'if we provided advice it would be clear that was advice we were providing to the business',[9] as indicated by the reference to his title in the signature block on his emails. However, he conceded that he would use that signature block on all of his communications, save for when he was formally acting as company secretary, regardless of whether the communication contained legal advice;
(f) when questioned about a clause in his employment contract concerning incentive payments, he agreed that the payment of incentive bonuses (up to 25 per cent of his annual remuneration) were partly based upon his personal performance, and partly based upon the financial performance of the Viterra parties;
(g) when questioned about a long term incentive plan referred to in his employment contract,[10] Mr Fitzgerald stated that 'they were never really paid'. However, he did get benefits under the employee share plan, which 'crystallised' when Glencore purchased Viterra.[11] The shares were shares in Viterra Inc, and he could not recall how many he had, or their value;
(h) he confirmed he has received a bonus each year since he has been general counsel, including an amount equivalent to 25 per cent of his remuneration in 2011. He could not recall how much he was paid in 2013 (the year Cargill purchased the JWM business), but thought it was more than 25 per cent (it was subsequently confirmed to be nearly 50 per cent);
(i) he was taken to a bundle of Performance Development Review documents, one of which referred to the sale of (an unrelated) business as one of his performance objectives. He agreed that one of his performance objectives was to ensure that the sale went through 'properly and legally', and as a result, the Viterra parties' business would benefit;
(j) he agreed that the outcome of his performance review was partly relevant to the bonus payable to him;
(k) he was taken to references to examples of 'entrepreneurial spirit', where he had stated he had assisted in pursuing new business opportunities, and gave evidence that he had met a potential new supplier and referred them to someone in the business, stating 'of course I want the business to succeed';
(l) he gave evidence that he was involved in the business of the Viterra parties, but did not comment upon financial matters, and did not work in the operational side of the business. He would attend meetings and provide legal input, not commercial input. He agreed that as a lawyer he would learn about commercial matters and express views upon them, but in meetings where he was assisting the commercial people negotiate contracts, he would let the commercial people talk about the commercial side of the business, he would defer to the experts;
(m) he agreed that he may have expressed views to the commercial people to the effect that 'are you sure you are being realistic'. However, he understood the distinction between legal and commercial matters;
(n) he was taken to an email referring to discussions concerning Mr Fitzgerald and Mr Argent providing lists of companies importing malt into South Korea. Mr Fitzgerald said he was involved in the conversation because he was the 'point person' for regulatory approvals required as a consequence of the sale of the JWM business to Cargill. He said he left it to others, in this case Scott Argent, to respond to requests for financial information;
(o) he was involved in the process of the sale of the JWM business, including preparation of the information memorandum, due diligence disclosures, and data room disclosures. He agreed that some of the information referred to legal matters, but other information was financial in nature. He was a member of the work group established by Glencore to oversee the sale process, along with Mr Mattiske and Mr Hughes;
(p) turning again to his role within the business of the Viterra parties, he gave evidence that he has always been part of the executive team, as the Viterra parties were in a very heavily regulated industry. He would comment on nonlegal matters if he thought it was in the best interests of the Viterra parties to do so, and would voice concern if he thought something was 'out of order';
(q) the Acquisition Agreement was prepared by KWM, although he was involved in its drafting, and was probably also involved in its execution. He was aware of the terms of clause 31.15 of the Acquisition Agreement;
(r) he agreed that he led the October 2013 investigations. Upon receipt of the 22 October letter, he immediately contacted KWM, as he believed the letter signalled pending litigation. He was responsible for compiling information for KWM, he sought advice from KWM, and he also provided advice concerning the Viterra parties' response to the 22 October letter;
(s) when queried about his nomination in clause 31.15 of the Acquisition Agreement, he gave evidence that he did not think that the concerns raised by Cargill in the 22 October letter would affect him personally, and he could not recall turning his mind to the Warranties. The October 2013 investigations all occurred within a very short time frame, it was close to settlement, and he was concerned to respond to the 22 October letter 'factually and correctly', and
(t) when asked why he considered there were legal proceedings pending, he pointed to the part of the 22 October letter which said that 'Cargill reserves all of its rights'.
54 Senior counsel for the Cargill parties also tendered a number of documents during the course of Mr Fitzgerald's crossexamination. These included:
(a) a letter dated 31 October 2011 containing an offer of employment from the Viterra parties to Mr Fitzgerald, which included the terms of his contract of employment;
(b) a letter from the Viterra parties to Mr Fitzgerald dated 28 October 2010 concerning his appointment as Director - Legal;
(c) a letter from the Viterra parties to Mr Fitzgerald dated 13 December 2012, confirming his ongoing employment after the purchase of the Viterra parties by Glencore, and advising him of his new title and reporting lines;
(d) Mr Fitzgerald's Performance Review for 2009-2010; and
(e) Mr Fitzgerald's Performance and Development Review for 2010-2011.
55 After Mr Fitzgerald finished giving evidence, senior counsel for the Cargill parties also tendered documents concerning his bonus payment in 2013, and Mr Fitzgerald's confirmation of the amount paid to him in respect of the 2013 financial year, and that he ceased to own any shares in Viterra Inc as at December 2012.
56 Also tendered into evidence during the course of the hearing were the responses by KWM to the requests for further and better particulars of the third party notice made by the solicitors for Mr Hughes and the solicitors for the YWA parties in 2016. These were relied upon in support of these parties' contentions that the defendants had, by reason of the third party notice, squarely put in issue their knowledge of the Viterra Practices and the Viterra Policies prior to 31 October 2013.
57 The Cargill parties (and the other applicants) relied upon a folder of key documents derived from the exhibits to Ms Whiting's affidavit. These included, among other things:
(a) an email sent by a Mr Simon Stone dated 28 May 2010, and addressed to, among others, Mr Fitzgerald and Mr Hughes, and copied to Mr Jason Rees. The stated purpose of this email was to 'kick off' the Transformation Project, including the Malt Cost Review. Mr Fitzgerald was on the steering committee with respect to an unrelated aspect of the Transformation Project, but not the Malt Cost Review. Messrs Hughes, Argent and Rees were on the steering committee for the Malt Cost Review. The email attached the Project Charter for the Malt Cost Review, which had as its stated objective:
Reduce cost of barley by using off specification grades through taking advantage of segregation and storage and handling opportunities from Viterra's ownership of the SA supply value chain ...
This Project Charter identified Dr Stewart as one of the project managers for the Malt Cost Review;
(b) an email from Mr Lucas Jones dated 23 July 2010 (copied to Mr Hughes and Dr Stewart), which stated, among other things:
Essentially Malt has determined that the majority of their plants can use up to 30% off specification grain. We're keen to take advantage of the cost saving that this will allow.
(c) an email from Mr Gary Hughes to Mr Rob Gordon dated 10 August 2010 which commenced:
as discussed last week a couple of the malt staff have advised that they feel the code of conduct may be in conflict with some of the decisions being made in malt around the accepted practise [sic] of burying off grade barley.
The code of conduct statement referred to in the email was as follows:
Be accurate and truthful in all dealings with customers and accurately represent the quality, features and availability of all dealings with customers and accurately represent the quality, features and availability of Viterra Inc products and services;
(d) some emails concerning the above issue, including a redacted email which suggested advice was sought from Mr Fitzgerald concerning this issue;
(e) an email chain commencing on 11 August 2010 with a question by a JWM customer concerning the difference between its laboratory tests and the Certificate of Analysis provided by Viterra, with the final email from Dr Stewart stating:
I think we have been caught out fair and square on this one.
(f) a copy of the Viterra Malt Certificate Analysis Generation Procedure;
(g) a bundle of JWM's Sign Out reports and Certificates of Analysis which showed handwritten amendments to the laboratory results, such amendments being incorporated into the Certificate of Analysis provided to the JWM customer;
(h) an email from a customer dated 28 September 2010 to Mr Wicks, copying in Dr Stewart, which stated, among other things:
We would like repeat again [sic]:
- Kindly show the real specifications on C/As in order to avoid misunderstanding about the right [sic] of these documents. This affected the reputation of Joe White Malting as well as Thai Tan distributor ...
(i) an email exchange between Dr Stewart and Dr Megan Sheehy on 22 May 2012 concerning the weekly malt report, whereby Dr Stewart asked Dr Sheehy to remove a reference to Hindmarsh barley in the weekly report. Dr Stewart stated as follows:
Thanks Megan, my fault. It was something Gary [presumably Mr Hughes] requested as there is quite a wide circulation of the weekly report, so best just refer to Hindmarsh malt as 'malt'.
(j) an email from Dr Stewart to Mr Wicks and Mr Jones dated 28 August 2012 concerning 'JWM Barley Requirements 2013-14'. Dr Stewart states:
This is intended for internal use for you to advise various grain purchasers. It will require a bit of editing if it is to be released to the trade.
The attached report is headed 'Internal JWM Only' and refers to Hindmarsh barley being required for the Adelaide plant.
(k) an email chain commencing on 3 September 2012 with Dr Sheehy sending a draft 'COA Production and Sign-Out Procedures for Review', extending the procedures for international customers to domestic customers, and ending with the following reply from the Sydney plant manager:
Other than documenting that 'adjustments are authorised practice' is somewhat damning ...
No comment from me;
and
(l) an email from Dr Sheehy, copying in Dr Stewart, on 11 October 2012, which stated, among other things:
Further to my email last week with the sign-out procedure, here is the updated procedure for the Certificate of Analysis Generation Procedure with Domestic Customers included. Following some excellent feedback from Miro, we have decided to make this procedure obsolete in TRIM, but we can still add new revisions into the folder when required. Hence it will live in TRIM still, just unofficially, and should not be stored in any official procedure folders at your site, as we do not want customers or auditors to have access to this procedure.
58 The Document Revision Notice accompanying the Malt Certificate of Analysis Procedure (which used a Viterra letterhead), included the following against the heading 'Description of Changes'.
Updated document to reflect changes in position titles and also included reference to Domestic malt COA. This document is for internal use only, and thus must not be kept in an official procedure folder, but filed separately for private use only (i.e. not be available for audit or customer viewing).
59 The key documents relied upon by the Cargill parties also included an email from Mr Hughes to Mr James Maw of Glencore, copying in Mr Mattiske and Mr Argent, which attached a number of documents, presumably as part of the transition process after Glencore's acquisition of the Viterra parties in December 2012. These documents included:
(a) a description of key head office sales and production personnel;
(b) a proposed organisational structure for the JWM business;
(c) a document headed 'Malt Sales Project Summary';
(d) a document headed 'Transformation Project - Malt Sales Project Summary Presentation' dated 5 September 2011, which referred to the 'cost base' project completed August 2010;
(f) the JWM Barley Requirements 2013 2014 document referred to at paragraph 57(j) above;
(g) a document headed 'Barley Acquisition - Steering Committee',[12] which stated, under the heading 'Confirm the baseline'
The Barley Acquisition Strategy aims to lower the average unit cost of barley by increasing the off-grade purchases. This will deliver cost savings over and above the $1.3 million currently realised.
The Malt business has already been realising savings through off-grade purchases ...
This project aims to make such savings more strategic and less reactionary
Malt believes it can increases [sic] its use of off grade barley from an average of 11% to 24%. With the cooperation of the Grain Group it plans to reach this target over 2 phases.
The remainder of this document detailed plans for each of the JWM malting plants; and
60 The key documents also included a selection of documents concerning the October 2013 investigations, as follows:
(a) an email from Dr Stewart dated 22 October 2013 which stated as follows:
As preparation for the transition to Cargill, please cease using GA for "'additive free' customers";
(b) an email from Mr Fitzgerald to Mr Wilson-Smith attaching the 22 October letter;
(c) two versions of an email sent by Mr Hughes on 22 October 2013 to, among others, Dr Stewart, Mr Wicks, Mr Youil and copied to Mr Fitzgerald. The email was headed 'Cargill Customer Review & Cargill Customer Review Key Recommendations Document'. The first version said:
Until further notice please cease correspondence and alterations/ additions to these documents immediately. I will discuss with you in more detail tomorrow.
Also, there should be no written correspondence regarding this issue until further notice, including email or other.
Further, the content of these documents and the issues discussed in them should not be discussed in any way with Cargill employees or representatives.
(d) a draft memorandum from Dr Stewart to Gary Hughes headed 'Cargill Customer Review - Key Relationships'. This document, along with the following spreadsheet, were relied upon by the Cargill parties to contend that in the period in which the October 2013 investigations took place, the Viterra parties knew that JWM was not in a position to supply malt in accordance with its customers' specifications;
(e) a spreadsheet sent by Dr Stewart to Ms Laura McIntyre on 28 October 2013 headed 'Cargill Customer Review';
(f) an email exchange between Mr Fitzgerald and Dr Stewart on 23 October 2013, where Dr Stewart sent through the Malt Certificate of Analysis Generation Procedure at Mr Fitzgerald's request, as follows:
You mentioned a Procedure governing the Certificate of Analysis Process. Is that on the Pulse or is it something you could send through to me please?
(g) an email exchange between Dr Stewart and Mr Fitzgerald concerning a draft 'talking points' document prepared by KWM on 24 October 2013, whereby Dr Stewart suggests changing the phrase 'JWM has at all times supplied malt that meets customer specifications' to 'meets customer needs';
(h) an email from Mr Fitzgerald to Mr Wicks on 24 October 2013 seeking information on customer complaints concerning the issues raised by the 22 October letter;
(i) an email from Dr Stewart to Mr Fitzgerald on 24 October 2013 attaching documents headed 'Barley Use and Additive Free Malting'. This document showed levels of compliance with correct barley variety ranging from 42 per cent at one plant to 100 per cent at another plant. The document stated as follows:
On the whole figures are in line with the Transformation Project targets for offspecification barley usage,
and referred to estimated production losses as a result of JWM ceasing to use additives;
(j) an email from Phillipa Purser of Cargill to others within Cargill dated 25 October 2013 providing an overview of her telephone call with Mr Mattiske of the previous day. She stated as follows:
Overall he believes that while a couple of JWM practices needed tightening up there was no fundamental issue. He reiterated that Glencore were completely unaware of any of these practices;
(k) an email from Mr Hughes to Mr Fitzgerald concerning a draft of the letter from the Viterra parties to Cargill dated 25 October 2013. Mr Hughes stated, among other things:
Comfortable with it now but I would point out that the last sentence of [concerning industry practice] applies to 1 and 3 but it is probably stretching it a bit for point 2 [use of off-specification barley] as this was an internal Viterra driven initiative to use cheaper barley to improve productivity, this does happen elsewhere but is stretching the industry practice covenant;
(l) a clean copy of the letter of 25 October 2013 referred to above (extracted at paragraph 13 of these reasons);
(m) Cargill's response of 29 October 2013 (extracted in part at paragraph 14 of these reasons);
(n) an email from Mr Fitzgerald to others concerning an internal telephone conference on 29 October 2013; and
(o) draft and final versions of the letter of 29 November 2013.
61 The Cargill parties contend that by their filing and service of the third party notice, the defendants have put in issue their knowledge of the existence and the extent of the Viterra Practices and the accuracy of the Warranties and representations made to Cargill during the sale process, including the precompletion representations. At paragraphs 32 and 33 of their written outline of submissions, the Cargill parties submitted as follows:
This pleading necessarily alleges that, at the time that the last Representations were deemed to have been made on 31 October 2013:
By this pleading, Glencore and Viterra have squarely put in issue their knowledge of the nature and extent of the Viterra Practices or the accuracy of the Representations and Warranties. This made it necessary for JWM and the JWM Executives to positively plead Glencore and Viterra's knowledge of these matters, including through the JWM Executives' communications with Glencore and Viterra. Glencore and Viterra cannot simultaneously allege a state of ignorance based on communications from JWM Executives while seeking to shield from scrutiny other relevant communications "that may prove, or disprove, the alleged state of mind". As a result, the Third Party Notice directly raises and lays open to scrutiny the contents of any documents in their possession that are likely to contain statements about the existence of the Viterra Practices or the truth or falsity of the Warranties.
62 In the course of his oral submissions at the hearing of the applications, senior counsel for the Cargill parties took me at some length through the relevant pleadings, in particular the third party notice, and noted that the assertion that the Viterra parties did not know of the Viterra Practices and the Viterra Policies is the predicate of the defendants' claims in the third party notice. Curiously, the defendants allege that JWM engaged in misleading and deceptive conduct when the Viterra parties controlled the JWM business, and the JWM executives were employed by the Viterra parties. By virtue of the implied allegation that they were unaware of the Viterra Practices and the Viterra Policies by reason of the failure of JWM and the JWM executives to inform them of these practices, the defendants have put their state of mind in issue, such as to open privileged communications evidencing their knowledge of the Viterra Practices and Viterra policies to scrutiny. Their pleading of reliance necessarily involves an allegation that they were unaware of these practices.
63 Further, in response to the contentions in the defendants' written outline to the effect that there has been no waiver, as the defendants have not pleaded the fact of taking advice, or the contents of advice, senior counsel referred to the decision of the Court of Appeal in Vic Hotel Pty Ltd v DC Payments Australasia Pty Ltd[13] ("Vic Hotel"), where Dixon AJA stated:[14]
I accept the applicant's submission that the judge applied the wrong test, as he focussed on a narrower question of whether the pleadings made any express or implied assertions about the contents of privileged communications, either as a material fact or as a particular to any material fact pleaded. All that was called for was an orthodox application of the principles in s 122 of the Evidence Act and in [Mann v Carnell].
There is no doubt that a party may waive legal professional privilege by the mere institution of proceedings.
64 The YWA parties also contend that the defendants have, by reason of the third party notice, put their state of mind in issue such that it would be inconsistent with them maintaining confidentiality in otherwise privileged documents. They submitted that, by putting in issue their knowledge (or lack thereof) of the existence of the Viterra Practices and the Viterra Policies, the defendants have made implied representations about the content of privileged communications. Further, the existence and the extent of the inconsistency must be considered against the surrounding circumstances, including the defendants having put in issue the state of mind of their own internal lawyer, being Mr Fitzgerald. In the current case, the client and the lawyer are one and the same, by reason of clause 31.15 of the Acquisition Agreement. If Mr Fitzgerald knew of the Viterra Practices prior to 31 October 2013, the claims against the YWA parties must fail. Senior counsel for the YWA parties submitted that it would be an absurdity for the defendants to impliedly allege that Mr Fitzgerald was at no time aware of these matters, but claim privilege over documents which would shed light upon Mr Fitzgerald's knowledge of these matters merely on the basis that Mr Fitzgerald was acting as a lawyer for the Viterra parties.
65 At paragraph 22 of their written outline, the YWA parties submitted as follows:
In terms of the statements of principle in Rio Tinto and DSE (Holdings), the defendants have, by their allegations about their state of mind (including Mr Fitzgerald's state of mind) impliedly represented that there were no communications to which Mr Fitzgerald was party, at any time before 31 October 2013, that disclosed the Viterra Practices and the Viterra Policies. There is a clear inconsistency, therefore, between making that implied assertion about those otherwise privileged communications, and yet seeking to withhold them from the third parties on the basis that they are privileged.
Secondly, and more generally, the defendants' allegations do not simply involve an implied representation that there were no communications (privileged or otherwise) involving Mr Fitzgerald that disclosed the existence of the Viterra Practices and the Viterra Policies up to 31 October 2013; the defendants' implied representation extends to any person in authority at the defendants (including, as discussed in paragraph 31 of the Background Submissions, Jason Rees, Matt Mann and David Mattiske).
Again, there would be an obvious unfairness if the defendants were to be permitted to impliedly assert in their third party statement of claim that those persons had no knowledge of the Viterra Practices and the Viterra Policies on or before 31 October 2013, and yet resist producing documents in which they were made aware of the Viterra Practices and the Viterra Policies at the relevant times on the basis of privilege. The defendants have, by their third party statement of claim, impliedly represented that their privileged communications on or before 31 October 2013 do not contain any reference to the Viterra Practices and the Viterra Policies. That implied representation gives rise to the requisite inconsistency with the maintenance of privilege over those documents.
66 Further, senior counsel for the YWA parties noted that there are very likely to be documents created on or before 31 October that make reference to these matters, pointing to a number of documents which were exhibited to Ms Whiting's affidavit, as well as Mr Fitzgerald's involvement in the Transformation Project. Senior counsel for the YWA parties submitted that the documents concerning the October 2013 investigations amount to 'a more direct case of issue waiver'. The defendants contend that they made the pre-completion representations by reason of the failure of the representations made by the YWA parties concerning the Viterra Practices and the Viterra Policies. The redacted portions of documents in evidence concerning the October 2013 investigations referred to Mr Fitzgerald. The schedules of privileged documents prepared by KWM make it clear that there are some documents concerning the October 2013 investigations that are subject to a claim for legal professional privilege.
67 As for the question of the inconsistency of the defendants' conduct with the maintenance of confidentiality in privileged communications, senior counsel for the YWA parties submitted that the defendants must be taken to have impliedly asserted that nothing in any privileged communication evidences that anyone told the defendants about the Viterra Practices, and that the precompletion representations were made in ignorance of the Viterra Practices. Senior counsel submitted that there is an obvious inconsistency between making these implied representations about the contents of the privileged communications, and refusing to produce them to prove the truth or otherwise of these representations.
68 In his oral submissions during the course of the hearing, senior counsel for the YWA parties submitted that the documents exhibited to Ms Whiting's affidavit (referred to and summarised in paragraphs 57 to 60 of these reasons) show that the Transformation Project was developed and promulgated at the highest level of the Viterra parties' business in order to increase the profitability of the JWM business: that is, it was not a secret. However, while the defendants raise many matters in their defence, essentially the defence is one of ignorance.
69 Senior counsel submitted that, while the authorities make it clear that the inquiry in such applications is quite fact specific, the current application is more straightforward than most: the defendants, given Mr Fitzgerald's central role in the transaction, including the October 2013 investigations, have put in issue the state of mind of their own lawyers. Senior counsel submitted as follows:[15]
The first is that this is not a case where the issue is what the defendants believed their legal position to be, this is a much more straightforward case. It is a case that concerns whether information ever came to the attention of the defendants in any form before the relevant representations were made to the plaintiff. Secondly, the issue is not simply whether the client has put its state of mind in issue and the peculiarity in this case is, for the reasons which I will have explained and I will develop further, the defendants have put in issue the knowledge of their own lawyers about the existence the Viterra practices and the Viterra policies.
The reason for that is that it was Mr Fitzgerald and also King&Wood Mallesons who drafted the acquisition agreement and sent correspondence to the plaintiff allegedly in reliance upon my clients' failure to tell the defendants something. The essence of the defendants' case is that no-one who was involved in the preparation of the acquisition agreement, the talking points to Mr Mattiske or the correspondence to the plaintiff in October upon which the claims against my clients are founded, no-one was aware of the existence of the Viterra practices and the Viterra policy and, moreover, had they been aware of that fact, the representations contained within those documents would not have been made.
So the statements of principle as referred to in these authorities, in our respectful submission, cannot be applied without regard to the fact that the situation here is somewhat different to the circumstances that are generally before a court when considering whether there is an issue waiver. The issue waiver here is much more pervasive than ordinarily occurs when this issue comes before the court.
70 Senior counsel also referred to the defendants' allegations in paragraph 59, and submitted as follows:[16]
Essentially by this allegation in paragraph 59, the defendants are alleging that had the defendants, including those four executives, known of the existence of the Viterra practices and the Viterra policies, they would not have given those warranties and would not have given those representations to the plaintiff. That allegation, therefore, involves logically the implied representation that when officers of the defendants were communicating with their lawyers about the preparation of the acquisition agreement which included those warranties, the preparation of correspondence which was sent to the plaintiff, none of those communications involved any reference to the Viterra practices and the Viterra policies. One of the striking matters, your Honour, about paragraphs 54, 55, 56, 57 down to paragraph 59 of the statement of claim is that it doesn't specify to whom the relevant representations were made at the defendants or who at the defendants relied upon them. Nevertheless, as I explained, it's clear from the statement of claim and from the architecture of the acquisition agreement itself, that the relevant decision makers about the giving of the warranties and the acquisition agreement included Mr Fitzgerald.
At the very least, the defendants' allegations in the third party statement of claim are to be understood as extending to those persons.
71 Senior counsel for the YWA parties also referred to the particulars of the third party notice provided in a letter from KWM to the YWA parties' solicitors on 8 September 2015.[17] In response to a request for particulars to whom the alleged representations by the YWA parties were said to have been made. The representations were made and communicated to at least the following people:
(a) officers, employees and agents of Glencore and Viterra involved in the preparation of the Information Memorandum;
(b) officers, employees and agents of Glencore and Viterra involved in due diligence and the preparation of the data room;
(c) officers, employees and agents of Glencore and Viterra involved in the preparation and execution of the Acquisition Agreement, including the verification and giving of the Warranties.
72 Senior counsel referred to a number of the key documents referred to by senior counsel for the Cargill parties as casting real doubts upon the defendants' implied assertion that Mr Fitzgerald was unaware of the Viterra Practices and the Viterra Policies when he was involved in the preparation of the Acquisition Agreement and in preparing the October 2013 responses, including the documents referred to at paragraphs 57 (a), (c) and (d) and paragraphs 60 (b) and (f) above. As such, it is not a matter of arid speculation that there are otherwise privileged documents which are central to and even determinative of the claims against the YWA parties.
73 Finally, in relation to the documents concerning the October 2013 investigations and October 2013 responses, senior counsel for the YWA parties submitted that the defendants are claiming privilege over documents which evidence exactly what they were told by the YWA parties. Mr Fitzgerald gave evidence that he led the October 2013 investigations. Senior counsel submitted as follows:[18]
After that investigation occurred, the defendants sent the letters of 25 and 30 October 2013, allegedly in reliance upon my clients' failure to tell them of the existence of the practices and policies. It's a clear issue waiver. You can't on the one hand allege in your statement of claim that you are unaware of the existence of practices and policies because my clients have failed to disclose them, and on the other hand claim privilege over documents that evidence exactly what the defendants were told, including by my clients pursuant to that investigation.
In terms of the statements of principle referred to in our written submissions, the defendants have implicitly alleged that pursuant to that investigation, no-one told them about the existence of the practices and policies. There are no privileged documents that refer to those issues and that the letters of 25 October 2013 and 30 October 2013 were therefore sent in ignorance of those practices and policies.
It's an obvious inconsistency between making that allegation and yet seeking to withhold from scrutiny evidence about exactly what they were told at that relevant time, including by my clients. So for all of those reasons, your Honour, we say that there's a clear issue waiver in relation to the three categories of documents specified in our summons.
74 Similarly, counsel for Dr Stewart in his written outline submitted that the claims against Dr Stewart are at the heart of the proceeding, particularly given his technical role within the JWM business, whereby Dr Stewart was directly concerned with the aspects of the business concerned with the matters which were the subject of the Viterra Practices and the Viterra Policies. Accordingly, the documents are unlikely to be peripheral to the claims against Dr Stewart in this proceeding. Given that the knowledge of the Viterra parties concerning the Viterra Practices and the Viterra Policies is a central issue within the proceeding, there will be real forensic unfairness if the question of knowledge is confined by reference to only part of the information that was available in the relevant period.
75 Counsel for Dr Stewart noted that the defendants have made the following allegations against Dr Stewart in the third party notice:
(a) on 1 August 2013, Mr Wilson-Smith (a lawyer) was informed by Dr Stewart that certain warranties were accurate;
(b) on 12 August 2013, Mr Fitzgerald (a lawyer) requested Dr Stewart to confirm whether any of the warranties were not accurate; and
(c) prior to 22 October 2013, Dr Stewart did not disclose to Viterra the Viterra Policies and the Viterra Practices.
76 Counsel for Dr Stewart submitted that the role of Viterra's lawyers is at the crux of the conduct upon which the defendants allegedly relied. The forensic unfairness arises from the Viterra parties' lawyers constituting the personnel to whom it is alleged the representations were made, in consequence of which the alleged reliance is cloaked in claims of privilege. Unless the defendants are ordered to produce the documents evidencing their knowledge of the Viterra Practices and the Viterra Policies, Dr Stewart (and the Court) will be deprived of the opportunity to examine any consideration by the Viterra parties of the alleged conduct of Dr Stewart and the knowledge of the Viterra parties, and to test the causal significance of any non-disclosure by him to any decision making by the Viterra parties.
77 During the course of his oral submissions, counsel for Dr Stewart accepted that it is not sufficient for privileged documents to be merely relevant to the issues in the proceeding. However, while in the defence to the FASOC the defendants made no positive assertions about their state of mind, in the third party notice the Viterra parties, for strategic or forensic or pecuniary reasons, 'crossed the Rubicon' and mounted a positive, affirmative case concerning their knowledge (or lack thereof), of the Viterra Practices and the Viterra Policies. The third party claim has an embedded allegation that the defendants did not know of the undisclosed matters or the inaccuracy of the Warranties. That is what elevates the current case beyond mere reliance. As in cases alleging undue influence, the entire quality of the state of mind of the defendants is raised as the issue in the third party notice. Further, the reference in the particulars provided of the third party notice of certain representations being made to lawyers means that the defendants have laid open to scrutiny communications evidencing those lawyers' knowledge and state of mind.
78 Counsel for Mr Hughes also contended that the documents sought by him ought to be disclosed by reason of the matters pleaded in the third party notice. Counsel submitted that central to the causes of action pleaded in the third party notices are assertions that:
(a) at all relevant times the Viterra parties were unaware of the Viterra Practices and the Viterra Policies;
(b) Mr Hughes failed to make the Viterra Parties aware of the true state of affairs;
(c) the Viterra parties made representations to Cargill and gave the Warranties in reliance of what Mr Hughes allegedly did or did not tell them;
(d) central to Mr Hughes' defence is the assertion that he disclosed the Viterra Practices and the Viterra Policies, and the Viterra Parties had knowledge of these matters; and
(e) while counsel accepted that mere reliance does not of itself give rise to an issue waiver, he noted the decision of Commissioner of Taxation v Rio Tinto Ltd ('Rio Tinto'),[19] where the Full Federal Court stated:
whether or not an applicant will waive privilege in alleging reliance on misleading or deceptive conduct will, as in every instance of waiver, depend very much on the particular character of the case and how it is conducted.[20]
79 Counsel for Mr Hughes contended that the way in which the Viterra parties have elected to conduct their case against Mr Hughes means that there has been a waiver of any privilege over documents relating to the Viterra parties' knowledge of the matters in the Information Memorandum and other documents provided to Cargill during the sale process, documents relating to the Viterra Parties' knowledge of the results and recommendations of the Malt Cost Review Steering Committee, documents relating to the Viterra Parties' knowledge of the use of off-grade or off-specification barley, and documents concerning the October 2013 investigations.
80 In their written outline of submissions concerning issue waiver, the defendants referred to the decisions in Archer Capital 4A v Sage Group (No 3)[21] and Ambu v Vulcanite[22] in support of their contention that the mere fact that a party pleads a cause of action that includes their state of mind as a material fact or otherwise puts their state of mind in issue does not necessarily amount to a waiver of privilege, even where legal advice may be relevant to that state of mind. The defendants submitted that legal professional privilege is a fundamental right and ought not lightly be found to be waived. Privilege always trumps relevance: there is no question of any balancing of the two being required. The defendants have not pleaded the fact of taking advice, let alone the contents of any such advice.
81 In his oral submissions during the course of the hearing, senior counsel for the defendants submitted that no issue waiver could possibly arise by reason of the pleading of the defendants' defence. As for the third party notice, he noted that in paragraph 13, the defendants state that they deny Cargill's claims in the FASOC, and in the third party notice, the defendants use the formula 'further or alternatively, for the purposes of this third party statement of claim only' many times. Accordingly, the defendants' primary position in the third party proceedings is a denial of Cargill's claims.
82 As for the submissions of counsel for Mr Hughes concerning the use of the word 'disclose' throughout the third party notice, senior counsel submitted that:[23]
The word 'disclosed' is an ordinary English word and it means various things in various contexts. Here, the weight placed on the word 'disclosed' can't be borne by that word in the context. All 'disclosed' means there is inform, let know. It's not intended to carry with it the meaning, 'I am hereby revealing to you what you do not already know.' That's an entirely artificial approach to the construction of the pleading and it's only natural that it would be used in this context because the definition chose by the plaintiff in these matters is the undisclosed matters.
So the pleader says, well, none of these gentlemen disclosed the undisclosed matters. All it means is, none of these gentlemen told the defendants about the undisclosed matters. It's not bringing forward as an issue in the pleadings the state of mind of the defendants.
83 In response to the submissions made by senior counsel for the JWA parties, senior counsel for the defendants submitted that senior counsel for the JWA parties was incorrect when he submitted that the third party notice contains an implied representation:[24] 'Pleadings don't contain any implied representations. They are statements of the party's case ... '
84 Further, senior counsel for the defendants submitted that the concept of reliance is somewhat broader than that contended for in the submissions of the applicants. Senior counsel submitted:[25]
Just because, for example, someone might know something about the subject matter of the representations, here the JWM executives' representatives, doesn't mean that the person cannot be said to have relied on the representations. Indeed, that person may make a decision about, do I believe the representations or do I believe something else? I'm not talking about the particular facts here but this is a contention that by this pleading, there's been a waiver in relation to an issue.
We say that merely by pleading reliance upon the JWM executives' representations, the person said to rely is not saying there were no other influences operating upon me in making the decision I did. Our learned friend's submission depends upon this notion that implicit in the use of the word 'reliance' is an implied representation that Glencore and Viterra, when they made the representations and gave the warranties, knew nothing about questions of how certificates were made up and so on.
It's not the converse of an allegation of reliance that there is nothing else that Glencore and Viterra know when making the representations or the warranties. Again, the argument that's put, which is an argument of issue waiver, simply can't be sustained by reliance on that word 'reliance'.
85 Senior counsel for the defendants referred to the decision of the Court of Appeal in Vic Hotel, and submitted that the applicants were seeking, in effect, to 'force waiver' of the defendants' legal professional privilege.
86 Finally, senior counsel for the defendants noted that any question of issue waiver depends upon an analysis of the precise issues and the facts of a particular case, and the issue is not to be decided by analogy with the facts of any other case.
87 In his reply, senior counsel for the YWA parties submitted that the defendants, in focussing upon the plea of reliance as being the source of any issue waiver, failed to address the main contention of the applicants, being that the issue waiver arises not only from the defendants' plea of reliance in the third party notice, but also the allegation that, by their silence, JWM and the JWM executives represented that the Viterra Practices and the Viterra Policies didn't exist. The defendants are logically asserting that these policies and practices were not brought to their attention in any other way. The defendants have laid open their privileged communications to scrutiny because the alleged representations were said to have been made to, and relied upon by, among others, Mr Fitzgerald.
88 Senior counsel for the YWA parties submitted that it is clear on the authorities that it is not possible to ascertain whether a representation by silence amounted to misleading and deceptive conduct unless it is known what the alleged recipient knew at the relevant time. He referred to the decision of the Court of Appeal in Steutel & Anor v Kimple & Anor[27], where Nettle JA (as he then was), stated as follows:
But as Chernov JA makes plain, conduct is only misleading or deceptive if it is capable of inducing error. Whether it is misleading or deceptive is therefore a question of fact to be determined in the context of the known facts and circumstances. In the end, conduct cannot be characterised as misleading or deceptive unless it conveys a misrepresentation. And if the circumstances of its communication, and the state of knowledge of the recipient, are such as to prevent misrepresentation, it matters not that in other circumstances the result could have been different.
89 Senior counsel for the YWA parties submitted that the question of whether an allegation involves a representation as to the contents of privileged documents is not determinative of the question of whether the defendants have laid privileged communications open to scrutiny. Mr Fitzgerald clearly had a central role in making decisions: it will be impossible to cross examine him if the defendants maintain privilege over documents which would show what he knew at the relevant time.
90 Counsel for Dr Stewart submitted that the reservation made by the defendants in paragraph 44 of the third party notice (to the effect that the allegations made in the third party notice were made only for the purpose of the third party notice) does not protect the defendants from any inconsistency which might flow from the allegations in the third party notice.
91 Senior counsel for the Cargill parties rejected the defendants' contention that the allegations in the third party notice didn't put into issue the defendants' state of mind. Referring to the decision of the Court of Appeal in Protec Pacific Pty Ltd v Stueler Services GmbH & Co KG [28], counsel for the Cargill parties noted that reliance is always a question of causation: in order for the defendants to succeed in their third party claims, they must be able to show that the alleged representations were a substantial, or appreciable cause of them making the representations in the course of the sale process, the pre-completion representations, and the giving of the Warranties. The defendants can't rely upon representations they know to be false.
92 Clause 31.15 of the Acquisition Agreement is reproduced at paragraph 6 of these reasons. The Cargill parties, in their written outline of submissions, submitted that the inclusion of clause 31.15 in the Acquisition Agreement is inconsistent with maintaining privilege over the communications of the Viterra executives nominated in that clause in relation to the accuracy of the Warranties, particularly by reason of the inclusion of Mr Fitzgerald, given that his knowledge of the JWM business is likely to be sourced from privileged communications.
93 In his oral submissions during the course of the hearing, senior counsel for the Cargill parties submitted that the effect of clause 31.15 is that in any dispute between the parties concerning the accuracy of any Warranties which are made 'to the best of Viterra's knowledge', the knowledge of the four people nominated in clause 31.15 will be in issue, and that the inclusion of Mr Fitzgerald is a waiver of privilege in any communication evidencing his knowledge. If Mr Fitzgerald's evidence is that his role is entirely legal in nature is accepted, then almost all of his knowledge would have been acquired through privileged communications.
94 Senior counsel for the defendants submitted the defendants' denial of its breach of the warranties does not lead to a waiver of privilege. Clause 31.15 goes no further than making the question of Mr Fitzgerald's knowledge relevant, which is insufficient to amount to a waiver of privilege.
95 In his oral submissions during the course of the hearing, senior counsel for the defendants submitted that nothing in clause 31.15 of the Acquisition Agreement abrogates legal professional privilege. Legal professional privilege is a fundamental right, which may only be abrogated by clear words. The fact that Mr Fitzgerald is a lawyer does not change the position: as he conceded in his evidence, a lawyer in a position such as his will acquire knowledge of commercial matters where no question of legal professional privilege arises.
96 Senior counsel for the Cargill parties, in his submissions in reply, submitted that it is inconsistent with the maintenance of legal professional privilege to represent a lawyer's knowledge of the content of privileged communications as the knowledge of the company. The principle of statutory construction requiring clear words for the abrogation of legal professional privilege is not relevant to whether a party, by its conduct, has waived legal professional privilege.
97 In their written outline, the Cargill parties submitted that before completion, Mr Mattiske disclosed the substance of the outcome of the October 2013 investigations and, further, after completion, the Viterra Parties provided the Schedule D documents.
98 In relation to the defendants' claim for privilege over the documents relating to the October 2013 investigations, senior counsel for the Cargill parties submitted that the October 2013 responses disclosed the outcome of privileged communications, thus there has been a waiver of privilege. As for the Schedule D documents, the defendants consented to the filing of the FASOC which enumerated the Schedule D documents, and no application has been made to restrain the Cargill parties' use of the Schedule D documents.
99 The Cargill parties relied upon the decision of Almond J in Colin Campbell (Chemicals) Pty Ltd v The Members of Lloyd's Syndicate QBE Casualty 386 & Ors ("Campbell")[29] whereby a party is said to have acted inconsistently with the maintenance of privilege in circumstances where there had been inadvertent disclosure of privileged communications, and a failure of the party which had made the error to promptly alert the other party to that error and seek to recover the documents concerned. His Honour stated as follows:
Even if it is accepted that the 2011 Underwriters' privilege in the documents was not lost at the initial point of disclosure (by operation of s 122(4)), in my view, this does not determine the effect of the subsequent conduct of the disclosing party. The Disclosed Documents were disclosed in March 2013. A outlined earlier, the 2011 Underwriters and their lawyers have not since sought to restrain the use of the documents, nor have they sought to have the documents returned. Indeed, some of the Disclosed Documents have found their way in to Campbell's pleadings. Whilst it is unclear precisely when the 2011 Underwriters discovered that the documents had been disclosed, they must be taken to have known that some of the documents had been disclosed when Campbell filed its Reply and Defence to Counterclaim on 30 August 2013, and certainly by the time submissions were filed on 19 February 2014 in relation to the hearing before the Associate Judge.
In taking no steps to recover or limit the use of the Disclosed Documents, the 2011 Underwriters have, over many months, acted in a way inconsistent with the maintenance of privilege over the documents.
In this way, any client legal privilege that may still have subsisted in the documents, following their initial deliberate, but unauthorised, disclosure, has, in my view, been lost by the subsequent conduct of the 2011 Underwriters in failing to protect their privilege, such conduct being wholly inconsistent with the maintenance of privilege in the Disclosed Documents.
This finding has the further consequence that the documents referred to in the Disclosed Documents, which are necessary to a proper understanding of the Disclosed Documents, are also required to be produced. Without the attachments the reader is left to speculate on the content of the communication. In my view, the attachments are essential to a proper understanding of the relevant Disclosed Documents.
100 The Cargill parties also rely upon s 126 of the Evidence Act which provides that:
If, because of the application of s 121, 122, 123, 124 or 125, this division does not prevent the adducing of evidence of a communication or the contents of a document, those sections do not prevent the adducing of evidence of another communication or document if it is reasonably necessary to enable a proper understanding of the communication or document.
101 Accordingly, to the extent that there are privileged documents which assist in the understanding of the Schedule D documents, they ought to be produced.
102 In their written outline of submissions, the defendants referred to the evidence of what took place at handover, being the evidence of Mr Wilson-Smith, and submitted that the handover on the sale of the company of documents to which it was previously a party which were privileged to its parent company at that time does not constitute an act inconsistent with the maintenance of the privilege. The solicitors for the defendants have consistently maintained their position that they do not consent to the disclosure of the otherwise privileged documents.
103 In his oral submissions during the course of the hearing, senior counsel for the defendants submitted that the Cargill parties' reliance upon s 126 of the Act requires an examination of individual documents in the possession of the Cargill parties: that is probably an issue best dealt with at trial. Nothing has been advanced by the Cargill parties as to why provision of the documents concerning the October 2013 investigations are necessary for a proper understanding of the Schedule D documents.
104 As for the question of the Viterra parties' claim for privilege in the Section D documents, senior counsel for the defendants submitted that the documents were handed over at completion because they were the property of JWM: the entitlement of JWM to possession of these documents does not affect the Viterra parties' claim to privilege, being a right attaching to the communications in the documents. Accordingly, Campbell does not apply.
105 In his reply submissions, senior counsel for the Cargill parties repeated his submissions that the handover of the Schedule D documents at settlement is inconsistent with the maintenance of the privilege. There is no evidence about whether any claim for privilege was pressed at settlement. He relied upon the decision of J Forrest J in Mullett v Nixon & ors (Subpoena application)[30] in support of their submissions that the terms of s 126 are to be given a broad application.
106 In their written outline of submissions, the Cargill parties submitted that the onus lies upon on the Viterra parties to establish that Mr Fitzgerald has the requisite independence such as to enable the Viterra parties to maintain a claim for legal professional privilege in documents in which he is purportedly providing legal advice to the Viterra parties. The Cargill parties point to the following matters by reason of which it was said that Mr Fitzgerald could not provide disinterested advice:
(b) his annual bonus is linked to the financial performance of the Viterra parties, which in 2013 must have been based in part on the sale price of the JWM business;
(c) he was named in clause 31.15 of the Acquisition Agreement; and
(d) any advice Mr Fitzgerald gave in the course of the October 2013 investigations concerned allegations involving him personally.
107 In his oral submissions at the hearing, senior counsel for the Cargill parties relied upon the decision of Elliott J in IOOF Holdings Ltd v Maurice Blackburn ("IOOF")[31] and Branson J in Rich v Harrington[32] as support for the proposition that, in order for advice given by inhouse lawyers to be protected by legal professional privilege, the party claiming privilege bears the onus of establishing the requisite degree of independence of the lawyer from his or her employer. In the current case, there is a question as to whether Mr Fitzgerald had the necessary detachment from the Viterra parties, particularly given his inclusion in clause 31.15 of the Acquisition Agreement. The nature of Cargill's allegations in this proceeding necessarily call his role into question.
108 Senior counsel handed up and referred to an article authored by Kyrou J when still in private practice.[33] The introductory paragraph of the article stated as follows:
For general counsel fulfilling dual roles in public companies, the watchwords are 'capacity' and 'independence' in order to retain legal professional privilege over documents they prepare.
109 In the article, Kyrou J referred to the relevant leading authorities, a number of which are relied upon by the parties in the current application, and discussed some of the indicia of independence, such as terms of the employment contract, the inhouse lawyer's position in the organisational hierarchy of the company, whether the lawyer's remuneration is linked to the financial performance of the business, and to whom the inhouse lawyer reports.
110 Senior counsel for the Cargill parties submitted that Mr Fitzgerald lacked the requisite independence, based upon the objective facts which have emerged from the evidence, including:
(a) there being no reference to his independence in his employment contracts or performance reviews;
(b) from 2012 he reported to the country manager of the Viterra parties;
(c) his employment contract included a provision for an annual bonus to be paid of up to 25 per cent of his remuneration, based in part upon the financial performance of the Viterra parties. In fact, the bonus paid in the 2013 year, when the JWM business was sold, was closer to 50 per cent;
(d) Mr Fitzgerald's failure to disclose his employment contract and prior ownership of shares in Viterra in his affidavit suggests that his evidence should be treated with some caution: in particular, his evidence that he was not involved in financial or commercial matters should be rejected; and
(e) As for his nomination in clause 31.15 of the Acquisition Agreement, how could he possibly be independent in October 2013 when he was involved in crafting the October 2013 responses, when he had a personal interest in the dispute?
(a) Although many authorities have referred to it, it is not settled that there is a separate requirement of independence in Australian law that goes further than the requirement of professionalism.
(b) Independence here means freedom from pressures brought to bear by the employer and the question of any personal loyalties, duties or interests, and professional detachment.
(c) When an employee legal adviser is performing that role in a communication concerning a legal matter he or she must act independently; the fact of non- legal roles does not mean that the lawyer is incapable of acting independently.
(d) In cases where there has been some doubt as to independence, on occasion the court has examined the documents - this is not appropriate here, where the challenge is made as a point of principle only, and the independent barrister has already reviewed 2,200 documents involving Fitzgerald and upheld the claims for privilege.
(e) While establishing independence is a part of the privilege holder's ordinary burden in establishing the claim to privilege, the court in Australian Hospital Care referred to the party challenging privilege bearing the burden of overturning a presumption arising from the privilege holder's affidavit of documents.
112 The defendants submitted that the position of Mr Fitzgerald is similar to the position of the in-house counsel considered in Archer (No 2). At paragraph 24 of their outline, the defendants submitted as follows:
The affidavit sworn by Fitzgerald establishes that he had the requisite degree of independence. Importantly:
(a) He has held the role of general counsel at Viterra Limited for nearly seven years (initially as Director - Legal, then as General Counsel), and in that capacity has been the lead lawyer for the Viterra group and supervised the internal legal team.
(b) He has held no other role apart from infrequent routine tasks as company secretary, which he has kept separate from his legal role.
(c) His involvement in the sale of JWM was limited to his role as general counsel, and he was a member of the executive team for the Viterra group in his capacity as general counsel.
(d) He was, in a legal capacity, appointed as a member of a steering committee for a 'transformation project' concerned with storage and handling, but was not a member of the steering committees for two other transformation projects, namely the Malt Cost Review or the Road Freight Logistics Improvement Project.
(e) Furthermore, he positively affirms his independence, including that at no time did he alter his legal advice at the request of the business nor was his legal advice subject to vetting or amendment.
(f) He explains that part of his annual bonus was linked to the general performance of the business, which was standard for Viterra Employees. Although, at the end of FY2013 he received a bonus for his contribution in restructuring Viterra including the sale of JWM and two other large divestments, this could not have affected his independence as it was unexpected, and he was not offered any financial incentive or bonus linked with the sale of JWM.
113 In his oral submissions during the course of the hearing, senior counsel for the defendants submitted that there is nothing in the language of ss 117 and 118 of the Act which imposes a requirement that, to attract the protection of legal professional privilege, any lawyer providing legal advice to his or her employer must satisfy some criteria of 'independence'. Senior counsel submitted:[36]
the court should construe the words of the statute and not any gloss upon the statute which judges may have found useful from time to time to explain why they are making a decision about the meaning and the effect of the statute.
114 Senior counsel for the defendants submitted that there was nothing in Mr Fitzgerald's evidence to suggest that he did not understand the difference between commercial and legal advice. As for the question of his ability to bring a disinterested mind to his task of giving legal advice - no one is capable of being wholly disinterested in any matter. Further, just because his contractual documents make no reference to independence, does not mean he does not understand the concept.
115 Senior counsel submitted that I should be cautious of drawing adverse inferences concerning Mr Fitzgerald's evidence given that he will be an important witness at the trial. In any event, he was not dissembling in his evidence.
116 As for the submission that the inclusion of Mr Fitzgerald in clause 31.15 of the Acquisition Agreement was inconsistent with Mr Fitzgerald giving legal advice, senior counsel for the defendants asked, rhetorically, did he stop giving legal advice after 4 August 2013?
117 As for the question as to whether Mr Fitzgerald lacked independence by reason of clause 31.15 after the Viterra parties received the 22 October 2013 letter, senior counsel noted that Mr Fitzgerald would be comforted by the terms of clause 31.15, which expressly provides that the nominated persons have no personal liability to Cargill.
118 In his submissions in reply, senior counsel submitted that I am bound by the statements of principle made by Elliott J in IOOF. As for the suggestion that I should not make any adverse findings about Mr Fitzgerald because he will be a witness at the trial, senior counsel noted that he was put forward as a witness in this application. The terms of his employment contract and his entitlement to bonuses are all relevant matters. As for the relevance of his inclusion in clause 31.15, Mr Fitzgerald may not have any exposure to personal liability as a result of giving the Warranties, but any adverse findings in that regard could damage his personal and professional reputation.
Section 125 Issue
119 In their written outline of submissions, the Cargill parties submitted that the documents exhibited to Ms Whiting's affidavit and relied upon by the Cargill parties 'gives colour to the charge' that the Viterra parties knowingly deceived the customers of the JWM business, and knowingly made the representations and the warranties in the course of the sale process, particularly in October 2013. At paragraph 24 of their submissions, the Cargill parties stated as follows:
First, the materials shows that, before mid-2013, executives and employees of Viterra and Glencore were aware of:
120 As for the October 2013 investigations, the Cargill parties submitted as follows:
Second, the October 2013 Investigation made plain that the Senior Executives were aware of, or turned a blind eye to, the nature and extent of the Viterra Practices. For example, on or before 25 October 2013, Mr Fitzgerald was informed:
Despite these matters, Glencore and Viterra sent the October 2013 Responses stating:
121 The Cargill parties submitted that there are reasonable grounds for believing that the October 2013 pre-completion representations were deliberately and intentionally crafted to conceal the true nature and extent of the Viterra Practices, and as such, the documents relevant to the October 2013 investigations were in furtherance of that deceit.
122 In his oral submissions during the course of the hearing, senior counsel for the Cargill parties took me in some detail to the documents referred to at paragraphs 57 to 60 of these reasons in support of his contentions that the Viterra parties' conduct amounted to perpetration of a fraud upon JWM's customers, and upon Cargill. Senior counsel noted that I need only find that there were 'reasonable grounds' for finding that there had been a fraud. He referred to the decision of Elliott J in Talacko v Talacko,[38] as support for the following propositions:
(a) it is not necessary for the Cargill parties to prove fraud on the balance of probabilities, but rather, to prove evidence to give 'colour to the charge';
(b) documents prepared 'in furtherance of a fraud' are documents which assist or advance the fraud;
(c) conduct after the fraud can sometimes be in furtherance of the fraud, if that conduct helps to conceal the fraud;
(d) where the fraud has already been committed, obtaining advice about the consequences of the fraud does not constitute a fraud; and
(e) where the fraud is ongoing, advice obtained during the course of that ongoing fraud that may inform the conduct of the fraudster will be in furtherance of the fraud.[39]
123 In the current case, senior counsel for the Cargill parties submitted the relevant fraud was as follows:[40]
It's not disclosing the true situation about the practices that were being adopted in the preparation of the malt and the certificates of analysis and in relation to the representations, we would say in light of their knowledge, not disclosing the full extent of the Viterra practices, particularly in response to the letters of 22 and 25 October.
124 Senior counsel for the Cargill parties submitted that the documents I was taken to and described in paragraphs 57 to 60 of these reasons are:[41]
... more than sufficient to give colour to the charge that the following two frauds were committed: first, the fraud on the customers of Joe White. These customers were sold malt that didn't comply with contractual requirements and were given false certificates of analysis to cover up noncompliance. Deliberate steps were taken to hide the COA procedure document from the customers and auditors. The range of the persons involved included Mr Hughes, Mr Gordon, other employees, Mr Fitzgerald, Mr Rees and Mr Mattiske as alleged in schedule D.
What we say is that executive and employees of Viterra, before mid-2013 were aware of, one - this is in paragraph 24 of our submissions - the Transformation Project and its effect on JWM's ability to meet customer contract requirements; two, the practice of altering test results provided to customers without informing customers that those test results had been altered; three, that a document formalising that practice which was not to be stored in official procedures and was not to be made available to customers or auditors; and four, the use of barley that was not approved for malting without informing customers.
That is the fraud on the customers and we say that was known by executives and employees of Viterra and Glencore before mid-2013. What we say secondly, and as a result of that, Glencore and Viterra deceived Cargill Australia before and after the acquisition agreement was signed on 4 August.
125 As for the conduct of the Viterra parties in preparing the October 2013 responses, senior counsel relied upon the following matters to establish that the October 2013 responses were made when senior executives of the Viterra parties were aware of or turned a blind eye to the nature and extent of the Viterra Practices such as to give 'colour to the charge' of fraud:
(a) Mr Fitzgerald being informed on or before 25 October 2013 that an average of only 74 per cent of malt supplied was manufactured from barley varieties specified in customer contracts, in line with Transformation Project targets, and there would be lost production of 14,000 tonnes to supply additive free malt;
(b) Mr Fitzgerald was aware of the details of the Certificate of Analysis procedure; and
(c) Mr Fitzgerald was told that the October 2013 responses should say that JWM supplied malt which met customer needs, not customer specifications.
126 In their written outline, the defendants submitted the deceit claim as pleaded seems to focus upon all of the representations said to have been made by the Viterra Parties, but appears to be principally directed at the pre-completion representations. The defendants submitted that the evidence relied upon is not sufficient to establish that there are privileged documents prepared in furtherance of a fraud, and that there is insufficient basis for the Court to be satisfied that a fraud has been committed, as a detailed review of documents exhibited to Ms Whiting's affidavit does not bear out the assertions made out by her in the affidavit, which are objectionable to the extent that Ms Whiting seeks to go beyond the contents of the documents themselves. The defendants submitted that, most importantly, it has not been shown that any particular communications or class of communications were made for the purpose of committing a fraud or in order to give continuing efficacy to a fraud. Even with respect to the October 2013 investigations, it has not been shown that any advice was sought for any reason other than as to the consequences of past conduct, which does not fall within the terms of s 125 of the Act.
127 Senior counsel for the defendants, in his oral submissions at the hearing, noted that the test imposed by s 125 of the Act provides that the Court must consider that there are reasonable grounds that a fraud was committed and a communication was made or a document produced in furtherance of that fraud. He urged caution at this stage of the proceeding, particularly when allegations of fraud are made against a legal practitioner, particularly when that legal practitioner is going to be a witness at trial.
128 Senior counsel for the defendants queried what are the reasonable grounds relied upon to support such an allegation, given the seriousness of the allegation? Mr Fitzgerald is a practitioner of some standing, he gave evidence in a straightforward manner, and there was nothing about his evidence which: 'suggested the taint of fraud about his approach to his discharge of his duties as the legal officer of the company.'
129 Senior counsel for the defendants noted that it was not put to Mr Fitzgerald that anything he did was in furtherance of a fraud, and the documents relied upon by the Cargill parties were not put to him.[42] Rather than making a finding that there are reasonable grounds for believing that a respectable solicitor was engaged in a fraud, the safe course is to leave the matter to trial.
130 Senior counsel for the defendants turned to the key documents relied upon by the Cargill parties and described in paragraphs 57 to 60 above, and made the following observations:
(a) Mr Fitzgerald was involved in the Storage & Handling component of the Transformation Project, not the Malt Cost Review;
(b) the customer complaint and the issue about the specifications had nothing to do with the Viterra Practices, and preceded the date that Glencore acquired the Viterra parties;
(c) the email exchanges concerning the Certificate of Analysis Generation Procedure suggests that the JWM staff were hiding things from the Viterra parties;
(d) the email from Mr Fitzgerald of 23 October 2013 requesting that Dr Stewart provide a copy of the Certificate of Analysis procedure suggests that Mr Fitzgerald knew nothing about the Viterra Policies prior to that time;
(e) we do not know why changes were made to the Certificates of Analysis: there is no evidence as to the purpose for which the changes were made, and no evidence of any involvement of Mr Fitzgerald;
(f) the email from Dr Stewart to officers of JWM on 22 October 2013 instructing them to cease using additives for additive free customers is not a document made in furtherance of a fraud;
(g) the 22 October letter states that JWM disclosed to Cargill the Viterra Practices;
(h) many of the parameters in the Cargill Customer Review documents do not concern the Viterra Practices;
(i) the reference to 'needs' rather than 'specifications' in the October 2013 responses is merely prudent. The effect of the October 2013 responses is ultimately a matter for trial, but does not constitute fraud; and
(j) in his telephone call with Cargill, Mr Mattiske reiterated that Glencore was completely unaware of the Viterra Practices. Nothing in that conversation suggests there has been a concealment of a fraud.
131 In his submissions in reply, senior counsel for the Cargill parties submitted that the very purpose of s 125 of the Act and the "reasonable grounds" test is to enable the Court to consider these matters prior to trial. He submitted there is more than adequate evidence to find there are reasonable grounds to find that frauds had been committed by JWM and the Viterra parties. There is no higher threshold simply because a lawyer is involved in any communications: indeed s 125 presumes the involvement of lawyers. The documents referred to at paragraphs 57 (k) and (l) above clearly show that JWM was concealing the Viterra Policies from its customers and auditors, and these documents were not in the due diligence materials
132 Both Mr Hughes and Dr Stewart seek documents which they were in their capacities as executives of JWM Pty Ltd either authors or recipients. Counsel for Mr Hughes in his written outline of submissions, submitted that no valid privilege claim could be made under either s 118 or s 119 of the Evidence Act as against Mr Hughes because the documents lacked the necessary character of confidence as between the Viterra Parties and Mr Hughes. He submitted that the Viterra Parties must establish that the production of documents involves something being revealed that was not previously known, that is, revealing something confidential that was previously unknown to the person to whom the revelation was made. Mr Hughes' submissions referred to the decisions of Fisher v Federal Commissioner of Taxation,[43] Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd,[44] Ashby v Commonwealth of Australia (No 2),[45] and Hannaford v RSPCA of New South Wales.[46] Accordingly, the Viterra parties have not and cannot establish that the Hughes documents were confidential documents or confidential communications.
133 Similarly, counsel for Dr Stewart submitted that there can be no privilege in communications in which Dr Stewart was the author or recipient because it was never confidential as against him. Dr Stewart would have been under an obligation not to disclose the contents of his communications to others, but it cannot sensibly be said to be confidential from him. Counsel submitted it is possible to distinguish the current application from circumstances where a document is disclosed on terms restricting the basis upon which a party receives the communication and from a situation where an officer of a company had a power to access confidential documents but never did so. It is not possible to re-establish confidentiality against a person who is never a stranger to the communication.
134 In his oral submissions during the course of the hearing, counsel for Dr Stewart submitted that communications to which Dr Stewart was a party are not 'confidential communications' within the meaning of section 117 of the Act. Production of these documents cannot amount to a 'disclosure' to him.
135 The defendants submitted that the starting point is that the documents were privileged by reason of being confidential at the time they were made and absent the litigation, Mr Hughes and Dr Stewart would have no right to access the document because they no longer have any association with the Viterra parties. The defendants relied upon the decisions stated in State of South Australia v Barrett,[47] and William Buck (WA) Pty Ltd v Faulkner (No 4) ("William Buck")[48]
136 In his oral submissions during the course of the hearing, senior counsel for the defendants noted that neither counsel for Mr Hughes or Dr Stewart referred to any authority in support of their contentions, probably because it is such a novel application. Senior counsel referred to ss 117 and 118 of the Act, noting that the Viterra parties are the "client" for the purpose of s 118 of the Act, and they have the benefit of the privilege. The fact that Dr Stewart and Mr Hughes may have been parties to the communication is immaterial.
137 In his submissions in reply, counsel for Dr Stewart re-iterated his submissions that a communication to which Dr Stewart is a party cannot be confidential from him, and sought to distinguish William Buck on the basis that Dr Stewart is being sued in the same capacity as in which he came to have access to the documents.
138 A helpful summary of the principles concerning issue waiver is contained in the written outline of submissions filed on behalf of Mr Hughes, as follows (omitting the references to the judicial officers in the authorities referred to in these submissions):
(a) Section 122 of the Evidence Act is intended to import the common law test for issue waiver: Vic Hotel Pty Ltd v DC Payments Australasia Pty Ltd [2015] VSCA 101; (2015) 321 ALR 191.
(b) What brings about the waiver is the inconsistency, which the courts, when necessary informed by considerations of fairness, perceive, between the conduct of the privilege holder and the maintenance of the confidentiality: Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1.
(c) In some cases, waiver will be imputed by the law with the consequence that a privilege is lost, even though that consequence was not intended by the party losing the privilege. Intention will be imputed when the actions of a party are plainly inconsistent with the maintenance of the confidentiality which the privilege is intended to protect: Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 250 CLR 303.
(d) Issue waiver is not limited to where there has been express or implied assertions about the contents of the communication, and extends to circumstances that include the laying open of the confidentiality to necessary scrutiny, and by doing so (that is by expressly or impliedly making an assertion about the contents of the communication or laying the communication open to scrutiny) the inconsistency enunciated by is brought about - it is the existence of that inconsistency that is important: ; ;
139 In my view, the defendants have, by reason of their pleading of their claims in the third party notice against JWM and the JWM executives, put the extent of their knowledge of the Viterra Practices and the Viterra Policies in issue, such as to lay open to scrutiny privileged communications which evidence or otherwise bear upon that knowledge.
140 I accept that the mere pleading of reliance upon alleged misrepresentations is, of itself, not sufficient to give rise to an issue waiver. However, as was agreed by all parties, the application of the principles in Mann v Carnell,[49] as illuminated by the statements in the decisions of DSE (Holdings) Pty Ltd v Intertan,[50] Rio Tinto,[51] and Vic Hotel,[52] is a very fact-specific exercise. As emphasised by senior counsel for the YWA parties, the knowledge of the defendants is a central issue in this proceeding. It is of some significance to the defence, given the terms of clause 31.15 of the Acquisition Agreement, but it is central to the claims in the third party notice. I agree that, to the extent that forensic unfairness is a relevant factor, JWM and the JWM executives would be severely disadvantaged in testing the defendant's assertions if the privileged communications evidencing the knowledge were withheld from them.
141 The forensic unfairness of the defendants refusing to disclose documents which evidence their knowledge of the Viterra Practices and the Viterra Policies during the relevant period is in part highlighted by the submissions advanced by senior counsel for the defendants in response to the applicants' contentions that, in order to have relied upon the alleged misrepresentations of JWM and the JWM executives, by pleading their reliance upon these representations, the defendants are impliedly asserting their ignorance of the Viterra Practices and the Viterra Policies when they gave the Warranties and made the representations to Cargill. Senior counsel's submissions were to the effect that no such implied representation, or perhaps more accurately 'embedded allegation' was made by the mere pleading of reliance, because it is not necessary for parties in the position of the defendants to establish that they knew nothing about the matters which were the subject of the alleged representations. That submission, with respect, highlights the difficulties faced by JWM and the JWM parties in defending the claims made against them by the defendants, particularly given that the representations said to have been made by them are largely said to have been made by silence. The authorities make it clear that reliance is essentially a question of causation.[53] In cases where a party is alleging misrepresentation by nondisclosure, the liability of that party is highly dependent upon what the party who makes such a claim knew or did not know about the relevant subject matter. If, as the defendants seem to be contending, it is not necessary for the defendants to establish that they were in complete ignorance of the Viterra Practices and the Viterra Policies, this brings the issue of what precisely did they know and when into even sharper focus.
142 In Wayne Lawrence Pty Ltd v Hunt and ors,[54] Hodgson J adopted the following useful (and oft cited) formulation of what ought to be taken into account when determining whether the advancement by a party of a certain state of mind in a pleading amounts to conduct inconsistent with the maintenance of legal professional privilege, as follows:
Accepting that the decision of the majority in that case correctly interprets and applies s 122(1), it seems to me still that the question of whether the advancing of a person's state of mind is to be taken as consenting to the giving of evidence of confidential communication, or as waiving privilege, is a matter of degree in each case. It does not seem to me that the assertion of a belief must, in all circumstances, be taken as consenting to evidence being led of any legal advice or confidential communication that could be relevant to whether such a 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 probability or otherwise of the legal advice being relevant to the holding of that 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 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.
143 Applying the analysis above, although here the relevant state of mind is knowledge, rather than belief, I would make the following observations:
(a) as to the significance of the defendants' knowledge: I accept the submissions, as advanced by each of the applicants, that the defendants' knowledge is central to the defendants' claims against JWM and the JWM executives;
(b) as to the probability that the defendants' knowledge would have been informed by legal advice: it is likely that the Viterra parties' knowledge would have been informed by legal advice, particularly in the course of the October 2013 investigations, which were led by Mr Fitzgerald, and the reference by KWM in the schedule of privileged documents to documents concerning the October 2013 investigations. It may also be that other privileged documents may evidence the Viterra parties' knowledge, such as the redacted document referred to in paragraph 57(d) above; and
(c) no inspection has taken place, but may well need to be undertaken, perhaps by independent counsel, in order to establish the extent to which legal advice, in particular, documents concerning the October 2013 investigations, bears upon the knowledge of the Viterra parties, and the extent to which the advice goes to other issues which are not the subject of any waiver.
144 However, the terms of the summons issued by the applicants cast the net too widely, insofar as they seek to obtain privileged documents which record or evidence the Viterra Practices and the Viterra Policies, as opposed to the defendants' knowledge of these matters during the relevant period. Whether the Viterra Practices and the Viterra Policies existed, and their extent and impact is an issue at trial, but it is not an issue upon which the defendants have laid open their state of mind to scrutiny. Further, I would confine the category of documents to be produced to include only documents which evidence the knowledge of the Viterra personnel listed in clause 31.15 of the Acquisition Agreement. I would do so on the basis that, given the claims against the third parties are predicated upon Cargill being successful in its claims against the defendants, the relevant knowledge of the defendants must be taken to be the knowledge of the persons nominated in clause 31.15 of the Acquisition Agreement.
145 There is no doubt that this is the case for the purposes of the claims with respect to the alleged breach of the Warranties, but I also consider that this extends, at least for present purposes, to the claims for misleading and deceptive conduct, including with respect to the precompletion representations. While Cargill has in its particulars alleged that a number of Viterra and JWM personnel knew of the Viterra Practices and the Viterra Policies, including Mr Hughes and Dr Stewart, and has alleged that Mr Hughes and/or Mr Youil made the 18 and 19 July statements, it seems to me that Cargill, in circumstances where the Acquisition Agreement specified the identities of those said to constitute the 'corporate mind' of Viterra, will face difficulties in asserting that it reasonably relied upon representations made by any other person apart from the four nominated individuals. In effect, the terms of clause 31.15 of the Acquisition Agreement represents Cargill's agreement as to which persons are said to be the corporate mind of the Viterra parties for the purpose of the sale process and the completion of the sale.
146 My view in this regard is bolstered by the particulars of the third party notice provided in response to the request of the YWA parties, reproduced at paragraph 71 above, whereby the representations made by the YWA parties were said to have been made to officers, employees and agents of Glencore and the Viterra parties involved in the sale process, and the preparation and execution of the Acquisition Agreement, including the verification and giving of the Warranties. While this group is clearly broader than the four individuals nominated in clause 31 of the Acquisition Agreement, the reference to the sale process and the preparation and execution of the Acquisition Agreement, in my view, focuses the inquiry concerning the state of the Viterra parties' knowledge, insofar as they seek to rely upon that lack of knowledge in the third party notice, upon the knowledge of the individuals nominated in clause 31.15. The need to closely consider the facts and circumstances of the case at hand is not confined to determine whether there has been an issue waiver - it is also significant to determining the scope of any waiver.
147 Further, the scope of the documents to be inspected needs to be confined to the knowledge of the relevant persons during the period from May 2013 to 31 October 2013. Of course, the knowledge of the relevant persons may be informed by documents coming into existence prior to or after that period. However, I doubt that the waiver could be held to extend to documents brought into existence for the purpose of this litigation.
148 The documents sought by the applicants on the grounds of issue waiver by reason of the defendants' claims in the third party notice are also said to be subject to production on other bases. I will deal with each of these grounds in turn, in the event I am found to be wrong in relation to the primary ground of challenge.
149 I do not consider that, by including Mr Fitzgerald in the list of Viterra personnel in clause 31.15 of the Acquisition Agreement, the defendants have laid open to scrutiny all communication involving Mr Fitzgerald which are otherwise subject to legal professional privilege. This submission seems to presume that all communications involving Mr Fitzgerald are privileged communications, or at least are the subject of a claim for legal professional privilege. That cannot be correct, and indeed, the Cargill parties have identified in their evidence documents authored or received by Mr Fitzgerald that are not subject to a claim for privilege.
150 Further, there is a temporal problem with Cargill's contentions concerning this issue, as alluded to by senior counsel for the defendants in his submissions. If, the conduct of nominating Mr Fitzgerald in clause 31.15 of the Acquisition Agreement is conduct amounting to waiver, when did the actual inconsistent conduct take place: when the first draft of the Acquisition Agreement including this term was prepared? Upon execution of the Acquisition Agreement? There seems to me to be some difficulty with the proposition that a party could, by its conduct, waive privilege not only in privileged communications in existence at the time of the alleged inconsistent conduct, but also future communications.
151 However, this is not to say that clause 31.15 of the Acquisition Agreement is not relevant to the question of waiver. Its existence is one of the background facts and circumstances taken into account when determining whether, by reason of their pleading of the claims in the third party notice, the defendants have acted inconsistently with the maintenance of privilege in certain classes of documents. Further, and as can be seen from paragraphs 137 to 139 of these reasons, it is of particular relevance to the scope of any waiver. However, in my view, standing alone, the mere existence of that clause does not give rise to any waiver.
152 The Cargill parties contend that, by sending the October 2013 responses, the Viterra parties have waived privilege in any advice, by disclosing the substance of the legal advice received by them in the course of the October 2013 investigations, which resulted in the provision of the October 2013 responses.
153 I disagree. The October 2013 responses contain nothing more than contentions of fact concerning the matters raised by Cargill in the 22 October letter. No reference is made to legal advice: it is no more than a statement of position. It may be actionable, if found to contain misrepresentations, but it does not amount to a 'knowing and voluntary disclosure' of legal advice within the mean of s 122(3)(a) of the Act.
154 Authorities concerning whether there has been a 'knowing and voluntary' disclosure of the substance of legal advice have consistently found that the mere reference to their client's 'instructions' in a solicitor's letter of demand, does not waive legal professional privilege in either the instructions, or the advice provided in response to the instructions, including where such correspondence includes assertions by the solicitors of the legal effect of those instructions.[55] The October 2013 responses are in a different category again as far as 'disclosure waiver' is concerned: they do not involve a solicitor's representation of their client's position, but a party's representation of its position as to certain factual matters.
155 Further, I do not consider that the handover of the Schedule D documents at completion amounts to waiver of any privilege of other documents which are somehow related to those documents but have not been provided to Cargill.
156 The Viterra parties maintain a claim for privilege in the Schedule D documents on the basis that the privilege is not lost in the otherwise privileged communication by reason of the property in the document being passed to Cargill. I am not entirely sure what consequences are contended should flow from my determination of that contention: after all, the defendants have not sought that I make a declaration of any kind, or for orders restraining further use of the Schedule D documents.
157 However, to the extent it is necessary to do so for the purpose of the application, I consider any privilege in the Schedule D documents for the benefit of the Viterra parties has been lost. The undisputed evidence is as follows:
(a) the Schedule D documents were handed over at completion, consistent with the terms of the Acquisition Agreement, and related agreements;
(b) they were handed over in a manner and in circumstances where it can be inferred that the documents were confidential, but there is no evidence that any express reservation was made regarding the Viterra parties' rights to maintain confidentiality over these documents by reason of legal professional privilege; and
(c) they have been referred to, and in fact deployed by Cargill in this litigation, without protest until 5 June 2015. .
158 In my view, contrary to the submissions of senior counsel for the defendants, the current situation is analogous to the dispute before Almond J in Campbell. However, little may turn upon that view, as I am not satisfied that, by reason of the disclosure of the Schedule D documents, the operation of s 126 of the Act is enlivened. Cargill has asserted in general terms that other documents are required to obtain a full understanding of the October 2013 investigations: that may well be the case, but Cargill has not identified what documents they have in their possession they cannot understand. That said, if there are missing portions of the Schedule D documents, or missing attachments, they ought to be produced.
159 During the course of the hearing, the Cargill parties embarked upon a concerted attack upon the independence of Mr Fitzgerald, given his apparent close involvement with the business of the Viterra parties, and the connection between his remuneration and the financial performance of the Viterra parties.
160 Senior counsel for the defendants, while maintaining that as a matter of fact Mr Fitzgerald had the requisite degree of independence in order to enable the defendants to maintain a claim for privilege over communications evidencing legal advice given by him, queried whether, by reason of the terms of ss 117 and 118 of the Act, the Act imposes an 'independence' test on communications involving inhouse lawyers, or whether such a test imposes an impermissible 'gloss' on the language of the Act. I find those submissions attractive, on a plain reading of these provisions, given the frequent exhortations of the High Court to the effect that the starting point in any construction of statutory provisions is the plain language of the statute in question, and particularly in circumstances where independent counsel has found that communications satisfied the dominant purpose test, which in my experience tends to be the more vexing issue when dealing with communications involving inhouse lawyers. Senior counsel for the Cargill parties submitted I was bound by the statement of principle of Elliott J in IOOF,[56] but arguably, upon reading this decision in full, these statements are obiter. Further, some judges have expressed reservations concerning the statements of Branson J in Rich v Harrington,[57] to the effect that 'independence' of inhouse counsel was a mandatory requirement for attaching legal professional privilege. It seems to me that the position with respect to independence is far from settled. However, this is not the occasion to depart from what has been a reasonably consistent approach in this jurisdiction, and I have approached the evidence on the basis that, adopting the language of Wigney J in Archer (No 2), that
any requirement of independence on the part of an in-house lawyer is an aspect of the relationship between the lawyer and the employer (client) and the capacity in which the lawyer is consulted.[58]
161 As discussed during the course of the hearing, there is no 'bright shining line' demarcating 'independent' inhouse lawyers from 'nonindependent' inhouse lawyers. At one extreme would be an inhouse counsel who reported to, say, a general counsel heading up an autonomous legal department as separate as practical from the business operations of the company, and whose contract expressly referred to his or her independence was separately located from the company's business operations, and whose remuneration was entirely unconnected with the financial performance of the company. At the other extreme is an inhouse lawyer who acts, for all intents and purposes, as a decisionmaker within the business. Mr Fitzgerald, on the evidence, falls somewhere in between.
162 Senior counsel for the Cargill parties submitted that I should treat Mr Fitzgerald's evidence with some caution, given his failure to disclose the fact that at some stage he owned shares in one of the Viterra parties, and that he 'dissembled' in his evidence. I disagree. This is not the occasion to embark upon a lengthy evaluation of Mr Fitzgerald's credit, given his role as a witness at the trial, but to the extent that it is necessary to make observations about Mr Fitzgerald's evidence for the purpose of determining this application, in my view, Mr Fitzgerald's evidence was unremarkable. He made appropriate concessions, did not give emphatic answers in circumstances where his memory was faulty or incomplete, and he did not appear to overstate the position concerning his role within the Viterra business.
163 Considering Mr Fitzgerald's evidence concerning what might be considered to be the traditional indicia of independence, it is correct that to say that Mr Fitzgerald does not carry what might be considered to be the desirable trappings of independence. In particular, his remuneration is linked to the financial performance of Viterra. Further, while I would not place too much store on the absence of any reference to independence in his employment contract, his reporting lines during the relevant period tell against his independence as well. However, these matters are of less significance than his evidence about what he actually does: he was unshaken in his evidence that his predominant function within the Viterra parties is legal, not commercial, and that while he has become familiar with commercial and operational issues over the years, he would always defer to the personnel concerned with commercial and operational matters on such matters.
164 I do not consider Mr Fitzgerald's evidence that he might occasionally comment on commercial matters, and wanted the business to succeed, to detract from his independence. After all, he is not a robot, and one would expect him to have some interest in the business, conversations from time to time with his commercial colleagues concerning the business, and some loyalty to his employer. Again, I found his evidence in that respect quite plausible, and quite unremarkable.
165 To the extent that one can draw guidance from other decisions concerning the issue, I agree with the submissions of the defendants that the position of Mr Fitzgerald is quite similar to the position of inhouse counsel in Archer (No 2). In that case, Wigney J held that an in-house lawyer who was also a company secretary, and also held some administrative and managerial functions, still maintained sufficient independence to attract legal professional privilege for legal advice provided by him. Wigney J emphasised the importance, in such circumstances, of evaluating the capacity in which the inhouse lawyer was a party to communications. That question does not arise here, because of the determination of independent counsel concerning the dominant purpose of communications over which the defendants have claimed privilege.
166 I consider that the current case is substantially different than the circumstances confronting the Court in Rich v Harrington. In that case, the legal counsel concerned was a partner of the accounting firm concerned, and the advice provided was in relation to a claim against the partners of the firm of a nature which had potentially serious adverse reputational consequences for the firm. Accordingly, Branson J's finding that the lawyer concerned would not have sufficient professional detachment to attract legal professional privilege over her advice in relation to that particular proceeding is unsurprising in the particular circumstances of that case.
167 The analysis in Rich v Harrington was by the Cargill parties said to be applicable to the position of Mr Fitzgerald in giving advice concerning the October 2013 investigations. Given his nomination in clause 31.15 of the Acquisition Agreement, Mr Fitzgerald was said by senior counsel for the Cargill parties to have a personal stake in the successful completion of the sale. However, Mr Fitzgerald's evidence is that he did not actually turn his mind to that issue during the course of the October 2013 investigations. Again, that evidence is hardly surprising: one might expect that the Viterra parties' receipt of the 22 October letter, nine days before completion of a sale of a business valued at $420 million, the serious nature of the allegations in the 22 October letter, and the work required to address these allegations, would no doubt have caused Mr Fitzgerald and other relevant personnel of the Viterra parties to focus upon nothing else but responding to the 22 October letter and subsequent correspondence.
168 Accordingly, I consider that Mr Fitzgerald has the requisite independence to enable the defendants to maintain a claim for legal professional privilege over legal advice provided by him, subject to my findings concerning issue waiver and fraud.
Section 125 Issue
169 Section 125 of the Act provides as follows:
125 Loss of client legal privilege - misconduct
(1) This Division does not prevent the adducing of evidence of -
(a) a communication made or the contents of a document prepared by a client or lawyer (or both), or a party who is not represented in the proceeding by a lawyer, in furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty; or
(b) a communication or the contents of a document that the client or lawyer (or both), or the party, knew or ought reasonably to have known was made or prepared in furtherance of a deliberate abuse of a power.
(2) For the purpose of this section, if the commission of the fraud, offence or act, or the abuse of power, is a fact in issue and there are reasonable grounds for finding that -
(a) the fraud, offence or act, or the abuse of power, was committed; and
(b) a communication was made or document prepared in furtherance of the commission of the fraud, offence or act or the abuse of power -
the court may find that the communication was so made or the document so prepared
(3) In this section, power means a power conferred by or under an Australian law.
170 Paragraphs 14 and 15 of the Cargill parties' written outline contain a useful summary of the principles governing the application of s 125 of the Act, as follows:
Further, under s.125(2), if the relevant misconduct is a fact in issue, the Court may find that the misconduct was committed and the communication was made (or document prepared) in furtherance of that misconduct if "there are reasonable grounds" for so finding. This means that the party alleging fraud need not establish it on the balance of probabilities - it only needs to show "'something to give colour to the charge' at a prima facie level that has a foundation in fact".
Conduct in furtherance of fraud includes concealing information about a past fraud. While merely seeking legal advice about the consequences of past fraud is generally not "in furtherance" of that fraud, "if the client is obtaining legal advice in the context of an ongoing dishonest or fraudulent undertaking, so that the advice will or may impact upon or inform the client in the course of that undertaking, it will be regarded as being in furtherance of the improper purpose". Further, so long as the advice sought objectively assisted in the commission of the fraud, it does not matter whether the individual giving or receiving the advice had knowledge of that fraud.
clearly, where the client seeks advices on how to commit a fraud or an act that is sufficiently serious to warrant the imposition of pecuniary penalties pursuant to statute. In my opinion, the same also applies to advice on how to commit an equitable fraud falling short of actual dishonesty.[60]
and further: [61]
the fact that s 125(1) does not require that the commission of an offence or an act that renders a person liable to a civil penalty involve any dishonesty indicates that the section is intended to apply to all categories of fraud known to the law irrespective of whether dishonesty is a necessary element of such a fraud.
172 The approach of Kyrou J in Amcor v Barnes concerning what constitutes 'fraud' differs somewhat from the approach taken in New South Wales, where the authorities, at least tentatively, suggest that the notion of fraud must incorporate some actual dishonesty. In Talacko v Talacko,[62] Elliott J did not need to form a view on the matter given the nature of the misconduct involved, but observed that it would be unlikely for him to find that Kyrou J was 'clearly wrong'.
173 The distinction between fraud involving actual dishonesty and other species of fraud is of some relevance to the current application, because of the nature of the conduct relied upon by the Cargill parties in support of its contention that s 125 of the Act strips the protection of legal professional privilege from documents which include legal advice evidencing the defendants' knowledge of the nature and extent of the Viterra Practices, as such advice was sought 'in the context of an ongoing dishonest or fraudulent undertaking', and therefore was in furtherance of a fraud.
174 For the purpose of the analysis required for the purpose of this aspect of the application, it seems to me that the conduct of the Viterra parties can be disaggregated as follows:
(a) the Viterra Practices, whereby JWM alleged sold products using 'offspecification' barley to customers, and products including additives contrary to customer specifications;
(b) the Viterra Policies, which documented the policies which enabled JWM to allegedly provide customers with Certificates of Analysis which did not reflect the results of laboratory tests carried out by JWM, allegedly for the purpose of disguising from customers the impact of the Viterra Practices upon the nature and the quality of products supplied to them by JWM;
(c) the making of the Warranties, and the making of representations in the Information Memorandum and during the course of the sale process; and
(d) the making of the pre-completion representations, made during the course of October 2013, which were said by senior counsel for the Cargill parties to have been deliberately and intentionally crafted to conceal the true nature and extent of the Viterra Practices, and that the Viterra Policies were deliberately undertaken to conceal from customers that malt supplied was not in compliance with customer specifications.
175 Adopting Kyrou J's broader, but not definitive, approach to the question of fraud, the question remains, what is 'fraud' for the purpose of s 125 of the Act? In particular, does it extend to species of equitable fraud, such as unconscionable dealing, or a breach of fiduciary duty?
Fraud, n**.** 1. A knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment. Fraud is usu. A tort, but in some cases (esp. when the conduct is willful) it may be a crime. - Also termed intentional fraud. ... 2. A misrepresentation made recklessly without belief in its truth to induce another person to act. ... 3. A tort arising from a knowing misrepresentation, concealment of material fact, or reckless misrepresentation made to induce another to act to his or her detriment. 4. Unconscionable dealing; esp., in contract law, the unfair use of the power arising out of the parties' relative positions and resulting in an unconscionable bargain. fraudulent, adj.
'[T]he use of the term fraud has been wider and less precise in the chancery than in the common-law courts. This followed necessarily from the remedies which the respectively administered. Common law gave damages for a wrong, and was compelled to define with care the wrong which furnished a cause of action. Equity refused specific performance of a contract, or set aside a transaction, or gave compensation where one party had acted unfairly by the other. Thus "fraud" at common law is a false statement ... ; fraud in equity has often been used as meaning unconscientious dealing - "although, I think, unfortunately, a great equity lawyer has said." William R. Anson, Principles of the Law of Contract 263 (Arthur L. Corbin ed., 3d Am. Ed. 1919).
Actual fraud. A concealment or false representation through a statement or conduct that injures another who relies on it in acting. - Also termed fraud in fact; positive fraud; moral fraud. [Cases: Fraud 3.][63]
177 The note under the definition of fraud reproduced above highlights the difficulty in construing the term 'fraud' within the meaning of s 125 of the Act.
178 One difficulty with extending the definition of 'fraud' too far beyond conduct involving actual dishonesty is that, while the authorities emphasise that what is described as 'unconscionable dealing' must be accompanied by some 'moral obloquy'[64], extending the definitions of fraud to all forms of unconscionable or misleading and deceptive conduct might well give the s 125 exception far greater reach than was ever intended by the legislature. As noted by senior counsel for the defendants in his submissions concerning the effect of Mr Fitzgerald's inclusion in clause 31.15 of the Acquisition Agreement upon claims for privilege over legal advice provided by him, legal professional privilege is an important legal right, only to be abrogated by clear words. In my view, adopting too broad a definition of fraud may well encroach too far upon the principle that parties should be able to be fulsome and frank with their lawyers.
179 It is not necessary for the purposes of the current applications to precisely delimit the boundaries of what conduct might be considered to be fraud for the purposes of s 125 of the Act, and whether it includes all species of equitable fraud. However, given that the Cargill parties seek to extend the operation of s 125 of the Act to conduct which, properly analysed, is really said to be actionable by reason of the failure of JWM and the Viterra parties to disclose certain matters, in the case of JWM, to their customers, and, in the case of the Viterra parties, to Cargill, I do consider it necessary to consider what conduct might or might not be fraudulent for the purpose of s 125 of the Act.
180 Taking first the conduct of JWM in engaging in the Viterra Practices, and developing and implementing the Viterra Policies, there seems to me to be a clear distinction between the Viterra Practices and the Viterra Policies. The Viterra Practices, involving the use of offspecification barley, and the unauthorised use of additives, even taking Cargill's case at its highest, are no more than breaches of JWM's contracts with its customers. Properly analysed, the fact that these breaches may have been frequent, intentional, and even systematic does not alter their fundamental character.
181 In my view, by engaging in the Viterra Practices, JWM has not engaged in a fraud upon its customers. It is clear from the authorities, that, without more, a breach of contract, even an intentional breach, cannot amount to unconscionable conduct (assuming, for the present purposes, that the definition of fraud within the meaning of s 125 of the Act includes unconscionable conduct). The position is helpfully summarised by the Court of Appeal in Body Bronze International Pty Ltd & ors v Fehcorp Pty Ltd,[65] when considering whether a deliberate breach of a contractual obligation amounted to unconscionable conduct under s 51AC of the Trade Practices Act 1974 (Cth), as follows:[66]
In applying these principles to conduct which involves the breach of a contract, it should be recognised that not every breach of contract, even a deliberate breach, necessarily involves the moral obloquy that the authorities suggest needs be present for unconscionable conduct in breach of s 51AC to be made out. Although it may be true that for an act to have that moral character it will usually be conduct that is intentional or at least reckless, it does not follow that any breach that is intentional necessarily has that moral character. As Weinberg J (as the then was) said in Macdonald v Australian Wool Innovation Ltd:
Any promise that is deliberately broken could easily be characterised as 'unconscionable'. That is not the sense in which the term is used in s 51AC.
A decision may be taken to break a contract because, upon rational commercial considerations, the burden of performance may be greater and more onerous than the liability to be incurred if the conduct amounts to breach. The party committing the breach may know that it will deliver to the opposite party an opportunity to exercise rights both under and outside the contract that flow from the breach, and that the opposite party has the means to exercise and enforce those rights. Those rights may include seeking injunctive relief to restrain the breach, accepting a repudiation of the contract so as to terminate executory obligations and seeking damages, or keeping the contract on foot and merely seeking damages. There may be nothing offensive to conscience in a commercial participant taking such a commercial decision in given circumstances. Whether or not it amounts to unconscionable conduct does not simply flow from it being a deliberate breach; it must be evaluated in 'all the circumstances'.
182 In the current case, the evidence suggests that, as a result of the Malt Cost Review component of the Transformation Project, JWM (and possibly the Viterra parties) made a conscious commercial decision to breach JWM's contracts with its customers for perceived prospective commercial gain.
183 Of course, the current proceeding does not involve parties who might have claims against JWM by reason of JWM engaging in the Viterra Practices, such that this Court is deprived of the contentions of JWM's customers as to how to properly characterise the legal effect and consequences of the Viterra Practices. However, in the absence of anything more, I do not consider that otherwise privileged documents which further or give effect to the Viterra Practices are 'in furtherance of the commission of a fraud.'
184 However, the position is different with respect to the Viterra Policies. In my view, the evidence is sufficient to persuade me that there are reasonable grounds to believe that JWM, by altering the results of its laboratory tests on Certificates of Analysis provided to its customers, with the intention and effect of concealing its breaches of contract from the customers affected, thus, in many cases at least, depriving them of the opportunity to exercise any rights they have as a result of JWM's breaches of contract, had engaged in fraud for the purposes of s 125 of the Act. It could be argued that customers are able to conduct their own testing (and the evidence is that at least one customer did), but it seems to me that the purpose of the provision by JWM of Certificates of Analysis was to provide JWM's customers with the comfort that the products supplied to them were of a nature consistent with the Certificates of Analysis. To me, there are reasonable grounds for finding that JWM, in providing altered Certificates of Analysis, engaged in 'a knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment.'
185 Here, the detriment to JWM's customers by not knowing the true state of affairs could be that they lost the opportunity to reject the product supplied to it, or to seek a refund of moneys paid by it, or produced inferior quality products using JWM's malt, with potentially adverse commercial consequences for them. Accordingly, any documents which were made or prepared in order to further give effect to, or conceal from JWM customers the Viterra Practices, including the Viterra Policies, are not protected from disclosure by reason of legal professional privilege. For the avoidance of doubt, this of course does not include legal advice as to the consequences of JWM developing and implementing the Viterra Policies.
186 In forming the view that there are reasonable grounds that, in developing and implementing the Viterra Policies, and in particular, the practice of supplying customers with Certificates of Analysis which had been altered, JWM had engaged in a fraud, I rely upon the following matters:
(a) as a result of the Malt Cost Review Component of the Transformation Project, JWM had a financial and operational objective of reducing costs by increasing the use of off specification barley;
(b) the evidence, including subsequent references to the Transformation Project, supports the contention that this policy was implemented;
(c) the staff concerns referred to in paragraph 57(c) above indicate that the implementation of the Viterra Practices would, at least in the view of some staff, breach the Viterra Code of Practice with respect to the 'accuracy and truthfulness' of JWM's dealings with its customers;
(d) the Viterra Malt Certificate of Analysis Generation Procedure itself provides a mechanism by which alterations to Certificates of Analysis must be approved;
(e) this document was not kept in Viterra or JWM's main document/information management system, apparently to avoid it becoming available to JWM customers and/or auditors. This, along with the emails referred to at paragraphs 57(e), (i), (j), (k), (l) and paragraph 58 of these reasons do evidence some 'consciousness of guilt' on the part of the relevant personnel; and
(f) the bundle of documents described at paragraph 57(g) above indicates that the practice of altering Certificates of Analysis was, even if it was not the dominant practice, was not isolated.
187 The fact that JWM personnel may have also been hiding things from their superiors at the Viterra parties may be a live issue at trial. However, this question is not relevant to this application; it is sufficient for present purposes for there to be reasonable grounds for finding that JWM had acted fraudulently with respect to its customers.
188 It is not possible for me to determine whether, on the evidence, and in the absence of a full understanding on my part of the nature of the documents over which privilege has been claimed, and the manner in which the defendants have conducted the discovery process (no criticism is intended), there are likely to be documents which would otherwise be the subject of a claim for legal professional privilege but have been prepared in furtherance of this particular fraud. However, it is sufficiently clear from the authorities that s 125 would catch documents prepared to give effect to, and conceal from customers, the Viterra Policies.
189 Turning now to the representations said to have been made to Cargill by the Viterra parties during the course of the sale process, I consider that there must be, for the purpose of this aspect of the application, a material distinction between the alleged misrepresentations made to Cargill in the Information Memorandum, the 18 and 19 July statements, and the due diligence process (including the data room disclosures), and the precompletion representations. Essentially, the former misrepresentations can be characterised as misrepresentations by silence, in that Cargill alleges that the Viterra parties failed to disclose the existence of the Viterra Practices and the Viterra Policies, and the impact of the Viterra Practices and the Viterra Policies upon the profitability, and therefore the value, of the JWM business.
190 It seems to me that there will be substantial debate at trial as to what the Viterra parties knew about the practices, what, if they did know about them, they were required to disclose to Cargill, and, given the terms of the sale process disclaimers, and the fact that Cargill was represented in the sale process by one of Australia's leading investment banks, the extent to which Cargill was entitled to rely upon these alleged misrepresentations. I am conscious that, while it is possible that misrepresentations by silence can be found to have been made, that is only in particular circumstances,[67] and I am not satisfied that there are reasonable grounds to believe that any nondisclosure of the Viterra Practices or the Viterra Policies by the Viterra parties was knowing and/or intentional, at least for the purpose of the current applications. It is quite possible that the JWM executives, and/or the Viterra parties, had some knowledge of these practices and policies, or some of them, but never turned their mind to the question of whether they should be disclosed as part of the sale process. Taken at its highest, the evidence does not carry the whiff of deceit, at least at this stage, and at least insofar as it concerns the alleged nondisclosures made during the course of the sale process, and as such, s 125 does not apply to otherwise privileged documents concerning the Viterra Practices and the Viterra Policies insofar as they came into existence prior to the 22 October letter.
191 Further, in reaching this view, I am conscious of how Cargill has relied upon its allegations that the defendants have failed to disclose the Viterra Practices and the Viterra Policies. These allegations do not stand alone, but are said to have underpinned the Warranties and representations concerning the financial performance of the JWM business made during the course of the sale process. Accordingly, in order to find that there were reasonable grounds for finding the Viterra parties had acted fraudulently in giving the Warranties and making certain representations during the sale process, I would need to find that the persons referred to in clause 31.15 (or any of them):
(a) knowingly and/or intentionally failed to disclose the existence of the Viterra Practices and the Viterra Policies; and
(b) did so knowing that these practices and policies underpinned the financial performance and thus the value of the JWM business, and thus the accuracy of the Warranties and the representations made during the sale process.
192 There is simply insufficient information before me, at least at this stage, to even lend 'colour to the charge' in relation to these matters.
193 Again, the position is different with respect to the pre-completion representations. Following the 22 October letter, the Viterra parties were put squarely on notice of the existence of the Viterra Practices, and Cargill's concerns about the consequences of the Viterra Practices. Indeed, the tone of the 22 October letter suggests that Cargill, whether reasonably or not, was quite aghast at what it had learned from the JWM executives about the Viterra Practices. The Viterra parties can have been in no doubt that Cargill took the matter very seriously: indeed, this is consistent with Mr Fitzgerald's evidence that he expected litigation to be initiated, and he contacted KWM immediately for advice. Completion was only nine days away, and could well have been in jeopardy. Given the time frames involved, there is little doubt that the October 2013 responses would, for all practical (rather than necessarily legal) purposes,[68] significantly influence what Cargill would do. As it happened, Cargill proceeded to completion. Whether it did so in reliance upon what the Viterra parties told it in the October 2013 responses, or whether it would have done so anyway even had it known the true extent of the Viterra Practices, is a matter for trial. However, examining the October 2013 responses, and the other documents relied upon by the Cargill parties, such as Mrs Purser's record of her phone call with Mr Mattiske, I consider that there are reasonable grounds to find that notwithstanding what had emerged, during the course of the October 2013 investigations at the latest, the October 2013 responses were, in the words of the Cargill parties' submissions, 'deliberately and intentionally crafted to conceal the true nature and extent of the Viterra Practices' from Cargill.
194 In particular, the thrust of the October 2013 responses was to the effect that any noncompliance by JWM with its customer contracts was isolated, and certainly not systemic, and that the Certificates of Analysis provided to customers were 'above board'. While of course the Viterra parties had a relatively short period of time to prepare the October 2013 responses, it is apparent from the documents relied upon by the Cargill parties that Dr Stewart, who appears from the evidence to have been aware of the Viterra Practices and the Viterra Policies from an early stage, was involved in the October 2013 investigations.
195 It is apparent from the terms of Cargill's letter of 29 October 2013 that Cargill was not particularly impressed by Viterra's initial response to the 22 October letter. That may support a contention at trial to the effect that Cargill did not in fact rely upon the October 2013 responses, but rather decided to take the risk of going ahead with completion, and to rely upon its rights to make claims under the Acquisition Agreement afterwards. However, it is not necessary, for the purposes of s 125 of the Act, that the fraud (in this case, deceit) is effected:[69] the section operates upon communications made or prepared with the purpose of effecting a fraud.
196 I should hasten to add that my determination that documents brought into existence for the purpose of making the October 2013 responses are not subject to a claim for legal professional privilege by reason of s 125 of the Act does not amount to a finding that any person, including any lawyer, acted dishonestly. Who knew what and when remains quite murky, and is clearly a matter for trial. It may well be found that the precompletion representations were made recklessly, and are thus actionable, rather than intentionally. It may well be that some or all of those involved in preparing the October 2013 responses genuinely believed the pre-completion representations to be true, even though had proper inquiries been made, they would have been found to be incorrect. I accept the caution sounded by senior counsel for the defendants about making definitive findings concerning fraud at an interlocutory stage. However, while the situation is somewhat awkward, the purpose and nature of the inquiry provided for by s 125 of the Act necessitates making preliminary determinations in less than perfect circumstances and upon less than perfect material.
197 The final component of the applications, being the claims by Mr Hughes and Dr Stewart for access to documents of which they were the author or the recipient can be dealt with quite promptly: the terms of s 117 and s 118 of the Act confer privilege over communications which are confidential between a lawyer and a client as against the world, unless that privilege is lost in circumstances prescribed by the Act. At the time that Mr Hughes and Dr Stewart were parties to these communications, they were privy to them in their capacity as employees of the Viterra parties. As such, they were under an obligation not to disclose the contents of the communications. Nothing in the Act provides for a partial loss of confidentiality, or a loss of confidentiality vis a vis some people and not others. I accept that the current application is analogous to the situation and circumstances in State of South Australia v Barrett [70] ("Barrett") and William Buck (WA) Pty Ltd v Faulkner (No 4),[71] the authorities relied upon by the defendants. In particular, the circumstances of current applications are almost on all fours with the applications in Barrett, where the Full Court of the Supreme Court of South Australia held that former directors of a company do not have a right of access to privileged documents they would have had access to when exercising their duties as directors of the company. As former employees of the Viterra parties, Mr Hughes and Dr Stewart arguably did not have an automatic right of access to the Viterra parties' privileged documents, even when they were employees.
198 I do not consider the authorities relied upon by counsel for Mr Hughes and Dr Stewart concerning what amounts to disclosure particularly helpful. 'Disclosure', within the meaning of ss 118 and 119, and 131A of the Act means disclosure of the contents of the confidential communication: the fact that a third party, when under an obligation of confidence not to disclose the contents of the communication, has knowledge of the existence and contents of the communication does not of itself a right to compel production of the otherwise privileged communication.
199 Accordingly, having made the findings in respect of the application as set out in these reasons, and subject to hearing further from counsel concerning the manner in which the orders should be framed, I propose to make orders in the following terms:
(a) By 4.00pm on [date], the defendants produce for inspection documents which record or evidence the knowledge of the persons referred to in clause 31.15 of the Acquisition Agreement of the Viterra Practices and the Viterra Policies (as defined in the FASOC) prior to 31 October 2013, alternatively in the period between 22 October 2013 and 31 October 2013;
(b) By 4.00pm on [date], the defendants produce for inspection any documents brought into existence to further, give effect to, or conceal the existence of policies and practices in the JWM business which resulted in JWM providing to its customers Certificates of Analysis which had been altered to conceal the use of off-specification barley and/or additives in the products supplied by JWM. For the avoidance of doubt, this category of documents does not include documents which record advice as to how to deal with the consequences of this conduct;
(c) Insofar as they are not required to be disclosed pursuant to paragraphs (a) or (b) above, documents relied upon or brought into existence for the purpose of the Viterra parties preparing the October 2013 responses, including any legal advice concerning the October 2013 responses; and
(d) the applicants' summonses be otherwise dismissed.
VIETERRA OPERATIONS PTY LTD (formerly VITERRA OPERATIONS LTD (ACN 007 556 256))
VITERRA PTY LTD (ACN 084 962 130) (formerly VITERRA LTD (ACN 084 962 130))
CARGILL MALT ASIA PACIFIC PTY LTD (formerly JOE WHITE MALTINGS PTY LTD (ACN 004 287 352))
VITERRA OPERATIONS PTY LTD (ACN 007 556 256) (formerly VITERRA OPERATIONS LTD (ACN 084 962 130))
VITERRA PTY LTD (ACN 084 962 130) (formerly VITERRA LTD (ACN 084 962 130)
[1] YWA parties' 'Relevant Background' Submissions, para 5.
[2] Orders of Elliott J, made on 23 November 2016 and 14 December 2016.
[3] Source, Cargill and YWA Submissions.
[4] Omitting references to paragraphs in the FASOC. The claims concerning the CBH Representations are not relevant to the issues in these applications.
[5] The Schedule D documents came into Cargill's possession upon completion of the sale of the JWM business, and are relied upon as evidencing the knowledge of the Viterra parties of the Viterra Practices and the Viterra Policies, and as such, in support of Cargill's claims in deceit.
[6] The summonses have been edited by me for greater ease of reading.
[7] Being the letters sent by the Viterra parties to Cargill on 25 October 2013 and 30 October 2013.
[8] The October 2013 responses were the communications in which the Viterra parties are said to have made the precompletion representations.
[11] I understand this evidence to mean that his shares were somehow purchased from him when Glencore purchased the Viterra parties in December 2012.
[12] This document was headed 'Thursday 5 August', which means it was produced in 2010.
[27] [2005] VSCA 312, [45]
[28] [2014] VSCA 338, [281]
[33] 'Legal Professional Counsel wearing two hats' (2000) Law Society Journal.
[35] [2013] FCA 1098; [2013] 306 ALR 384, [59]-[73].
[37] Paragraphs 26 and 27 of the Cargill's parties' submissions.
[39] See also Amcor Ltd v Barnes [2011] VSC 341.
[42] Noting that senior counsel for the Cargill parties, quite properly, limited his crossexamination to matters relevant only to the 'independence' issues.
[46] [2013] NSWSC 1708 at [43]- [44].
[53] See paragraphs [88]-[89] and [91] of these reasons, and the authorities referred to in these paragraphs.
[54] [1999] NSWSC 1044, [12].
[55] See French v Triple M Melbourne Pty Ltd and ors (Ruling No 1) [2008] VSC 547, and QUBE Logistics (Vic) Pty Ltd v Wimmera Container Line Pty Ltd [2013] VSC 695, applying the findings in Osland v Secretary to the Department of Justice (2008) 82 ALJR 1288.
[57] [2007] FCA 1987; (2007) 245 ALR 106 cf Dye v Commonwealth Securities Ltd [No 5] [2010] FCA 950 per Katzmann J, Archer (No 2) [2013] FCA 1098 per Wigney J, which Elliott J referred to in IOOF.
[59] [2011] VSC 341, [42].
[62] [2014] VSC 328, [79].
[63] Bryan A. Garner (ed), Black's Law Dictionary (Thomson West, 8th ed, 2004) 685.
[64] See Attorney-General of New South Wales v World Best Holdings Pty Ltd [2005] NSWCA 261; (2005) 63 NSWLR 557.
[67] For example, where silence distorts a positive representation, which may well found to be applicable in the current case.
[68] The question of the legal effect of the pre-completion representations is of course a matter for trial.
[69] Amcor Ltd v Barnes [2011] VSC 341, [64].
Cargill Australia Ltd
Viterra Malt Pty Ltd & Ors [2017] VSC 126
(2015) 321 ALR 191
(1999) 201 CLR 1
(2013) 250 CLR 303
(2003) 127 FCR 499
(2006) 151 FCR 341
(2008) 72 NSWLR 236
(2003) 7 VR 27
(2013) 306 ALR 414
(2007) 245 ALR 106
(1951) 82 CLR 606
(1995) 64 SASR 73
(2008) 82 ALJR 1288
(2005) 63 NSWLR 557
(2011) 282 ALR 571
The applications were allowed in part. The proposed orders required production of documents recording the knowledge of the clause 31.15 personnel, documents made to further or conceal the altered-certificate practices, and documents brought into existence for preparing the October 2013 responses, including relevant advice. The remaining summons relief was proposed to be dismissed ([199]).
(i) the CBH Representations were conveyed as alleged in paragraph 67 of the statement of claim;
(j) in reliance on:
(i) the Financial and Operational Performance Representations, the Warranty Representations and the CBH Representation, it entered into the Acquisition Agreement; and
(ii) the Pre-Completion Representations, it completed the Acquisition Agreement; and
(k) the Representations and the CBH Representations were false.
(v) Prior to about 22 October 2013, none of Hughes, Youil, Wicks, Stewart or Argent disclosed to Glencore or Viterra the Undisclosed Matters.
(vi) In relation to the Warranties:
(A) between about 31 July and 3 August 2013, prior to the finalisation of the Acquisition Agreement, one or more of Hughes, Youil, Wicks, Stewart and Argent informed Glencore and Viterra that each of the Warranties the subject of the statement of claim was accurate by verifying the accuracy of it; and
(B) prior to Completion, none of Hughes, Youil, Wicks, Stewart or Argent informed Glencore or Viterra that any of the Warranties was not accurate despite having been requested to do so if any of the Warranties was not accurate.
(e) Assessing whether there has been a waiver of privilege requires a fact based enquiry as to whether, in effect, the privilege holder has directly or indirectly put the contents of an otherwise privileged communication in issue in litigation, either in making a claim or by way of defence: Federal Commissioner of Taxation v Rio Tinto [2006] FCAFC 86; (2006) 151 FCR 341.
(f) In determining whether there has been an implied waiver of privilege, the court's focus will be on whether there has been conduct that is inconsistent with the maintenance of confidentiality in the communication over which privilege is asserted. The court's assessment of whether there has been an implied waiver will be informed by considerations of forensic unfairness in allowing the claim to proceed without disclosure of the communication: DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384; (2003) 127 FCR 499, Vic Hotel v DC Payments; Macquarie Bank Limited v Arup Pty Ltd [2016] FCAFC 117; The Oswal Matters - In Trial Rulings - Confidentiality, Discovery and Privilege [2017] VSC 19.
(g) The relevant inconsistency and unfairness may exist if 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: Council of the NSW Bar Association v Archer [2008] NSWCA 164; (2008) 72 NSWLR 236; Chong v CC Containers Pty Ltd [2015] VSCA 137.
(h) To determine whether there is relevant inconsistency, the Court will consider the precise issue in dispute and how the relevant confidential communications impact upon that issue: Liquorland (Australia) Pty Ltd v Anghie [2003] VSC 73; (2003) 7 VR 27; Patrick Stevedore Operations (No 2) Pty Ltd v Port of Melbourne Corporation (No 2) [2016] VSC 467.