Federal Court of Australia

Brontes Security LLC v “Lihir Chief” (formerly “Charlie B”) (No 2) [2023] FCA 515

ORDERS

THE COURT ORDERS THAT:

1.    Until further order, on the ground that it is necessary to prevent prejudice to the proper administration of justice, the following parts of the affidavit of Gavin Vallely sworn on 10 May 2023 not be published and be suppressed pursuant to s 37AF of the Federal Court Act 1976 (Cth):

(a)    the words after “in relation to” in paragraph 10(c)(ii);

(b)    the words in quotation marks in paragraph 10(d)(i);

(c)    in the email from Mr Ritter to Mr Vallely on page 10 of the affidavit (in exhibit GJV-1) and the copy of that email on page 22 (in exhibit GJV-1), the words after “BBC” (in the second paragraph) to the end of the bracket in the next paragraph; and

(d)    in the email from Mr Ritter to Mr Vallely on page 11 of the affidavit (in exhibit GJV-1) and the copy of that email on page 23 (in exhibit GJV-1), the words after “on” to the commencement of the bracket and the words in the second paragraph after the word “on”.

2.    The interlocutory application filed by Inter Ocean Express Ltd on 8 May 2023 be dismissed.

3.    Inter Ocean Express Ltd pay the costs of HFW Australia and the second defendant of the interlocutory application.

4.    The plaintiff file and serve written submissions, limited to 5 pages, and evidence upon which it proposes to rely, and formulate a draft order seeking to protect any confidential information in the five documents the subject of order 1 made on 21 April 2023 (being the non-publication order over certain parts of the affidavit of Meike Mtshali sworn 23 February 2023), by 26 May 2023.

5.    The second defendant file and serve written submissions in reply, limited to 5 pages, and any evidence upon which it proposes to rely by 7 June 2023.

6.    The proceeding be listed for case management on 16 June 2023.

7.    The operation of order 1 made 21 April 2023 (being the non-publication order over certain parts of the affidavit of Meike Mtshali sworn 23 February 2023) be extended up to and including 16 June 2023.

8.    Costs in relation to the dispute between the plaintiff and second defendant be reserved.

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

REASONS FOR JUDGMENT

(Revised from transcript)

RARES J:

Introduction

1    On 21 April 2023, after a contested hearing between the plaintiff, Brontes Security LLC, and the second defendant, Swire Shipping Pty Limited, I made an order releasing Swire from the implied undertaking not to use five documents or information contained in them to the extent that it would otherwise be precluded from making such use for the purpose of Swire bringing proceedings in the courts of the Hong Kong Special Administrative Region against Charles Brown and Torsten Hartmann (the undertaking release order): Brontes Security LLV v “Lihir Chief” (formerly “Charlie B”) [2023] FCA 388. Brontes had filed or produced those five documents to Swire during the course of the proceeding shortly after it had obtained the arrest of Lihir Chief on 10 August 2022. Swire was the demise charterer of the ship and had executed an option for purchase which it notified the exercise of the option to the ship’s owner, Inter Ocean Express Ltd, and on 16 June 2022, Inter Ocean acknowledged to Swire that its exercise of the option was effective.

2    Inter Ocean seeks, first, to set aside the undertaking release order, secondly, to restrain Swire’s lawyers in this proceeding, HFW Australia, from continuing to act in it for Swire and, thirdly, with Brontes’ support, an extension of the suppression and non-publication order that I made on 21 April 2023 (the 21 April suppression order) in respect of the five documents, that will expire today.

Background

3    On 4 August 2022, Brontes filed a writ in which it claimed to be entitled to enforce a mortgage over Lihir Chief, which Inter Ocean had granted on 27 June 2022 in Brontes’ favour. The writ claimed that Inter Ocean was in default under the mortgage because it had entered into an agreement to sell the ship without having first obtained Brontes’ consent. The Marshal arrested the ship at Brisbane on 10 August 2022.

4    Swire appeared immediately and was joined as second defendant. That was because Swire was the demise charterer of Lihir Chief under a bareboat charterparty on the BARECON 2017 form made on 25 August 2020 between it, as charterer, and Inter Ocean. The term of the charter was two years and six months plus or minus 30 days at Swire’s option. The charterparty contained the option for Swire to purchase Lihir Chief.

5    In the meantime, Swire engaged HFW Australia as its solicitors in Australia. HFW Australia is associated with other partnerships or law firms that trade under the name Holman Fenwick Willan or HFW, including Holman Fenwick Willan LLP (HFW UK), that is based in London but which operates through offices in London, Brussels and Shanghai. All of the Australian partners in HFW Australia were and are also members of HFW UK.

6    In the course of receiving instructions when Swire requested that HFW Australia act for it in connection with this proceeding, a senior partner of HFW Australia, Gavin Vallely, caused a conflict search to be made on about 5 August 2022. That search resulted in Mr Vallely ascertaining that, in 2021, Inter Ocean had been HFW UK’s client in two matters concerning both Lihir Chief and Swire, then known as The China Navigation Company Pte Ltd. That led Mr Vallely to contact a partner in HFW UK, Michael Ritter, by telephone to discuss the results of the conflict search. Mr Vallely explained that Swire proposed to retain HFW Australia in relation to a mortgagee arrest of Lihir Chief. Mr Ritter gave Mr Vallely some information which revealed the topic of the advice given, the details of which I ordered be suppressed because Inter Ocean maintains a claim of legal professional privilege over it.

7    Mr Vallely said that he did not discuss with anyone any confidential and privileged advice provided by HFW UK beyond his discussion with Mr Ritter when he learnt of the very shortly expressed general topic over which the claim for privilege is made. At no point has HFW Australia ever acted for Inter Ocean. After his discussion with Mr Ritter, Mr Vallely and HFW UK set about creating information barriers to prevent any communication of material held by HFW UK with anyone in HFW Australia relating to the London firm’s previous retainer for Inter Ocean. The evidence about the nature of those steps only came to be filed on 10 May 2023. Thus, in those circumstances I accept that Inter Ocean has not yet had an opportunity to make full inquiries about whether or not it can seek to challenge that evidence.

Release from implied undertaking

8    As I found in Brontes [2023] FCA 388, on 22 August 2022, after a case management hearing, Brontes applied to the Marshal to release Lihir Chief from arrest, which promptly occurred. On 1 September 2022, Brontes, Inter Ocean and Swire entered into a settlement deed in respect of the proceeding under which each released the others from all claims relating to the circumstances of the arrest and the ship was sold to Swire, free of any mortgages, the next day.

9    Swire wished to use the five documents and information in them in Hong Kong to commence a proceeding in the High Court of the Hong Kong Special Administrative Region and instructed its Hong Kong solicitors, Holman Fenwick Willan, another associated firm, to act for it against the two directors of Inter Ocean at the relevant time, namely Mr Brown, who appeared to reside in Hong Kong, and his co-director Mr Hartmann, claiming that they were liable to it for the tort of conspiracy to injure by unlawful means.

10    Swire’s legal counsel, Meike Mtshali, deposed a lengthy affidavit that Swire read at the hearing on 21 April 2023. That affidavit annexed the five documents and set out a great deal of background information. The affidavit also annexed a draft statement of claim settled by counsel, which Swire wished to pursue by being able to commence proceedings in Hong Kong using that draft or another pleading relying on the material, information and documents the subject of the five documents. But, in order to do so, Swire needed to be released from the implied undertaking not to disclose a document or information obtained in the proceeding without leave of the Court for any purpose other than that for which it was given, unless it had been received into evidence or otherwise deployed in open court: cf: Deputy Commissioner of Taxation v Shi (2021) 273 CLR 235 at 261-262 [49]-[52] per Gordon J, Kiefel CJ, Gageler and Gleeson JJ agreeing at 246-247 [12].

11    When I admitted Ms Mtshali’s evidence, I made the 21 April suppression order under s 37AF in the Federal Court of Australia Act 1976 (Cth) suppressing and prohibiting publication of some parts of it, including the five documents annexed to it, up to and including 8 May 2023, so as to give Inter Ocean time to consider whatever decision I came to and to apply to set aside or vary any orders I made if it sought to do so. Inter Ocean had appeared on the morning of the hearing of 21 April 2023, but without giving Swire any adequate notice, material as to the basis of its proposed intervention or any security within the jurisdiction were it to be exposed to an order for costs.

12    On 8 May 2023, Inter Ocean filed the present interlocutory application and sought orders including the joinder of HFW Australia as a party to the proceeding on a limited basis, an extension of the 21 April suppression order to the date of determination of its application, an order setting aside the undertaking release order and an order restraining HFW Australia from acting as Swire’s solicitors in this proceeding.

13    As I explained in my earlier reasons, having considered the evidence, Swire had shown, in all the circumstances, good reason why Ms Mtshali’s unchallenged evidence ought be accepted. First, the claims in the draft statement of claim arose out of and could be supported by the five documents and the information in them, that were not all known to Swire prior to the commencement of the arrest proceeding and, secondly, the essential allegations that formed the core part of the draft statement of claim required the use of the five documents and information in them in order to advance a case against Mr Brown and Mr Hartmann for the tort of conspiracy to injure by unlawful means. However, as I noted (in Brontes [2023] FCA 388 at [35]), I refrained from disclosing in my reasons any of the material or information to which the implied undertaking attached because that might become the subject of a further application by Inter Ocean, if so advised, once the stay until 8 May 2023 expired. On 8 May 2023, I extended the stay until today. Hence, the hearing of Inter Ocean’s application today.

Application to set aside release

14    When senior counsel for Inter Ocean today sought to advance that part of its interlocutory application seeking to set aside the undertaking release order, he was unable to identify any basis upon which Inter Ocean, a non-party which had not produced under compulsion any of the five documents, could be able to do so. Inter Ocean did not challenge my finding that Swire had shown special circumstances so as to warrant it being released from the implied undertaking in the form of the undertaking release order as made. Nor could Inter Ocean identify, in any coherent way, why, if there were any real or perceived conflict of interest or duty between HFW UK and Inter Ocean arising out of their earlier solicitor-client relationship or the participation of HFW Australia, that could bear on the ability of Swire, as a person claiming to have been injured by the alleged conspiracy, to use the knowledge of the existence of the five documents, the documents themselves and the information in them that it had gained in this proceeding in its proposed Hong Kong proceeding.

15    Inter Ocean had not appeared, nor had it filed, produced or relied on the five documents in this proceeding last year. Inter Ocean did not advance any evidence or argument that Swire was implicated, or would act unconscientiously, in any possible misuse of any of Inter Ocean’s confidential information or the breach of any duty that HFW Australia may have had to it in respect of the formulation of the draft statement of claim by Swire’s Hong Kong solicitors and counsel.

16    Swire had obtained the five documents and the information in them in the ordinary course of the proceeding and later formed the view on advice that it should sue Mr Brown and Mr Hartmann. Thus, Swire knew of these matters regardless of anything that HFW Australia may have done in relation to any possible conflict of interest or duty that it may have owed to Inter Ocean. Subsequently, using those objective facts, being the five documents and the information in them, Swire obtained advice reflected in the draft statement of claim that, if allowed, it could use the five documents to support its case in Hong Kong against Mr Brown and Mr Hartmann. I was satisfied that Swire had a legitimate reason to be granted the undertaking release order, in the interests of justice, so that it could use the five documents and the information in them to seek to vindicate whatever rights that it asserted it had in Hong Kong.

17    I am unable to understand any legitimate forensic basis on which it could be said that, having successfully negated the unmeritorious opposition of Brontes to Swire’s release from the implied undertaking, it was open to Inter Ocean to seek to intervene in the proceeding and assert that documents that Brontes (not Inter Ocean) had produced (arguably) under compulsion in it, should somehow not be able to be used by its forensic opponent (Swire), against whom Brontes had intended to deploy the five documents in support of its arrest of the ship last year.

18    Accordingly, I indicated during the course of argument that I would reject Inter Ocean’s application to set aside the undertaking release order.

Application for extension of the 21 April suppression order

19    Brontes sought an extension of the 21 April suppression order. That was because, it contended, a failure to do so would defeat the objective of the limited release of Swire from the implied undertaking, and have the effect of treating the five documents as having been put into evidence in the proceeding, therefore freeing Swire of any other constraint on their use. I endeavoured, in vain, to elicit from Brontes why any of the information in the five documents or in the other parts of Ms Mtshali’s affidavit, including the draft statement of claim, had any aspect over which equity would grant relief as confidential information, according to the principles that Mason J, with whom Murphy, Aickin, Wilson and Brennan JJ agreed, identified in O’Brien v Komesaroff (1982) 150 CLR 310 at 326-327.

20    However, because Brontes has not had an opportunity to identify anything in that material that might be confidential, I consider it to be in the interests of justice to allow it to review that material so that it can identify with precision what it contends is confidential. For that reason, I will extend the 21 April suppression order to 16 June 2023, when the matter can next be listed for case management. At the moment, an indefinite continuation of the 21 April suppression order that I made for the purposes of determining Swire’s application for the undertaking release order would prevent wider dissemination of documents and information the subject matter of the undertaking, including the draft statement of claim. It is difficult to understand how, on the present state of the evidence, without some further clarification, Brontes’ claim can be made good that it has a legitimate interest in ongoing suppression and non-publication of Swire’s draft pleading, together with a great deal of the material (including boilerplate documentation or documents found in ship registries and public records in various places in the world). Nonetheless, it may be that there is some material or information that Brontes can prove is confidential and which it may be entitled to protect from disclosure, in all the circumstances, that a focused argument based on evidence may identify.

Application for extension of stay of release

21    For its part, Inter Ocean also sought a stay so that it could obtain advice on whether to bring an application for leave to appeal from my refusal to set aside the undertaking release order. It did not offer any undertaking as to damages and did not explain why it would suffer any, let alone irreparable, prejudice without the grant of a stay.

22    Inter Ocean also sought the stay to allow it the opportunity to decide whether to test forensically Mr Vallely’s and HFW Australia’s evidence concerning the lack of any real or potential conflict of interest and duty in which HFW Australia may have been placed. The difficulty with that contention is that Inter Ocean seeks the stay to support an order to restrain HFW Australia from acting in this proceeding. Inter Ocean may or may not have remedies against other persons in other jurisdictions arising from the relationship of solicitor and client that existed by reason of its retention of HFW UK in 2021, but I am unable to understand how there would be any likely utility restraining HFW Australia from acting for Swire in this proceeding.

23    First, there is no evidence that HFW Australia is acting in or in relation to the Hong Kong proceeding, as opposed to Holman Fenwick Willan’s firm in Hong Kong. Secondly, this proceeding is effectively at an end save and to the extent that I will, as I have indicated, allow Brontes to advance its claim, if it can, to establish confidentiality of any material in any of the five documents or the information in them that Brontes filed in the proceeding. However, that is a matter about which any suggested conflict that HFW Australia might have would be beside the point and irrelevant.

24    Thirdly, although this has not yet been the subject of any detailed argument, on 8 August 2022 HFW Australia wrote to Inter Ocean directly, informing it that they acted for Swire, referring to the charterparty and its terms, including cl 16, under which Inter Ocean warranted it had not effected any mortgage of the vessel and would not do so without Swire’s prior consent, which could not be unreasonably withheld. The letter recited that on or around 27 June 2022, as pleaded in the writ, Inter Ocean signed a document titled “First Preferred Liberian Mortgage MV Charlie B”, being the previous name of Lihir Chief, that purported to create a mortgage over the vessel in favour of Brontes, for which it said Swire’s consent had neither been sought nor obtained. The letter noted that Brontes had commenced this proceeding, and Swire demanded that, if the ship were arrested at Brisbane or any other port pursuant to the proceeding, Inter Ocean provide whatever security was necessary so as to facilitate her immediate release and stated that Swire would hold Inter Ocean liable for all loss or damage. At that point, it must have been blindingly obvious to Inter Ocean that HFW Australia was acting on the subject matter of what it now asserts gave rise to some unidentified conflict of interest of that firm, Mr Vallely and its Australian solicitors involved in this proceeding.

25    Next, on 9 August 2022, HFW UK served a notice of dispute on Inter Ocean informing them that they were the English solicitors acting on behalf of Swire and that the dispute was based on the breach of cl 16(a) of the charterparty, in that Inter Ocean had purported to create a ship’s mortgage over Lihir Chief in favour of Brontes without first obtaining Swire’s consent. This letter invoked the arbitration clause in the charterparty and appointed Stephen Hofmeyr QC as its arbitrator. Two days later on 11 August 2022, HFW UK gave notice to Inter Ocean of a second dispute under the memorandum of agreement dated 16 June 2022 between Inter Ocean, as sellers, and Swire, as buyers, in respect of the agreement to sell Lihir Chief pursuant to Swire’s exercise of the option, again appointing Mr Hofmeyr QC as arbitrator.

26    On 23 August 2022, Henrike Koch, a lawyer acting for Inter Ocean, and whose affidavit, made as Inter Ocean’s attorney-in-fact, is one of the five documents, acknowledged the two notices of dispute referring matters to arbitration and agreed to the appointment of Mr Hofmeyr QC as sole arbitrator.

27    In those circumstances, it is difficult to see how it could be said that Inter Ocean was not aware of the possibility that one or more of the HFW partnerships may have had a real or potential conflict of interest or duty in relation to acting in any of the matters that, only now, it is seeking to raise here.

28    In Lindsay Petroleum Company v Hurd (1874) LR 5 PC 221 at 239-240, Lord Selborne LC said:

…the doctrine of laches in Courts of Equity is not an arbitrary or technical doctrine where it would be practically unjust to give a remedy, either because the party has, by its conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of those cases, lapse of time and delay are most material.

29    That principle may well be a relevant factor to be considered on any further application by Inter Ocean. However, I do not see in the circumstances of this proceeding any utility in maintaining Inter Ocean’s interlocutory application on foot to allow it to pursue its application to restrain HFW Australia from acting for Swire in what, if anything, is left in this proceeding.

30    There is no apparent injustice in refusing to stay the operation of the undertaking release order. Having regard to the inherent weakness of Inter Ocean’s arguments, I do not consider that it is in the interests of justice to stay the operation of that order any longer and will not do so.

Conclusion

31    For these reasons, Inter Ocean’s interlocutory application filed on 8 May 2023 should be dismissed with costs.

Associate:

Dated:    22 May 2023