Federal Court of Australia

Korea Midland Power Co Ltd v ACIRL Quality Testing Services Pty Ltd [2025] FCA 561

ORDERS

THE COURT ORDERS THAT:

1.    Categories 2 and 3 of the schedule to the subpoena to ALS be set aside.

2.    The interlocutory application filed by ALS and ACIRL dated 6 April 2025 otherwise be dismissed.

3.    The costs of that interlocutory application be costs in the cause.

4.    Extend the time for ALS to answer category 1 of the schedule to the subpoena to 4 June 2025.

5.    KOMIPO file and serve any notice of motion challenging any claim for privilege over documents produced by ALS in answer to the subpoena by 9 June 2025, noting that affidavits and written submissions have already been filed in relation to privilege issues.

6.    Any such notice of motion be referred to another judge for hearing and determination.

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

REASONS FOR JUDGMENT

Delivered ex tempore, revised from transcript

JACKMAN J:

1    On 21 February 2025, the applicant (KOMIPO) served a subpoena on ALS Limited (ALS), which is the parent company of the first respondent (ACIRL) seeking the following documents:

(1)    Reports prepared by McGrathNicol (or any other external advisor) involved in the independent forensic investigations described in ASX announcements by ALS dated 24 February 2020 and 2 April 2020;

(2)    All documents prepared for the purpose of providing instructions to McGrathNicol (or any other external advisor) in respect of the investigation; and

(3)    All documents provided to McGrathNicol (or any other external advisor) for the purposes of undertaking the investigation and preparing the report.

(the subpoena)

2    KOMIPO has indicated that only category 1 is pressed, while reserving its right to call on the balance of the subpoena at a later time.

3    ALS and ACIRL seek to have the subpoena set aside on grounds that:

(1)    the subpoena lacks a legitimate forensic purpose on the basis that there is no pending hearing, application or order for which the subpoenaed documents are necessary;

(2)    the subpoena seeks documents which will properly be sought by way of discovery from ACIRL at the appropriate stage (noting that ACIRL has confirmed that the documents are within its possession, custody or power);

(3)    categories 2 and 3 are oppressive and would require production of a vast number of documents of no relevance.

4    If the subpoena is not set aside, ALS objects to production of the McGrathNicol report or reports sought in category 1 on the ground of legal professional privilege.

5    KOMIPO is a Korean energy company and a purchaser of coal. ACIRL’s business includes analysing and certifying samples of coal and its certificates affect the price payable by KOMIPO under its coal purchase contracts and its obligations to accept that coal. The substantive proceedings concern allegations that certificates of analysis of coal issued by ACIRL recorded an excessively high net calorific value and were therefore misleading and deceptive. There appears to be a dispute as to whether the case is concerned only with four such certificates or whether the case is broader. The pleadings have either closed, or are close to being closed, but no orders for discovery have yet been made. The ASX announcements by ALS, referred to in category 1 of the schedule to the subpoena, refer to the independent investigation into allegations that certificates of analysis issued by a particular business unit were amended without justification, an apparent reference to McGrathNicol's investigation. The ASX announcement of 2 April 2020 referred to the investigation having identified evidence that approximately 45–50% of certificates of analysis were manually amended without justification in certain of the company's laboratories since the acquisition of ACIRL by ALS in 2007, and that the matter was being referred to the NSW Police.

6    The first question is whether the subpoena should be set aside. ACIRL submits that it is not legitimate to use a subpoena as a substitute for discovery, and although there is authority for such use early in the proceedings, that should ordinarily be allowed only when it is clearly seen to be necessary. ACIRL submits that ALS is a stranger to the proceedings, which should not be put to the trouble of answering a subpoena, and submits that the documents may well be obtained on discovery. ACIRL submits that there is no pending hearing or application for which KOMIPO requires any investigation reports, although I note that they are plainly being sought in preparation for the final hearing of these proceedings.

7    KOMIPO submits that the documents sought in paragraph 1 squarely concern the matters in dispute, and it is necessary and convenient for them to be produced at an early stage in order to enable the issues in the proceedings to be refined and future case management to be conducted efficiently.

8    It seems to me obvious that the McGrathNicol report or reports will be sought by KOMIPO on discovery, and irrespective of the dispute on the current state of the pleadings, they will have to be discovered subject to any valid claim for legal professional privilege.

9    ALS is a "stranger" to the proceedings in only the most technical sense that its subsidiary, but not ALS itself, is a party. It makes little, if any, practical difference whether it is ALS or ACIRL which produces the McGrathNicol report or reports. The real issues concern whether the McGrathNicol report or reports are subject to valid claims of privilege and whether any such privilege has been waived. If KOMIPO obtains access to the report or reports, that would realistically assist in narrowing the scope of discovery and other pre-trial steps.

10    The efficient and just application of these matters of civil practice and procedure requires the earliest possible resolution of those claims for privilege. While I express no firm or ultimate view on the point, it seems to me to be a realistic possibility that, if the report or reports are privileged, then the privilege over at least some parts of them has been waived; that is, the outcome of the debate over a waiver of privilege may not be an all or nothing matter. In order to determine which parts, if any, are the subject of waiver, the judge would likely need to read the reports.

11    As the docket judge to whom the hearing of the proceedings has been assigned, I should arrange for that to be heard and decided by another judge. The convenient course would be for that judge to decide both whether there is a proper prima facie claim for privilege, and also whether and to what extent any such privilege has been waived. That course is also fortified by the fact that the contents of the McGrathNicol report or reports may also be relevant to issues in Federal Court proceeding NSD176 of 2023, ASIC v Terracom Limited, for which I am also the docket judge with a final hearing fixed to commence on 16 June 2025; that is, in under three weeks’ time.

12    Accordingly, I dismiss the application to set aside category 1 of the subpoena. As KOMIPO does not press categories 2 and 3 at this stage, I should set those aside for the sake of good order. I note that those paragraphs are very widely drafted and that, in the context of considering discovery categories in due course, a more confined approached should be capable of being adopted.

13    As to the costs of the interlocutory application, each party has achieved a measure of success but the real contest will be in relation to the claims for privilege, which are yet to be determined. In the circumstances, the costs of the interlocutory application should be costs in the cause.

Associate:

Dated:    28 May 2025

SCHEDULE OF PARTIES