Chen v Nature’s Care Holdings Pty Ltd

[2024] NSWSC 36

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Chen v Nature’s Care Holdings Pty Ltd [2024] NSWSC 36

Hearing dates:

31 January 2024

Decision date:

01 February 2024

Jurisdiction:

Equity - Commercial List

Before:

Stevenson J

Decision:

Plaintiffs entitled to inspect electronic mailboxes maintained by them when directors of the defendants; undertaking to Court not to assert waiver of privilege noted

Catchwords:

CORPORATIONS – former directors - inspection of documents – electronic mailboxes maintained by the plaintiffs when they were directors of the defendants – where defendants may be entitled to client legal privilege in relation to documents in the mailboxes

EVIDENCE – documentary evidence - electronic mailboxes maintained by former directors – client legal privilege

Legislation Cited:

Corporations Act 2001 (Cth)

Cases Cited:

Nature’s Care Holdings Pty Ltd v Chen [2024] NSWSC 14

State of South Australia v Barrett (1995) 64 SASR 73

Category:

Principal judgment

Parties:

Jina Chen (First Plaintiff)
Michael Wu (Second Plaintiff)
Nature’s Care Holdings Pty Limited (First Defendant)
Nature’s Care Group Pty Limited (Second Defendant)
AJ & Son Investment Pty Limited (Third Defendant)
Nature’s Care Manufacture Pty Limited (Fourth Defendant)
Nature’s Care Global Franchising Pty Limited (Fifth Defendant)

Representation:

Counsel:
A Horvath SC with P Afshar and R K Jameson (Plaintiffs)
C S Ward SC with I J King (Defendants)

Solicitors:
Norton Rose Fulbright (Plaintiffs)
Clifford Chance (Defendants)

File Number(s):

2024/40271

JUDGMENT

1. The background to this matter is set out in the recent judgment of Rees J in proceedings 2024/23372 (the “Main Proceedings”) . ^[1]

   1. Nature’s Care Holdings Pty Ltd v Chen [2024] NSWSC 14.

2. I am to hear the plaintiffs’ application for the continuation of urgent interlocutory relief granted on 23 January 2024 by Rees J in the Main Proceedings on Monday and Tuesday next, 5 and 6 February 2024.

3. The parties are engaged in the very large task of preparing for that hearing. Notices to Produce have been exchanged and I have made urgent rulings in relation to them.

4. In that context, by Summons filed in Court on 31 January 2024, the first and second defendants in the Main Proceedings, Ms Jina Chen and Mr Michael Wu, seek:

“An order pursuant to section 198F of the Corporations Act 2001 (Cth) authorising the plaintiffs or their solicitors to inspect and take copies of all documents in the mailboxes of ‘XXX’ and ‘XXX for the period 1 January 2023 to 31 January 2024.”

5. The mailboxes were maintained by Ms Chen and Mr Wu when they were directors and employees of one or more of the defendants, who are the plaintiffs in the Main Proceedings. They are no longer directors or employees of any of those companies.

6. Accordingly the application must be seen to be made under s 198F(2) of the Corporations Act which provides:

“A person who has ceased to be a director of a company may inspect the books of the company (including its financial records) at all reasonable times for the purposes of a legal proceeding:

(a) to which the person is a party; or

(b) that the person proposes in good faith to bring; or

(c) that the person has reason to believe will be brought against them.

This right continues for 7 years after the person ceased to be a director of the company.”

7. The mailboxes have been in existence since 2015. Mr Wu’s former mailbox contains 65GB of data comprising 154,485 items. Ms Chen’s former mailbox, contains 19.5GB of data comprising 47,755 items.

8. The defendants, the plaintiffs in the Main Proceedings, wish to review the documents in the mailboxes to ascertain whether any of the documents are the subject of client legal privilege. I was informed, although there was no direct evidence of this, that this task could not be completed prior to the hearing in the Main Proceedings next week.

9. My attention has been directed to the decision of the Full Court of the Supreme Court of South Australia in State of South Australia v Barrett. ^[2]

   2. (1995) 64 SASR 73.

10. In that case, former directors of a bank sought, under provision analogous to s 198F of the Corporations Act, documents “in the nature of advices to or requests for advice from the Bank with respect to aspects of the transactions which are the subject of the present litigation. ^[3]

    3. Per Olsson J at p 74.

11. Olsson J said:

“It is clear, then, that, as a matter of principle, even whilst they held office as directors, the personal respondents were only entitled to access to documents privileged in the hands of the Bank for the limited due diligence purposes for which their power of access existed, and not for any reasons private and personal to them. The common law principle did not negate the existence of legal professional privilege qua the directors, it merely qualified it to the extent of a bona fide exercise of their power so far as it was necessary to enable them to discharge their legal obligations. That is to say, the power would be enforced by the courts only for the purpose for which it existed and not for a purpose antipathetic to the best interests of the corporation.” ^[4]

4. At p 77.

12. Mullighan J said:

“Assuming that the privilege did not apply against them when they were directors of the Bank, it does not follow that it could never apply against them. In my view once they ceased to be directors and no longer had the right of inspection, they were placed in the same position as any other person outside the Bank and the privilege applied against them. There is no reason in principle or logic to conclude that the situation which existed when the documents came into existence must remain forever. The appropriate time to consider whether the privilege extends to relevant persons is when it is claimed.” ^[5]

5. At p 84.

13. This case is different to Barrett in that the documents that Ms Chen and Mr Wu seek to inspect are their own email mailboxes, in the sense that they are mailboxes maintained by them when they were directors of the defendants. The fact remains, however, that these mailboxes comprise a part of the books of the defendants, and should there be privileged communications within those mailboxes, that privilege enures for the benefit of the relevant defendant company.

14. However, in the urgent circumstances facing the parties preparing for contested and potentially significant interlocutory application next week, I took the practical course of enquiring of Ms Chen and Mr Wu whether they would undertake to the Court that, should inspection of their mailboxes be permitted, they would not contend that any of the defendants, as plaintiffs in the Main Proceedings, has waived such privilege as might attach to documents in those mailboxes.

15. That undertaking has now been given to the Court.

16. I make the following orders:

1. Order pursuant to s 198 of the Corporations Act that the plaintiffs or their solicitors may inspect and take copies of all documents in the mailboxes of XXX and XXX for the period 1 January 2023 to 31 January 2024.

2. Note the undertaking of the plaintiffs given to the Court that they will not contend, whether in proceedings numbered 2024/23372 (the "Main Proceedings") or at all, that the plaintiffs in the Main Proceedings have waved such privilege as may attach to such documents.

3. Summons be otherwise dismissed.

4. Costs to be costs in the cause in the Main Proceedings.

17. I expect that those advising Ms Chen and Mr Wu will not seek to tender at the hearing any document in a mailbox that is obviously privileged. I will hear argument at the hearing of the interlocutory application in relation to any controversies that thereby arise.

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Endnotes

Amendments

01 February 2024 - Coversheet category amended

Decision last updated: 01 February 2024