Great Southern Managers Australia Ltd (Receivers and Managers Appointed) (in liq) v Clarke

[2012] VSCA 207

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2012 0153
GREAT SOUTHERN MANAGERS AUSTRALIA LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 083 825 405)	Applicant/Appellant
v
PETER CLARKE AS TRUSTEE OF THE CLARKE FAMILY TRUST & ORS ACCORDING TO THE ATTACHED SCHEDULE OF PARTIES	Respondents

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JUDGES:	BUCHANAN and OSBORN JJA and BEACH AJA
WHERE HELD:	MELBOURNE
DATES OF HEARING:	24 August 2012
DATE OF JUDGMENT/ORDER:	5 September 2012
MEDIUM NEUTRAL CITATION:	[2012] VSCA 207
JUDGMENT APPEALED FROM:	[2012] VSC 260 (Sifris J)

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EVIDENCE - Client legal privilege - Loss of client legal privilege - Joint clients - Joint privilege - Jointly retained - Multiple parties - Disclosure requirement - Evidence Act  2008, ss 124 and 131A.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr D M B Derham QC with Mr A M Dinelli	DLA Piper
For the First to Fifth Respondents	Dr S B McNicol with Mr T Warner	Macpherson & Kelley Lawyers Pty Ltd
For the Sixth Respondent	No appearance	Norton Rose
For the Seventh to Tenth Respondents	No appearance	Allens
For the Eleventh Respondent	No appearance	Mills Oakley
For the Twelfth Respondent	No appearance	Colin Biggers & Paisley
For the Thirteenth and Fourteenth Respondents	No appearance	Arnold Bloch Leibler
For the Fifteenth and Sixteenth Respondents	No appearance	Moray & Agnew

BUCHANAN JA
OSBORN JA
BEACH AJA:

Introduction

1. This is an application for leave to appeal from an order of Sifris J made on 24 July 2012, wherein his Honour made a declaration in the following terms:

Joint privilege held by the plaintiffs and the seventh defendant in the Board Paper of Great Southern Plantations Limited (now Great Southern Limited) dated June 2005 (the June 2005 Board Paper) is lost pursuant to s 124 of the Evidence Act2008 (Vic) and the plaintiffs may tender the June 2005 Board Paper at trial.

1. The application for leave to appeal concerns a trial scheduled to commence on 17 September 2012.  The proceeding is one of 16 separate Group Proceedings brought in this Court, pursuant to Part IVA of the Supreme Court Act1986, relating to managed investment schemes formerly operated by the Great Southern group of companies.  Each of the 16 Group Proceedings relates to a distinct Product Disclosure Statement issued in respect of one or more Great Southern managed investment schemes.  The plaintiffs, who are respondents to the present application, were investors in the relevant managed investment schemes.  They claim relief in respect of alleged deficiencies in the Product Disclosure Statements and in respect of other conduct.  Great Southern Managers Australia Limited (‘GSMAL’), the current applicant, was the responsible entity under the Corporations Act2001 of each of the managed investment schemes.

1. The trial of this proceeding is due to be heard by Croft J. During a directions hearing on 27 April 2012, the parties requested his Honour to refer the question of whether a claim for privilege could be maintained in respect of a document described by the parties as ‘the 2005 Board Paper’, to another judge for determination. Principally, the question at issue concerned the proper construction and operation of s 124 of the Evidence Act2008.  While there was some reference before us to other ways in which GSMAL may have been held (or may yet be held) to have lost privilege in the 2005 Board Paper,[1] the substance of what was determined below and the substance of the proceeding before us concerned the ability of the respondents to rely on s 124 in support of their foreshadowed tendering of the 2005 Board Paper at trial.

   [1]Eg s 122 of the Evidence Act or the circumstances addressed by Salmon LJ in Londonderry’s Settlement [1965] Chancery 918, 938. 

1. GSMAL conceded in argument that the 2005 Board Paper may be relevant to matters in issue between it and the respondents. 

The relevant statutory provisions

1. Section 124 of the Evidence Act provides:

124.   Loss of client legal privilege-joint clients

(1) This section only applies to a civil proceeding in connection with which 2 or more parties have, before the commencement of the proceeding, jointly retained a lawyer in relation to the same matter.

(2) This Division does not prevent one of those parties from adducing evidence of-

(a)a communication made by any one of them to the lawyer; or

(b)the contents of a confidential document prepared by or at the direction or request of any one of them-

in connection with that matter.

1. Section 124 is contained in Division 1 of Part 3.10 of the Evidence Act. Division 1 is headed ‘Client legal privilege’. In s 117 (also contained in Division 1 of Part 3.10), ‘client’ is defined to include:

(a) a person or body who engages a lawyer to provide legal services or who employs a lawyer (including under a contract of service);

(b)      an employee or agent of a client;

…

1. Section 118 of the Evidence Act provides:

118.     Legal advice

Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of-

(a)a confidential communication made between the client and a lawyer; or

(b)a confidential communication made between 2 or more lawyers acting for the client; or

(c)the contents of a confidential document (whether delivered or not) prepared by the client, lawyer or another person-

for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client.

The decision below

1. Sifris J heard argument on the point on 29 May 2012.  On 20 June 2012, his Honour delivered reasons for judgment, holding that s 124 of the Evidence Act applied to the 2005 Board Paper.  On 24 July 2012, his Honour made orders consistent with the reasons previously delivered.

The proposed grounds of appeal and the application

1. The proposed grounds of appeal are as follows:

1.The learned trial judge erred in holding that the joint client legal privilege in the June 2005 Board Paper is lost pursuant to s 124 of the Act.

2.The learned trial judge erred in holding that s 124 of the Act is to be construed as applying to circumstances where one party (being a party jointly entitled to client legal privilege in the communication or confidential document) did not jointly retain, or have any involvement with the engagement of, and the provision of instructions to, the lawyer.[2]

[2]Reasons dated 20 June 2012, [51]-[52].

3.The learned trial judge ought to have held:

(a)consistently with the language of s 124 of the Act, the section only applies where two or more parties have ‘jointly retained a lawyer’;  and

(b)as the first to fifth respondents did not jointly retain the lawyer;

the section does not operate so as to allow the first to fifth respondents to adduce evidence of the communications of the confidential document the subject of joint client legal privilege.

4.The learned trial judge erred in holding that s 124 of the Act applies where there are parties to the proceeding other than the holders of the joint client legal privilege.[3]

5.The learned trial judge ought to have held that s 124 of the Act does not operate in circumstances where the adduction of evidence the subject of joint legal privilege would be disclosed to persons other than the joint holders of the privilege in the proceeding.

6.Alternatively to Grounds (1)-(5) above, in circumstances where his Honour had held that s 131A of the Act did not apply and, accordingly, s 124 did not apply until the communications the subject of joint client legal privilege were to be adduced at trial, the learned trial judge erred in making the Declaration in the form made.[4]

[3]Reasons dated 20 June 2012, [63].

[4]Cf Reasons dated 20 June 2012, [39]-[40].

1. GSMAL seeks orders that leave to appeal be granted, the appeal heard instanter and the appeal allowed.  The respondents do not oppose the Court hearing and determining the leave application and the putative appeal ‘simultaneously and instanter’.  Indeed, the respondents made no submissions in relation to the leave application – their submissions were confined to the merits of the proposed appeal.

The parties’ contentions

1. GSMAL advances three arguments on this application.  First, it submits that, consistently with its language, s 124 of the Evidence Act only applies where two or more parties have ‘jointly retained a lawyer’ and, as that did not occur in this case, the section does not operate so as to allow the respondents to adduce evidence of the communications of the confidential document the subject of joint client legal privilege (the 2005 Board Paper).

1. Secondly, GSMAL submits that s 124 of the Evidence Act does not operate in circumstances where the adducing of evidence the subject of joint client legal privilege would disclose otherwise privileged material to persons other than the joint holders of the privilege in the proceeding.

1. Thirdly, GSMAL contends in the alternative that where s 131A of the Evidence Act has been held not to apply, s 124 has no operative effect until the communications the subject of joint client legal privilege are adduced at trial.  It is then submitted that the consequence of this conclusion is that Sifris J erred in making the declaration in the form in which his Honour made it.

1. The respondents contend that Sifris J correctly rejected GSMAL’s first two arguments. As to GSMAL’s third point, the respondents seek to rely upon a notice of contention, contesting Sifris J’s conclusion that s 131A of the Evidence Act did not apply to s 124. They contend that s 131A applies to s 124 so that s 124 ‘is not confined to the giving or adducing of evidence at trial but applies also to the giving or producing of information or documents pre-trial’. They then contend that s 131A is relevant in this case and that joint privilege is lost under s 124 not only on the adducing of evidence at trial, but also at the pre-trial stages, such as the discovery stage of the trial under s 131A(2)(b).

Section 124:  the requirement for two or more parties to have ‘jointly retained a lawyer’

1. Sifris J described the legal advice contained in the 2005 Board Paper in the following terms:

It is now apparent that the May 2005 emails from Mr Pascoe, set out in full in the 2005 Board Paper, contained legal advice tendered to GSMAL as principal client.  According to the affidavit of Ms Karen Fleischer, formerly in-house solicitor of Great Southern Limited, sworn 16 May 2012 (the ‘Fleischer Affidavit’), that advice from Mr Pascoe was sought and obtained on behalf of GSMAL for the benefit of scheme members, including members of the 2005 Plantation Scheme (one of the schemes with which class action proceeding 10/02882 is concerned).[5]

[5]Clarke & Ors v Great Southern Finance Pty Ltd & Ors [2012] VSC 260, [13].

1. There was no issue before us concerning these findings.  GSMAL’s application was conducted on the footing that there was joint privilege between it and the respondents, the advice having been sought and obtained on behalf of GSMAL for the benefit of scheme members, including the respondents.

1. It was common ground that the relationship between GSMAL and the respondents was that of trustee and beneficiaries. It was further conceded by GSMAL that the respondents were ‘clients’ within the meaning of s 118.

1. In Re Doran Constructions Pty Ltd (in liquidation),[6] Campbell J had to consider the question of joint privilege, the identities of the parties to a retainer and whether there was, on the evidence, a joint retainer.  In considering the matter, Campbell J said:

[62]    I should also say that Mr Freeman’s evidence, that during the meeting he was not asked to provide legal advice to Doran Constructions, is of little assistance.  It is perfectly possible for there to be a conclusion that there was a retainer by, amongst others, Doran Constructions, even if no one in the course of the meeting said words to the effect of, ‘Will you please now advise Doran Constructions’.

…

[76]    In my view, there was a joint retainer in the present case.  While the impetus for the transaction was, I accept, that Doran Holdings had been asked by its financiers to clean up its intercompany loan accounts, that ‘cleaning up’ process required co-operative action on the part of all four companies involved.  There is no basis for believing that any of the companies whose co-operation was involved, were excluded from the advice which was given.  Certainly none of them sought advice from anyone other than Mr Freeman.  That Doran Holdings was the impetus for the transaction, but all the companies needed to co-operate, is well captured by Mr Joyce’s statement at the meeting, ‘Holdings wants to do a series of transactions to take the loans out of Holdings and place them in the Constructions group.  Chris what are your thoughts on how we should go about it?’

…

[81]    If one applies s 124 of the Evidence Act 1995, it seems to me that Doran Constructions, the Doran brothers and other companies in the Doran Group, had ‘jointly retained a lawyer in relation to the same matter’ at the time of the meeting on 1 November 1994.

[6][2002] NSWSC 215.

1. The question of joint privilege was also considered in Mercantile Mutual Insurance (NSW Workers Compensation) Limited v Murray.[7]  Mason P[8] said:

[43]    An insured and insurer may have a shared or similar interest in advancing a claim on behalf of the insured or in defeating a claim against the insured and this may give rise to a shared or common interest privilege (Bulk Materials (Coal Handling) Services Pty Ltd v Coal and Allied Operations Pty Ltd(1988) 13 NSWLR 689, Farrow Mortgage Services at 608F).

[44]    But it does not follow that insurer and insured are incapable of jointly retaining a lawyer in circumstances giving rise to a joint privilege.  Whether they have done so, or whether the acts of one should merely be seen as in its own interests or merely as agent for the other, depend on the particular facts.  These will include the terms of the insurance policy, in particular the terms of any clause dealing with the insured’s duty to assist the insurer.

[7][2004] NSWCA 151.

[8]With whom Handley JA and Brownie AJA agreed.

1. The origin of the provisions concerning legal professional privilege in the Evidence Act can be found in the identically numbered provisions of the Evidence Act 1995 (Cth). In Legal Professional Privilege in Australia (2^nd edition), Dr Desiatnik described these provisions in the following terms:

As regards the law of legal professional privilege, the Evidence Act 1995 assuredly does not warrant a standing ovation. At best, it deserves polite applause. It is unnecessarily vague in parts, it has caused much judicial discord over the scope of its provisions … .

1. That said, in our view, Sifris J was correct to conclude that the requirement of a lawyer having been ‘jointly retained’ in s 124(1) was met in circumstances where the advice was sought for the benefit of the respondents.[9]  The section does not require all of the joint privilege holders to expressly retain the lawyer:  it encompasses cases where one joint privilege holder retains the lawyer for its benefit and for the benefit of the other joint privilege holders.  That is what occurred in this case.  It follows that there was no error in his Honour so concluding.

   [9]See further, Kidson (Inspector of Taxes) v Macdonald & Anor [1974] 1 All ER 849, 858, wherein Foster J held that the word ‘jointly’ in its ordinary sense means ‘common to two or more’.

1. Section 124(1) is directed to the substance of the transaction, not the agency through which it is effected.  There is no dispute that the retainer was effected on behalf of the respondents, nor that they were absolutely entitled to receive the advice which is in issue.  In Farrow Mortgage Services Pty Ltd (in liquidation) v Webb,[10] Sheller JA[11] said:

Two or more persons may join in communicating with a legal adviser for the purpose of retaining his or her services or obtaining his or her advice.  The privilege which protects these communications from disclosure belongs to all the persons who joined in seeking the service or obtaining the advice.  The privilege is a joint privilege.  So is it also if one of a group of persons in a formal legal relationship communicates with a legal adviser about a matter in which the members of the group share an interest.  Communications by one partner about the affairs of the partnership or a trustee about the affairs of the trust are examples.  Implicit in the relationship is the duty or obligation to disclose to other parties thereto the content of the communication.  Accordingly, no privilege attaches to such communications as against others who, with the client, share an interest in the subject matter of communication.[12]

[10](1996) 39 NSWLR 601.

[11]With whom Waddell AJA agreed.

[12](1996) 39 NSWLR 601, 608B-C.

1. Section 124 is, as the heading indicates, concerned with ‘joint clients’.  Regard may be had to the heading of s 124 pursuant to ss 35(b)(i) and 36(2A) of the Interpretation of Legislation Act1984. As we have said, GSMAL concedes that the respondents are ‘clients’ within the meaning of s 118. While the interpretation of s 124(1) is not free from difficulty, the construction posited by GSMAL would, in our view, lead to a distinction being drawn between the rights of those who actively participate in the retaining of the lawyer and those who take a passive role having the lawyer retained by a joint privilege holder for their benefit. In our view, there is no warrant in principle or authority for such a distinction. The better view is, as we have said, the view taken at first instance – namely that the joint retention requirement of s 124(1) is met when one of the joint privilege holders retains the lawyer for its own benefit and for the benefit of the other joint privilege holders. This approach also accords with the approach taken by Campbell J in Re Doran Constructions Pty Ltd (in liquidation),[13] to which we have already referred.

   [13][2002] NSWSC 215.

1. The matter may be tested this way.  Assume GSMAL was the party wishing to rely upon s 124, and the respondents resisted on the basis that the respondents had not actively participated in the joint retainer.  On GSMAL’s construction, it would be entitled to rely on s 124 in circumstances where the respondents had actively participated in the joint retainer – but not in circumstances where it (GSMAL) had taken all the active steps in respect of the retainer.  In our view, there is no warrant for giving s 124 such a capricious construction.

1. In Minister for Immigration and Citizenship v SZJGV,[14] French CJ and Bell J stated:

The [task of construction] begins with the ordinary and grammatical sense of the words having regard to their context and legislative purpose …

[14](2009) 238 CLR 642, 649 (‘SZJGV’)

1. Crennan and Kiefel JJ observed that the modern approach to statutory construction uses ‘context’ in its widest sense.[15]

   [15]Ibid, 664 [47].

1. Section 35(a) of the Interpretation of Legislation Act 1984 provides that ‘a construction that would promote the purpose or object underlying the Act … shall be preferred to a construction that would not promote that purpose or object.’

1. In the present case the apparent purpose of s 124 is to provide for the loss of client legal privilege as between joint clients. 

1. In SZJGV French CJ and Bell J further endorsed the view that a court should avoid a construction of legislation which would lead to an ‘irrational’ result.  Their Honours cited a passage from Maxwell’s On the Interpretation of Statutes:

Where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity which can hardly have been intended, a construction may be put upon it which modifies the meaning of the words and even the structure of the sentence.  This may be done by departing from the rules of grammar, by giving an unusual meaning to particular words, or by rejecting them altogether, on the ground that the legislature could not possibly have intended what its words signify, and that the modifications made are mere corrections of careless language and really give the true meaning.[16]

[16]Maxwell on the Interpretation of Statutes (12^th ed, 1969) 228.  See also Grey v Pearson (1857) 6 HLC 61, 106; 10 ER 1216, 1234 (Lord Wensleydale), cited with approval by Higgins J in Australian Boot Trade Employees’ Federation v Whybrow & Co (1910) 11 CLR 311, 341-2. The same rule was referred to by Dixon J in Broken Hill South Ltd v Commissioner of Taxation(NSW) (1937) 56 CLR 337, 371.

1. Both the context and the purpose of s 124 support the construction we prefer in respect of the requirement that the parties have ‘jointly retained’ a lawyer.  The contrary view would mean that the loss of privilege would depend arbitrarily upon the directness of the nature of the arrangements pursuant to which advice was jointly obtained.  We do not accept that this is the intention of the legislation. 

Section 124:  the disclosure to other persons point

1. GSMAL contends that s 124 does not operate in circumstances where the adduction of evidence the subject of joint client legal privilege would be disclosed to persons other than the joint holders of the privilege in the proceeding.  There is nothing in this point.  On its face, s 124 has application whether or not there are other parties in the proceeding.  Section 124(1) applies to proceedings in connection with which two or more parties have the requisite interest.  It is not restricted to litigation between such parties.  That parties other than the joint privilege holders might gain access to material the subject of the joint privilege is a concomitant feature of litigation being conducted in open court.  Even in a case where only the joint privilege holders are parties, the tendering of privileged material has the capacity to, in the words of GSMAL, ‘throw open’ a confidential communication.[17] Sifris J was, in our view, correct to reject GSMAL’s submissions on this point.

   [17]The question of whether parties other than the joint privilege holders will be able to make use of particular confidential communications would, of course, depend upon the existence of any confidentiality regime that might be put in place by the court and/or the operation of the principle in Home Office v Harman [1983] 1 AC 280.

The terms of the declaration

1. The issue in dispute before Sifris J was whether or not s 124 of the Evidence Act permitted the respondents to tender the 2005 Board Paper at trial.  For the reasons given above, Sifris J correctly held that s 124 would permit the respondents to tender the document.  However, the terms of the declaration made are wider than this. Putting to one side the respondents’ notice of contention, we would, in the circumstances, grant leave and allow the appeal solely for the purpose of reforming the declaration.  In our view, the appropriate form of declaration is as follows:

Division 1 of Part 3.10 of the Evidence Act2008 does not prevent the plaintiffs from adducing evidence of the 2005 Board Paper at the trial of this proceeding.

1. In defence of the wider declaration granted by Sifris J, the respondents sought to invoke s 131A. Section 131A provides:

131A.          Application of Part to preliminary proceedings of courts

(1)      If-

(a)a person is required by a disclosure requirement to give information, or to produce a document, which would result in the disclosure of a communication, a document or its contents or other information of a kind referred to in Division 1 or 3; and

(b)the person objects to giving that information or providing that document-

the court must determine the objection by applying the provisions of this Part (other than sections 123 and 128) with any necessary modifications as if the objection to giving information or producing the document were an objection to the giving or adducing of evidence.

(2) In this section, disclosure requirement means a process or order of a court that requires the disclosure of information or a document and includes the following-

(a)a summons or subpoena to produce documents or give evidence;

(b)pre-trial discovery;

(c)non-party discovery;

(d)interrogatories;

(e)a notice to produce;

(f)a request to produce a document under Division 1 of Part 4.6;

(g)a search warrant.

Note Subsection (2) of the New South Wales Act does not include a reference to a search warrant.

1. Undoubtedly, s 131A is capable of having operation where a court process requires the disclosure of information. However, that is not this case. The issue might have arisen as an outcome of the subpoena process described in the affidavit of Stuart Graeme Walter,[18] but in this case it appears to have arisen after the provision of documents pursuant to that process. The issue before Sifris J was whether or not s 124 would operate at trial so as to prevent Division 1 of Part 3.10 of the Evidence Act from operating so as to prevent the respondents from tendering the 2005 Board Paper. In the circumstances of this application, s 131A has no application.

   [18]Sworn 8 May 2012.

1. In argument before us, the respondents contended that s 131A was engaged in this application because GSMAL was refusing to provide an unredacted copy of the 2005 Board Paper to parties in the proceeding other than the respondents. Putting to one side the question of the respondents’ standing to make this submission, this issue did not form part of the matter that fell to be determined by Sifris J below. The reasons of his Honour only support a declaration in the terms we have foreshadowed. In the event that some other party wishes to make application in reliance upon ss 124 and 131A of the Evidence Act in respect of some failure to produce an unredacted version of the 2005 Board Paper, then such application may be made in the Trial Division in the usual way.

Conclusion

1. It follows that in our view, leave to appeal should be granted and the appeal allowed for the limited purpose of reformulating the declaration to provide that Division 1 of Part 3.10 of the Evidence Act2008 does not prevent the plaintiffs from adducing evidence of the 2005 Board Paper at the trial of this proceeding.  Otherwise, we would dismiss the appeal.

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SCHEDULE OF PARTIES

GREAT SOUTHERN MANAGERS AUSTRALIA LIMITED (RECEIVERS & MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 083 825 405)

Applicant/Appellant

v

PETER CLARKE AS TRUSTEE FOR THE CLARKE FAMILY TRUST

First Respondent

SAMANTHA BARBARA MURRAY

Second Respondent

RAYMOND CARL DRUMMOND

Third Respondent

LAURENCE DAVID HOGAN

Fourth Respondent

JACLYNE EDWINA FISHER

Fifth Respondent

GREAT SOUTHERN FINANCE PTY LTD (RECEIVERS & MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 009 235 143)

Sixth Respondent

BENDIGO AND ADELAIDE BANK LIMITED (ACN 068 049178)

Seventh Respondent

ABL CUSTODIAN SERVICES PTY LTD

IN ITS CAPACITY AS TRUSTEE OF THE ABL PORTFOLIO FUNDING TRUST 2007-1 (ACN 097 889 720)

Eight Respondent

ABL NOMINEES PTY LTD

IN ITS CAPACITY AS TRUSTEE OF THE LIGHTHOUSE TRUST NO 12 (ACN 106 756 521)

Ninth Respondent

PIRIE STREET HOLDINGS LIMITED (ACN 061461550) (FORMERLY ADELAIDE BANK LIMITED)

Tenth Respondent

JAVELIN ASSET MANAGEMENT PTY LTD (ACN 136 367194)

Eleventh Respondent

JOHN CARLTON YOUNG

Twelfth Respondent

CAMERON ARTHUR RHODES

Thirteenth Respondent

PHILLIP CHARLES BUTLIN

Fourteenth Respondent

JEFFREYARTHUR SYDNEY MEWS

Fifteenth Respondent

PETER JOHN PATRIKEOS

Sixteenth Respondent