FEDERAL COURT OF AUSTRALIA

Korea Midland Power Co Ltd v ACIRL Quality Testing Services Pty Ltd (No 2) [2025] FCA 987

ORDERS

THE COURT ORDERS THAT:

1.    The proceeding be listed at a time convenient to the parties and the Court for further submissions as to the extent of the waiver of the McGrathNicol report dated 2 April 2020.

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

REASONS FOR JUDGMENT

GOODMAN J:

A.    INTRODUCTION

1    On 21 February 2025, the applicant served a subpoena upon ALS Limited seeking, relevantly, production of:

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    On 28 May 2025, Justice Jackman dismissed an application by ALS and its subsidiary, the first respondent, ACIRL Quality Testing Services Pty Ltd in so far as that application sought to set aside paragraph 1 of the subpoena: Korea Midland Power Co Ltd v ACIRL Quality Testing Services Pty Ltd [2025] FCA 561. His Honour also ordered that a dispute concerning a claim for legal professional privilege over documents to be produced in answer to paragraph 1 of the subpoena be referred to another judge for hearing and determination. These reasons for judgment address that dispute.

B.    BACKGROUND

3    In answer to the subpoena ALS produced, subject to claims of legal professional privilege, two written reports prepared by McGrathNicol and addressed to Mr Michael Pearson qua General Counsel for ALS. Those reports are dated 21 February 2020 and 1 April 2020, and I will refer to them as the preliminary report and the final report respectively.

4    The applicant challenges the claim of legal professional privilege, and contends that to the extent such privilege existed, it has been waived by ALS.

5    In support of its claim of legal professional privilege over the reports, ALS relied upon an affidavit of Mr Pearson. Mr Pearson was cross-examined. It was common ground that Mr Pearson was a candid witness whose evidence should be accepted (albeit that ALS and the applicant are at odds as to the effect of that evidence). I formed the same view and I accept Mr Pearson’s evidence.

6    From that evidence, the salient background facts are as follows.

7    The ALS Group (being ALS and its subsidiaries including ACIRL) provides testing, inspection and certification services across a range of industries, including coal and other commodities (such as gold and iron ore). For coal and other commodities, ALS Group entities inspect, weigh, sample, analyse and report on the quantity and quality of coal and other commodities to produce findings for final commercial settlement.

8    The ALS Group’s Australian coal business is with ACIRL, trading as “ACTest”, and which is sometimes referred to as “ALS Coal”. ACIRL has its own network of laboratories which conduct testing and certification of coal samples. One aspect of ACIRL’s business is to test coal samples and provide certificates as to their qualities (for example, moisture levels and net calorific value) to sellers of coal.

9    Mr Pearson, who was admitted to practise as a solicitor in 1994 and has held a practising certificate since then, was General Counsel and Company Secretary of ALS from 4 December 2017 until 1 October 2024. During that period, he reported both to ALS’s Managing Director and Chief Executive Officer (a single position) and to the Chair of ALS’s board of directors. He also reported to the directors of ALS at meetings which occurred approximately monthly. His reports were separated into legal matters and corporate governance matters.

10    As General Counsel, Mr Pearson was responsible for the provision of legal advice and legal services to the ALS Group. That advice was either provided by Mr Pearson personally, by lawyers working under his supervision at ALS, or by (and sometimes in conjunction with) external lawyers engaged by ALS.

11    Mr Pearson oversaw the ALS Group’s litigation and other disputes, including disputes concerning the quality of testing services and occasional allegations of professional negligence. He was also responsible for providing legal advice to ALS concerning its continuous disclosure obligations pursuant to the Australian Securities Exchange (ASX) Listing Rules and the Corporations Act 2001 (Cth).

12    On 3 February 2020, a journalist from the Australian Financial Review sent an email to Mr Simon Starr, ALS’s Head of Investor Relations, in the following form:

Thanks again for taking my call.

Here’s what the matter is about. I have copies of the litigation filed in the Federal Circuit Court involving miner Terracom that touches on their dealings with ALS. It is Federal Circuit Court matter SYG3l92/2019.

The directors have legal representation, so Terracom is aware of the action. I would like to ask questions for a story. Could you please get back to me on Tuesday afternoon with any response.

In the claim, a former senior staffer alleges that Terracom was involved in a falsification of coal analysis. I have attached part of the claim dealing with ALS.

He stated that he was threatened with being terminated if he refused to cause ALS Coal/ACIRL Quality Testing Services Pty Ltd to “cause coal analysis results to be altered without due cause in order to inflate customer invoices and prevent customers exercising their contractual rights to reject cargoes”.

Is ALS aware of the allegations? Are they true?

Is ALS aware of any falsification of analysis results having occurred, and if so, how do they occur? Does ALS allow their customers to alter results, or seek them to be altered? If so, in what cases is it allowed?

In the case, the former employee has filed copies of documents about tests for shipments which he says involved changed results. (see attached)

The first documents are marked as a shipping analysis report with the status “preliminary”, with a second official “sampling and analysis” certificate showing different numbers, which matched a customer invoice.

One is for an ALS job (Lab reference 31015572).

The coal was loaded in that case onto the ship at Dalrymple Bay on May 3, 2018. The first report is dated May 8, 2018, and the certificate May 10, 2018, with the certificate noting the sampling was done during loading. The laboratory reference number is the same. It shows changing levels of total moisture and net calorific value.

The former employee has supplied such details for about 12 shipments of more than l million tonnes of coal, dated between May 2018 and June 2019. All record improvements in the moisture and net calorific value in favour of Terracom.

Some of the dates are only a day apart between the first report and the certificate. It is on the same day in one occasion for reference 31015824, with again differences are noted in moisture and net calorific value.

Would ALS have any reason for moisture and net calorific numbers to change, if they are the same reference number and if the same day, or only a couple of days apart? How much should they change?

Thanks for any assistance, …

(emphasis added)

13    Mr Starr forwarded that email under cover of an email in the following terms to Mr Pearson:

Liam Walsh (AFR) just called me wanting to see if we’d comment on litigation regarding surrounding the falsification of coal results. Although it seems that ALS is not the direct subject of legal action, there is mention of the company in the proceedings.

See below and attached.

I don’t think we should be commenting on matters that are before the courts but lets discuss when you’ve had a chance to have a look at Liam’s email. He would like a response (including ‘no comment’) by tomorrow afternoon as I expects he plans to publish on Wednesday (although he told me he wasn’t necessarily publishing at all).

14    It was immediately obvious to Mr Pearson that ALS and ACIRL would require legal advice about a range of potential matters arising from the allegations set out in Mr Walsh’s email including whether:

(1)    ALS or ACIRL might become involved in the existing proceeding brought against Terracom Limited in the (then) Federal Circuit Court of Australia (Terracom proceeding);

(2)    ALS or ACIRL had any potential exposure to claims from clients or third parties;

(3)    ALS had any obligation to disclose any information to the ASX, any other authorities (such as the Police and the Australian Securities and Investments Commission), and its auditors; and

(4)    any ALS or ACIRL employees had breached the terms of their employment contracts or other obligations and, if so, what consequences might follow.

15    In view of the nature of the allegations, Mr Pearson considered his response to the matters raised therein to be part of his role as General Counsel of ALS.

16    Mr Pearson also provided evidence that:

(1)    in his role as General Counsel, he has dealt with professional negligence claims against ALS or its subsidiaries and so was particularly cognisant of the potential for third parties to bring claims against ALS or ACIRL based upon alleged falsification of analysis results. From the time that Mr Pearson became aware of the allegations, he considered there was a real prospect of litigation by third parties against ALS or ACIRL in relation to such allegations; and

(2)    it was also clear to him from the time that he became aware of the allegations that in order to provide any advice on the subjects identified at [14(1) to (4)] above to ALS or ACIRL (including by procuring advice on those subjects from external lawyers), he needed to have a professional, forensic investigation urgently undertaken in order to identify relevant facts upon which to base such advice. Mr Pearson confirmed in cross-examination his evidence that any facts so determined would be used principally or primarily for legal advice. He also agreed that such facts might be used for other purposes but did not accept that his principal or primary purpose was not maintained until the final report was produced.

17    Following some discussions with others within ALS including Mr Jason Hubbard (the General Manager of ACIRL) and Mr Michael Burcham (ALS’s Chief Risk Officer), Mr Pearson decided to engage: (1) external lawyers to provide advice to ALS and ACIRL; and (2) McGrathNicol to conduct an investigation for the purpose of Mr Pearson providing or obtaining legal advice.

18    On 10 February 2020, Mr Pearson had an initial call with Mr Derek Pocock, a partner at Baker McKenzie, solicitors, who provided him with some preliminary legal advice about a topic arising from the allegations.

19    After Mr Burcham made the initial contact with Mr Graham Newton a partner at McGrathNicol, Mr Pearson took the following steps qua ALS’s General Counsel to engage McGrathNicol to undertake the factual investigation into the allegations, which Mr Pearson says he required to provide and procure legal advice for ALS and ACIRL:

(1)    during the afternoon of 11 February 2020, Mr Pearson spoke with Mr Newton and Mr Burcham. During that call, he explained to Mr Newton that he needed McGrathNicol urgently to undertake a detailed factual investigation into the allegations and to do so for the purpose of Mr Pearson providing and obtaining legal advice with respect to the allegations; and he asked Mr Newton to provide an engagement letter addressed to Mr Pearson, which Mr Newton agreed to do; and

(2)    Mr Pearson reviewed a draft engagement letter provided by Mr Newton that day to ensure that the scope was appropriate; and signed a final version of the letter later the same day (11 February 2020). The engagement letter was addressed to Mr Pearson as General Counsel of ALS and marked “Privileged & Confidential”. It commenced:

1     Background

1.1     We refer to our telephone discussion with ALS Limited (ALS), on 11 February 2020, in which ALS has requested McGrathNicol Advisory (McGrathNicol) to conduct an independent investigation into allegations that certificates, issued by the ALS Coal at its Newcastle site (ALS Coal), in respect of the coal quality, were falsified at the request of a coal provider.

1.2     This letter outlines the terms and conditions under which McGrathNicol is to be engaged …

2     Objective and scope of work

2.1     The objective of our work will be to conduct an independent investigation into the alleged conduct and to identify the extent to which such unauthorised practices have occurred. To achieve this objective, we will conduct this investigation in a phased approach as outlined below.

(emphasis in original)

20    Mr Pearson did not seek approval or instruction before engaging McGrathNicol as he regarded that engagement to be within his standing authority as ALS’s General Counsel.

21    On 11 February 2020, McGrathNicol commenced its forensic investigation.

22    At around the same time, Mr Pearson engaged McGrathNicol to conduct an independent review of controls relating to the testing and certification of businesses within the ALS Group other than ACIRL, and to provide recommendations to the ALS Group in relation to potential additional measures that could be implemented, if required, to minimise the possibility of amendments of testing results without justification, if that was occurring in any other ALS businesses. I will refer to this investigation as the second investigation. Mr Pearson did not regard the report to be produced as a result of the second investigation to be subject to legal professional privilege (and no claim of privilege arises with respect to the second investigation).

23    During the course of the McGrathNicol investigation, Mr Pearson had frequent telephone calls with Mr Newton to receive updates, including as to any material developments. Mr Pearson conveyed such information where necessary to Baker McKenzie to allow Baker McKenzie to provide legal advice in relation to various issues from time to time, which they did.

24    On 18 February 2020, Mr Pearson signed an engagement letter with Baker McKenzie to provide legal advice in connection with the allegations.

25    On 19 February 2020, Mr Pearson met with Mr Pocock at Baker McKenzie’s Brisbane office with Mr Mark Chapple, another partner at Baker McKenzie, joining the meeting by telephone. Mr Pearson discussed factual matters relayed to him by Mr Newton and sought and received advice from both Mr Pocock and Mr Chapple. Mr Pearson also requested written legal advice. On 20 February 2020, Mr Pocock and Mr Chapple provided the written advice that Mr Pearson had requested.

26    On 21 February 2020, McGrathNicol sent the preliminary report to Mr Pearson as General Counsel. It was marked “Privileged & Confidential” with the subject line: “Re: Confidential investigation – ALS Coal”. The preliminary report bore a notation “draft” and recorded some preliminary findings of the McGrathNicol investigation.

27    On 22 February 2020, the directors of ALS met. The agenda for that meeting included:

28    At that meeting, both Mr Pearson and Mr Pocock provided legal advice to the ALS Board in relation to legal issues arising from the McGrathNicol investigation. Mr Pearson agreed in cross-examination that there was a division of responsibilities at that board meeting between Mr Burcham (who provided an update on the McGrathNicol investigation) and Messrs Pearson and Pocock (who provided legal advice flowing from that update), but Mr Pearson did not accept that the reason for this division was that the directors of ALS were considering the preliminary report for purposes other than receiving legal advice.

29    On 23 February 2020, the directors of ALS met again. The minutes of that meeting include:

…

3.    Draft ASX Release

The CEO presented the revised draft ASX Release which was discussed in detail.

The Board provided feedback and suggested amendments to the revised draft.

After discussion, and subject to minor amendment it was resolved to approve the ASX Release and authorise the Company Secretary to lodge the ASX Release with the ASX prior to the market opening on 24 February 2020.

…

30    On 24 February 2020, ALS caused an ASX announcement (24 February 2020 Announcement) to be published in the following terms:

ALS Limited … has appointed external advisors to conduct an independent, forensic investigation into the processes applied to the certification of coal samples by staff employed in the coal superintending and certification unit within the ALS Coal business stream.

Preliminary investigations have identified that a number of certificates of analysis issued from two laboratories within the coal superintending unit in Australia were amended before issue without proper justification.

Four staff members of the coal superintending unit have been suspended pending the outcome of the ongoing investigation.

ALS processes more than 40 million samples per year. The coal superintending unit processes more than 39,000 samples for shipping analysis which equates to approximately 3,000 certificates of analysis per year. The unit accounted for less than 3% of ALS Group underlying EBIT in the financial year ended 31 March 2019.

ALS has put immediate measures in place to stop the amendment of certificates without proper justification, and additional review processes are being put in place within the coal superintending unit to ensure the integrity of certificates of analysis.

Different methods of verification are carried out in other parts of the ALS Group and are tightly controlled by automated processes and management systems, limiting the ability to amend certificates of analysis in this manner. ALS has commissioned an additional independent review of certification and reporting processes across all divisions of the Group. Preliminary findings indicate the issues being investigated are isolated to the coal superintending unit and have not identified any evidence of similar practices in other divisions.

CEO and Managing Director, Raj Naran said, “Integrity and ethical conduct are critical to our business. Investigations to date indicate that these incidents are isolated to the coal superintending unit but they do not meet the standards of behaviour we expect from our staff.

“We have acted quickly as soon as these issues were identified, to deal with them and put additional processes in place to ensure they cannot happen again.”

ALS will update the market and relevant authorities of the findings of the investigation as appropriate.

The Board and management has considered these matters and reiterates earnings guidance provided at the announcement of half-year results for Group underlying NPAT of $185 million to $195 million for the financial year ended 31 March 2020.

ALS places the highest priority on ethical conduct. The Board has prioritised this independent investigation in order to establish the facts and take further appropriate action. ALS’ Code of Conduct clearly articulates the standards of behaviour and business ethics expected of everyone who works for and with ALS. This Code is supported by a global compliance and quality control program with robust systems, policies, training and operational procedures designed to ensure services are ethical, reliable and independent.

This announcement was approved for release by the Board of ALS Limited.

31    Mr Pearson was an author of the 24 February 2020 Announcement.

32    As is plain, and as Mr Pearson readily accepted in cross-examination, the 24 February 2020 Announcement did not refer to the McGrathNicol investigation having been commissioned for the purpose of obtaining or providing legal advice or in respect of anticipated litigation.

33    Mr Pearson did not accept that the 24 February 2020 Announcement articulated “a number of other purposes that were important to ALS as to why that investigation was made”, although he accepted that some actions, other than obtaining legal advice, were taken as a consequence of the preliminary report.

34    On 23 and 24 March 2020, Mr Pocock and Mr Chapple provided two further memoranda of advice to Mr Pearson in light of the preliminary report. They also continued to provide legal advice in conference and over the telephone.

35    On 31 March 2020, the directors of ALS met. The minutes of that meeting include:

d)    Report on ALS Coal division

The CRO and Mr. Newton (McGrath Nicol) updated the Board on the current status of the investigation which was nearing completion. Both answered questions from directors about specific matters pertaining to the findings.

…

The General Counsel and Company Secretary and Mr Pocock (Baker McKenzie)

…

(emphasis in original; the ellipses represent redactions in the minutes as adduced on this application)

36    During that meeting, Mr Burcham and Mr Newton provided an update on the McGrathNicol investigation; and Mr Pearson and Mr Pocock provided further legal advice to the directors of ALS in relation to issues arising from the McGrathNicol investigations and findings.

37    One of the “Action Items” recorded in the minutes of the meeting was for Mr Pearson to “[p]repare a revised ASX Release regarding the Coal Superintending Unit and circulate to directors” within 24 hours of the meeting.

38    On 1 April 2020, Mr Newton provided the final report, addressed to Mr Pearson and marked “Private and Confidential”. Paragraph 2.1.1 of the final report is found under the heading “Terms of Reference” and states:

McGrathNicol Advisory (McGrathNicol) has been engaged by Mr Michael Pearson (Mr Pearson), in his role as General Counsel of ALS Limited (ALS), to conduct an independent forensic investigation into the processes that ALS applies to the certification of coal samples by staff attached to the ALS Coal business. McGrathNicol will report the results of our investigations to Mr Pearson in order that he provide legal advice to ALS.

(bold emphasis in original; underline emphasis added)

39    Mr Pearson did not ask Mr Newton to insert the underlined words into the final report. As noted at [19] above, he had, however, made Mr Newton aware that he (Mr Pearson) needed McGrathNicol to conduct a detailed factual investigation and to provide a report to him so that he could provide and obtain legal advice into matters arising from that report. Mr Pearson also gave evidence that the above extract of the final report accurately reflected his purpose in commencing the investigation.

40    Following delivery of the final report, Mr Pearson continued to receive legal advice from Baker McKenzie in relation to the findings of the final report and steps to be taken in light of those findings.

41    On 2 April 2020, ALS caused to be published an ASX announcement (2 April 2020 Announcement) in the following terms:

ALS Coal Australian Superintending and Certification unit – completion of independent investigation

1.    ALS Limited … provides the following update on the outcomes of an independent investigation into allegations that certificates of analysis issued by the Company’s Australian Coal Superintending and Certification Unit were amended without justification.

Independent investigation of certification of coal samples

2.    An independent forensic investigation has been completed into the certification of coal samples in the Coal Superintending and Certification Unit within the ALS Coal business stream, which accounted for less than 3% of ALS Group underlying EBIT in the financial year ended 31 March 2019.

3.    The investigation has identified evidence that approximately 45-50% of the certificates of analysis were manually amended without justification in the Company’s laboratories in Newcastle, Mackay, Gladstone and Emerald since acquisition of the ACIRL business by ALS in 2007. No evidence of bribery or other third-party payments involving ALS staff has been found or indicated.

4.    As previously announced, the four most senior staff of the Coal Superintending and Certification Unit were suspended pending the outcome of the investigation. The employment of the CM Coal Services has since been terminated and the other three staff are no longer employed by the business.

5.    ALS has continued to communicate with clients of the Coal Superintending and Certification Unit about the progress of the investigation and the Company’s remedial actions. To date there has been no material change to the performance of the business. Stringent additional measures have been put in place to stop the amendment of certificates without proper justification. The Company is also planning several enhancements to further automate the certification and reporting process to ensure the issuance of certificates of analysis is tightly controlled within the Company’s laboratory information management system COAL 8, used by the Coal business stream.

6.    ALS and its relevant subsidiary are in the process of referring the matter to the NSW Police, in accordance with legal obligations.

Independent review of Group certification and reporting processes

7.    …

12.    CEO and Managing Director, Raj Naran said, “This is a very serious breach of the ethical standards we expect from everyone who works for ALS, and we have taken strong action to put an end to the behaviour.

13.    “Now that we have established the extent of the issues within the coal superintending unit, our focus is on upgrading systems and processes to ensure the integrity of coal certifications and reassure our clients.

14.    “While the findings of the investigation are very disappointing, we are pleased that the review found no evidence of any similar practices elsewhere in the Group.

15.    “How we have responded to this situation demonstrates the importance of our Code of Conduct and the standards of behaviour and business ethics we expect of everyone who works for and with ALS.”

16.    This announcement was approved for release by the Board of ALS Limited.

(bold emphasis in original; underline emphasis added; enumeration added for ease of reference)

42    The heading “Independent review of Group certification and reporting processes” and the text in paragraphs 7 to 11 are referable to the second investigation.

43    Mr Pearson was an author of the 2 April 2020 Announcement.

C.    LEGAL PROFESSIONAL PRIVILEGE

44    Against that background I turn to consider whether legal professional privilege attaches to the reports.

45    It is common ground on this application that as the dispute relates to pre-trial disclosure the relevant principles are those applicable at common law: see Esso Australia Resources Limited v Commissioner of Taxation [1999] HCA 67; (1999) 201 CLR 49 at 59 ([16] to [17]) (Gleeson CJ, Gaudron and Gummow JJ).

46    Those principles are well settled, and have recently been set out by two Full Courts of this Court: Singtel Optus Pty Ltd v Robertson [2024] FCAFC 58 at [23] to [32] (Murphy, Anderson and Neskovcin JJ) and Australian Securities and Investments Commission v Macleod [2024] FCAFC 174; (2024) 307 FCR 332 at 347 [75] where Burley, Anderson and Meagher JJ endorsed the summary of the relevant principles provided by the primary judge (Shariff J) in Australian Securities and Investments Commission v Noumi Ltd [2024] FCA 349 at [57] to [66].

47    At common law, legal professional privilege applies to confidential communications made for the dominant purpose of the client obtaining (including preparation for obtaining) legal advice or for use in litigation or regulatory investigations or proceedings: Singtel Optus at [24]. Legal professional privilege is not limited to communications between lawyer and client, but may also cover communications with a third party if those communications are made for the dominant purpose of a lawyer providing legal services: Noumi at [62], citing Pratt Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 122; (2004) 136 FCR 357 (Finn, Merkel and Stone JJ).

48    The party claiming legal professional privilege bears the onus of establishing its existence: Noumi at [63], citing Grant v Downs [1976] HCA 63; (1976) 135 CLR 674 at 689 (Stephen, Mason and Murphy JJ).

49    The ordinary meaning of dominant purpose indicates the need for a ruling, prevailing or most influential purpose. It is not sufficient to show a substantial purpose or that the privileged purpose is one of two or more purposes of equal weighting; rather it must be predominant and be the paramount or most influential purpose: Singtel Optus at [27]; Noumi at [61] and the authorities there cited.

50    The purpose for which a document was created is a matter of fact to be determined objectively, having regard to the evidence, the nature of the document, and the parties’ submissions: Singtel Optus at [25]; Noumi at [63], citing Esso Australia at 107 [172] (Callinan J).

51    The nature and extent of the evidence needed to prove the existence of privilege is fact and circumstance dependent: Singtel Optus at [25]; Noumi at [65], citing Martin v Norton Rose Fulbright Australia [2019] FCAFC 234 at [30] (Besanko, Flick and Abraham JJ).

52    Ordinarily, the relevant purpose will be that of the author of the document in question “or of the person or authority under whose direction, whether particular or general, it was produced or brought into existence”: Grant v Downs at 677 (Barwick CJ); Noumi at [64].

53    Generally, the “best evidence” will be that given by the person whose purpose is in question: Noumi at [63], citing Australian Competition and Consumer Commission v NSW Ports Operations Hold Co Pty Ltd [2020] FCA 1232 at [49] (Wigney J). However, the evidence of the intention of the person who made the document, or the person who authorised or procured it (here, Mr Pearson), is not conclusive of purpose (Singtel Optus at [26]) and the Court is not obliged to accept the evidence of a witness that a document was created for a privileged purpose. Nor is it obliged to find evidence to be persuasive irrespective as to challenge by cross-examination, particularly where such evidence is contradicted by facts otherwise established by contemporaneous material: Singtel Optus at [30], [32] and the authorities there cited.

54    In many instances, the character of the documents will illuminate the purpose for which they were brought into existence: Grant v Downs at 689. Where that is not the case, it may be demonstrated by identifying the circumstances in which the communication took place and the topics to which the instructions or advice were directed: Noumi at [66], citing Commissioner of Taxation v PricewaterhouseCoopers [2022] FCA 278; (2022) 114 ATR 335 at 375 to 376 [146] (Moshinsky J). See also Singtel Optus at [26], [31].

55    The relevant communications the subject of the claim for legal professional privilege in the present case are the preliminary report and the final report. As requested, I have had regard to the contents of both reports for the purpose of considering both the question of whether a claim of legal professional privilege has been made out; and the question of whether any such privilege has been waived.

56    The parties did not seek to draw a distinction between the evidence relevant to a consideration of whether the preliminary report is the subject of a valid claim for legal professional privilege on the one hand and the evidence relevant to a consideration of whether the final report is the subject of such a claim on the other hand. In view of the proximity of the two reports and as most of the facts relevant to an assessment of one report are also relevant to an assessment of the other, I will address the two reports together.

57    It is clear from the evidence, including the terms of each of the reports, that they were confidential communications from McGrathNicol to ALS. There was no issue on this application that this was the case. It is also common ground that a purpose of those communications was to enable ALS to obtain legal advice. The contest between the parties on this application is whether ALS has established that such a purpose was the dominant purpose.

58    Consistently with the authorities mentioned at [53] above, in considering this question, it is necessary to address the evidence of Mr Pearson, who commissioned the reports, including his subjective evidence as to his purpose in doing so. It is also necessary to consider the contemporaneous objective evidence concerning the purpose of the reports, as well as their contents.

59    Mr Pearson’s evidence as to his state of mind is that from the time that he received Mr Starr’s email, he was minded to obtain legal advice, including on the four topics set out at [14] above, and that to do so he needed a professional forensic investigation to be undertaken to identify the facts which such advice would address.

60    The objective evidence includes:

(1)    Mr Pearson’s engagement of McGrathNicol and Baker McKenzie at about the same time around 10 February 2020;

(2)    Mr Pearson’s statement to Mr Newton at that time that the investigation was required for the purpose of Mr Pearson providing and obtaining legal advice with respect to the allegations ([19(1)] above). Although this is not recorded in the engagement letter ([19(2)] above), the final report does include a statement to that effect, which was included by Mr Newton not at the urging of Mr Pearson ([38] and [39] above);

(3)    that during the course of the McGrathNicol investigation, Mr Pearson received updates from McGrathNicol and conveyed information to Baker McKenzie, and Baker McKenzie provided advice thereon, ([25] to [26] and [34] above) in various telephone conversations ([23] above) and at the ALS directors meetings on 22 February 2020 and on 31 March 2020 ([28] and [36] above);

(4)    the 21 February 2020 Announcement, which: (a) was drafted by Mr Pearson; (b) refers to the appointment of McGrathNicol to conduct “an investigation into the processes applied to certification of coal samples” but does not refer to such investigation being undertaken for the purpose of ALS seeking legal advice or anticipated litigation; (c) includes “ALS will update the market and relevant authorities of the findings of the investigation as appropriate” and “[t]he Board has prioritised this independent investigation in order to establish the facts and take further appropriate action”; and

(5)    the 2 April 2020 Announcement.

61    The final report includes the statement as to Mr Pearson’s purpose in commissioning the McGrathNicol investigation set out at [38] above. Otherwise, the reports are neutral as to the purpose for which they were commissioned.

62    It is apparent from the evidence discussed above that ALS, through Mr Pearson, had the following purposes in commissioning McGrathNicol to provide the reports:

(1)    the identification of the underlying facts. This is plain from at least the McGrathNicol letter of engagement ([19(2)] above), the 24 February 2020 Announcement ([30] above), and Mr Pearson’s evidence; and

(2)    the obtaining of legal advice, based upon those factual findings.

63    I am not satisfied that any other purpose for the obtaining of the reports has been established. As Mr Pearson explained in his evidence, ALS did take some actions as a consequence of information conveyed during the course of the investigation. However, it does not follow that the taking of such actions (or the possibility of taking such actions) was a purpose for which the reports were obtained. The evidence does not establish any change in ALS’s purposes for obtaining the final report from the time it was commissioned.

64    I am satisfied that the purpose of obtaining legal advice was ALS’s dominant purpose in obtaining each of the reports, as:

(1)    it is clear that the obtaining of information from McGrathNicol and the obtaining of legal advice from Baker McKenzie were pursuits that travelled together from the engagement of each of them in February 2020 until at least the provision of the final report. For example, the decision to retain both was made effectively at the same time ([17] to [19] above); on 10 February 2020, Mr Pocock of Baker McKenzie provided preliminary advice about a topic arising from the allegations ([18] above); during the course of the investigation Mr Pearson conveyed information that he had obtained from Mr Newton arising out of the investigation to Baker McKenzie for the purpose of receiving legal advice (and such advice was received) (e.g. [23] and [25] above); Mr Pocock was present at meetings of the directors of ALS on 22 February 2020 and 31 March 2020 at which information concerning the investigation was provided and Mr Pocock provided legal advice concerning the information provided ([28] and [36] above). Further, following delivery of the final report Mr Pearson continued to receive legal advice from Baker McKenzie concerning the findings in the final report ([40] above);

(2)    Mr Pearson’s evidence – which I again note I was invited to, and do, accept – is clear that, in so far as he was concerned, the obtaining of legal advice was at least the dominant purpose for which the reports were obtained. In cross-examination, Mr Pearson:

(a)    confirmed his evidence that any facts determined by the investigation would be used principally or primarily for legal advice;

(b)    acknowledged that information obtained from the investigation was used for other purposes, but when challenged as to the existence of other purposes, confirmed that his primary focus was upon the possible legal consequences of the allegations;

(3)    the 24 February 2020 Announcement and the 2 April 2020 Announcement do not disclose the existence of any purpose for the obtaining of the reports other than the ascertainment of the underlying facts; and

(4)    I do not regard the absence in those Announcements of a reference to a purpose of obtaining legal advice to carry any significant weight in circumstances where the Announcements do not identify a particular purpose other than the obtaining of factual findings, which purpose in my view is subsidiary to the purpose of using those findings once made for the purpose of obtaining legal advice.

65    I also note that it was not suggested to Mr Pearson that the decision to bring the McGrathNicol reports into existence would have been made irrespective of the obtaining of legal advice from Baker McKenzie (cf Noumi at [61], citing Federal Commissioner of Taxation v Pratt Holdings Pty Ltd [2005] FCA 1247; (2005) 60 ATR 466 at 479 [30(8)] (Kenny J); Asahi Holdings (Australia) Pty Ltd v Pacific Equity Partners Pty Limited (No 4) [2014] FCA 796 at [33] (Beach J)). Indeed, Mr Pearson’s evidence strongly suggested the opposite, namely that the McGrathNicol reports were obtained in order that legal advice could be obtained from Baker McKenzie.

66    For the above reasons, I am satisfied that the reports are subject to legal professional privilege.

D.    WAIVER

67    I turn now to consider whether there has been a waiver of the privilege. The applicant contends that by making the 2 April 2020 Announcement, ALS waived privilege in the final report.

68    The issue for determination is whether ALS has waived its right to maintain its claim of legal professional privilege because it has engaged in conduct which is inconsistent with the maintenance of the confidentiality of the reports: Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 at 13 ([28] to [29]), (Gleeson CJ, Gaudron, Gummow and Callinan JJ); Osland v Secretary, Department of Justice [2008] HCA 37; (2008) 234 CLR 275 at 296 to 297 [45] (Gleeson CJ, Gummow, Heydon and Kiefel JJ).

69    The assessment as to whether ALS has engaged in conduct inconsistent with the maintenance of the confidentiality of the reports “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 at 296 to 297 [45]. It is a question of fact and degree: Osland at 298 to 299 [49]. In considering that question of fact and degree, the result may turn on the fine detail of the case at hand, and as Allsop CJ explained in Australian Securities and Investments Commission v Australia and New Zealand Banking Group Limited (No 2) [2020] FCA 1013 at [27]:

The distinctions drawn in this area are fine. The disclosure of the substance or gist or conclusion of legal advice will render a waiver: Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237; 140 FCR 101 at 119 [65]–[66]; and the authorities there cited, especially Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd [1996] NSWSC 7; 40 NSWLR 12 at 17–19 and Adelaide Steamship Co Ltd v Spalvins [1998] FCA 144; 81 FCR 360 at 366–367 read with 376–377.

70    The applicant bears the onus of proving waiver: New South Wales v Betfair Pty Ltd [2009] FCA 160; (2009) 180 FCR 543 at 556 [54] (Kenny, Stone and Middleton JJ).

71    The applicant contends that a waiver arises because of the following statements in paragraph 3 of the 2 April 2020 Announcement:

(1)    

The investigation has identified evidence that approximately 45-50% of the certificates of analysis were manually amended without justification in the Company’s laboratories in Newcastle, Mackay, Gladstone and Emerald since acquisition of the ACIRL business by ALS in 2007. ; and

(2)    

No evidence of bribery or other third-party payments involving ALS staff has been found or indicated.

72    I have reached the view there has been a waiver of at least some of the information in the final report, for the following reasons.

73    The 2 April 2020 Announcement commences with statements that its purpose was to provide an update on the outcomes of the investigation (first paragraph) which had been completed (second paragraph). Then the third paragraph expressly states that the McGrathNicol investigations had identified:

(1)    evidence that approximately 45 to 50 per cent of the certificates of analysis were amended without justification in the nominated laboratories since ALS’s acquisition of the ACIRL business in 2007; and

(2)    no evidence of bribery or other third-payments involving ALS staff had been found or indicated.

74    Thus, ALS has deployed (to the extent that the final report contains such information) information in the final report by publishing the above statements to the public at large.

75    That information was deployed at a time when, as Mr Pearson explained, ALS had under contemplation the possibility of: (1) involvement in the Terracom proceeding; and (2) claims from clients or third parties including regulators ([14] above). Of course, the possibility of such a claim has crystallised in the form of the present proceeding.

76    The deployment of such information was for a forensic advantage in seeking to deter prospective claimants from pursuing claims against it and in seeking to assure regulators that there was nothing worthy of investigation. The deployment of that information was also for a commercial advantage, being the maintenance of ALS’s commercial reputation including the provision of reassurance to the market as to the (low) materiality of the issues under investigation and that appropriate steps had been taken in response, as Mr Pearson acknowledged.

77    As Gyles J (with whom Tamberlin J agreed) explained in Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237; (2004) 140 FCR 101 at 120 [68], it is well-established that for a client to deploy the substance or effect of legal advice for forensic or commercial purposes it is inconsistent with the maintenance of the confidentiality that attracts legal professional privilege. In Cooper v Hobbs [2013] NSWCA 70, McColl JA (with whom Bergin CJ in Eq agreed) observed at [71]:

In Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237; (2004) 140 FCR 101 (at [68]), Gyles J (Tamberlin J agreeing) held that it was “... well established 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”. Maxwell P (Bongiorno AJA agreeing) cited Gyles J's proposition in Secretary, Department of Justice v Osland [2007] VSCA 96; (2007) 26 VAR 425 (at [20]) and applied it (at [67]) in rejecting the challenge to the Attorney-General's claim of legal professional privilege in relation to advice he had received on the basis of which he had rejected the respondent's petition for mercy. The plurality in the High Court approved Maxwell P's reasoning: Osland v Secretary, Dept of Justice (at [50]).

78    Thus, there is a clear inconsistency between the publication of the information set out at [71] above and the maintenance of confidentiality over it. That inconsistency gives rise to a waiver.

79    ALS relied upon the decision of Justice Thawley in Duma v Fairfax Media Publications Pty Limited (No 2) [2021] FCA 119. In that case, Horizon Oil Limited made an announcement which revealed some conclusions of an investigation that had been undertaken on its behalf. Justice Thawley upheld a claim for privilege over various documents. On the question of waiver, his Honour said at [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].

80    This decision does not assist ALS. It cannot be said in the present case that there was no relevant divergence between the interests of ALS and the interests of those to whom the information was disclosed, when the latter group must be taken to include those with potential claims against ALS, and regulators. Further, in the present case, as noted above, the information was deployed for forensic and commercial advantage.

81    Although I am persuaded that there has been a waiver of at least some of the information in the final report, the extent of that waiver is presently unclear. This is a topic upon which the Court would be assisted by further submissions.

E.    CONCLUSION

82    For the reasons set out above, both the preliminary report and the final report are subject to legal professional privilege, but there has been a waiver of that privilege with respect to parts of the final report. There should be further submissions with respect to the extent of that waiver.

Associate:

Dated:    21 August 2025

SCHEDULE OF PARTIES