Federal Court of Australia

Duma v Fairfax Media Publications Pty Limited (No 2) [2021] FCA 119

ORDERS

THE COURT ORDERS THAT:

1.    Horizon Oil Limited’s claim of privilege in respect of the documents produced pursuant to the subpoena issued to it on 2 July 2020, as set out in its letter to the Registry dated 8 February 2021 (the Privilege Application), be upheld.

2.    Access be refused to the following documents produced by Horizon Oil Limited pursuant to the subpoena issued to it on 2 July 2020:

a.    the documents contained on the USB stick labelled “privileged documents” in subpoena packet S-5 produced to the Court on 16 December 2020; and

b.    the documents contained on the USB stick labelled “Wholly Privileged Documents” in subpoena packet S-6 produced to the Court on 9 February 2021.

3.    The respondents pay Horizon Oil Limited’s costs of the Privilege Application as agreed or assessed on an ordinary basis.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(revised from transcript)

THAWLEY J:

1    On 3 December 2020, Bromwich J dismissed interlocutory applications seeking to set aside a subpoena issued to Horizon Oil Limited: Duma v Fairfax Media Publications Pty Limited [2020] FCA 1792. Mr Duma and Horizon Oil contended that there was no legitimate forensic purpose for the subpoena. The subpoena was issued in one of two closely related defamation proceedings arising out of the publication of articles in print and online in the Australian Financial Review newspaper (AFR) in the period from 10 to 16 February 2020 and on 14 April 2020. The applicant in both proceedings is Mr William Duma, a minister in the national government of Papua New Guinea (PNG). The first respondent in each proceeding is the publisher of the AFR, Fairfax Media Publications Pty Limited. The second and third respondents in each proceeding are two journalists as co-authors of the individual articles. The two proceedings are listed for trial together to commence on 29 March 2021.

2    As I will described further, documents have now been produced under the subpoena issued to Horizon Oil and the matter has been referred to me as duty judge to resolve questions as to whether Horizon Oil’s claims of legal professional privilege are made out and, if so, whether there has been a waiver of any such privilege.

3    The matters complained of in the underlying proceedings concern allegations directed at transactions between Mr Duma and Horizon Oil. Horizon Oil took no issue with the respondents’ description of the background in the following terms:

In the articles, it is asserted that, in November 2010, the PNG government refused to extend a petroleum retention licence (PRL) in which Horizon held an interest. Proceedings were commenced by Horizon to review that refusal. In March 2011, a new PRL was issued to a consortium which included Horizon, and the proceedings settled. One of the consortium partners was a company called Elevala Energy Ltd (Elevala). Within months of the allocation of the new licence, Elevala’s interest was sold to Horizon for US$10.3 million. The articles explored the possibility of a link between Elevala and the applicant, and posed questions about the propriety of the transaction.

4    After publication of the articles on 10 and 11 February 2020, Horizon Oil announced to the market that it would conduct an independent investigation into the allegations which had been made. On 12 February 2020, it announced that it had established “an Independent Board Committee (IBC) to oversee an investigation into the matters which were” the subject of the articles which appeared on 10 and 11 February 2020.

5    Horizon Oil relied upon an affidavit of its solicitor, Mr Marjoribanks, a partner of Herbert Smith Freehills (HSF). His unchallenged evidence includes:

    Horizon Oil engaged HSF to provide it with legal advice in relation to the allegations in the articles;

    HSF engaged Deloitte’s forensic investigation team to assist HSF;

    between February 2020 and 4 June 2020, HSF (with the assistance of Deloitte) conducted a confidential investigation for the dominant purpose of providing legal advice to Horizon Oil;

    HSF provided Horizon Oil’s IBC with confidential legal advice on 4 June 2020.

6    On 9 June 2020, Horizon Oil made an announcement which included:

INVESTIGATION INTO PNG TRANSACTION CONCLUDED

Horizon Oil Limited [Horizon or the Company] advises that its investigation into Horizon’s payment to acquire an interest in Petroleum Retention Licence 21 [PRL 21] in the Western Province of Papua New Guinea [PNG] in 2011 has now concluded.

Horizon confirms no breach of foreign bribery law

The investigation, which included a forensic review of all aspects of the transaction, was conducted by Herbert Smith Freehills [HSF] and Deloitte with the oversight of an Independent Board Committee [IBC]. Horizon confirms that no breach of any Australian foreign bribery law has been established. Horizon is not aware of any regulatory investigation into these matters involving the Company in Australia or Papua New Guinea.

The 2011 transaction was undertaken to advance Horizon’s legitimate business interests in PNG. Horizon confirms that the structure of the transaction and the quantum of the purchase price paid by Horizon was consistent with market practice and comparable to other relevant transactions at the same time. In addition, Horizon confirms that no payments were made in excess of the agreed purchase price and Horizon has no knowledge of any subsequent transfers or transactions made by the counterparties after the purchase price was paid.

Further detail of the timeline of the 2011 transaction is set out in the Annexure.

Prompt and decisive action by the Horizon Board

Given the seriousness of the allegations first made in the Australian Financial Review on 10 February 2020, the significant adverse market impact to Horizon’s shareholders resulting from the articles and that the transaction with Elevala Energy occurred more than 8 years ago, the Horizon Board initiated an immediate and in-depth investigation.

The investigation was to examine whether the Company’s actions in respect of the 2011 transaction breached Australia’s foreign bribery laws. HSF instructed Deloitte’s forensic investigation team to identify and collate relevant factual information. The IBC directed HSF and Deloitte to have consideration to all information in the Company’s possession in the conduct of that investigation.

Horizon confirms that the investigation did not establish any breach of Australian foreign bribery laws.

7    On 16 December 2020, Horizon Oil produced ten documents but objected to inspection on the grounds of legal professional privilege. By agreement between the parties, the production was stated to be without prejudice to Horizon Oil seeking leave to appeal from the orders which Bromwich J had made on 3 December 2020. An application for leave to appeal those orders was filed on 22 December 2020. The parties want the privilege issue to be determined notwithstanding the application for leave to appeal. That is an appropriate course given the impending trial and in order to determine all issues dividing the parties (including the interested party) in respect of the subpoena.

8    On 8 February 2021, Horizon Oil revised its claim for privilege. It no longer claims privilege over one of the ten documents, claims four of the documents are wholly privileged and claims five are partly privileged on the basis of litigation privilege and advice privilege. Horizon Oil does not claim litigation privilege over any part of a document which is not also covered by advice privilege.

9    The respondents make two contentions: first, that the privilege has not been made out on the evidence; and secondly, that Horizon Oil has waived any privilege proved to subsist.

10    Although the respondents’ submissions were made by reference to the provisions of the Evidence Act 1995 (Cth), disputes concerned with pre-trial disclosure and inspection, as opposed to the adducing of evidence, are determined according to the common law: Esso Australia Resources Limited v Commissioner of Taxation (1999) 201 CLR 49 at [17]-[28], per Gleeson CJ, Gaudron and Gummow JJ; at [64], per McHugh J.

Are the documents privileged?

11    Legal advice privilege “may be availed of by a person to resist the giving of information or the production of documents which would reveal communications between a client and his or her lawyer made for the dominant purpose of giving or obtaining legal advice”: Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 at [9], per Gleeson CJ, Gaudron, Gummow and Hayne JJ.

12    The “dominant” purpose is the prevailing purpose, namely the purpose which predominates over other purposes: AWB Ltd v Cole (2006) 152 FCR 382 at [105], per Young J; Archer Capital 4A Pty Ltd v Sage Group Plc (No 2) (2013) 306 ALR 384 at [11], per Wigney J. The purpose for which a communication is made is a question of fact to be determined objectively from the nature of the relevant communication, the content of the communication, the relevant context and the relationships between the parties: Commissioner of Taxation v Pratt Holdings Pty Ltd (2005) 225 ALR 266 at [30], per Kenny J; AWB at [110]. Notwithstanding that the purpose must be determined objectively, evidence of subjective purpose is relevant and although not necessarily conclusive, can be decisive: Esso at [172], per Callinan J; AWB Ltd v Cole (No 5) (2006) 155 FCR 30 at [44(2)], per Young J. The relevant time for ascertaining purpose is when the communication was made.

13    The onus of establishing that privilege applies such that disclosure may be resisted is on the person asserting the privilege, here Horizon Oil: Grant v Downs (1976) 135 CLR 674 at 689, per Stephen, Mason and Murphy JJ. Courts may examine the documents the subject of the privilege dispute in order to determine whether the nature and content of the documents support the privilege claim by throwing light on the purpose for which they were brought into existence. I was not asked to examine unredacted copies of the documents in the present case.

14    The affidavit of Mr Marjoribanks addressed each document and explained the basis of the asserted privilege. His evidence has not been called into doubt. As mentioned, privilege was no longer claimed over Document 1. According to the evidence, Documents 2, 3, 5, 6 and 8 were minutes of Horizon Oil IBC meetings prepared by Ms Quinlivan, an in-house legal adviser of Horizon Oil, containing variously:

    confidential updates given by Ms Quinlivan to the Horizon Oil IBC as to matters under investigation by HSF for the purpose of HSF providing legal advice to Horizon Oil;

    the contents of confidential communications sent from Ms Quinlivan to HSF for the purpose of HSF providing legal advice to Horizon Oil;

    records of meetings attended by Mr Marjoribanks and three other solicitors of HSF for the dominant purpose of providing Horizon Oil with legal advice;

    updates by HSF and Deloitte in relation to the status of the investigation for the purpose of HSF providing legal advice to Horizon Oil;

    the contents of legal advice provided by HSF to Horizon Oil regarding anticipated litigation concerning an employment issue;

    legal advice given by HSF to Horizon Oil and the Horizon Oil IBC’s confidential discussion about that advice.

15    Document 4 was said to be a copy of a presentation that HSF prepared for the dominant purpose of providing legal advice to Horizon Oil at the Horizon Oil IBC meeting on 19 February 2020.

16    Document 7 was said to record the content of legal advice provided by HSF to Horizon Oil and records confidential updates given by Ms Quinlivan to the Horizon Oil IBC as to matters under investigation by HSF and Deloitte for the purpose of HSF providing legal advice to Horizon Oil.

17    Document 9 was said to be a copy of a draft legal advice HSF prepared for the Horizon Oil IBC dated 3 June 2020 and Document 10 was said to be the final advice dated 4 June 2020.

18    I am satisfied on the basis of Mr Marjoribanks’ affidavit and a review of redacted documents 2, 3, 5, 6 and 8 that those documents are privileged. I am satisfied on the basis of Mr Marjoribanks’ affidavit that the remaining documents are privileged.

Waiver

19    A person who would otherwise be entitled to the benefit of legal advice privilege may waive that privilege: Mann v Carnell (1999) 201 CLR 1 at [28], per Gleeson CJ, Gaudron, Gummow and Callinan JJ. The test revolves around whether there is conduct inconsistent with the maintenance of confidentiality in the legal advice. It does not matter whether the client in whom the privilege rests subjectively intends to waive the privilege. The High Court observed in Mann at [29] (citations omitted):

Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is “imputed by operation of law”. This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege … What brings about the waiver is the inconsistency, which the courts, where necessary informed by consideration of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.

20    Implied waiver of privilege “reflects a judgment that the conduct of the party entitled to the privilege is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect”; that judgment “is to be made in the context and circumstances of the case, and in the light of any considerations of fairness arising from that context”: Osland v Secretary, Department of Justice (2008) 234 CLR 275 at [45], per Gleeson CJ, Gummow, Heydon and Kiefel JJ.

21    It is the challenger of the privilege, namely the respondents in the present proceeding, who bears the onus of demonstrating waiver of privilege: Archer at [100]; Australian Competition and Consumer Commission v NSW Ports Operations Hold Co Pty Ltd [2020] FCA 1232 at [153].

22    A limited disclosure of the existence, and the effect, of legal advice may not be inconsistent with maintenance of confidentiality in the terms of the advice; it depends on the circumstances of the case: Mann at [30]-[32]; Osland at [49]. In Osland, the appellant had been convicted and sentenced to imprisonment for murder. After unsuccessful appeals, she petitioned the Governor of Victoria for mercy. The Governor denied the petition. The Attorney-General for Victoria issued a press release stating that he had received a joint advice from three Queen’s Counsel recommending that the petition be denied.

23    The High Court observed (citations omitted):

[46]     The conduct of the Attorney-General in issuing the press release and including in it certain information about the joint legal advice is to be considered in context, which includes the nature of the matter in respect of which the advice was received, the evident purpose of the Attorney-General in making the disclosure that was made, and the legal and practical consequences of limited rather than complete disclosure.

…

[48]    The evident purpose of what was said in the press release was to satisfy the public that due process had been followed in the consideration of the petition, and that the decision was not based on political considerations. The three eminent lawyers who gave the advice were appointed following consultation with the State Opposition. They were external to the Department. Their advice covered all the grounds upon which the petition was based. They recommended denial of the petition. Their advice was carefully considered, and the petition was denied. The Attorney-General was seeking to give the fullest information as to the process that had been followed, no doubt in order to deflect any criticism, while at the same time following the long-standing practice of not giving the reasons for the decision. This did not involve inconsistency; and it involved no unfairness to the appellant. If she had a legal right to reasons for the decision, then she still has it. If she had no such right, the press release did not deprive her of anything to which she was entitled. What the Attorney-General said did not prevent the appellant from making public her petition, or any part of it, as and when she desired.

[49]    Whether, in a given context, a limited disclosure of the existence, and the effect, of legal advice is inconsistent with maintaining confidentiality in the terms of advice will depend upon the circumstances of the case. As Tamberlin J said in Nine Films and Television Pty Ltd v Ninox Television Ltd, questions of waiver are matters of fact and degree. It should be added that we are here concerned with the common law principle of waiver, not with the application of s 122 of the Evidence Act 1995 (Cth) which, as was said in Mann v Carnell, has the effect that privilege may be lost in circumstances which are not identical to the circumstances in which privilege may be lost at common law.

[50]    The reasoning of Maxwell P was correct.

24    Maxwell P, in the Court of Appeal in in Secretary, Department of Justice v Osland (2007) 95 ALD 380, had made the following remarks (Ashley JA and Bongiorno AJA agreeing):

[27]     … The disclosure in question did not occur in the context of litigation. It did not have the effect of unfairly advantaging one party over another. The content of the legal advice was not “put in issue”. Nor was it in Carnell. There, although there was litigation on foot between Dr Mann and the ACT Government, the disclosure of the legal advice was unconnected with the respective positions of the parties in the litigation …

[49]     Disclosure of the conclusion (or the gist, substance or effect) of legal advice may, or may not, amount to a waiver of privilege in respect of the advice as a whole. Whether it does in a particular case will depend on whether, in the circumstances of the case, the requisite inconsistency exists, between the disclosure on the one hand and the maintenance of confidentiality on the other …

[51]     As Carnell demonstrates, the inconsistency test readily accommodates the notion that, in appropriate circumstances, the privilege-holder may disclose the content of legal advice to a third party for a particular purpose without being held to have waived privilege in the advice. Likewise, in my opinion, the test of inconsistency is well capable of accommodating the notion that, in appropriate circumstances, the privilege-holder should be able to disclose publicly that it is acting on advice and what the substance of that advice is, without being at risk of having to disclose the confidential content of the advice.

…

[66]     … In the language of Carnell, this was a disclosure “for the purpose of explaining or justifying” the Attorney-General’s actions. The purpose was similar to that of the disclosure in Carnell itself, where the Chief Minister wished to satisfy the relevant member of parliament that the ACT Government “had acted responsibly and in accordance with legal advice”.

[67]     In my opinion, there was no inconsistency between disclosing the fact of, and the conclusions of, the independent advice for that purpose, and wishing to maintain the confidentiality of the advice itself. This was not a case of a party to litigation “deploying” a partial disclosure for forensic advantage, while seeking unfairly to deny the other party an opportunity to see the full text of the privileged communication. Nor was it “the laying open of the confidential communication to necessary scrutiny”.

25    Horizon Oil also referred to GMCG, LLC v Agenix Ltd [2007] QSC 309. In GMCG, the question was whether the defendant to the litigation had waived privilege in legal advice by reason of the contents of the following note to a preliminary final ASX report (emphasis added):

Note 9. Contingent liability

Legal dispute over consulting fees

A former consultant of the company has commenced legal proceedings in Australia against the company in relation to the Animal Health business transaction announced 7 April 2006. The consultant is seeking fees of $500,000 plus reimbursement of legal fees plus interest.

The company has received legal advice that it has no liability whatsoever.

If the matter proceeds to trial, the company’s potential exposure is estimated at $820,000.

26    Douglas J concluded that there had not been a waiver, because disclosure to shareholders, potential shareholders and creditors “promoted the integrity of the accounts and market transparency … in circumstances where the disclosure has given it no advantage in the litigation”: at [17].

27    Both Osland and GMCG reveal that it is relevant to have regard to any divergence of interest between the disclosing party and the interests of the person or persons to whom the disclosure is made.

28    Horizon Oil also referred to College of Law Ltd v Australian National University [2013] FCA 492. There the question was again whether a party to litigation had waived privilege in legal advice by virtue of the following statement made in an agenda paper available to ANU staff and students on the Australian National University (ANU) website:

Advice was received at the end of October from the University Legal Office that the Faculty could proceed to market using the brand name ANU College of Law.

29    Griffiths J concluded that privilege had not been waived. His Honour’s reasons for so concluding included that:

(1)    the disclosures revealed “very little about the actual content of the legal advices”, that is, the disclosure of the bottom line does not necessarily equate to the disclosure of the substance of the advice: at [35], see also: RinRim Pty Ltd v Deutsche Bank Australia Limited [2013] NSWSC 1654 at [44], Banksia Securities Limited v The Trust Company (Nominees) Limited [2017] VSC 583 at [31], Mullett v Nixon [2016] VSC 129 at [33]; and

(2)    the purpose of the disclosures was not to secure an advantage to the ANU which had an adverse impact upon the College, but in order to keep interested persons informed of relevant matters while preserving the ANU’s entitlement to receive privileged legal advice: at [36]-[37].

30    The respondents relied on Ampolex Ltd v Perpetual Trustee Co Ltd (Canberra) (1996) 40 NSWLR 12, a case which turned on s 122 of the Evidence Act 1995 (NSW) as it then stood. In Osland at [49] (extracted above), the plurality observed that s 122 of the Commonwealth Evidence Act “has the effect that privilege may be lost in circumstances which are not identical to the circumstances in which privilege may be lost at common law”. The respondents also relied upon Adelaide Steamship Co Ltd v Spalvins (1998) 81 FCR 360; BT Australasia Pty Ltd v New South Wales (No 7) (1998) 153 ALR 722; NRMA Ltd v Morgan (No 2) [1999] NSWSC 694; Fenwick v Wambo Coal Pty Ltd (No 2) [2011] NSWSC 353. Each of these cases turned on s 122 of the relevant Evidence Act as it stood at the relevant time. That is not to say that the cases are irrelevant. However, it is necessary to appreciate that they each involve the application of a particular statute (as it stood at a particular time) to the particular facts. Section 122(3) as it now stands contains a statutory deeming of when a party is taken to have acted in the inconsistent way required for s 122(2) to permit the adducing of what would otherwise be a privileged communication. This underscores the point made in Osland at [49].

31    The respondents submitted (citations omitted):

16.     Horizon is a public company listed on the Australian Stock Exchange (ASX). Consequently, it has an obligation to make announcements to the market “that a reasonable person would expect would have a material effect on the price or value of its securities” (Continuous Disclosure Obligations).

17.     Immediately following the publication of the matters complained, Horizon made a number of announcements to the market between February and June 2020 including:

(a)     on 10 February 2020 that stated:

“..[.] given the seriousness of the allegations made in the article and that the relevant transaction occurred some nine years ago, HZN’s board has today initiated an independent investigation into this matter.”

(b)     on 12 February 2020, that stated:

“Horizon Oil’s board has now established an Independent Board Committee [IBC] to oversee an investigation into the matters which were subject to articles in the Australian Financial Review on 10 and 11 February. Herbert Smith Freehills and Deloitte have been engaged to conduct the investigation”.

(c)     on 9 June 2020, the important announcement that included the following statements:

(i)     Horizon Oil Limited [Horizon or the Company] advises that its investigation into Horizon’s payment to acquire an interest in Petroleum Retention Licence 21 [PRL 21] in the Western Province of Papua New Guinea (PNG) in 2011 has now concluded.

(ii)     The investigation, which included a forensic review of all aspects of the transaction, was conducted by Herbert Smith Freehills [HSF] and Deloitte with the oversight of an Independent Board Committee [IBC]. Horizon confirms that no breach of any Australian foreign bribery law has been established…

(iii)     The 2011 transaction was undertaken to advance Horizon’s legitimate business interests in PNG. Horizon confirms that the structure of the transaction and the quantum of the purchase price paid by Horizon was consistent with market practice and comparable to other relevant transactions at the same time. In addition, Horizon confirms that no payments were made in excess of the agreed purchase price and Horizon has no knowledge of any subsequent transfers or transactions made by the counterparties after the purchase price was paid…

18.     In making the above announcements, Horizon “knowingly and voluntarily disclosed the substance” (within the meaning of s.122 EA) of the investigation conducted by its lawyers and Deloitte. It may be inferred that a reason for it so doing was to comply with its Continuous Disclosure Obligations. They were making the announcement to achieve an advantage, both commercially and legally.

…

21.     The following disclosures were made as a result of the announcements in February 2020 and June 2020:

(a)     Horizon intended to conduct a forensic investigation into the 2011 transaction;

(b)     Horizon established an independent board committee to oversee that investigation;

(c)     Horizon engaged Herbert Smith Freehills and Deloitte to conduct the investigation;

(d)     the investigation was conducted and had concluded by June 2020;

(e)     the investigation included a forensic review of all aspects of the transaction;

(f)     following that investigation, Horizon confirmed that it had not breached any Australian foreign bribery law;

(g)     the 2011 transaction was proper. It was undertaken for a proper purpose. It was properly structured, and the purchase price was consistent with market practice. No payments were made in excess of the purchase price. Horizon had no knowledge of any subsequent transfers or transactions following payment of the purchase price.

22.     What is clear is that the substance of any advice received by Horizon was disclosed, and that the claims for privilege in respect of the nine remaining documents is lost. General access should be made, including orders permitting the uplift and copying of unredacted versions of the documents.

32    I have earlier observed that the question is not one which turns on s 122 of the Evidence Act. The question turns on whether the conduct of Horizon Oil is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect, a question answered by reference to the context and circumstances of the case, and in the light of any considerations of fairness arising from that context.

33    Horizon Oil was not involved in any litigation involving the respondents. Horizon Oil was not seeking to deploy a disclosure of legal advice for any forensic or other advantage that had an adverse impact on the respondents. Horizon Oil made the ASX announcements in circumstances where it owed continuous disclosure obligations. In the face of serious allegations, and recognising its disclosure obligations, and presumably its obligations more generally, Horizon Oil was seeking to indicate to the market that it had taken appropriate steps and received legal advice. Horizon Oil disclosed that it received advice that it had not breached any Australian foreign bribery law. The interests of Horizon Oil and the market to whom this disclosure was made did not relevantly diverge such that it could be said that Horizon Oil’s disclosure was inconsistent with maintenance of confidentiality in the legal advice it had received – see: Kenquist Nominees Pty limited v Campbell (No 5) [2018] FCA 853 at [49].

34    The respondents have not established that there has been a disclosure of the substance of any legal advice apart from the advice that it had not breached any Australian foreign bribery law.

35    I am not satisfied that the disclosure of advice to the effect that Horizon Oil had not breached any Australian foreign bribery law, or the making of the ASX announcements more generally, amounts to conduct which is inconsistent with the maintenance of the confidentiality which legal professional privilege is intended to protect. The respondents have not established that there has been a waiver of privilege in the advice the subject of the documents produced.

CONCLUSION

36    Horizon Oil has made good its claims for privilege and the respondents have not established that there has been any waiver of privilege.

Associate:

Dated:    22 February 2021