In the matter of Timor Sea Oil & Gas Australia Pty Ltd (in liq) (No 2)

1. [1]

   For reasons described in my earlier judgment in In the matter of Timor Sea Oil & Gas Australia Pty Ltd (in liq) [2020] NSWSC 1832, I refused the Commonwealth’s application to adduce five paragraphs of an affidavit made by Ms Leonie McGregor on a basis which would not permit the plaintiff or anyone acting on its behalf from seeing that evidence. Instead, I directed that it be provided, confidentially, to senior counsel and a named partner of the law firm instructing him, and only to them. Those paragraphs sought to explain why a document called for by a notice to produce, and known as the “Woodside Report”, was a Cabinet document.

2. [2]

   Promptly after limited confidential access was given to those paragraphs, the plaintiff accepted that the document was a Cabinet document which attracted public interest immunity, and that the appropriate order in the present case was that its notice to produce should be dismissed. Such an order will be made, by consent.

3. [3]

   However, the plaintiff seeks an order that the Commonwealth pay its costs of the notice of motion. The Commonwealth seeks an order that the plaintiff pay its costs. This judgment resolves that controversy.

The parties’ submissions

1. [4]

   The Plaintiff seeks its costs on the following grounds (I am very substantially drawing upon its written submissions of 16 December 2020, and the paragraphs in quotations are taken verbatim from those submissions):

   1. (1)

      “The Plaintiff sought access to the redacted passages of the McGregor affidavit and the affidavit of Ms Gillies dated 10 December 2020 (the Gillies affidavit) at 8:49am on Friday 11 December 2020”.

   2. (2)

      “The Plaintiff offered to enter into appropriate confidentiality undertakings in relation to receiving unredacted copies of the affidavits. The representatives for the Commonwealth rejected the request made by the Plaintiff for unredacted copies of the McGregor affidavit and the Gillies affidavit. Legal representatives for the Commonwealth said in terms;

   3. (3)

      Senior Counsel for the Commonwealth properly conceded that the connection between the Woodside report and the Cabinet process was not apparent without the confidential material.

   4. (4)

      “Senior Counsel for the Commonwealth properly conceded that the redacted affidavits did not address the reasons for the redacted paragraphs in the McGregor and Gillies affidavits to themselves be kept confidential.”

   5. (5)

      “It is clear that the redacted evidence in the McGregor and the Gillies affidavits are the types of evidence which should have been disclosed in advance of the hearing, subject to an appropriate confidentiality undertaking. That was offered by the legal representatives of the Plaintiff, and was rejected by the legal representatives of the Commonwealth.”

   6. (6)

      “Most tellingly, the Commonwealth was unable to articulate any basis for this stance when invited to do so at the hearing.”

   7. (7)

      “Upon Senior Counsel for the Plaintiff and the legal representative of the Plaintiff being given access to the redacted paragraphs of the McGregor affidavit, the Plaintiff has consented to the Notice to Produce being set aside and accepted the public interest immunity claim made by the Commonwealth in the Woodside report.”

   8. (8)

      “It is reasonable to infer that had the unredacted material in the affidavits been provided when requested in the early morning of Friday 11 December 2020 (the redacted affidavits having been served on the Plaintiff[’]s legal representatives at 5.00pm on 10 December 2020), the work associated with the Commonwealth’s Notice of Motion dated 10 December 2020 and the ultimate hearing on 14 December 2020, would not have needed to take place.”

2. [5]

   The factual matters stated in subparagraphs (1)-(7) above are accurate. The conclusion in subparagraph (5) is disputed, and I shall return to this.

3. [6]

   But the main area of dispute is the inference I have been invited to draw in subparagraph (8) that had the Commonwealth provided the material on which it sought to rely in advance of the hearing, the hearing would not have needed to take place. The Commonwealth submits that that is “not the only available – or even the most likely – inference”.

4. [7]

   The Commonwealth makes the following submissions:

5. [8]

   The Commonwealth also disputes that the paragraphs of Ms McGregor’s affidavit should have been disclosed in advance of the hearing. It states that “[i]t was not suggested that the Commonwealth’s submission proceeded upon anything other than an honest and reasonable (if, ultimately, rejected) interpretation of the authorities” and a view that this was a case where the material founding the claim for public interest immunity could be adduced without providing the material to the other side.

6. [9]

   The Commonwealth’s submission concludes that:

Consideration

1. [10]

   The “usual order as to costs”, now found in UCPR r 42.1, is that costs follow the event. The underlying principle is articulated in Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [67]. The “event” is the setting aside of the plaintiff’s notice to produce, as sought by the Commonwealth. The starting position is that the unsuccessful plaintiff should pay the Commonwealth’s costs of its notice to produce.

2. [11]

   But that is merely the starting point. It is open to the plaintiff to make out a case for a costs order which is different from the usual costs order. Indeed, in an appropriate case, it is open for a wholly unsuccessful party to seek an order that the other side pay its costs. This was regarded as “well established” and “does not require any discussion of the case law” in Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 at [24]. Presently apposite is the proposition endorsed by McHugh J in Oshlack at [69] and by the Court of Appeal in Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256; 288 ALR 385 at [97]:

3. [12]

   Bearing those principles in mind, I approach the exercise of discretion as follows.

4. [13]

   First, the Commonwealth had a relatively powerful claim to set aside the notice to produce. The Woodside Report was more closely connected with the processes of Cabinet than anyone would reasonably infer, based on the publicly available information and what was disclosed by the Commonwealth when the dispute arose.

5. [14]

   Secondly, articulation of the basis of that claim was easy. It was done by Ms McGregor in four sentences.

6. [15]

   Thirdly, the Commonwealth chose not to disclose that basis in advance of the oral hearing. Indeed, it was not disclosed until after the conclusion of the oral hearing.

7. [16]

   Fourthly, the question is not whether the Commonwealth’s position was other than “honest and reasonable”. The question is not whether some special costs order should be made for conduct which is other than honest and reasonable. The Full Court of the Supreme Court of Victoria rejected the submission that some misconduct was required in Keddie v Foxall [1955] VLR 320, holding that “a Judge may have regard to conduct – not necessarily misconduct – of any party which is calculated to occasion unnecessary expense”: at 324.

8. [17]

   The question is merely whether the plaintiff has established a proper basis to depart from the usual order as to costs. The fact that the Commonwealth was incorrect to proceed on the basis that its application should be determined by a Court on the basis of evidence not supplied to the other side is a relevant consideration bearing upon the discretion as to costs.

9. [18]

   Fifthly, I do not accept that there is any great force in the Commonwealth’s submission that paragraphs 31-34 “simply provided some evidence to substantiate what the Commonwealth had already said” to the plaintiff. Contested applications are ordinarily decided on the basis of evidence, not assertions. Further, the notion of what is a “Cabinet document” extends to a wide range of documents, some deserving of lesser protection, others deserving of greater protection. Merely asserting that the Woodside report was a “Cabinet document” fell short of explaining the gravamen of the Commonwealth’s opposition to production.

10. [19]

    Sixthly, I accept what emerged during the course of the hearing, namely, that no one on behalf of the Commonwealth had given attention to the question as to how the Court would receive the evidence which was central to the Commonwealth’s case.

11. [20]

    Had I taken the course sought by the Commonwealth in the passage I have reproduced above, and granted an adjournment, the plaintiff would have had a powerful case for costs. The Commonwealth, seemingly having gambled on the hope that I would permit evidence to be adduced by it without providing access to the other side, thereby leading to unfairness to the plaintiff and denying to the Court the advantage of submissions, was unprepared to deal with the prospect that I might approach the application in a different way. I think the foregoing falls within the principle enunciated above.

12. [21]

    I did not grant an adjournment, because it seemed prima facie, immediately upon reading the material in Ms McGregor’s affidavit, that this was a clear case.

13. [22]

    Seventhly, I turn to the Commonwealth’s submission concerning the impression conveyed by my tone and expression when I read paragraphs 30-34 of Ms McGregor’s affidavit. That occurred in the following way.

14. [23]

    Senior counsel for the Commonwealth had started with his application to suppress paragraphs 9-12 of the other affidavit. While he was seeking to obtain instructions (which, sensibly albeit belatedly, were obtained), I said this:

15. [24]

    When shortly thereafter counsel turned to Ms McGregor’s affidavit, the following exchange took place:

16. [25]

    I granted a short adjournment for the purpose of taking instructions.

17. [26]

    On returning, I said this:

18. [27]

    I accept the Commonwealth’s submission that the view I expressed above subject to hearing from the parties, suggested a preliminary conclusion that the Commonwealth’s application would succeed. I also accept that that view may well have been appreciated by the plaintiff, and may have contributed to the decision to concede to setting aside the notice to produce. But it does not follow that I should reject the inference propounded by the plaintiff that had there been disclosure in advance of the hearing, the hearing would not have run. The two contentions are not mutually exclusive alternatives.

19. [28]

    Any lawyer reading the redacted paragraphs would appreciate that the claim for protection was stronger than what is sometimes conveyed by a document being a “Cabinet document”. I regret I am forced into opacity, but I draw attention to the 32nd word in paragraph 32 and the 10th word in paragraph 34 of Ms McGregor’s affidavit. Conversely, the considerations favouring production were relatively weak. The plaintiff is required to adduce evidence as to the cost of undertaking various steps to remediate the vessel in support of its claim, and to do so over the next few weeks, and it is understandable that it would be advantageous for that to occur with the benefit of a report commissioned by the company which was familiar with the vessel and which was directed to substantially the same topic. But the plaintiff, very properly, has at no time suggested that the document is necessary in order for it to make out its claim.

20. [29]

    In short, the Commonwealth was wrong (and it concedes that it was wrong) to say that the connection between the Woodside report and the Cabinet process was apparent from what had been supplied in advance of the hearing. The Commonwealth was wrong to proceed on the basis that the material which supplied that connection should not be supplied to any representatives of the plaintiff, who offered undertakings as to confidentiality. I am comfortably satisfied that had the Commonwealth done so, the hearing would not have taken place, because those advising the plaintiff would have reached the view that the Commonwealth’s claim for public interest immunity was well-founded. This is a case falling within the principle endorsed by McHugh J in the High Court and by the Court of Appeal reproduced above.

21. [30]

    The appropriate order is that the Commonwealth pay the plaintiff’s costs of the notice of motion.