Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation Ltd

Re: BURGUNDY ROYALE INVESTMENTS PTY LTD AND ORS
And: WESTPAC BANKING CORPORATION LIMITED AND ORS
No. G339 of 1987
FED No. 341

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Einfeld J.(1)

HEARING

SYDNEY

#DATE 12:7:1990

JUDGE1

The principal action in this matter was launched in 1987 by Burgundy Royale Investments Pty Ltd and the 3 other applicants against Westpac Banking Corporation Ltd for, inter alia, damages for contraventions of the Trade Practices Act arising out of one or more advances made by Westpac to Burgundy Royale in January 1985 in relation to commercial development in Darwin. The action was recently discontinued when the applicant companies went into receivership with substantial debts. Meanwhile Westpac commenced cross claims against several guarantors of the loan(s), including the 8th and 9th cross respondents, who in turn are defending the cross claims on what are said to be similar grounds to those which the applicants had proposed to advance against Westpac in their discontinued claim.

Burgundy Royale was jointly owned by the other applicant companies Kota Nominees Pty Ltd and The Esplanade Pty Ltd which were in turn wholly owned by the applicant company Golden Gloss Properties Ltd. The 8th cross respondent (Wong) and his son and other members of his family were the only shareholders of Golden Gloss of whose voting shares Wong himself held 75%. Wong and his son appear to have been its directors.
At all relevant times Baker and McKenzie acted as solicitors for Burgundy Royale and the other applicants. The solicitors for Westpac and other parties issued subpoenas against Baker and McKenzie seeking production of what is alleged to be a very large number of relevant documents. Baker and McKenzie have now produced the documents referred to in the subpoenas and have generally agreed that access should be granted to Westpac and all cross respondents except the 9th cross respondent (Wee) and Wong. I was advised that many large folders are involved and that they occupy a great deal of shelving in a specially designated room of the Court.
As to Wong and Wee, Baker and McKenzie claim a general retaining lien over the documents on the basis that Wong, while not in name the original or actual client, nonetheless stood in the shoes of the client, was responsible to Baker and McKenzie for their fees on behalf of the client, of which some $1.3m worth has been paid, and was now a debtor for fees in an additional sum of approximately $500,000. Wee is apparently only involved in this fight over access to documents because he and Wong are represented by the same solicitors and counsel, If the documents were revealed to Wee and his lawyers, so the argument goes, the effect of the lien would be lost. Wong says that he was never a client of Baker and McKenzie in this matter and says that Baker and McKenzie's clients were Burgundy Royale and the other applicants.
This action is set down for hearing before Mr Justice Foster in August 1990, following the recent partial granting of an application by Wong and Wee for an adjournment. Because of the size and urgency of the task of inspecting the documents produced, I obtained the parties' early consent to a partial resolution of the problem by permitting immediate access to most of the documents to all the parties except Wong and Wee. However, the problem before the Court is compounded by the fact that in addition to resisting Baker and McKenzie's claim to a lien over the documents, Wong in particular somewhat oddly claims that some of the documents should be protected from access to other parties on the ground of his legal professional privilege. Whilst alternative positions can be and are often in litigation, it is difficult to see how Wong can at the one time argue that he is not a client of Baker and McKenzie and that the documents are therefore not subject to any such lien as might deprive him of access unless he pays or secures Baker and McKenzie's outstanding fees, while also advocating that some of them are protected by his legal professional privilege. The 10th cross respondent (Lee) reserved the right to make a similar claim of privilege, although no one seems to suggest that he was either a client or a debtor of Baker and McKenzie so that they might have ever had his documents.
In order to identify those documents that might be privileged from production to other parties on that ground, I permitted the legal representatives of Wong, Wee and Lee to have limited priority access to the documents, and stood over to the trial the determination of whether privilege should attach to the documents so identified. I am informed that the likely number of documents involved in this exercise is not likely to be large. However, the resolution of the lien problem is, for the reasons given, considerably urgent and this judgment has therefore been prepared under significant time constraints.
The right of a solicitor to retain the client's documents until outstanding fees are paid has been said to be only a passive and possessory right, apparently deriving from and therefore co-extensive with, the right of the client to the documents: Barratt v Gough-Thomas (1950) 2 All ER 1048 at 1053.
Obviously that means that a client's documents may be produced by a solicitor under subpoena to a Court and made available to persons other than the client without extinguishing or diminishing the value and effect of the solicitor's lien. It appears that they may also be exposed to the client where it is possible for the Court to ensure that when the proceedings are completed, the effect of the lien will be preserved: Bolster v McCallum (1966) 85 WN(NSW)(Pt1) 281. From what I understand of the present case, that would involve some provision for Wong, a resident of a foreign country, to bring into the jurisdiction of the Australian courts sufficient moneys to abide any order they might be persuaded to make for him to pay Baker and McKenzie the fees which are alleged to be owing. Section 23 of the Federal Court Act and the Court's inherent jurisdiction may, inter alia, provide power to make such provision.
Because most of the large number of parties in this matter will, by reason of the earlier arrangements made for access to which I have referred, have by now inspected the documents and made copies for their own use in the litigation, this case raises a major issue of what counsel for Wong and Wee called, I think incorrectly, "natural justice". What presumably counsel had in mind was the possible, even likely, unfairness of a situation where other parties in the litigation, especially the cross claimant Westpac, had access to relevant material under and by operation of the practices and procedures of the Court, and were in a position to tender it, object to its tender or otherwise meet and rebut its substance at the hearing, when his clients could not do so. The return of the late quite unlamented "trial by ambush" would not be welcome.
Of course at the time when such material is presented at the trial, Wong's lawyers will be required to assimilate its contents and import and then obtain instructions and perhaps evidence in rebuttal, some of it possibly from overseas. This has the potential for substantially increasing the length and cost of the litigation, and even for making somewhat of a farce of it. In Bolster v McCallum, Jacobs JA at 284 and Asprey JA at 287 in the New South Wales Court of Appeal spoke of this type of situation as providing an exception to the lien's normal operation of depriving the client or alleged client of access to the produced documents.
This matter was argued in effect as a demurrer, viz. that on no presentation of the case for Baker and McKenzie, could the lien be held to subsist because on no view of the evidence was Wong a client of Baker and McKenzie and a solicitor's lien only operates qua clients. The evidence presented on this issue by Baker and McKenzie must therefore be accepted as prima facie true. By very sensible agreement between the parties to facilitate an early hearing and determination of the matter, this evidence was not subjected to cross examination and at least for present purposes, available objections to its admissibility were substantially waived.
Speaking generally in this context, the evidence manifested these essential features:
1. A man named Yeung was a close business adviser to Wong and represented his interests in many respects, including written and oral negotiations and discussions with Baker and McKenzie both directly and through a Hong Kong lawyer (Bradley) in relation to the substance of and fees for the applicants' action against Westpac.
2. Bradley acted as an intermediary between the applicant companies and Wong and his son in Hong Kong and Baker and McKenzie in Australia and held out that he was the solicitor for Wong and his son. Bradley's services in this regard appear to have been retained by Yeung acting on behalf of Wong.
3. Baker and McKenzie's initial instructions from the applicants were invariably or almost invariably obtained via Bradley. When he needed to refer elsewhere, Bradley said that he would consult Wong or his son or both before instructing Baker and McKenzie.
4. On several occasions Bradley made clear to Baker and McKenzie that he was dealing with Wong on all important matters to do with the applicants' case, including Baker and McKenzie's fees.
5. Wong himself participated in a decisive way in personal and telephone discussions with Baker and McKenzie on the litigation and the steps which should be taken by the applicants. No one else did so with similar authority.
6. On more than one occasion, Baker and McKenzie were told that Wong was funding the applicants' case and was responsible for their fees. On occasions Wong's son was also held out as having some responsibility in this regard but it seems that this was at least in tandem with his father. The context seems to establish that the father had assumed the major and perhaps the sole responsibility for the fees and that his son was largely if not entirely acting as his father's spokesman or representative.
7. Wong or his son, apparently from Wong's personal or from joint or corporate assets, paid Baker and McKenzie fees of over $1m. The interests of Wong and his family were said by Bradley to be "parallel" to the applicants' interests. Baker and McKenzie were given to understand by Bradley and others that the applicant companies did not have money to pay Baker and McKenzie's actual and expected fees. Wong told Baker and McKenzie directly or through an intermediary that he would be selling a property to meet his obligations in this regard.
8. Disputes arose about the size of Baker and McKenzie's fees. They were raised by or on behalf of Wong. Negotiations in this respect were carried out by and with Wong or persons directly representing him. One or more compromise offers or proposals to pay Baker and McKenzie by instalments were made by Wong. An arrangement for their payment was made with Wong personally.
9. The possibility of terminating this litigation by withdrawing the applicants' claim was said by Bradley to be a decision to be made by Wong. No one else was said to be consulted.
Thus although Wong was not a party to the litigation at the time and was never a party to the case between Burgundy Royale and Westpac, he was clearly being consulted on and making many of the applicants' decisions, was giving their instructions, was paying their fees, and was the decisive if not the only figure in the ultimate determination to end their claim. Clearly he asserted a client's rights and controls over the applicants' solicitors and they accepted that position. To the extent that the applicants had a separate existence to Wong, they at least impliedly accepted and asserted that his exercise of these rights and controls was at their wish and with their approval and consent. Wong may not have been the client because he was not a "persona" in the case but he was clearly a client as well as the debtor for Baker and McKenzie's fees. Mr Justice Foster's conclusion in another phase of this case that Wong was the applicants' "alter ego" cannot seriously be challenged.
It is clear that directors may, concurrently with their company, "possess", even "own", the company's documents: Southern Pacific Hotel Services Inc v South Pacific Hotel Corporation Ltd (1984) 1 NSWRL 710 at 714-5, Rochford v Trade Practices Commission (1982) 153 CLR 134. In this case the evidence makes it quite unthinkable that the applicant companies could have held, or disposed of, the documents brought into existence and processed by Baker and McKenzie, without Wong's definitive approval. Put another way, so far as the evidence thus far reveals, the fate of the applicant companies' documents would have been determined by Wong or by people acting for him and at his direction, to a significant extent at least, in his private, i.e. non corporate or directorial, capacity. Counsel for Wong admitted in argument before me that documents can be possessed or owned by more than one individual, corporate or otherwise; in other words a director/shareholder, especially a dominant one such as Wong in relation to these companies, can co-possess the same documents, even if they were brought into existence for and for the purpose of litigation in which only the companies and not the co-possessor are parties.
However, Wong's counsel also submitted that two people do not have the right to possession of the same document at the same time, and even that there is no evidence of Wong's concurrent right to the documents. I reject both of those submissions. The first is not a matter of "right" but a practical question. Joint owners of a motor car cannot drive it at once (unless perhaps one is a "back seat driver") but their right to do so exists. The second is an overwhelming inference from the evidence, and dramatises the peculiarity of Wong's foreshadowed claim that the documents are privileged from disclosure by legal professional privilege.
I can see nothing in Sharrment Pty Ltd v Official Trustee in Bankruptcy (1987-88) 18 FCR 449 to oppose, and significant expressions in Bolster, especially at 286 (per Asprey JA), to support, the concept that a person in Wong's position, is established by the essence of the evidence at this stage, can have a concurrent immediate right to possession of documents which are also the companies' documents. This is not in truth an example of lifting the "corporate veil"; it is a case where there are dual personae with one acting in two capacities. It is thus also not necessary to decide whether the concept of a solicitor's lien should be extended to the person with the obligation to pay the "client's" fees. If these determinations were necessary, I believe that this case demands both.
In my judgment, Baker and McKenzie's lien extends in principle to withholding the documents from Wong while the subject fees remain unpaid. However, the question arises whether the result should follow that the documents now produced to the Court under subpoena should be withheld from Wong in the exercise of the Court's inherent jurisdiction and discretion in relation to the conduct of the case and if not, whether conditions should be imposed. In this regard I take into consideration the following matters inferred from or established by the evidence and present circumstances of the litigation:
1. Baker and McKenzie accepted that their fees were to be paid by a foreign national without requiring him to bring assets into the jurisdiction to which they might have access. This empties their criticism that Wong has not offered to secure their fees of most of its substance. The Court should be slow to patch up the consequences of their decision to proceed on that basis.
2. Baker and McKenzie have not yet taken action against Wong or even presented a bill for taxation, on the grounds that the latter is a prerequisite of the former and will take some time. No reason was advanced as to why steps in this regard had not yet been taken and were not well advanced. Accepting for this purpose Baker and McKenzie's evidence, it is not clear to me that a debt has not arisen nonethless, nor that action could not have already been commenced in Hong Kong or another appropriate Commonwealth country.
3. The facts that Wee cannot afford separate representation and that any verdict obtained against him would not be likely to be enforceable due to his impecuniosity should not affect his entitlement to participate in the litigation on equal terms with other parties.
4. This litigation involves a veritable battery of parties and legal representatives and is only about 4 weeks from a hearing. Any relevant documents will be tendered then by someone who has had access before the trial, at which time Wong and Wee will be able to see them. The prospect that adjournments should be contemplated at, or that other delays might ensue because of, each or any tender of a document not previously seen, is unappealing and contrary to the public interest and the interests of justice.
5. Limiting access to the documents for the present to counsel and solicitors for Wong and Wee and their limited exposure to Wee would significantly facilitate the litigation but not spell the death knell for the lien or the fees it would protect, if shortly thereafter Wong was required to demonstrate an earnest of his belief in the genuineness of his resistance to Baker and McKenzie's claim for unpaid fees.
The Court should not easily affect to become a debt collector, nor when in adversarial mode, a negotiator or conciliator of disputes between parties of this magnitude. However, it seems to me that the following conclusions are appropriate to the various often conflicting considerations which arise here:
1. The documents produced in the Court by Baker and McKenzie are entitled in principle to a lien in their favour as against Wong.
2. Exposing the documents to Wee and his lawyers without conditions or safeguards would defeat the lien.
3. Unconditionally withholding the documents from two parties only prior to trial, when they will be entitled to see them at trial, borders on a tactical ploy or worse to which the Court should not lend its authority.
In due course, I shall make formal orders, declarations and directions to give effect to the following decisions:
1. The lien is upheld or enforced on the following conditions:
(a) that Baker and McKenzie file and serve a draft of their proposed claim for fees against Wong by not later than 4 p.m. on Thursday July 19
(b) that Baker and McKenzie lodge a bill for taxation of the costs allegedly payable by Wong by not later that Wednesday August 8 1990 and seek the earliest possible appointment for taxation
(c) that in the event that the taxed costs are not paid within 28 days of certification, Baker and McKenzie commence action against Wong and any other appropriate parties for their recovery
(d) that Baker and McKenzie prosecute such action with all due diligence and expedition
2. In the meantime, access to the documents is granted to senior and junior counsel and the particular members of the firm of solicitors acting for Wong and Wee.
3. During such access copying of the documents is permitted for the purpose only of counsel's briefs on hearing.
4. No document is to be shown or its contents disclosed to Wong personally, and necessary documents only are to be disclosed to but not copied for Wee for the obtaining of necessary instructions only, until the following conditions have been met:

(a) That Wong bring into court and lodge with the Registrar or deposit in another mutually agreed interest bearing account the sum of $200,000

(b) That any such account be in the joint names of the solicitor for Wong and the partner at Baker and McKenzie having charge of this matter or, if the parties agree, in the name of a 3rd party

(c) Adequate security to the same value may be substituted for the cash deposit

(d) That Wong by his solicitor agree that such deposit or security abide the taxation of Baker and McKenzie's costs and action to enforce its result, and orders concerning the ultimate fate of any accrued interest if cash is deposited.

I direct that by not later than 4 p.m. on Thursday July 26, Wong file and serve a draft of his proposed defence to Baker and McKenzie's draft claim for unpaid fees.

Costs of Baker and McKenzie's application for recognition of the lien are reserved to the trial where the relevance of the documents and the significance of this dispute to the action will be determined.

Liberty to apply on 48 hours notice on or after July 26 to my associate or to Foster J. if available or another Judge of the Court between July 13 and 25.

The parties are to bring in minutes of appropriate declarations, orders and directions to give effect to these orders and directions at 9.30 a.m. on July 30 1990.

[1990] FCA 341

12 JULY 1990