Banksia Securities Limited v The Trust Company
[2017] VSC 583
•28 September 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2015 01384
| BANKSIA SECURITIES LIMITED (ACN 004 736 458) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) | Plaintiff |
| v | |
| THE TRUST COMPANY (NOMINEES) LIMITED (ACN 000 154 441) | Defendant |
---
JUDGE: | Sifris J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 18 September 2017 |
DATE OF JUDGMENT: | 28 September 2017 |
CASE MAY BE CITED AS: | Banksia Securities Limited v The Trust Company |
MEDIUM NEUTRAL CITATION: | [2017] VSC 583 |
---
EVIDENCE – Privilege – Waiver of privilege – Whether sufficient disclosure – Whether inconsistent conduct.
EVIDENCE – In-house counsel – Communications – Whether privileged – Whether independence is a requirement.
EVIDENCE – Communication of privileged documents to third parties – Third parties bound by confidentiality – Documents retain privilege.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. A. Redwood with Mr P. M. Bindon | Maddocks |
| For the Defendant | Mr I. G. Waller QC with Mr P. G. Liondas and Ms F. L. Shanel | Clayton Utz |
HIS HONOUR:
A Introduction
This is an application by the plaintiff, Banksia Securities Limited (Banksia), by summons dated 23 June 2017 for orders pursuant to s 55 of the Civil Procedure Act 2010 (Vic) and/or r 29.11 of the Supreme Court (General Civil Procedure) Rules 2015 that the defendant, The Trust Company (Nominees) Limited (Trust Co) discover certain specified documents.
The documents sought comprise:
(a) communications from Gadens Lawyers (Trust Co’s lawyers) to Trust Co concerning legal advice about Statewide Secured Investments Pty Ltd (Statewide) and the Amalgamation and steps available to Trust Co under the Statewide Trust Deed and communications between Trust Co officers, in March or April 2009, about that advice (Gadens Related Communications);
(b) communications to or from Anthony Evans (Trust Co’s in-house counsel) between December 2008 and December 2009 (Evans Communications); and
(c) communications between staff of Trust Co and staff of McGrath Nicol, a business and accountancy advisory firm which provided non-legal services to Trust Co during the relevant period (McGrath Nicol Related Communications).
Banksia relies upon an affidavit of Daniel Fitzgerald sworn 23 June 2017 (Fitzgerald Affidavit), the affidavit of David Charles Newman sworn 23 June 2017 (Newman Affidavit) and the further affidavit of David Charles Newman sworn 9 August 2017 (Supplementary Newman Affidavit). Trust Co relies on the affidavit of Lindsey Ann Cregan affirmed 1 September 2017 (Cregan Affidavit).
B Background[1]
[1]I have taken the largely uncontroversial background facts from the outline of submissions filed by Banksia, for which I am grateful.
Banksia’s request for discovery of the Gadens Related Communications, Evans Communications and McGrath Nicol Related Communications must be assessed in the context of its claim against Trust Co in this proceeding (the Banksia Proceeding) and the related Bolitho Proceeding. Banksia’s Claim is set out in the restated and consolidated statement of claim dated 9 February 2017 (Banksia SOC).[2]
[2]For convenience, defined terms appearing in these submissions have the same meaning as in the Banksia SOC, unless indicated otherwise.
In general terms, Banksia’s claim relates to an alleged conflict of duty which resulted in Trust Co breaching its statutory obligations under Chapter 2L of the Corporations Act 2001 (Cth).
The factual context in which the allegations of breach arose was the amalgamation in early 2009 of Banksia with Statewide (Amalgamation). Statewide was another, larger debenture-issuer which was insolvent by reason of its perilous financial and capital position. Both Banksia and Statewide were finance company debenture-issuers regulated by trust deeds under Chapter 2L. Those trust deeds included the usual kind of financial and operating covenants for issuers of that kind. Trust Co was the trustee for both Banksia and Statewide and by virtue of that position Banksia says it had superior knowledge of Statewide’s particular financial circumstances. The Special Purpose Receivers allege that the Amalgamation ultimately led to Banksia’s collapse in late 2012.
On 13 March 2009, the Banksia Board resolved to enter into the Amalgamation. The Amalgamation Agreement was executed on 18 March 2009. It provided for the Amalgamation to become effective on 30 March 2009 by the purchase of Statewide’s shares by Banksia’s parent, Securities Hold Co Limited, for nil consideration. On or about 18 and 19 March 2009, Banksia and Statewide informed Trust Co that Banksia and Statewide had agreed to merge their businesses and Trust Co was sent a copy of the press release of Banksia announcing the transaction on 19 March 2009. That press release provided that ‘The Boards of Directors of The Banksia Financial Group and Statewide Secured Investments’ had reached an agreement to amalgamate, effective from 30 March 2009, and that the ‘amalgamated entity [would] trade under The Banksia Financial Group banner.’ Following the effectiveness of the Amalgamation Agreement on 30 March 2009, the Amalgamation was implemented by the progressive transfer of substantially all of Statewide’s loans and debentures to Banksia from approximately May 2009 to October 2010.
The core allegation[3] is that the entry into and implementation of Amalgamation placed Trust Co in a position of conflict in the discharge of simultaneous duties because that transaction was likely to be in the interests of Statewide and its debenture-holders but was unlikely to be in the interests of Banksia and its debenture-holders.
[3]Banksia SOC at [55]-[57].
Banksia alleges that Trust Co thereby breached ss 283AC and 283DA(f) of the Corporations Act by continuing to act as trustee for Banksia and Statewide in these circumstances and not informing Banksia (and ASIC) of its conflict. Banksia also pleads a parallel cause of action in contract and tort.[4] Had Trust Co not breached its duties Banksia alleges the Amalgamation or its ongoing implementation would not have occurred.
[4]Banksia SOC at [2(t)(vi)], [60], [65].
Relevantly, Banksia also pleads[5] that by its conduct Trust Co impliedly consented to the Amalgamation for the purposes of clause 12.01(k) of the Statewide Trust Deed and otherwise did not take appropriate steps to manage its conflict such as by obtaining appropriate external legal advice prior to the consummation of the merger on 30 March 2009 (12 days after it was brought to its attention) and otherwise obtained no advice at all as to its potential conflict prior to the effective date of the Amalgamation (or subsequently during the extended period of implementation).
[5]Banksia SOC at [59].
Running alongside Banksia’s claim are the claims made against Trust Co in the related Bolitho Proceeding. The two proceedings are closely interrelated, are to be heard together and evidence in one will be evidence in the other. The Bolitho Proceeding makes similar allegations of conflict as the Banksia Proceeding and also alleged a series of further breaches directed at Trust Co’s failure to exercise its statutory duties of reasonable diligence. Those breaches are also picked up by Banksia in its Amended Reply and Defence in the Banksia Proceeding and by Banksia in its Defence in the Bolitho Proceeding.
Together, Banksia’s claim and the claims made by debenture-holders in the Bolitho Proceeding all allege that Trust Co’s position of conflict led to its repeated and comprehensive failure thereafter to take steps that a prudent trustee concerned to protect the interests of Banksia and its debenture-holders would have taken in the circumstances. That failure resulted in loss and damage to Banksia (and therefore its debenture-holders) in excess of $100 million (including losses flowing from Banksia’s ultimate collapse) which is sought to be recovered in the two proceedings. Banksia’s debenture-holders are currently still owed in excess of $170 million (in principal and capitalised interest) under the Banksia Trust Deed.
C Gadens Related Communications
The Gadens Related Communications comprise the advice given by Gadens to Trust Co dated 6 April 2009 concerning Statewide and the Amalgamation (Gadens Advice) and communications between Trust Co officers concerning the Gadens Advice. Trust Co objects to discovering the Gadens Advice on the basis that it is protected by client legal privilege. The Gadens Related Communications have been identified in a schedule of privilege claims provided by Clayton Utz dated 6 April 2009 (CU Privilege Schedule).
The conduct of Trust Co in March and April 2009, through the dealings and communications of in-house counsel for Trust Co, Anthony Evans (Evans) with in-house counsel for Banksia, Daniel Fitzgerald (Fitzgerald), amounted, it was submitted, to:
(a) a knowing and voluntary disclosure of the Gadens Advice to Banksia; or
(b) conduct that was otherwise inconsistent with Trust Co now seeking to maintain the confidentiality of the Gadens Advice,
sufficient to conclude that any client legal privilege existing over the Gadens Advice has been lost under s 122 of the Evidence Act 2008 (Vic).
Trust Co submitted that there was no disclosure of the substance of the Gadens Advice and further there was and is no inconsistency giving rise to any waiver.
The evidence
Banksia relies on facts, matters and circumstances set out in the Fitzgerald Affidavit and the Newman Affidavit.
By way of general background:
(a) As noted, Fitzgerald was the in-house solicitor for Banksia and Evans was an in-house solicitor for Trust Co;
(b) Gadens were Trust Co’s lawyers at all relevant times throughout 2008 until the appointment of receivers to Banksia on 25 October 2012;
(c) during that relevant period Trust Co had on a number of occasions communicated to Banksia the comments it had received from Gadens about Banksia’s prospectuses;[6]
(d) on occasions during that relevant period, Gadens would communicate its comments on Banksia’s draft prospectuses directly to Banksia.[7]
[6]Pages 232 to 464 of exhibit DCN-1 to the Newman Affidavit.
[7]Pages 232 to 464 of exhibit DCN-1 to the Newman Affidavit.
In late 2008, prior to the Amalgamation, correspondence had been exchanged between ASIC and Statewide.[8] In the lead up to the Amalgamation, Trust Co had also been investigating Statewide’s financial position, especially in relation to Statewide’s exposure to impairments arising from financial instruments (CDOs).
[8]Pages 131 to 231 of exhibit DCN-1 to the Newman Affidavit.
Shortly after Trust Co became aware of the proposed Amalgamation on 18 March 2009, Evans contacted Fitzgerald on 23 March 2009 making reference to the Amalgamation and indicating, amongst other things, that Trust Co would be pursuing Statewide for further information about its CDOs and various other matters.
On 7 April 2009 (a week after the Amalgamation became effective), Evans sent an email to Fitzgerald asking Fitzgerald to contact him to work out how to progress some aspects of Banksia’s acquisition of Statewide. On 8 April 2009 Fitzgerald responded as to his limited availability.
On 21 April 2009 Fitzgerald received a further email from Evans informing him that he had he had attempted to call him on the Friday of the preceding week and stating:
We are very concerned that both the former Statewide officers and now Banksia have not considered dealing with the Trustee to be important enough.
We will now be proceeding with a formal notice on Banksia in regard to the failure of Statewide to adhere with the requirements of the trust deed in regard to the merger of the two issuers [sic].
Fitzgerald then raised the matter with Banksia’s managing director, Pat Godfrey, who asked Fitzgerald to determine the nature of Trust Co’s concerns.
On 22 April 2009, Fitzgerald then called Evans and made arrangements to meet him later that day at a cafe on Collins Street. Fitzgerald informed Godfrey by email that he had made arrangements to meet Evans. That email also referred to the conversation he had with Evans in which according to Fitzgerald Evans indicated that Trust Co had not received adequate responses from Statewide on certain matters that Trust Co had requested.
At the meeting:
(a) Evans outlined the various concerns that Trust Co held about Statewide and the Amalgamation,[9] referred expressly to legal advice received by Trust Co from Gadens and foreshadowed serious action that Trust Co was considering taking based on that legal advice;
(b) while doing so, Evans held up a copy of a document on ‘Gadens Lawyers’ letterhead and indicated to Fitzgerald that this document was advice that Trust Co had received from Gadens;[10] and
(c) the impression that Fitzgerald was left with was that Evans was trying to emphasise to Fitzgerald the seriousness of the concerns he was raising by indicating that they arose from the advice Trust Co had obtained from Gadens.[11]
[9]As set out in [24] of the Fitzgerald Affidavit.
[10]At [25] of the Fitzgerald Affidavit.
[11]At [25] of the Fitzgerald Affidavit.
The account in Fitzgerald’s Affidavit as set out above is, it was submitted, consistent with a contemporaneous memorandum (the Memorandum) by Fitzgerald summarising the meeting.[12] That memorandum relevantly stated:
It seems they had some very detailed correspondence and exchanges with Statewide about their accounts and their prospectus. He says then, out of the blue, Statewide informed them by phone that they are merging with Banksia and nothing else is required. Trust Co has had expectations that it would formally notified and its consent to a merger formally sought. It would then have formally spelled out its further requirements for compliance with the Statewide trust deed.
I gather Trust Co was close to issuing a notice of default based on the Gadens advice as well as requiring Banksia to provide specific answers to a series of issues raised by Gadens. That move might be deferred so long as we make appropriate contact and agree to meet with Trust Co on 30 April after the Board meeting.
[12]Exhibit DJF-1 to Fitzgerald Affidavit at p 12.
Further, in a statement dated 30 November 2015 (the Statement), Fitzgerald stated:
Following my meeting with Mr Evans, I sent the memo referred to above at paragraph 39 [BAN.999.033.0331] to Pat Godfrey and Wes Santilla indicating that Mr Evans had been in contact and summarising our discussions including that I understood that:
(i) Trust Co was close to issuing a notice of default based on the advice from Gadens Lawyers and requiring Banksia to provide specific answers to a series of issues raised by Gadens Lawyers; and
(ii) Trust Co had expected to be formally notified of the proposed Amalgamation and Trust Co’s consent sought, but this had not happened.
I suggested that Mr Godfrey, Mr Santilla and I meet with representatives of Trust Co on 30 April 2009.
Legal principles
Pursuant to s 118 of the Evidence Act 2008 (Vic) (the Act) evidence is not to be adduced if it would result in disclosure of “a confidential communication...prepared by the client, lawyer, or another person…for the dominant purpose of the lawyer…providing legal advice to the client”.[13]
[13]Evidence Act 2008 (Vic) s 118.
However, pursuant to s 122(2) of the Act, s 118 of the Act does not prevent the adducing of evidence in circumstances where “the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence”[14] or (pursuant to s 122(3)(a) of the Act) in circumstances where the “client or party knowingly and voluntarily disclosed the substance of the evidence to another person”.[15]
[14]Evidence Act 2008 (Vic) s 122(2).
[15]Evidence Act 2008 (Vic) s 122(3)(a).
Section 122 of the Act was intended to align the statutory regime more closely with the test for waiver of privilege at common law as expressed by the High Court in Mann v Carnell.[16] The Court identified inconsistency between the conduct of the client and “maintenance of the confidentiality”[17] or the “purpose of the privilege”[18] as the touchstone of the test for loss of privilege.
[16]Explanatory Memorandum, Evidence Bill 2008 (Vic) 46.
[17](1999) 201 CLR 1, [29].
[18]Mann v Carnell (1999) 201 CLR 1, [35].
The party resisting the claim for privilege bears the onus of establishing that such privilege has been waived. [19]
[19]Rich v Harrington (2007) 245 ALR 106, [8]; Nine Films & Television Pty Ltd v Ninox Television Ltd [2005] FCA 356, [21]; Mullett v Nixon [2016] VSC 129, [11].
Although waiver is a question of fact requiring consideration of the particular circumstances of the case at hand,[20] it has been established that revealing elements of legal advice, or even its substantive recommendation or conclusion, does not necessarily amount to waiver of the privilege.[21] A distinction should be drawn between disclosing the substance of the legal advice, and disclosure from which inferences may be drawn as to what was advised.[22] Merely exposing the ultimate recommendation or conclusion of legal advice falls short of disclosing the substantive reasoning contained therein and consequently cannot be said to be sufficient disclosure or conduct inconsistent with maintaining privilege over the remainder of the advice.
[20]Osland v Secretary of Justice (2008) 234 CLR 275, [49]; Rich v Harrington (2007) 245 ALR 106, [31].
[21]Mullett v Nixon & Ors [2016] VSC 129, [33].
[22]Osland v Secretary, Department of Justice (2008) 234 CLR 275, [45].
As was noted by Darke J in RinRim Pty Ltd v Deutsche Bank Australia Limited & Ors:
Generally, the reasoning of the lawyer forms the essence of a legal advice or opinion. The disclosure here is limited to the bare fact that the Advice contains a particular recommendation. Even if the recommendation was regarded as “the substantive recommendation of counsel”, I do not think that the mere disclosure of its existence amounts to disclosure of the gist or essence of the Advice. To my mind, the extent of the disclosure falls short of disclosure of the substance of the Advice within the meaning of s122(3) of the Act.[23]
[23]RinRim Pty Ltd v Deutsche Bank Australia Limited & Ors [2013] NSWSC 1654, [44].
Ultimately, given the application of s 122 of the Act ultimately turns on the extent of disclosure of the substance of the advice and on an assessment of inconsistency between the maintenance of privilege and the conduct of the party seeking its protection, it is instructive to bear in mind the observation of Young CJ in Eq in Landmark Underwriting Agency Pty Ltd v Kilborn[24] regarding cases of this nature:
The present, to my mind, is a borderline case. Borderline cases of this nature need to be decided by impression because dwelling on the matter usually only leads to confusion rather than to clarity….if on one’s impressionistic reading of the material one sees that it is a borderline case and has some doubt about the matter, then the doubt should be resolved by maintaining the privilege.[25]
[24][2006] NSWSC 1108.
[25]Landmark Underwriting Agency Pty Ltd v Kilborn [2006] NSWSC 1108, [116].
Analysis
In my opinion it is sufficiently clear from the evidence referred to, that there has not been sufficient disclosure of the substance of the Gadens Advice and accordingly there has been no disclosure waiver.
Banksia has failed to establish that Trust Co knowingly and voluntarily disclosed the substance of the advice provided to Banksia, or that Trust Co’s conduct was in any other way inconsistent with Trust Co objecting to the adducing of evidence by reliance on s 118 of the Act.
Fitzgerald does not say what the substance or reasoning underpinning the advice was. Rather, he speculates as to what the advice must have been from the fact of the advice, the conclusion and other contextual matters. This speculative and inferential reasoning is impermissible and does not establish any actual disclosure of the actual substance of the advice. The fact is that the substance of the advice was not discussed and guesswork from the nature and context of the discussion is insufficient. Most importantly, the Memorandum, a contemporaneous document, says nothing about the substance of the advice. To undertake a course of action based on advice does not go far enough to reveal or disclose the substance of the advice. The Statement does not take the matter any further. Although more expansive, the Fitzgerald Affidavit does not reveal the substance of the advice or any reasoning. It does not take the matter any further.
In my opinion, given the nature of the communications, it follows that the internal communications relating to the Gadens Advice are covered by the privilege.
D Evans communications
The CU Privilege Schedule identified a number of documents purportedly protected by client legal privilege and described in general terms as internal communications to, or from, Evans as in-house counsel.
In correspondence between the parties,[26] Banksia sought clarification of the basis for the claim to privilege over these documents for the period December 2008 and December 2009.
[26]Exhibit DCN-2 to the Supplementary Newman Affidavit at pp 643-644.
In response to that correspondence, Trust Co:
(a) provided a description of nine documents falling within this category and an explanation of the basis of the claim to privilege over them (it was noted that four of these documents are already included in the Gadens Related Communications); and
(b) produced copies of eight documents ostensibly falling within this category but in respect of which a claim to privilege is no longer maintained.[27]
[27]Exhibit DCN-2 to the Supplementary Newman Affidavit at pp 648-654.
Trust Co’s assertion that the communications to and from Evans are protected by client legal privilege cannot, it was submitted, be sustained in the absence of clear evidence from Evans establishing that he was acting in a sufficiently independent legal professional capacity for the purpose of those communications and that the communications were for the dominant purpose of Evans giving confidential legal advice to Trust Co or Evans obtaining confidential legal advice from its external lawyers (Gadens).
Trust Co submitted that it was not a requirement that in-house counsel be sufficiently independent or that it was necessary for in-house counsel to give evidence. The relevant enquiry, it was submitted, by reference to authorities, was whether at the relevant time in-house counsel, in this case Evans, was acting as a lawyer and the relevant communications were for the dominant purpose of obtaining legal advice.
The evidence
The evidence[28] establishes that Evans was employed by Trust Co as a lawyer with the title of Corporate Solicitor, and any administrative or managerial tasks he undertook were incidental to his legal role. Evans’s legal role included, among other things, providing legal advice to Trust Co including through members of the Structured Finance team in relation to issues concerning Trust Co’s role as trustee for debenture-issuers, and undertaking legal reviews of issuer’s prospectuses which related to the trustee.[29] Evans was not involved in the day-to-day monitoring or review of the reports, certificates and information provided by debenture-issuers to Trust Co under their relevant trust deeds or as required by the Corporations Act. This work was undertaken by other members of the Structured Finance team, and in particular, two financial analysts, each of whom reported directly to the manager of the Structured Finance team (Mr Silavecky).[30]
[28]See paras 18 to 24 of the Cregan Affidavit, which refers to the inquiries made from Evans, as well as relevant evidence from the witness statements filed by Mr Silavecky (Tab 10 of Exhibit LAC-1) (Silavecky Statement) and Mr Renouf (Tab 11 of Exhibit LAC-1) (Renouf Statement), and his contract of employment (Tab 9 of Exhibit LAC 1).
[29]Silavecky Statement at [10], Renouf Statement at [7].
[30]See paras 18 to 24 of the Cregan Affidavit.
Legal principles
Trust Co rely on s 118 of the Act, to which I have previously referred.[31]
[31]See above Gadens Related Communications, Legal principles.
The party seeking to assert legal professional privilege bears the onus of establishing the basis for its application, and accordingly bears the onus of establishing the facts from which the court can determine that the privilege is capable of being asserted.[32] As noted by Beach J in Asahi Holdings (Australia) Pty Ltd v Pacific Equity Partners Pty Limited:[33]
[T]he applicants bear the onus of establishing the claims, including each factual element necessary to establish the requisite dominant purpose….There should be sufficient evidence which process directly or by inference that the dominant purpose for the communication was for the relevant client to be given or to obtain legal advice.[34]
[32]Tabcorp Holdings Ltd v Victoria [2013] VSC 302, [74]; Powercor Australia Ltd v Perry (2011) 33 VR 548, [42]; Priest v New South Wales [2006] NSWSC 1281, [21]; Grant v Downs (1976) 135 CLR 674, 689; National Crime Authority v S (1991) 29 FCR 203, 211.
[33][2014] FCA 796.
[34][2014] FCA 796, [29].
The “purpose” to which “dominant purpose” refers is the purpose that led to the creation of the document or the making of the communication.[35] The dominant purpose of the communication is determined objectively, having regard to the evidence and nature of the document,[36] though evidence of the subjective purpose of the person making the communication or creating the document is also relevant.[37]
[35]IOOF Holdings Ltd v Maurice Blackburn Pty Ltd [2016] VSC 311, [47]; Carnell v Mann (1998) 89 FCR 247, 253F.
[36]IOOF Holdings Ltd v Maurice Blackburn Pty Ltd [2016] VSC 311, [47]; Commissioner of Taxation (Cth) v Pratt Holdings Pty Ltd (2005) 225 ALR 266, 278.
[37]Carter Holt Harvey Wood Products Australia Pty Ltd v Auspine Ltd [2008] VSCA 59, [2].
Some attention has been given in the case law to the status of in-house counsel and the importance of establishing that the in-house counsel was, in making the communications over which privilege is invoked, acting in a legal professional capacity, entailing an element of independence and detachment from the commercial activities of the business at large.[38]
[38]Archer Capital 4A and Sage Group (No 2) (2013] FCA 1098, [59]-[73]; Rich v Harrington (2007) 245 ALR 106, [40], [58]; Seven Network Ltd v News Ltd [2005] FCA 1551, [4]-[5]; Australian Hospital Care (Pindara) Pty Ltd v Duggan [1999] VSC 96, [37], [54], [67].
However, such focus on the level of independence of in-house counsel, whilst helpful, should not distract from the primary task of assessing the dominant purpose of the communications.[39] One must be cautious to avoid importing a test of independence that finds no basis within the statutory text.[40]
[39]Dye v Commonwealth Securities Ltd (No 5) [2010] FCA 950, [15]-[19]; Cargill Australia Ltd v Viterra Malt Pty Ltd and Ors [2017] VSC 126, [160].
[40]Cargill Australia Ltd v Viterra Malt Pty Ltd and Ors [2017] VSC 126, [160].
In Seven Network Ltd v News Ltd,[41] Tamberlin J observed:
Commercial reality requires recognition by the courts that the fact that employed legal advisers not practising on their own account may often be involved to some extent in giving advice of a commercial nature related to the giving of legal advice. Such involvement does not necessarily disqualify the documents relating to that privilege. The matter is necessarily one of fact and degree involves a weighing of the relative importance of the identified purpose.
[41][2005] FCA 142
Similarly, in Archer Capital 4A Pty Ltd & Ors v Sage Group PLC (No 2), Wigney J noted:
A communication between a lawyer and his or her employer is unlikely to satisfy the dominant purpose test if the lawyer was not employed as a lawyer…or the lawyer was not consulted in his or her professional capacity as a lawyer….A communication between the lawyer and his or her employed in those circumstances would not be privileged because it would not meet the dominant purpose test, not because the lawyer was not independent. On the other hand, if the relationship between the employer and lawyer was professional…the resulting communication is likely to satisfy the dominant purpose test.
….Legal professional privilege will attach…if it is established that the communication arises as a result of the employer consulting the employed solicitor in a professional capacity in relation to a professional matter that arises from the relationship of lawyer and client.[42]
[42]Archer Capital 4A Pty Ltd & Ors v Sage Group PLC (No 2) [2013] FCA 1098, [72].
It is the communications themselves to which the privilege attaches, as opposed to protecting the source of the communications generally. As has been previously observed, “the mere fact that a person speaking is a solicitor, and the person to whom he speaks is his client, affords no protection”.[43] Consequently, the focus must be on the dominant purpose of the communications themselves, rather than undue concentration on the role of in-house counsel within the business.
[43]Minter v Priest [1930] AC 558, 568.
Consequently, a party opposing a claim of privilege may seek to elicit facts that demonstrate in-house counsel was not acting independently, for the purposes of establishing that the dominant purpose of the communications could not be the provision of purely legal advice.[44] It is thus erroneous to speak of a presumption of a lack of independence.[45]
[44]Aquila Coal Pty Ltd v Bowen Central Coal Pty Ltd [2013] QSC 82, [9]; Australian Hospital Care Pty Ltd v Dugan (No 2) & Ors [1999] VSC 191, [67].
[45]Aquila Coal Pty Ltd v Bowen Central Coal Pty Ltd [2013] QSC 82, [9].
This being said, whilst not extending to purely commercial advice, the nature of the advice to which privilege may attach is not restricted to formal advice as to the law, and may extend to advice as to what should prudently and sensibly be done in the relevant legal framework.[46]
[46]IOOF Holdings Ltd v Maurice Blackburn Pty Ltd [2016] VSC 311, [47]; DSE (Holdings) Pty Ltd v InterTAN Inc (2003) 135 FCR 151, [21]-[22] and [30]-[71]; Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325; AWB Ltd v Cole (2006) 152 FCR 382; BHP Billiton Olympic Dam Corporation Pty Ltd v Bluestone Apartments Pty Ltd (2013) 115 SASR 586, [62]-[64].
Analysis
In my opinion it is sufficient, and the evidence establishes, that in relation to the relevant communications, Evans was acting as in-house counsel or Corporate Solicitor and further, the evidence establishes, that the relevant communications were for the dominant purpose of obtaining legal advice. The communications are therefore subject to privilege.
Much was made of the fact that Evans, no longer in the employ of Trust Co, failed to give evidence. In my opinion he was not required to give evidence and no adverse inference should be drawn from his failure to do so.
In my opinion independence as a separate ground is not required although it may be relevant in the determination of the other matters. However, as noted, I find as a fact that Evans was acting in such capacity for the dominant purpose referred to.
E McGrath Nicol Related Communications
The communications contained in the McGrath Nicol Documents are identified in the CU Privilege Schedule as relating to Trust Co obtaining advice about ‘Trust Co’s appointment rights under the Banksia trust deed’ and ‘in relation to Trust Co consent to Banksia Prospectus 19’ during September and October 2012.
The McGrath Nicol Related Communications:
(a) are plainly relevant, it was submitted, as they relate to Trust Co’s evaluation of actions available to it in September and October 2012 which in turn bear directly on whether a prudent trustee in Trust Co’s position should have considered taking similar actions at an earlier point in time in respect of Banksia or Statewide. The question of what a prudent trustee in Trust Co’s position would have done is, it was submitted, a central issue on the face of the pleadings in both this proceeding and claims by debenture-holders in the Bolitho Proceeding;
(b) do not on their face attract the legal advice privilege under s 118 of the Evidence Act alleged because there is an insufficient basis to conclude that the communications comprising the McGrath Nicol Related Communications are communications with a ‘lawyer’, or are exclusive to the lawyer and client relationship.
Trust Co submitted that obligations of confidentiality on the part of a third party, in this case McGrath Nicol, retained the privileged status of the document. Alternatively, it was submitted that McGrath Nicol were agents and within the circle of privilege.
The evidence
Each of the McGrath Nicol Related Communications arose in the context that two employees of McGrath Nicol, including Mark O’Reilly (O’Reilly), had been seconded to Trust Co under express terms[47] that:
[47]The terms of the secondment were set out in a letter dated 14 June 2012 addressed to Trust Co which is at exhibit DCN-1, pp 477 to 481 of the First Newman Affidavit (Secondment Terms).
(a) they were under the responsibility, direction and control of Trust Co;
(b) other employees of McGrath Nicol (Joseph Hayes (Hayes) and Barry Kogan (Kogan)) were to meet with Trust Co during the secondment to discuss relevant issues; and
(c) all the relevant McGrath Nicol personnel were to keep Trust Co’s information confidential.
O’Reilly was also subject to a separate express obligation not to disclose Trust Co’s confidential information, except to Kogan, Hayes or Anthony McGrath (McGrath) as required for the secondment.[48] During the secondment, the McGrath Nicol personnel were copied into, or forwarded emails by Trust Co and its legal advisers, and from time to time they responded to these emails.[49]
[48]Secondee Confidentiality Agreements dated, 20 June 2012. (See Tab 9 of Exhibit LAC-1).
[49]See para 48 of the Cregan Affidavit.
Ms Cregan deposes that she has reviewed each of the McGrath Nicol Related Communications and on the basis of her review and her understanding of the role played by the relevant lawyers under their relevant retainers, she believes that:
(a) the five documents which are referred to as being in respect of the ‘Gadens No 19 Retainer’, disclose confidential communications between Trust Co and Gadens which were made for the dominant purpose of Trust Co obtaining legal advice from Gadens (Gadens No 19 Retainer documents);
(b) the 10 documents which are referred to as being in respect of the ‘In-house Request’, disclose confidential communications between Trust Co and Mr Kim (Senior Legal Counsel) and/or Mr Bryant (Group General Counsel) which were made for the dominant purpose of Trust Co obtaining legal advice from Mr Kim and/or Mr Bryant in their professional capacity as a lawyer on a professional matter (In-house Request documents);
(c) the 49 documents which are referred to as being in respect of the ‘Ashurst Retainer’, disclose confidential communications between Trust Co and Ashurst which were made for the dominant purpose of Trust Co obtaining legal advice from Ashurst (Ashurst Retainer documents).[50]
[50]See para 53 of the Cregan Affidavit. Ms Cregan deposes further that 11 of the documents were made for the dominant purpose of Trust Co obtaining legal advice under both the In-house Request and the Ashurst Retainer.
Legal principles
The authorities establish that there can be limited disclosure of privileged communications to a third-party without loss of such privilege, provided the communication is provided to the third-party for a limited purpose on a confidential basis.[51]
[51]Australian Rugby Union Ltd v Hospitality Group Pty Ltd (1999) 165 ALR 253, [40]; Network Ten Ltd v Capital Television Holdings Limited (1995) 36 NSWLR 275, 286.
In Spotless Group Ltd & Ors v Premier Building and Consulting Group Pty Ltd,[52] Chernov JA observed:
That the re-communication was in written form is, as I have said, irrelevant to this issue. What is of relevance is that, on its proper characterisation, the communication that was made to the third parties, effectively by the respondent, was the legal advice which it had received and to which privilege attached. There is no need, in those circumstances, to ask whether the re-communication was made for a “privileged purpose”. Rather, the relevant question is, as it was in Mann, whether by “passing on” that communication to the third parties the respondent had waived the privilege.”[53]
[52][2006] VSCA 201.
[53][2006] VSCA 201, [20].
A document may be privileged to the extent to which it records a privileged communication, even if the document itself would not satisfy the dominant purpose test.[54]
[54]Asahi Holdings (Australia) Pty Ltd v Pacific Equity Partners Pty Ltd [2014] FCA 796, [35].
Similarly, in Slea Pty Ltd v Connective Services Pty Ltd & Ors,[55] Almond J said:
In my view, the relevant enquiry is whether or not the inclusion of a third party in a communication made between the client and a lawyer means that the communication (or the document) is no longer confidential. That question will be answered by determining whether the person who made the communication, or the person to whom the communication was made, was under an express or implied obligation not to disclose its contents.[56]
[55][2017] VSC 361.
[56]Slea Pty Ltd v Connective Services Pty Ltd & Ors [2017] VSC 361, [23].
Analysis
In light of the express obligations of confidentiality, and the obligations to be implied from the circumstances of the retainer of McGrath Nicol and the communications between Trust Co and its lawyers, the fact that the McGrath Nicol employees were included in the correspondence, or were forwarded or replied to communications disclosing privileged communications does not negate the fact that the emails disclose confidential communications which were made between a client and lawyer for a privileged purpose and further does not result in any express or implied waiver of the client legal privilege subsisting in the communications and was consistent with Trust Co maintaining privilege over the communications.
Accordingly, the privileged communications remained confidential and retained their privileged status notwithstanding disclosure to third parties in the specific circumstances referred to. It follows that it is not necessary to deal with the alternative submissions based on agency.
F Disposition
For the reasons given, the application will be dismissed.
25
0