Grocon Group Holdings Pty Limited v Infrastructure NSW (No 2)

By a notice of motion filed on 23 June 2023, the defendant, Infrastructure NSW (INSW), seeks production of a large number of documents over which the plaintiffs (together, Grocon), have claimed legal professional privilege. This judgment concerns two issues raised by that notice of motion. Both concern the question whether there has been an implied waiver of privilege over certain documents in respect of which a claim for privilege is maintained.

INSW is the successor to the rights and liabilities of Barangaroo Development Authority (the Authority), which was established as a NSW Government agency to promote, procure, facilitate and manage the development of land adjacent to the Sydney CBD known as Barangaroo.

In these proceedings, Grocon sues INSW for damages it says it has suffered arising out of its participation between late 2015 and June 2016 in a competitive tender process for the right to develop a portion of Barangaroo known as Central Barangaroo, in which it was ultimately the successful tenderer.

Relevantly to the current application, Grocon makes two claims. First, it claims damages for misleading and deceptive conduct in contravention of s 18 of the Australian Consumer Law. That claim arises in the following way. One issue relevant to the tender process was the rights that Lendlease and Crown (the developers of Barangaroo South next to Central Barangaroo) had to sight lines of Sydney Harbour (across Central Barangaroo) and the effect of those rights on the maximum permitted above ground development floor area that could be constructed on Central Barangaroo. Copies of the clauses in the contracts with Lendlease and Crown setting out their rights in relation to the sight lines were provided to Grocon. The clauses are in identical terms. They provided:

In para 62 of the further amended commercial list statement (FACLS), Grocon pleads that the Authority represented that:

In para 64 of the FACLS, Grocon pleads that in reliance on that representation (among others) it decided that it would bid for the rights to develop Central Barangaroo.

In para 212 of the FACLS, Grocon pleads that during the period 15 November 2017 to 20 December 2018, the Authority continued to make the representation pleaded in para 62. That representation is said to be misleading and deceptive because the effect of the Sight Lines Clauses was to place restrictions on the ability of the Authority to agree to a development of the type proposed by Grocon and, in particular, a development that would have a base above ground development floor area of at least 120,000 square metres. In para 269 of the FACLS, Grocon pleads that it suffered loss and damage because of that misleading conduct, including the expenditure of considerable sums of money to comply with development obligations it had as a consequence of entering into two contracts with the Authority. The second of those contracts, which was entered into on or about 15 November 2017, is referred to as the “Central Barangaroo Development Agreement” (CENDA). It replaced the earlier agreement and set out Grocon’s development obligations in relation to Central Barangaroo.

There are some infelicities in the pleading. Grocon does not expressly plead that it relied on the representation pleaded in para 212. Nor does it expressly plead that it relied on the representation in incurring the loss it pleads in para 269, although there is a pleading of reliance in para 64. Nothing, however, was said to turn on these difficulties in the pleading for present purposes.

Second, Grocon claims that under the CENDA, the Authority had a contractual obligation to issue a notice (described in the FACLS as a “Sight Lines Resolution Notice”) as soon as it was reasonably able to do so setting out the terms on which the development of Central Barangaroo could proceed following the resolution with Crown and Lendlease of negotiations concerning their rights under the Sight Lines Clauses.

Grocon contends that in breach of those obligations, the Authority never issued a Sight Lines Resolution Notice to Grocon despite it being able and obliged to do so. Grocon also alleges that by failing to issue the notice, the Authority engaged in unconscionable conduct. Grocon claims that had the notice been issued it would have been able to develop Central Barangaroo and would not have had to assign all its rights in respect of Central Barangaroo to Aqualand, with whom it had previously entered into a contract to undertake the residential component of the development. Grocon pleads and gives evidence of various steps that it could and would have taken to develop Central Barangaroo successfully. Some of those steps had already been taken, including entry into the subcontract with Aqualand and the entry into a contract with Scentre to undertake the retail component of the development. Among the witnesses who give evidence concerning what Grocon did and could have done but for the Authority’s alleged breaches is Mr John Easy, who has been the Consultant General Counsel with Grocon since April 2017 and who was heavily involved in the negotiations with the Authority and Grocon’s implementation of its contractual obligations.

The principles relating to implied waiver were most recently examined by the Court of Appeal in GR Capital Group Pty Ltd v Xingfeng Australia International Investment Pty Ltd [2020] NSWCA 266. After referring to the relevant authorities, including the decision of the High Court in Mann v Carnell (1999) 201 CLR 1; [1999] HCA 66, Macfarlan JA (with whom McCallum JA and Simpson AJA agreed) summarised the principles in these terms (at [57]):

Although Macfarlan JA expressed the test as inconsistency between the privilege holder’s conduct and its maintenance of the privilege, it is important to bear in mind what that means. The statement that a communication is privileged is the statement of a legal conclusion arising from a number of essential features of the communication. One of those features is the confidential nature of the communication. As Gleeson CJ, Gaudron, Gummow and Callinan JJ explained in Mann v Carnell at [29], the loss of the privilege arises from conduct that is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect:

In Mann v Carnell, the question was whether the disclosure of the communication to a third party was inconsistent with the maintenance of the confidentiality. In GR Capital, as in the present case, the question was whether the making of an allegation or the giving of evidence on the same issue as the privileged communication was inconsistent with the maintenance of the confidentiality.

There are suggestions in the way the test is sometimes formulated that the inconsistency can only arise where the allegation or evidence makes an express, or more often, implied assertion about the contents of the privileged communication: see, for example, Archer Capital 4A Pty Ltd as trustee for the Archer Capital Trust 4A v Sage Group plc (No 3) [2013] FCA 1160; (2013) 306 ALR 414 at [22] per Wigney J. Certainly, as Macfarlan JA recognised in para (2) of his summary in GR Capital, an implied assertion about the contents of an otherwise privileged communication will normally be sufficient to amount to a waiver. Whether, however, it is necessary for there to be a waiver is less clear.

In GR Capital, Xinfeng Australia International Investment Pty Ltd (Xinfeng) commenced proceedings in 2018 against GR Capital Group Pty Ltd and The One Capital Group Pty Ltd (the Judgment Debtors) seeking to recover a loan of $10 million plus interest. The Judgment Debtors filed a cross-claim, claiming that the $10 million was part of a larger incomplete transaction. On the first day of the hearing, the Judgment Debtors consented to judgment against them for $10 million, to dismissal of the cross-claim and to an order against them for indemnity costs. In 2019, the Judgment Debtors filed a notice of motion seeking to set aside the consent orders on the basis that, at the time of agreeing to them, they were unaware that the transaction was illegal (because it allegedly involved a transfer of money from China to Australia in contravention of Chinese foreign exchange regulations). Xinfeng then issued a subpoena to the former solicitors of the Judgment Debtors seeking the production of any documents containing legal advice given about the proceedings. The Judgment Debtors applied to have the subpoena set aside on the basis that the documents were subject to legal professional privilege.

At first instance, Ward CJ in Eq held that by asserting that it had made a mistake about the alleged illegality, the Judgment Debtors had waived privilege “in legal advice that goes to the merits of the claim(s) made in the proceedings”.

The Court of Appeal thought that, in adopting that approach, her Honour had stated the test of inconsistency too broadly. As Macfarlan JA explained (at [59]):

In oral submissions, Ms Mirzabegian SC, who appeared for Grocon, placed considerable emphasis on this passage as demonstrating that what was required was a likelihood that legal advice was given at the time the consent judgment was agreed. But, in my opinion, that reads too much into the passage. The timing of likely legal advice was relevant because the Judgment Debtors claimed that they were ignorant of the illegality defence at the time they agreed to the consent orders. By claiming that they were ignorant of the defence they were impliedly asserting that no one had told them about the defence. It would be inconsistent for them to give that evidence and to maintain confidentiality in legal advice on that question. But that inconsistency only extended to advice given in the context of the proceedings. It would not, for example, extend to any advice given to them at any time in relation to Chinese foreign exchange regulations or the restrictions they imposed on the transfer of money to Australia. Advice not given in connection with the consent orders may have been forgotten or superseded, and consequently the necessary inconsistency would not arise. I do not understand Macfarlan JA to be saying any more than that in the quoted passage.

Two other cases to which the parties attached particular significance should be mentioned.

The first is the decision of the Court of Appeal in Chen v City Convenience Leasing Pty Ltd [2005] NSWCA 297. In that case, the plaintiffs leased to the first defendant a ground floor shop to be used as a convenience store. Following termination of the lease, they commenced proceedings in the District Court to recover unpaid rent. The defendants filed a cross-claim alleging that they had been induced to enter the lease by false representations and seeking recission of the lease. The representations were that an air-conditioner and loading dock would be available for the defendant’s uninterrupted use. Those representations were said to be false because the air-conditioner had been installed by a predecessor in title to the plaintiffs’ interests without the approval of the building’s owners corporation or the approval of the local council and the loading dock was on common property.

The trial judge found that the representations were made, that they were misleading and that the defendants had relied on them. Accordingly, she gave judgment for the defendants. During the course of the trial, Mr Gebara, the second defendant, who it appears was a director of the first defendant and principal witness for the defendants, was cross-examined on whether he had received legal advice on what areas were common property and what areas formed part of the leased premises and on a special condition in the lease, the effect of which was that the plaintiffs did not warrant that the air-conditioner was installed with the body corporate’s approval or council approval and the defendants could not raise any claim in connection with the use of the air-conditioner. On each occasion, the trial judge upheld objections to those questions on the basis of legal professional privilege.

One issue on appeal was whether the defendant had waived legal professional privilege in advice on those matters. On that question, Gzell J (with whom Bryson JA and Windeyer J agreed) said (at [41]):

Applying that test, his Honour concluded that privilege had been waived:

It followed that the evidence was wrongly excluded and the case required a retrial.

The second decision is Macquarie Bank Limited v Arup Pty Limited [2016] FCAFC 117. In that case, the applicant (BrisConnections) sued Arup Pty Limited in respect of allegedly misleading traffic forecasts on which BrisConnections relied in taking various steps in relation to the Airport Link toll road in Brisbane. Arup had been engaged by the consortium responsible for building the toll road (the Sponsor Group) (which included the appellant, Macquarie Bank) to provide the traffic projections. Arup filed a cross‑claim against the Sponsor Group alleging that it had engaged in misleading and deceptive conduct by (1) representing to Arup that it would take “all necessary steps” to ensure that BrisConnections would be bound by a limitation of liability clause, limiting Arup’s liability to $10 million; and (2) failing to disclose that it knew that BrisConnections had formed the view that it was not bound by the limitation of liability. Arup contended that in reliance on the representation and failure to disclose, it performed various services under the engagement agreement and as a result suffered loss.

The Sponsor Group sought discovery from Arup of documents falling within the following categories:

Macquarie Bank challenged the claim for privilege on the basis that there had been an implied waiver. The primary judge rejected that challenge. In dismissing an application for leave to appeal against that decision, the Full Court said:

In commenting on the decision in Chen, the Full Court cited with approval the following passage from the judgment of Wigney J in Archer Capital 4A at [22]:

One feature of the decision in Macquarie Bank which is difficult to accept is that the answer to enquiries of the type currently before the Court may depend on the description of the documents in respect of which privilege is claimed. The Full Court appears to have thought that because it was not apparent from the description of the documents in respect of which privilege was claimed that any of them concerned the question of reliance, it could not be said that Arup laid open to scrutiny those documents by raising that question.

Only the privilege holder knows the actual contents of the advice. Where the inconsistency is said to arise from the subject matter of the communication in respect of which privilege is claimed, it seems to me appropriate not to start with the communications but with the basis on which the inconsistency in said to arise. If the court is satisfied that it would be inconsistent for a privilege holder both to make a particular allegation or give evidence of a particular matter and claim privilege over legal advice concerning the same subject-matter, then it should tailor the order for production by reference to that subject-matter, leaving it to the privilege holder to produce any documents falling within that description. It should not start with the document over which privilege is claimed and its description. The former approach was the one taken by the Court of Appeal in GR Capital, and I should follow it.

It is not easy to reconcile the decisions in Chen and Macquarie Bank. The Court of Appeal referred to both of them in GR Capital without criticism or approval. It may be that they are examples of the point made by Macfarlan JA that the line between relevance to an issue and inconsistency in this context may be very fine and one of which reasonable views might well differ. In any event, the approach I propose to take is the one outlined in GR Capital, a decision which is binding on me.

The first category of documents in respect of which INSW submits Grocon has waived privilege is legal advice on the meaning and effect of the Sight Lines Clauses. That waiver is said to arise most clearly from the pleading of reliance on the representation that the Sight Lines Clauses “did not limit in any substantive way the nature of the development that could be undertaken at Central Barangaroo” and “only provided for the Authority to engage in a consultation or negotiation process with each of Crown and Lendlease”. It is also said to arise from affidavit evidence of Mr Grollo, the Chief Executive Officer of Grocon, in support of that allegation. So, for example, Mr Grollo says that from a conversation he had with a representative of the Authority in July 2016 he “understood … that the Authority had to consult with Lendlease and Crown in relation to their respective developments at Barangaroo, but were not bound to reach agreement with them in relation to what the Authority wanted to do”. Mr Grollo also says:

In my opinion, this material is sufficient to amount to a waiver of privilege in legal advice on the meaning and effect of the Sight Lines Clauses. Grocon was given copies of the clauses in connection with the tender process. On the face of the clauses, their meaning appears to be unclear. The rights that Lendlease and Crown had under the clauses were important to Grocon’s tender. It is to be expected in those circumstances that Grocon, and Mr Grollo in particular, may well have obtained internal or external legal advice on the meaning and effect of the clauses. The effect of Mr Grollo’s evidence is that, as a consequence of what was said to him by the Authority, he did not appreciate that the Sight Lines Clauses imposed material restrictions on what the Authority could agree to. His evidence, therefore, contains an implied assertion that no-one told him that the Sight Lines Clauses imposed restrictions of that kind. It is inconsistent for Mr Grollo to make an assertion of that kind and for Grocon to maintain that advice on that subject-matter remains confidential. In this respect, the facts of this case appear to be indistinguishable from the facts in GR Capital.

The facts of this case are different from those in Macquarie Bank. In that case, the waiver was said to arise from the pleading alone, and what was pleaded was not the legal effect of a particular clause but an allegation that the Sponsor Group would do something (take all necessary steps to ensure that BrisConnections would be bound by a limitation of liability clause) and an allegation that it failed to disclose that BrisConnections had formed a particular view (that it was not bound by the clause). Legal advice on those matters may have been relevant to the question of reliance on the pleaded conduct. However, it could not be said that the allegations involved an implied assertion about the existence or content of legal advice on those matters. Consequently, it could not be said that there was an inconsistency between making those allegations and maintaining confidentiality over legal advice of that type.

Mr Easy gives extensive evidence of what Grocon did and could have done. When giving that evidence, he often gives evidence of what he believed about various matters as an explanation of why certain things were, or would have been, done. The following are some examples:

In addition, in para 95 and following of his second affidavit, Mr Easy gives evidence of what steps Grocon could and would have taken if the Authority had issued a Sight Lines Resolution Notice. Mr Easy says that his evidence is based on “my understanding of the specific terms in the contracts between Grocon, the Authority, Aqualand, Scentre and Oxford on the basis of my training, knowledge and experience”. He then gives specific evidence of what Grocon (and he) would have done and explains how those steps were consistent with specific contractual rights and obligations Grocon had.

In my opinion, by giving the evidence of the views he has formed on particular matters, Mr Easy has waived privilege in any communication that records his views on those matters. It does not matter that Mr Easy may not be understood as making an express or implied assertion about the existence or content of legal advice. What is inconsistent is for Mr Easy both to express a view on a particular matter (such as what view someone formed, what someone needed to know or would do, whether one transaction was more favourable than another, whether a particular event was likely and the meaning or effect of a particular contract or contractual right or obligation) and to assert that communications recording his views on those matters remain confidential. The fact that the relevant communications may have consisted of legal advice or were made for the purpose of Grocon obtaining legal advice does not alter the position.

On the other hand, I do not think that the waiver goes beyond communications relating to the specific matters on which Mr Easy expresses his views. The fact, for example, that Mr Easy says in his second affidavit, in a paragraph which is introductory in nature, that his evidence is based on his understanding of the specific terms in the contracts between Grocon, the Authority, Aqualand, Scentre and Oxford does not mean that he has waived privilege on all communications that are relevant to the meaning of those contracts. It is not sufficient that the communication relates generally to the contracts referred to by Mr Easy. Nor is it sufficient that the communication is relevant to Mr Easy’s understanding of a particular matter. The communication must record Mr Easy’s views on a specific matter about which he has expressed a view in his affidavits. It is only then that the necessary inconsistency arises.

The parties should bring in short minutes of order to give effect to these reasons for judgment. If the parties cannot reach agreement on the form of those orders, they should, within 14 days, or such other time as the parties agree, provide my Associate with the form of orders they seek and a short outline of written submissions in support of those orders, with the intention that any outstanding dispute be resolved on the papers.