FX Group Holdings Pty Ltd v Perpetual Trustee Company Limited as trustee of the CPEC 8 Trust A (formerly the CHAMP IV Trust A)

1. [1]

   By a Share Sale Agreement dated 11 September 2018 (“the Agreement”), the first to fourth cross-claimants (“the Vendors”) agreed to sell their shares in FX HoldCo Pty Ltd to the first cross-defendant (“the Purchaser”).

2. [2]

   There is a dispute as to the proper construction of the provisions in the Agreement concerning the calculation and the making of “Uplift Payments”.

3. [3]

   On 18 October 2022, the Purchaser commenced these proceedings seeking declaratory relief to vindicate the construction of the relevant provisions for which they contend.

4. [4]

   The Vendors contend that:

5. [5]

   In relation to their claim for rectification, the Vendors allege that they understood and intended that the Agreement provided for a “Profit Sharing Arrangement”, and that the Purchaser knew, or ought to have known, that the Vendors mistakenly understood that the Agreement made such a provision.

6. [6]

   Alternatively, the Vendors contend that, if the Purchaser’s construction of the Agreement is correct, and if the Agreement is not to be rectified, they instructed their solicitors, King & Wood Mallesons (“KWM”), that the Agreement should provide for the Profit Sharing Arrangement and that in breach of KWM’s retainer and duty of care, KWM failed to ensure that the Agreement so provided.

7. [7]

   In that context, in [63] of their Amended Commercial List Cross-Claim Statement, the Vendors allege:

8. [8]

   Uniform Civil Procedure Rules 2005 (NSW), r 21.10(1), enables a party to require another to produce for inspection a document referred to in any originating process or pleading, or any other specific document that is clearly identified in the notice and that is relevant to a fact in issue.

9. [9]

   On 28 March 2023, the Purchaser, by its solicitor, required the Vendors to provide:

10. [10]

    The Vendors, by their solicitor, responded to that request on 27 April 2023 by providing redacted copies of six email chains, and their attachments. The redactions were stated to be by reason of, relevantly, client legal privilege.

11. [11]

    Now, by Notice of Motion filed on 30 May 2023, the Purchaser [1] seeks production of the unredacted copies of the documents.

12. [12]

    There is no dispute that, but for the allegation at [63] of the Amended Commercial List Cross-Claim Statement, the documents would be privileged.

13. [13]

    As is evident from the fact that the documents have been produced in a partially unredacted form, there is also no dispute that, by making the allegation at [63] of the Amended Commercial List Cross-Claim Statement, the Vendors have waived privilege over parts of those communications.

14. [14]

    The question is whether, by making the allegation at [63] of the Amended Commercial List Cross-Claim Statement, the Vendors have waived privilege over the entirety of the email chains in question.

Decision

1. [15]

   For the reasons that follow, the Vendors have not waived privilege beyond the unredacted portions of the documents. The Purchaser’s Notice of Motion should be dismissed with costs.

Principles

1. [16]

   There is no dispute as to the relevant principles. They were summarised by Allsop J (as his Honour then was) in DSE (Holdings) Pty Ltd v InterTAN Inc [2] in an oft cited passage. A waiver will arise if:

2. [17]

   Legal professional privilege does not attach to documents as such, but rather to the information they communicate. [4]

3. [18]

   Further, where a communication deals with a privileged subject matter in respect of which there has been a waiver of privilege, and also another privileged subject matter in respect of which there has not been a waiver, the question will be whether redaction of material relating to the latter subject matter might lead to the meaning or import of the former being distorted or inaccurately perceived. [5]

4. [19]

   If there be doubt as to where that line is to be drawn, the benefit of the doubt must go to the beneficiary of the waiver.

5. [20]

   As I have said, here, there is no dispute that, on the face of it, the email chains in question are privileged.

6. [21]

   Further, the Vendors accept that they have:

7. [22]

   What is in dispute is whether, as the Purchaser contends, the Vendors have waived privilege and laid open to scrutiny all instructions “as to” the Agreement and laid “open to scrutiny the whole of the [Vendors’] pre-execution instructions to KWM regarding the [Agreement]”. That is said to be so because “it is only upon review of the whole of those instructions that it is possible to determine whether the assertion at [63] is accurate”.

8. [23]

   The Purchaser contends that, for that reason, it is entitled to see the entirety of the six email chains in question (including their attachments).

9. [24]

   The Purchaser emphasised in submissions that, as I have said, client legal privilege is in respect of communications and not documents. But that rather begs the current question which is, what are the relevant communications in the email chains in question?

10. [25]

    It appears to me that the relevant communications are:

11. [26]

    As the Vendors accept, it would be inconsistent with the assertion made at [63] of the Amended Commercial List Cross-Claim Statement for the Vendors to maintain privilege over such communications.

12. [27]

    But it cannot follow, without more, that there is a concomitant inconsistency, and thus waiver, in relation to whatever else happens to be in the email chains; no matter how remote the subject matter of those other matters be to the matter asserted at [63] of the Amended Commercial List Cross-Claim Statement.

13. [28]

    If the redacted material relates to an entirely separate subject matter, not capable of relevance to the Profit Sharing Arrangement, I do not see how there could be requisite inconsistency.

14. [29]

    I have been invited to look at an unredacted copy of the emails.

15. [30]

    I have done so.

16. [31]

    I am mindful of the fact that I do not have the detailed knowledge of the circumstances of this claim that is doubtless currently held by those advising the Purchaser. I am thus mindful of the fact that an aspect of the redacted material that might not strike a person, not deeply familiar with the detailed background of the matter, as being capable of relevance to the Vendors’ contentions concerning their intention that the Agreement contain a Profit Sharing Arrangement, might differently be viewed by, say, counsel preparing for the cross-examination of a witness in the proceedings.

17. [32]

    However, having carefully looked at the portions of the email chains, and their attachments, that have been redacted, my conclusion is that it is clear beyond argument that they relate to entirely different aspects of the Agreement than the Profit Sharing Arrangement.

18. [33]

    It is not possible to explain, email by email, the reason for my having come to that conclusion without revealing the contents of the redacted material. However, to take two examples that were the subject of a particular submission by senior counsel for the Purchaser, the redacted material in relation to the definition of “Equity Proceeds” and in the provision of the Agreement dealing with “Uplift Payment” has nothing to do with the formal substance of those provisions.

Conclusion

1. [34]

   For these reasons, the first and second cross-defendants’ Notice of Motion of 30 May 2023 is dismissed with costs.