Cleary & Cleary
[1999] FamCA 286
•26 March 1999
FAMILY COURT OF AUSTRALIA
AT SYDNEYSUIT NO.SY 6055/83
Elizabeth Ann CLEARY
Applicant
AND
Brian Joseph CLEARY
First Respondent
BJC Investments Pty Limited
Second Respondent
BEFOREJustice P.J. MOSS
DATE OF HEARING: 5 March 1999
DATE OF JUDGMENT: 26 March 1999Appearances: Mr Richardson of Senior Counsel instructed by Fred A & John F Newnham, Solicitors, appeared for the Applicant.
Mr Lindsay of Senior Counsel instructed by Russell McLelland & Brown, Solicitors, appeared for the Respondents.
Catchwords:
PROPERTY - Applicant's proceedings for property Orders pursuant to s 79 - Orders also sought setting aside certain transactions involving the Respondent pursuant to s 85 - Whether documents relating to the transactions privileged from production – Family Law Act s 79, s85.
PROPERTY - Orders sought pursuant to s 85 setting aside certain transactions - Whether s85 should be construed as evincing an intention to override client legal privilege.
PRIVILEGE - Client legal privilege - Subpoenas directed to solicitors who previously acted for Respondent - Whether relevant communications privileged - Whether evidence of criminal or fraudulent conduct - Whether Court should inspect relevant documents
CORPORATIONS LAW - Whether client legal privilege prevails - Whether Applicant acting in good faith and for a proper purpose - Corporations Law s 247A
Headnote:
The Applicant and First Respondent were married in 1971. Some time in 1982 or 1983 the parties separated but continued to live in the matrimonial home. They reconciled after a period of some months and thereafter continued to live together as man and wife until they finally separated in February 1996. During the period of their temporary separation the Applicant commenced proceedings in the Family Court of Australia seeking orders in respect of maintenance and the exclusive occupation by her of the matrimonial home. These proceedings were discontinued as a result of the parties’ reconciliation.
Prior to the marriage the Respondent and his siblings were shareholders in and controlled a large group of companies known as the Cleary Bros Group and it was from this source throughout the marriage that the Respondent derived income and other receipts upon which the parties lived.
On 16th February 1984 the Respondent sold certain shares pertaining to the Cleary Bros Group to investment companies controlled by his sibling for $754,586.00 the purchase price to be paid on extended terms in accordance with a deed entered into in June 1981.
Following the parties’ final separation in February 1996 the Applicant commenced proceedings in the Family Court of Australia claiming property orders pursuant to s79 of the Act, and orders pursuant to s85 of the Act that various transactions entered into by the Respondent with his siblings and entities controlled by them, in particular in respect of the sale of the shares mentioned above, be set aside. In the course of her application pursuant to s85, the Applicant caused subpoenas to issue to the solicitors who had acted for the Respondent in the earlier proceeding requiring production of documents relating to the transfer of the shares and “all files containing advice in relation to Family law matters between [the parties].”
The Respondent claimed that client legal privilege attached to the relevant communications and objected to their production. The Applicant submitted that the communications did not acquire such protection it being asserted that there was evidence that the purpose of the Respondent's communication with his solicitors was to seek assistance in the commission of crime or fraud. It was further submitted that “the chronology and the resistance to inspection are of themselves enough” to demonstrate to the required degree the ulterior purpose contrary to the public interest. Further, it was submitted, that in the events which had happened the sale of the shares should be characterised as a “transaction where a person divests himself of assets in fear of orders being made under the Family Law Act.”
Held,
(1) In so far as the application was on the basis that the evidence disclosed a prima facie case that in respect of the sale of the shares, in particular, the Respondent's intention was surreptitiously to divest himself of assets to avoid an anticipated order in the earlier proceedings the application must fail on the ground that such assertions made or raised were based on mere surmise and conjecture.
Reg v Bell; ex Parte Lees 91980) 146 CLR 141; A.G. (Northern Territory) v Kearney (1985) 158 CLR 500; Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501; Baker v Campbell (1983) 153 CLR 52; Giannarelli v Wraith (1991) 171 CLR 592; Grant v Downs (1976) 135 CLR 674 referred to;
(2)There was no basis in the present circumstances to justify an inspection by the Court of the relevant documents
Trade Practices Commission v Sterling (1979) 36 FLR 244 per Lockhart J followed
(3)The ambit of s85 is by no means free from doubt but in any event that section should not be construed as evincing an intention to override the protection provided by the application of the principle of client legal privilege.
Goldberg v Ng (1995) 18 CLR 83; Wilson v Wilson & Ors (1994) FLC 92-498 referred to
(4)The operation of s247A of the Corporations Law is subject to the application of principles relating to client legal privilege and in any event the Applicant was not acting in good faith or for a proper purpose in claiming under the section. Cescastle Pty Ltd v Renak Holdings Ltd (1991) 9 ACLC 1333 referred to.
1.The Applicant in the proceedings before me, Elizabeth Anne Cleary, commenced proceedings in this Court against the Respondent, Brian Joseph Cleary, and eleven corporate Respondents including BJC Investments Pty Limited. Also joined as Respondents are the First Respondent’s two brothers, and the Estate of his late sister.
2.In her second amended application filed herein 6 August 1998 the Applicant seeks an Order against the First Respondent pursuant to s.79 of the Family Law Act in the sum of $5,000,000.00. She also seeks Orders pursuant to s.85 of the Family Law Act setting aside a large number of share transfers which took place on 16 February 1984 such transfers being by BJC Investments Pty Limited to some of the other corporate Respondents the shares in question being BJC’s shareholdings in Bridon Pty Limited and Bombo Holdings Pty Limited, each of these companies being within the Cleary Group. Other Orders are sought in that application but it is unnecessary to refer to them for the purposes of the present proceeding.
3.In his cross-application filed herein 18 September 1997 the First Respondent seeks Orders in respect of the sale of the former matrimonial home and an Order that the Applicant’s s.79 application be adjourned until such time as the Respondent becomes entitled to receive an accruing superannuation benefit and that he be restrained for a limited period from engaging in any conduct which might relevantly diminish that entitlement. In effect, he sought an Order that the second amended application of the Applicant be otherwise dismissed.
4.On behalf of the Applicant subpoenas were directed to Messrs Gillis Delaney Brown, Solicitors. That firm acted for the First Respondent in relation to Family Law matters between the Applicant and First Respondent in 1983. The Applicant and the First Respondent were married in 1971 and finally separated in February 1996. Those earlier proceedings came about as a result of the parties separating (although continuing to reside in the matrimonial home) which separation continued until the parties reconciled a short time later. In July 1983, during the period of separation, the Applicant instituted proceedings in the Family Court in respect of custody, maintenance and exclusive occupation of the matrimonial home. It was in respect of those proceedings that the First Respondent was represented by the said solicitors.
5.The first such subpoena, issued on 7 October 1998, required production of the file or files relating to the transfer of the shares mentioned above. The second subpoena, issued on 12 October 1998, required production of “all files containing advice in relation to Family Law matters between Brian Joseph Cleary and Elizabeth Anne Cleary”. The said solicitors thereafter produced to the Court documents apparently covered by the terms of the subpoenas. Client legal privilege is claimed by one or other of the present Respondents in respect of the documents so produced. The evidence makes it reasonably clear that, as between the present Respondents, it is the first Respondent who is entitled to make that claim. Nevertheless, and no doubt for more abundant caution, Counsel announced his appearance on behalf of both Respondents.
6.On 30 October 1998 the documents were identified by Mr Saunders, the solicitor for the Respondents, and sealed against inspection pending determination of the issues relating to the claim that the documents are privileged from production. I should say that, absent the Applicant’s contention that certain facts and circumstances should be seen to oust the claim for privilege, it is common ground that the documents are privileged on the basis that they represent written confidential communications between the Respondents, or one of them, and his or its solicitor or barrister made or brought into existence for the sole purpose of seeking or giving advice or for the sole purpose of use in existing or anticipated litigation: Grant v Downs (1976) 135 CLR 674 at 688; Baker v Campbell (1983) 153 CLR 52 at 112.
7.The exception, which the Applicant contends is here applicable, is that communications between solicitor and client which would be privileged from production, on the basis referred to in the preceding paragraph, do not acquire that protection if it can be shown, to the required degree, that the purpose of the client’s communication with his solicitor was to seek assistance in the commission of crime or fraud.
8.In the alternative, the Applicant seeks an Order in purported reliance on s.247A of the Corporations Law to the effect that her solicitor be authorised to inspect the relevant documents.
The Present Applications
9.The parties to these applications are the Applicant and the Respondents. The other Respondents, apparently, do not wish to be heard in respect of the present applications but are aware, as I understand the position, that such applications are before me.
10.In so far as the Applicant seeks a determination that the relevant documents are not privileged on the basis mentioned above, that application seems to be based on the relevant material, to which I have referred, in the Applicant’s second amended application filed 6 August 1998. That is to say, no formal application has been filed seeking an Order that the relevant documents are not privileged from production in the proceedings.
11.No objection is taken by the present Respondents to the determination by me in this proceeding of the issues tendered by the Applicant. Indeed, it is clear from the submissions made on their behalf that they are desirous that the issues which the Applicant raises in this proceeding be determined.
The Evidence
12.Apart from evidence to which I have already referred, the evidence before me comprises certain paragraphs of an affidavit sworn herein by the Applicant and filed 24 July 1998. In that affidavit she deposes to the fact that in late 1982 the parties lived separately and apart in the matrimonial home and that in July 1993 she commenced proceedings in this Court seeking the relief mentioned above. Those proceedings continued until the latter part of 1983. She refers to the fact that in about August or September 1983 the Respondent instructed his then solicitors to prepare a report as to the value of his shareholding in the Cleary Brothers Group of companies. She says she was unaware of that until she commenced her present proceedings. I should say that a copy of the said report is in evidence before me as an annexure to the Applicant’s affidavit.
13.She further deposes that an incident took place about a month after the parties were reconciled, as mentioned above, when according to her evidence the Respondent arrived home in an inebriated state and said to her:
“I am out of the company now you can’t touch me. I’ve got no money you will get nothing if this ever happens again.”
14.She goes on in her affidavit to complain that the effect of the share transfers of 16 February 1984 was that the First Respondent’s company BJC Investments Pty Ltd transferred certain assets to his siblings “via their companies”. She was unaware of these transactions until recent times. She was also unaware, she says, that by transfer dated 5 September 1983 the First Respondent mortgaged certain land at Kiama to one of the companies in the Group. This, too, has come to her knowledge only after the commencement of her current proceedings.
15.There is also in evidence certain paragraphs from an affidavit sworn by the First Respondent and filed herein 10 June 1998, and from that affidavit it appears that upon the death of the First Respondent’s father the latter left the Cleary companies and businesses operated by the companies in equal shares to the First Respondent and his three siblings and they then continued to operate the businesses.
16.According to the Respondent’s affidavit, prior to 1981 there were discussions between himself and his siblings as to what arrangements should prevail in the event that any of them were to sell their shares. He says that an agreement was come to whereby it was agreed that if any of them wished to sell their shares the others would purchase them, it being a condition that the purchase money would be paid by twenty-five yearly instalments without interest. He deposes to the fact that a Deed covering this arrangement was entered into by each of them and their investment companies on 1 June 1981 and that a copy of that Deed has been discovered in the proceedings.
17.His affidavit goes on to depose to the fact that the parties separated in 1983 as mentioned above and that proceedings were commenced in this Court by the Applicant as mentioned above. He says that he made a decision to sell his shares under the terms of the 1981 Deed and obtained a valuation from Duesburys in September 1983. The relevant shares were transferred to his siblings’ investment companies in February 1984 at the price arrived at by Duesburys, namely, $750,000. The vendor was his company BJC Investments Pty Limited.
18.Each year since the sale on 14 February, instalment payments are paid to BJC Investments Pty Limited. It further appears that up until 1996 the First Respondent was a Director of the Clearys Group of companies but in October 1997 he resigned from all directorships in the Group except that he remains a director of BJC Investments Pty Limited.
19.It is the First Respondent’s evidence that up until about the time of final separation between the parties, all his accounts and expenses as well as the accounts and expenses referable to the Applicant were “paid through the company and accounted for through my loan account”.
20.I have referred above to the affidavit of Mr Saunders. He deposes to the fact that he separated the documents in respect of which privilege is claimed and that they are now contained in a separate envelope appropriately marked. That envelope and the sealed contents have in fact now been marked Exhibit B in the application with which I am dealing.
21.Paragraph 5 of that affidavit is in the following terms –
“The file is Gillis Delaney Brown’s file in acting for and advising my client in relation to Family Law matters in 1983. It relates to then pending proceedings in this Court which appear to have concerned children’s issues, occupation of the home and various injunctions, and possible further proceedings and issues under the Family Law Act that may have arisen consequent upon the then separation of the husband and the wife.” (italics added)
22.Mr Saunders discloses in the affidavit that his firm, Russell McLelland & Brown, has acted generally for the Cleary Brothers Group of companies over a number of years “and acted for Brian Joseph Cleary and the purchasers in relation to the share transfers referred to in the first subpoena”. Mr Saunders deposes to the fact that he searched the records of Russell McLelland & Brown and discovered that the file in relation to the share transfers was destroyed in 1991 or 1992. However, he was, apparently, able to find some documents which he recognised as having been part of that file and these documents have been disclosed on discovery or otherwise in the proceedings. These documents include copies of the share transfers, the Duesburys valuation referred to above, a covering letter forwarding the transfers and the minutes of directors meetings of the relevant companies relating to the transfers.
23.Paragraph 10 of the affidavit is in the following form –
“The documents or categories of documents which I separated into the envelope on which privilege is claimed are:-
(a) various handwritten documents I recognise as being made by Mr Paul. These handwritten documents include notes of conferences with the husband by Mr Paul, notes of conferences between Mr Paul and Counsel who were briefed to advise in relation to matters, and various drafts of documents, calculations, briefs and advices prepared by Mr Paul;
(b) various drafts and a final copy of a brief to counsel to advise prepared by Mr Paul which was forwarded to Counsel then instructed, the then RNJ Purvis QC and the then P Rose;
(c) consequent correspondence between Counsel and Gillis Delaney Brown, and Gillis Delaney Brown and counsel in relation to the brief and subsequent conferences and advice;
(d) written advices as to Family Law matters from Gillis Delaney Brown to my client and accounts detailing the nature of advices given;
(e) a letter from Gillis Delaney Brown to RNJ Purvis QC seeking to confirm advice provided in conference by Counsel;
(f) printouts of Gillis Delaney Brown accounting records relating to the file, including time recording records which in some entries gives detail of the nature of advices or information/instructions provided;
(g) other correspondence between Gillis Delaney Brown and Counsel, including accounts which in part give detail of the nature of instructions or advices provided.
(The Mr Paul referred to was the Solicitor who had the conduct of the First Respondent’s proceedings in 1983.)
Affidavit of Robert Elvy
24.During the hearing before me there was tendered on behalf of the Applicant an affidavit sworn herein 23 November 1998 by Robert Elvy. That affidavit had been filed in the substantive proceedings on behalf of the Respondents. Mr Elvy is Chief Executive Officer of the Cleary Bros Group of companies and has held that position since 1989. However, his employment with the Group goes back to December 1975. As the content of his affidavit makes clear, he retains a detailed knowledge of the history of the Group over a long period of time. As well he is currently a director of all but a few of the corporate Respondents in the proceedings. From his affidavit it is possible to set out the following chronology which, it seems to me, is relevant in considering the issues with which I am dealing –
1916Cleary Bros is established to carry on business in transport and timber-getting. The original owners were the First Respondent’s father and the latter’s two brothers;
1947The First Respondent’s father purchased the interest of his brothers in Cleary Bros;
1958Death of the First Respondent’s father. The beneficiaries of his estate were his widow and his four children including the First Respondent;
1954By this time all four siblings (“the Clearys”) were employed by the Group and/or had a financial interest in it;
1962Bombo Holdings incorporated, the directors being the Clearys. Bombo has since that time been the holding company which owns the majority of the shares of the trading companies in the Group;
1967The Clearys established a partnership in respect of carrying on business as pastoralists;
1970The Clearys advised to re-structure the Group and as part of the re-structure each incorporated a company through which they held their investments in the Group. Duesburys, chartered accountants, were instructed to advise in relation to the re-structure. During 1970 the First Respondent incorporated the Second Respondent, Dennis Cleary incorporated DMC Investments, John Cleary incorporated JKC Investments and Jill Ovens (nee Cleary) incorporated JEO Investments;
1972Bridon incorporated. The Clearys transferred to that company the real estate inherited from their father. Since that time Bridon has been the company in the Group which is the registered proprietor of most of the real estate owned by the Group. Included in such real estate is 1,500 acres of rural land at Berry upon which the partnership referred to above operated a pastoralist business which continued (later under a different arrangement) until December 1997;
1973The Clearys were referred to solicitors for the purpose of obtaining advice concerning the sale of shares of companies within the Group. There were already in existence in respect of each of the companies in the Group pre-emptive rights provisions restricting the sale or transfer of shares, the effect of which was to require a shareholder wishing to dispose of his or her shares to first offer the shares to the other shareholders at an agreed price or at a price determined by the auditor of the company (the auditor at the time being Duesburys);
1971Each of the four investment companies (referred to above) acquired one-quarter of the issued shares in Bridon and Bombo Holdings;
1981The Clearys and their investment companies entered into a Deed which amended the articles of Bridon and Bombo Holdings by providing that shares in those companies and their subsidiaries might be offered for sale and purchased on completion of the transfer or on extended terms by instalments over twenty-five years free of interest;
1982Since 1979 the First Respondent had been drawing upon his loan account in Bombo and in BJC Investments for the purpose of building what became the matrimonial home at Kiama and by 30 June 1983 the loans exceeded $1 million. This sum was out of all proportion to the combined drawings of the other three Clearys; at a meeting of the Clearys the First Respondent was informed that he was required to provide security for the loans and to reduce them;
1983On 5 September the First Respondent granted Cleary Bros (Bombo) a mortgage over the matrimonial home to secure the outstanding borrowings by himself and by BJC Investments;
1983On 13 September the First Respondent obtained a valuation of the shares held by BJC Investments in Bridon and Bombo Holdings. The valuation was prepared by the Groups’ auditors, Duesburys. The amount of the valuation was $754,585.98;
1983On 27 September Cleary Bros (Bombo) served a Notice of Demand on the First Respondent in respect of the outstanding loans. The demands were not met but the amount was reduced over time;
1984On 16 February BJC Investments sold its shares in Bombo and Bridon to the other three investment companies, in equal parcels, for the sum of $754,586, the purchase price to be paid on the extended terms in accordance with the Deed of 1 June 1981;
1985First instalment of the said purchase price of the shares, namely, $30,183.43, was credited to BJC Investments. Since that time in each subsequent year on 14 February such an amount has been credited to BJC Investments. The amount still to be paid in respect of the sale of the shares pursuant to the said Deed is $332,017.68.
The Applicant’s Case on Privilege
25.The Applicant contends that the relevant communications do not attract the principle of client legal privilege. She claims there is evidence before me which sufficiently demonstrates that the relevant communications were to give effect to an improper purpose, with the consequence that the claimed privilege could never have attached to such communications. On her behalf it is submitted that “the chronology and the resistance to inspection are of themself enough” to demonstrate, to the required degree, an ulterior purpose contrary to the public interest. Further, that in the events which have happened (which have been referred to above) the sale of the shares should be characterised as “a transaction where a person divests himself of assets in fear of Orders being made under the Family Law Act”.
26.I understood it to be agreed between the parties that in the light of the recent decision of the Full Court of the Federal Court in Esso Australia Resources Ltd v Commissioner of Taxation (22 December 1998), the present application before me should proceed on the assumption that the better view is that the Evidence Act does not have “derivative” effect on ancillary proceedings, with the consequence that the application before me will proceed on the basis that it is to be determined by the application of relevant common law principles. See also BT Australasia Pty Ltd v State of New South Wales (unreported, Sackville J, 29 September 1998).
The Exception Relied Upon
27.In order to understand the basis on which the exception rests, it is necessary, in my opinion, to bear in mind the rationale of the privilege itself, which, absent the upholding of the validity of the Applicant’s contention here, would have attached to the relevant communications. In Grant v Downs (supra, at 685) that was stated in the following terms –
“The rationale of this head of privilege, according to traditional doctrine, is that it promotes the public interest because it assists and enhances the administration of justice by facilitating the representation of clients by legal advisers, the law being a complex and complicated discipline. This it does by keeping secret their communications, thereby inducing the client to retain the solicitor and seek his advice, and encouraging the client to make a full and frank disclosure of the relevant circumstances to the solicitor. The existence of the privilege reflects, to the extent to which it is accorded, the paramountcy of this public interest over a more general public interest, that which requires that in the interests of a fair trial litigation should be conducted on the footing that all relevant documentary evidence is available. As a head of privilege legal professional privilege is so firmly entrenched in the law that it is not to be exorcised by judicial decision. None the less there are powerful considerations which suggest that the privilege should be confined within strict limits.”
28.However, to allow the privilege to attach to relevant communications in circumstances where the legal advice is sought so that the client might better undertake or continue criminal or fraudulent conduct, would subvert the purpose of the privilege by impeding the administration of justice. Accordingly, such communications never, at any point in time, come within the relevant class of communications. The result is the same whether or not the solicitor is improperly involved in the client’s conduct: Reg. v Bell; ex parte Lees (1980) 146 CLR 141, esp. per Stephen J, at 152-154. In that case, the disqualifying conduct on the part of the client involved an Order of the Court being frustrated which was thus “to frustrate the processes of the law” (at 156).
29.In situations where because of the particular circumstances (such as in the present case) it appears self-evident that the communications are privileged, it is not enough to displace that assumption to make a mere charge of crime or fraud; rather there must be something to give colour to the charge. There must, indeed, be some prima facie evidence that the allegation has some foundation in fact: AG (Northern Territory) v Kearney (1985) 158 CLR 500 at 516 (per Gibbs, CJ). The evidence in question must involve dishonesty that goes to the heart of the relationship (per Wilson J at 524). It will be enough if there is prima facie evidence of dishonesty including trickery and sham contrivances (per Wilson J at 526), or any illegal or improper purpose (per Dawson J at 528).
30.Although something “less than proof of an allegation of crime or fraud” may be enough to oust a claim that communications are privileged, nevertheless circumstances must be made to appear “which sufficiently point to the bona fides and credibility of the allegation”. In particular, something more is required than merely pleading the allegation, or than mere surmise and conjecture: Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 (per Dawson J at 522). Although it is not possible to fix with precision the material that will be sufficient in a particular case, it must be such as would lead a reasonable person to see a strong probability that there was a disqualifying crime or fraud (per Kirby J at 592-593).
31.Where the privilege attaches to particular communications, it does so whether or not those communications would be relevant and otherwise admissible in judicial or quasi-judicial proceedings, or in an administrative proceeding: Baker v Campbell (supra). It matters not that the privileged communications are sought to be relied upon and put into evidence by an accused person in criminal proceedings: Carter v Northmore and Ors (1995) 183 CLR 121. Nor can any adverse inference be drawn by reason of a party’s reliance on legal professional privilege: Giannarelli v Wraith (1991) 171 CLR 592 at 605.
Conclusion as to privilege
32.Bearing in mind that the relevant transactions concern the circumstances surrounding the obtaining of the share valuation in September 1983, and the sale of the shares in February 1984, in particular, certain aspects of the chronology, set out in para 24 of these reasons, it seems to me, should be carefully borne in mind.
33.First, Bombo Holdings, the directorships in respect thereof, and the investment companies were all in place by 1971. Bridon was incorporated the following year and it was in 1974 that each of the investment companies acquired a quarter of the issued shares in Bridon and Bombo Holdings. The advice in respect of pre-emptive provisions in respect of the shares was sought in 1973, but there already existed restrictions on the sale of the shares. The relevant Deed was entered into in June 1981.
34.The significance of the timing of these events emerges, it seems to me, because of the Applicant’s submissions that the valuation of the shares by Duesburys, as well as the extended terms in respect of payment of the shares, should be construed as an indication of a scheme being afoot which had as its purpose, or one of its purposes, to permit the First Respondent to alter the position of his assets to the potential detriment of the Applicant vis-à-vis her rights under the Family Law Act on the happening of particular events.
35.According to the Applicant, the period of separation under the one roof was from “late 1982” until “early 1984”. The First Respondent on the other hand, places the period as being from June 1983 and says that the parties had reconciled by Christmas 1983. It is the Applicant’s case, of course, that whatever the precise period of separation under the one roof, and notwithstanding that it was under the one roof, the fact of such separation made it plain to all, in particular, the First Respondent, that the marriage appeared to be in jeopardy, and that the commencement of the earlier proceedings by the Applicant must have added to this impression, although it should be borne in mind, in my opinion, that the proceedings then instituted did not comprise proceedings for property settlement.
36.Whatever the precise dates of separation and reconciliation might be, the only relevant events which fell within that period, were the granting of the mortgage over the matrimonial home by the First Respondent in September 1983 and his obtaining the valuation of shares also in September 1983. It is not clear on the present state of the evidence whether the sale of the shares in February 1984 fell within or outside the period of separation. In any event whether it did or did not is irrelevant to the way the Applicant’s case is put.
37.Thus, it seems to me, that but for the mortgage, and the valuation and sale of shares, all other relevant matters were in place at a time and in circumstances which could have had nothing to do with the proposition advanced on behalf of the Applicant to which I have referred above. An adequate explanation for the sale of the shares at the time when they were in fact sold might, it seems to me, be provided by reference to the objective evidence of the First Respondent’s indebtedness to the Group.
38.Nor is clear, on the evidence, that immediately following the sale of the relevant shares the Respondent’s then net-asset position was worse than it would appear to have been immediately prior to that sale. The shares were sold for the price arrived at by Duesburys, who had had a long association with the financial affairs of the company, from at least 1970. Neither is it clear, on the evidence, that it is correct to describe the sale of the shares as a transaction as a result of which the Respondent divested himself of assets. In exchange for the shares he received the purchase price fixed by Duesburys. Again, the fact that the price was payable over many years seems at odds with the concept of one dealing with his assets “in fear of orders being made under the Family Law Act”.
39.As I have mentioned, the Applicant tendered the affidavit sworn herein by Mr Elvy and it forms part of the evidence before me. Annexed to that affidavit is a copy of an affidavit sworn by the First Respondent on 27 September 1983 in the proceedings between the Applicant and the First Respondent referred to above.
40.That affidavit seems to me to have some bearing on the present application. It sets out in some detail matters relevant to the First Respondent’s then financial situation, and, in particular, in respect of his indebtedness to the Cleary Group. There is reference to the indebtedness of BJC Investments being secured by mortgage to Cleary Brothers (Bombo). The evidence in this affidavit in so far as it relates to the activities of the Cleary Group is corroborated by Mr Elvy, in his affidavit, where he deposes that he knows those matters to be true. The significance of this affidavit, as I see it, is that its disclosures are inconsistent with the suggestion that the First Respondent in the course of those earlier proceedings, bearing in mind the issues raised at the time, failed to make a full and frank disclosure of material facts. It is true that the affidavit made no reference to the sale of the shares, but the omission of any reference to that subject matter may be entirely explicable because of the fact that the sale did not take place until some four months or more after the affidavit was sworn.
41.Thus, it seems to me, that insofar as the present application rests on the basis that the evidence discloses a prima facie case that in respect of the sale of the shares, in particular, the Respondent’s intention was surreptitiously to divest himself of assets to avoid an anticipated order in the earlier proceedings, and that that was the purpose, or one of his purposes, in communicating with his then solicitors, the application must fail on the ground that the assertions made or raised about the matter never rise above the level of mere surmise and conjecture.
Inspection by the Court
42.Each party submitted that it was open to me to conclude that I should inspect the documents, that is to say they submitted that I had a discretion to do so. Grant v Downs (supra) and Trade Practices Commission v Sterling (1979) 36 FLR 244 were cited as authorities for the proposition.
43.However, those cases were dealing with a very different situation to the one before me; those case were concerned with circumstances where the party claiming that certain communications were privileged relied on the description appended to such documents in an affidavit, and where the other party pointed to evidence that the description so appended was inaccurate, with the result, if this were so, that the claim was unfounded. That is not the case here as I have already made clear; if the Applicant’s contention fails, the only obstacle to the privilege claim will have been removed.
44.Indeed, in Trade Practices Commission v Sterling, Lockhart J cited with approval the following passage from Westminster Airways Ltd v Kuwait Oil Co Ltd [1951] 1 KB 134 –
“Each case must depend on its own circumstances; but if, looking at the affidavit, the Court finds that the claim to privilege is formally correct, and that the documents in question of which it is made are sufficiently identified and are such that, prima facie, the claim to privilege would appear to be properly made in respect of them, then, in my judgment, the Court should, generally speaking, accept the affidavit as sufficiently justifying the claim without going further and inspecting the documents.”
45.Accordingly, it seems to me, not only is there no basis for such an inspection by the Court, but to do so would seem inconsistent with the application of the principles referred to above where the present exception is relied upon. Thus, in order to oust the claim that the communications are privileged, the Applicant is required to demonstrate that the exception relied upon should prevail.
46.The fact that the claim fails for the reasons stated makes it unnecessary to consider, in any depth, the validity of the contention which underlies the Applicant’s case, namely that simply because an Order is sought pursuant to s.85, and even assuming the evidence strongly suggested such a claim would ultimately succeed with the result that an Order would in due course be made, such circumstances if proved to the requisite degree would or could be sufficient to justify an ouster of the claim for privilege.
47.To accept such a proposition would involve holding that s.85 should be construed as evincing an intention, in such circumstances, of overriding the protection that would otherwise attach to relevant communications. However, it is now established that legal professional privilege is a substantive general principle reflecting traditional common law rights, and as such cannot be abolished or cut down except by clear statutory provision: Goldberg v Ng (1995) 18 CLR 83 at 94.
48.The ambit of s.85 is by no means free from doubt, in my opinion. In Wilson v Wilson & Ors (1994) FLC 92-498 at 81,181-81,184, I attempted to spell-out those doubts. I also referred to observations made by the High Court, in an unsuccessful special leave application, as to the possible retrospective operation of an Order made under s.85, and the need to protect the interests of third parties in framing any such Order: Loder v Ayson & Ors (1988) FLC 91-955.
Claim under Corporations Law
49.As an alternative basis for gaining access to the relevant communications, which must now be regarded as privileged communications, in the light of the determination above, the Applicant purports to rely on s.247A of the Corporations Law which is in the following terms –
247A(1) [Court’s Power] On application by a member of a company or registered managed investment scheme, the court may make an order:
(a)authorising the applicant to inspect books of the company or scheme; or
(b)authorising another person (whether a member or not) to inspect books of the company or scheme on the applicant’s behalf.
The Court may only make the order if it is satisfied that the applicant is acting in good faith and that the inspection is to be made for a proper purpose.
50.There is evidence that the Applicant at all material times was a shareholder in BJC Investments, holding one class A redeemable preference share, and although the evidence is not entirely clear, it would appear that the rights conferred by the holding of such a share did not include the right to vote at any general meeting of the company, and no right to share in any surplus assets of the company and to receive only such dividend as the directors in their absolute discretion determined.
51.Here the Applicant’s claim is confronted by difficulties which seem to me insurmountable. First, the section does not appear to me to be capable of being read as a statutory provision impliedly abolishing or cutting down claims to legal professional privilege: Goldberg (supra). Second, it seems impossible to view the privileged communications, being records created by the relevant solicitors and in some cases by counsel, as coming within the definition of “books of the company”: see Ford’s Principles of Corporations Law 9th Edition pp456-460.
52.Third, it has been held that before an Order is made under the section it is important that the Court be satisfied that the Applicant is acting in good faith and for a proper purpose. Further that “proper purpose” means “a purpose connected with the proper exercise of the rights of a shareholder as a shareholder, as opposed to the purpose connected with some other interest …”: Cescastle Pty Ltd v Renak Holdings Ltd (1991) 9 ACLC 1333. The purpose of the Applicant so far as the present application is concerned is to get access to the privileged communications with a view to ascertaining whether their contents are of assistance in her claim for an Order under s.85 of the Family Law Act. That purpose, it seems to me, has nothing to do with any relevant exercise of her rights as a shareholder.
53.Accordingly, the applications for an Order that the privileged communications be produced to the Applicant for inspection pursuant to the subpoenas issued on her behalf and that in the alternative an inspection order be made in respect of those communications pursuant to s.247A of the Corporations Law must be dismissed. Exhibits may be returned including the sealed documents, which should be uplifted by the solicitors for the present Respondents forthwith. In the event the present Respondents or either of them seeks an Order for costs submissions in that regard should be served and faxed to my Associate within seven days and any response thereto should be served and faxed within a further seven days.
I certify that this and the preceding
12 pages are a true copy
of the reasons for judgment
of His Honour Justice P.J. Moss
Jacqueline O’Connell, Associate
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