Discovery blowout risk rises when teams share legal reviews externally
An NSW Supreme Court ruling found that making a legal review report available to prospective buyers in the APAC share sale process waived privilege over related communications.
In Dexus Capital Investment Services Pty Ltd atf Dexus Diversified Infrastructure Trust A v Australia Pacific Airports Corporation Ltd [2026] NSWSC 125, delivered on 26 February 2026, Justice Muston dealt with privilege challenges over thousands of documents in litigation about the Project Mercury sale process for shares in Australia Pacific Airports Corporation Limited.
King & Wood Mallesons prepared a "Legal Review Report" dated 15 November 2024 in connection with Project Mercury. The report set out KWM's opinions on legal issues affecting the transaction structure, including whether the proposed transaction would trigger any pre-emptive rights, and it identified a confined list of documents on which those opinions rested. The plaintiffs did not claim privilege over the KWM Report or over the documents that it identified as the basis of its opinions.
The KWM Report went to prospective buyers of shares in the "Target" company. Annotations on the document suggested that prospective buyers initially received it in partially redacted form and that "preferred bidders" would receive an unredacted version. The SAS defendants, who are the second and eighth defendants, argued that this disclosure meant that the plaintiffs had disclosed the substance of all legal advice that KWM gave about the structure of Project Mercury, including advice on pre-emptive rights, and that privilege had therefore fallen away over all such advice.
They contended that the waiver extended not only to the KWM Report but also to all communications created for the purpose of seeking advice on that subject matter, all communications that recorded, referred to or reproduced any such advice, and all documents that KWM might have relied on when it gave that advice.
Justice Muston rejected that broad contention. He held that the opinions in the KWM Report were clearly confined and that they rested on an identified series of documents over which no one claimed privilege. He did not accept that the plaintiffs, by providing the KWM Report to prospective purchasers, disclosed the substance of any other legal advice that KWM had given on those issues.
Justice Muston nonetheless found a waiver of privilege over a narrower but still significant class of material. He held that disclosure of the KWM Report resulted in "a waiver of privilege over all communications created for the purpose of seeking the KWM Report." He reached that conclusion because he regarded the maintenance of confidentiality over such documents as inconsistent with the earlier disclosure of the report, and he regarded those documents as reasonably necessary to enable a proper understanding of its content under s 126 of the Evidence Act 1995 (NSW).
The court also addressed claims of waiver tied to the evidence of Nicole Harris, the first plaintiff's General Manager, Legal. The plaintiffs pleaded that Dexus Capital Investors Limited understood, as at October 2024, that APAC's shareholders had agreed on a form of deed poll that could be used for compliance with the Shareholders' Deed and that the deeds poll executed by the interested parties were in that agreed form. Harris gave affidavit evidence about her understanding, at specific points in time, of whether the Standard Deed Poll complied with the Shareholders' Deed, whether APAC's shareholders had previously agreed on its form, whether the substance of the Standard Deed Poll adequately protected information shared as part of Project Mercury, whether changes in a side letter with GIC Infra Holdings Pty Ltd altered that substance, and whether an existing deed poll with the Dexus Wholesale Australian Property Fund extended to that fund's access to the virtual data room for Project Mercury.
Justice Muston held that it would be inconsistent and potentially productive of unfairness for the plaintiffs to positively advance a case based on Harris's state of mind on those issues while simultaneously maintaining a claim of privilege over documents in which her views on those matters were recorded. Accordingly, he found that the plaintiffs had waived privilege over documents expressly recording Harris's views on those five topics at the relevant times.
The court directed that an independent barrister determine remaining disputed claims of privilege. The matter is listed for final hearing on 7 April 2026.
