Craig v Hillier - [2018] SADC 114

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
CRAIG & ORS v HILLIER & ORS
[2018] SADC 114
Judgment of His Honour Judge O'Sullivan
14 November 2018
PROCEDURE - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - PRODUCTION AND INSPECTION - GROUNDS FOR RESISTING PRODUCTION - LEGAL PROFESSIONAL PRIVILEGE
Litigation privilege claimed, common interest privilege claimed. Documents not produced for the dominant purpose of litigation. No litigation privilege, no common interest privilege.

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - PRODUCTION AND INSPECTION OF DOCUMENTS - GROUNDS FOR RESISTING PRODUCTION - PRIVILEGE - OTHER GROUNDS
Basis for without prejudice privilege exists, subject to Kadlunga list to be prepared. Common interest privilege available.

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - PLEADINGS - STRIKING OUT - DISCLOSING NO REASONABLE CAUSE OF ACTION OR DEFENCE
Application for dismissal on the ground that pleaded cause of action inconsistent with plaintiffs' documents. Certain paragraphs of Statement of Claim struck out with leave to re-plead. Application otherwise dismissed.

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - PLEADINGS - STRIKING OUT - OTHERWISE ABUSE OF PROCESS
Application for dismissal on the ground of abuse of process. Complaints properly a matter for trial. Application dismissed.

CRAIG & ORS v HILLIER & ORS
[2018] SADC 114
Introduction

This matter involves a challenge by the plaintiffs to the defendants’ claim for common interest privilege and an application by the defendants for the dismissal of the proceedings as an abuse of process, or in the alternative, striking out of the statement of claim as an abuse of process.
There are three interlocutory applications before the Court:
1. The plaintiff’s interlocutory application filed 29 March 2018 seeking:
1.1Production of the documents disclosed at subparagraph 1.2.6 of the defendants’ list of documents filed on 11 September 2017; or in the alternative,
1.2That the defendants file a supplementary list of documents identifying each document contained in the brief disclosed at subparagraph 1.2.6 of their list of documents filed on 11 September 2017.
2.The defendants’ interlocutory application filed 30 July 2018 (“defendants’ first interlocutory application”) seeking orders that:
2.1The proceedings be dismissed pursuant to Rule 193(a) of the District Court Rules 2006 (“DCR”);
2.2In the alternative, the proceedings be dismissed pursuant to DCR 193(b) as an abuse of process;
2.3In the further alternative, the statement of claim be struck out as an abuse of process pursuant to DCR 117(2)(e).
3.The defendants’ interlocutory application filed 10 October 2018 (defendants’ second interlocutory application) in which the defendants seek:
3.1Leave to file and serve a second third party statement of claim against the third party;
3.2That William Buck (SA) Pty Ltd be joined as a party to the proceedings;
3.3The defendants have leave to file and serve a third party statement of claim against William Buck (SA) Pty Ltd; and
3.4That the effective date of the filing of the third party statement of claim against William Buck is the date of the filing of the interlocutory application i.e. 10 October 2018.
When the matter was called on, Ms Walker of counsel for the defendants applied to have the defendants’ second interlocutory application stood over pending the determination of the defendants’ first interlocutory application and the plaintiffs’ application, a course to which the third party and proposed second third party consented. Accordingly, the defendants’ second interlocutory application was stood over to a date to be advised by the Court, pending the determination of the remaining applications.
The Plaintiffs’ Application
The plaintiffs seek the production of the document disclosed at subparagraph 1.2.6 of the defendants’ list of documents filed on 11 September 2017, described as:
Brief to William Buck, 2016, prepared by Norman Waterhouse Lawyers, instructed by Victoria Martin, on the basis of common interest privilege.
In support of its application, the plaintiff reads:
1.     The second affidavit of Rebecca Anne Halkett sworn 9 March 2018;
2.     The third affidavit of Rebecca Anne Halkett sworn 29 March 2018;
3.      The fourth affidavit of Rebecca Anne Halkett sworn 5 July 2018;
4.     The fifth affidavit of Rebecca Anne Halkett sworn 6 July 2018;
5.The sixth affidavit of Rebecca Anne Halkett sworn 3 August 2018;
6.The seventh affidavit of Rebecca Anne Halkett sworn 3 August 2018; and,
7.The eighth affidavit of Rebecca Anne Halkett sworn 19 October 2018.
The defendants oppose the plaintiffs’ interlocutory application and read:
1.The affidavit of James Alexander Haines Hillier sworn 25 May 2018; and
2.The fourth affidavit of Peter Robert Borecki sworn 25 May 2018.
The non-party, Ms Victoria Martin, reads:
1.The second affidavit of Stephen Bradley Williams sworn 6 July 2018, filed 9 July 2018 (“second Williams affidavit”).
Background
The brief to William Buck 2016 referred to in the list of documents is referred to by the parties as the “William Buck brief”.
The genesis of the William Buck brief is that it was prepared by Norman Waterhouse Solicitors, on the instructions of the non-party, Ms Victoria Martin. The history leading to the preparation of the William Buck brief is set out in the second Williams affidavit.
Parts of the second Williams affidavit were objected to by the plaintiff. Rather than rule on each of the objections, I was invited to receive the affidavit de bene esse with the paragraphs the subject of objection to be considered according to weight. I proceed on that basis.
Ms Martin is the sister of the first defendant and sole director and shareholder of Nordburger Pty Ltd (“Nordburger”), a company which owns and operates the Nordburger chain of restaurants.
When the plaintiffs’ interlocutory application came before a Master of this Court on 29 May 2018, the Master extended an invitation to Ms Martin to address submissions to the Court concerning the plaintiffs’ challenge to the defendants’ claim for common interest privilege.
On 5 September 2018, the Master referred the plaintiffs’ interlocutory application and the defendants’ first interlocutory application for hearing and determination by a Judge of this Court.
The proceedings
The proceedings were commenced by the plaintiff as a loan recovery claim on 31 March 2017. A second statement of claim was filed on 21 August 2018.
The first and second defendants are alleged to have obtained loans from the plaintiffs through the intermediary of their accountant, the third party Andrew Craig, a member of William Buck SA Pty Ltd, Chartered Accountants (“William Buck”).
The plaintiffs allege that Andrew Craig introduced the defendants to the plaintiffs at the first defendant’s request. The first and second plaintiffs are the parents of Andrew Craig.
A second defence was filed on 10 September 2018. A number of matters are raised in the defence but for the purposes of this matter the second defence alleges that the defendants were subjected to undue influence by Andrew Craig[1], as a result of which it is alleged that the transactions are voidable.
[1] [25]-[35].
A counterclaim has been filed by the first and second defendants in which undue influence is pleaded against Andrew Craig[2]. Orders are sought, amongst other things, that the transactions the subject of the claim are voidable at the election of the defendants, and a declaration that by service of the defence and the counterclaim, each of the transactions the subject of the claim were rescinded. In the further alternative, equitable damages are sought.[3]
[2] Counterclaim [2].
[3] Counterclaim [5].
On 12 May 2017, third party proceedings were commenced against Andrew Craig alleging a breach of fiduciary obligations as a consequence of which the defendants seek equitable compensation.[4] In the prayer for relief, the defendants also seek, amongst other things, a declaration that each of the transactions the subject of the claim were rescinded by the defendants by the service of the defence and counterclaim.
[4] Statement of Third Party Claim [19], [20], [28], [29], [37], [38].
The William Buck Brief
Mr Williams deposes in the second Williams affidavit that William Buck and in particular Andrew Craig, acted as the personal accountant for Ms Martin until 5 May 2016 and was also the accountant for Nordburger. He deposes further that Andrew Craig was the principal accountant at William Buck who provided services to Ms Martin and Nordburger and provided the majority of the accounting services personally[5].
[5] Second Williams Affidavit [9].
Mr Williams then deposes as follows[6]:
[6]    At [13]-[23].
13.    In January of 2016 as a consequence of the concerns she held in relation to the conduct of Andrew Craig and William Buck, Ms Martin engaged Norman Waterhouse to act for her and Nordburger and generally represent her and Nordburger’s interests in respect of their dealings with William Buck and Andrew Craig both with respect to providing legal advice and in anticipation of potential litigation against Andrew Craig and William Buck.
14.    At all material times since then I have personally acted for Martin and Nordburger in providing the services which have been and are being provided by Norman Waterhouse.
15.    During the early months of our acting, our clients provided comprehensive instructions to us concerning their dealings with Andrew Craig and William Buck, with the ultimate intention of providing a detailed log of complaints to William Buck.
16.    Consequent upon those instructions, I also engaged and dealt with forensic accountants, Hugh McPharlin and Briston Talbot, concerning the dealings and communications between my clients and William Buck and Andrew Craig.
17.    In fulfilment of those instructions, I caused to be prepared a detailed document which particularised the various complaints of my clients in considerable detail and which annexed numerous supporting documents provided to me by Ms Martin.
18.    The document was prepared for the purposes of obtaining my legal advice and assistance, and the assistance of the forensic accountants and Mr Mark Douglas, of the South Australian Bar, in anticipation of potential litigation against William Buck and Andrew Craig.
19.    The document was prepared with the assistance of, and settled by, Mr Douglas.
20.    It was also prepared and provided to William Buck in order to seek the assistance and cooperation of William Buck in investigating the conduct of Andrew Craig. The document was provided to William Buck at that time on the basis that it was the accounting firm acting for my clients and had a professional obligation to fully investigate the complaint lodged by my clients and maintain strict confidentiality.
21.    In its final form, that document is the William Buck brief.
22.    On 29 April 2016 I caused a copy of the William Buck brief to be provided to Mr Jamie McKeough, who was at that time the managing partner of William Buck. At this stage, Mr McKeough received only the briefing paper and not the associated supporting documents.
23.    The briefing paper was provided to Mr McKeough on a private and confidential basis in his capacity of the managing partner of my clients’ accountants…
The William Buck brief was provided to Mr McKeough on 29 April 2016 under cover of a letter from Norman Waterhouse which is exhibit SBW-5 to the second Williams affidavit. The letter is addressed for the attention of Mr McKeough, marked private and confidential, and deals with a number of matters including:
·     Norman Waterhouse is instructed to initiate a formal complaint on behalf of its clients concerning the conduct of William Buck and Andrew Craig in relation to the management of their financial affairs;
·     Attaches a ‘briefing paper’ detailing the areas of complaints and sets out in broad terms in paragraphs 1-6 on page 1 of the letter, the matters to which the complaints relate;
·     Confirms the matters raised in the brief are not exhaustive, with the clients reserving their rights to present further information and to raise further complaints;
·     Indicates that annexures to the statement enclosed with the letter will be provided in the near future, confirms that there is more information and extends an invitation to Mr McKeough to seek further detail from Norman Waterhouse concerning any matters raised should he require it;
·     States the expectation that most if not all the relevant documents were already within the William Buck files;
·     Asks for Mr McKeough to advise Mr Williams at his earliest convenience as to William Buck’s intentions in respect of the investigation of the complaint; and
·Observes the matter is very sensitive, involves Mr Hillier (the first defendant), who has had a long-standing personal relationship with Andrew Craig, and continues that Norman Waterhouse’s clients are anxious to ensure that their complaint is dealt with on a confidential basis and with no interference.
The letter concludes with an indication that Mr Williams is available at Mr McKeough’s convenience for any discussions or meetings he may require and that if he wishes to speak with the clients direct, arrangements may be made.
On 29 April 2016, after Mr Williams had sent the William Buck brief to Mr McKeough, he engaged in a meeting with, amongst others, Ms Martin, Mr Douglas of counsel and the first defendant.
Mr Williams deposes to what occurred at that meeting in the second Williams affidavit[7]:
[7]    At [27]-[33].
27.    During that meeting I used words to the effect as follows:
27.1I advised Mr Hillier of the fact that I had communicated to William Buck on behalf of my client a detailed complaint to William Buck concerning the management of the Martin’s (sic) personal accounting affairs and of Nordburger;
27.2Mr Hillier was told of our concerns about the conduct of Andrew Craig;
27.3Mr Hillier was informed that the conduct of which we had complained also impacted on his personal accounting affairs, on the various loans that had been entered into, and on the financial affairs of other companies and businesses with which he was associated;
27.4I suggested to Mr Hillier that he should seek the advice of his own solicitors and consider whether he wished to also make a complaint;
27.5I indicated to Mr Hillier that we would cooperate with him and provide information to him to assist him in his complaint; and
27.6I stressed that the provision of any such information would be on a strictly confidential basis and that, apart from sharing the information we provided to him with his solicitors, he would not be authorised to share or otherwise disclose that information to any other party.
28.    At that meeting, I handed to Mr Hillier a Deed Poll and told him that my clients would require him to sign the Deed Poll if he wished to avail himself of the offer of assistance and cooperation my clients had provided to him.
29.    On the following Monday, being 2 May 2016, Mr Hillier attended at the office of Norman Waterhouse and met briefly with me. At that meeting, Mr Hillier informed me that he had engaged Randle & Taylor to represent him.
…
31.    On the morning of 2 May 2016, Mr Hillier signed the Deed Poll in my presence. The Deed Poll was witnessed by an employee of Norman Waterhouse…
32.    Prior to him signing the Deed Poll it had been made clear to Mr Hillier by me and Mark Douglas that he would not receive the support and cooperation of my clients and me, or a copy of the William Buck briefing paper, until he had signed the Deed Poll.
33. After Mr Hillier had left the office, and following his execution of the Deed Poll, I sent an email to John Taylor of Randle & Taylor. I attached to that email the briefing paper to William Buck and a copy of the executed Deed Poll…
The Deed Poll is exhibit SBW-6 to the second Williams affidavit.
By letter dated 11 May 2016 Randle & Taylor[8], the solicitors retained by the defendants, wrote to Minter Ellison, solicitors for William Buck, and terminated William Buck’s retainer to provide services to Mr Hillier and that of a number of other entities. In that letter, Randle & Taylor sought an undertaking as to confidentiality in the following terms:
[8] Exhibit SBW-8 to the second Williams affidavit.
Undertaking as to Confidentiality
Our Clients seek your client’s undertaking that save for files and records in relation to Nordwestern Pty Ltd and Nordburger Holdings Pty Ltd as per sub-paragraph 1.1 above, all files and records in relation to Our Clients remain confidential and are to be released only to Mr Hillier, Hood Sweeney (or other accountants engaged by Our Clients from time to time) and our office (or other solicitors as may be engaged by Our Clients from time to time) unless Mr Hillier provides his prior express consent otherwise.
Kindly confirm by return email that your client is able to comply as requested above.
Formal complaint and investigation
We have to hand letter from Norman Waterhouse to your client 29 April 2016 setting out complaints of Ms Martin.
Mr Hillier has considered the said letter, including the Brief attached thereto and as a result is greatly concerned. Not only does he support the investigation of Ms Martin’s complaint but also, he asked that your client’s investigation, specifically in relation to the conduct of (the third party) be extended to all dealings with Our Clients.
Kindly confirm by return email your client’s intentions in relation to investigating its dealings with Our Clients specifically, in relation to any breach of fiduciary duty, ignorance and/or improper or unprofessional conduct…
Otherwise, Our Client’s reserve their rights in relation to all matters.
During the course of the proceedings between the plaintiffs and the defendants, the defendants filed a list of documents on 11 September 2017. At item 1.2.6 of that list, privilege is claimed over the William Buck brief on the basis of common interest privilege. The plaintiffs challenge the claim for common interest privilege and submit that the privilege, if it exists, has been waived by the provision of the William Buck brief to William Buck.
Issues
A number of issues arise:
1.Does legal professional privilege arise over the William Buck brief and if so, what type of privilege?
2.Has the provision of the William Buck brief to William Buck resulted in privilege being waived?
3.Does without prejudice privilege arise out of the provision of the William Buck brief to William Buck?
4.If privilege does arise, does common interest privilege arise as a result of the provision of the William Buck brief to William Buck?
5.If privilege does arise, does common interest privilege arise as a result of the provision of the William Buck brief to the defendants’ solicitors, Randle & Taylor?
6.Is the request for the William Buck brief fishing?
Is the William Buck Brief privileged?
The first step is to determine whether the William Buck brief is privileged in the hands of a party communicating the information, assuming that no disclosure had been made.
The two types of privilege, which are subsets of legal professional privilege, are what have been termed “advice privilege” and “litigation privilege”[9].[10]
[9] Grant v Downs (1976) 135 CLR 674, 683 per Stephens, Mason and Murphy JJ. See also Dr Ronald Desiatnik - Legal Professional Privilege in Australia 3^rd ed pp 28-30.
[10] A third category wherein an exclusion of litigation privilege involves confidential communications between lawyer and client and third parties with the dominant purpose for the existence of the communication related to proceedings on foot or reasonably contemplated does not arise in the circumstances of this matter. – Desiatnik ibid.
Does advice privilege arise over the William Buck brief as between Ms Martin and Norman Waterhouse?

No party disputes that advice privilege attached to the William Buck brief consequent upon the retainer of Norman Waterhouse to advise and the instructions of Ms Martin[11]. To the extent documents produced as a result of advice privilege have not been provided to William Buck or the defendants, no party suggests advice privilege has been waived.
[11] Second Williams Affidavit [13] [18].
Does litigation privilege arise over William Buck
Litigation privilege attaches to communications, written or oral made and prepared in confidence for the dominant purpose of the use in existing or reasonably contemplated proceedings.[12]
[12] Grant v Downs, Supra at p683; Esso Australia Resources v Commissioner of Taxation (Cth) (1999) 201 CLR 49, [35], [46].
Mr Douglas of counsel for Ms Martin, submits that litigation privilege exists because the documents were brought into existence for the dominant purpose of anticipated litigation as well as for other reasons, as set out in the Norman Waterhouse letter 29 April 2016. It is submitted further that the disclosure to William Buck does not obviate that privilege because of the requirement that the material be kept confidential as against Andrew Craig as a separate participant in pending multi party litigation, ie: against William Buck and Andrew Craig.
Litigation reasonably contemplated as at 29 April 2016
It is apparent from Norman Waterhouse’s letter dated 29 April 2016, that Ms Martin and Nordburger Pty Ltd are initiating a formal complaint concerning the conduct of William Buck, and in particular Andrew Craig, in relation to the management of their financial affairs.
The letter sets out at paragraphs numbered 1-6 a broad description of the complaints. Those complaints are identified as:
1.     Mismanagement of the financial affairs of the clients;
2.     A conflict of interest and breach of fiduciary duty by Andrew Craig;
3. Management of the client’s personal and business affairs with little or no regard to the interests of the clients and with a lack of transparency and communication;
4.Allegations concerning the provision of information to the Australian Taxation Office and serious allegations concerning the client’s tax statements;
5.      Complaints about charging coupled with a lack of transparency; and
6.Manipulation of various matters for self-interest and family interests over the interests of the clients.
The letter points out that the matters raised in the brief are not exhaustive and Norman Waterhouse’s clients reserve their rights to present further information and to raise further complaints. There then follows an invitation to Mr McKeough to seek further detail should he require it, and then for Mr McKeough to advise Mr Williams at his earliest convenience as to the intentions of William Buck in respect of the investigation of the complaint.
That letter was written on 29 April 2016. I am not aware of any proceedings having since been issued. That of itself, of course, is not determinative as proceedings may well have been contemplated at the time.
Although Mr Williams deposes in paragraph 13 of the second Williams affidavit that the purpose of the instructions was to provide legal advice in anticipation of potential litigation against Andrew Craig and William Buck, in paragraph 15 of the second Williams affidavit Mr Williams refers to Norman Waterhouse’s clients providing comprehensive instructions with the ultimate intention of providing a detailed log of complaints to William Buck.
He continues that consequent upon those instructions, he retained and dealt with forensic accountants and caused to be prepared a detailed document particularising the various complaints of his clients and numerous supporting documents provided by his clients.
At paragraph 18 of the second Williams affidavit he deposes that the document was prepared for the purpose of obtaining legal advice and assistance as well as the assistance of forensic accountants and Mr Douglas of counsel in anticipation of potential litigation against William Buck and Andrew Craig.
In Australian Competition and Consumer Commission v Yazaki[13] (“Yazaki”) Besanko J considered the question of when a proceeding is reasonably anticipated. In particular, his Honour considered whether that point is only reached when a proceeding is more likely than not, or instead when there is a real prospect of proceedings.[14]
[13] [2014] FCA 1316.
[14] Supra at [29]-[36].
Having considered the authorities, his Honour concluded that the test of whether litigation is reasonably anticipated is an objective test and requires a consideration of all the facts and circumstances with the question to be determined at the time the document is produced. A statement of the person claiming privilege that proceedings were reasonably anticipated on or from a certain date is not conclusive.[15]
[15] Supra at [34].
At paragraphs 35 and 36 of the judgement his Honour observed that:
A court may consider a variety of factors to be relevant in deciding when proceedings are reasonably anticipated. Whether relevant witnesses have been interviewed is one factor (Visy Industries v ACCC at 136-137, [61]-[63]; ACCC v Australian Safeway Stores at 545-546 per Goldberg J). Another factor is whether the cooperation of crucial witnesses has been secured (Australian Competition and Consumer Commission V Prysmian Cavi E Sistemi Energia S.R.L. (no2) [2012] FCA 44 at [66] per Lander J).
As I have noted, in paragraphs 13 and 18 of the second Williams affidavit, Mr Williams deposes to potential litigation against Andrew Craig and William Buck. A mere assertion of potential litigation is not sufficient and there must be focused and specific evidence rather than assertions, conclusions and generalised comments.[16]
[16] Australian Competition and Consumer Commission v Yazaki (supra) at [37].
Mr Williams was not cross-examined, however I note that in Barnes v The Commissioner of Taxation[17], the Full Court of the Federal Court of Australia observed[18] that the fact that generalised evidence is not challenged in cross examination does not mean that such evidence must be accepted, particularly when it is manifestly inadequate. I do not consider the evidence put before the Court in the second Williams affidavit as manifestly inadequate.
[17] (2007) 242 ALR 601.
[18] At [18].
Notwithstanding there is no assertion of potential litigation in Norman Waterhouse’s letter dated 29 April 2016, having considered the circumstances leading to the retainer of Norman Waterhouse by Ms Martin and the purpose of the instructions, I find that litigation was reasonably anticipated at the time the William Buck brief was prepared.
Dominant purpose
To attract litigation privileges the documents comprising the William Buck brief must have been produced for the dominant purpose of litigation.[19]
[19] Esso Australia Resources v Commissioner of Taxation (Cth) (Supra).
I am not satisfied that the dominant purpose of the William Buck brief was for the purposes of litigation. It is apparent from Norman Waterhouse’s letter dated 29 April 2016 that the dominant purpose of the William Buck brief was to put a case to William Buck for the purpose of it investigating the complaints against Andrew Craig and by extension, William Buck itself. The fact that the documents may also be used for the purposes of litigation, as deposed to by Mr Williams, reinforces my view that the dominant purpose was not anticipated litigation.
In any event, if I am wrong in reaching that conclusion, for the reasons which follow if litigation privilege arose, confidentiality has been waived by Norman Waterhouse providing the documents to William Buck.
Has the provision of the William Buck brief to William Buck resulted in litigation privilege being waived?
The waiver of litigation privilege depends on whether there has been, objectively viewed, a waiver of the confidentiality that is an essential part of the privilege.
The question of whether there has been a waiver of privilege at common law was dealt with by the High Court in Mann v Carnell[20].
[20] (1999) 201 CLR 1.
In that matter, litigation between a plaintiff and the Australian Capital Territory Government was settled upon the acceptance by the plaintiff of a sum paid into court.
During the progress of the litigation, the plaintiff had been in contact with an independent member of the Legislative Assembly of the Australian Capital Territory, a Mr Moore. Upon a request from Mr Moore to Ms Carnell, the then Chief Minister. The Chief Minister responded by enclosing four documents, each of which were unquestionably privileged. The issue in Mann v Carnell was whether that privilege had been lost by the provision of the documents from the Chief Minister to Mr Moore. When he received the documents, Mr Moore checked with the Chief Minster’s office as to whether the documents were the subject of confidentiality and, having been told they were, returned the documents without making copies. It was clear that the documents had been provided to Mr Moore on a confidential basis.
The majority dealt with the question of the waiver of privilege at common law at [28] - [35].
At [28], the Court observed: [citations omitted]
…Legal professional privilege exists to protect the confidentiality of communications between lawyer and client. It is the client who is entitled to the benefit of such confidentiality, and who may relinquish that entitlement. It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilege. Examples include disclosure by a client of the client’s version of a communication with a lawyer, which entitles the lawyer to give his or her account of the communication, or the institution of proceedings for professional negligence against a lawyer, in which the lawyer’s evidence as to advice given to the client will be received.
Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is “imputed by operation of law”. This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege. … What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.
The question therefore comes down to one of a disclosure inconsistent with maintaining the privilege.
In Norman Waterhouse’s letter dated 29 April 2016, it was made clear in the last sentence of the second last paragraph that Norman Waterhouse’s clients were anxious to ensure that their complaint was dealt with on a confidential basis and that William Buck ensured that there was no interference or manipulation of the investigation in any way. Although that is an indication that the communication was to remain confidential, it was done against the background of potential litigation. That of itself creates a tension between maintaining the confidentiality and the potential ramifications of that confidentiality in circumstances where the documents provided may well become an issue should those anticipated legal proceedings eventuate. That does not sit well with the concept of maintaining litigation privilege and in my view, by providing the William Buck brief to a potential defendant, any litigation privilege was waived.
Finally, on the question of confidentiality, I note Mr Roberts SC for the plaintiffs submits that the description in Norman Waterhouse’s letter dated 29 April 2016 paragraphs 1-6 is sufficient of itself to waive privilege, although he accepts that his case in no sense turns upon that. Rather, he puts it forward as a separate and independent basis upon which privilege is lost.[21] In my view, the description contained in Norman Waterhouse’s letter at paragraphs 1-6 is not sufficient to waive privilege.
[21] T 34.25-35.1.
Without prejudice privilege
Without prejudice privilege is a well known form of privilege. In Yokogawa Australia Pty Ltd & Ors v Allstom Power Ltd[22], Duggan J identified the rationale of “without prejudice” privilege[23], citing a passage from the judgment Gleeson CJ in Hong Kong Bank of Australia Ltd v Murphy[24]. Duggan J explained that the rationale relies in part upon public policy to encourage parties, so far as possible, to settle their disputes without resort to litigation and not be discouraged by the knowledge that anything that is said in the course of those negotiations may be used to their prejudice in the course of the proceedings.
[22] [2009] SASC 377 at [69]-[84].
[23] At [70].
[24] (1992) 28 NSWLR 512, 522.
The issue is whether the without prejudice privilege is invoked by reason of the communication of the William Buck brief to William Buck.
In order for without prejudice privilege to attach, there are two requirements. First, a dispute must exist between the prospective litigants. It is not a requirement that litigation must have commenced, as it extends to a situation where litigation is contemplated if the negotiations do not result in a satisfactory resolution of the matters in dispute. If litigation is not contemplated, then the privilege in this form does not arise.
The second requirement is that the material contains express or implied admissions made bona fide for the purpose of achieving settlement of the dispute.[25]
[25] Lawyers Professional Responsibility – GE Dal Pont Fifth Edition [12.10].
I have found that as at 29 April 2016, litigation was reasonably anticipated.
As to the second requirement, I have not seen the contents of the William Buck brief and I was not invited to do so in light of the fact that it is likely I will be the trial judge in this matter. Other than the description set out above at paragraphs 1-6 in the letter dated 29 April 2016, I have no further information as to the contents of the documents.
I have a discretion as to whether or not to inspect the documents[26]. In Grant v Downs the majority observed:[27]
[26] Grant v Downs (1976) 125 CLR 674, 677, 688-9.
[27] At pp 688-689.
It is well accepted that the Court in allowing production and (inspection of documents exercises a judicial discretion. In so doing it needs to scrutinise with care claims of privilege made on the ground now under consideration. It is for the party claiming privilege to show that the documents for which the claim is made are privileged. … The Court has power to examine the documents for itself, a power which has perhaps been exercised too sparingly in the past, springing possibly from a misplaced reluctance to go behind the formal claim of privilege. It should not be forgotten that in many instances the character of the documents the subject of the claim will illuminate the purpose for which they were brought into existence.[28]
[28] See also Esso Australian Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49, [52].
In Perazzoli v Bank SA, A Division of Westpac Banking Corporation Ltd[29] the Full Court of the Federal Court of Australia considered a failure by the Judge at first instance to inspect documents on an application for production of documents over which privilege had been claimed before holding that in that case the judge should have inspected the documents.[30] In so finding the Court considered his Honour’s approach was contrary to that recommended in Esso at paragraph 52 where the plurality said that a Court should not be hesitant in examining documents in respect of which disputed claims of privilege are made.
[29] [2017] FCAFC 204.
[30] 29 at [104].
I am unable to determine from the description of the documents either in the defendant’s list of documents filed 11 September 2017 or from the six paragraphs set out in a letter from Norman Waterhouse dated 29 April 2016, whether the second requirement is satisfied.
However, I am conscious of the warning by McKechnie J in Hansfield Developments v Irish Asphalt Ltd[31] that privilege should not be overborne lightly. So much so is also reflected in s 67C of the Evidence Act (1929) (SA).
[31] [2009] IEHC 420, [53].
Subject to what I say below, in my view a sufficient basis for without prejudice privilege as between Ms Martin and William Buck in relation to the William Buck brief exists. The qualification to which I refer is that there needs to be a better description of the documents comprising the William Buck brief in order to determine whether each of the documents is subject to that privilege. As an example, it is not clear why documents answering the description in paragraph 5 of Norman Waterhouse’s letter dated 29 April 2016, which refers to mismanagement of Norman Waterhouse’s clients’ fee payments including overcharging, would attract without prejudice privilege.
Further, there is a serious allegation in paragraph 4 of Norman Waterhouse’s letter dated 29 April 2016. Potentially, the allegation raises the issue of fraud.
In Clone Pty Ltd v Players Pty Ltd (in liq recs apt) [2012] SASC 12 at [157] Kourakis J, as he then was, observed:
… that no litigation privilege attaches to communications, or documents evidencing steps taken, for the purposes of abusing the very processes of the Court pursuant to which litigation is being conducted. The privilege exists to encourage frank communications between clients and their lawyers and between their legal advisers in order to facilitate the conduct of proceedings in accordance with the rules, procedures and practices of the Court, and the professional ethics of the legal representatives. Communications and conduct undertaken for the purpose of subverting those processes, or which breach professional conduct rules, are adverse to that public interest and should not attract the privilege.
It may be that upon a more fulsome description of the documents in paragraph 4 of Norman Waterhouse’s letter dated 29 April 2016, a question arises over whether any privilege can apply.
Rather than inspect the William Buck brief, at this stage I will order the defendants file a Kadlunga[32] list, that is to say, by reference to each of the documents in the William Buck brief there should be a description in sufficient detail to identify the contents adequately, without going so far as disclosing their confidential contents.
[32] Kadlunga Proprietors v Electricity Trust of SA (1985) 395 SASR 410.
That would, or at least should, allow the plaintiff to consider each of the documents in the William Buck brief and determine whether or not it intends to press further with its challenge to the claim for privilege. If so, I will then consider whether the Court should inspect the documents and if this is appropriate, given the likelihood of me being the trial judge, I will refer that inspection to a Master of the Court who is familiar with this matter.
I deal with whether the defendants can avail themselves of common interest privilege based on without prejudice privilege below.
Relevant principles – common interest privilege
The next two issues concern common interest privilege.
Professor Dal Pont in his text ‘Lawyers’ Professional Responsibility’ describes common interest privilege in the following terms:[33]
[33] Lawyers Professional Responsibility GE Dal Pont, 5^th Edition, [11.190].
Where a person entitled to claim privilege in relation to a document discloses it to a third party who has an interest sufficient for common interest privilege, there is no loss of privilege. In such a case, the third party is also entitled to privilege in respect of the contents of that document. The common interest, which may be legal or commercial, must be either identical or so closely related as to make it inappropriate to treat the parties separately. Instances of a ‘common interest’ have been found to include officers of the same company or group, an insured and an insurer/underwriter, a company and its parent company, a plaintiff and a litigation funder funding the plaintiff’s case, and a liquidator and creditors (as beneficiaries of the liquidator’s statutory obligation to provide information and of the liquidation itself).
Though there is no requirement that each person be represented by the same lawyer, this constitutes a significant influencing factor in favour of substantiating a common interest. To this end, it has been said that common interest privilege requires ‘an identity of interest so close that the parties concerned could (had they chosen to do so) have used the same solicitor or other lawyer. Two persons whose individual interests conflict or are potentially adverse to each other will therefore lack a common interest for this purpose.

(Citations omitted)

In Marshall v Prescott[34] the New South Wales Court of Appeal considered the question of common interest privilege[35]. In so doing Barrett JA observed:[36]
[34] [2013] NSWCA 152.
[35] At [57]-[65].
[36] At [57].
If a document in which legal professional privilege subsists is given to someone else so that the content ceases to be confidential, the privilege is usually lost. This is because the act of giving is, in the particular circumstances, inconsistent with any continuing intention to maintain confidentiality: Mann v Carnell at [13]. An exception operates, however, where the person entitled to the privilege and the person to whom the content of the document is made known have such a commonality of interest in relation to the subject matter of the privilege that sharing of the content is consistent, rather than inconsistent, with an ongoing intention to preserve confidentiality and privilege. Questions of common interest privilege usually arise (as here) when litigation is on foot or foreshadowed …
His Honour referred to Buttes Gas & Oil Co v Hammer (No 3)[37] which has been adopted in Australia[38].
[37] [1981] QB 223, 243 per Lord Denning MR.
[38] See Farrow Mortgage Services Pty Ltd v Webb (1996) 39 NSWLR 601, 611 per Sheller JA.
Barrett JA described the process of analysis necessary to determine if common interest privilege exists[39] and in so doing referred to the judgment of McKechnie J in Hansfield Developments v Irish Asphalt Ltd.[40]
[39] At [63].
[40] Supra at [53].
… The first step, it was said, is to determine by normal standards whether the document would be privileged in the hands of the party communicating the information, assuming that no disclosure had in fact been made. If it is found that the documents would be so privileged, the Court must proceed to the second step which is to ask whether the relationship between the parties was sufficiently close that the transmission of documents should not be held to amount to an implied waiver of the privilege. The nature of that assessment was described in this way (also at [53]):
In considering this the Court should take into account the relationship between the parties, as well as the nature and purpose of the disclosure and whether there could be held to be an objective intention to waive privilege on the part of the holder.
McKechnie J continued:
Privilege should not be overborne lightly, and therefore the ultimate question must be whether it is reasonable in the circumstances to conclude that there was an implied waiver of the privilege. If such an implied waiver cannot be found, the Court should not otherwise interfere.
Barrett JA continued at paragraph 65:
This formulation in terms of implied waiver and intention to waive represents, in my opinion, an accurate summation of the relevant principle. Normally, disclosure of protected content by the holder of the privilege causes the privilege to be lost. This is because of the inherent inconsistency between failing to safeguard the confidentiality essential to privilege and, at the same time, seeking to maintain the immunity that the privilege confers. Where there is, in relation to actual or pending litigation (or its course or outcome), a commonality of interest between, on the one hand, a party to the litigation who is also the holder of the privilege and, on the other, the person to whom disclosure of the privileged content is made by that party for a purpose relevant to that litigation, the commonality of interest supplies a rational basis for inferring an intention that the party's confidentiality should continue and the party's privilege should be maintained, even though the subject matter of the disclosure has passed into the hands of the other person.
Referring to the decision of Sheller JA in Farrow Mortgage Service Pty Ltd v Webb,[41] the Court of Appeal also observed[42] that common interest is not ‘a rigidly designed concept’.
[41] At p 609.
[42] At [61].
Does common interest privilege arise as a result of the provision of the William Buck brief to William Buck?
The non-party asserts common interest privilege applies between it and William Buck. If that is correct, there can be no question of confidentiality being waived. In order for common interest privilege to arise, there must be a common interest whether legal or commercial, which must be identical or so closely related as to make it inappropriate to treat the parties separately.[43] It is an exception to the waiver of privilege by communication to a third party in circumstances where the person entitled to the privilege and the person to whom the content of the document is made known, have such a commonality of interest in relation to the subject matter of the privilege, that sharing of the content is consistent, rather than inconsistent with an ongoing intention to preserve confidentiality and privilege.[44]
[43] Supra Lawyers Professional Responsibility GE Dal Pont Fifth Edition.
[44] Supra Marshall v Prescott per Barrett JA at [57].
The common theme is a closeness of interest or commonality of interest. In Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd[45] Giles CJ observed:[46]
[45] (1995) 37 NSWLR 405.
[46] Supra at 409-410.
Common interest privilege has been considered in a number of cases, … two persons interested in a particular question will not have a common interest for the purposes of common interest privilege if their individual interests in the question are selfish and potentially adverse to each other. In such a case there will not be the necessary identity of interest.
The plaintiffs submit that there was no commonality of interest between William Buck and Ms Martin. They submit that it is apparent from paragraph 13 of the second Williams affidavit, that Ms Martin engaged Norman Waterhouse to act for her and Nordburger and generally represent her and Nordburger’s interests in their dealings with William Buck and Andrew Craig, both with respect to providing legal advice and in anticipation of potential litigation against them both.
The non-party submitted that the communications in the William Buck brief are the subject of a common interest legal professional privilege that has not been waived either by disclosure of the material to Mr Hillier or the disclosure to William Buck, since the disclosure was made on the express basis that confidentiality, including against Andrew Craig, be maintained.
As I have found there is no litigation privilege existing between Ms Martin and William Buck, it follows there is no common interest privilege or litigation privilege between Ms Martin and William Buck. In those circumstances, the only other privilege that arises is without prejudice privilege.
In Rush &Tompkins Ltd v Greater London Council[47] the House of Lords held that admissions by a party in without prejudice discussions was inadmissible at the instance of another party to the litigation. In Lord Griffith’s view,[48]
[47] [1989] AC 1280.
[48] Supra at [1305].
In multi-party litigation it is not an infrequent experience that one party takes up an unreasonably intransigent attitude that makes it extremely difficult to settle with him. In such circumstances it would, … place a serious fetter on negotiations between other parties if they knew that everything that passed between them would ultimately have to be revealed to the one obdurate litigant. What would in fact happen would be that nothing would be put on paper but this is in itself a recipe for disaster in difficult negotiations which are far better spelt out with precision in writing.[49]
[49] For examples of the endorsement by Australian Courts see for example Alstom Power Ltd v Yokogawa Australia Pty Ltd (No. 3) [2009] SASC 100 at [46]-[56].
Without prejudice privilege may only be waived with the consent of each party.[50]
[50] Quad Consulting Pty Ltd v Bleakey & Associates Pty Ltd (1990) 27 FCR 86, 93 per Hill J.
The two parties of course, are Ms Martin and William Buck. It is apparent from the position taken by Ms Martin to the plaintiffs’ application that Ms Martin does not consent to the waiver of without prejudice privilege.
In Yokogawa Australia Pty Ltd v Alstrom Power Limited[51] Duggan J considered the question of whether without prejudice privilege can continue where there has been disclosure to third parties. His Honour considered a number of authorities[52] before determining that:
[51] Supra.
[52] At [69]-[81]
[83]It is unnecessary to decide in the present case whether the privilege is wide enough to prevent disclosure to all third parties except in cases of fraud or other recognised exceptions. However, it is my view that the privilege should apply in a case such as the present where the litigation has a connection with the same subject matter as the negotiations.[53]
[53] cf Glengallan Investments Pty Ltd v Arthur Anderson [2001] QCA 115.
[84]In such a case the result should not turn on the question whether all concerned are joined in the same action. The rationale for without prejudice privilege which is relied upon in authorities such as Rush & Tompkins, is equally applicable in cases where the negotiations and the litigation arise out of the same subject matter and the negotiations and settlement (if achieved) are of potential relevance to subsequent litigation between one of the parties to the negotiation and a party involved in the litigation.
In light of my view as to the existence of without prejudice privilege as between Mss Martin and William Buck, the question of common interest privilege as between them does not directly arise and the question is whether without prejudice privilege has been waived. In my view it has not.
Is there common interest privilege as between Ms Martin and the defendants?
If there is privilege over the William Buck brief or parts of it on the basis of without prejudice privilege, then in my view there is a sufficient commonality as between Norman Waterhouse’s clients and the defendants for there to be common interest privilege. For the reasons set out above, there is no common interest privilege as between Ms Martin and the defendants in litigation privilege as that privilege has been waived.
Other grounds of objection to production of the William Buck brief
Three further grounds were advanced by Ms Martin in opposition to the production of the William Buck brief. Those grounds are:
1.     Relevance
2.      Fishing
3.      Abuse of process
Relevance
It is submitted by Ms Martin that the William Buck brief is not relevant to any matter arising out of the pleadings as between the plaintiffs and the defendants.
Whereas that may be the view of the non-party, nonetheless, the defendants have considered it necessary to disclose the William Buck brief in its list of documents dated 11 September 2017. There is no suggestion that the William Buck brief was included in the defendants’ list of documents in error. It is clear that in the defendants’ view, the William Buck brief is relevant, and on that basis I reject the submission that the William Buck brief is not relevant.
It was submitted by Mr Roberts SC that the non-party has no standing to make the submission as to relevance. In light of my decision as to relevance, there is no need to rule on that point.
Fishing
In Proude v Marco Visic & the South Australian Country Fire Service[54] Blue J considered the concept of fishing in the context of an application authorising a party under Rule 81 of the Supreme Court Civil Rules 2006 to maintain an action as a representative action on behalf of group members. That application had not been heard and the defendant sought disclosure of documents and/or information relating to the funding and potential beneficiaries of the action.
[54] [2012] SASC 184.
His Honour dealt with fishing at [51]-[52]:
The cases cited by the plaintiff are subpoena cases. It has been held that a subpoena may be capable of being set aside on the grounds that it is fishing in the sense that:
a person who has no evidence that fish of a particular kind are in a pool desires to be at liberty to drag it for the purpose of finding whether there are any there or not.
For this purpose, a subpoena is not regarded as “fishing” if it is “on the cards” that the documents in question exist. (Citations omitted).
Mr Douglas described the application as being of a nature that the plaintiffs are parties who want to see the William Buck brief in case there is something relevant, there being no foundation either in the evidence that the plaintiffs have adduced, nor in the pleadings that would suggest that the material is going to be of any prima facie utility to resolving the issues in the primary action.
Again, the plaintiff submits that there is no standing for the non-party to make a fishing submission.
The pleadings contain allegations as to the actions of Andrew Craig and in particular, a breach of fiduciary duty. It seems to me that once that is taken into account, the William Buck brief may well contain relevant documents. Indeed, the defendants considered the William Buck brief to be relevant. In the circumstances, I do not consider the application to be fishing. As a result, there is no need for me to decide the question of whether or not the non-party has standing to make the submission.
Abuse of Process
The final ground of objection from the non-party was that the proceedings as a whole are being pursued on the basis of an abuse of process, which is described by Mr Douglas in this way:[55]
[55] T 45.1-16.
…it's known to the plaintiffs in this loan claim that in fact the financial dealings on the subject matter of this case were architected by, decided by, and substantively, the dealings of Mr Andrew Craig. The manner in which the case is advanced proceeds from the misleading basis that Mr Andrew Craig contrary to that suggestion only brokered an introduction and then acted on the instructions of the defendants. I'll take your Honour to the material that makes good my client's concerns in that regard but my submission is that if your Honour is satisfied of those concerns, then on the authorities the appropriate response is a stay of the plaintiff's action in order to preserve the Court's processes.
My alternative contention is that there are sufficiently serious concerns arising on the material that's now before the Court, concerns that have not been engaged with by detailed affidavit material from the plaintiffs who have not chosen to descend to deposition at all in the face of these allegations, nor their lawyers. That would merit that your Honour direct an appropriate explanation and a detailed explanation in evidence before you permitted the proceedings to continue so that the Court is finally informed about some of the troubling aspects of the presentation of this matter over the last two years.
I deal with the question of whether or not the proceedings should be dismissed as an abuse of process later in these reasons. Suffice to say that in any event, in my view it is not appropriate to direct an explanation before allowing the proceedings to continue.
The Defendants’ submissions on the production application
Ms Walker, who appeared for the defendants, adopts the non-party’s oral submissions, save in respect of Mr Douglas’ submissions about direct relevance. Ms Walker submits that it is apparent from the second William affidavit that the brief contains secondary documents and is a compilation of complaints with some attached material with no suggestion that the relevant primary documents haven’t been disclosed by the defendants. The plaintiff responds that it does not know what is found within the brief, but in any event, the discovery obligation attaches to documentation that records relevant information.
I accept the Plaintiff’s submissions.
Conclusion
On the production application:
1.There is advice privilege in existence, however production is not sought of any documents which fall within that privilege alone.
2. There is no litigation privilege or if there is, it has been waived.
3.There is no common interest privilege arising out of litigation privilege between the non-party and William Buck.
4. There is without prejudice privilege as between the non-party and William Buck.
5.There is common interest privilege based on without prejudice privilege as between the non-party and the defendants.
However, a more detailed description of the documents claimed to be the subject of privilege is required. I will order a Kadlunga list be provided by the defendants to the plaintiffs to enable the plaintiffs to determine which of the documents (if any) comprise the William Buck brief are open to challenge on the basis of the asserted privileges. If necessary, a Master of the Court will inspect the documents under challenge.
4. I reject the non-party’s arguments as to the relevance, fishing and abuse of process by the plaintiffs.
The defendant’s interlocutory application to have the proceedings dismissed or in the alternative struck out.
In the defendants’ first interlocutory application, the defendants seek amongst other things:
1. That the proceedings be dismissed pursuant to DCR 193(a);
2.In the alternative, the proceedings be dismissed pursuant to DCR 193(b) as an abuse of process;
3.In the further alternative, the statement of claim be struck out as an abuse of process pursuant to DCR 117(2)(e).
The defendant reads:
(i) The fifth affidavit of Peter Robert Borecki sworn 27 July 2018;
(ii)The sixth affidavit of Peter Robert Borecki sworn 24 August 2018; and
(iii) The affidavit of Nicholas Gerard McCabe sworn 27 August 2018.
District Court Rule 193 provides as follows:
The Court may dismiss proceedings if—
(a) the pleadings disclose no reasonable cause of action; or
(b)the proceedings are frivolous, vexatious or an abuse of the process of the Court.
District Court Rule 117(1)(2)(e) provides:
(1)The Court may make any order it considers necessary for the proper conduct of a proceeding or otherwise in the interests of justice.
(2)     The Court may (for example)—
(a)     …
(e)strike out a document or proceeding if the Court considers it frivolous, vexatious or an abuse of the process of the Court;
(f)    …
Relevant principles
The defendant seeks dismissal of the proceedings as disclosing no cause of action or in the alternative, dismissing the proceedings or striking out of the statement of claim, both on the basis of an abuse of process.
The expression “abuse of process” can encompass a variety of matters, but at its heart, the Court is concerned with ensuring that its processes are used properly, honestly and in good faith. The Court will act summarily to prevent its litigation procedures from being used vexatiously or oppressively.[56] Whilst not closed, the categories of abuse include:
[56] Halsbury’s Laws of Australia Volume 20 [325-7150].
Proceedings involving a deception of the court which are fictitious or constitute a mere sham;
Proceedings which are manifestly groundless, without foundation or serve no useful purpose[57].
[57] Supra [325-7155].
In Walton v Gardiner[58] the High Court held that abuse of process applies to cases in which the processes of the Court are used for the purpose of injustice or unfairness.
[58] (1993) 177 CLR 378, [392-393].
As to summary dismissal, it is trite law that the power to dismiss is only used with great caution and in clear and obvious cases.[59] The test for dismissal is such that the claim must be obviously unsustainable and so bad that no legitimate amendment could cure the defects.
[59] General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125, Dey v Victorian Railways Commissioners (1949) 78 CLR 62.
Application under DCR 193(a)
The basis of the application under DCR 193(a) is that no reasonable cause of action is disclosed such that the proceedings ought be dismissed.
The crux of the defendants’ submissions is that when regard is had to the second statement of claim, and to the documents exhibited to the fifth affidavit of Peter Robert Borecki (fifth Borecki affidavit), it is revealed that the pleaded case is materially different from the documentation and no cause of action is made out. The defendant puts that submission based on the pleadings and various financial documents.
The pleaded case

Paragraphs 1 and 2 of the second statement of claim plead the “initial agreement” which is alleged to be between the second defendant, Lancom Pty Ltd (“Lancom”) and the plaintiffs, which was partly written and partly oral. To the extent it was oral, it is alleged to be contained in discussions between the first defendant in his capacity as a director of Lancom and Andrew Craig.
To the extent it was written, paragraph 1.3 of the second statement of claim defines the initial agreement as comprising a document headed “Loan Agreement” and a document headed “Deed of Guarantee and Indemnity”.
Paragraph 2 of the second statement of claim alleges that the third plaintiff, Land Investments Pty Ltd (“Land Investments”) would provide Lancom, or its nominee, or in the alternative, the first defendant with the principal sum of $200,000.00[60].
[60] Second statement of claim [2.1].
Exhibit PRB-6 to the fifth Borecki affidavit, is the written Loan Agreement but it is made not as between the Land Investments and the first or second defendants but rather, between the first and second plaintiffs and an entity known as Lady Laing Pty Ltd (“Lady Laing”). The document is unsigned and no party suggested that there was a signed loan agreement or for that matter, any other document which might comprise the Loan Agreement.
The Deed of Guarantee and Indemnity commences in part of exhibit PRB‑6 to the fifth Borecki affidavit[61]. It is alleged to have been given by the first defendant with the primary obligor as Lady Laing. It too is unsigned, and no party suggested that there was any other document which comprised the pleaded Deed of Guarantee and Indemnity.
[61] At p 57.
Paragraph 3 of the second statement of claim pleads that on or about 7 February 2011, and in performance of the initial agreement, the plaintiffs paid Lady Laing $200,000.00. The particulars to that paragraph reveal that the amount of $200,000.00 was paid by way of bank cheque, made out to “The Store” from the account of RJ Craig Nominees Pty Ltd. The Store was at the time operated by Lady Laing.
Paragraph 3A of the second statement of claim, pleads that the plaintiffs were directed to make the payment of $200,000.00 to Lady Laing by the first defendant. So it is that the defendants submits that the initial sum of $200,000.00 does not come from any of the plaintiffs, but rather come from RJ Craig Nominees.
It addition to the initial amount of $200,000.00, the second statement of claim pleads further loans at paragraphs 4 and 5. It is alleged in those paragraphs that at the direction of the first defendant in his capacity as a director of Lancom or alternatively personally, a further loan amount comprised of various payments made between 18 February 2011 and 10 February 2012 and totalling $280,000.00 was paid to Lady Laing. The pleading is that the plaintiffs paid the further loan amount, however exhibit PRB-8 to the fifth Borecki affidavit reveals that of the amounts advanced by way of further loan payments, all of the cheques except for one were made payable to Lady Laing and were drawn on Tuloona Pastoral Services. The remaining cheque, dated 4 July 2011 was payable to Lady Laing and drawn on Land Investments.
Exhibit PRB-14 is a statement of account for Tuloona Pastoral Services, with the heading “Robert James Craig & RJ Craig Noms P/L atf the Craig Family settlement T/A”. The sixth affidavit of Rebecca Anne Halkett sworn 3 August 2018, filed on behalf of the plaintiffs on 6 August 2018, deposes at paragraph 8.5, that Tuloona Pastoral Services is a partnership between the first plaintiff, Robert James Craig and RJ Craig Nominees Pty Ltd with the first plaintiff owning 90% of the partnership and RJ Craig Nominees Pty Ltd owning 10%. R J Craig Nominees is owned and controlled by the first and second plaintiffs. The defendants submit that there is no pleading that the funds were advanced by RJ Craig Nominees Pty Ltd in partnership with the first plaintiff or as trustee for the Craig Family settlement.
Further, in paragraph 8 of the seventh affidavit of Rebecca Anne Halkett also sworn 3 August 2018, Ms Halkett deposes that Andrew Craig signed the cheques drawn on Tuloona Pastoral Services pursuant to an authority, although there is no pleading of any sort that Andrew Craig had that authority. In circumstances where the plaintiffs plead at paragraph 9 of the second statement of claim that Andrew Craig acted as agent for the first and second defendants, that raises, at the very least, a timing issue.
The second statement of claim continues by pleading an email 20 September 2013, as comprising an amended repayment agreement[62]. At paragraph 10 of the second statement of claim, it is pleaded that Land Investments would provide Lancom or its nominee with $70,000.00. At paragraph 11, it is pleaded that the plaintiffs paid the first defendant $70,000.00 on 25 September 2013. However, exhibit PRB-14 to Mr Borecki’s fifth affidavit reveals that the sum of $70,000.00 came from Tuloona Pastoral Services.
[62] Paragraph 9.
In summary, the defendants’ first point is that the money did not come from the plaintiffs, and as such they cannot make out a reasonable cause of action that they have loaned the money.
Financial documents
The second point upon which the defendants rely in relation to its application under DCR 193(a) is that in the draft balance sheet of Lady Laing, exhibited as PRB-22 to the fifth Borecki affidavit, records the sum of $390,000.00 as a non-current liability. That sum corresponds with the amount loaned to Lady Laing but is recorded as being due to Erik Vari Pty Ltd (“Erik Vari”). An ASIC search of Erik Vari is at exhibit PRB-15 to the fifth Borecki affidavit, and records that the Company’s sole director and shareholder is the first plaintiff. Exhibit PRB-16 is an indenture establishing the Erik Vari Trust with Erik Vari as trustee.
The draft 2011 balance sheet for Lady Laing was prepared by William Buck.
Three days prior to Lady Laing purchasing the business known as “The Store”, (the purchase was the purpose for which the funds were advanced to Lady Laing), Erik Vari became a shareholder of Lady Laing.[63]
[63] Exhibit PRB‑18 to the fifth Borecki affidavit.
In summary, the draft 2011 balance sheet for Lady Laing records a non-current liability to a company that is not a plaintiff in circumstances where the pleaded case alleges monies paid by non-plaintiffs to a non-defendant, albeit it is pleaded that the payments were made to Lady Laing at the first defendant’s direction.
On that basis, the defendants submit that the claim advanced by the plaintiffs simply cannot succeed and should be dismissed pursuant to DCR 193(A).
There is much force in Ms Walker’s thorough submissions, however ultimately, as Mr Roberts SC submitted in reply, it is a question of payment by the plaintiffs but from various sources. That is not a complete answer, because there is a discontinuity between the allegations in the second statement of claim, where it is pleaded quite clearly that the plaintiffs paid the amounts in question to Lady Laing when the documentation attached to the fifth Borecki affidavit shows that not to be the case.
Nonetheless, this is not a matter which might be dismissed pursuant to provisions of DCR 193(a) as disclosing no cause of action. Clearly, there is a serious matter to be tried, however it is also clear that the pleadings will need to be amended to properly identify the basis upon which the plaintiffs claim to be entitled to payment in circumstances where the monies were advanced by other parties.
Accordingly, although the application pursuant to DCR 193(a) will be dismissed, there will be an order striking out paragraphs 3, 5, 11, 21.1, 21.4, 22.1, 22.4 and 23 with leave to re-plead.
The defendants’ application pursuant to DCR 193(b) and 117(2)(e)
Both these provisions provide for the dismissal of proceedings if they amount to an abuse of process of the Court[64] or striking out of the statement of claim or proceeding, if the Court considers it frivolous, vexatious or an abuse of the process.
[64] DCR 193(b).
The defendants submit that the application is based not just on the lack of a reasonable cause of action, but that the changes made to financial statements and the signing of a handwritten note, written and orchestrated by Andrew Craig, created a sham which put forward Land Investments as an entity to whom funds are owed and Lancom as the entity owing those funds.
In a carefully crafted argument, Ms Walker directed me to paragraph 5 of the fifth Borecki affidavit and the exhibits thereto, to some of which I have made reference above.
From exhibit PRB-22, the Lady Laing draft balance sheet for the 2011 financial year records a loan from Erik Vari as a non-current liability in the sum of $390,000.00. Although a draft balance sheet, there is provision at page 164 of the fifth Borecki affidavit for Andrew Craig to sign as a director of William Buck.
Exhibit PRB-23 to the fifth Borecki affidavit is an email from Ms Sondra Deering of The Store to Jennifer Rees of William Buck, dated 24 September 2012, advising that The Store’s last day of business will be 11 October 2011. Exhibit PRB-24 to the fifth Borecki affidavit shows a trial balance for Lancom as at 30 June 2011, with a print date of 5 October 2012, some six days before the last trading day of The Store. Lancom’s 2011 trial balance shows a loan due to Erik Vari as a non-current liability. There is no corresponding entry for this amount in 2010. That is to be contrasted with Lancom’s general ledger as at 30 June 2011, exhibit PRB-25 to the fifth Borecki affidavit, again with a print date of 5 October 2012, which contains entry number 389 “recognised loan from EVPL on lent to Lady Laing Pty Ltd” in the sum of $390,000.00.
The significance, so the defendants submit, is that initially it was Lady Laing owing the money to Erik Vari, however, a week after Ms Deering informed William Buck that The Store was going to close, an entry appears in Lancom’s trial balance recording that it owes the sum of $390,000.00 to Erik Vari with Lancom on-lending that amount to Lady Laing.
Exhibit PRB-26 to the fifth Borecki affidavit is Lady Laing’s general ledger as at 30 June 2011, also with a print date of 5 October 2012. On page 175 of exhibit PRB‑26, item 72 of the general ledger for Lady Laing as at 30 June 2011 contains an entry “loan EVPL to Lancom to L/Laing” in the sum of $200,000.00, which the defendants submit is the initial $200,000.00 advanced on 7 February 2011.
At page 177 of the fifth Borecki affidavit, also part of exhibit PRB-26, there is a further entry in Lady Laing’s 30 June 2011 general ledger at item 14, described as “loan EVPL to Lancom to L/Laing” in the sum of $190,000.00, with a total loan due to EVPL from Lancom and Lady Laing of $390,000.00. Prior to this point in time, in the Lady Laing draft financial statements for the year ended 2011, it was shown as a loan from Lady Laing to Erik Vari.
In exhibit PRB-27 to the fifth Borecki affidavit, at page 179, there is a balance sheet for Lady Laing as at 30 June 2012. There is no entry for any liability to Erik Vari, but rather a non-current liability to Lancom in the sum of $827,936.00.
In exhibit PRB‑27, at page 181 of the fifth Borecki affidavit, there is a balance sheet for Lancom as at 30 June 2012, with an entry on page 182 of a non-current liability to Land Investments, in the sum of $390,000.00.
The defendant complains that there are no explanations for these changes to various financial documents and puts its case that William Buck, having been told on 24 September 2012 that Lady Laing was selling The Store with its last day of operation as being 11 October 2012, there are changes made to financial documents in which there appears to be a restructuring of the loan in the sense that the documents record the loan in the sum of $390,000.00 being owed by and to different entities.
That may be so, and it is certainly a matter that will require explanation, however, with due respect to Ms Walker’s submissions, it is not a sufficient basis for the Court to find that there is an abuse of process, or a sham, so as to warrant either dismissal of the proceedings or striking out of the proceedings or a document, in this case the second statement of claim. It may be for example, although of course I do not know, that instructions were given or there is an allegation that instructions were given as to how the financial statements were to be prepared or adjusted by William Buck, and in particular, Andrew Craig. Whether that is the case and if it is alleged, whether it is established, are matters for trial.
Accordingly, I dismiss the defendant’s application pursuant to DCR 193(b) and DCR 117(2)(e).
Orders
I propose making the following orders however, prior to doing so I will hear from the parties as to the time within which the orders can be complied with.
On the plaintiffs’ interlocutory application for a production:
1.On or before a date to be fixed, the defendants file and serve on the plaintiffs and the third party, a Kadlunga list setting out each of the documents in the William Buck brief in sufficient detail to allow the plaintiffs or the third party to consider the content of the document but not so specific as to amount to a disclosure of the content of the document;
2.On or before a date to be fixed, the plaintiff and third party identify those of the documents in the Kadlunga list to which it challenges the claim for common interest privilege by the defendants;
On the defendants’ first interlocutory application:
3.Paragraphs 3, 5, 21.1, 21.4, 22.1, 22.4 and 23 will be struck out with leave to the plaintiffs to replead by on or before a date to be fixed;
4.The defendants’ application to have the proceedings dismissed pursuant to DCR 193(a) is dismissed;
5.The defendants’ application in the alternative, that the proceedings be dismissed pursuant to DCR 193(b) be dismissed;
6.The defendants’ application in the further alternative, that the statement of claim be struck out as an abuse of process pursuant to DCR 117(2)(e) be dismissed.
7.I will hear the parties on the question of costs at an adjourned hearing on a date to be fixed.