B.C.I Finances Pty Limited (In Liq) v Commissioner of Taxation
[2015] FCA 602
•15 June 2015
FEDERAL COURT OF AUSTRALIA
B.C.I. Finances Pty Limited (In Liq) v Commissioner of Taxation
[2015] FCA 602
Citation: B.C.I. Finances Pty Limited (In Liq) v Commissioner of Taxation [2015] FCA 602 Parties: B.C.I. FINANCES PTY LIMITED (IN LIQUIDATION) v COMMISSIONER OF TAXATION, ANDREW BINETTER, GARY BINETTER and MARGARET BINETTER File number: NSD 626 of 2011 Judge: FOSTER J Date of judgment: 15 June 2015 Catchwords: PRIVILEGE – legal professional privilege – common interest privilege – whether certain documents in the possession of the Commissioner of Taxation and the liquidators of the applicant are protected by either form of privilege Cases cited: Harman v Secretary of State for the Home Department [1983] 1 AC 280
Parry v News Group Newspapers Ltd (1990) 140 N.L.J. 1719
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2006] NSWSC 234
Trade Practices Commission v Sterling (1979) 36 FLR 244Date of hearing:
12 June 2015
Place:
Sydney
Division:
GENERAL DIVISION
Category: Catchwords Number of paragraphs: 33 Counsel for the Applicant: Mr J Arnott Solicitor for the Applicant: Cosoff Cudmore Knox Counsel for the First Respondent: Ms KC Morgan Solicitor for the First Respondent: Minter Ellison Counsel for the Second Respondent: Mr MR Pesman SC and Ms A Knox Solicitor for the Second Respondent: Polczynski Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 626 of 2011
BETWEEN: B.C.I. FINANCES PTY LIMITED (IN LIQUIDATION)
ApplicantAND: COMMISSIONER OF TAXATION
First RespondentANDREW BINETTER
Second RespondentGARY BINETTER
Third RespondentMARGARET BINETTER
Fourth Respondent
JUDGE:
FOSTER J
DATE OF ORDER:
15 JUNE 2015
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.As soon as practicable, the liquidators of the applicant produce to the solicitors for the second respondent (Polczynski Lawyers) for inspection and photocopying the document which is document 6.3 in the bundle of twenty (20) privileged documents made available to the Court on 10 June 2015 by the liquidators of the applicant.
2.The application made by the second respondent (Mr Andrew Binetter) for access to the documents the subject of claims of privilege made by the first respondent and by the liquidators of the applicant otherwise be refused.
3.The costs of the said applications in respect of privilege made by the second respondent be costs of the liquidators of the applicant and costs of the first respondent in the various applications fixed for hearing before Jagot J on 19 June 2015, that is, the two applications to release those parties from Harman undertakings and the application made by Andrew Binetter for relief founded upon abuse of process (filed on 27 April 2015).
4.The privileged documents produced to the Court by the liquidators of the applicant for inspection by Foster J be immediately returned to the solicitors for those liquidators.
5.The privileged documents produced to the Court by the first respondent for inspection by Foster J be immediately returned to the solicitors for the first respondent.
THE COURT NOTES THAT:
6.Andrew Binetter, Gary Binetter and Margaret Binetter remain parties to this proceeding and further that they are the second, third and fourth respondents in this proceeding.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 626 of 2011
BETWEEN: B.C.I. FINANCES PTY LIMITED (IN LIQUIDATION)
ApplicantAND: COMMISSIONER OF TAXATION
First RespondentANDREW BINETTER
Second RespondentGARY BINETTER
Third RespondentMARGARET BINETTER
Fourth Respondent
JUDGE:
FOSTER J
DATE:
15 JUNE 2015
PLACE:
SYDNEY
REASONS FOR JUDGMENT
(REVISED FROM TRANSCRIPT)
The Commissioner of Taxation (Commissioner), who is the first respondent in this proceeding, has applied to the Court for an order releasing him from the implied obligation not to use certain documents obtained during the course of this proceeding for purposes other than those of this proceeding (for a discussion of the relevant principle, see Harman v Secretary of State for the Home Department [1983] 1 AC 280 at 304, 309 and 319–321). In broad terms, the documents which are the subject of the Commissioner’s application are certain documents obtained as a result of this Court having issued a letter of request to the judicial authorities of Israel by order made on 9 August 2012.
The liquidators of the applicant, BCI Finances Pty Limited (In Liquidation) (the liquidators) have made a very similar application although the documents in respect of which they wish to be released are not precisely the same as the documents which are the subject of the Commissioner’s application.
Andrew Binetter (Mr Binetter), who is also a party to this proceeding, intends to oppose the applications made by the Commissioner and the liquidators. In addition, Mr Binetter has applied for orders bringing to an end all proceedings pursuant to the said letter of request and for the destruction of all documents and records obtained by the Commissioner and/or the liquidators as a result of the issue of that letter of request. He also seeks an injunction against both the Commissioner and the liquidators restraining them from using any information obtained by them as a result of the issue of the said letter of request. It is Mr Binetter’s case that, by keeping this proceeding on foot after 22 May 2014 (when the Court made a costs order against Mr Binetter and two of his relatives), the Commissioner and the liquidators abused the processes of the Court.
On or about 12 May 2015, Mr Binetter’s solicitors served a Notice to Produce dated 7 May 2015 on the Commissioner and an identical Notice to Produce dated the same day on the liquidators.
Those parties then moved to set aside the Notices to Produce but were unsuccessful in their endeavours to do so.
Subsequently, documents were produced by both the Commissioner and the liquidators in answer to the Notices to Produce. Some of the documents produced were the subject of claims of privilege. The Commissioner made certain claims of privilege and the liquidators made their own independent claims of privilege.
The hearing of the Interlocutory Applications by the Commissioner and the liquidators to be released from the implied undertaking and of Mr Binetter’s application for relief based upon his allegations of abuse of process are all fixed for Friday next (19 June 2015) before Jagot J.
Mr Binetter challenged the claims for privilege made by both the Commissioner and the liquidators, although in respect of the claims made by the Commissioner he appears now to accept that those claims are soundly based. For this reason, I shall only briefly refer to the claims made by the Commissioner.
THE COMMISSIONER’S PRIVILEGE CLAIMS
The Commissioner explained and supported his claims for privilege through two affidavits affirmed by his solicitor Thomas Charles Arnold on 27 May 2015 and 11 June 2015 respectively.
In the first of those affidavits, at par 4, Mr Arnold articulated the basis for the claims for legal professional privilege made in respect of the documents referred to in that affidavit in the following terms:
The documents over which the Commissioner claims legal professional privilege fall within the following 3 categories:
(a)Internal correspondence between lawyers employed by the Commissioner’s solicitor. This correspondence was prepared for the dominant purpose of providing legal advice to the Commissioner with respect to these proceedings.
(b)Correspondence between Minter Ellison and the Commissioner. This correspondence was prepared for dominant purpose of providing the Commissioner with legal advice in relation to communications with the liquidators’ solicitor with respect to these proceedings.
(c)Correspondence between Minter Ellison and Heskia-Hacmun Lawyers, being the lawyers retained by the Commissioner to represent the Commissioner in the letter of request proceedings in Israel. This correspondence was prepared for dominant the [sic] purpose of providing instructions to Heskia-Hacmun in relation to these proceedings.
In his second affidavit, at pars 3 and 4, Mr Arnold described the basis for the claims for privilege made in respect of the documents referred to in that affidavit as follows:
3.This affidavit is affirmed in support of the Commissioner’s claim that certain documents that fall within the scope of the Notice to Produce filed on 11 May 2015 (the Notice to Produce) are subject to legal professional privilege on the basis that the documents contain or describe communications between the Commissioner and his solicitors issued for the dominant purpose of providing legal advice in respect of these proceedings or confidential communications between the Commissioner or his solicitors and another person (being John Sheahan and Ian Lock, the joint and several liquidators of BCI Finances Pty Limited) (the Liquidators), of Sheahan Lock Partners, or Cosoff Cudmore Knox, the Liquidators’ solicitors for the dominant purpose of providing professional legal services, primarily legal advice, in relation to proceedings in which the Commissioner and the Liquidators had a common interest by virtue of the Commissioner being the primary creditor in BCI Finances Pty Limited and a funder of the proceedings.
4. The documents over which the Commissioner claims legal professional privilege fall within the following 3 categories:
(a)Internal correspondence between lawyers employed by the Commissioner’s solicitor. This correspondence was prepared for the dominant purpose of providing legal advice to the Commissioner with respect to these proceedings;
(b) Correspondence between Minter Ellison and the Commissioner, and the Australian Government Solicitor and the Commissioner. Minter Ellison acts for the Commissioner in these proceedings in relation to the proceedings commenced by the applicant pursuant to Part IVC of the Taxation Administration Act 1953 (Cth). The Australian Government Solicitor has been providing legal advice to the Commissioner with respect to another matter. This correspondence was prepared for the dominant purpose of providing the Commissioner with legal advice in relation to communications with the Liquidators, or the Liquidators’ solicitors, with respect to these proceedings;
(c) Correspondence between the Liquidators and the Commissioner, or the Liquidators’ solicitors, and the Commissioner. The correspondence within this category was exchanged confidentially between the Liquidators and the Commissioner, and their respective solicitors and was prepared for the dominant purpose of providing the clients with professional legal services, including legal advice in relation to proceedings in which the Commissioner and the Liquidators had a common interest by virtue of the Commissioner being the primary creditor in BCI Finances Pty Limited and a funder of the proceedings.
In each affidavit, after explaining the basis for the claims, Mr Arnold went on to describe with particularity the documents in respect of which the claims were made and the basis for each of the claims. It is not necessary for me to address each of these documents one by one. I have looked at all of the documents and I am satisfied that the description of the documents given by Mr Arnold in every case is a fair one and that the claims for privilege articulated by him in his affidavits are justifiable. As I said, in the end, I do not think that Senior Counsel for Mr Binetter really took issue with this.
THE LIQUIDATORS’ PRIVILEGE CLAIMS
As far as the claims for privilege made by the liquidators are concerned, the position was slightly different. Senior Counsel for Mr Binetter asked me to look at all of the documents in question in order to satisfy myself that those documents are truly privileged.
In addition to making that request, Senior Counsel made submissions directed to categories 5 and 6 described by Counsel for the liquidators in an Outline of Written Submissions made available to me for the purpose of the present applications and dated 10 June 2015. Those categories related in turn to documents 6.2, 6.5 (together, category 5) and 6.8 (category 6) contained in a folder of privileged documents made available to me by the lawyers for the liquidators.
As was the case with the documents the subject of privilege claims made by the Commissioner, I have looked at and considered all of the documents the subject of claims of privilege made by the liquidators. It appeared to me that, at some points during argument, there was some confusion as to the basis upon which the liquidators’ privilege claims were being made. That is to say, there was some confusion as to whether the claims were being made as claims for legal professional privilege or common interest privilege.
Having inspected the documents, I only had concerns about document 6.1 and document 6.3 in the liquidators’ folder of privileged documents.
In order to consider the liquidators’ claims for privilege I took account of the contents of the affidavit of the liquidators’ solicitor James Michael Cudmore sworn on 29 May 2015 and the claims of privilege articulated and explained by Mr Cudmore in that affidavit.
Document 6.1 comprises an email chain commencing on 30 May 2014 and ending on 4 June 2014. I was not satisfied that the claim for common interest privilege based upon a relationship of litigation funder between the Commissioner and the liquidators could be justified in respect of that email chain. The liquidators and the Commissioner executed a Deed of Indemnity on 28 January 2015 by which the Commissioner effectively agreed to fund certain actions of the liquidators up to a specified amount. When confronted with the possibility that the liquidators’ claim for common interest privilege might not succeed, Counsel for the liquidators produced to the Court a further document for the purpose of further explaining the context in which document 6.1 had been created. This additional document was an email dated 5 June 2015 passing between an employee of the liquidators and the Australian Tax Office to which was attached an earlier email passing between that same employee and the liquidators’ solicitors. In light of the production of that additional email, I formed the view that document 6.1 was privileged because the inquiry being made by the liquidators’ employee revealed by the email chain comprising document 6.1 was, in truth, being made by the liquidators with a view to their seeking legal advice and assistance from their own lawyers in respect of the subject matter of the emails. It seemed to me that, in light of those circumstances, document 6.1 was privileged.
The second document that attracted my interest was document 6.3 which is an email dated 29 September 2014 from one of the liquidators to an officer of the ATO. It was copied to the other liquidator. As I understood submissions advanced by Counsel for the liquidators, this document was said to be privileged because it fell under the protection of the principle explained by Bergin J in Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2006] NSWSC 234 (Rickard) it being, so it was submitted, a communication made preparatory to and in contemplation of appropriate litigation funding coming from the Commissioner for certain proceedings later brought by the liquidators against the Binetter interests which ultimately became a proceeding in this Court (SAD 5 of 2015).
I do not think that this document can be the subject of a claim of privilege which is propounded on this basis. This email is nothing more than a report by the liquidators to the ATO setting out expenditure up to a certain point and, although it may well have been hoped by the liquidators at the time when that document was sent that funding might be forthcoming, there was no other evidence that established the state of play as far as funding was concerned as at that date. The document itself does not really bring the subject matter sufficiently close to the funding agreement executed on 28 January 2015 to be justified upon the basis explained by her Honour in Rickard. For that reason, I do not think that the claim of privilege made in respect of document 6.3 can be sustained.
The claims of privilege in respect of the remaining documents were satisfactorily explained by Mr Cudmore in his affidavit. Nonetheless, in deference to submissions made to me by Senior Counsel for Mr Binetter, I think that I should explain in a little more detail why I consider documents 6.2, 6.5 and 6.8 in the liquidators’ folder of privileged documents to be privileged. These documents were those upon which Senior Counsel focussed most of his attention when making his submissions.
Documents 6.2 and 6.5 comprise category 5 and are handwritten file notes made by Mr Maloney who, at the times when he made these notes, was an associate or an employee in the firm of Cosoff Cudmore Knox who are the solicitors for the liquidators. The first file note is dated 1 September 2014 and the second is dated 12 November 2014. The file notes appear for the most part to record the substance of a conversation between Mr Maloney and Mr Poulos (in the case of the September note) and Mr Maloney and Messrs Poulos and Arnold (in the case of the November note). It was submitted on behalf of Mr Binetter that, at the time when these file notes were made, the Commissioner and the applicant were on opposite sides of the Court record in this very proceeding and that, for that reason, no common interest privilege could possibly attach to these documents. As far as that submission goes, I think that it is correct.
Senior Counsel for Mr Binetter also submitted that the file notes constituted nothing more than a factual record of what passed between the parties to the conversation recorded in the file notes. Having made that submission, Senior Counsel went on to submit that, in those circumstances, the file notes could not conceivably be privileged. In support of that proposition, he cited a judgment of the English Court of Appeal: Parry v News Group Newspapers Ltd (1990) 140 N.L.J. 1719 (Parry v News). In particular, Senior Counsel relied upon some remarks made by Bingham LJ at pars 22 and 23 of his Lordship’s Reasons. Lord Justice Bingham noted that the defendants in Parry v News accepted that the memorandum recording a particular conversation between solicitors the subject of interest in that case:
… was no more than what it appears to be — a factual record by Mr. Barton-Taylor, whether accurate or not, of what he believed to have passed on the telephone.
His Lordship went on to hold that a bare record of what passed between the two solicitors on opposite sides of the record in the circumstances of that case was not privileged.
In the present case, Mr Cudmore has sworn in his affidavit that the reason Mr Maloney’s file notes were made was, in the case of the September note:
… for the purpose of providing legal advice to the Liquidators about the conduct of these proceedings.
And in the case of the November note:
… for the dominant purpose of the Liquidators being provided with professional legal services by [his firm] relating to these proceedings.
The inquiry that always has to be made in determining whether a communication attracts legal professional privilege is: What was the dominant purpose for the making of the communication? And in the case of written communications: What was the dominant purpose for making the record of the communication? Mr Cudmore testified that the purpose for which Mr Maloney made the two file notes in question was to enable his firm to advise his clients, the liquidators. That evidence was not challenged. I accept it. In addition, I note that the contents of the file notes themselves support Mr Cudmore’s evidence.
I think that Mr Maloney’s file notes fall within one of the categories of privileged documents explained by Lockhart J in Trade Practices Commission v Sterling (1979) 36 FLR 244 at 246, being his Honour’s category (d):
(d)Notes, memoranda, minutes or other documents made by the client or officers of the client or the legal adviser of the client of communications which are themselves privileged, or containing a record of those communications, or relate to information sought by the client’s legal adviser to enable him to advise the client or to conduct litigation on his behalf. See Woolley v. North London Railway Co. (1869) L.R. 4 C.P. 602, at p.604; Greenough v. Gaskell (1833) 1 My. & K. 98, at p. 102; 39 E.R. 618, at p.620; Corporation of Bristol v. Cox (1884) 26 Ch. D. 678, at pp. 681-682; Woolley v. Pole (1863) 14 C.B.N.S. 538; 143 E.R. 556; Seabrook v. British Transport Commission [1959] 1 W.L.R. 509; Grant v. Downs (1976) 135 C.L.R. 674, and Bray, Principles and Practice of Discovery (1885) pp. 388-389.
These file notes may be characterised as notes of information communicated to the clients’ (the liquidators’) legal adviser (Mr Maloney) made by the clients’ legal adviser which information was sought or obtained by that legal adviser in order to enable him and his associates to advise the clients or to conduct litigation on their behalf. The file notes probably also fall within his Honour’s category (e) which his Honour explained on the same page of the report as follows:
(e)Communications and documents passing between the party’s solicitor and a third party if they are made or prepared when litigation is anticipated or commenced, for the purposes of the litigation, with a view to obtaining advice as to it or evidence to be used in it or information which may result in the obtaining of such evidence. See Wheeler v. Le Marchant (1881) 17 Ch. D. 675; Laurenson v. Wellington City Corporation [1927] N.Z.L.R. 510, and O'Sullivan v. Morton [1911] V.L.R. 70.
Parry v News proceeded upon the basis that the only reason that the solicitor’s file note was made in that case was to keep a record of what was said as between solicitors on opposite sides of the record. To my mind, that case is distinguishable even if it was correctly decided. Here, the dominant purpose for the creation of the file notes was to enable Cosoff Cudmore Knox to advise the liquidators or to provide legal services to them (including in respect of litigation). Although on opposite sides of the record technically speaking, the interests of the ATO and the interests of the liquidators were very much aligned when the file notes in question were made. The participants in the conversation were not hostile protagonists embroiled in hard-fought litigation. The true nature of their relationship was quite different.
Document 6.8 (which is category 6 of the liquidators’ Counsel’s outline) is in a different category. It was created on 14 December 2014 and, in effect, is a report to Mr Arnold, the Commissioner’s solicitor, in respect of matters which concerned the progress of enquiries being made by the liquidators in circumstances where a funding arrangement was well and truly in the offing.
The subject matter of that email is confidential and privileged. The email appears to have been created by the liquidators’ lawyer having applied legal skills to information and documents previously made available to that lawyer by third parties. The only question to be resolved to my mind was whether, by disclosing that information to Mr Arnold, the communication lost its privileged character. I think that the report was made at a time which was sufficiently close to the date when the Deed of Indemnity dated 28 January 2015 was signed to attract privilege upon the basis of the reasoning in Rickard and in circumstances where discussions as to the provision of such an indemnity were well advanced. I think that the claim for privilege is made out in respect of document 6.8.
For all of the above reasons, the only document which I consider is not protected by privilege is document 6.3. All of the other documents the subject of claims of privilege will remain protected and will not be made available to Mr Binetter or his legal representatives.
I will order the liquidators to produce for inspection by Mr Binetter’s solicitors the document which is document 6.3 in the bundle of privileged documents made available to me by the liquidators’ solicitors. Otherwise, I refuse Mr Binetter’s application for access to the documents the subject of claims of privilege made by the Commissioner and the liquidators. Mr Binetter has substantially lost his application for access to the privileged documents held by the Commissioner and the liquidators. However, that application was made and pressed for the purposes of the various applications listed before Jagot J next Friday. Plainly, Mr Binetter should not have his costs of the application with which I have now dealt. Effectively, he lost. On the other hand, I am of the view that the Commissioner and the liquidators should only have their costs of that application if they secure a substantial victory in the matters listed before her Honour next Friday. For those reasons, I think that the costs of Mr Binetter’s application for access to privileged documents should be the liquidators’ and the Commissioner’s costs in the applications listed before Jagot J on 19 June 2015.
There will be orders accordingly.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. Associate:
Dated: 17 June 2015
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