Bufalo Corporation Pty Ltd (No 2)
[2002] VSC 450
•25 October 2002
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 8005 of 2001
| IN THE MATTER of BUFALO CORPORATION PTY LTD (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION) | |
| GREGORY STEWART ANDREWS | Plaintiff |
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JUDGE: | Hansen J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1 October 2002 | |
DATE OF JUDGMENT: | 25 October 2002 | |
CASE MAY BE CITED AS: | Bufalo Corporation Pty Ltd (No 2) | |
MEDIUM NEUTRAL CITATION: | [2002] VSC 450 | |
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Corporations – Liquidator's examination – Questions as to statements at a meeting –Whether meeting held without prejudice – Submission that examination be in camera – Ruling by Master that questions be answered and examination be in public – Direction sought restraining any enquiry into meeting – Corporations Act s 569F(1)(a).
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APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr S K Wilson, QC with Mr W E M Lye | Russell Kennedy |
| For the Liquidator | Mr J R Dixon | Tress Cocks & Maddox |
HIS HONOUR:
This application arises in the course of a s 596A examination being conducted by a liquidator. The applicant seeks a direction under s 596F(1)(a) precluding enquiry into communications at a meeting attended by the examinee on 15 November 2000 on the ground of without prejudice privilege or legal professional privilege. That is the relief sought in para 2 of the amended interlocutory process. During the hearing the applicant raised an alternative way of disposing of the application. If the liquidator is entitled to enquire into communications at the meeting, the enquiry ought to be held in private to protect the confidential nature of the information discussed at the meeting in relation to any third party, and access to the transcript should be restricted. I note that the claim for relief in para 1 of the amended interlocutory process was abandoned.
As long ago as 8 November 2001 a judge made orders for the examination of four persons under s 596A and five persons under s 597B of the Corporations Act concerning the examinable affairs of Bufalo Corporation Pty Ltd ("the company"). Three of the s 597B examinees, who either are or had been officers of Primelife Corporation Ltd ("Primelife"), applied to set aside the examination summonses directed to them. I refused that application last April.[1] They appealed to the Court of Appeal. Their appeals are fixed for hearing on 30 October 2002. The other six examinees have been examined during this year, and their examinations have concluded, with one exception. The exception is an accountant, Gideon Rathner. His involvement in the examinable affairs of the company arises as a result of Primelife having, on 10 August 2000, appointed him as receiver and manager of the property of the company pursuant to a debenture dated 21 December 1998, granted by the company to Primelife. His examination is complete with the exception of the one contentious area of the meeting on 15 November 2000.
[1]Bufalo Corporation Pty Ltd [2002] VSC 107.
The company and Primelife once had a commercial relationship, but it broke down. The company commenced action against Primelife and some others on 30 August 1999 in proceeding 6668 of 1999 in this Court. Later, three individuals, John, Joe and Tony Bufalo, were added as plaintiffs. John and Joe were directors, while Tony was general manager, of the company. They were among the s 596A examinees. Another person, Edward Christiaan Sent, was added as a defendant to the proceeding. Sent is a director of Primelife and one of the s 597B examinees who sought to have his examination summons set aside and whose appeal is pending. The litigation remains on foot. It is strenuously defended, and there is a counterclaim. I gave a history of the proceeding, and referred to the issues, in my earlier judgment.
On being appointed receiver and manager, Rathner instructed solicitors, Holding Redlich, who from that point acted as solicitors for the company in lieu of the solicitor who had previously acted. On 5 September 2000 Holding Redlich filed a notice that they were acting as solicitors for the company. They continue to be the solicitors on the record for the company.
It is convenient to quote some paragraphs from my earlier judgment:
"29On 10 October 2000 the solicitors then acting for the Bufalos, Rosendorf Lawyers, filed an application for leave to amend the second amended statement of claim. Warren J, who had the management of the case in 2000 and 2001, ordered that the proposed amendment be served in draft. On 16 November, Holding Redlich (acting for the company on the instructions of the receiver and manager) wrote to Rosendorf Lawyers noting that the amendments purported to amend the claim of the company, that the amendments had not been authorised by the receiver and manager, and that contemporaneous documents not only did not support the allegations but were inconsistent with them. Concern was expressed about costs and a meeting was suggested. In the absence of substantiating evidence, the receiver and manager would take steps to discontinue the proceeding of the company at the directions hearing on 17 November 2000.
30At the directions hearing on 17 November, Warren J was informed that the receiver and manager wished to apply to discontinue the company’s proceeding.
31The response of the Bufalos was to file, on 27 November, an application for leave for them to continue the proceeding in the name of the company. Primelife and Sent responded, on 11 December, with an application for security for costs against the company and the directors if they were given leave to continue the claim. Then, on 13 December, the receiver and manager filed an application for leave to discontinue the company’s proceeding or for an order that its proceeding be stayed until the directors indemnified the company. In an affidavit, the receiver and manager stated that he had legal advice that it was in the interest of the company to discontinue."
The applications were referred to the Listing Master who was to hear them on 15 August 2001. Before that happened, on 27 June 2001 the directors appointed Gregory Stewart Andrews as administrator to the company. At the second meeting of creditors on 24 July 2001 it was resolved that the company be wound up and Andrews became liquidator. The company remains in liquidation and Andrews continues to be the liquidator.
Since being appointed administrator Andrews has sought information as to the affairs of the company, including matters the subject of the proceeding. He described it as a "large and complex" matter. The task was difficult. He required time to gather information and obtain advice as to how he should proceed.
On 15 August 2000 the Listing Master gave the receiver and manager leave to discontinue the proceeding if the liquidator did not, by a certain time, notify the receiver and manager that he proposed to continue the company's proceeding. This gave the liquidator time in which to continue his investigations, and consider whether to elect to continue the company's proceeding.
The liquidator determined, on advice, that to facilitate his investigations he should have the benefit of examinations under s 596A and s 596B. Hence, he sought and was granted the orders for the issue of examination summonses. Examinations have been held on various dates this year but, to the extent indicated, the process is still in progress. In the meantime, orders have been made extending the time by which the liquidator must determine whether to continue the company's proceeding.
On 22 August 2002 the receiver and manager was being examined by counsel for the liquidator. He was asked a question about the letter Holding Redlich wrote on 16 November 2000, referred to in the quoted para 29 at [5]. He was asked whether he had a meeting on 14 November 2000. He suggested that the meeting was on 15 November 2000, and there was reference to notes of the meeting made by Holding Redlich and by himself. Counsel for the liquidator had the notes.
I interpolate that the notes had been provided by Holding Redlich at an earlier stage in the examination process. They comprised three handwritten sets of notes taken at the meeting on 15 November 2000, referred to below, made by Jonathan Kramersh and Heather Cross of Holding Redlich, and Rathner. They are a confidential exhibit LAW 1 to the affidavit of Leonard Adrian Warren made on 26 August 2002, to which further reference is made below.
A further fact appropriate to note at this point is that Warren was present during Rathner's examination, pursuant to leave granted at an earlier time. He is a solicitor and member of the firm Russell Kennedy. He has acted throughout as the solicitor for Primelife and Sent in the litigation.
It should also be noted that during his examination Rathner was represented by counsel. Such counsel was present on 26 August 2002. I infer that Rathner was so represented throughout his examination.
Returning to the examination on 22 August 2002, counsel for the liquidator then asked Rathner whether:
"At this meeting, you went through the third amended statement of claim with the representatives of Primelife?"
At this point Warren objected, stating that he recollected that at about this time there was a without prejudice meeting. He did not have his notes. He wished to be able to consider overnight whether there may be an objection "to any reference [being] made to this conference at this point in time". In the discussion that ensued Warren said he had not seen the notes that Rathner had produced. The examination was stood over to 26 August 2002, but before the adjournment occurred counsel for the liquidator asked Rathner some questions about the meeting. In summary, Rathner said that the meeting occurred on 15 November, that he could not recall anyone stating that it was without prejudice except there was a reference in the notes to "without prejudice" in relation to "documents" which he thought referred to documents provided at the meeting by Primelife. He could not assist beyond that as to the use of the words "without prejudice", as he did not have a separate recollection.
By the time the examination resumed on 26 August 2002 Warren had been provided with a copy of the notes. He had also made the affidavit of 26 August 2002 referred to above.
When Rathner's examination resumed on 26 August 2002 counsel for the liquidator returned to the meeting on 15 November 2000. Rathner said that there was one meeting that day. It was "to talk about the Supreme Court proceeding". He had made a note of the meeting. He identified that note, and the notes of the meeting made by Kramersh and Cross. He identified the persons present at the meeting. They were senior and junior counsel, G Garde QC and M Roberts, and the solicitor, Warren, for Primelife and Sent, on the one hand, and Rathner and his counsel, M Sifris, and solicitors, Kramersh and Cross, on the other hand. Counsel then asked:
"Alright, what was said at this meeting?"
Warren objected, saying that it was contended on behalf of Primelife that the meeting was conducted on a without prejudice basis. He then referred to his affidavit which he had made that morning (and to which I refer below). In response to a question from the Master, Warren said that the meeting was conducted on a without prejudice basis in relation to proceeding 6668 of 1999. The Master observed that the liquidator stood in the shoes of the agent of the company, the reference to "agent" obviously being a reference to the receiver and manager. Warren agreed, stating:
"I have no problem with the liquidator having access to the documents about what was said in that meeting, nor, if there was a private examination without outsiders being present, to the liquidator asking questions about that meeting, but the objection is to the examination being conducted in a public way and therefore the public can have access to the transcript of what took place in that examination – at that meeting."
Warren was concerned that if the examination was conducted publicly, and without the objection being taken, the privilege would be lost. The hearing was adjourned to enable his affidavit to be read. I now refer to the affidavit.
Warren commenced the story with the application to amend the statement of claim filed on 10 October 2000; see at [5]. A few days later senior counsel, Garde QC, asked Warren to organise a without prejudice conference at which Rathner, Sifris and Kramersh would attend on behalf of the company, and himself, junior counsel, Roberts, and Warren would attend on behalf of Primelife and Sent. "The mooted purpose of the conference" was to discuss the parties' respective responses to the proposed further amended statement of claim, particularly as it sought orders that the debenture be set aside and Rathner's appointment be terminated, and to seek to persuade Rathner not to support the application to amend but, rather, to discontinue the company's claim or allow the directors to take it over but with indemnities and security to protect the company's assets.
Warren said that he then, on 14 November 2000, telephoned Rathner. He said to Rathner that their conversation was "without prejudice" and asked him to attend the conference in which "we would seek to persuade him that there should be a joint challenge to the right of the [Bufalos] to seek to amend the statement of claim on behalf of all the [plaintiffs], and more generally that the current litigation in proceeding No 6668/99 was not an asset worthy of protection". Rathner said he would attend "and obtain advice concerning anything we said".
The meeting was held on 15 November 2000 with the attendees referred to above. Warren took notes but he had to leave early. His notes were "very scanty". They did not record the meeting as being held on a "without prejudice" basis, although that was his recollection. He specifically recalled saying, as he handed over a selection of documents to Rathner's representatives, that all documentation referred to, or given to Rathner, at the conference was referred to or given on a "without prejudice" basis. He recalled "that there was a full and frank discussion of the strengths and weaknesses of the respective parties' cases".
Warren added some hearsay evidence of the recollections of counsel. Roberts had advised that he could not recall whether the words "without prejudice" were used at the meeting, although he understood that what was said would not be disclosed. Garde QC recalled that the "without prejudice" basis was stated, and that the purpose of the conference was to discuss settlement or other resolution of the application to amend and the proceeding in general, and that "admissions were made which were not to be used outside the conference".
Warren concluded the affidavit by exhibiting the Holding Redlich and Rathner notes of the meeting which he had received from Holding Redlich.
The liquidator's counsel and the Master having read the affidavit, the hearing resumed, and Warren developed his submission. The material then before the Master on the point in question consisted of the oral evidence of Rathner, the notes of Rathner and his lawyers made at the meeting on 15 November 2000, and Warren's affidavit. It is notable that the objection of without prejudice privilege was made on behalf of Primelife, not Rathner, and that neither Rathner nor his lawyers provided any additional evidence either for or against the objection. In short, Rathner took no part in the issue before the Master. He adopted the same approach in the hearing before me. Before me he was not represented and no affidavit by or on his behalf was relied on by either side.
In any event, relying on his affidavit Warren submitted that the meeting was held on a without prejudice basis. He observed that the notes of Rathner and his solicitors had the words "without prejudice" written next to the word "document". The question was whether "in the context and on the evidence of [Warren and Garde QC] the whole conference was on a without prejudice basis". If the Master was not satisfied that it was held on that basis there was no need to address further submissions on the point. He referred to some authorities noting, in the submission, references to the without prejudice privilege being a joint privilege that could be maintained by each party entitled to the benefit of it. Towards the end of his submissions Warren returned to a point he had previously made on 22 August 2002. He did not object to Rathner being examined about the meeting in private as long as the transcript was not generally available. In explaining this contention Warren said that there were decisions of courts that evidence at an examination is admissible at a trial without the benefit of the common law rules relating to the admissibility of evidence, while other decisions had held that admissibility was subject to the common law rules. An instance of the former, he said, was Southern Equities Corporation Ltd (in liq) v Bond (No 2).[2] An instance of the latter, he said, was Southern Equities Corporation Ltd (in liq) v Arthur Andersen and Co (No 11).[3]
[2](2001) 78 SASR 554.
[3]Supreme Court of South Australia, Bleby J, 6 May 2002, BC 200202329.
Counsel for the liquidator then addressed submissions in response. The first question was whether there was evidence that established that the meeting was a without prejudice occasion. He submitted that the evidence did not show that the conference was aimed at settlement. There were no offers, or negotiation, for the settlement of the litigation. Rather, the parties met for the "mooted purpose" referred to in Warren's affidavit. There was a reference to some documents being provided without prejudice. But, otherwise, speaking generally, it could not be said that a without prejudice communication was made at the meeting. Moreover, it would be necessary to inspect the documents to see whether Warren could establish a claim for without prejudice privilege as against the liquidator.
At this point the Master brought the submissions to an end and made a ruling. The ruling has not been revised. I set out the substance of it, as follows:
"A rule of evidence such as the without prejudice rule must give way to the public policy that lies behind the power to conduct examinations that will enable the liquidator to know precisely what was done and by whom in connection with the company's examinable affairs. The first passage read by Warren from McNicol, Law of Privilege, first sentence chapter 8 at 453 indicates that there is very high authority for the view that any admission cannot be put in evidence without the consent of both parties to the communication. That is the protection afforded by the rule, and that is to prevent the use of admissions made in evidence at a trial. That being the case, first of all, I rule that the liquidator may pursue his investigation into communications which are asserted to be without prejudice but would be unable, if they are indeed without prejudice communications, to put them into evidence at later proceedings between the parties without the consent of the other party to the communication. In those circumstances no harm will come whether or not the transcript is admissible. The position will be the same if other persons seek to put in a communication in the allegedly without prejudice conference. It is not necessary to conduct the hearing in camera and I do not make any ruling as to whether or not this is a without prejudice communication or conference or that communications in it were made without prejudice. I will assume that for the purposes of the ruling."
At this point Warren sought a stay on the ruling in order to consider the position. Counsel for the liquidator contended that there was no reasonable basis on which to stay the ruling. Warren submitted that it was usual, where a party wished to take a ruling on privilege further, to maintain the status quo. The Master responded, it is important to note, that "that would certainly be the case in relation to legal professional privilege, but here, whichever way it goes, Primelife is protected". He added that the communications sought to be enquired into could not be used in any proceeding without Primelife's consent. A few minutes later the hearing was adjourned for lunch.
During the lunch break, counsel instructed by Warren sought and obtained from Balmford J an injunction restraining the liquidator, until 10.30 am on 30 August 2002 or further order, from asking Rathner any questions in the course of his examination concerning the meeting on 15 November 2000.
On 28 August 2002 the present interlocutory process was filed on behalf of Primelife for an order in terms of the injunction. The application was returnable before me on 30 August 2002 when, by leave, it was amended to seek a direction pursuant to s 569F(1)(a) that for the purposes of the liquidator's examination of Rathner the liquidator not enquire into the meeting on 15 November 2000. A further affidavit of Warren, made on 28 August 2002, was also filed. I have regard to the affidavit but it is not necessary to set out its contents.
For completeness, I note that Warren made two further affidavits, on 30 September 2002 and 1 October 2002. The purpose of the former affidavit was to deal with a point that is not material to the resolution of the case. The latter affidavit exhibited, and thereby put into evidence, the debenture and the instrument of appointment of Rathner as receiver and manager of the company. Clause 9.1 of the debenture provided for Primelife to appoint in writing any person to be a receiver or receiver and manager of the charged property (defined, in summary, as the whole of the assets, property and undertaking of the company both present and future) or any part thereof and that every such receiver so appointed "shall be the agent of the company and the company shall be responsible for the acts and defaults of such receiver who without any consent of the company has power to do anything in respect of the charged property that the company could do". That is a sufficient reference to the clause. By the instrument of appointment Rathner was appointed receiver and manager with, inter alia, all the rights and powers conferred upon a receiver and manager by virtue of the Property Law Act 1958 and by virtue of the debenture and by any other means.
As mentioned, the applicant is Primelife. The liquidator conceded that Primelife had standing to bring the application.
Before referring to counsels' submissions it is convenient to compare the position taken by Primelife before the Master and before me. Before the Master, Primelife contended that the whole of the meeting was without prejudice, but did not object to Rathner being examined upon it if the examination was conducted in private and with no general right of access to the transcript. It is clear to me, from a reading of the transcript, that in making his submission Warren recognised that the liquidator represented the company and, as such, was entitled to know what had been said by or to Rathner, who attended the meeting as receiver and manager of the company.
Before me, counsel for Primelife sought orders in terms of the application contained in the amended interlocutory process, which included a blanket order removing any enquiry into the meeting on 15 November 2000 from the scope of Rathner's examination. This was a radically different position from that taken before the Master. How was it put?
Primelife's counsel commenced by submitting that, properly construed, the conversation at the meeting explored a resolution or settlement of the claims by the company against Primelife and others. Hence, the meeting must be taken as having been conducted on a without prejudice basis. It was clear on the evidence that during the meeting, the parties' lawyers being present, the parties exchanged information and received legal advice concerning the proceeding. The legal advice was properly the subject of legal professional privilege. As a party to the communications and advice, counsel contended that Primelife was entitled to uphold the confidence in the communications and advice on either basis, that is, without prejudice privilege or legal professional privilege. Neither ground of privilege had been abrogated by the Corporations Act.
On either basis of privilege Primelife sought an order, in terms of the interlocutory process, that the liquidator not be permitted to question Rathner regarding the conversations at the meeting on 15 November 2000. In other words, no questions at all, whether in public or in private, and whether with or without any restriction on the availability of the transcript. In addition to asserting a claim of legal professional privilege (which Warren had not suggested or deposed to) this was a significant change from the position contended before the Master. Whether or not for that reason, counsel suggested an alternative disposition of the application. If it be held that the liquidator is entitled to enquire of Rathner as to the meeting, that enquiry should be in private so as to protect the confidential nature of the information discussed at the meeting vis-à-vis any third party. On that basis too there should be an appropriate restriction on the availability of the transcript. It is readily apparent that the alternative manner of disposition represented a return to Primelife's position before the Master.
In the course of these submissions, and those of counsel for the liquidator, a number of authorities were referred to for the purpose of identifying the relevant principles concerning the two privileges and illustrating their application. In my view, no question of principle arises on this application concerning the content of either privilege.
In developing his submissions it became apparent that counsel for Primelife was treating the liquidator as though he stood as a third party, with no right to be informed of communications at the meeting. In other words, he was to be precluded access to Rathner's knowledge of communications at the meeting. This was on the basis that the meeting was a private consultation in which Rathner received instructions from Primelife. At a late stage in the hearing counsel for Primelife referred to Rathner wearing two hats simultaneously. One hat was as agent of the company. The other hat was as an appointee receiving instructions from or conferring with his appointor’s legal representatives. Counsel did not suggest how to resolve the question of which "hat" Rathner was wearing, and when, at any time in the meeting. Apart from that, the lack of evidence of what was said meant that the issue could not be resolved. In these circumstances, counsel's contentions were in the nature of unsubstantiated assertions. In addition, the submission suffered from an overriding and fundamental flaw. It failed to properly acknowledge or accept Rathner's position as receiver and manager of the company, and the consequences of that situation. By virtue of the debenture and his appointment, Rathner had control of the business and assets of the company including the claims by and against it in proceeding 6668 of 1999, and was an agent of the company. It is true that the relationship of agency of a receiver and manager is of a somewhat limited type. It is also true that an appointor may give instructions to a receiver and manager in relation to the conduct of the receivership. I was not taken to any of the authorities concerned with the nature of the agency and counsel did not engage in any analysis of Rathner's legal position as agent. As it happens, the resolution of this case does not require any elaboration of the nature or incidence of the relationship either generally or as it concerns Rathner in this case.
To the extent that counsel's submission that the meeting with Primelife's lawyers was a private one in which Rathner received instructions, it cannot stand. Notwithstanding what counsel asserted before me, the case is not that at the meeting Primelife was merely giving instructions to its appointee as to how, in any particular respect or another, to conduct the receivership. The claim is that the communications at the meeting were made between opposite parties to litigation genuinely aimed at settling the case. The contention on the without prejudice claim in para 23 of Primelife's written submission is that:
"The proper construction of the conversations constituting the 15 November 2000 conference were conversations to explore a resolution of the claims by the company (Receiver and Manager appointed) against the Applicant et al."
And earlier in the written submission at the commencement of the section concerning without prejudice communications, counsel relied on the general rule "that communications between parties which are genuinely aimed at settlement whether oral or in writing, cannot be put in evidence without the consent of both parties in the event of those negotiations for settlement being unsuccessful".
It was put in the same way in respect of the claim of legal professional privilege. In para 25 of the written submissions the situation was described in the following way:
"[T]he parties were represented by their respective lawyers and indeed Counsel, and in that context, there was, in discussion, expressions of legal opinion about aspects of the proceedings. In the context of the 'without prejudice' meeting, it is clear that the parties received legal advice which is the subject of a claim for legal professional privilege."
When, in the course of an examination, a question, or area or questioning, is objected to on the ground that it enquires into an occasion or as to a communication that was without prejudice, or that a communication is protected by legal professional privilege, the person in control of the examination, here the Master, will consider how the matter is best handled, and the appropriate ruling to be made. The Master may confine the questions, have the examination in private, limit access to the transcript, or otherwise conduct the examination in such a way or with such limits as may be appropriate in the circumstances. I referred to the Master's power to confine the examinations within acceptable limits in my earlier judgment at [87] and in that respect referred to Hong Kong Bank of Australia v Murphy.[4]
[4](1992) 28 NSWLR 512.
I take it to be clear that an objection to the admissibility of evidence at a subsequent trial on the ground of without prejudice privilege or legal professional privilege is not lost by reason of evidence of the subject matter having been given at an examination under s 596A or s 596B. The Corporations Act contains no provision to that effect. Section 597(12A) provides for the inadmissibility of evidence on the ground of incrimination. Subject to that, s 597(14) provides that a written record of an examination signed by the examinee, or an authenticated transcript of such evidence, "may be used in evidence in any legal proceedings against the person". It is clear too that such evidence may be admissible at a trial, other than against a particular examinee, if it is admissible under the rules of evidence. But, and this is important, a tender of the evidence can be objected to on common law or statutory grounds including without prejudice privilege and legal professional privilege. See Re Norman Baker Pty Ltd (in liq); ex parte Hillman;[5] Hong Kong Bank;[6] Douglas-Brown v Furzer;[7] Southern Equities Corporation Ltd v Arthur Andersen & Co (No 11).[8] I agree with the conclusion of Bleby J in Southern Equities Corporation Ltd (in liq) v Arthur Andersen & Co (No 11) that Lander J erred in his dictum in Southern Equities Corporation Ltd (in liq) v Bond (No 2)[9] that to be admissible the transcript of an examination did not have to satisfy any of the common law requirements for admissibility.
[5](1981) 6 ACLR 257 at 260.
[6]Supra at 523.
[7](1994) 13 ACSR 184 at 194.
[8]Supra at paras 11-21.
[9]Supra at [61].
An examination under s 596A or s 596B is just that. It is not the trial of a proceeding in which there are issues by reference to which a question as to the admissibility of evidence can be determined. It was for this reason that McLelland J, at first instance in Hong Kong Bank, held that the rationale for the without prejudice privilege was "simply not applicable" at an examination.[10] That was one of several points decided by McLelland J in that case. An appeal was made against his decision, and leave to appeal was granted, but the appeal was dismissed. Gleeson CJ, in whose judgment Mahoney JA and Priestley JA agreed, did not hold that McLelland J had been wrong in his conclusion. The appellants had relied on a passage in Rush & Tompkins Ltd v Greater London Council[11] in which the issue was whether the second defendant could obtain discovery of without prejudice communications between the plaintiff and the first defendant. It was held that the second defendant could not have such discovery. The appellants in Hong Kong Bank relied on the following sentence in the judgment of Lord Griffiths:
"In my view the general public policy that applies to protect genuine negotiations from being admissible in evidence should also be extended to protect those negotiations from being discoverable to third parties."[12]
Gleeson CJ pointed out that Rush & Tompkins was a decision concerning multi-party litigation and that the reference to "third parties" is to be understood in that context.[13] Gleeson CJ said that the case could not:
"… be taken as authority for a proposition as wide as that for which the appellants need to contend in order to treat the privilege as qualifying the rights of examination conferred by s 597."
[10]Supra at 522.
[11][1989] AC 1280.
[12]Ibid at 1305.
[13]Supra at 523.
Having made that point, Gleeson CJ concluded on the matter of without prejudice privilege as follows:
"Admissions made in the course of "without prejudice" negotiations, even if they come to be known as a result of information that emerges from a s 597 examination, would not be admissible in evidence in the pending litigation. Furthermore, the circumstance that a particular question might relate to "without prejudice" communications might be relevant to whether a particular line of questioning is legitimate, and ought to be permitted by the Registrar, or to a decision by the Registrar under s 597(4) or s 597(5) as to whether the public ought to have access to an examination, or part of an examination. It was noted above, in the context of the appellant's argument about abuse of process, that it is not possible at this stage, and in advance of the examination, to resolve all questions that might arise as to the propriety of certain lines of examination. Whilst I do not consider that the appellants have made good the general proposition for which they contend, nevertheless I would not conclude that the circumstance that a particular question might touch upon "without prejudice" negotiations could not be of importance to the way in which the examinations are conducted."[14]
[14]Ibid.
The same type of approach is apt when the objection is that the communication is protected by legal professional privilege, bearing in mind the nature and purpose of that privilege. And remember that in this case the objection is taken against a liquidator to preclude him from being informed of the knowledge of the receiver and manager of a company acquired in the receiver and manager's capacity as such. In bare terms, the proposition is startling. While allowing for that, it may nevertheless be appropriate to observe legal professional privilege in an examination. A recent case which was concerned with this issue is Doran Constructions Pty Ltd (in liq).[15] The case involved a liquidator's examination. In the course of the examination of a solicitor, the solicitor made a number of claims to refuse to answer questions on the ground of legal professional privilege. The liquidator of Doran Constructions Pty Ltd sought a review of rulings of the Deputy Registrar as to the availability of the privilege. The solicitor also claimed legal professional privilege in relation to certain documents, and the liquidator sought a review of rulings in respect of those documents. Amongst other contentions, the liquidator proposed that, by virtue of his appointment as liquidator, he was entitled to be informed of all advice given by the solicitor, pursuant to a joint retainer, to Doran Constructions Pty Ltd, which was one of the clients. It was not disputed that if there was a joint retainer of a solicitor the parties to the retainer could not claim privilege one against the other. In such circumstances each is entitled to the confidence of advice under the retainer.[16] These propositions are applicable to the present case, as I have already sought to point out. Earlier in his judgment in Doran Constructions Campbell J said that:
"Counsel for both parties accepted that there was no difficulty, as a matter of principle, about legal professional privilege being available in the course of such an examination, in appropriate circumstances (Re Transequity Ltd (in liq) (1991) TasR 308; Re BPTC Ltd (in liq) (1992) 7 ACSR 539; Re Compass Airlines Pty Ltd (1992) 35 FCR 447)." [17]
Campbell J went on to deal with, and rule on, the claims of legal professional privilege. He was able to do so because sufficient evidence had been given before the Deputy Registrar. In addition, the solicitor had sworn an affidavit in support of the application. He was not cross-examined on the affidavit. Campbell J considered that failure to be unimportant and, in any event, for reasons outlined in the judgment, little weight could be given to the solicitor's views.[18] It is unnecessary to set out the reasons for the latter view. Campbell J concluded that the liquidator was entitled to enquire into all matters which transpired at the meeting in question. But, as to the documents, he declared that the solicitor was not obliged to produce them. That was because, inter alia, he considered that the documents "were not necessarily ones relating to advice given by 'the solicitor to the company in liquidation'".[19] Hence, the claim of privilege in respect of the documents was made out. Campbell J made this decision on the basis of the solicitor's affidavit, there being no evidence to show that the privilege was not applicable. As he said, however, the decision was interlocutory and, on another occasion, with different evidence, a different conclusion might be reached. His decision was only for the purpose of the notice to produce documents at the examination.[20]
[15][2002] NSWSC 215.
[16]Supra at [7].
[17]Ibid at [14].
[18]Ibid at [54].
[19]Ibid at [125]-[127].
[20]Ibid at [128].
Whether it will be appropriate or possible to deal with the case in the way in which Campbell J felt able to do so in Doran Constructions must be a matter of judgment in the circumstances. Campbell J referred to the decision of Re BPTC Ltd. One of the points McLelland J dealt with in that case concerned whether a claim for legal professional privilege was available for documents produced at an examination. Following Re Transequity, McLelland J held that it was available both in relation to the production of documents and in answering questions. In concluding on this aspect McLelland J said:
"… I cannot agree with the statement in Spedley that the purpose of s 541 of the Code to enable a liquidator to gain information regarding the affairs of the company would be stultified if legal professional privilege could be claimed in relation to documents produced. It could always be argued that the protection of legal professional privilege affects to some extent the operation of any statutory power to require disclosure of documents for information and I do not consider that in a practical sense the availability of legal professional privilege in an examination under s 541 of the Code or s 597 of the Corporations Law is likely to impair to any serious degree the efficacy of such an examination or the fulfilment of its legitimate purpose. In the particular case of a liquidator's examination, the liquidator himself can effectively waive any such privilege on behalf of the corporation: see Comr for Corporate Affairs v Eastoe (1989) 15 ACLR 694; 7 ACLC 1051."[21]
[21]Supra at 547-548.
McLelland J gave his decision in Re BPTC on 29 May 1992. The parties immediately returned to him on two points. McLelland J gave his decision on these points on 1 June 1992, the judgment in which is also reported as Re BPTC (in liq).[22] The first of the two points concerned the use in the examinations of without prejudice communications. As to that his Honour said:
"In my opinion, the claim that a particular communication was made 'without prejudice' is not a sufficient ground to resist a requirement for the contents of that communication to be provided (whether orally or by the production of a document) in an examination under s 597. The origin and purpose of that particular privilege is quite remote from those of the privilege against self-incrimination and legal professional privilege and I see no reason in principle for excluding from any such requirement under s 597 the contents of "without prejudice" communications, bearing in mind that there is no issue for determination in any such examination and the rationale of the privilege is simply not applicable. I should add that the mere fact that a "without prejudice" communication is produced in an examination under s 597 has no effect on any claim for privilege in respect of it in other proceedings inter partes."[23]
That accords with McLelland J's opinion in Hong Kong Bank.
[22](1992) 7 ACSR 551.
[23]Ibid at 552.
The Master had only to deal with an objection of without prejudice privilege. He was not given submissions to the extent that I was. He gave a ruling and supported it by reasons ex tempore which accord with the considered views of McLelland J in Hong Kong Bank and Re BPTC. However, as far as I understand the transcript, the Master was not taken to the remarks of Gleeson CJ in Hong Kong Bank, referred to at [42]. Nor was the ground of legal professional privilege relied on, as it was before me. It is evident that the Master was alive to the fact that the legal professional privilege ground was not relied upon. Furthermore, the decision not to rely on it would reasonably have been considered intentional for, in addressing his submissions, Warren made references to that ground of privilege.
All that the Master could do was rule upon the submission made to him in light of the evidence before him. On that basis it was open and in my view correct for him to rule as he did. He did not have to rule in relation to whether the meeting was without prejudice in whole or in part. Indeed, the evidence concerning the meeting was of such a nature, or so limited, that he was not in a position to have done so.
If, as is the case, Primelife desires to contend that a further ground of privilege exists, such argument should, at least in the first instance, be made to the Master, as the person responsible for controlling the examination. It is wrong, and unfair to the Master, to seek to raise a fresh point on the present application.
There is an additional reason why the legal professional privilege argument should be considered by the Master. There is, in my view, a dearth of evidence at this stage regarding the purpose of the meeting and the communications at the meeting. The somewhat cryptic notes of Holding Redlich and Rathner do not provide an adequate basis on which to arrive at an informed decision as to the applicability of legal professional privilege, or the general claim of without prejudice privilege. Nor do they provide an adequate basis on which to consider matters of the type referred to in the remarks of Gleeson CJ in Hong Kong Bank, in particular, in relation to whether, as the applicants contend in the alternative, Rathner's examination should be conducted in private and with a restriction on access to the transcript. Before the Master, the evidence of Rathner proceeded no further than reference to, or identification of, the notes and his recollections as to whether the meeting was without prejudice. The without prejudice objection was made in response to the first question Rathner was asked regarding what was said at the meeting, and there the matter rests. Rathner, the receiver and manager of the company, was prevented from informing the liquidator of the company of what had occurred at the meeting.
In my view, Warren's affidavits do not provide an appropriate evidentiary basis on which I, rather than the Master, or the Master himself, can or should rule on the issues raised. The affidavits are affected by generality and assertion, and counsel significantly qualified the case sought to be put by them by the extent of his submissions.
I have already quoted a paragraph from Primelife's written submission which asserts that at the meeting there were "expressions of legal opinion about aspects of the proceedings … It is clear that the parties received legal advice". What does this mean? What is the content or subject matter of the "expressions of legal opinion"? Who gave the advice and to whom? Who was the client? Bear in mind, in this respect, that the only client present was Rathner. Was there any respect in which the occasion was open, and not one of confidence? If so, in any and what relevant respect was it open? It is important to note that the genuine purpose of the meeting, as Primelife's counsel stated, was to persuade Rathner to give up the company's claim. Matters of this type cannot be satisfactorily answered on the present evidence. It is possible, of course, that if the claim of legal professional privilege had been made before the Master, the Master might have sought to press the examination in an attempt to obtain an evidentiary foundation upon which he could consider the matter.
In view of the current state of the examinations, it seemed necessary to set these matters out, as it may assist the parties and the Master in the further conduct of them. However, it is appropriate to return to a fundamental point to ensure that it does not escape attention. Even if Primelife is correct in its submission of a common interest legal professional privilege, or a without prejudice privilege, the liquidator is entitled to know the legal advice, and the communications, Rathner received.
The appropriate disposition of the application is that the relief sought by the amended interlocutory process be refused. As I have said, the relief sought under para 1 was abandoned. Then, as I have said, relief was sought under para 2. That relief was a direction under s 569F(1)(a) that, for the purpose of Rathner's examination, the liquidator not be permitted to enquire into the meeting on 15 November 2000. In their submissions, counsel for Primelife added an alternative claim for relief, namely, that if the liquidator is entitled to enquire of Rathner as to the meeting, the examination be conducted in private, and access to the transcript restricted, so as to protect the confidential nature of the information vis-à-vis a third party.
Section 596F(1)(a) provides that subject to s 597 the court may at any time give a direction about the matters to be enquired into at an examination. For the reasons I have given, and having regard to all the circumstances, it is not appropriate to exercise the discretion by simply precluding the examination of Rathner in relation to the meeting. The application is refused.
The application for the alternative relief must also fail. That is for the reasons already given, and having regard to all the circumstances. But there is a further reason why it is not appropriate to grant the alternative relief. The alternative relief lies at the heart of the area of discretion of the Master, which is to be exercised in light of the relevant circumstances as they may be when the matter is before him. They are not the subject of an application under s 596F(1)(a).
The appropriate course is for all relief sought by Primelife to be refused. The examination process should resume before the Master and be dealt with in accordance with law and with such assistance as these reasons may provide.
I should say that counsel for the liquidator did not seek to cross-examine Warren on his affidavit. In the circumstances, that was a justified and appropriate course. Thus far, the liquidator's counsel has been precluded from examining Rathner on the meeting, and he only has the notes of the company's lawyers (Holding Redlich) and Rathner as to the circumstances and content of the meeting. The liquidator disputes the claims of privilege, but at this stage, apart from the notes, his counsel has had little or no basis on which to cross-examine Rathner. The place for evidence in the first instance was before the Master. It remains that way. I reject the attempt to argue a new point before me and to seek to raise its significance by taking advantage of the successful preclusion of evidence, thus far, by the company's agent Rathner, by relying on the evidence of Warren.
Counsel for the liquidator suggested that it might conduce to the smooth conduct of the examination if I was to refer to the Master the power which exists under s 596F(1)(a). I cannot do that. The schedule to the Corporations Law Rules refers to a master the power under s 596F(1)(b)-(g), but not para (a). Under Rule 16.1(3) a judge may refer an application to a master for hearing and determination. An application is not a power. A reference of power is a matter for the judges in the exercise of their rule-making power.
I should mention that at the outset of his submissions, counsel for the liquidator submitted that the application was an appeal, in effect, from the Master's ruling and as such was incompetent. See the doubts on the matter of appeal from a master's ruling expressed obiter by Beach J in Re National Safety Council of Australia Victorian Division (in liq); re Friedrich.[24] In the present case the answer to counsel's submission is that the primary application for relief is based on s 596F(1)(a). As the Master does not have power to make a direction under that provision, and as the power may be exercised by a judge "at any time", it is open to a party to apply for a direction under para (a) in the course of the examination process. Strictly speaking, the application is not an appeal, and cannot be, because the Master has no power under para (a). Nor did he purport to exercise such power. In the circumstances it is not otherwise necessary to consider counsel's submission.
[24](1989) 1 ACSR 293 at 296.
I shall hear counsel on the terms of the orders and costs.
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