The Australian Securities and Investments Commission would not be prejudiced if it didn’t have access to the report and couldn’t make submissions at TerraCom’s appeal hearing in August, Federal Court Justice David O’Callaghan said Tuesday.

Justice O’Callaghan did, however, order unredacted copies of the report to be provided to him and the two other judges on the appeals court bench, noting that the court would be asked to determine the question of privilege for itself, without the benefit of substantial submissions.

TerraCom’s appeal, which was filed in April, challenges a March ruling by Justice Angus Stewart that found that while legal professional privilege attached to the PwC report, TerraCom had waived privilege by referring to the contents of the report in an ASX statement and open letter to shareholders. TerraCom argues the company’s disclosure only lifts privilege over those discrete sections of the report to which the disclosure related.

ASIC is investigating claims current and former TerraCom executives falsified coal quality results. In announcements to shareholders, TerraCom relied on the PwC report’s findings clearing the company’s CEO and CFO.

In a hearing before Justice O’Callaghan Monday, counsel for ASIC Dr Suzanne McNicol QC said the regulator would be denied procedural fairness if senior and junior counsel were not able to access the report in order to make submissions at the appeal hearing.

“Not only are we hamstrung, we’re shut out,” she said.

“If the Full Federal Court turns to me and says, ‘what do you say about that, Dr McNicol?’ I will have nothing to say, because either I will have sat in court as an uninformed bystander or I will not be in court because it will be futile.

“Where are our rights?”

ASIC argued in the alternative that the report should be disclosed to an independent third party to make submissions in the appeal.

The regulator has filed a notice of contention in the appeal, foreshadowing an argument that the PwC report does not attract legal professional privilege.

Counsel for TerraCom Michael Elliott SC argued that the Full Court would be “perfectly able to form [their] own views” without disclosing the documents to counsel or a third party, which he said would “destroy” the contested privilege

In his judgment Tuesday, Justice O’Callaghan said because TerraCom itself did not intend to make substantive submissions at the appeal, no purposed was served by taking the “unusual step” of providing the document to counsel confidentially or by appointing a contradictor.

“In circumstances where it is intended that TerraCom’s appeal be conducted in the fashion described by its counsel, it is difficult to imagine how any issue of procedural unfairness of the type submitted by ASIC could conceivably arise,” he said.

The report, dubbed Project Rex and seized by ASIC from TerraCom’s Blair Athol mine site offices in Queensland in May last year, was commissioned by law firm Ashurst for the sole purpose of providing legal advice to TerraCom, Justice Stewart found in his ruling.

But TerraCom’s reliance in its ASX statement on findings in the report exonerating the company’s CEO and CFO was “inconsistent with the maintenance of the privilege that otherwise attaches to the report,” the judge said.

Ashurst engaged PwC in August 2019 on behalf of TerraCom to provide forensic support. PwC’s report was produced in December of that year.

Justice Stewart said it would be unfair to ASIC if TerraCom could “hide behind” its statements citing the report but maintain privilege to keep the statements from being tested.

TerraCom is represented by Michael Elliott SC, instructed by Horton Rhodes. ASIC is represented by Dr Suzanne McNicol QC, Yaseen Shariff, Roshan Chaile and Rebecca Gall, instructed by HWL Ebsworth.

The appeal is TerraCom Limited v Australian Securities and Investments Commission. The primary case is TerraCom Limited v Australian Securuties and Investments Commission.

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