ABL Nominees Pty Ltd v Pescott (No.2)
[2015] VSC 206
•15 May 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2009 04804
| ABL NOMINEES PTY LTD (ACN 106 756 521) (in its capacity as Trustee of the Lighthouse Warehouse Trust No 8 (ENVIRONINVEST FINANCE)) & ors (according to the attached Schedule) | Plaintiffs |
| v | |
| EUAN PESCOTT | Defendant |
- and –
| EUAN PESCOTT | Plaintiff by Counterclaim |
| v | |
| ABL NOMINEES PTY LTD (ACN 106 756 521) (in its capacity as Trustee of the Lighthouse Warehouse Trust No 8 (ENVIRONINVEST FINANCE)) & ors (according to the attached Schedule) | Defendant by Counterclaim |
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JUDGE: | DERHAM AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 8 May 2015 |
DATE OF JUDGMENT: | 15 May 2015 |
CASE MAY BE CITED AS: | ABL Nominees Pty Ltd v Pescott (No.2) |
MEDIUM NEUTRAL CITATION: | [2015] VSC 206 |
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PRACTICE AND PROCEDURE – Subpoena to former solicitors of defendant – Claim for client legal privilege – Whether privilege established – Whether privilege waived – Relevance to issue – No relevance.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs and the Defendants by Counterclaim | Dr O Bigos | Allens |
| The Defendant and Plaintiff by Counterclaim appeared in person |
HIS HONOUR:
Introduction
The defendant, Euan Pescott, claims that documents produced by his former solicitors, Millens Pty Ltd (‘Millens’), pursuant to a subpoena issued by the plaintiffs, are subject to client legal privilege (‘privilege’). The plaintiffs contend the privilege claim should not be upheld or, alternatively, that if the documents are privileged the privilege has been waived.
Factual Background
By order made on 22 October 2014 the defendant was given leave to file and serve a fourth further amended defence and counterclaim.[1] In that fourth amended defence and counterclaim, the defendant claims that the loan agreement the subject of the claim by the plaintiffs is voidable by reason of a number of matters and seeks orders that it be set aside.
[1]See ABL Nominees Pty Ltd v McKenzie (No.2) [2014] VSC 529.
The matters that are the foundation of the voidability of the loan agreement include misleading or deceptive conduct, breach of fiduciary duty, and abuse of trust and confidence. That alleged conduct was engaged in by the defendant’s brother, Mr Roger Pescott. He was at the time a director of Environinvest Ltd and of the lender of the loan, BEP Finance Pty Ltd. Mr Roger Pescott’s conduct is allegedly attributed to the lender. Importantly for the purposes of the defence, the defendant pleads, and in the hearing of this application amply demonstrated, that he is profoundly hearing impaired. He further pleads that he was inexperienced in matters of finance and business, entirely reliant upon his brother Mr Roger Pescott for guidance in matters of finance and business; did not understand the purport or effect of the loan agreement; did not have the benefit of legal advice in relation to it; could not service the loan contemplated by the agreement; and had no need to invest in the property funded by the loan (being an Environinvest Eucalypt Project managed investment scheme). Most of the allegations made by the defendant in the counterclaim are put in issue by the plaintiffs in their reply and defence to counterclaim.[2]
[2]Reply to fourth further amended defence and defence to counterclaim filed 12 November 2014.
The plaintiffs also plead in answer to the counterclaim that the defendant should be denied any equitable or statutory relief for a number of reasons, including that the defendant had, by an amended defence dated 17 October 2011, abandoned allegations in his defence dated 22 September 2010 that the loan agreement was voidable for partly analogous reasons, primarily on the basis of the principles explained in Commercial Bank of Australia Ltd v Amadio.[3]
[3](1983) 151 CLR 447, 462 (‘Amadio’).
As a result of the claims made in the fourth amended defence and counterclaim, the plaintiffs subpoenaed a number of individuals and firms, including Millens.[4] The documents sought by that subpoena were wide ranging, but in summary, related to previous financial, business and investment decisions made by the defendant and instructions to his former solicitors concerning his understanding of his loan agreement and the conduct of these proceedings.
[4]Subpoena dated 19 December 2014.
Millens produced documents to the Prothonotary pursuant to the subpoena on 3 February 2015 (‘Millens’ documents’). On 13 March 2015, for the purpose of enabling claims for privilege to be conveniently and expeditiously dealt with, I ordered the defendant to file and serve a list of documents which set out a description of the Millens’ documents in respect of which he claimed privilege, and the basis for the claims. I also ordered that the defendant file and serve an affidavit in support of any claim for privilege over those documents. The hearing of any objection by the defendant to the plaintiffs’ inspection of the Millens’ documents was set down for hearing on 8 May 2015.
On 6 May 2015, the defendant swore an affidavit which exhibited a list of Millens’ documents over which he claims privilege. The list is in fact a screen shot of documents on a disc produced by Millens. He says:
The documents produced by Millens were all brought into existence as a result of the current legal proceedings to allow me, through Millens, to conduct a proper defence of the allegations against me. To provide these documents to the plaintiffs would be highly prejudicial to the conduct of my defence.
None of the documents related to any financial, business or investment decisions made by me…
Submissions and Consideration
The plaintiffs claimed that the evidence in support of the claim for privilege was insufficient. It does not contain focused and specific evidence that should be given to ground a claim for privilege. It is a mere assertion of privilege, which is insufficient.[5]
[5]AWB Ltd v Coles (No.5) (2006) 155 FCR 30 at [44]; Kennedy v Wallace (2004) 142 FCR 185 at [13].
Clearly the claim is for privilege under ss 118 and 119 of the Evidence Act2008, particularly litigation privilege under s 119, as applied by s 131A to the production of documents pursuant to subpoena. For present purposes it will suffice to refer only to a part of the requirements to establish privilege under s 119, that is that inspection of the documents by the plaintiffs would disclose the contents of a confidential document (whether delivered or not) that was prepared for the dominant purpose of the client being provided with professional legal services relating to an Australian proceeding.
The defendant bears the onus of establishing the claim for privilege, including each factual element necessary to establish the requisite dominant purpose. In that respect, focused and specific evidence is required in respect of each communication, rather than mere generalised assertion, let alone opaque and repetitious verbal formulae. There should be sufficient evidence which proves directly or by inference that the dominant purpose for the communication satisfied the test for litigation privilege.[6]
[6]Asahi Holdings (Australia) Pty Ltd v Pacific Equity Partners Pty Ltd (No 4) [2014] FCA 796, [29]; see also Australian Crime Commission v Stewart (2012) 286 ALR 713, [69] and AWB Ltd v Cole (2006) 232 ALR 743; Ausnet Electricity Services v Liesfield [2014] VSC 474, [119] (per Robson J); HRF Nominees Pty Ltd (In Liq) & Others v Man Civil Constructions Pty Ltd & Others (No.2), [2014] VSC 613 at [60].
It can be seen that the plaintiffs contend that the proof required to establish privilege in relation to the Millens’ documents is insufficient. In the course of the hearing, which involved difficulty for the defendant because of his profound hearing impairment,[7] I proposed to the parties that I should cut through the difficulty arising from the very general claim to privilege by inspecting the documents. This was likely to be more timely, efficient and cost effective. The plaintiffs and defendant agreed to this course.
[7]The plaintiffs provided a running transcript and the defendant was assisted by his brother Roger Pescott as a McKenzie friend.
The second contention made by the plaintiffs arose from the change in the defence in 2011 (which dropped what had been the pleading of, in effect, an Amadio defence)[8] and the raising of similar matters in the fourth amended defence and counterclaim (but I observe in passing, in many respects the current defence and counterclaim is significantly different from the earlier pleading). The plaintiffs submitted that as a result of the pleadings referred to above, the defendant was estopped from now raising the defence and counterclaim that he had previously and knowingly abandoned. That abandonment required some element of awareness or knowledge that he was advancing the allegations that had previously been dropped. The plaintiffs contended that if the defendant had known that the previous defence had been included and had been removed then he is estopped from now raising the substance of the fourth amended defence and counterclaim. In this way, communications between Millens and the defendant relating to the several defences filed was said to be relevant.
[8]Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447.
The plaintiffs pointed to the affidavit of documents sworn by the defendant on 20 January 2015. Schedule 2 of that affidavit included documents that were never in his possession, custody or power. One of those categories of documents was described in paragraph 20 of the affidavit as documents that identify, record or evidence the defendants communications with, including advice received from, any legal advisors of the defendant.
Thus it appeared, as at 20 January 2015, that the defendant did not have and had never had in his possession any documents that recorded any communications with his lawyers, Millens. His affidavit of 6 May 2015, however, reveals that Millens have produced pursuant to the subpoena documents that appear to include communications between the defendant and Millens (for example, email letter from Millens to E Pescott 22 October 2010).
The plaintiffs also pointed to the defendant’s affidavit of 16 April 2015, where he dealt with orders that had previously been made, apparently by consent, for discovery by him. He contended that he had not given instructions to consent to orders for the discovery of documents as set out in the order of Ferguson J (as she then was) made on 10 December 2014. Putting that matter to one side (as it is not presently in issue), in paragraph 20 of that affidavit he deposed that he had asked his brother if he knows of documents that identify, record or evidence communication with any legal advisors and has been told by him that he has no knowledge of such documents.
In the context of what has now been produced by Millens, these statements by the defendant are a little surprising. It may indicate a lack of understanding of his obligation to make discovery of documents that are in electronic form. It is also clear that the statement made in the 6 May 2015 affidavit about the documents referred to in that affidavit which, as I have said, appear to include emails between the defendant and Millens, is inconsistent with the affidavits of 20 January and 16 April 2015.
These matters are, however, of limited relevance to the existence of privilege over the Millens’ documents and whether that privilege has been waived. They may give rise to further applications for discovery by the plaintiffs, but I find it hard to see that they bear upon the questions I have to decide in relation to the Millens’ documents.
More importantly, the plaintiffs allege there are inconsistencies between the statement made by the defendant in his affidavit of 6 May 2015 and the statements previously made by him which included criticisms of Millens about the way the defences were originally filed without his knowledge or authority, as follows:
(a) In his affidavit of 10 September 2014 sworn in support of his application to make amendments to his defence, the defendant deposed that he was represented by Millens until June 2013, that Millens prepared and filed the then existing defence, that he had made known to Millens, in clear but general terms, the defences referred to in his affidavit but they did not plead any of those defences;
(b) In his affidavit of 7 October 2014, sworn in support of his second application to amend his defence, he says that Roger organised the retainer of Millens and that he had received emails from Michelle Groves, who worked for Millens, to advise him when the matter was in Court, but these emails never required information or details or sought instructions.[9] That affidavit also referred to:
[9]Affidavit of Defendant sworn 7 October 2014, paragraph 16.
(i) Millens attending a conference with the defendant and Mr Noel McGee QC;
(ii) the defendant never having given Millens direct instructions;
(iii) that he did not know about the change of solicitors from Millens to Aldgate Lawyers or back to Millens;
(iv)that he was never consulted about the defences or gave instructions about further defences; and
(v) the removal of the defence concerning the unenforceability of the loan agreement (the Amadio defence) by Millens was undertaken without consulting him.
The plaintiffs contended that the defendant has waived privilege over the Millens’ documents by putting in issue their contents in asserting that the defences were filed without his knowledge or authority, particularly the defence that removed the Amadio defence. In this regard, reliance was placed on s 122 of the Evidence Act 2008, which provides, in substance, that privilege does not prevent the adducing of evidence if a client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in ss 118 or 119. In Commissioner of Taxation v Rio Tinto Ltd[10] the Full Court of the Federal Court, after noting that each case turns on its own particular facts, formulated the test for issue waiver as whether a party has made an assertion as part of their case that puts the contents of the privileged documents in issue, or necessarily lays them open to scrutiny, with the consequence that an inconsistency has arisen between the making of the assertion and the maintenance of the privilege.
[10](2006) 151 FCR 341; 229 ALR 304, at [68].
Thus, it was submitted by the plaintiffs, that they should have access to Millens’ documents to test:
(a) What, if anything, the defendant knew and said about the content of his defences (including requests for and the provision of instructions); and
(b) What, if anything, the defendant told Millens about his disabilities and the circumstances in which he entered into the Loan Agreement.
I have inspected the documents referred to in the affidavit of the defendant sworn on 6 May 2015. All of the documents are communications, which, on their face, attract privilege. Thus, despite the very general and unfocused evidence given in the affidavit of 6 May 2015, I am satisfied that the documents are the subject of privilege.
At the hearing on 8 May 2015 I proposed as a first step the determination of the question of whether or not privilege attached to the documents. I then proposed that if, as a result of my inspection of the documents, the claim for privilege was upheld, then that the matter should return to Court for further argument as to whether issue waiver was applicable. This was because it was clear that the defendant had not had a proper opportunity to digest the concept involved in a waiver of privilege and needed time to consider it and get such advice as he could.
My inspection of the documents, however, leads me to the conclusion that there is no need to engage in further debate about whether there has been a waiver under s 122 of the Evidence Act2008, in particular whether issue waiver applies to the documents in question.
I reach this conclusion because, having read each of the documents — and where the document was an email with an attachment, the attachments — I am satisfied that none of the documents are relevant to what the defendant knew or said about the content of his defences (including requests for and the provision of instructions) nor do they relate to what the defendant told Millens about his disability and the circumstances in which he entered into the loan agreement. The documents throw no light on the instructions given by or (importantly, because of the involvement of Mr Roger Pescott) on behalf of the defendant, to Millens about his defences, or the alteration of those defences.
In short, none of the Millens’ documents referred to in the affidavit of 6 May 2015 are relevant to the defence originally filed and dated 23 September 2010; nor to the replacement of that defence with the second further amended defence filed on 17 October 2011; nor (should it be relevant) to the matters the subject of the applications made in September and October 2014 for the further amendment that ultimately resulted in the fourth amended defence and counterclaim.
For these reasons it seems to me that it is unnecessary to return to argue the application of issue waiver to the documents produced by Millens.
Conclusion
For these reasons I will uphold the claim for privilege with respect to the documents described in the defendant’s affidavit of 6 May 2015. Further, because none of the documents are relevant to the matters concerning the change in the defences, and communications and instructions relating to those changes in the defences, there is no reason to consider the question of whether or not there has been an issue waiver under s 122 of the Evidence Act 2008 in relation to any of the documents. They are simply not relevant to the issue raised.
I will adjourn the application to enable the parties to submit appropriate orders consequent upon these reasons.
SCHEDULE OF PARTIES
| S CI 2009 04804 | |
| BETWEEN: | |
| ABL NOMINEES PTY LTD (ACN 106 756 521) (in its capacity as Trustee of the Lighthouse Warehouse Trust No 8 (ENVIRONINVEST FINANCE)) | First Plaintiff |
| - and - | |
| BEP FINANCE PTY LTD (ACN 083 023 741)(In Liquidation) | Second Plaintiff |
| - and - | |
| PRIMARY YIELD FINANCE PTY LTD (ACN 110 168 833) (Receivers and Managers Appointed) | Third Plaintiff |
| - and - | |
| EUAN PESCOTT | Defendant |
| AND BETWEEN: | |
| EUAN PESCOTT | Plaintiff by Counterclaim |
| - and - | |
| ABL NOMINEES PTY LTD (ACN 106 756 521) (in its capacity as Trustee of the Lighthouse Warehouse Trust No 8 (ENVIRONINVEST FINANCE)) | First Defendant by Counterclaim |
| - and - | |
| BEP FINANCE PTY LTD (ACN 083 023 741) (In Liquidation) | Second Defendant by Counterclaim |
| - and - | |
| PRIMARY YIELD FINANCE PTY LTD (ACN 110 168 833) (In Liquidation) (Receivers and Managers Appointed) | Third Defendant by Counterclaim |
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