Bloomfield and Grainger and Anor - [2017] FamCA 32

FAMILY COURT OF AUSTRALIA

BLOOMFIELD & GRAINGER AND ANOR

[2017] FamCA 32

FAMILY LAW – PRACTICE AND PROCEDURE – Legal professional privilege – Application by the Applicant seeking an order that the First Respondent produce documents over which he has claimed legal professional privilege – Application granted.

Family Law Act 1975 (Cth)
Evidence Act 1995 (Cth)

Attorney-General (NT) v Kearney (1985) 158 CLR 500
AWB Ltd v Cole (No 5) (2006) 155 FCR 30
Commr of Police v Propend Finance Pty Ltd (1997) 188 CLR 501
Crescent Farm (Sidcup) Sports Ltd v Sterling Offices Ltd [1972] Ch 553
Gartner v Carter [2004] FCA 258
Grant v Downs (1976) 135 CLR 674
P & V Industries Pty Ltd v Anthony Porto (No 3) [2007] VSC 113
R v Bell; Ex parte Lees (1980) 146 CLR 141
Southern Equities Corporation Limited (in liq) v Arthur Anderson & Co (1997) 70 SASR 166
Varawa v Howard Smith & Co Ltd (1910) 10 CLR 382 at 386

APPLICANT:

Ms Bloomfield

FIRST RESPONDENT:

Mr Grainger

SECOND RESPONDENT:

The Bankrupt Estate of Ms Grainger

FILE NUMBER:

BRC

2014

DATE DELIVERED:

27 January 2017

PLACE DELIVERED:

Brisbane

PLACE HEARD:

Brisbane

JUDGMENT OF:

Hogan J

HEARING DATE:

27 September 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Jones

SOLICITOR FOR THE APPLICANT:

Tucker & Cowen

COUNSEL FOR THE RESPONDENT:

Dr Greinke

SOLICITOR FOR THE RESPONDENT:

Morgan Conley Solicitors

Orders

IT IS ORDERED THAT

The First Respondent disclose the correspondence from Morgan Conley Solicitors to him dated 17 October 2012 and 19 October 2012 to the Applicant by 4.00 pm on Tuesday 31 January 2017.
The Application for an order in terms of Clause 2 of Annexure ‘A’ to the Applicant’s Application in a Case filed 21 June 2016 is adjourned to a date to be fixed.
Each party’s costs of and incidental to that part of the Applicant’s Application in a Case filed 21 June 2016 which relates to the relief sought in Clause 2 of Annexure ‘A’ to that Application in a Case are reserved.
The cross-application contained within Item 4 of Part B of the Response to an Application in a Case filed 26 July 2016 is adjourned to a date to be fixed.
Each party’s costs of and incidental to the cross-application contained within Item 4 of Part B of the Response to an Application in a Case filed 26 July 2016 are reserved.
In the event that either party otherwise seeks that the other pays his or her costs of and incidental to the appearance on 27 September 2016, that party shall:
(a)file and serve brief written submissions in support of such application for costs within 14 days of the date hereof; and
(b)the party against whom an order for costs is sought shall file and serve any brief written submissions in answer to any submission filed and served by the party seeking costs within a further 14 days thereafter; and
(c)the party seeking costs shall file and serve any brief further written submissions strictly in reply to the submissions served by the party against whom costs are sought within seven (7) days of its service,
and all such applications for costs shall be determined in Chambers.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Bloomfield & Grainger and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 89 OF 2014

Ms Bloomfield

Applicant

And

Mr Grainger

First Respondent

And

The Bankrupt Estate of Ms Grainger

Second Respondent

REASONS FOR JUDGMENT

Despite the terms of the Application in a Case,[1] discourse between Counsel who appeared for each of the Applicant and the First Respondent distilled the application to one about the production of two pieces of correspondence, dated 17 and 19 October 2012 respectively, from the First Respondent’s solicitors to him.
[1]Filed 21 June 2016, by which the Applicant originally sought that the First Respondent produce documents created or modified up to and including 1 November 2012 (the date of the Binding Financial Agreement between the First Respondent and Ms Grainger) in respect of which he claimed privilege in the List of Documents dated 15 June 2016.
This followed upon Counsel for the First Respondent outlining for the Court that this is the only correspondence in existence in respect of which legal professional privilege is claimed and the production of which is resisted on this basis.
The Applicant refutes the Respondent’s claim that he is not required to produce the communications on the basis that the nature of the communication contained within the correspondence is such that legal professional privilege does not attach to them.
After an order was made pursuant to s 133 Evidence Act 1995 (Cth), both documents were provided to the Court to permit them to be inspected for the purpose of determining the Applicant’s application for production of the same and the First Respondent’s claim that they are properly the subject of a claim for legal professional privilege.
Broad overview
Ms Grainger purchased an unencumbered property at Suburb B in Queensland in 2007. She subsequently borrowed amounts totalling about $2.6 million from Suncorp Bank. These borrowings were secured by, amongst other things, a mortgage over the Suburb B property and a guarantee and indemnity given by the First Respondent.
Proceedings between Ms Grainger and the Applicant initially resulted in Ms Grainger obtaining a Judgment, dated 28 April 2011, against the Applicant in the amount of $250,000.00 plus interest.
The Applicant appealed this determination. The appeal was heard on 5 September 2011. On 16 September 2011, the April 2011 Judgment was set aside and, instead, judgment was given in the Applicant’s favour against Ms Grainger in the amount of $2,100,000.00 plus interest.
In August 2012, Ms Grainger’s application to the High Court for special leave to appeal the September 2011 determination was dismissed.
On or about 28 or 29 August 2012, the First Respondent and Ms Grainger attended a meeting with Messrs D and E of Morgan Conley Solicitors. The purpose of that meeting is in dispute: the Applicant’s assertion that a purpose of it was to discuss how to protect the Suburb B property as a consequence of the September 2011 Judgment is denied by the First Respondent, who contends that the only purpose of the meeting was to discuss the refusal of special leave and potential options for settlement with the Applicant.
On or about 11 October 2012, the First Respondent attended a meeting with Messrs D and E in relation to the guarantee he had provided to Suncorp as security for Ms Grainger’s borrowings.
On or about 14 October 2012, a Bankruptcy Notice was served on Ms Grainger in respect of the judgment debt.
On or about 17 October 2012, Morgan Conley Solicitors wrote a letter of advice to the First Respondent. This communication is one of the communications the subject of the claim of legal professional privilege.
Whilst it is denied that Morgan Conley Solicitors sent a letter of advice to the First Respondent on 19 October 2012, what has been described as draft correspondence of that date is the second communication the subject of a claim of legal professional privilege.
In denying the Applicant’s contention that a purpose of the communications, contained within the correspondence dated 17 and 19 October 2012, was to advise the First Respondent how to protect the Suburb B property from the consequences of the September 2011 Judgment, the First Respondent asserts that the letter dated 17 October 2012 provided advice in respect of the First Respondent’s liability as guarantor of Ms Grainger’s borrowings from Suncorp.
It appears that the First Respondent and Ms Grainger attended on Messrs D and E on 24 October 2012. In denying the Applicant’s assertion that the meeting was in respect of the Bankruptcy Notice with which Ms Grainger had been served, the First Respondent asserts that the meeting was for the purpose of preparing the Financial Agreement between the First Respondent and Ms Grainger.
It is accepted that, on or about 24 October 2012, the First Respondent instructed Morgan Conley Solicitors to prepare a Financial Agreement between himself and Ms Grainger, which agreement would facilitate the transfer of the Suburb B property from Ms Grainger to him. It is accepted that, on 29 October 2012, he obtained a valuation of the Suburb B property from C Real Estate – this valued the property in the amount of $2,250,000.00.
It is also uncontentious that, on 1 November 2012, the First Respondent and Ms Grainger entered into a Financial Agreement pursuant to s 90C (“Financial agreements during marriage”) of the Family Law Act 1975 (Cth).
The Financial Agreement relevantly provided, in summary, as follows:
a)in Recital H: that Ms Grainger wished to transfer her interest in the Suburb B property to the First Respondent for his benefit and the children’s maintenance during the marriage and in the event of separation, with the value of the property to be transferred to him for his and the children’s maintenance being $2,250,000.00; and
b)in Recital M: that the parties wished to enter into a binding Financial Agreement under s 90C of the Act in order to, amongst other things, agree on terms that would provide for Ms Grainger’s and the children’s maintenance during the marriage and in the event of separation; and
c)in Clause 3.1: that, by this Agreement and in consideration of the mutual promises contained within it, the First Responded and Ms Grainger agreed that:
i)she would transfer her legal and beneficial interest in the Suburb B property to him to be held for the maintenance of the children during the marriage and in the event of separation; and
ii)in consideration of receiving the transfer of the Suburb B property, the First Respondent would accept the liability to Suncorp under the mortgage and indemnify Ms Grainger for any amounts Suncorp claimed against her pursuant to the mortgage facility; and
iii)the Agreement shall not preclude either of them from further exercising any rights available to them under provisions of the Family Law Act1975 (Cth) in relation to how any or all of the remaining property of the marriage is dealt with in the event of the breakdown of the marriage, in circumstances where either the property pool of the marriage, or the needs of the parties’ children, have materially changed.
d)by Clauses 3.2 to 3.9 inclusive: that each relinquished any interest in superannuation funds and unparticularised bank accounts held by the other; that each be responsible for credit card liabilities incurred in their respective names and that each retain furniture and chattels within their possession.
It is accepted that:
a)on 28 November 2012: the Applicant caused a Creditor’s Petition to be filed in the Federal Circuit Court; and
b)on or about 12 December 2012: the Creditor’s Petition was served on Ms Grainger; and
c)on or about 7 January 2013: Ms Grainger filed a Debtor’s Petition and was made bankrupt.
The proceedings
On 7 January 2014, the Applicant commenced proceedings in the Federal Circuit Court seeking an order that the November 2012 Financial Agreement be set aside on the basis that the First Respondent and Ms Grainger entered into the agreement for the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor[2] or creditors.[3]
[2]Defined to include a person who could reasonably have been foreseen by the party entering into the Financial Agreement as being reasonably likely to become a creditor of the party: s. 90K(1A) Family Law Act (1975) (Cth).
[3] s 90K(1)(aa)(i) Family Law Act (1975).
Applicable principles
It is, I think, sufficient to record that authority[4] relevantly establishes that:
[4]Such as: Attorney-General (NT) v Kearney (1985) 158 CLR 500; Commr of Police v Propend Finance Pty Ltd (1997) 188 CLR 501.
a)legal professional privilege is accorded to a document produced for use in litigation or for the obtaining or giving of legal advice because "it assists and enhances the administration of justice by facilitating the representation of clients by legal advisers"[5]; and
[5]          Grant v Downs (1976) 135 CLR 674 at 685, per Stephen, Mason and Murphy JJ.
b)only those communications passing between a legal adviser and his or her client in professional confidence are privileged - a communication made by a client for assistance in the commission of a crime or fraud lies outside any legitimate professional relationship; and
c)legal professional privilege does not attach to a communication which is for the purpose of committing a fraud, the meaning of which - for these purposes - is not narrow but encompasses actions like those undertaken by a person for the purpose of ensuring a creditor is unable to recover, or which communications are for the purpose of putting assets beyond the reach of legitimate claims of secured creditors[6]; fraud ‘in this context embraces a range of legal wrongs that have deception, deliberate abuse or misuse of legal powers, or deliberate breach of legal duty at their heart’[7] – that is, fraud in this context ‘includes all forms of fraud and dishonesty such a fraudulent breach of trust, fraudulent conspiracy, trickery and sham contrivances”[8]; and
d)a communication between a client and the client’s lawyer for the purpose of the client putting assets beyond the reach of the legitimate claims of secured creditors is a fraud on justice – as the purpose is a fraud on the creditor, there is no public interest in protecting any such communication; and
e)even if no crime or fraud was contemplated, if the communication was made to further illegal purposes[9], for the purpose of frustrating the processes of the law[10], to further an abuse of public power or as a step in or preparatory to, or in aid of, the carrying out of a fraud in respect of which civil courts will give relief[11], the communication is outside legal professional privilege and this privilege does not attach to such communication; and
f)if a party resisting a claim of legal professional privilege can show reasonable grounds for believing the communication, effected by the document for which legal professional privilege is claimed, was made for some ulterior, illegal or improper purpose - that is, for some purpose contrary to the public interest[12] – the claim of legal professional privilege may not be upheld; and
g)whilst it is unnecessary to prove the ulterior purpose, the crime or the alleged fraud so as to displace legal professional privilege (or, perhaps, more accurately, to establish that it does not in fact attach):
i)more is required than mere pleading or mere surmise and conjecture: vague or generalised contentions of crimes or improper purposes are insufficient; there must be more than what it is hoped may be proved; and
ii)the party resisting the claim of legal professional privilege must establish or identify circumstances which point sufficiently to the bona fides and credibility of the allegation; and
iii)allegations of facts which, if not disputed or met by other facts, lead a reasonable person to see a strong probability that there was fraud or crime or ulterior purpose may be sufficient; and
iv)there has to be something "to give colour to the charge"[13]; some prima facie evidence that the allegation has some foundation in fact – for example, is there evidence (including that in the documents for which the claim of legal professional privilege is made) which, if accepted, raises a prima facie case of the ulterior or illegal purpose/s, the crime or the alleged fraud such that the communication falls outside the privilege, or, does the evidence establish a prima facie case that the communication was made in furtherance of a crime or commission of a fraud?
[6]          Gartner v Carter [2004] FCA 258 per Lander J.
[7]Southern Equities Corporation Limited (in liq) v Arthur Anderson & Co (1997) 70 SASR 166 per Doyle CJ at 174.
[8]Crescent Farm (Sidcup) Sports Ltd v Sterling Offices Ltd [1972] Ch 553 at 565.
[9]          P & V Industries Pty Ltd v Anthony Porto (No 3) [2007] VSC 113 per Hollingworth J at [24].
[10]         See, for example, AWB Ltd v Cole (No 5) (2006) 155 FCR 30.
[11]         Varawa v Howard Smith & Co Ltd (1910) 10 CLR 382 at 386.
[12]See: Attorney-General (NT) v Kearney (1985) 158 CLR 500 at 514-515; R v Bell; Ex parte Lees (1980) 146 CLR 141 at 147, 156, 159, 161.
[13]         Attorney-General (NT) v Kearney (1985) 158 CLR 500 at 516, 517, 525, 527.
The approach summarised briefly above reflects the conclusion that the public interest in the law refusing to countenance even the possibility that legal professional privilege is used to cloak criminal or fraudulent activities outweighs the public interest in protection being accorded to professional confidences between a client and that person’s legal representatives.
Application of the applicable principles to this case
In the present case, the allegation that the First Respondent and Ms Grainger entered into the Financial Agreement for the improper purpose of defeating the Applicant, a creditor of Ms Grainger, has been clearly and definitely made. There is no suggestion that this allegation has not been made honestly.
What is required, therefore, is consideration of whether there is some prima facie evidence that such allegation has some foundation in fact: that is, having regard to the relevant surrounding circumstances, has the Applicant given colour to the charge? Is the Court persuaded there is sufficient probability of its truth to make it right to disallow the First Respondent’s claim of legal professional privilege in respect of the communications the subject of the claim of privilege? Is there a sufficiently strong case that the First Respondent and Ms Grainger entered into the Financial Agreement for the improper purpose of defeating or defrauding creditors such that the First Respondent should not be permitted to hide behind the legal professional privilege claimed in respect of the communications contained in the correspondence dated 17 and 19 October 2012?
Having had regard to the chronology of accepted and established facts, the contents of the correspondence and the essence of the submissions made on behalf of the Applicant, the answers to these questions is, in my view, in the affirmative.
That is, I am satisfied that, when considered in context, the communications are such that there is ‘colour to the charge’.
Given the current stage of the proceedings, I consider it inappropriate to say more. I simply emphasise the obvious: namely, that whether or not the Applicant in fact persuades of those matters which must be established for an order setting aside the Financial Agreement to be made is a matter for trial.
For the reasons outlined above, I consider that legal professional privilege does not attach to the communications within the correspondence from the First Respondent’s solicitors to the First Respondent dated 17 and 19 October 2012 and, accordingly, the Applicant is entitled to disclosure of the same by 4.00 pm on Tuesday 31 January 2017.

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hogan delivered on 27 January 2017.

Associate:

Date: 27 January 2017