G&S Engineering Services Pty Ltd v MACH Energy Australia Pty Ltd (No 16)

This is an application by the plaintiffs, G&S Engineering Services Pty Ltd and DRA Pacific Pty Ltd, and the cross-defendants, G&S, DRA Pacific, DRA Group Holdings (Pty) Ltd and DRA Global Limited (collectively the cross-defendants), seeking orders, inter alia, upholding their objection to the inspection of the whole of a document, or alternatively parts of the document, on the basis of legal professional privilege. In the proceedings and many of the relevant documents, the cross-defendants are often referred to as the “CDJV” parties.

The document in question is a draft supplementary statement which has been produced to the court by its author, Andrew Naude, pursuant to a subpoena to produce filed 21 June 2024 issued at the request of the defendants/cross-claimants, MACH Energy Australia Pty Ltd, MACH Mount Pleasant Operations Pty Ltd, and JCD Australia Pty Ltd (collectively the cross-claimants). The cross-claimants wish to inspect the draft supplementary statement.

These proceedings were commenced in March 2019 and arise out of a contract entered in March 2017 between MACH Energy (on the one hand) and G&S and DRA Pacific (on the other hand) for the design, construction and commissioning of a coal handling and preparation plant and train load at Mount Pleasant mine in the Hunter Valley, New South Wales. The proceedings have had a long history of hard-fought interlocutory disputes.

The determination of the present application is pressing because the substantive trial of the proceedings is set to commence on 19 August 2024 before Stevenson J with an estimated duration of eight weeks.

The draft supplementary statement has been marked confidential and I have made a non-publication order under the Court Suppression and Non-publication Orders Act 2010 (NSW) in relation to it. I have been asked by the cross-defendants to inspect the draft supplementary statement for the purposes of determining the application and the cross-claimants have not objected to me doing so. I have inspected the draft supplementary statement and read its contents.

For the reasons set out below, I have determined that the cross-defendants’ claim to legal professional privilege over the whole of the draft supplementary statement should be dismissed and the cross-defendants’ claim to legal professional privilege over parts of the draft supplementary statement should be upheld. Accordingly, the cross-defendants should be permitted to redact the privileged content in the draft supplementary statement before the cross-claimants and their solicitors are permitted to inspect it.

DRA Global is the ultimate parent company of the DRA group of companies, which includes the other cross-defendants.

Victoria Hawkins is the General Counsel of DRA Global. In 1993, Ms Hawkins was admitted as a legal practitioner. Since January 2020, Ms Hawkins has held the position of General Counsel, in which role her responsibilities include providing legal advice to the cross-defendants and managing these proceedings on behalf of the cross-defendants together with their external solicitors.

From around January 2016 to July 2019, Andrew Naude was the Chief Financial Officer and Strategy Director of DRA Group, which at the time was the parent entity of the DRA group of companies, having previously held several roles within the DRA group of companies since 2013.

In July 2019, Mr Naude became the Chief Executive Officer of DRA Global, which by then had become the ultimate parent company of the DRA group of companies, after DRA Global acquired DRA Group in July 2018.

On 28 April 2021, Mr Naude entered into a written employment agreement with DRA Global (Employment Contract), cl 17 of which relevantly provided as follows:

In October 2022, Mr Naude ceased to be employed by DRA Global.

In about September 2023, Mr Naude commenced proceedings against DRA Global in the Federal Court of Australia in Perth, Western Australia. There are now several proceedings currently on foot in the Federal Court of Australia between Mr Naude and DRA Global (Federal Court proceedings). Mr Naude is represented by the Perth-based law firm, Bennett Litigation and Commercial Law. Martin Bennett and Bernard Lock of Bennett are the primary solicitors from Bennett acting for Mr Naude.

In 2018, K&L Gates acted as the solicitors for DRA Group in its acquisition of G&S.

From March 2019 to May 2023, Jones Day were the solicitors on the record for the cross-defendants. Kenneth Hickman was the partner of Jones Day with carriage of the proceedings on behalf of the cross-defendants.

In May 2023, Mr Hickman left Jones Day and became a partner of HFW Australia. Since that time, HFW have been the solicitors on the record for the cross-defendants in the proceedings.

On 18 February 2022, Mr Naude made a witness statement on behalf of the cross-defendants (Earlier Statement) outlining the evidence he was expected to give in these proceedings, which was served on the solicitors for the cross-claimants. At the time that Mr Naude made the Earlier Statement he was the Chief Executive Officer of DRA Global.

The subject matter of the Earlier Statement principally focuses on the events occurring in the first half of 2018 leading up to the acquisition of G&S by DRA Group from Calibre Group Ltd on 4 July 2018.

In June 2023, Mr Naude was served with a subpoena to produce documents issued at the request of the cross-claimants which required him to comply by 21 July 2023 (first subpoena). Bennett acted for Mr Naude in relation to his response to the first subpoena, communicating with the solicitors acting for the cross-claimants, Corrs Chambers Westgarth (CCW).

Between 29 June 2023 and 28 July 2023, CCW and Bennett engaged in email correspondence regarding Mr Naude’s compliance with the first subpoena, in which HFW also became involved on behalf of the cross-defendants when they became aware of it.

On 29 June 2023, Bennett sent a letter by email to CCW regarding the first subpoena, expressing that Mr Naude was “willing to provide his assistance”, stating that Mr Naude was travelling overseas with his family and requesting an extension of the time for compliance with the first subpoena from 21 July 2023 to 4 August 2023.

On 30 June 2023, CCW sent an email to Bennett agreeing to extend the time for compliance with the first subpoena from 21 July 2023 to 4 August 2023.

On 18 July 2023, Bennett sent an email to CCW which, amongst other things, stated that Mr Naude was prepared to meet and clarify the handwritten notes that he was to produce in answer to the first subpoena.

On 24 July 2023 at 11:43am, CCW sent an email to Bennett asking whether it would be possible to meet with Mr Naude on 14–15 August 2023.

On 24 July 2023, Bennett sent a letter by email to CCW referring to the request for a meeting with Mr Naude in August 2023 and stating:

On 25 July 2023, HWL Ebsworth (solicitors acting on behalf of DRA Global) sent a letter by email to Bennett requiring Mr Naude to return all company property to DRA Global as soon as possible and reminding him to abide by his post-contractual obligations under the Employment Contract.

On 25 July 2023, HFW sent separate letters by email to each of CCW and Bennett after they were provided with the communications which had passed between CCW and Bennett about compliance with the first subpoena. In the letter to CCW, HFW referred to the contractual, equitable and statutory obligations owed by Mr Naude to DRA Global and its subsidiaries to preserve the confidentiality of confidential information in his possession. In the letter to Bennett, HFW referred to the same obligations and also declined Mr Naude’s request to be provided with a copy of the Earlier Statement.

On 26 to 28 July 2023, HFW, CCW and Bennett engaged in lengthy email correspondence about Mr Naude’s confidentiality obligations and the propriety of the actions being taken by each of them while Mr Naude was a witness in the proceedings. Relevantly, Bennett made it clear to HFW that Mr Naude would comply with the first subpoena by providing information from his personal journals which were not the property of DRA Global and CCW provided a download link to Bennett to enable Mr Naude to obtain a copy of the Earlier Statement.

On 3 August 2023, Bennett sent a letter to the Registrar of this court producing documents in compliance with the first subpoena.

On 25 August 2023, CCW sent a letter by email to Bennett in relation to the first subpoena and the Earlier Statement with the stated purpose “to identify for Mr Naude’s consideration certain matters”. The lengthy letter then set out sections of the Earlier Statement and attached a schedule of various documents either produced by Mr Naude or disclosed by the cross-defendants and relevantly stated (footnote omitted):

It is clear from this letter that the idea of providing a supplementary witness statement from Mr Naude first came from CCW.

On 6 September 2023, Bennett sent a letter by email to CCW in response to their letter of 25 August 2023, stating:

In short, by this letter Bennett indicated to CCW that Mr Naude would not engage with CCW in relation to a supplementary witness statement without the consent of DRA Global.

On 1 November 2023, Bennett sent a letter by email to HFW referring to the correspondence concerning the first subpoena, including the suggestion made by CCW that Mr Naude might wish to consider providing a supplementary witness statement and his view that he was not provided with all relevant documents when preparing the Earlier Statement. The letter relevantly continued:

The letter concluded with Bennett asking HFW to provide a reply before close of business on Friday 3 November 2023.

In summary, this letter contained an indication of Mr Naude’s view that the Earlier Statement was required to be supplemented and an offer by Mr Naude to meet with HFW to prepare a supplementary witness statement, failing which Mr Naude would consider his position in agreeing to appear as a witness for the cross-defendants. I infer from this letter that the draft supplementary statement had not been created at that time because Mr Naude was offering to meet with HFW for the purpose of preparing it.

On 3 November 2023, HFW sent a letter by email to Bennett responding to their letter of 1 November 2023, relevantly stating:

By this letter, Mr Naude was invited by HFW to provide to them his proposed corrections to the Earlier Statement.

On 21 November 2023, Bennett sent a letter by email to HFW noting that the Earlier Statement had been served on the cross-claimants and relevantly stating:

This letter and the attached draft supplementary statement were not received by HFW at the date the letter bears because they were sent to the wrong email address. These documents were in fact sent by email from Bennett to HFW on 19 January 2024. This letter evidences that sometime between 1 and 21 November 2023, the draft supplementary statement was prepared.

It is the draft supplementary statement attached to Bennett’s letter of 21 November 2023 which is the subject of this application in which the cross-defendants assert legal professional privilege over it.

On 18 January 2024 (the day before HFW received the letter of 21 November 2023 with the draft supplementary statement attached), Bennett sent a letter by email to HFW stating:

As I have mentioned, the fact that HFW had not received the letter of 21 November 2023 and the attached draft supplementary statement explains why there was no response from HFW in relation to it.

On 23 January 2024, HFW sent a letter by email to Bennett stating:

On 1 February 2024, Bennett sent a letter by email to HFW in response to HFW’s letter of 23 January 2024, stating:

Notably, while emphasising that it was Mr Naude who took the proactive step of providing the draft supplementary statement, Bennett indicated that Mr Naude was still looking to HFW to assess it and decide whether to correct or supplement the Earlier Statement.

On 2 February 2024, HFW sent a letter by email to Bennett in response to the letter of 1 February 2024 stating:

Importantly, in this letter HFW made it plain that DRA Global had not requested Mr Naude to prepare the draft supplementary statement and reiterated that they required further information from Bennett to enable HFW to consider it.

On 16 April 2024, Mr Lock (a senior associate of Bennett) affirmed an affidavit in the Federal Court proceedings to which DRA Global and Mr Naude are parties (Lock affidavit). In the Lock affidavit, Mr Lock referred to these proceedings, the Earlier Statement, the first subpoena and the draft supplementary statement attached to the letter dated 21 November 2023 from Bennett to HFW. The letter and attached draft supplementary statement were marked as annexure JBL-12 to the Lock affidavit.

On 31 May 2024, HFW informed CCW that the cross-defendants do not intend to call Mr Naude as a witness to give evidence at the trial.

On 20 June 2024, CCW sent a letter by email to HFW in which they indicated that they had obtained a copy of the Lock affidavit via the Federal Court registry and that from their review of the Lock affidavit they had been made aware of the draft supplementary statement. In the letter, CCW raise their understanding of the circumstances in which the draft supplementary statement was prepared and state that:

The letter concluded with a demand that HFW confirm by 10am the following day that they would immediately disclose the draft supplementary statement along with related correspondence, failing which that HFW consents to the cross-claimants seeking leave from the court to issue a further subpoena to Mr Naude seeking the production of those documents.

On 21 June 2024, at the request of the cross-claimants this court issued a subpoena to Mr Naude (second subpoena) seeking production of:

On 24 June 2024, HFW sent an email to Bennett stating that they were aware of the issuing of the second subpoena and asking whether it had been served. HFW stated that the cross-defendants asserted privilege over parts of the documents sought by the second subpoena and that they would be writing to CCW to propose that the cross-defendants be given a reasonable period of first access to assert the privilege before access was given to the cross-claimants. HFW said that if Mr Naude proposed to volunteer the draft supplementary statement to the cross-claimants then the cross-defendants required a proper opportunity to review and redact it for legal professional privilege. HFW asked Bennett to confirm that they would meet the cross-defendants’ request if Mr Naude proposed to volunteer the draft supplementary statement and to confirm whether it had been provided to the cross-claimants.

On 25 June 2024 at 10:32am, Bennett sent an email to HFW and CCW confirming that service of the second subpoena on Mr Naude had been effected and that Mr Naude had not yet complied with the second subpoena.

On 25 June 2024 at 10:53am, CCW sent an email to Bennett and HFW serving a copy of the second subpoena on HFW and noting that because HFW had been in possession of the draft supplementary statement for more than six months they should be able to readily identify and disclose to CCW the parts of it not the subject of a claim of privilege.

On 26 June 2024, Bennett sent an email to CCW and HFW stating that they were instructed by Mr Naude to comply with the second subpoena at 4:30pm that day.

On 27 June 2024, HFW sent a letter by email to CCW in response to their letter of 20 June 2024 relevantly stating:

On 5 July 2024, by filing the notice of motion of that date, the cross-defendants made this application claiming legal professional privilege over the draft supplementary statement.

The parties agree that the principles to be applied in determining the application are those relating to legal professional privilege at common law. I agree, because the issue in these proceedings is being assessed at the pre-trial stage of documents produced by a third party pursuant to a subpoena.

Although other nomenclature has developed around this privilege under the Evidence Act 1995 (NSW) (“client legal privilege”, comprised of “legal advice privilege” and “litigation privilege”), it continues to be termed legal professional privilege at common law: see, for example, Armstrong Strategic Management & Marketing Pty Ltd v Expense Reduction Analysts Group Pty Ltd [2012] NSWCA 430, Campbell JA (with whom Macfarlan JA agreed) at [53] and [69].

The classic formulation of the test is that stated in Grant v Downs (1976) 135 CLR 674, by Barwick CJ at 677 as follows:

This statement of principle was approved in Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49; [1999] HCA 67, Gleeson CJ, Gaudron and Gummow JJ at [61].

In Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543; [2002] HCA 49, Gleeson CJ, Gaudron, Gummow and Hayne JJ at [9] expressed the principle in this way (footnote omitted):

The principle is not just a rule of evidence, but plays an important role in the effective and efficient administration of justice by giving a practical guarantee of fundamental, constitutional or human rights by protecting the freedom of the full and unreserved communication between clients and lawyers: Attorney-General (NT) v Maurice (1986) 161 CLR 475, Deane J at 490; [1986] HCA 80; Carter v Northmore Hale Davy & Leake (1995) 183 CLR 121, McHugh J at 161; [1995] HCA 33.

The rationale for the protection offered by legal professional privilege is that it promotes the public interest in the administration of justice by encouraging a person to obtain fully informed legal advice. This is given greater weight than the public interest in a fair trial conducted based on all relevant information. In Grant, Stephen, Mason and Murphy JJ at 685 stated the rationale in these terms:

This same rationale involving legal professional privilege as the product of balancing those two competing public interests is emphasised in Esso Australia by Gleeson CJ, Gaudron and Gummow JJ at [35].

Consistent with this rationale, the subject matter of the legal professional privilege is communications — oral, written or recorded — not documents per se: Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501, McHugh J at 552; [1997] HCA 3. The privilege protects the confidentiality of documents produced for the purpose of communication between a client and lawyer. This confidentiality facilitates the administration of justice: Propend, Brennan CJ at 508.

Using the language of “sole” purpose rather than “dominant” purpose (reflecting the previously favoured test), in Maurice, Deane J at 490 expressed the scope of the privilege and its application to more than just communications in the following way:

The classes of documents to which legal professional privilege extends include (Trade Practices Commission v Sterling (1978) 36 FLR 244, Lockhart J at 245–246, amended to reflect the now accepted dominant purpose test):

The “dominant” purpose test is one which is described as involving “clear paramountcy”, with its ordinary meaning being the ruling, prevailing or most influential purpose: Sydney Airports Corporation Ltd v Singapore Airlines Ltd [2005] NSWCA 47, Spigelman CJ (with whom Sheller JA and Campbell AJA agreed) at [7]. Neither the primary purpose nor a substantial purpose satisfies the dominant purpose test: Grant, Barwick CJ at 678.

The relevant purpose is to be determined objectively but the subjective purpose of the person responsible for the document coming into existence will always be relevant: Sydney Airports, Spigelman CJ at [6], citing Esso Australia, Callinan J at [172].

The onus rests on the party asserting the legal professional privilege to establish its claim: Grant, Stephen, Mason and Murphy JJ at 689.

Attention must be focused on the purposes of the person who produced the document or the person who directed the production of the document: Grant, Barwick CJ at 677; Pratt Holdings Pty Ltd v Commissioner of Taxation (2004) 136 FCR 357, Finn J (with whom Merkel J agreed) at [35]; [2004] FCAFC 122.

The purpose can be found in the intended use of the document, which is a question of fact, the test being to find the purpose for which the document was brought into existence, not the use to which it is put after it was brought into existence: Grant, Jacobs J at 692, approved in Propend, Brennan CJ at 507–508.

The fact that the person who produced the document or who directed its production had in mind multiple uses for the document does not prevent it from being privileged so long as it was produced with the requisite dominant purpose: Grant, Barwick CJ at 677.

The court can examine the document to determine the purpose for which it was created: Grant, Barwick CJ at 677, Stephen, Mason and Murphy JJ at 689; Esso Australia, Gleeson CJ, Gaudron and Gummow JJ at [52].

The examination of the nature of the document to illuminate the purpose for which it was brought into existence or evidence of the circumstances in which it was brought into existence can ground the claim for legal professional privilege, but resort to verbal formula or ritual will not necessarily or conclusively establish it: Grant, Stephen, Mason and Murphy JJ at 689; Esso Australia, Gleeson CJ, Gaudron and Gummow JJ at [52].

The evidence of purpose can be direct evidence by the person whose purpose is in question and can also be inferred from the document, although care must be taken to ensure that reliance is not solely placed on material which is not known to the person who challenges the privilege: Hancock v Rinehart (Privilege) [2016] NSWSC 12, Brereton J at [32], applied in Tavcol Pty Ltd v Valbeet Pty Ltd [2016] NSWSC 1002, McDougall J at [24]. Mere assertion of privilege will not suffice: it must be proved on admissible evidence of the facts on which the assertion is based: Hancock, Brereton J at [7], applied in Tavcol, McDougall J at [25].

On the question of the evidence required to prove the dominant purpose being beyond bare conclusory assertions, in Barnes v Commissioner of Taxation [2007] FCAFC 88; (2007) 242 ALR 601, Tamberlin, Stone and Siopsis JJ at [18] said:

In the oft-cited summary of the accepted principles on legal professional privilege collected in Commissioner of Taxation v Pratt Holdings Pty Ltd (2005) 225 ALR 266; [2005] FCA 1247, Kenny J at [30] said (citations and quotations omitted in part):

Communications between a solicitor for a party and a potential witness raise particular considerations in the application of the privilege and relevant principles. The fundamental proposition is that stated Harmony Shipping Co SA v Saudi Europe Line Ltd [1979] 1 WLR 1380 by Lord Denning at 1384 (in gendered language):

Legal professional privilege can exist in respect of the confidential communications and the documents which constitute or reflect those communications between the solicitor and the potential witness to enable a witness statement to be drafted but it would not prevent the witness from conveying the information the subject of the witness statement to any other person: Public Transport Authority of Western Australia v Leighton Contractors Pty Ltd (2007) 34 WAR 279; [2007] WASCA 151, McLure JA (as her Honour was then, with whom Steytler P and Miller JA agreed) at [31]–[32]. A draft witness statement can be privileged because it discloses confidential communications, namely what the solicitor asked the witness and what the witness said to the solicitor: Leighton Contractors, McLure JA at [32].

The purpose of creating a finalised witness statement to be served on the opposing party in existing litigation is very different from the purpose of preparing a draft witness statement, the latter being privileged in the normal course of events: Australian Competition and Consumer Commission v Cadbury Schweppes Pty Ltd (2009) 174 FCR 457; [2009] FCAFC 32, Mansfield, Kenny and Middleton JJ at [45].

Although the subject of ongoing debate (see Cadbury Schweppes at [34]–[38]), it would appear that confidentiality is an essential requirement if a communication between a solicitor and a witness or potential witness is to attract legal professional privilege: Australian Competition and Consumer Commission v NSW Ports Operations Hold Co Pty Ltd [2020] FCA 1232, Wigney J at [46]–[47], citing Ritz Hotel Ltd v Charles of the Ritz Ltd (No 22) (1988) 14 NSWLR 132, McLelland J at 133–134, and Leighton Contractors at [22] and [33]; Edwards v Nine Network Australia Pty Ltd (No 4) [2022] FCA 1496, Katzmann J at [14]–[27]. Whatever the extent of it, one element of confidentiality is essential, which is non-disclosure to the opposing party: Cadbury Schweppes at [37].

A final version of a witness statement which is provided to the court and the opposing party is of a different character to drafts of that witness statement which may retain their privileged status: Cadbury Schweppes at [73].

In Asahi Holdings (Australia) Pty Ltd v Pacific Equity Partners Pty Ltd (No 2) [2014] FCA 481; (2014) 312 ALR 403, Bromberg J at [37]–[38] summarised the position in relation to the work product of lawyers in this way:

Mr Mehigan SC with Mr Johnson appeared as counsel for the cross-defendants, instructed by HFW.

The submissions of the cross-defendants can be summarised as follows:

The cross-defendants say that precisely when the draft supplementary statement was brought into existence is not clear but the dominant purpose of it is apparent from the letters exchanged between Bennett and HFW which both preceded and followed the draft supplementary statement being sent to HFW.

The cross-defendants submit that it is the objective purpose of Mr Naude in preparing the draft supplementary statement that is the focus of the inquiry. They say it does not matter that HFW did not request that Mr Naude prepare it, nor, they say, does that fact prevent it from being a document brought into existence for the dominant purpose of communication to HFW for use in these proceedings.

The cross-defendants assert that the claim to privilege is not one of pure inference, from verbal formulae or mere assertion (as warned against in Barnes at [18]) but is based on the correspondence of Mr Naude’s solicitors, Bennett, which must be presumed to have been written on his instructions and is the specific and focused evidence required to discharge their onus. The cross-defendants accept that they do not have direct evidence from Mr Naude but say that is not an absolute requirement when the dominant purpose is determined objectively, based on Esso Australia at [172] and Sydney Airports at [6].

The cross-defendants rely on the letter of 1 November 2023 from Bennett to HFW in which Bennett stated that Mr Naude was of the view that a supplementary statement should be filed addressing further evidence that he wished to give and that he was prepared to meet with HFW for the purpose of preparing and compiling that statement. The cross-defendants also rely on the response of 3 November 2023 in which HFW requested that Mr Naude provide his proposed corrections to the Earlier Statement so that the cross-defendants could properly consider his proposal. The cross-defendants say that as part of their letter of 21 November 2023, Bennett then sent the draft supplementary statement to HFW (which was received by HFW on 19 January 2024).

The cross-defendants submit that the dominant purpose of the draft supplementary statement was therefore to communicate to the cross-defendants’ solicitors an outline of further evidence that Mr Naude proposed to give in the proceedings. The cross-defendants concede that although HFW did not ask Mr Naude to prepare the draft supplementary statement, it was sent in response to their request to Mr Naude to inform them of the proposed corrections to the Earlier Statement. According to the cross-defendants, the draft supplementary statement is therefore a “discussion document” of the kind mentioned in Cadbury Schweppes at [73] or a draft statement in the hands of a witness which is privileged (as described in Leighton Contractors at [32]) and which could be evaluated by HFW as the cross-defendants’ solicitors to inform the preparation by them of any finalised witness statement addressing any further evidence by Mr Naude.

The cross-defendants contend that the dominant purpose was affirmed in the letter of 1 February 2024 from Bennett to HFW which was provided so that HFW and the cross-defendants could assess and understand Mr Naude’s concerns.

According to the cross-defendants, the privilege attaching to the draft supplementary statement is consistent with the way the court deals with claims for legal professional privilege over draft expert reports in the hands of an expert, as demonstrated in New Reinsurance Corporation Ltd (in liq) v Renaissance Reinsurance Ltd [2007] NSWSC 258, White J at [22].

The cross-defendants say that any purpose of Mr Naude creating the draft supplementary statement to relieve himself of a duty he considered he was under to ensure that his Earlier Statement was complete by informing HFW of the clarifications needed is consistent with Mr Naude having a dominant purpose of communicating with HFW for use in the proceedings. They say that this is reinforced by the following:

The cross-defendants submit that the draft supplementary statement has sufficient confidentiality to attract legal professional privilege because:

The cross-defendants say that if the claim to legal professional privilege over the draft supplementary statement is not upheld, then the privilege attaching to parts of it should be redacted before inspection is permitted. The privileged communications contained in the draft supplementary statement are said to comprise the following:

I have been invited to inspect the draft supplementary statement which has been colour-coded to indicate the portions of it which relate to each of the above five categories sought to be redacted.

Mr Kidd SC with Mr Ball appeared as counsel for the cross-claimants, instructed by CCW.

The cross-claimants contend that the cross-defendants’ claim of legal professional privilege in the draft supplementary statement should be rejected because it fails the dominant purpose test and there is no confidentiality in the draft supplementary statement. The bases put forward by the cross-claimants for these contentions can be summarised as follows:

The cross-claimants say that the second subpoena did not seek Mr Naude’s communication of the draft supplementary statement to HFW and Mr Naude has not produced a document recording that communication, nor was it directed to the copy of the draft supplementary statement possessed by HFW. They say that the second subpoena sought and Mr Naude has produced the draft supplementary statement created and possessed by him. They also say that what the cross-defendants seek to do is to infer the dominant purpose of the draft supplementary statement based upon the use to which it was later put after its creation, namely its communication to the cross-defendants’ lawyers. They submit that this reasoning was rejected in Propend by Brennan CJ at 508 where it was emphasised that privilege depends on the purpose for which the document was brought into existence, and the use to which it was put after it was brought into existence is immaterial. They also refer to Pratt Holdings which states, per Kenny J at [30](6), that the fact the document is provided to solicitors for advice is not determinative of the purpose for which it was created.

The cross-claimants submit that the submissions by the cross-defendants ignore the extensive and important factual background to the creation of the draft supplementary statement, which is such that the cross-defendants cannot discharge the steep onus placed upon them to establish the claim for privilege. They assert that those facts tend to contradict the claim for privilege because they tend to show that Mr Naude did not create the draft supplementary statement at the request of the cross-defendants or their solicitors. They also assert that Mr Naude had his own paramount or, at the very least, equally important purpose for creating the draft supplementary statement which was not for the cross-defendants to obtain legal advice or assistance in the proceedings.

The cross-claimants attack the basis on which the cross-defendants submit that the draft supplementary statement has a character of confidentiality because Mr Naude was bound by an obligation of confidentiality as to its subject matter, he took steps to keep it private and it was prepared in circumstances of confidentiality between him and his own solicitors.

The cross-claimants submit that whatever obligation of confidentiality might have once inhered in the subject matter of the draft supplementary statement, it ceased when the cross-defendants took the positive step of serving upon the cross-claimants the Earlier Statement which traversed that subject matter. They also say that by doing this the cross-defendants have acted inconsistently with the maintenance of the confidentiality.

As to the suggestion that Mr Naude has sought to act to keep the draft supplementary statement private, the cross-claimants assert that this overlooks the context in which Mr Naude acted due to various threats being made against him about his alleged duty of confidentiality.

The cross-claimants also say that the preparation of the draft supplementary statement by Mr Naude with the assistance of his own solicitors has nothing to do with the cross-defendants, Mr Naude not having claimed any privilege, and it is not for the cross-defendants or HFW to do so on his behalf.

The cross-claimants say that the core propositions to be taken from the relevant facts are:

The cross-claimants submit that this is not a case where a litigant’s solicitor has met with a witness to take a proof or a draft statement of evidence for use in the litigation, with the cross-defendants and HFW declining Mr Naude’s invitation to meet with him. The author of the draft supplementary statement was Mr Naude and the cross-defendants and HFW did not request that he prepare it.

The cross-claimants submit that the argument raised by the cross-defendants that the draft supplementary statement is analogous to a draft report in the hands of an expert as analysed in New Reinsurance is misplaced because in this case the cross-defendants and HFW declined Mr Naude’s invitation to meet with him to prepare it and therefore the draft supplementary statement was not created on the instruction of or request by the cross-defendants or HFW.

The cross-claimants also reject the cross-defendants’ reliance on Cadbury Schweppes and Leighton Contractors in this case as they submit that the draft supplementary statement is not some earlier draft in Mr Naude’s hands of a finalised statement that was prepared by the cross-defendants and HFW and then filed with the court.

The analogy on which the cross-claimants rely is from Secretary of State for Trade and Industry v Baker [1998] Ch 356, Richard Scott VC at 366 who put the proposition that an unsolicited communication from a third party, a potential witness, about the facts of the case would not be privileged. They further rely on Sterling to establish that a document created by third party will only qualify for litigation privilege if it is created for the dominant purpose of it being put before the litigant’s solicitor with the object of obtaining advice or enabling the litigant to prosecute or defend an action.

The cross-claimants argue that that if the document was not requested to be created by the litigant or the litigant’s solicitor, there is no basis for any inference that it was created for that dominant purpose. They say that there is no direct evidence of Mr Naude’s dominant purpose in this regard as the cross-defendants have not adduced evidence from him of his purpose and are instead left to fall back on the record of correspondence between the parties and Mr Naude which does not support the privilege claim.

The cross-claimants submit that the cross-defendants bear the onus of establishing the existence of the privilege and, referring to Barnes and Kennedy, they must discharge the onus by reference to focused and specific evidence that permits a conclusion to be drawn as to the dominant purpose of the creation of the particular document and simply to show one purpose for the creation of the document was to obtain legal advice and assistance is not good enough. Relying on Kennedy at [168], they say that the evidence must be precise as to the weight or preponderance of the stated purpose. They also rely on the statement of principles in Pratt Holdings at [30], particularly those at (3), (6), (7) and (8).

The cross-claimants also rely on the principle that legal professional privilege at common law is concerned with communications and not documents per se, and only attaches to documents such as witness statements which embody or reflect the communication, citing Tavcol at [15]–[17] and Leighton Contractors at [31]–[32].

The cross-claimants submit that the application of these principles to the circumstances of the draft supplementary statement justifies the rejection of the cross-defendants’ claim for privilege over it because the evidence does not permit a conclusion to be drawn as to the dominant purpose of the creation of the document to the requisite degree of precision or clarity demanded on the authorities. They make the following points:

The cross-claimants contend that the draft supplementary statement is not a draft of a final statement that was served in the proceedings but is a new statement authored by Mr Naude which records matters he considers require correction, clarification and context from the Earlier Statement. The cross-claimants cite the preferable view prevailing in New South Wales that an obligation of confidentiality is a precondition for litigation privilege to attach to a document in the hands of a witness as opposed to a party’s solicitors, citing NSW Ports Operations at [46]–[47] and Edwards at [14]–[27]. They also say that because there is no property in a witness, a statement taken from a witness is not confidential in that witness’s hands unless the witness is subject to a duty of confidentiality, relying on Ritz Hotel at 133–134, and the witness is free to share information about the subject of their statement with any other person, citing Leighton Contractors at [31]–[32].

The cross-claimants submit that the duty of confidentiality said by the cross-defendants to arise from cl 17.1 of the Employment Contract cannot survive the service of the Earlier Statement on the cross-claimants because the element of non-disclosure to an opponent is essential to the confidentiality in litigation privilege, citing Cadbury Schweppes at [37]. The cross-claimants say that having served the Earlier Statement and revealed Mr Naude’s knowledge of previous confidential matters to the cross-claimants, the cross-defendants cannot now claim that the further exposition by Mr Naude of those same matters by way of correction, clarification and context remain confidential.

The cross-claimants submit that if Mr Naude took steps to keep the draft supplementary statement private with the cross-defendants because he considered he was subject to certain ongoing duties, then he was wrong and his mistaken belief, driven by caution, is of no consequence. They further say that the factual background reveals Mr Naude’s primary concern in dealing with the cross-defendants and HFW, to the exclusion of the cross-claimants and CCW, was a result of concern for the threats made against him as opposed to positively establishing, preserving or reviving some duty of confidentiality.

The cross-claimants characterise Mr Naude as having gone on a frolic of his own and having created the draft supplementary statement for his own purposes, noting that he did not intend to keep it private and asserting that it should be treated no differently to his personal notes.

The cross-claimants highlight that if the draft supplementary statement had been prepared by solicitors at HFW following meetings with Mr Naude, there could be no argument against the document being the subject of legal professional privilege because the author of the document would be a solicitor at HFW, and the relevant inquiry would have concerned the purpose of the solicitor in creating the document and the obligations of confidentiality operating on them. They say that if the statement prepared by the solicitor had then been shared with Mr Naude for comment, the privilege in it would not have been lost or waived. The cross-claimants say that this is not what happened because the cross-defendants and HFW declined to meet with Mr Naude and a solicitor engaged to provide legal services subject to a duty of confidentiality did not prepare the draft supplementary statement.

The cross-claimants contend that the confidential circumstances of Mr Naude’s relationship with his own lawyers, Bennett, is of no real relevance because Mr Naude has not claimed any privilege over the draft supplementary statement.

Finally, the cross-claimants contend that the privilege claim over the documents sent to HFW is not an issue in the present case because the communication to HFW and the draft supplementary statement in HFW’s possession is not the subject of the second subpoena. The cross-claimants say that the subject of the second subpoena is the draft supplementary statement as authored by Mr Naude in his possession, which the cross-defendants have not established is the subject of legal professional privilege.

I am not satisfied that the whole of draft supplementary statement in the hands of Mr Naude is properly the subject of legal professional privilege. I am satisfied that parts of it are properly the subject of legal professional privilege and should be redacted before any inspection of it by the cross-claimants and their solicitors, CCW, may be allowed.

I will explain each of these conclusions in turn.

I will first determine whether I should uphold the cross-defendants’ claim to legal professional privilege over the whole of the draft supplementary statement in the hands of Mr Naude.

Applying the tests in Grant at 677 and 689, I need to decide whether the cross-defendants have met their onus of proving that the draft supplementary statement was produced or brought into existence with the dominant purpose of its author, Mr Naude, of using it or its contents in order to obtain legal advice or to conduct or aid in the conduct of litigation. It will not be sufficient if this was the primary purpose or substantial purpose of Mr Naude, as the dominant purpose must be clearly paramount (Grant at 678 and Sydney Airports at [7]).

The dominant purpose must be determined to be that of Mr Naude because the evidence is clear that he produced the draft supplementary statement and HFW as solicitors for the cross-defendants made it very clear in their letter of 2 February 2024 that it was not prepared at their request. This is consistent with the evidence that pre-dates the sending of the draft supplementary statement to HFW in which Mr Naude had offered to meet with HFW to prepare and finalise the draft supplementary statement (in the letters of 1 and 21 November 2023 from Bennett to HFW, albeit the latter not received by HFW until 19 January 2024), which was not accepted by HFW (in the letters of 3 November 2023 and 23 January 2024 from HFW to Bennett).

The draft supplementary statement was not, therefore, the work product of HFW on behalf of the cross-defendants and does constitute an earlier draft of a later finalised witness statement of the sort described and held to be ordinarily privileged in Cadbury Schweppes at [45] and Asahi at [38].

I do not have the direct evidence of Mr Naude’s subjective purpose in creating the draft supplementary statement but in any event, I need to determine his purpose objectively (Sydney Airports at [6]) as a question of fact focusing on the purpose for which it was brought into existence not the use to which it was put afterwards (Propend at 507—508). I consider that I can determine Mr Naude’s objective purpose through the correspondence of his solicitors, Bennett, which I infer was all written on his instructions. I consider the evidence in that correspondence is focused and specific, of the type which could be sufficient to meet the onus on the cross-defendants (Barnes at [18]). It is not necessary for me to have Mr Naude’s direct evidence of his subjective purpose to undertake my assessment of the objective purpose.

I have looked at all the correspondence leading up to and after the creation of the draft supplementary witness statement and have examined it to determine the purpose of its creation (Grant at 677 and Esso Australia at [52]).

The conclusion I have reached after conducting this exercise is that there were two purposes for which the draft supplementary statement was created.

First, the draft supplementary statement was created by Mr Naude for the purpose of supplementing the Earlier Statement because Mr Naude was conscious that he had an obligation to ensure that his evidence to the court was the truth and he considered that there were inadequacies in the Earlier Statement which required correction to make his evidence the truth. This purpose is demonstrated in each of the letters of 1 and 21 November 2023, 18 January 2024 and 1 February 2024 from Bennett to HFW. Those letters express Mr Naude’s purpose in very clear terms, as follows:

These are quite emphatic expressions of purpose, almost suggesting mandatory directions to HFW in the steps they must take on receipt of the draft supplementary statement to disclose it to the cross-claimants and the court.

Secondly, the draft supplementary statement was also created by Mr Naude for the purpose of communicating matters which he considered were inadequacies in the Earlier Statement and how they should be corrected to HFW for their consideration on behalf of the cross-defendants. This purpose is demonstrated in the communications between Bennett and HFW, being the letter of 1 November 2023 from Bennett, the letter of 3 November 2023 from HFW, the letter of 21 November 2023 from Bennett and the letter of 1 February 2024 from Bennett in which the clear expression of the first purpose identified above can be seen, but at the same time that purpose is tempered by statements being made which recognise that it is appropriate for HFW to consider these matters in the form of the draft supplementary statement. This second purpose is revealed in the following:

All of these communications reveal that while Mr Naude in creating the draft supplementary statement had the purpose of ensuring his evidence in the proceedings was true, he also had the purpose of communicating the way in which he thought the Earlier Statement needed to be supplemented to HFW so that they could consider those matters in providing legal advice and services to the cross-defendants in the conduct of the proceedings. In this way, the draft supplementary statement is the documentary record of what Mr Naude wished to communicate to HFW as solicitors for the cross-defendants.

By proceeding in this way, at a time when Mr Naude knew that he was to be called as a witness on behalf of the cross-defendants, it can be inferred that Mr Naude knew that he had to proceed through HFW to raise his concerns and make his alterations and that he could not unilaterally file a further witness statement in the proceedings. But having the second purpose does not detract from Mr Naude also having the first purpose at the same time.

While the second purpose is one which is capable of supporting a claim for legal professional privilege and meets the rationale for the substantive rule of law that protects the confidentiality of communications, it is not one which I consider to be dominant because it exists alongside the first purpose and is not clearly paramount to it. I consider the second purpose to be a substantial purpose (as is the first purpose), but that is not enough on the test I must apply.

While the first purpose finds its expression in the second purpose (being the way in which Mr Naude could put into effect the first purpose) I consider that each of these two purposes are of equal importance and neither is dominant (Pratt Holdings at [30](8)). On the evidence, neither is subsidiary to the other but neither exists without the other.

My conclusion is that the cross-defendants have not discharged their onus to demonstrate that the second purpose is dominant and, as a result, I consider that it does not support the claim for legal professional privilege over the whole of the draft supplementary statement. This finding disposes of the cross-defendants’ claim for legal professional privilege over the draft supplementary statement.

In case I am wrong about that conclusion, I consider that I should also state my reasons in relation to the opposing arguments about the confidentiality of the draft supplementary statement. In my view the parties’ respective principal arguments about this issue are misplaced. On the one hand, the cross-defendants argued that sufficient confidentiality arises with respect to the draft supplementary statement because it contains content about the “business affairs” of DRA Global and is therefore within the terms of the confidentiality obligation in cl 17.1 of the Employment Contract. On the other hand, the cross-claimants submitted that there is no confidentiality in the content of the draft supplementary statement because it seeks to provide correction, clarification and context to the Earlier Statement which was served on the cross-claimants and no longer confidential.

In my opinion, the draft supplementary statement was a confidential document at the time when it was created and has remained so since. When Mr Naude was invited to consider providing a supplementary statement in the letter of 25 August 2023 from CCW (“we would be grateful if you could advise whether Mr Naude will provide a supplementary statement”), he declined to do so in direct terms in the letter of 6 September 2023 from Bennett (“[o]ur client does not intend breaching his ongoing duty of confidentiality and will therefore not engage with Corrs on issues of his witness statement, unless he is compelled to do so by an order of the Court or with the consent of DRA Global”). From that point, Mr Naude (through Bennett) only engaged with the cross-claimants (through HFW) on the subject of the draft supplementary statement and it was only ever provided to HFW. CCW and the cross-claimants had no idea that the draft supplementary statement had even come into existence let alone been provided to HFW until it came to light in the form of the reference to it in the Lock affidavit in June 2024, which led to the second subpoena.

To my mind, there is sufficient evidence of an obligation of confidentiality in the draft supplementary statement to meet the essential requirement of confidentiality in the communication between a solicitor and a witness to attract legal professional privilege to it (as explained in NSW Ports Operations at [46]–[47] and Edwards at [14]–[27]). The contents of the draft supplementary statement have not been disclosed to the cross-claimants as the opposing party, which is an essential element of confidentiality (Cadbury Schweppes at [37]).

While it is true that the Earlier Statement has been disclosed to the cross-claimants, that does not prevent the content of the proposed clarifications and additions to the Earlier Statement contained in the draft supplementary statement from being confidential. They had never been communicated to the cross-claimants, were confidential in fact and were treated as such by Mr Naude.

Specifically, I reject the argument of the cross-claimants that the service of the Earlier Statement waived any confidentiality in the contents of the draft supplementary statement.

I have inspected the draft supplementary statement to determine whether it contains reference to confidential communications properly the subject of legal professional privilege which should be redacted before any inspection of it should be allowed.

I am satisfied that each of the colour-coded parts of the copy of the draft supplementary statement which was provided to me are properly the subject of the claim for legal professional privilege and should be redacted from any copy of the draft supplementary statement made available for inspection by the cross-claimants and their solicitors in answer to the second subpoena.

I find that each of the following parts of the draft supplementary statement should be redacted of privileged material in accordance with the colour coding provided to me in the schedule attached to the written submissions of the cross-defendants filed 12 July 2024:

For the reasons set out above, I propose to make the following orders:

I will make directions for hearing the parties before determining the issue of costs in chambers.