Plaintiff v Defendants

Supreme Court of Victoria|2017-11-17|Before: Daly AsJ

COSTS - Apportionment of costs sought as a reflection of success in relation to discrete issues within the application - Consideration of time spent on particular issues at hearing - Found appropriate to award on an 'issue basis' pursuant to GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3) [2008] VSC 296 - Viterra Parties' successful application in relation to the independence of in-house counsel and production of a document over which privilege was claimed - Held Viterra Parties to pay sixty per cent of the Cargill Parties' costs of 14 February 2017 summons - No order as to costs of the hearing on 11 April 2017.

Mr A Myers QC with Mr S H Parmenter and Mr O Wolahan

1 This ruling concerns three issues in dispute between the parties, two of which arise directly out of my ruling of 30 March 2017 ('30 March ruling')[1] and orders subsequently made on 6 April 2017 and 11 April 2017 ('April orders'). The first issue is the costs of the Cargill Parties and the Viterra Parties of the Cargill Parties' application by their summons filed 14 February 2017 ('14 February summons'), which resulted in the 30 March ruling and the April orders.[2] The hearing of the argument concerning costs was initially listed for hearing on 25 July 2017.

2 The second issue arose out of correspondence between the parties as a result of the Cargill Parties' contention that the Viterra Parties had not complied with the April orders, in that they continued to maintain a claim for legal professional privilege over a number of documents apparently concerning the October 2013 investigations which the solicitors for the Cargill Parties maintained were caught by the April orders. On 6 June 2017, Elliott J made, among other things, the following orders:

The application as to further production on compliance with [the April orders], as identified in paragraphs 35-37 of the letter from Gilbert + Tobin dated 24 May 2017 is referred ... for hearing at 10.00am on 25 July 2017.

3 The other issue arises out of an application made by the Viterra Parties by summons filed 18 May 2017 ('18 May summons'). On 22 May 2017, Elliott J made orders referring the application in paragraph 1 of the 18 May summons for hearing before me on 25 July 2017.[3]

4 I shall deal with each of the three issues in order of the time at which they arose:

(a) the costs of the Cargill Parties' summons filed 14 February 2017, as between the Cargill Parties and the Viterra Parties;

(b) the Viterra Parties' application in paragraph 1 of the 18 May summons; and

(c) the Cargill Parties' application to inspect further documents referred to me by the orders of Elliott J of 6 June 2017, as well as the documents referred to me by an agreement between the parties on or about 20 October 2017, and provided to the Court on or about 8 November 2017.

5 In their proposed minute of orders, the Cargill Parties seek that the Viterra Parties pay their costs of their application in the 14 February summons, including the costs of the hearings on 6 April 2017 and 11 April 2017, contending, in summary, that they were largely successful in the application, and there is no cause to discount for their failure to succeed on certain issues. On the other hand, the Viterra Parties contended that they should pay only thirty per cent of the Cargill Parties' costs, including the costs of the hearing on 6 April 2017, and that the parties should bear their own costs of the hearing on 11 April 2017.

6 Taking the last point first, I agree with the submissions of the Viterra Parties that the Cargill Parties and the Viterra Parties should bear their own costs of the hearing on 11 April 2017. I shall not traverse what led up to, and what transpired at the hearing on 11 April 2017 in any detail, or for that matter at all. Both parties bear some responsibility for what occurred, and, to the extent that this ruling has any precedential value beyond this application, I merely note that I scheduled this hearing to put an end to a convoluted and almost unseemly email debate between the parties (and copied to the Court) concerning the meaning and effect of the orders I made on 6 April 2017.

7 Turning to the more substantive application, the parties largely relied upon their written outlines of submissions filed in anticipation of the scheduled hearing of 25 July 2017. In their submissions filed 10 July 2017, the Cargill Parties submitted, in summary, as follows:

(a) the Cargill Parties were successful in obtaining orders for the production of documents by the Viterra Parties on the basis of implied waiver, and pursuant to s 125 of the Evidence Act 2008 (Vic) ('Evidence Act');

(b) the documents produced by the Viterra Parties were 'highly probative documents', which formed the basis of the amendments to the Cargill Parties' statement of claim allowed by Elliott J on 7 July 2017;

(c) the starting point is that, as the successful party, the Cargill Parties should obtain all of their costs of the application;

(d) the grounds upon which the Cargill Parties failed to succeed did not materially add to the duration and the costs of the hearing and ought not be severable, especially the Cargill Parties' reliance upon clause 31.15 of the Acquisition Agreement;

(e) as for the limb of the application concerning the independence of Mr Fitzgerald, the Viterra Parties' senior legal counsel, his evidence was relevant to other issues in the application, and, given the unsettled state of the law, it was not unreasonable for the Cargill Parties to bring the application; and

(f) there were no 'special circumstances', or disentitling conduct which warranted a departure from the usual position as to costs.

8 In response, in their outline of submissions filed 18 July 2017, the Viterra Parties submitted, in summary, as follows:

(a) the Cargill Parties should only recover part of their costs, by reason of their partial success, and other matters which ought to be taken into account;

(b) in particular, the Viterra Parties submitted that 'the breadth of the Cargill parties' summons filed on 14 February 2017 should be contrasted to the confined nature of the [April orders]';

(c) discounts ought to be applied to reflect the Cargill Parties' lack of success on their contentions that there had been an issue waiver by reason of clause 31.15 of the Acquisition Agreement, no disclosure waiver by reason of statements made by the Viterra Parties in October 2013, and the Cargill Parties' 'concerted attack upon the independence of Mr Fitzgerald';

(d) in relation to the Cargill Parties' application concerning Mr Fitzgerald, the issue took up a significant portion of the hearing time;

(e) a further discount ought to be applied to reflect that part of the costs that the Viterra Parties 'have been ordered to pay to the third parties occasioned by the third parties being present for various aspects upon which the Cargill Parties failed'; and

(f) a further small discount ought to be applied for the fact that the Viterra Parties were forced to file a summons to compel production of a document for which the Cargill Parties had claimed privilege, that document having been ultimately produced.

9 In my view, the Viterra Parties ought to pay sixty per cent of the Cargill Parties' costs of the 14 February summons. I accept that, given the discrete nature of the issues in the application, in particular the question of the independence of Mr Fitzgerald, this is an appropriate case for apportionment of costs upon an 'issue basis'.[4] There were three substantial issues in the application: the 'issue waiver' issue, the 's 125 issue', and Mr Fitzgerald's independence or lack thereof. The Cargill Parties were largely, but not entirely, successful in relation to the first two issues, in that the categories of documents ordered to be produced were somewhat confined in scope, compared with the categories of documents sought in the summons.

10 The independence of Mr Fitzgerald was a significant issue in the application, with a determination adverse to the Viterra Parties upon that application potentially having ramifications well beyond the immediate scope of the application. It was not unreasonable for the Cargill Parties to bring the application, but that is not the test. This limb of the application consumed a substantial proportion of the hearing time, both in evidence and submissions, and a substantial portion of the 30 March ruling was devoted to this issue. A substantial number of authorities were relied upon by both parties to support their respective contentions concerning this issue.

11 Doing the best I can in the circumstances, in my view, the independence issue alone justifies an order that the Viterra Parties should only be required to pay seventy per cent of the Cargill Parties' costs of the 14 February summons (including the hearing on 6 April 2011). A further ten per cent reduction ought to be allowed to reflect the fact that the April orders provided for a more confined class of documents to be produced on the basis of either issue waiver or the s 125 issue, and the Viterra Parties' success in compelling production of a document over which the Cargill Parties had claimed privilege. Upon reflection, it is difficult to justify or quantify any further reduction based upon the participation of the third parties in the hearing of the applications.

12 In their summons filed 18 May 2017, the Viterra Parties seek that the Cargill Parties produce the following categories of documents:

... all documents over which they have claimed privilege which record or evidence the knowledge of the Cargill Parties, in the period up to and including 31 October 2013, of the Undisclosed Matters (as defined in paragraph 19 of the Further Amended Statement of Claim dated 2 April 2015 (the FASOC)), including all documents which record or evidence the knowledge of the Cargill Parties of:

(a) JWM supplying malt to customers that did not comply with contractual requirements and specifications;

(b) JWM supplying 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;

(c) the Viterra Policies (as defined in paragraph 19 of the FASOC); and

(d) the effect of the Viterra Practices (as defined in paragraph 19 of the FASOC) on JWM's financial and operational performance and JWM's ability to produce and sell malt:

(i) in the volumes and to the specifications required by customers; and

(ii) in the volumes and for the returns reflected in the Financial and Operational Information (as defined in paragraph 19 of the FASOC),

Save for documents brought into existence after 31 October 2013 for the dominant purpose of the Cargill Parties obtaining legal services with respect to this proceeding (or anticipated proceeding, as the case may be).

13 In effect, the Viterra Parties' application is the 'mirror image' of the applications made by the Cargill Parties and the third parties which culminated in the 30 March ruling.

14 The Viterra Parties relied upon the following affidavits in support of their application:

(a) an affidavit of Monique Carroll affirmed on 18 May 2017 ('18 May affidavit'); and

(b) an affidavit of Monique Carroll affirmed on 1 June 2017 ('1 June affidavit').

15 In the 18 May affidavit, Ms Carroll deposed, in summary as follows:

(a) she referred to a summary of claims made by the Cargill Parties in the proceeding contained in another affidavit filed in this proceeding, along with the terms of clause 13.3 of the Acquisition Agreement, which qualifies the Warranties given by the Viterra Parties in the Acquisition Agreement;

The issues in this proceeding include:

(a) whether the Cargill Parties relied on the alleged misrepresentations and nondisclosures by the Defendants, which encompasses whether and to what extent the Cargill Parties knew or suspected the existence of the alleged Viterra Practices as a result of disclosures made during the sale process or the knowledge and experience gained from the operation and/or ownership of malt businesses of the Cargill Parties other than JWM or otherwise; and

(b) the quantum of the loss alleged to have been suffered by the Plaintiff, including what if any loss it sustained from ceasing the alleged Viterra Practices.

(c) she referred to some passages of the 30 March ruling concerning the question of issue waiver on the part of the Viterra parties;

(d) she referred to the definition of Undisclosed Matters in the pleadings, being:

(i) the existence and extent of the Viterra Practices;

(iii) the impact of the Viterra Practices and the Viterra Policies on JWM's Financial and Operational Information, and the production and sale of malt;[5]

(e) she deposes that from her review of the Cargill Parties' discovered documents she believes that the Cargill Parties have claimed privilege over hundreds of documents relating to the due diligence process;

(f) she instructed a colleague to conduct a search of the Cargill Parties' privileged documents (the details, but of course not the contents of which are contained in an electronic database) which are either described as concerning 'due diligence', or fall within the period of the October 2013 investigations. The resulting schedule, which is exhibit 'MLC-49' to the 18 May affidavit ('Schedule') refers to 782 documents;[6]

(g) she referred to a number of discovered (and not privileged) documents which referred to discussions between representatives of the Cargill Parties and JWM concerning operational matters, including the use of 'offspecification' barley.

(h) she extracted a number of document descriptions from the Schedule which came into existence during the due diligence period which coincided with the discussions referred to in (g) above, and/or referred to 'malt and barley issues';

(i) she referred to records of meetings and telephone calls during the due diligence process where the issue of off-specification barley was raised;

(j) she referred to an email prepared by Gary Hughes of JWM recording a meeting held between JWM and Cargill representatives on 15 October 2013, which led to the October 2013 investigations;

(k) she referred to and identified a number of documents over which the Cargill Parties have claimed privilege which were brought into existence during the course of the October 2013 investigations; and

The Defendants will be prejudiced in their ability to properly test the allegations pleaded by the Cargill Parties in the FASOC that the Cargill Parties were not aware of the Undisclosed Matters, in circumstances where the Cargill Parties have claimed privilege over communications and documents which appear likely to evidence or record the extent to which the Cargill Parties knew of the Undisclosed Matters.

16 In the 1 June affidavit Ms Carroll deposed,[7] relevantly, in summary, as follows:

(a) she identified a spreadsheet discovered by the Cargill Parties which identified a number of questions raised by the Cargill Parties concerning the malting process during the due diligence period; and

(b) she deposed that this spreadsheet and a covering email had originally been subject to a claim for legal professional privilege by the Cargill Parties, which was not ultimately pressed.

17 The Viterra Parties seek production of the above documents on the basis that any privilege in those documents has been waived by reason of the Cargill Parties having placed their knowledge of the alleged Viterra Practices and Viterra Policies in issue, so as to lay open to scrutiny privileged communications which evidence or otherwise bear upon that knowledge. In the Viterra Parties' written outline of submissions, these documents are said to concern the Cargill Parties' knowledge of the Undisclosed Matters.

18 In their written outline of submissions, the Viterra Parties referred to the 30 March ruling in support of their application, including my finding that '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', along with my statement that:

In cases where a party is alleging misrepresentation by non-disclosure, 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.[8]

19 In their written outline of submissions, the Viterra Parties submitted that, in summary:

(a) the Cargill Parties' knowledge of the Undisclosed Matters is in issue, such as to lay open privileged communications to scrutiny. They stated [citation omitted]:

The plaintiff alleges that the defendants did not disclose the 'Undisclosed Matters', and relevantly claims reliance. This places what the plaintiff knew and did not know of the 'Undisclosed Matters' into sharp focus, just as it had been held that it did for the defendants on their third party claims.

(b) further, any knowledge on the part of the Cargill Parties was likely to have been informed by legal advice. They stated:

First, it is open to the court to infer that, should there be material evidencing or recording the Cargill Parties' knowledge of the 'Undisclosed Matters', this would have been the subject of legal advice, especially given the magnitude ($420 million) of the transaction and the undisputed fact of lawyers advising them on the transaction. This inference is especially open given that the Cargill Parties have opted not to place responsive material before the Court on the issue denying the possibility despite the Carroll affidavits deposing to the likelihood of the existence of such privileged communications.

(c) the evidence relied upon by the Viterra Parties identify a number of documents that may have informed the Cargill Parties' knowledge of the Undisclosed Matters, based upon the time period, subject matter, and basis of the privilege claim, in particular, documents brought into existence during the due diligence process, and during the course of the October 2013 investigations; and

To the extent that any of the privileged material records or evidences the Cargill Parties' knowledge of any aspect of the 'Undisclosed Matters' prior to completion, that privilege has been waived by reason of the pleading of reliance on the Undisclosed Matters, and the breaches of warranties, and must be produced to the defendants. In the absence of production of these documents, the defendants' ability to property test the plaintiff's alleged reliance on the Undisclosed Matters and the allegation of breaches of warranties by the defendants will be seriously compromised.

20 In his oral submissions at the hearing of the application, senior counsel for the Viterra Parties submitted that it was irrelevant to the determination of the application that the Viterra Parties could not specifically identify any particular document which might be caught by the doctrine of issue waiver. That said, he took me through some of the documents exhibited to the 18 May affidavit which were said to demonstrate that, prior to the entry into the Acquisition Agreement, representatives of the Cargill Parties were alert to the fact that JWM's practices might not be in accordance with the Cargill Parties' expectations. In particular, senior counsel referred to an email or file note of Mr Hughes dated 23 October 2013, which referred to the practices adopted by JWM regarding the preparation of Certificates of Analysis (that is, the Viterra Policies), and the use of an additive in the malting process, and to 'issues being raised on several occasions by Cargill'.

21 In addition to Mr Hughes' file note, senior counsel for the Viterra Parties referred to the following documents exhibited to the 18 May affidavit, including:

(a) an email exchange by representatives of the Cargill Parties during the due diligence process, annexing a spreadsheet which provided, in meticulous detail, the operational and financial details of each of JWM's plants.[9] The covering email stated, among other things:

It might be related to barley varieties, but they only on 6 days steeping/germination where we are at 6/7. They definitely have solid process expertise, and utilise just in time better than us. We have to be honest we are questioning how they can do this given aging/processing requirements.

(b) a record of 'the operations call held between White and Cargill on 18 July 2013', which is in a question and answer format;[10]

(c) a record summarising questions and answers from a 'Commercial Discussion with Joe White Management' on 19 July 2013,[11] which referred to, among other things:

During times of drought, Joe White may buy off-grades and work with grain handlers to capture higher volumes;

and

(d) a record summarising questions and answers from the 'Barley Inventory Discussion held with Joe White Management' on 23 July 2013,[12] which referred to, among other things, his response to a question about whether there was potential to achieve additional margin on the barley:

Malt blending with a lower and higher grade barley - up to 30% of nonmalt-1 varieties can be utilised.

22 A more detailed analysis of the documents referred to above, highlighting references to operational issues now known to be the Viterra Practices, is contained in the 18 May affidavit. Senior counsel submitted that these documents demonstrated that representatives of the Cargill Parties were alert to the Viterra Practices, and given that the Cargill Parties' lawyers were heavily involved in the due diligence process, there are likely to be documents subject to a claim for privilege which meet the description in paragraph 1 of the 18 May summons.

23 Following the hearing of the application, the solicitors for the Viterra Parties, King & Wood Mallesons ('KWM'), sent through a helpful note identifying which of the documents listed in the Schedule by reason of their date and description, may well be documents which are the target of the application.

24 As for the application of the principles which emerge from the authorities concerning issue waiver, senior counsel noted that it is of no significance that the Cargill Parties have not pleaded any reliance upon legal advice. Rather, the Cargill Parties, by pleading their reliance upon the Undisclosed Matters when entering into, and then completing, the Acquisition Agreement, have placed the Undisclosed Matters at the heart of their case.

25 The Cargill Parties did not dispute the relevant legal principles in applications such as the current application, save that their submissions expressed some reservations concerning the contemporary relevance of the factors identified by Hodgson CJ in Wayne Lawrence Pty Ltd v Hunt,[13] which was referred to in the Viterra Parties' submissions and, for that matter, the 30 March ruling.

26 In their written outline of submissions, the Cargill Parties contend that the Viterra Parties are seeking to apply this Court's findings about their own issue waiver to the Cargill Parties, which ought not be entertained, on the basis that:

(a) the authorities emphasise that questions of issue waiver are fact specific, and the application must be dealt with by reference to the Cargill Parties' conduct and pleadings, not by analogy with any previous finding regarding the conduct of the Viterra Parties; and

Secondly, the Defendants' waiver contention must fail because, in order to succeed, it would have to be the case that the mere pleading of a case involving an allegation of reliance waives privilege. That is not the law. On the contrary, the law is that merely putting state of mind in issue does not waive privilege - something more is required. Here, there is nothing that takes the Plaintiff's case outside the ordinary class of case involving reliance.

27 The Cargill Parties' submissions noted the following:

(a) legal professional privilege is an important common law right;

(b) inconsistency, not 'fairness', is the key element in determining whether there has been any 'issue waiver';

(c) 'merely pleading a cause of action in which state of mind is in issue is not enough to constitute the necessary inconsistency to found a finding of issue waiver; something more is required' [citation omitted];

(d) authorities where 'something more' than state of mind being an issue include the decision of the Court of Appeal in Vic Hotel Pty Ltd v DC Payments Australasia Pty Ltd,[14] my decision in the 30 March ruling (by reason of the Viterra Parties pleading a positive case in the Third Party Notices), and the decision of the Full Federal Court in Commissioner of Taxation v Rio Tinto Ltd;[15] and

(e) the authorities referred to above are to be contrasted with cases in which there was nothing more than 'state of mind being an issue'.[16]

28 Applying the relevant principles to the current case, the Cargill Parties submitted as follows [citations omitted]:

The Defendants' application focuses on the 'Undisclosed Matters' pleaded at FASOC [19]. They submit that an implied waiver arises 'by reason of the pleading of reliance on the Undisclosed Matters' and breach of warranty. The Defendants mischaracterise the Plaintiff's case. What the Plaintiffs plead is that the Plaintiff entered the Acquisition Agreement in reliance on certain positive representations that were conveyed in the course of the sale process. The Undisclosed Matters are pleaded, along with a very long list of positive statements, as one of many bases upon which the Financial and Operational Performance Representations were made. By contrast, so far as the PreCompletion Representations are concerned, the Undisclosed Matters are not relied on as giving rise to the making of the representations, but are only pleaded in falsifying those Representations.

That is not to say that the Plaintiff contends that, if it knew the truth about the Undisclosed Matters, that it would not be relevant to its pleas of reliance - but close attention must be paid to the case actually pleaded by the Plaintiff. The Defendants' submissions are not faithful to the Plaintiff's pleading. The Plaintiff has not pleaded or even referred to obtaining legal advice which relevantly informed its state of mind on reliance. Nor has it necessarily laid open its privileged communications for scrutiny.

When the Plaintiff's pleading is actually addressed, it contains nothing more than a conventional misrepresentation and reliance case. As the cases make clear, without more, a case of that kind does no more than make state of mind a relevant issue, but does not constitute a waiver. In other words, there is nothing in the case pleaded by the Plaintiff that takes it outside the class of where state of mind is in issue insofar as a privilege holder has pleaded reliance.

So far as the warranties are concerned, there is similarly no implied waiver.

(a) First, the same principles apply so that pleading a contractual breach of warranty does not, ipso facto, result in implied waiver simply because the scope of the warranties may be read down if the representee had actual knowledge, or because actual knowledge may go to causation.

(b) Further, it would be perverse for the Court to find that clause 31.13 of the Acquisition Agreement did not result in an implied waiver while finding that cl 13.3(a) does.

Finally, in relation to the Viterra Parties' contention that there are likely to be privileged communications which touch on the Undisclosed Matters, the Cargill Parties submitted as follows:

There is nothing in the documents to which Ms Carroll refers that goes beyond showing that, as would be entirely normal in any due diligence process leading to a large acquisition, legal advisers were involved along the way. There is nothing in those documents which suggests that privileged communications exist which informed the state of mind which falls to be examined. Even then, as Anbu demonstrates, even if privileged documents clearly exist which bear on state of mind, even that is not enough.

29 In her oral submissions at the hearing of the application, counsel for the Cargill Parties submitted that the pleading in paragraph 19 of the FASOC concerning the Undisclosed Matters needs to be understood in its proper context. The representations which were said to be relied upon by the Cargill Parties were not the Undisclosed Matters, but rather, concerned the financial and operational performance of the JWM business. The Undisclosed Matters underpinned the pleaded representations, and caused them to be false. However, while the Cargill Parties do not shy away from the fact that the Undisclosed Matters form an important part of the case, they do not of themselves constitute the representations relied upon by the Cargill Parties.

30 Counsel for the Cargill Parties noted that the gravamen of her submission was that the Viterra Parties have not established why this proceeding is anything more than a common garden variety misrepresentations case, noting that legal professional privilege is an important common law immunity. The current application can be distinguished from my decision in the 30 March ruling, because the previous application was analogous with the facts and circumstances in Vic Hotel, in that, by pleading their claims in the third party proceedings in the manner in which they did, the Viterra Parties were 'approbating and reprobating'.

31 Counsel for the Cargill Parties referred to the statement of Dixon AJA in Vic Hotel that:

The test for waiver is not whether the pleadings made any express or implied assertions about the content of the privileged communications, pleaded either as a material fact or as a particular to any material fact, which might be inconsistent with maintenance of the privilege. Rather, it is whether the privilege holder, DC Payments, by its conduct in its pleading of the state of mind of Next Payments, acted in a way that was inconsistent with its objection to Next Payments adducing evidence that would result in disclosure of its knowledge of the privileged legal advice. Put another way, was DC Payments's [sic] conduct in pleading a state of mind of Next Payments inconsistent with the maintenance of confidentiality in communications relevant to that state of mind.

It is the privilege holder's conduct that effects waiver. Here, waiver is not the consequence of the privilege holder's disclosure of confidential communications to the senior managers; it is the consequence of the issue that was pleaded. Where the privilege holder puts into issue the state of mind of another who is aware of the confidential communications, the waiver of the privilege is in relation to the issue. I doubt that it is open to another party to litigation to force waiver of a party's legal professional privilege by making assertions about, or seeking to put in issue, that party's state of mind, but that is not this case.[17]

32 Counsel for the Cargill Parties, in referring to the above statements in Vic Hotel, submitted as follows:

There again, is where one sees the parallels to the case ... before Your Honour on the last occasion because it was the defendants positively asserting that the third parties had not told them about the undisclosed [matters] or that the third parties had represented to them that they did not exist, yet relied on privilege to shield the October communications that gave rise to the waiver there.[18]

33 Counsel for the Cargill Parties also referred to the decisions of Rio Tinto, Liquorland, Sage, and Anbu in support of the proposition that mere relevance of a party's knowledge and state of mind to an issue in the proceeding is insufficient, of itself, to amount to a waiver of privilege. Referring to Anbu, also a 'standard' misleading and deceptive conduct case, counsel noted in that case there was much stronger evidence that there was legal advice which informed the plaintiff's state of mind, in that documents answering that description were produced to the Court in response to a Notice to Produce. She also noted the observations of Wigney J to the effect that answers under crossexamination at trial might give rise to a waiver,[19] such that the Viterra Parties are not shut out from contending at a later stage that there has been a waiver of legal professional privilege on the part of the Cargill Parties.

34 Counsel for the Cargill Parties referred to the 18 May affidavit relied upon by the Viterra Parties, and submitted that the evidence is 'somewhat of a distraction', and does not establish that 'the lawyers are crawling all over the subject matter of the Undisclosed Matters'. The documents relied upon by the Viterra Parties do nothing more than raise some questions, which were answered by JWM in the course of the due diligence process. She noted that the email of Mr Hughes of 23 October 2013 referred to at paragraph 20 above appeared to be a memorandum to himself, and there was no evidence that this was provided to the Cargill Parties prior to 31 October 2013.

35 Finally, counsel for the Cargill Parties referred once again to the 30 March ruling, and the pleadings in the Third Party Notice. She submitted that there was an express pleading in the Third Party Notice that the third parties told the Viterra Parties that the Undisclosed Matters did not exist. She referred to the submissions of senior counsel for the YWA parties referred to in the 30 March ruling,[20] and submitted as follows:

We're not seeking to rely on privilege to stop the defendant saying oh yes, well you did and here it is. That's the key distinction. The defendants wanted to stop - use privilege to stop the third party saying here and when is how we told you of the undisclosed matters.

If they want to use all the documents that they have at their disposal to say that in fact, Glencore and Viterra did tell Cargill of the practices, they're quite free to do that. Cargill is not seeking to use privilege to shut them out from that exercise, and that is the exercise that they were trying to use privilege to shut the third parties out from.[21]

36 In reply, senior counsel for the Viterra Parties submitted, in summary, as follows:

(a) as for the question of whether there are likely to be documents subject to a claim for legal professional privilege, he noted that there was a detailed due diligence process, and the probability that lawyers were involved in the correspondence between the parties during the course of the October 2013 investigations was high;

(b) the Cargill Parties' knowledge of the Undisclosed Matters is central to the question of the Cargill Parties' reliance upon the alleged representations; and

(c) while there is no real dispute between the parties concerning the applicable principles governing the determination of this application, contrary to the submissions on the part of the Cargill Parties, the discussion in Wayne Lawrence concerning what matters ought to be taken into account when determining whether an issue waiver has occurred remains useful.

37 In my view, there has been no conduct on the part of the Cargill Parties that is inconsistent with their maintenance of legal professional privilege over documents which evidence the Cargill Parties' knowledge of the Undisclosed Matters. Indeed, the Viterra Parties' failure to make any such application until two years after the commencement of the proceeding (with the pleading of the relevant matters remaining largely in the same terms over that time) suggests a tacit understanding on the part of the Viterra Parties that the claims by the Cargill Parties are indeed 'common garden variety' misleading and deceptive conduct and breach of warranty claims, the pleading of which ordinarily would not give rise to a waiver going to the knowledge or state of mind of the plaintiff. While I accept that applications such as these turn on their own facts and circumstances, I agree with the submissions of counsel for the Cargill Parties that the decisions in Liquorland, Anbu, and Sage are illustrations of the proposition that there must be something more than merely pleading a state of mind, and in the decisions where there has been found to be a waiver (VicHotels, Rio Tinto, and the 30 March ruling), there has been 'something more'.

38 It is apparent from the authorities relied upon by counsel for the Cargill Parties, starting with Liquorland,[22] and continuing with Sage,[23] and Anbu,[24] that a party putting in issue its knowledge or other state of mind as a relevant issue in its pleading is merely the starting point of determining the question of whether there has been a waiver of otherwise privileged communications recording, evidencing, or relevant to that knowledge or state of mind. There must be 'something more', to strip away this significant common law right. Here, there has been no 'approbating or reprobating' on the part of the Cargill Parties, or any other conduct by the Cargill Parties inconsistent with the maintenance of the privilege. As noted succinctly in Austral Dutch Kaolin Pty Ltd v Hanjin P & C Co Ltd:[25]

It follows that the mere pleading of reliance as an element of the cause of action does not impliedly waive the privilege attaching to communications between the applicant and its lawyer ... [26]

39 The Cargill Parties have done no more than that.

40 Further, while this is not necessarily fatal to the application, I am not greatly persuaded that, at least during the due diligence period, there are likely to be priviliged documents relevant to the question of whether the Cargill Parties knew of the Undisclosed Matters. The documents exhibited to the 18 May affidavit and referred to by senior counsel for the Viterra Parties in his submissions do indicate the possibility that representatives of the Cargill Parties might have been alerted to the Viterra Practices during the course of the due diligence process, but it is not apparent from the documents themselves that the Cargill Parties' lawyers (either external or internal) were 'crawling all over' these issues. Further, it is not apparent from the descriptions of the documents in the Schedule of a selection of the Cargill Parties' privileged documents, insofar as they came into existence during the due diligence process, that these documents would contain legal advice on the matters referred to in the 'Q & A' process described in the exhibits. There seems to be little, if any, overlap between the audience of the documents referred to in the exhibits, and the documents referred to in the Schedule.

41 I do accept that, given the circumstances, the size of the transaction, and the nature and subject matter of the correspondence between the parties in this period, that there are likely to be privileged documents relevant to this issue which came into existence during the course of the October 2013 investigations, and that was confirmed by my review of the descriptions contained in the Schedule. I am reinforced in my view on both matters by the fact that the only additional documents produced by the Viterra Parties which made their way into the Cargill Parties' amended pleading filed and served in July 2017 were all documents which came into existence in October 2013.

42 I accept that the parties' knowledge of the Undisclosed Matters is a central issue in the proceeding: as stated by counsel for the Cargill Parties in her submissions, the Undisclosed Matters 'underpin' the representations pleaded by the Cargill Parties. Further, given I have ordered that the Viterra Parties disclose privileged documents evidencing their knowledge of the Viterra Practices and the Viterra Policies, it may seem unfair to refuse to compel the Cargill Parties to do the same. However, it is almost trite law that, since Mann v Carnell,[27] it is not 'fairness' that determines whether there has been a waiver: it is conduct inconsistent with the maintenance of legal professional privilege, and that conduct must be the conduct of the privilege holder. In the 30 March ruling, I found that there was conduct on the part of the Viterra Parties inconsistent with the maintenance of the privilege, in that they did not simply deny any knowledge of the Undisclosed Matters, but attempted to shift liability to the Third Parties, while simultaneously denying them access to documents which would disprove the claims made by the Viterra Parties.

43 Other points of distinction between the application which was the subject of the 30 March ruling include the dual role of Mr Fitzgerald as being both a recipient of the representations said to have been made by the Third Parties and his role as the Viterra Parties' in-house counsel, such that documents concerning Mr Fitzgerald's knowledge of the Undisclosed Matters ought not be shielded by legal professional privilege, as well as the implied allegation in the Third Party Notice that the Viterra Parties did not know of the Viterra Practices and the Viterra Policies. I agree with counsel for the Cargill Parties that the fundamentally inconsistent conduct of the Viterra Parties was making an allegation that the Third Parties did not inform the Viterra Parties of the Undisclosed Matters, and then seeking to shield from disclosure documents which evidenced what the Third Parties did in fact tell the Viterra Parties. This is particularly pertinent in respect of documents concerning the October 2013 investigations, which in any event were ordered to be produced on another basis, being the s 125 issue.

44 While it is not necessary for present purposes to rehearse the competing arguments in any detail, from about May 2017 the parties have been in dispute about whether the Viterra Parties have fully complied with the terms of the April orders, particularly the orders concerning the October 2013 Responses (being the letters sent by the Viterra Parties to the Cargill Parties in response to the queries raised by them in the letters dated 22 and 29 October 2013). In the end, the dispute narrowed down to one tranche of fifteen documents, and a further tranche of 45 documents, which were referred to me for inspection by agreement between the parties.

45 The April orders required that the Viterra Parties produce for inspection the following categories of documents:

(a) all documents which record or evidence the actual knowledge, in the period up to and including 31 October 2013, 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), save for documents brought into existence after 31 October 2013 for the dominant purpose of the defendants obtaining legal services with respect to this proceeding (or anticipated proceeding, as the case may be);

(b) pursuant to s 125 of the Act, all documents brought into existence to further give effect to or conceal the existences of the policies and practices which resulted in JWM providing to its customers Certificates of Analysis which had been altered to conceal the use of offspecification barley and/or additives in the products supplied by JWM. For the avoidance of doubt, this category of documents does not include documents which only record advice as to how to deal with the consequences of developing the Viterra Policies and the Viterra Practices; and

(c) all documents relied upon or brought into existence for the purpose of, or in connection with, the defendants preparing or discussing the proposed response (whether by way of correspondence or otherwise) to the letters from Cargill dated 22 and 29 October 2013 (the October 2013 Reponses), including any legal advice concerning the October 2013 Responses.

46 In relation to the first tranche of documents, none of the documents fall within the terms of the April orders, save that some of the redactions on document VIT.618.001.0876 should possibly be removed, unless I am able to be persuaded that the redacted parts are not relevant to the issues in the proceeding. The sections in question are at pages 25 and 26 of this document, under the headings 'Strategic Summary' and 'Expansion Model' insofar as they refer to 'Australia'.

47 In relation to the second tranche of documents, the only documents which, on their face, might fall within the terms of the April orders are:

48 However, in relation to each of the three documents referred to above, I can see how KWM could form the view that, in the case of the first document, the redactions obscure irrelevant matters, and in relation to the second and third documents, they may not, strictly speaking, fall within the terms of the April orders. Accordingly, I am prepared to provide the Viterra Parties with an opportunity to provide a short note (to be copied to the solicitors for the Cargill parties) to briefly submit why these documents should not be produced, and I will rule upon the three outstanding documents in chambers.

1. The Viterra Parties pay sixty per cent of the Cargill Parties' costs of their summons filed 14 February 2017, including the costs of the hearing on 6 April 2017.

2. There be no order as to the parties' costs of the hearing on 11 April 2017.

3. The application in paragraph 1 of the Viterra Parties' summons filed 18 May 2017 is dismissed.

4. By 4.00pm on 24 November 2017 the Viterra Parties file and serve brief written submissions as to:

(a) why the following documents should not be produced to the Cargill Parties pursuant to the terms of the April orders:

(b) why it is said that the redactions to pages 25 and 26 of VIT.618.001.0876 are permissible on the grounds of lack of relevance.

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] [2017] VSC 126. The 30 March ruling contains a detailed account of the dispute between the parties, and this ruling adopts the defined terms used in the 30 March ruling.

[2] The costs of the third to seventh third parties were dealt with in an unpublished ruling dated 3 May 2017, where I ordered that the Viterra parties pay eighty per cent of the YWA parties' costs, and seventy per cent of the third and sixth third parties' costs.

[3] The applications scheduled for hearing on 25 July 2017 were subsequently adjourned to be heard on 25 September 2017. Further, by agreement between the parties on or about 19 October 2017, while this ruling was reserved, a further tranche of documents was forwarded to me to review to assess whether they fell within the terms of the April orders.

[4] See GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3) [2008] VSC 296, [59(b)].

[6] Of course, many of these may be duplicates, or parts of email chains.

[7] This affidavit also concerned other matters in dispute between the parties which were not referred to me for determination.

[8] Cargill Australia Ltd v Viterra Malt Pty Ltd and ors [2017] VSC 126, [141].

[13] [1999] NSWSC 1044 ('Wayne Lawrence').

[16] For example, Liquorland (Australia) Pty Ltd v Anghie [2003] VSC 73; (2003) 7 VR 27 ('Liquorland'); Archer Capital 4A Pty Ltd v Sage Group P/C (No 3) [2013] FCA 1160; (2013) 306 ALR 414 ('Sage'); and Anbu v Vulcanite Pty Ltd (2015) 324 ALR 303 ('Anbu').

[18] Transcript of Proceedings, Cargill Australia Ltd v Viterra Malt Pty Ltd and Ors, (Supreme Court of Victoria, [2017] VSC 126, Associate Justice Daly, 25 September 2017) 24 [27]-[31] - 25 [1]-[3].

[21] Transcript of Proceedings, Cargill Australia Ltd v Viterra Malt Pty Ltd and Ors, (Supreme Court of Victoria, [2017] VSC 126, Associate Justice Daly, 25 Septembers 2017), 37 [15]-[26].

[28] I assume that the handwritten annotations on the document have been made by Kate Lindner of KWM.

At a glance

Court

Decision date

Before

Source

Judgment (146 paragraphs)

Parties

Cases Cited (6)