Aussie Court Backs PE in Privilege Fight with Asahi
An Australian federal court has ruled that the acquirer of a company is not entitled to certain communications involving legal counsel retained by both the company and its private equity sellers.
The case stemmed from Japanese beverage giant Asahi Holdings’ 2011 acquisition of New Zealand’s Flavoured Beverages Group Holdings Ltd. from Australia’s Pacific Equity Partners and Hong Kong-based Unitas Capital Pte. Ltd. for $1.3 billion. Asahi subsequently sued PEP and Unitas, claiming the private equity firms had inflated the company’s earnings in the course of due diligence on the deal.
Asahi subpoenaed all the documents related to the deal that passed between PEP, Unitas, and Clayton Utz, which advised both the private equity firms and Flavoured Beverages. The private equity companies agreed that Asahi, as the acquirer of Flavoured Beverages, was entitled to some documents but said others were privileged, and they engaged counsel to sort the documents accordingly. Asahi countered that the sorting was tainted by hearsay and the privilege claim should be rejected.
In his Oct. 3 decision, Justice Christopher Jessup backed the private equity firms in their claim of privilege, ruling that the fact that Clayton Utz represented both the company acquired by Asahi and its sellers did not mean the latter could not assert privilege.
“The fact that Clayton Utz considered that the Company was their client is not, in my view, inconsistent with the existence of some documents in the files of that firm over which the respondent sellers would have privilege claims which were not shared by the Company itself,” the judge wrote.
Jessup also rejected Asahi’s argument that the process by which the private equity firms sorted the documents was tainted. Asahi had pointed to the fact that the lawyer retained by the PEP and Unitas to sort the documents, Arnold Bloch Liebler Melbourne partner Caroline Goulden, had been guided in the process by Geoffrey Hutchison, who was an employee of PEP but no an officer of any of the actual funds or vehicles through which the private equity firms had held Flavoured Beverages. Hutchison was therefore not the “originator” of the documents, Asahi argued.
But the judge said the determination of privilege was by Goulden, who had overseen an extensive review even before consulting with Hutchison.
“Ultimately, the basis for the claim for privilege made by the respondent sellers was Ms Goulden’s professional judgment,” Jessup wrote. “The court should not reject that claim upon the ground that there was, or may have been, some hearsay in so much of her evidence as related to the assistance which she received from Mr. Hutchinson.”
In the arguments before Jessup, Asahi was represented by barristers Sue McNicol SC and Kane Loxley instructed by Corrs Chambers Westgarth. Barrister Catherine Button and Arnold Bloch advised PEP, while Michael O’Bryan SC and Allens acted for Unitas.