Metro Environmental Logistics Pty Ltd v Newcastle Port Corporation (No 4)

1. [1]

   The plaintiff, Metro Environmental Logistics Pty Ltd (“MEL”), alleges that the defendant, Newcastle Port Corporation trading as Port Authority of New South Wales (“Port Authority”), engaged in unconscionable conduct in relation to the proposed development and use of a Multi-User Facility to be located at Glebe Island in Sydney.

2. [2]

   MEL and Port Authority entered an Agreement for Lease in December 2018 pursuant to which Port Authority was to construct a Multi-User Facility at Glebe Island, and MEL was to have the exclusive use of a portion of that facility for the bulk importation and despatch of sand.

3. [3]

   In March 2019, Port Authority terminated the Agreement for Lease on the grounds that MEL had failed to satisfy certain conditions precedent that, MEL contends, Port Authority was aware MEL could not meet when introduced into the Agreement for Lease.

4. [4]

   MEL alleges that Port Authority thereby engaged in unconscionable conduct and claims reliance damages of more than $4 million and loss of profits of some $297 million from 2019 for a period of up to 20 years.

5. [5]

   The proceedings have reached a stage where MEL has served its lay and expert evidence in chief and Port Authority has served some of its lay evidence.

6. [6]

   I am part-heard in relation to Port Authority’s application, made by Notice of Motion filed on 12 March 2024, that MEL provide security for Port Authority’s costs up to the conclusion of its evidence in the sum of some $950,000.

7. [7]

   MEL has already provided $363,000 security for earlier stages in the proceedings. [1]

8. [8]

   MEL accepts that it will be unable to pay Port Authority’s costs of defending the claim if it were ordered to do so. MEL has not been an operating company since the termination of the Agreement for Lease by Port Authority. MEL will remain a dormant operating company. It has no assets. Its sole purpose is to prosecute these proceedings.

9. [9]

   Argument on Port Authority’s application proceeded before me on 20 May 2024.

10. [10]

    Two of the issues argued that day were whether, as MEL contended, an order for further security in the amount sought by Port Authority would stultify the proceedings, and whether, as Port Authority submitted, the proceedings were likely to be stultified in any event by reason of MEL’s inability to finance its own costs of the proceedings.

11. [11]

    In that regard, MEL’s solicitor, Mr Munstermann, deposed on 21 March 2024:

12. [12]

    During the hearing before me on 20 May 2024, that evidence remained unqualified until I had this exchange with Mr White SC, who appeared with Mr Tynan for MEL:

13. [13]

    Several days later, Mr Munstermann made a further affidavit exhibiting redacted copies of two documents dated 9 February 2024:

14. [14]

    By the Litigation Funding Deed, Jetset agreed to “advance to MEL funds required for MEL’s litigation costs”.

15. [15]

    By the Loan Deed, the six “Initial Lenders” agreed to advance to Jetset $950,000 to enable Jetset to fulfil its obligations under the Litigation Funding Deed. The Loan Deed also provided for “Additional Lenders” to execute an “Accession Deed” to become “lenders” under the Loan Deed. The documents revealed that on 10 April 2024, a further individual had executed such an Accession Deed and agreed to advance a further $500,000 to Jetset to enable it to fulfil its obligations under the Litigation Funding Deed.

16. [16]

    Mr White referred to the Initial Lenders and the Additional Lender as, together, the “Private Funders”.

17. [17]

    Those documents revealed, for the first time on this application, that, as at 21 March 2024, MEL was not only “seeking to raise further funds” but appeared to have secured funding.

18. [18]

    These are matters which appear to be directly relevant to MEL’s stultification argument. On 28 March 2024, I made a direction that Mr Munstermann and an officer of MEL provide an affidavit explaining why these matters were not disclosed prior to the hearing on 20 May 2024.

The redactions

1. [19]

   I invited written submissions from MEL concerning the basis for the redactions and received written submissions from Mr White.

2. [20]

   Mr White foreshadowed that MEL would provide the Court with an unredacted copy of the documents “so that the Court can rule on the redactions that have been made”.

3. [21]

   I received an unredacted copy of the documents.

4. [22]

   Clause 4.1 of the Litigation Funding Deed and cl 5.1 of the Loan Deed have been redacted on the basis that they contained legal advice received by MEL from its lawyers in relation to the proceedings.

5. [23]

   Each clause is headed “The Litigation” and provides that “the parties acknowledge that”, with the balance of the clauses redacted.

6. [24]

   Having seen the unredacted wording of those clauses, I am satisfied that they set out legal advice obtained by MEL in relation to the proceedings and are subject to legal professional privilege.

7. [25]

   Clause 6 of the Litigation Funding Deed is headed “Claim Proceeds” and provides that “MEL and Jetset will divide the claim proceeds between them as follows”, with par 6(a), (b), (c), and (d) redacted. Clause 7 of the Loan Deed is also headed “Claim Proceeds”. The entirety of subcll 7.1, 7.2, 7.3, and 7.4 is redacted. Schedule 3 of the Loan Deed is entitled “Claims Proceeds Worksheet” and is entirely redacted.

8. [26]

   These provisions have been redacted on the basis that it is said that they contain commercially sensitive information that should remain confidential.

9. [27]

   There is no dispute about the general nature of the contents of these paragraphs. Thus, Mr White submitted that they:

10. [28]

    Mr White later submitted that “it is not in issue that the Private Funders stand to gain a share of the claim proceeds in these proceedings”.

11. [29]

    Mr White drew attention to Practice Note SC Gen 17, which deals with Representative Proceedings, and in particular, cl 7.2 of that Practice Note, which provides:

12. [30]

    These proceedings are not representative proceedings. However, I think Mr White was correct to submit that where, as here, “litigation funding agreements are disclosed in non-representative proceedings … the same principles in respect of their potential redaction should apply”.

13. [31]

    In that regard, Mr White submitted:

14. [32]

    In Coffs Harbour City Council v Australian and New Zealand Banking Group Limited (t/as ANZ Investment Bank), [2] Rares J held that a redaction of similar clauses to those in cll 6 and 7 of the Litigation Funding Deed and the Loan Deed should be made because of the potential “tactical advantage” conferred on the defendant arising from their disclosure. [3]

15. [33]

    Having seen the redacted passages, I can see the force of Mr White’s submission. It may be, as Mr Hogan-Doran SC, who appeared with Ms Cameron for Port Authority, submitted, that there are provisions in the Litigation Funding Deed and in the Loan Deed that will ensure there is no potential for any conflict of interest between MEL and the Private Funders. However, knowledge of the “particular thresholds at which the claim proceeds [would be] distributed to MEL, Jetset and the Private Funders”, might well prompt Port Authority to “structure any settlement offers having regard to those thresholds”. [4]

16. [34]

    In any event, now that MEL has, belatedly, disclosed the existence and nature of the Litigation Funding Deed and the Loan Deed, and has accepted that they are “litigation funding agreements”, I am not able to see “why Port Authority requires further detail about the particular share of the claim proceeds that MEL, Jetset and the Private Funders will receive”. [5]

Conclusion as to redactions

1. [35]

   It is for these reasons that, on 28 May 2024, I declined to order that MEL provide Port Authority with unredacted copies of the documents in question.