Federal Court of Australia

TerraCom Ltd v Australian Securities and Investments Commission [2022] FCA 208

ORDERS

THE COURT ORDERS THAT:

1.    The proceeding be dismissed with costs.

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

REASONS FOR JUDGMENT

STEWART J:

Introduction

1    This case relates to an investigation by the Australian Securities and Investments Commission (ASIC) of suspected contraventions of the Corporations Act 2001 (Cth) by TerraCom Ltd and its current and former officers and employees in relation to the testing, certification and sale of coal during a period from late 2016 to early 2020.

2    As part of the investigation, ASIC executed a warrant at TerraCom’s Blair Athol mine site offices in March 2021. In May 2021, ASIC also issued a notice to TerraCom to produce books and documents.

3    The warrant caused a particular document, a “Project Rex Report” by PricewaterhouseCoopers Consulting (Australia) Pty Ltd (PwC) dated 16 December 2019, to be seized by ASIC and thereby come into its possession. The report was also caught by the notice issued by ASIC. TerraCom has claimed legal professional privilege over the PwC report. ASIC disputes that claim. Pending the resolution of that dispute, ASIC has not inspected the copy of the report seized under the warrant and TerraCom has not produced the report in answer to the notice.

4    TerraCom seeks a declaration that legal professional privilege attaches to the PwC report such that TerraCom is not obliged to produce it to ASIC in answer to the notice dated 14 May 2021 and ASIC is not entitled to inspect it.

5    The issues that call for resolution are the following:

(1)    Was the PwC report prepared for the dominant purpose of TerraCom’s lawyers providing TerraCom with legal advice or legal services?

(2)    If it was, and in that sense legal professional privilege attaches to it, was privilege over the whole or any part of the report waived by TerraCom?

(3)    If privilege over only part of the report was waived, does that have the result that privilege over the whole report is lost?

The essential facts

6    TerraCom is an ASX-listed resource explorer with a large portfolio of operating assets in Australia and South Africa.

7    On 13 August 2019, TerraCom terminated the employment of a commercial general manager, Justin Williams, in circumstances in which he made serious allegations against the company and its officers and employees with regard to the falsification of certificates of analysis of coal exported by TerraCom.

8    Craig Ransley, TerraCom’s Executive Chairman and one of its directors, who was not required for cross-examination, explained on affidavit that TerraCom instructed Ashurst Australia to act for and provide legal advice on the issues arising in relation to the allegations of misconduct that Mr Williams had made. Mr Ransley arranged for the engagement of Ashurst.

9    Mr Ransley said that at the time Ashurst was instructed, and at all times thereafter, he understood and intended that Ashurst would provide legal advice to TerraCom on the allegations of Mr Williams. Also, for that purpose, Ashurst would engage PwC to provide forensic support in locating, identifying and providing a report to Ashurst on potentially relevant materials and information so that Ashurst could consider the report and provide their advice having regard to its contents.

10    By letter of engagement dated 22 August 2019, Ashurst was appointed by TerraCom in, relevantly, the following terms:

You have asked us to act for and advise TerraCom Limited (TerraCom) on issues arising in relation to allegations of misconduct that former employee Justin Williams has made against the company and certain company personnel. For confidentiality reasons, we have designated this matter Project Rex.

Our work will include carrying out an investigation into Mr Williams’ allegations for the purpose of providing legal advice to TerraCom. Whilst Mr Williams’ allegations and the future course of the matter are somewhat unclear at this stage, the initial steps in the matter are likely to be along the following lines.

    …

    3.    Communicate with, and engage, PwC for forensic support in the investigation.

    …

6.    Prepare a preliminary report of the allegations following the initial interview, and plan for further investigations (in conjunction with PwC).

11    By letter of engagement dated 29 August 2019, PwC was appointed by TerraCom in, relevantly, the following terms:

We are writing to confirm that:

•    The Board of TerraCom Limited (TerraCom) has engaged Ashurst Australia (Ashurst) to provide TerraCom with legal advice on matters arising in relation to a former employee, including allegations of misconduct that the former employee has made against TerraCom and certain executives thereof.

•    Ashurst has been instructed to carry out an investigation into these allegations, for the purpose of providing legal advice to TerraCom.

•    Ashurst will engage PwC on behalf of TerraCom to provide forensic support and services in connection with the investigation. We acknowledge and agree that we are being instructed by Ashurst on behalf of TerraCom, and that Ashurst’s advice is being given for TerraCom’s use and benefit.

•    The purpose of PwC’s involvement and report is to enable Ashurst to provide the legal advice referred to above. …

12    Mr Ransley explained that he caused PwC to be retained. He did this as the person responsible for providing instructions to Ashurst on behalf of TerraCom. He said that he intended that the PwC report be prepared for the purpose of TerraCom being provided with legal advice by Ashurst in relation to the issues arising from the allegations of misconduct made by Mr Williams and in relation to proceedings that he expected would be brought by Mr Williams, referred to below. He said that when PwC was retained and when the PwC report was produced by PwC, he understood and intended that the PwC report be prepared for that purpose, and no others.

13    On 3 September 2019, Mr Williams commenced a general protections application against TerraCom in the Fair Work Commission. Mr Williams made various allegations including that TerraCom procured that certificates of analysis used as the basis for its commercial invoices to customers were fraudulently altered by the superintending company that produces such certificates of analysis. He alleged that he had detailed discussions with TerraCom’s CEO, Danny McCarthy, about that conduct but that Mr McCarthy had instructed him to continue doing it.

14    On 11 October 2019, TerraCom appointed a communications advisory firm, Teneo, to advise it on a communications strategy and to liaise with the press. The engagement letter is marked “Strictly Private and Confidential”. Teneo’s role is elliptically described by it as follows:

Teneo will assist you in developing and articulating a corporate narrative and long-term value proposition which will resonate with external stakeholders and address market perception around the Company’s valuation.

15    Mr Ransley explained that in late November 2019, he confidentially sought advice from John Hurst, the Senior Managing Director of Teneo, as to the strategy to be employed if there was media reporting on Mr Williams’s proceeding.

16    On 26 November 2019, i.e., prior to the production of the PwC report, Mr Hurst emailed a draft media statement to Wal King, the then chairman of TerraCom. The email was marked “Strictly Private and Confidential”. The draft press statement characterised Mr Williams’s allegations as being that TerraCom “blended $126 million of coal exports” and included statements to the effect that TerraCom denied the allegations. It also included the following statements, attributed to Mr King, on which ASIC relies in its waiver case:

“To ensure complete transparency for our customers we asked PwC Australia to undertake a forensic investigation. PwC found Mr Williams’ claims were totally unfounded,” Mr King said.

“Once coal is extracted it is subject to three separate tests: two at the Dalrymple Bay Coal Terminal; and, one on board the ship. PwC found there was zero manipulation of data …”

17    A later draft, apparently emailed to Mr King on 19 December 2019, is to similar effect. It characterised the allegations as being that TerraCom “altered reports about the quality of its coal exports”, and then stated:

TerraCom took Mr Williams’ allegations extremely seriously and employed PwC Australia to undertake a forensic investigation into the claims. PwC has completed its report and found that the allegations are completed unfounded. [sic]

18    Mr Ransley explained that from time to time, TerraCom provided confidential information to Teneo in the course of obtaining its advice, and that TerraCom expects that Teneo treats as confidential any sensitive information that it receives as part of its engagement. He explained that he had carriage of the matter in relation to Mr Williams’s allegations of wrongdoing and liaised with Mr Hurst on TerraCom’s media strategy. He said that he did not provide Mr Hurst or anyone else from Teneo with a copy of the PwC report as it remained confidential to the board and senior management of TerraCom.

19    In seeking to explain how the first draft media statement purported to say what was recorded as the conclusion in the PwC report prior to that report having been prepared, Mr Ransley said that he had confidentially advised Mr Hurst that the most likely outcome of the forensic investigation by PwC would be that Mr Williams’s claims were totally unfounded. In effect, Mr Ransley and Mr Hurst were engaged in preparing a draft media statement in anticipation of the PwC report becoming available.

20    There is no evidence that either version of the draft media statements was provided to the media.

21    On 5 December 2019, Mr Williams commenced a proceeding under the Fair Work Act 2009 (Cth) in the (then) Federal Circuit Court of Australia. He cited six individual respondents each of whom was an officer of TerraCom. Relevantly, they excluded Mr McCarthy, the CEO, and Mr Boom, the CFO. In his grounds of application, Mr Williams made allegations against Mr McCarthy and Mr Boom, and sought a mediation with members of the board of TerraCom excluding Mr McCarthy and Mr Boom on the basis that they would have a clear conflict of interest. The grounds otherwise made allegations similar to those Mr Williams made in the Fair Work Commission concerning TerraCom’s alleged falsification of coal analyses.

22    On 16 December 2019, the PwC report was produced.

23    On 24 February 2020, ALS Ltd, a global testing, inspection and certification business, published an ASX announcement and media release which stated that it had appointed external advisors to conduct an independent forensic investigation into the processes applied to the certification of coal samples by staff employed in its coal superintending and certification unit. It stated that preliminary investigations had identified that a number of certificates of analysis issued by two laboratories within the coal superintending unit in Australia were amended before issue without proper justification.

24    Also on 24 February 2020, the Australian Financial Review (AFR) reported on the announcement by ALS and on Mr Williams’s allegations in his proceedings against TerraCom, and linked the two, i.e., at least implying that ALS was used by TerraCom for analysis of its coal for export. On the same day, TerraCom published a formal ASX announcement apparently in response to the AFR article. The announcement recorded that the AFR had reported that a former commercial general manager at TerraCom had alleged in court proceedings that TerraCom was involved in a scheme relating to “the fake analysis of coal samples”. The announcement also stated the following:

… Mr Williams falsely alleged that TerraCom altered reports about the quality of its coal exports.

TerraCom took Mr Williams’ allegations extremely seriously and had the conduct of its employees independently investigated.

25    Notably, the announcement did not say that there were allegations about employees, or particular employees, or about Mr McCarthy or Mr Boom, except for its reference to having “the conduct of its employees independently investigated”. It also did not say what the outcome of the investigation was, apart from stating that TerraCom believed that the allegations by Mr Williams were totally unfounded. That statement fosters the impression that that was the outcome of the investigation, because it implies that the stated belief is based on that outcome. However, it remains a statement of belief rather than a statement of the outcome of the investigation. I will return to this distinction.

26    On 26 February 2020, Mr Hurst of Teneo emailed a “first draft” of a statement to Mr Ransley for his consideration. The draft statement suggested the following as having been said by Mr Ransley:

“As previously stated, TerraCom took allegations that its employees had been involved in a scheme relating to the fake analysis of coal samples seriously.

A forensic investigation found that the allegations were completely unfounded and that none of our employees did anything wrong. …”

27    On 9 March 2020, a further article was published in the AFR. It reported that Mr Williams had made allegations of TerraCom’s coal analysis being faked with major laboratories’ help. It reported that TerraCom had highlighted its “independent forensic investigation” had found no wrongdoing.

28    On 11 March 2020, EY, the auditors of TerraCom, wrote to ASIC. EY explained that in accordance with its obligations under s 311 of the Corporations Act it was notifying ASIC in writing that it was aware of circumstances which may amount to a contravention of the Act. The letter identified that there had been public allegations made against TerraCom and its executive officers in relation to fraud and bribery, and then relevantly stated the following:

The Company instructed a third party to undertake an investigation into these allegations. We are advised by the Company that the investigation and subsequent report are subject to legal professional privilege. … As a result of those investigations, there was one alleged matter that we do not believe was resolved. The alleged matter related to the tampering of coal sampling results to improve the calorific value (energy content) of coal shipped to customers.

… In assessing the investigation undertaken by the external party engaged by the Company, we noted that in certain circumstances its scope was limited. We further note that the third-party testing body which allegedly modified the testing results has publicly announced that certificates of analysis were amended before issue without proper justification for a number of their clients.

In light of the above… [we]… hereby notify ASIC in writing that in our professional judgment, we have reasonable grounds to suspect that there has been a contravention of Section 596 of the Corporations Act 2001.

29    On 12 March 2020, TerraCom published an open letter to shareholders in the AFR. The letter addressed two topics, one of which was “Legal Dispute with Justin Williams”. The letter refers to the dispute with Mr Williams concerning the termination of his employment, and states the following:

As previously stated, TerraCom took allegations that its CEO and CFO had been involved in a scheme relating to the fake analysis of coal samples seriously and an independent forensic investigation was conducted and found no evidence of wrongdoing.

… for Mr Williams to suggest TerraCom was involved in an international conspiracy to undertake false testing is ludicrous.

30    On 2 April 2020, ALS published a further ASX announcement and media release. It stated that the independent forensic investigation which it had commissioned had identified evidence that approximately 45-50% of the certificates of analysis in its coal superintending and certification unit in the financial year ended 31 March 2019 were manually amended in the company’s laboratories without justification.

31    Also on 2 April 2020, Reuters published an article that morning that referred to the ALS announcement and the outcome of its investigation. The article also stated that TerraCom said in a statement to Reuters that a separate independent review of its business had found the allegations against it were unfounded.

32    Late on 2 April 2020, Mr Hurst emailed Mr Ransley with a draft media statement. Mr Ransley approved the statement. The statement gave an update on the court proceedings brought by Mr Williams and then referred to the ASX announcement by ALS in relation to which it stated the following:

As previously stated, TerraCom took the allegations by Mr Williams that its CEO and CFO had been involved in a scheme relating to the fake analysis of coal samples seriously and an independent forensic investigation was conducted.

That investigation found that the allegations against them were unfounded and neither had done anything wrong.

33    The statement was published the following day, 3 April 2020, as an ASX announcement.

Is the PwC report privileged?

34    The first issue is whether privilege attaches to the communication over which privilege is claimed, namely the communication in the PwC report. The applicant bears the onus on this issue: Grant v Downs [1976] HCA 63; 135 CLR 674 at 689 per Stephen, Mason and Murphy JJ. The dispute is concerned with pre-trial disclosure and inspection rather than the adducing of evidence and is therefore to be determined with reference to common law principles rather than the Evidence Act 1995 (Cth): Esso Australia Resources Ltd v Commissioner of Taxation [1999] HCA 67; 201 CLR 49 at [17]-[28] per Gleeson CJ, Gaudron and Gummow JJ, [64] per McHugh J (in dissent as to the result), [91] per Kirby J (in dissent as to the result) and [149] per Callinan J. The relevant time at which a claim for privilege in a document is to be determined is the time when the document came into existence: Barnes v Commissioner of Taxation [2007] FCAFC 88; 242 ALR 601 at [5] per Tamberlin, Stone and Siopis JJ.

35    The applicable common law test for legal professional privilege is known as the dominant purpose test, i.e., a communication or document will attract legal professional privilege if it was brought into existence for the dominant purpose of giving or obtaining legal advice or the provision of legal services: Esso Australia Resources at [61] per Gleeson CJ, Gaudron and Gummow JJ and [173] per Callinan J. It is a rule of substantive law, and not merely a rule of evidence, that a person can resist the giving of information or the production of documents which would reveal communications between a client and their lawyer made for the dominant purpose of giving or obtaining legal advice or the provision of legal services, including representation in legal proceedings: Daniels Corporation International Pty Ltd v ACCC [2002] HCA 49; 213 CLR 543 at [9] per Gleeson CJ, Gaudron, Gummow and Hayne JJ.

36    In the present case, it is submitted on behalf of ASIC that legal professional privilege does not attach to the PwC report because TerraCom has failed to discharge the onus on it, in particular because it has failed to adduce “focused and specific evidence” on the point and it has resorted to “the use of verbal formulae”. Reference was made to Barnes at [18]. In that case, a large number of documents had been given by the appellants to their lawyers. Many of these were pre-existing documents, i.e., they were not created for the purpose of being given to the lawyers. The claim was made on affidavit that all the documents came into the possession of the lawyers for the purpose of giving advice and for that reason they were privileged: [15]. It was held that the affidavit fell far short of providing any adequate basis for claiming privilege in respect of any individual document and that it consisted of assertions, conclusions and generalised comments: [16]. That situation is a far-cry from the present case where the evidence is focused on an identified document and is specific to the circumstances of its creation.

37    Reference was also made to AWB Ltd v Cole (No. 5) [2006] FCA 1234; 155 FCR 30 at [44(3)] where Young J set out the applicable principles. Those are not in contest.

38    In my view, on the evidence before me privilege obviously attaches to the PwC report. The combination of Mr Ransley’s evidence and the Ashurst and PwC engagement letters make it clear that the purpose of the preparation of the PwC report was for it to be given to Ashurst as a basis for Ashurst to give legal advice. The evidence is clear and specific with regard to the only document in dispute. No reliance is placed by TerraCom on any verbal formula; Mr Ransley does not even use the expression “dominant purpose”.

39    ASIC seeks to raise doubt about Mr Ransley’s evidence which addresses the time at which PwC was engaged because the report was later used to seek to publicly exonerate TerraCom or its officers, which is the conduct underpinning ASIC’s submissions on waiver which I will come to below. Reference was made to Cantor v Audi Australia Pty Ltd [2016] FCA 1391 at [68] per Bromwich J about subsequent use potentially revealing earlier purpose. The suggestion is in effect that an inference should be drawn that the engagement letters were a charade in order to make it look like the purpose of the report was to seek legal advice whereas the true purpose, or at least a substantial purpose, was to use the findings of the report for other purposes including to rely on them to publicly exonerate TerraCom and/or its officers.

40    However, Mr Ransley was not required for cross-examination. It is elementary that if an inference is sought to be drawn from other evidence in order to contradict the evidence of a witness, it is necessary to put the contradictory proposition to the witness and what it is based on in order to give the witness the opportunity to deal with it: Browne v Dunn (1893) 6 R 67 (HL). Moreover, a party is bound by the forensic choices that it makes in the course of a proceeding, such as not to cross-examine a witness: University of Wollongong v Metwally (No 2) [1985] HCA 28; 60 ALR 68 at 71; Ship Hako Endeavour v Programmed Total Marine Services Pty Ltd [2013] FCAFC 21; 211 FCR 369 at [47] per Siopis, Rares and Buchanan JJ.

41    For those reasons, I find that at least the dominant, if not the sole, purpose of the preparation of the PwC report was for it to be used by Ashurst in order to give legal advice to TerraCom. Therefore, legal professional privilege attached to the report at its creation.

42    I should add that TerraCom invited me to examine the PwC report as a means of confirming the purpose for which it was prepared. ASIC resisted this course, and submitted that it was not open to me to examine the document at the invitation of the party claiming the privilege in order to establish the privilege, but only at the invitation of the party resisting the privilege in order to scrutinise and test the claim for privilege. ASIC relied on the judgment of Brereton J in Hancock v Rinehart (Privilege) [2016] NSWSC 12 at [31] where it was said that the preferable explanation of the court’s power to inspect the document is that it exists not to facilitate proof by a claimant of the facts required to sustain the claim of privilege, but to provide a means of enabling a claim to be scrutinised and tested.

43    I will return to the question of inspection, and ASIC’s submissions. The short point at this stage is that the evidence of the purpose for which the PwC report was created was so one-sided that I did not find it necessary to examine the report on the question of whether privilege attaches to it. I decided to examine it for a different reason, namely in order to be able to decide whether a disclosure of something in the report was in respect of so distinct a subject-matter, as dealt with in the report, so as to be able to restrict the waiver inherent in the disclosure to only those parts of the report dealing with that subject-matter and retain the privilege over the remainder.

44    However, in examining the report for that purpose it is impossible not to notice that it is stated in it, more than once, to be solely for the purpose of providing it to Ashurst for the provision of legal advice to TerraCom. There is nothing in the report to suggest that it was created other than for that purpose. In short, the report itself confirms the evidence of Mr Ransley and the engagement letters with regard to the purpose for which it was prepared.

Was privilege in the disclosed subject-matter waived by TerraCom?

Introduction

45    It is common ground that the onus of proving waiver is on the party seeking access to the communication that is otherwise privileged: New South Wales v Betfair Pty Ltd [2009] FCAFC 160; 180 FCR 543 at [54] per Kenny, Stone and Middleton JJ.

46    The test for waiver is whether there has been an inconsistency between what a client has done and retention of the privilege. As the High Court said in Mann v Carnell [1999] HCA 66; 201 CLR 1 at [29] per Gleeson CJ, Gaudron, Gummow and Callinan JJ:

What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.

47    It was explained in Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237; 140 FCR 101 at [68] per Gyles J, Tamberlin J agreeing, that for a client to deploy the substance or effect of legal advice for forensic or commercial purposes is inconsistent with the maintenance of the confidentiality that attracts legal professional privilege. The inconsistency was described in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; 250 CLR 303 at [31] as being to approbate and to reprobate.

48    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] HCA 37; 234 CLR 275 at [45] per Gleeson CJ, Gummow, Heydon and Kiefel JJ.

49    In DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384; 127 FCR 499 at [58], which was adopted in Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86; 151 FCR 341 at [61] per Kenny, Stone and Edmonds JJ, Allsop J explained that waiver arises when:

the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication.

(Emphasis in original.)

50    ASIC relies on three independent categories of disclosure of the substance, gist or conclusion of part or all of the PwC report outside of the privileged lawyer-client relationship as amounting to waiver of the privilege over the report. They are by way of disclosure:

(1)    to Teneo;

(2)    in the open letter to shareholders on 12 March 2020; and

(3)    in the ASX announcement on 3 April 2020.

Disclosure to Teneo

51    Mr Ransley said that the PwC report was never given to Teneo. Since he was not challenged on that, it must be accepted. Prior to the report having been finalised, Mr Ransley said some things to Teneo about what he expected the report to say or to find for the purpose of preparing a draft press release, presumably for when the report had been finalised. The draft was marked strictly private and confidential, as were the terms of Teneo’s appointment. I infer that Teneo was bound to retain confidence in any information provided to it by TerraCom, save that which it had authority to disclose publicly. That would be the ordinary incidence of a relationship with a communications advisor.

52    In those circumstances, the disclosure by TerraCom to Teneo of facts related to the PwC report for inclusion in the draft press release in anticipation of future events but which were not subsequently disclosed publicly is not inconsistent with maintenance of the privilege, nor would maintenance of the privilege lead to any unfairness. The same is true of the draft media statements prepared by Teneo after the PwC report was issued (see [17] and [26] above) – there is no evidence that they were disclosed beyond Teneo, they were kept within a confidential advisory relationship and, accordingly, there is no inconsistency. Insofar as matters were subsequently disclosed publicly, those can be dealt with in the context of those public disclosures.

53    I therefore conclude that there was no waiver of privilege in the PwC report by the limited disclosure made by TerraCom to Teneo.

Letter to shareholders and ASX announcements

54    It is convenient to deal with the open letter to shareholders and the ASX announcements together.

55    It will be recalled that the immediate context of the first ASX announcement, on 24 February 2020, was an announcement earlier that day by ALS that it had commissioned an independent investigation into the falsification of certificates of analysis of coal by its staff, and the reporting on that announcement in the AFR which linked it to Mr Williams’s allegations against TerraCom. TerraCom’s announcement said that it had had an independent investigation and that it believed that Mr Williams’s allegations are totally unfounded. That statement of belief is not a statement of what was concluded by the independent investigation. See [23]-[25] above.

56    There was then, on 9 March 2020, a further article in the AFR about the allegations against TerraCom, which was further context to the open letter to shareholders on 12 March 2020. See [27] and [29] above. The letter to shareholders stated that an independent forensic investigation had found no evidence of wrongdoing by TerraCom’s CEO and CFO, and went on to state that the suggestion that TerraCom was involved in an international conspiracy to undertake false testing was ludicrous. The latter statement is again a statement or assertion of opinion by TerraCom, rather than being a statement about, or that discloses, any conclusion of the independent forensic investigation.

57    Although the express reference to the investigation was limited to allegations against the CEO and CFO, in the context of reports in the same newspaper in which the letter was published of broader allegations against TerraCom and its earlier statement that “the conduct of its employees” had been independently investigated, the denial of any wrongdoing by TerraCom could be said to leave the impression that that was based on the outcome of the investigation. However, properly understood, my view is that the statement about the findings of the investigation is limited to the exoneration of the CEO and CFO.

58    ASIC submits that the statement that “an independent forensic investigation was conducted and found no evidence of wrongdoing” should be read and understood as standing independently from the reference earlier in the sentence to allegations against the CEO and CFO. In my view, that is not the natural reading of the sentence. The statement about the investigation follows on from the statement about allegations against the CEO and CFO with the implication that the statement that the investigation found no evidence of wrongdoing is a statement that it found no evidence of wrongdoing by the CEO and CFO.

59    The second ASX announcement by TerraCom was published on 3 April 2020 (see [32]-[33] above). Its immediate context was the ASX announcement by ALS the previous day that the independent forensic investigation that it had commissioned had identified substantial evidence of the falsification of certificates of analysis of coal, and the publication by Reuters of an article reporting on that announcement as well as a statement from TerraCom that a separate independent review of its business had found the allegations against it to be unfounded (see [30]-[31] above).

60    Importantly, the report by Reuters (and the earlier AFR reports) of what TerraCom had said is not admissible evidence of TerraCom in fact having said that. That would be an impermissible hearsay use of that evidence. However, the report is admissible evidence of what was published by Reuters. Thus, the ASX announcement, which was specifically limited to allegations against TerraCom’s CEO and CFO, was published in the context of broader allegations having been made against TerraCom and TerraCom having been reported as saying that the allegations had been found by an independent investigation to be unfounded. On one view, only an astute reader of TerraCom’s ASX announcement is likely to have understood TerraCom to have limited its reliance on the outcome of the investigation as exonerating its CEO and CFO only and not the company more broadly. That is, however, how the ASX announcement is properly to be read. The fact that some readers may have been confused by the context does not alter the plain meaning of the words that were employed.

61    In my view, reliance by TerraCom on the finding in the PwC report of no wrongdoing by its CEO and CFO is inconsistent with the maintenance of the privilege that otherwise attaches to the report. TerraCom was taking advantage of that finding to deflect criticism of its officers, and itself, the effectiveness of the deflection being heightened by characterising the investigation that led to the report as an independent forensic investigation. That was to employ the findings of PwC for a forensic or commercial advantage – forensic in the sense of seeking to deflect the attention of any regulator in an investigation and commercial in the sense of maintaining the company’s commercial good standing and its share price. It cannot at the same time claim that the report is privileged. That is to seek to approbate and to reprobate.

62    TerraCom’s statements about the report’s findings were not casually made; they were consciously and deliberately made in an open letter to shareholders and to the market by way of formal ASX announcement. No doubt the intention was to put the minds of shareholders, the market and its regulators at ease. It would operate a tangible unfairness if TerraCom could, in effect, hide behind its statements as to the conclusion of the report whilst at the same time maintaining privilege over the report and thereby keep it beyond being tested by ASIC. Although ASIC can itself investigate the underlying facts and, in that sense, whether or not the reported conclusion of the PwC report is correct, it cannot test whether TerraCom’s exculpatory statement that is said to be based on the report is a fair reflection of what the report concluded without itself having access to the report. Without access to the report, ASIC cannot test whether TerraCom’s statements to shareholders and to the market are false or misleading in circumstances where it knows from the letter to it by EY that there are reasonable grounds to suspect that there was wrongdoing. That is the unfairness.

63    TerraCom submits that the disclosure of the contents of the report is so minor as to be de minimus, but I do not accept that. TerraCom said that the independent investigation concluded that the allegations against, at least, its CEO and CFO were unfounded. Regardless of what other conclusions the report expressed, that is a critical finding of vital relevance to TerraCom, which is no doubt why TerraCom repeated it publicly on a number of occasions. It is not de minimus at all.

64    In that regard, the voluntary disclosure of the gist or conclusion of legal advice amounts to waiver in respect of the whole of the advice to which reference is made including the reasons for the conclusion: Bennett at [65] per Gyles J, Tamberlin J agreeing. It has long been established that the disclosure in a summary way of only a conclusion expressed in legal advice can result in a waiver of the advice: Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 40 NSWLR 12 at 15 and 18 per Rolfe J with regard to the statement that “Ampolex maintains that the correct ratio is 1:1 and has legal advice supporting this position”, as supported by Kirby J in Ampolex Ltd v Perpetual Trustee [1996] HCA 15; 137 ALR 28 at 35 who said it was “strongly arguable” that the public reference to the supporting legal advice waived the privilege as to the precise content of the legal advice on that point; Australian Unity Health Ltd v Private Health Insurance Administration Council [1999] FCA 1770 at [18] per Goldberg J in relation to the statement that “Separate legal advice supporting PHIAC’s view of this rule has been received”; Queensland Law Society v Albietz [1998] QSC 231; [2000] 1 Qd R 621 at 625 per Williams J in relation to a terse statement of the lawyer’s advice and that the Professional Standards Committee adopted that advice; Bennett at [6] and [13] per Tamberlin J and [65] per Gyles J in relation to the statements that “AGS has now advised Customs that Public Service Regulation 7(13) does not prohibit all public comment…” and “AGS has advised Customs that your client is not correct in asserting that he is not subject to the Act and Regulations”; Switchorp Pty Ltd v Multiemedia Ltd [2005] VSC 425 at [12.1] per Whelan J and the authorities cited there.

65    More recently in ASIC v Australia and New Zealand Banking Group (No. 2) [2020] FCA 1013 (ASIC v ANZ) , Allsop CJ at [27]-[33] referred to the reasoning of Rolfe J in Ampolex and the fineness of the distinctions drawn in this area. The Chief Justice stated at [31] that “there is a waiver if one states: ‘I have legal advice. Its substance is.’ But there is no waiver if a party says what he or she believes and legal advice may be seen to be relevant to it”, noting that one must state the substance or gist or conclusion of the advice for privilege to be lost.

66    On that basis, I find that by the letter to shareholders and the second ASX announcement which conveyed the purported conclusion of the investigation, TerraCom waived legal professional privilege over the PwC report, at least to the extent of the subject-matter of allegations that its CEO and CFO had been involved in a scheme relating to the fake analysis of coal samples. Whether or not that limited disclosure nevertheless has the result that privilege over the whole report is waived is a matter I will return to below.

67    As mentioned, a statement of belief, even if based on legal advice, which does not disclose either the substance or effect of the advice does not amount to a waiver of the advice: Ampolex at 18; Switchcorp at [12.2] and the cases cited there; ASIC v ANZ at [31]. In Ampolex at 18, Rolfe J held that the statement “On the basis of legal advice received, Ampolex believes that it will be successful in the Convertible Note litigation” did not constitute a waiver. Rolfe J acknowledged that he did not think it could be suggested that the advice did not play a part in the formation of Ampolex’s view, but held that the statement does not rise above a statement of Ampolex’s view and does not purport to state the advice, or its substance or effect and therefore does not amount to a disclosure of the advice. Although Ampolex was concerned with whether the statement disclosed the “substance” of the advice pursuant to section 122(2) of the Evidence Act 1995 (Cth) rather than the common law question of implied or imputed waiver, the same considerations apply with equal force: Expense Reduction Analysts at [32]. On this basis, I am not satisfied that the statements by TerraCom that are relied on by ASIC are sufficient to constitute a waiver of the subject-matter of the report with regard to the broader allegations against TerraCom itself or its employees, other than merely the CEO and CFO. That is because, as I have explained, they amount to statements of TerraCom’s belief or assertion rather than being a disclosure of the findings or outcome of the independent investigation.

Is the disclosed subject-matter separable from the rest of the report?

Introduction

68    In Attorney-General (NT) v Maurice [1986] HCA 80; 161 CLR 475 it was said that in order to ensure that the opposing party is not misled by an inaccurate perception of the disclosed communication, fairness will usually require that waiver as to one part of a protected communication should result in waiver as to the rest of the communication “on that subject-matter”: at 481-2 per Gibbs CJ, 488 per Mason and Brennan JJ and 497-8 per Dawson J. See Federal Treasury Enterprise v Spirits International (No 6) [2019] FCA 337; 369 ALR 267 at [15]-[19].

69    In Federal Treasury at [25], which was adopted in Commonwealth Director of Public Prosecutions v Citigroup Global Markets Australia Pty Ltd [2021] FCA 511 at [138] per White J, I explained as follows:

Different considerations may arise between circumstances where, for example, an assertion is made in a pleading which is said to have the effect of waiving privilege (sometimes referred to as issue waiver) and where, as another example, privilege is waived over part of a document or communication and not over other parts of it (sometimes referred to as partial disclosure). Those different considerations must, however, inform the assessment of whether there is inconsistency between the maintenance of the privilege and the relevant conduct of the party. One consideration in the case of partial disclosure is whether the disclosed and the undisclosed parts of the communication cover the same or different subject matters. That is because if they cover the same subject matter, disclosure of only part of the communication may lead to the meaning or import of the disclosed part being distorted or inaccurately perceived. Thus in the case of partial disclosure, the assessment of whether or not there is relevant inconsistency is likely to include a consideration of whether or not the disclosed and undisclosed parts cover different subject matter.

70    It is in this context that I decided to exercise a discretion to examine the PwC report. I said at the time that I would give reasons later. I turn now to those reasons.

Whether to examine the document in respect of which privilege is claimed?

71    As mentioned, TerraCom invited me to examine the document for the purpose of deciding whether it attracted privilege at the time of its creation, if necessary, and also to decide whether the privilege in the whole document was waived if the privilege in a particular subject-matter included in the document was waived. ASIC submitted that I should not examine the document for any purpose, and that the only purpose for which I have the power to examine it is to determine the question of initial privilege, i.e., that I cannot examine it to determine the question of waiver or the question of partial waiver.

72    Whether or not a communication in a document attracts legal professional privilege is a question ultimately to be decided, if need be, upon an inspection by the judge of the document itself: Grant v Downes at 677 per Barwick CJ. In the same case, Stephen, Mason and Murphy JJ said (at 689) that the power to examine the document “has perhaps been exercised too sparingly in the past” and that “in many instances the character of the documents the subject of the claim will illuminate the purpose for which they were brought into existence.” In Esso Australia Resources (at [52]), it was said by Gleeson CJ, Gaudron and Gummow JJ that the court should not be hesitant to exercise the power to examine documents in respect of which there is a disputed privilege claim.

73    As mentioned, ASIC relies on the judgment of Brereton J in Hancock v Rinehart in support of the submission that the disputed document should not be examined by the court at the invitation of the party claiming the privilege, but only at the invitation of the party disputing the privilege. It is, however, to be noted that in that case no evidence was adduced or tendered in support of the privilege claim other than a solicitor’s affidavit identifying the documents, and the documents themselves. There was therefore no deponent explaining the circumstances of the preparation of the documents who could be cross-examined with regard to that explanation, and if the court had examined the documents there would have been no evidence on which the party disputing the privilege claim could have made any submissions; all the evidence on which the privilege was said to be based would have been restricted to the party claiming the privilege and the judge. That would have operated an obvious unfairness.

74    On appeal, in Rinehart v Rinehart [2016] NSWCA 58 at [20] per Beazley P, Leeming and Simpson JJA, it was said of the court’s powers to examine the documents that they are “wide and should not be unduly circumscribed.” It was held (at [40]) that it was neither necessary nor appropriate to express views as to all of the propositions enunciated by the primary judge. That was because the appeal could be decided on the basis that even on the assumption that the primary judge had erred in misconstruing the question of power, in the light of there being no evidence other than the documents themselves to support the privilege claim and the unfairness that would result as highlighted in the preceding paragraph, the outcome would be the same. That is manifestly not an endorsement of all the propositions of the primary judge on which ASIC relies, and it demonstrates how far removed that case is from the present.

75    There is authority to the effect that the court has no power to inspect privileged material for the purpose of deciding whether privilege has been waived, the power of inspection being limited to the question of whether the document is privileged in the first place: Legal Services Commission v JHW [2012] SASCFC 47; 223 A Crim R 534 at [60], [75] and [81] per Doyle CJ, Vanstone and Anderson JJ. No authority is cited by the Court and its statements on this point appear to be obiter, the firm basis for the decision having been that the primary judge erred in the question he asked when he examined the material. I have some doubt whether it is always the case that examination of the document cannot be relevant to the question of waiver. In particular circumstances, it may be that the content of the document is relevant to whether the party’s conduct is inconsistent with maintenance of the privilege. If the content of a document is relevant to a point in issue, then there does not seem to me to be any reason why the court would lack the power to look at the document.

76    In Verde Terra Pty Ltd v Central Coast Council (No 2) [2020] NSWLEC 10 at [87], Legal Services Commission v JHW is cited as authority for the proposition that the court is not permitted by law to inspect the privileged material for the purpose of determining the question of waiver, but no further reasoning is given. It occurs to me, however, that in Verde Terra the alleged waiver of privilege in respect of some of the documents at issue was decided under the Evidence Act 1995 (NSW) which, like the Commonwealth Act, provides in s 133 that if a question arises under Pt 3.10 of the Act dealing with privileges, which includes provisions dealing with waiver (e.g., s 122(2)), the court may order that the document be produced to it and may inspect the document for the purposes of determining the question. There would therefore seem to be no reason why the court could not examine the document under s 133 on a question of the waiver of privilege, provided that the content of the document might be relevant to the question at issue.

77    In any event, neither of those cases deals with whether the court has a discretion to examine the document in question in circumstances where the party resisting the privilege claim does not consent to such an examination and the purpose of the examination is to ascertain its subject-matter relative to the subject-matter of the disclosure, and whether waiver in relation to the disclosed subject-matter necessarily results in waiver of the privilege in respect of the whole document.

78    In view of the broad statements of the discretion in the High Court to which I have referred, the statement by the Court of Appeal quoted at [74] above, and the great difficulty in determining the question of partial waiver without examining the document, I take the view that I have the power to examine it for that purpose.

79    I decided to exercise the power because it is not practical to determine the extent to which the subject-matter of the disclosure by TerraCom is distinct from other subject-matter in the report, or the extent to which those parts of the report covering the one subject-matter can be properly and fairly understood if separated out from the rest of the report.

A distinct subject-matter?

80    Mindful of maintaining TerraCom’s rights of appeal by not disclosing too much about the content of the PwC report, I can describe the report as follows.

81    The executive summary of the report identifies several “concerns” raised by Mr Williams. These are identified and numbered 1(a) and (b), 2(a) and (b), and 3(a), (b) and (c). That numbering suggests that there are three principal topics each of which can be further divided into two or three sub-topics.

82    Concern 3 covers a topic of allegations, of which 3(b) is about the CEO, Mr McCarthy. TerraCom submits that it is only the sections of the report which deal with concern 3(b) in respect of which it should be concluded that privilege was waived by the limited disclosures in the letter to shareholders and the ASX announcements. However, the overall subject-matter of concern 3 is dealt with in an integrated way such that it is not practical, and it would result in the disclosed parts being misleading or incomplete, to separate out only those sections or sub-sections of the report that deal exclusively with concern 3(b). For example, section 3.4 of the report deals with concern 3. Subsections 3.4.1, 3.4.2 and 3.4.3 deal with general matters about concern 3 before then going on to the narrower matters within concern 3 and making key findings with respect to each of the sub-topics identified as concerns 3(a), (b) and (c).

83    In those circumstances, the relatively narrow disclosures by TerraCom necessarily lead to at least the waiver of all the sections of the report dealing with concern 3, namely 1.2.3, 1.2.4 and 3.4.

84    However, in my view even to excise those sections of the report will leave them incomplete and liable to be misunderstood because of the way in which the report is structured and the manner in which the different concerns interrelate. For example, section 1 of the report contains the executive summary. Subsection 1.1 deals with the background, which explains why the report came to be commissioned and what the different concerns are. This introductory part of the report is important for a proper understanding of the treatment of concern 3. Section 2 of the report deals with the scope of and approach to PwC’s task. The section relates as much to concern 3 as it does to any of the other concerns. Concern 3 cannot be fully comprehended without risk of misunderstanding if it is divorced from sections 1 and 2.

85    Section 3 of the report outlines the report’s findings. Subsection 3.1 details the processes and contextual information that is relevant to all three of the principal topics, including concern 3. Subsections 3.2 and 3.3 deal with concerns 1 and 2 and could, on one view, be excised. However, in my view such an approach runs the danger of leaving the report in a disjointed and incomplete condition such as to prejudice a proper understanding of the treatment of concern 3.

86    The report has four appendices each of which is relevant to concern 3.

87    In the circumstances, the partial disclosure of the contents of the report by the disclosure of the subject-matter of concern 3(b) leads ineluctably in this case to waiver of legal professional privilege in respect of the whole report.

Disposition

88    For the above reasons, the proceeding should be dismissed with costs.

Associate:

Dated:    11 March 2022