Elders Forestry Ltd v BOSI Security Services Ltd (No 3)

[2010] SASC 228

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

ELDERS FORESTRY LTD v BOSI SECURITY SERVICES LTD & ORS (NO 3)

[2010] SASC 228

Reasons for Decision of The Honourable Justice Kourakis

21 July 2010

PROCEDURE - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - PRODUCTION AND INSPECTION - GROUNDS FOR RESISTING PRODUCTION - LEGAL PROFESSIONAL PRIVILEGE - WAIVER OF PRIVILEGE

Application by defendants for disclosure of documents over which legal professional privilege claimed – whether plaintiff’s pleading implicates legal advice it received to extent necessary to waive privilege.

Held: Application dismissed.

Australian Agricultural Company Ltd v AMP Life Ltd [2006] FCA 371, discussed.
Elders Forestry Ltd v BOSI Security Services Ltd & Ors [2010] SASC 223; Elders Forestry Ltd v BOSI Security Services Ltd & Ors (No 2) [2010] SASC 226, considered.

ELDERS FORESTRY LTD v BOSI SECURITY SERVICES LTD & ORS (NO 3)
[2010] SASC 228

Civil: Application

1. KOURAKIS J:     This was an interlocutory application for disclosure of documents over which legal professional privilege was claimed.  The application was filed by the first to third defendants (the defendants) on 27 April 2010 and was made specially returnable before me on 28 April 2010.  After hearing argument on that date, I reserved my judgment.  The matter was next before me on 3 May 2010, the first day of the trial of the substantive proceedings.  Before calling the matter on for trial, I delivered my decision on the application, but indicated that I would provide my reasons for so deciding at the time of handing down my judgment in the substantive proceedings.[1]

   [1]    See Elders Forestry Ltd v BOSI Security Services Ltd & Ors [2010] SASC 223.

2. An earlier application for disclosure was made by the plaintiff.  The facts of these proceedings are outlined in those reasons for ruling and I do not need to repeat them.[2]  In this application, the defendants sought disclosure by the plaintiff of various documents for which the plaintiff claimed legal professional privilege. 

   [2]    See Elders Forestry Ltd v BOSI Security Services Ltd & Ors (No 2) [2010] SASC 226.

3. I set out below the pleadings which are relevant to this application, beginning with the plaintiff’s amended reply to the defence of the first to third defendants:

   1.… ITC says that:

   1.6    … BOSI is estopped from denying that it is bound by the Shareholders’ Deed as amended to the same extent as Timbercorp, and from asserting that it is permitted to deal with the shares in PPT without observing the Shareholders’ Deed as amended, where, by reason of the circumstances pleaded in paragraphs 6 and 10 below:

   1.6.1ITC and BOSI at all material times acted on the mutual assumption that BOSI’s interest in Timbercorp’s PPT Shares would be and was limited to the same extent as Timbercorp’s own interest in those shares, which was at all material times subject to Clause 2.5 and 7.2 of the Shareholders’ Deed as amended; and/or

   1.6.2ITC at all material times acted on the assumption that BOSI’s interest in Timbercorp’s PPT Shares would be and was limited to the same extent as Timbercorp’s own interest in those shares, and BOSI acquiesced in that assumption; and

   1.6.3it would be unconscionable and unjust for BOSI to be permitted to resile from the assumption, in circumstances where ITC has acted on the assumption to its detriment, in particular:

   (a)by incurring significant costs in exercising its option rights including the costs associated with the Deloitte valuation report in respect of the schedule 5 valuation as pleaded in paragraphs 73 to 84 of the Statement of Claim;

   (b)by incurring significant costs in enforcing its option rights in Supreme Court of South Australia Action No. 1550 of 2009; and

   (c)by funding the whole of the operating costs of PPT since June 2009.

   …

   6.… ITC denies that any equitable interest it had in the PPT shares is postponed to any such interest acquired by BOSI by virtue of ITC’s conduct, and says further that:

   …

   6.13  it would be unconscionable for BOSI to maintain, and BOSI is estopped from asserting, that it has a superior equitable interest to that of ITC in the circumstances pleaded:

   6.13.1in paragraph 1.6 above;

   6.13.2in this paragraph 6;

   6.13.3in paragraphs 10 and 11 below.

   …

   9.… ITC denies that it is estopped from claiming relief sought in its Statement of Claim, or that it is unconscionable for ITC to assert the entitlements pleaded in its Statement of Claim as against BOSI, and says further that:

   9.1    in the circumstances pleaded in paragraphs 1.6, 6, 10 and 11 herein BOSI is not entitled to the equitable relief sought …

4. I next set out relevant pleadings from the defendants’ supplementary pleading to the plaintiff’s reply:

   2.In response to paragraph 1.6 of the Reply, the defendants deny paragraph 1.6 and:

   …

   2.3    says further that if (which is denied) ITC did rely on the [assumption that BOSI’s interest in Timbercorp’s PPT Shares arising under the Charge and Mortgage] in taking the actions pleaded in paragraph 1.6.3(a)-(c), ITC’s actions were reckless in that:

   2.3.1ITC knew that the PPT Shares were worth significantly more than the $50,000 that ITC was proposing to pay Timbercorp for the Shares and might be worth in excess of $4 million;

   …

   2.4    says further that if (which is denied) ITC did rely on the [assumption that BOSI’s interest in Timbercorp’s PPT Shares arising under the Charge and Mortgage] in taking the actions pleaded in paragraph 1.6.3(a)-(c), it would not be unjust or unconscionable for BOSI to be permitted to resile from the Asserted Assumption or to deny that it is bound by the entirety of the Third Shareholders Deed given:

   …

   2.4.2the PPT Shares are potentially worth in excess of $4 million or more; …

5. On this application, I was taken to the case of Australian Agricultural Company Ltd v AMP Life Ltd.[3]  I was not referred to that authority in Elders Forestry Ltd v BOSI Security Services Ltd and Others (No 2).  The substantive proceedings in that case related to the sale by tender of shares of a company which was conducted by the respondent, AMP.  During the tender process, AMP retained Rabo to advise it in respect of financial issues relating to the sale.  The advices provided by Rabo to AMP contained a detailed review of the offers and of various considerations which Rabo considered pertinent to AMP’s deliberations.  The applicant, AACo, made a tender for the shares which was rejected by AMP in favour of a rival tender.  In the course of advising AMP, Rabo was privy to legal advice provided to AMP by its solicitor, Clayton Utz.  AACo sought orders that AMP produce for inspection documents held by Rabo in respect of which AMP claimed legal professional privilege.  AACo claimed that AMP had waived legal professional privilege in respect of the documents by its conduct of the proceedings.

   [3] [2006] FCA 371.

6. Cowdroy J summarised the submissions of AACo as follows:

   [8]AACo claims that AMP has waived its legal professional privilege on two bases. Firstly, AACo says that AMP waived privilege by specifically pleading its corporate state of mind in the defence. …

   [9]In respect of the first ground, AACo submits that AMP has not simply denied the allegations of misleading and deceptive conduct, but has made positive assertions as to its corporate state of mind at the time of making the decision. It refers to pars 112, 113 and 114 of the defence (set out hereunder).  It also refers to the affidavits Mark Derwin of AMP and Steve Cvetko of Rabo, both sworn on 23 September 2003, which attest to those deponents’ beliefs that the Nebo offer was superior to the AACo offer, because the difference in price was negligible and Nebo’s offer represented a lesser risk for AMP.

   …

   [12]AACo submits that where a party propounds a positive case that it possessed a certain state of mind, it opens up for examination and testing by the Court any evidence as to its actual state of mind.  AACo submits that a defence which specifically invokes a positive state of mind is inconsistent with the maintenance of privilege over documents which contributed to that state of mind.  As a consequence, AACo submits AMP has necessarily waived privilege in relation to its legal advice.  AACo relies upon Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405 at 411; Telstra Corporation Ltd & Anor v BT Australasia Pty Ltd & Anor (1998) 85 FCR 152 at 166-7; Fort Dodge Australia Pty Ltd v Nature Vet Pty Ltd [2002] FCA 501 at [11]; BP Australia Pty Ltd v Nyran Pty Ltd [2002] FCA 1302 at [17]; Rio Tinto Ltd v Commissioner of Taxation [2005] FCA 1336 at [40]–[42].

   [13]AACo submits that the majority judgment in Telstra Corporation remains good law and relies upon Perpetual Trustees (WA) Ltd v Equuscorp Pty Limited [1999] FCA 925 at [16] and DSE Holdings Pty Limited v Intertan Inc & Anor [2003] FCA 384.[4]

   [4]    Australian Agricultural Company Ltd v AMP Life Ltd [2006] FCA 371 at [8]-[9], [12]-[13].

7. Cowdroy J rejected AACo’s submission, concluding:

   [34]I cannot accept the submission of AACo that any positive defence mounted by AMP which raises its state of mind necessarily constitutes a waiver of privilege.  In my opinion, in order to waive privilege a party must assert a belief which is likely to have been, or is explicitly said to have been, materially dependent upon legal advice given to that party.  In that case the proof or otherwise of the belief is dependent upon the legal advice and accordingly privilege is waived.  This is the position in cases where the dispute relates to a party’s understanding of its legal position at a given point in time, such as Thomason, Rio Tinto, Ampolex and Fort Dodge.

   [35]In the present case, the belief pleaded by AMP is not intimately connected with the legal advice given to it at the time: cf Ampolex per Giles CJ Comm D at 411F. AMP’s defence does not make assertions as to the content of legal advice given to it; nor does AMP’s defence state that its decision to accept the tender of Nebo was based upon legal advice: cf Rio Tinto.AMP does not assert a belief in particular legal requirements or consequences, which could be reasonably expected to have been predicated upon legal advice, in which case legal advice might be material evidence in the proceedings.  Rather, AMP has pleaded its belief with respect to the best commercial option which was open to it, a belief informed primarily by commercial advice from Rabo.  In these circumstances I do not consider that AMP’s pleadings are inconsistent with the maintenance of its legal professional privilege.[5] (emphasis in original)

   [5]    Australian Agricultural Company Ltd v AMP Life Ltd [2006] FCA 371 at [34]-[35].

8. The reasoning and decision of Cowdroy J is, with respect, consistent with the approach I took in Elders Forestry Ltd v BOSI Security Services Ltd and Others (No 2).  ITC’s pleading does not implicate the legal advice it received to the extent which is necessary to waive privilege.  In that respect, the pleading is not materially different to the BOSI pleadings considered in Elders Forestry Ltd v BOSI Security Services Ltd and Others (No 2).

   Notice of the shares

9. BOSI also seeks the discovery of documents which are relevant to the market value of the PPT shares.  In my view, those documents are not directly relevant to any issue raised in the pleadings and there is otherwise no good reason to order the discovery BOSI seeks.

   Conclusion

10. It was for these reasons that I made orders on 3 May 2010 dismissing the first to third defendants’ interlocutory application of 27 April 2010.