Hartogen Energy Ltd (in liq) v Australian Gas Light Co

[1992] FCA 484

Re: HARTOGEN ENERGY LIMITED (IN LIQUIDATION) First Applicant (Second
Cross-Respondent ACTRAINT NO. 71 LIMITED (IN LIQUIDATION) and BRIAN RAYMOND
SILVIA, WARRAN PANTZER as Liquidators of the First and Second Applicants
And: THE AUSTRALIAN GAS LIGHT COMPANY; AGL PETROLEUM LIMITED; INTERNATIONAL
OIL PROPRIETARY LIMITED and JOHN EDWIN HOOPER as Secretary for the time being
of the Australian Gas Light Company
No. 667 of 1990
FED No. 484
Corporations - Evidence
(1992) 8 ASCR 277
(1992) 10 ACLC 1324
(1992) 109 ALR 177
(1992) 36 FCR 557

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Gummow J.(1)

CATCHWORDS

Corporations - liquidators - Rule in Ex parte James - basis of the Rule - Gooch's Case - whether authority for any principle as to conduct of litigation by and against corporations in liquidation.

Evidence - legal professional privilege - "sole purpose" test - cross-examination of deponents supporting existence of privilege - waiver - confidence - relationship between privilege and law of confidence.

Companies (New South Wales) Code 1981, ss. 377, 524.

Grant v Downs (1976) 135 CLR 674,

Waterford v The Commonwealth of Australia (1987) 163 CLR 54, and

National Crime Authority v S. (1991) 29 FCR 203, applied.

In re Contract Corporation (Gooch's Case) (1872) LR 7 Ch App 207, and Ex parte James (1874) 9 Ch App 709, considered.

HEARING

SYDNEY

#DATE 7:7:1992

Counsel and solicitors for Mr S.D. Robb
the applicants instructed by Corrs
(cross-respondents): Chambers Westgarth

Counsel and solicitors for Mr F. Gleeson
the respondents (cross-claimants) instructed by Freehill

Hollingdale and Page

ORDER

THE COURT ORDERS THAT:

1. Items 1, 2, 3, 4, 6, 8, 9, 10, 11, 13 and 14 identified in para. 3 of the affidavit of Michael Francis O'Neill sworn herein on 12 May 1992 and items 3, 4, 5, 6 and 7 identified in para. 4 thereof are not to be produced for inspection by the respondents.

2. The applicants' motion filed 3 June 1992 otherwise be dismissed.

3. The respondents' motion filed 3 June 1992 be dismissed.

4. The respondents pay the costs of the applicants of both motions.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

Before the Court are two motions both filed in Court on 3 June 1992. By their motion the applicants seek an order denying the respondents access to certain documents produced to the Court under subpoena and for which the applicants claim legal professional privilege. By their motion the respondents place in issue the existence of such privilege and, in any event, seek an order pursuant to sub-s. 377(5) of the Companies (New South Wales) Code ("the Code") that the third applicants (who are joint liquidators of the first and second applicants) waive any claim to legal professional privilege to the documents in question and that they consent to inspection thereof by the respondents.

1. Subsection 377(5) provides that any creditor or contributory may apply to the court with respect to any exercise or proposed exercise by a liquidator of the powers conferred by s. 377, the exercise of those powers being subject to the control of the court. It is in similar terms to sub-s. 477(6) of the Corporations Law, but s. 601 of the Corporations Law directs that any winding up which had started before the commencement of operation of the new law continues to be dealt with under the previously applicable law.

2. The first applicant ("Hartogen") is a company incorporated in New South Wales the winding up of which was ordered on 2 July 1990, pursuant to a summons which had been filed on 29 May 1989. The third applicants ("the liquidators") had been appointed as joint provisional liquidators by the Supreme Court of New South Wales on 29 May 1989 and were later appointed joint liquidators. They are also liquidators of the second applicant ("Actraint").

3. The litigation in this Court was instituted on 23 November 1990. Pursuant to a direction given on 19 April 1991 the applicants filed their list of documents on 14 August 1991. Under the headings "Westgarth's files re 541 examinations" and "Westgarth's files re this litigation" in items 13 and 14 respectively of Part 2 of Schedule 1, legal professional privilege was claimed for a large number of documents. They included those documents production of which for inspection was sought from the third applicants by the subpoenas now in question. The documents were sought by another route, by further subpoenas directed to Mr Richard Nicholls and his solicitors Messrs Abadee Dresdner and Freeman. Mr Nicholls had been a director of Hartogen at the time of the events giving rise to the litigation subsequently instituted by the liquidators.

4. On the return of the subpoenas the documents in question were produced to the Registrar but with a claim to legal professional privilege. The claim was made by the liquidators not by Mr Nicholls or his solicitors. The evidence before me indicates that they do not seek to maintain any such claim for themselves. The present motions were filed to obtain a resolution of the issue of the legal professional privilege claimed by the liquidators.
   Cross-examination

5. The claim to legal professional privilege was supported by affidavits by Mr Warren Pantzer (one of the liquidators), Mr F.J. Kehoe, a partner in the firm of solicitors acting for the applicants (Westgarth Middletons, now Corrs Chambers Westgarth), and by two affidavits of Mr M.F. O'Neill sworn 7 and 12 May 1992. Mr O'Neill is the solicitor with the primary carriage of this litigation for the applicants.

6. Giles J. pointed out in Fruehauf Finance Corporation Pty Ltd v Zurich Australian Insurance Ltd (1990) 20 NSWLR 359 at 366:
   

"Given the 'sole purpose' test for legal professional privilege, it will often be an issue deserving of investigation, since the determination of whether a document was brought into existence for a sole purpose attracting legal professional privilege involves questions of fact and degree. Like issues are commonly investigated when a claim to privilege is made for documents produced on subpoena."

Giles J. was giving reasons for what he regarded as the unsatisfactory position in the Supreme Court of New South Wales that deponents of affidavits in support of discovery should not be cross-examined. His Honour in so concluding referred to what had been said in this Court by Franki J. in Brambles Holdings Ltd v Trade Practices Commission (No. 3) (1981) 58 FLR 452 at 454. But in this Court matters have since moved, as is indicated by National Crime Authority v S. (1991) 29 FCR 203 at 211 per Lockhart J. See also Zarro v Australian Securities Commission (1992) 10 ACLC 831 at 834, 841, 848, involving a public interest immunity claim. In the present case, after hearing submissions, I indicated that I proposed to follow what had been said by Lockhart J. as to the existence of a discretion to permit cross-examination. I permitted cross-examination of the three deponents upon some but not all of the topics which counsel for the respondents sought to explore.

The Respondents' Submissions

1. Counsel for the respondents puts his case on various grounds. First, he submits that the documents are not privileged because they do not satisfy the "sole purpose" test expounded in such authorities as Grant v Downs (1976) 135 CLR 674 at 687 and Waterford v The Commonwealth of Australia (1987) 163 CLR 54 at 63-6, 75, 77-8, 85-6. In that regard reference also was made to what in the last cited case (at 87) Deane J. described as the helpful judgment of Lockhart J. in Trade Practices Commission v Sterling (1979) 36 FLR 244 at 245-6. Secondly, counsel contended that even if the documents were brought into existence for the sole purpose of submission to legal advisers for advice and for use or advice in anticipated litigation, nevertheless privilege did not attach because the documents did not satisfy what was described as the test in Wheeler v Le Marchant (1881) 17 Ch D 675 in respect of communications between a solicitor and a third party not the agent of the client of the solicitor. Thirdly, it was submitted that any claim for legal professional privilege had been waived within the meaning of the principles in Attorney-General for the Northern Territory v Maurice (1986) 161 CLR 475. Fourthly, the absence of a claim by Mr Nicholls was said to indicate (with certain other facts) the waiver of any relevant confidentiality that existed as a ground for resisting inspection by the respondents. The final submissions were that, in any event, the liquidators were precluded from asserting any claim to privilege, either upon the basis of the rule in Ex parte James (1874) 9 Ch App 709, or upon what was said to be the distinct principle propounded in In re Contract Corporation (Gooch's Case) (1872) LR 7 Ch App 207 at 211.
   The Issues in the Litigation

2. In order to appreciate these submissions it is necessary first shortly to describe the nature of the proceeding in this Court. In general terms (the Further Amended Statement of Claim is 45 pages in length), the dispute arises from the circumstances surrounding the entry in September 1988 into an agreement ("the purchase agreement") for the purchase by Actraint of the shareholding of what I will call the AGL Group in Paringa Mining and Exploration Company PLC ("Paringa"). This transaction ("the Paringa transaction") followed the calling of tenders. The purchase price of $3.10 per share was increased from the tender price of $3.01 as a result, so the applicants contend, of a fraudulent representation made on 5 September 1988 to Mr Nicholls, then a director a Hartogen, by Mr Paul Binsted. The applicants allege that Mr Binsted was a director of Lloyds Corporate Advisory Services Pty Limited which had been retained to advise the vendors on the tenders for sale of the Paringa shares.

3. The purchase agreement was amended on numerous occasions, the first being 19 October 1988 and the last on 3 May 1989. This last amendment changed the completion date to 29 May 1989. But, as I have indicated, it was on that day that the Supreme Court of New South Wales appointed the third applicants provisional liquidators of Hartogen. Then on 27 June 1989 the first respondent ("AGL") terminated the purchase agreement.

4. By its cross-claim AGL claims, inter alia, damages in the sum of $46 m. against Actraint for repudiation of the purchase agreement. This allows for the $67 m. received on the resale in November 1989 of the Paringa shares to another buyer.

5. Hartogen and Actraint also complain of the manner in which they were committed by their Boards to certain of the amendments to the purchase agreement and related documents. They complain of 2 "non-refundable" deposits and other payments totalling $32 m. made by Actraint. The applicants seek to recover these from AGL. A claim is also made that the purchase agreement be rescinded and Actraint and Hartogen be released from any liability thereunder. The directors of Hartogen are not joined but the applicants complain, through the liquidators, of grave breaches of duty. This is said particularly to be so having regard to the knowledge of the directors in September 1985 of the financially precarious position of Hartogen, a situation which deteriorated as the various amendments were made to the purchase agreement. The applicants seek to draw in AGL and its related corporations on the footing that they were participants with sufficient knowledge of these breaches of duty as to render them liable in equity for the delinquencies of the directors of Hartogen. The claims made by the applicants against the respondents are based also in (i) contravention of s. 52 of the Trade Practices Act and, (ii) illegality of the purchase agreement by reason of breach of s. 42 of the Securities Industry (New South Wales) Code and r. 3J(3) of the Listing Rules of the Australian Stock Exchange Limited. It is also contended (paras. 116-126) that certain of the payments made to AGL in 1989 shortly before the commencement of the liquidation of Hartogen are void under the preference provisions of the insolvency law.

6. The amended defence (a pleading of 39 pages) raises general defences to the whole of the amended statement of claim. These include affirmation of the purchase agreement (para. 87), estoppels by conduct of the applicants up to the notice of termination on 27 June 1989 (paras. 88, 89) and laches (para. 92). The amended cross-claim inter alia pleads representations by Hartogen and Actraint that they were solvent and ready and able to pay the purchase price for the Paringa shares. It is also alleged that by failing to pay to AGL the balance of the purchase price for the Paringa shares Actraint repudiated the purchase agreement (paras. 10-16) and that Hartogen defaulted on its guarantee of the obligations of Actraint (paras. 17-19).
   The Activities of the Liquidators

7. Immediately upon their appointment as provisional liquidators of Hartogen on 29 May 1989, the third applicants commenced preliminary investigations, particularly into the facts and circumstances surrounding the purchase agreement and the Paringa transaction. They retained the firm of Bruce and Stewart Turton, solicitors, to advise them in relation to their investigations, particularly as to whether:-
   

(i) The payment of the second deposit on 3 January 1989 of $13,721,410 (now pleaded in para. 87 of the further amended statement of claim), the payment of interest on 3 April 1989 of $900,000 (para. 102 of the pleading) and the payment of interest on 10 April 1989 of $4,157,776.50 (para. 103) were preferential payments within the meaning of s. 451 of the Code.

(ii) The effectiveness and enforceability of the purchase agreement, as it had been amended, particularly as regards claims made thereunder by AGL against Hartogen and Actraint.

1. In July 1989 that firm gave the provisional liquidators preliminary advice to the effect that (a) the payments to which I have referred appeared to be preferential payments within the meaning of s. 451 of the Code, (b) there might well be legal grounds upon which the effectiveness and enforceability of the purchase agreement could be challenged and (c) steps should be taken initially to interview on an informal basis, and if necessary, to examine under the provisions of s. 541 of the Code such persons as might assist the provisional liquidators in determining the legal rights of the provisional liquidators and of Hartogen and Actraint in relation to these matters. The advice was that these interviews might result in shortening the s. 541 examinations or in some cases eliminating the need for them, with consequent saving of expense and delay.

2. On 27 July 1989 the pending winding up application in relation to Hartogen was returnable before the Supreme Court of New South Wales. The third applicants, as provisional liquidators, were granted a further adjournment until 31 October to enable them, inter alia, to continue their investigations.

3. At the beginning of August 1989 Mr Kehoe received instructions from Mr Pantzer to act for him and Mr Silvia in relation to legal action they contemplated against AGL in respect of the Paringa transaction. Mr Kehoe's firm, in place of Bruce and Stewart Turton, was instructed to prepare for and thereafter conduct examinations pursuant to s. 541. Mr M.F. O'Neill became involved in the matter at this stage, under the supervision of Mr Kehoe. Mr R.J. Ellicott QC was among the counsel retained by Mr Kehoe's firm to conduct the s. 541 examinations and to advise generally in relation thereto.

4. Counsel and solicitors advised the liquidators that orders for examination of relevant persons should be issued and served and that thereafter certain of the proposed examinees should be invited to attend private and confidential interviews with the legal advisers of Hartogen before their formal examination. On 26 September 1989 orders for examination of a number of persons were issued by the Supreme Court of New South Wales. Mr Nicholls was among the Hartogen directors so summonsed. He and four others then were invited to attend a private and confidential interview to be conducted by Mr Ellicott in his chambers prior to the commencement of the s. 541 examinations on 18 October 1989.

5. A transcript of the interview of Mr Nicholls ("the Transcript") was taken and this is the document to which the respondents now wish particularly to have access and for which legal professional privilege is claimed most strongly. The liquidators' position is that the Transcript was brought into existence for the purpose of giving to their legal advisers information to assist them in providing advice, in relation to the then forthcoming s. 541 examinations, as to the facts and circumstances surrounding the Paringa transaction, and for the purpose of use in the contemplated litigation which I have described above. The s. 541 examinations were held but the Transcript was not marked for identification.

6. In addition to the Transcript, other documents were brought into existence in relation to the interview of Mr Nicholls. The liquidators' case is that they also were bought into existence for the purposes I have described.
   The Documents in Question

7. It is appropriate now to turn to describe in more detail what the evidence discloses as to the documents in question. I have not inspected them.

8. Legal professional privilege was claimed in respect of 14 documents produced to the Court by the liquidators on 8 May 1992. They are described in the evidence as follows:-
   

1. A Transcript of the interview held with Mr Nicholls by Mr Ellicott at Mr Ellicott's chambers on 10 October 1989. The interview was transcribed by Mr E.L. Davies. It has upon it handwritten amendments made by Mr O'Neill (who was present at the interview). The amendments were made in accordance with a request to Mr O'Neill by Mr Nicholls in a telephone conversation on 20 October 1989.

2. An identical copy of document 1, save for a handwritten note by Mr O'Neill "as amended by Nicholls 20/10".

3. A 1 page document headed "Statistics Sheet", dated 7 December 1989, which was prepared in relation to the forthcoming examination of Mr Nicholls pursuant to s. 541.

4. Mr Ellicott's memorandum of fees dated 23 October 1989 which refers to the interview of Mr Nicholls on 10 October 1989.

5. (The claim for privilege in respect of this document is no longer resisted).

6. This is a further copy of document 4, with handwritten notes by Mr O'Neill.

7. Mr Davies' memorandum of fees. (The claim to privilege is no longer resisted).

8. This item includes a 3 page document written by Mr Kehoe headed "Short Statement by Mr Richard Nicholls - Director of Hartogen and Genoa". It came into existence following an attendance by Mr Kehoe upon Mr Nicholls on 1 September 1989 with a view to Mr Kehoe obtaining information to assist him in the provision of legal advice to the liquidators both in relation to the conduct of the forthcoming s. 541 examinations and as to the facts and circumstances surrounding the Paringa agreement.

9. A file copy of a letter from Mr Kehoe's firm to Mr Nicholls' solicitors, prepared by Mr O'Neill, which encloses a copy of the Transcript and requests Mr Nicholls to satisfy himself the Transcript is an accurate record of his interview and, if not, to make any necessary alterations.

10. A letter from Mr Kehoe's firm to Mr Nicholls, prepared by Mr O'Neill and dated 3 October 1989. It enclosed by way of service on Mr Nicholls a copy of the summons under s. 541.

11. A copy of a letter from Mr Kehoe's firm to Mr Nicholls dated 23 October 1989, prepared by Mr O'Neill, and enclosing a copy of the Transcript incorporating Mr O'Neill's handwritten amendments as advised by Mr Nicholls to Mr O'Neill over the telephone on 20 October 1989.

12. A fax from Mr Nicholls' solicitors to Mr Kehoe's firm marked for the attention of Mr O'Neill which notes that Mr O'Neill and Mr Nicholls will be discussing direct minor changes to the Transcript. (A file copy was produced by Mr Nicholls' solicitors.)

13. A file copy letter dated 18 October 1989 from Mr Kehoe's firm to Mr Nicholls' firm which was prepared by Mr O'Neill and requests a response to the letter which is document number 9.

14. A further copy of the Transcript but without the handwritten amendments provided to Mr O'Neill by Mr Nicholls over the telephone on 20 October 1989.

1. The documents which were produced on 15 April 1992 by Mr Nicholls and his solicitors under subpoena and in respect of which privilege is claimed, include either the originals or copies as the case may be of some of the correspondence passing between the two firms of solicitors, which has already been described as items 9, 11, 12 and 13. They also include 2 further copies of the Transcript, one of which contains Mr O'Neill's handwritten amendments after the telephone discussion of 20 October 1989. There is no further copy of item 8.

2. The documents of principal importance to the respondents are the various copies of the Transcript and the 3 page document written by Mr Kehoe, which is item 8.

3. I turn first to consider the reliance placed upon Gooch's Case.
   Gooch's Case

4. Counsel for the respondents relied upon Gooch's Case supra for the proposition that the liquidators have a duty to the shareholders of the first and second applicants, to the creditors and to the Court to investigate the affairs of Hartogen and Actraint and to suppress nothing which has come to their knowledge in the course of those investigations and which is material to the ascertainment of the exact truth in the proceeding in this Court.

5. A consideration of Gooch's Case shows that it is authority for no proposition of such width. Pursuant to the then applicable English legislation the liquidator of Contract Corporation, Limited had the task of preparing A and B lists of contributories. On the A list were to be placed those who were the present members of the company, they being primarily liable to the extent of the unpaid capital of their shares. The B list would include past members who would be liable to the extent that (i) the amount recovered from the A list contributories was insufficient, and (ii) their contribution was needed to meet debts contracted prior to the time when they had ceased to be members. Such distinctions between the liabilities of present and past members now have a long legislative history. They were drawn by s. 360 of the Code, which in turn followed s. 218 of the Companies Act 1961 (N.S.W.) and s. 212 of the Companies Act 1948 (U.K.): see Wallace and Young "Australian Company Law and Practice", 1965, pp 621-623.

6. In the case in question, the liquidator sought to put Gooch on the A list and, in the alternative, on the B list. In support of his defence to the alternative claim, Gooch sought an order of discovery against the liquidator. He contended that there were no debts of the company dating back beyond the time at which he ceased to be a member, or at least for the discharge of which the company lacked sufficient assets.

7. At 212-3, James L.J. identified "the real question" between the parties as being whether the statutory requisites existed for placing Gooch upon the B list and if so the extent of his liability. His Lordship said that that was a question with which the company really had no concern and continued:
   

"That company must pay to its uttermost farthing in any event. And whether beyond the claim against the company, any particular creditor or creditors has or have claims against any past member or members of the company, is a question as to which every creditor may have his hand against every other creditor, and against every past shareholder; and every past shareholder may have his hand against every other past shareholder, and against every creditor. The official liquidator, as an officer of the Court, is bound to see that in this free fight everybody has a fair field and no favour, and to act strictly in the interest of truth and justice and none other. But the official liquidator, as the representative of the existing body, is no party, or quasi party, either for discovery or otherwise, to any such litigation.

This case, in truth, shows how impossible it would be to proceed with the winding up if this distinction were not observed ... ."

1. The present proceeding in this Court, involving the claim and cross-claim I have outlined above, is of quite a different description. It falls within the class of case which his Lordship had (at 212) described as follows:
   

"Among with other duties of an official liquidator, it may fall to him to represent the company as a party litigant. The company can only sue or be sued through his agency, and where there is such a suit, or where there is in the winding up a proceeding which is in substance, though not in form, a bill or action by or against the company, then, from the very necessity of the case, the adverse party has a right to deal with the official liquidator as the litigant, and to obtain from this the same measure of discovery in the same manner as he would from any other litigant."

1. That is the present situation. There is nothing in Gooch's Case to support the proposition that the extent of the inspection upon discovery which the respondents are entitled to have from the applicants is expanded by disqualifying the applicants from asserting legal professional privilege to which they are otherwise entitled.
   Confidence

2. I turn now to consider the significance of the failure of Mr Nicholls to assert any claim of confidentiality against production by him or his solicitors of the copies of the Transcript in their possession.

3. It is well settled that one aspect of the rationale of the doctrine of legal professional privilege is that the ready availability of confidential legal advice is in the public interest because it promotes both the observance of the law generally and the administration of justice in particular. This has been said on various occasions, most recently by Deane J. in Waterford v The Commonwealth supra at 82. However, there is a distinct body of substantive law concerned with protection of confidential information and the distinction between it and the operation in the law of evidence of legal professional privilege has not always clearly been observed.

4. It will be recalled that in Calcraft v Guest (1898) 1 QB 759, the Court of Appeal held it was open to the defendant to adduce as secondary evidence copies of proofs of witnesses with notes on the evidence in a former action brought in 1787 by the predecessor in title of the plaintiff. The litigation concerned the true boundary of the plaintiff's fishery in the River Frome. The original documents remained privileged. Lord Ashburton v Pape (1913) 2 Ch 469, decided that a client whose privileged documents (letters written to his solicitor) fell into the hands of a third party by a trick might obtain injunctive relief requiring the return of the documents and restraining the third party from making any use of them. In Calcraft v Guest the defendant, having obtained copies of the privileged documents, was not precluded by the privilege from tendering them as secondary evidence and the question of the provenance of the documents was a collateral issue. On the other hand, in Lord Ashburtun v Pape the provenance of the documents was central to the issue of breach of confidence. The distinction is further discussed and explained by Scott J. in Webster v James Chapman and Co. (a firm) (1989) 3 All ER 939, in Derby and Co. Limited v Weldon (No. 8) (1990) 3 All ER 762, in "Cross on Evidence", 4th Aust. Ed., 1991, (25025), (25030), (25255), and by Zuckerman (1986) All ER Annual Review 160, (1990) All ER Annual Review 205; cf. Hooker Corporation Limited v Darling Harbour Authority (1987) 9 NSWLR 538, Ritz Hotel Limited v Charles of the Ritz Limited (1988) 14 NSWLR 132.

5. In the light of my conclusions on other issues in the present case, it will not become necessary to determine whether, independently of legal professional privilege, Mr Nicholls and his solicitors might be restrained by the applicants, on the ground of confidentiality, from production of copies of the Transcript in their possession. However, I should indicate that were it necessary to do so, such a claim by the applicants would not be defeated by the submission for the respondents that the benefit of any obligation of confidence was enjoyed by Mr Nicholls and his solicitors alone, so that their failure to object to production and inspection by the respondents was sufficient answer on the confidentiality point. In my view, this is not a case where the only confidentiality in respect of the interview of Mr Nicholls was enjoyed by him so that he would be the only person with standing to enforce it; cf. Finnane v Australian Consolidated Press Limited (1978) 2 NSWLR 435 at 443-5, a case involving an examination pursuant to statutory powers not by consensual arrangement. See also Johns v Australian Securities Commission (19/6/92, unreported, per Black C.J., von Doussa J., at 67-76).

6. Mr Pantzer made the request to Mr Nicholls to attend the interview at the chambers of Mr Ellicott. The request was made on the footing that the answers to questions put during the interview might result in the liquidators dispensing with the examination under s. 541. The interview was to be private but a transcript was to be kept. The interview with Mr Ellicott was conducted on 10 October 1989 and 3 days later Mr Nicholls' solicitors forwarded to him a copy of the letter of 12 October from Mr Kehoe's firm (item 9) together with 2 copies of the Transcript "one to keep and one to alter in red pen as requested and return to me for transmission to Westgarths."

7. Counsel for the applicants points to the circumstances that the interview was conducted on the basis that it would be "private", and that the transcript might be expected to record not only what was said by Mr Nicholls but to disclose the terms of questions put, and particular subjects of interest to the questioner. Counsel submits that any confidentiality would be "a two way street" so that an obligation of confidence would be mutual; cf. Argyll v Argyll (1967) Ch 302 at 322. If it were necessary to resolve this issue, I would accept that submission. It is not necessary for present purposes further to explore the incidents of such a mutual obligation, for example its duration and any confinement of it to a limited purpose; cf. Smith Kline and French Laboratories (Aust.) Limited v Secretary, Department of Community Services and Health (1990) 22 FCR 73 at 94, affd 28 FCR 291.
   Waiver

8. There was no express waiver by the applicants of any legal professional privilege. Whether a waiver should be implied depends upon the principles discussed in Attorney-General for the Northern Territory v Maurice (1986) 161 CLR 475 at 481, 487-8, 493, 497-8. Counsel for the applicants submits that the issue was whether the liquidators had either used the Transcript in litigation or in some way otherwise put it into the public domain in a fashion which would make it unfair to allow the maintenance of their claim to privilege. He submitted, that as a matter of fairness, it could not be said that the liquidators had waived privilege in respect of the Transcript by the taking of steps whereby copies were supplied, through his solicitors, to Mr Nicholls for his consideration and the making of corrections. I accept those submissions. The present case is very different from the situation considered by Rogers C.J. Comm. D. in AWA Limited v Daniels (Supreme Court of New South Wales, 4/11/91, unreported) to which I was referred by counsel for the respondents.
   The "Sole Purpose" Test

9. That brings me to the question of whether the legal professional privilege claim has indeed been made out. There was much debate as to the operation of the "sole purpose" test propounded in Grant v Downs (1976) 135 CLR 674. It was submitted for the respondents that the Transcript and associated documents were brought into existence for "multiple purposes" and that no privilege existed.

10. The purpose for which a document is brought into existence is a question of fact: Grant v Downs supra at 692 (Jacobs J.), Waterford v The Commonwealth of Australia (1987) 163 CLR 54 at 66 (Mason, Wilson JJ.), 78 (Brennan J.). In Grant v Downs (at 692) Jacobs J. said:
    

"(T)he question the court should pose to itself is this - does the purpose of supplying the material to the legal adviser account for the existence of the material? I use the purpose here in the sense of intention - the intended use".

The purpose will ordinarily be that of the maker of the document, but this will not always be the case. In Laurenson v Wellington City Corporation (1927) NZLR 510 at 510, Skerrett C.J. looked to the person who "calls into existence (emphasis supplied) documents in the bona fide belief that litigation will probably ensue ...". And the phrase I have emphasised was employed by Stephen, Mason, Murphy JJ. in Grant v Downs (at 682-3). It is apt to describe the situations where, for example, solicitors commission the provision of a technical report; the relevant intention will not be that of the author but the solicitor.

1. In Waterford, Mason, Wilson and Brennan JJ. held that the evidence showed that the documents in question had been brought into existence for the sole purpose of seeking or giving legal advice to government and hence were exempt from production on the ground of legal professional privilege. Deane and Dawson JJ. dissented from that result. Mason and Wilson JJ. (at 66) said that the sole purpose test "looks to the reason why a document was brought into existence" so that if its sole purpose was to seek or to give legal advice in relation to a matter, the fact that it contains extraneous matter will not deny to it the protection of the privilege.

2. As this suggests, the division of opinion between the majority and minority in Waterford particularly was concerned with the operation of the sole purpose test where a document appeared to contain both privileged and non-privileged material, the latter dealing with government policy. That is not the real issue in the present case. The observations of Deane J. (at 85-6) should be read with that in mind. His Honour posed the issue as one of whether the moving purpose underlying the preparation of the document, the cause of its existence, was the seeking or provision of professional legal advice. Deane J. continued (at 86):
   

"Ordinarily, a letter from a professional legal adviser will be written only in his character as such and only for the purpose of furnishing professional legal advice. The cases where such scrutiny will ordinarily be necessary are cases like the present where a letter is or may be written in one or both of two capacities; eg. a letter written to the secretary of a company by a person who is both a director of the company and the company's solicitor."

1. Counsel for the respondents submitted that the Transcript and associated documents were brought into existence for at least two purposes beyond the sole purpose test. The first was the gathering of information by the liquidators as to the facts and circumstances surrounding the Paringa transaction and the affairs of Hartogen and Actraint. The second was the facilitation of a better understanding by the liquidators of the Paringa transaction and the other affairs of Hartogen and Actraint so as facilitate the speedy, efficient and productive conduct of the s. 541 examination. The purpose of that examination was said to be the gathering of information to assist the liquidators in the conduct of the provisional liquidation of Hartogen and in the winding up of the companies if that came to pass.

2. Counsel for the applicants submitted that I should find, and I do find, that from July 1989 the liquidators reasonably anticipated that litigation would be commenced between Hartogen and Actraint on the one hand and AGL and related corporations on the other, so as to determine the rights and obligations of the parties in relation to the purchase agreement and the Paringa transaction. Counsel then submitted that (i) where a liquidator contemplates litigation and makes a proper use of a s. 541 examination to obtain evidence, that is not a new and foreign purpose, (ii) nor is the arrangement for private conferences with a senior counsel in the circumstances of this case, the taking of a step that involves a new and foreign purpose, and (iii) the moving purpose underlying the preparation of the Transcript and associated documents was and remained a purpose that attracted legal professional privilege, namely to provide the legal advisers of the liquidators with information to assist them in the provision of advice as to the contemplated legal proceedings concerning the purchase agreement and the Paringa transaction. I accept those submissions.

3. However, item 12 is in a special position. All of the other relevant documents were created by the solicitors or counsel of the liquidators or their staff or agents. Item 12 is a communication from Mr Nicholls' solicitors to Mr Kehoe's firm which deals with proposed discussions between Mr Nicholls and Mr O'Neill as to minor changes to the Transcript. This document was not, in my view, "called into existence", in the sense of the authorities, by the liquidators or their solicitors. Its creation is consistent with the purpose of Mr Nicholls' solicitors to assist him in preparing for his pending s. 541 examination and, if the liquidators agreed, to obviate the need for that examination. Indeed, this may have been their purpose throughout their dealings with Mr O'Neill, but the other relevant documents were called into existence by the solicitors or counsel of the liquidators with their purpose in mind. That purpose is one which gives rise to the privilege now claimed by the liquidators. But they have not made out this claim in respect of item 12 or the copy produced by Mr Nicholls' solicitors.
   Wheeler v Le Marchant

4. There remains the reliance placed by the respondents upon Wheeler v Le Marchant (1881) 17 Ch D 675 at 681. Sir George Jessel M.R. there said that the doctrine of legal professional privilege did not extend to protect documents "merely because they are produced by a third pary in answer to an inquiry made by a solicitor" (emphasis supplied). The Master of the Rolls was using the term "produced" in the sense of brought into existence, not of production by that third party to the court. The case concerned documents passing between surveyors and the solicitors for the defendants, who had listed them in their discovery, but claimed privilege. Counsel for the respondents also relied upon Macedonia Pty Ltd v Federal Commissioner of Taxation (1987) 87 ATC (2) 4565. This case is authority that documents requested by a client from third parties (not agents of the client) will be privileged if delivered to the client's solicitor for the purpose of anticipated litigation.

5. In the view of Cotton L.J., all that was decided in Wheeler "was that communications between the solicitors and the surveyor of the client before any litigation was contemplated were not protected": Kennedy v Lyell (1883) 23 Ch D 387 at 407. Sir Nathaniel Lindley M.R. was of the same opinion in Calcraft v Guest supra at 762. Hence the reference to Wheeler by Lockhart J. in Sterling (supra at 246) in framing proposition (e):
   

"Communications between and documents passing between the party's solicitor and a third party if they are made or prepared when litigation is anticipated or commenced, or for the purposes of the litigation, with a view to obtaining advice as to it or evidence to be used in it or information which may result in the obtaining of such evidence."

This description applies to items 9, 10, 11 and 13. Items 1, 2, 3, 4, 6, 8 and 14 are privileged within one or more of the earlier propositions in Sterling.

1. However, in reply counsel for the respondent submitted that Wheeler was authority for the proposition that documents or copies of otherwise privileged communications which passed from the solicitors for the liquidators into the hands of Mr Nicholls or his advisers and had been produced by them on subpoena were not privileged.

2. Counsel for the applicants' response is that if a privileged document is in the hands of a third party that does not destroy the privilege, the question being whether the party entitled to the privilege has waived it. I accept that submission. See "Cross on Evidence", 4th Aust. ed., 1991, para. 25235. The courts regularly uphold claims of privilege by a party in respect of documents produced on subpoena by a stranger to the litigation; see Southern Pacific Hotel Services Inc. v Southern Pacific Hotel Corporation Limited (1984) 1 NSWLR 710 at 715.
   Ex parte James

3. I turn finally, to consider the reliance upon the so-called rule in Ex parte James (1874) LR 9 Ch App 709. The answer given by counsel for the applicants to the invocation of the rule by the respondents was that whatever its basis and ramifications it would be a misapplication of the rule to require the liquidators to abandon a significant procedural right given them, so that they may be deprived of its exercise for the benefit of the creditors as a whole of Hartogen and Actraint. He submitted that the force of this consideration was not diminished by the additional circumstance that the respondents were not only resisting a claim by the liquidators but themselves had instituted a significant cross-claim.
   What is the rule in Ex parte James?

4. Riley J. detected "a note of understandable resignation" in the remark in Halsbury's Laws of England 4th ed., vol. 3 p 289, that the extent of the operation of this rule "can only be defined by the case law": Re Roberts; Official Receiver v Lincoln Investments Limited (1976) 26 FLR 330 at 335. In its widest form the rule has been said to be that a liquidator or trustee in bankruptcy, as an officer of the court, will not be permitted to do anything which would be regarded as dishonourable or unconscionable for an ordinary man to do. Latham C.J. regarded such authorities as illustrating "the difficulties involved in applying a criterion of honest and high minded conduct": Downs Distributing Co. Pty Limited v Associated Blue Star Stores Pty Limited (in liquidation) (1948) 76 CLR 463 at 476.

5. Certain aspects of the rule are, in Australia, relatively settled. Ex parte James was a bankruptcy case but the rule has since been applied to liquidators of companies in compulsory winding up on the basis that they too are officers of the court and acting under its control; see McPherson "The Law of Company Liquidation", 3rd ed., pp 266-267. Secondly, in Downs Distributing Co. (at 482) Williams J. said that the authorities as a whole appeared to show that it was only in exceptional cases that the rule would be applied where the trustee or liquidator or his predecessor in office had not been personally concerned in the transaction in question. See also Re Byfield (a bankrupt), ex parte Hill Samuel and Co. Ltd v The trustee of the bankrupt (1982) 1 All ER 249 at 252.

6. In Re Chemical Plastics Limited (in liquidation) (1959) VR 570 Pape J. suggested that the rule might have its basis in the same equitable doctrine which in the particular circumstances of the case prevents a party from setting up a defence upon the Statute of Frauds because to do so would be to use the Statute as an engine of fraud; see Organ v Sandwell (1921) VLR 622, Last v Rosenfeld (1972) 2 NSWLR 923. But that suggestion has not been taken up in the later authorities. In the present case, the reliance by the liquidators upon the doctrine of legal professional privilege is not unconscientious or fraudulent in the equitable sense. So even if this suggestion be correct, it does not avail the respondents. I will return to this aspect of the matter later in these reasons.

7. His Honour also pointed out (at 574) that in the United States Ex parte James has been treated as an exception to the rule that payments made under a mistake of law are not recoverable. The same view recently has been repeated in Canada: Maddaugh and McCanius, "The Law of Restitution", 1990, p 265. Professor Hanbury was of the same opinion: "Modern Equity" 8th ed., 1962, pp 624.

8. The position in the United States is described as follows by Professor Palmer in "The Law of Restitution", 1978, para. 14.27(d) under the heading "Mistaken Payments to Court Officers". Professor Palmer points out that whilst there are innumerable cases stating that relief will not be given for mistake of law, the decisions do not support so broad a proposition and there is a number of exceptions to it. The particular passage in question, omitting footnotes, is as follows:
   

"An exception has been recognised also for payments made to court officers, on the ground that higher standards of good faith should be imposed on officers who are under judicial control. The exception has been applied to payments made to receivers, trustees in bankruptcy, administrators, sheriffs, clerks of court, and attorneys where the payment was mistakenly believed to be required as an expense in litigation. In the Restatement of Restitution ((1937) section 46(b)) this exception is limited to cases in which a court has control over the disposition of money, but the decisions do not support so narrow a limitation. It is sufficient that the money was received in the recipient's capacity as an officer of the court. Thus, in the cases involving attorneys, the emphasis is on the fact that, as officers of the court they are held to higher standards then are other persons; as was said in an Illinois case, a court `will require its officers to disregard technical rules and do what honest people ought to do.' Retention of money paid by mistake of law is a `shabby thing' an English court has said, and a court `will not allow its own officer to act so.' One would think that such statements would force courts to reevaluate the rule to which this is an exception."

"Williston on Contracts", 3rd ed., para. 1590 and "Corbin on Contracts", para. 617, are to like effect.

1. Ex parte James supra, Ex parte Simmonds (1885) 16 QBD 308, In re Brown (1886) 32 Ch D 597 at 602, In re Opera Limited (1891) 2 Ch 154, In re Rhoades (1899) 2 QB 347 at 355, Re Paddington Town Hall Centre Limited (in liquidation) (1979) 41 FLR 239 (a decision of Needham J.) and Re Kelly (1980) 108 DLR (3d) 149, are examples over the span of a century of trustees or liquidators being obliged to restore moneys paid under mistake of law. What was said in the first of these cases was relied upon in the succeeding six.

2. That equity approached mistakes of law rather differently to the common law courts is, of course, well known; see, for example, David Securities Proprietary Limited v Commonwealth Bank of Australia (1990) 23 FCR 1 at 34. An example is Re Saxon Life Assurance Society (1862) 2 J. and H. 408, 70 ER 1117, affd. 1 De GJ and S 29, 46 ER 12. The Saxon Life Assurance Society had been ordered to be wound up. A creditor sought to prove for its original debt on the ground that it had mistakenly agreed to a compromise of that debt which had given it substituted rights which were worthless. Page Wood V-C held that he had power to relieve against mistakes of law as well as those of fact and permitted the creditor to prove in the winding up for the amount of the original debt.

3. This was one of the authorities cited to the Court of Appeal in Chancery in Ex parte James at 613 as authority for the proposition that the Court of Chancery did not apply any inflexible rule that relief cannot be given for a mistake of law and that that Court had departed from such a rule in cases where manifest injustice would result from it. In Ex parte James the trustee in bankruptcy had received, pursuant to his own demand, from an execution creditor of the bankrupt the proceeds of an execution which the creditor had levied. It was held that the court had jurisdiction to order that the money be repaid by the trustee to the execution creditor and that it was no answer that the moneys had been paid under a mistake of law. The crucial passage in the judgment of James L.J., at 614, is as follows:
   

"With regard to the other point, that the money was voluntarily paid to the trustee under a mistake of law, and not of fact, I think that the principle that money paid under a mistake of law cannot be recovered must not be pressed too far, and there are several cases in which the Court of Chancery has held itself not bound strictly bound by it. I am of opinion that a trustee in bankruptcy is an officer of the Court. He has inquisitorial powers given him by the Court and the Court regards him as his officer, and he is to hold money in his hands upon trust for its equitable distribution among the creditors. The Court, then, finding that he has in his hands, money which in equity belongs to someone else, ought to set an example to the world by paying it to the person really entitled to it. In my opinion, the Court of Bankruptcy ought to be as honest as other people."

1. Two years later the same judge said, in Rogers v Ingham (1876) 3 Ch D 351 at 355:
   

"I have no doubt that there are some cases which have been relied on, in which this Court has not adhered strictly to the rule that a mistake of law is not always incapable of being remedied in this Court; but relief has never been given in the case of a simple money demand by one person against another, there being as between those two persons no fiduciary relation whatever, and no equity to supervene by reason of the conduct of either of the parties."

The passage which I have set out from Ex parte James has to be read with this in mind. The passage is concerned with explaining what in the circumstances of that case led the Court to find that there was an equity in the party claiming repayment. Further, the proposition that the money in equity belonged to the claimant for repayment is consistent with modern authority, exemplified by Chase Manhattan Bank v Israel-British Bank (1981) Ch 105.

1. Accordingly, there is much to be said for the location of the doctrinal basis of the rule in Ex parte James in the law as to the recovery of mistaken payments. That, as I have indicated, is how the matter has been seen by Professor Hanbury and by the United States authorities to which I have referred. In Australia, Ex parte James has been, as I have indicated, discussed by two members of the High Court in Downs Distributing supra but not in decisive terms.

2. However, in England itself Ex parte James has been treated as propounding some wider principle. The turning point was the decision of the Court of Appeal in In re Tyler; Ex parte the Official Receiver (1907) 1 KB 865 at 868-9, 873, where Vaughan Williams L.J. and Farwell L.J. respectively held that in the earlier case when James L.J. spoke of money "which in equity belonged to someone else", he was using those words in a popular sense and not in terms of ownership as understood in a court of equity. It followed that Ex parte James was not limited to cases where money had been paid under a mistake of law. Further, in Re M. and J. De Wit, Bankrupts; Ex parte Custom Credit Corporation (1961) 19 ABC 63, Paine J. took In re Tyler as meaning that the rule in Ex parte James "is beyond the established rules of law and equity."

3. The result, in my view, is that many of the cases applying in England and Australasia the so-called rule in Ex parte James in company liquidations are better understood as outlining the manner in which the court controls the exercise by liquidators of their powers conferred by the relevant legislation. In the present case, control of the court is provided for by sub-s. 377(2) of the Code.

4. Thus, directions have been given upon subjects other than the repayment of money. In Re Securitibank Limited (1978) 1 NZLR 97 at 209, a liquidator was directed by the court to waive failure to give adequate notice of dishonour of certain bill of exchange. In Re Associated Dominions Assurance Society Proprietary Limited and the Life Insurance Act (1962) 109 CLR 516 at 519-20, which concerned a winding-up governed by the particular provisions of that statute, Taylor J. held that a time bar upon claims by former employees for payment in lieu of a statutory long service leave entitlement should be disregarded. His Honour said that in the circumstances of the case he did not think it would be proper to allow the claim to be defeated by the limitation provision and that principles annunciated in Ex parte James and later cases authorised him to disregard that limitation.

5. It remains to decide whether the effect of the cases is to circumscribe by any particular rules the control by the court over the exercise of powers by liquidators. An endeavour was made to state in propositional form the effect of the English cases, by Walton J. in In re Clarke (a bankrupt); Ex parte The Trustee v Texaco Limited (1975) 1 WLR 559 at 563-4. His Lordship said that for the rule in Ex parte James to operate the following "conditions" must be present:
   

1. There must be some form of enrichment of the assets of the bankrupt by the person relying upon the application of the rule, this being "a universal feature of all the cases in which the rule has been applied."

2. The claimant must not be in a position to submit an ordinary proof of debt, the rule existing not merely to confer a preference on an otherwise unsecured creditor, but to provide relief to a claimant that would otherwise be without relief.

3. The rule applies so as to nullify the claim the liquidator or trustee otherwise would have if in all the circumstances of the case, as an honest man he would nevertheless be bound to admit that it would not be fair "that I should keep the money; my claim has no merits."

4. The rule by no means necessarily restores the claimant to the status quo ante and it applies only to the extent necessary to nullify the enrichment of the estate.

On that footing, what the Court of Appeal in Chancery was saying in Ex parte James was that it was not fair that the trustee should seek to retain money which had been paid to him purely under a mistake of law.

1. In Re Ayoub; Ex parte Silvia (1983) 67 FLR 144 at 148, Morling J. expressed the third condition mentioned by Walton J. as being that "it must be shown that it would be unfair for the trustee to rely upon his strict legal rights." In that case four creditors, who were unaware that a sequestration order had been made against the estate of the bankrupt, gave credit to him. Morling J. refused to direct the trustee to pay these creditors out of the assets of the estate in priority to the unsecured creditors and noted (at 149) that the Bankruptcy Act 1966 ("the Bankruptcy Act") proceeds upon the basis that debts proved against an estate are to rank equally, except in special circumstances for which provision is made for priority payment. Further, in Ah Toy v Registrar of Companies (1986) 10 FCR 356 at 376 the Full Court observed that there is a particular difficulty in applying the rule in Ex parte James to exclude a trustee or liquidator from prosecuting a statutory claim, because a court can hardly be put in the position of having to determine whether particular legislation fits some preconceived notion of a desirable general policy. The statutory claim there involved concerned the application of the provisions as to mutual credits and debts provided by s. 86 of the Bankruptcy Act. The Full Court said that to adopt some different solution to that stipulated by s. 86 "would be to prefer a personal opinion as to the desirable position, based upon a subjective assessment of commercial morality, to the result intended by the Parliament." Pape J. had spoken to similar effect, in relation to the Money Lenders Act 1958 (Vic.) in Re Chemical Plastics Limited (in liquidation) supra at 577. These considerations add force to the proposition that the true basis of Ex parte James is that which is exemplified in the American authorities so that the rule has a much narrower operation.

2. Be that as it may, the applicants contend that even in the wider formulation which I have described above the rule cannot be availed of by the respondents. There is no enrichment of the assets of Hartogen and Actraint by the respondents in respect of which the respondents are not in a position to submit an ordinary proof of debt. The counsel for the respondents points to the existence of the cross-claim in which substantial damages are sought against Hartogen and Actraint and to the impediment placed in the path of the respondents by a successful assertion against them of the claim of legal professional privilege for the Transcript. But in the setting of this complex litigation such a connection between the enrichment of the estates under the administration of the liquidators and the retention of the claim to legal professional privilege for this document is speculative and tenuous and therefore outside the scope of the conditions propounded by Walton J.

3. Counsel for the respondents also put the rule in Ex parte James on an even wider footing by, in effect, stating Walton J's third condition as if it were, by itself, a statement of the rule. The question then would be whether in any particular case it would be "unfair" for the trustee, having regard to his position as an officer of the court, to rely upon his strict legal rights. Counsel referred also to the special position as litigants given liquidators by the use of examinations under s. 541 of the Code.

4. Subsection 541(5) of the Code makes it clear that the Court retains power to intervene where an examination is conducted for an improper purpose or in a way that constitutes an abuse of process, so that if a liquidator conducts an examination directed to compel the examinee to disclose defences or to give pre-trial discovery or to establish guilt, the examination may be restrained. But on the other hand s. 541 applies equally to proceedings which the liquidator might be able to bring and to proceedings he contemplates bringing as well as those which he has decided to institute and those which he has already instituted: Re Hugh G. Roberts Pty Limited (1970) 91 WN (N.S.W.) 537 at 541 per Street J., Hamilton v Oades (1989) 166 CLR 486 at 497-8 per Mason C.J.

5. Further, in Waterford v The Commonwealth supra at 64-5, Mason and Wilson JJ. said:
   

"Legal professional privilege is itself the product of a balancing exercise between competing public interests whereby, subject to the well-recognised crime or fraud exception (cf. Reg. v Bell; Ex parte Lees (1980) 146 CLR 141), the public interest in `the perfect administration of justice' ... is accorded paramountcy over the public interest that requires, in the interests of a fair trial, the admission in evidence of all relevant documentary evidence. Given its application, no further balancing exercise is required."

In the same case (at 74) Brennan J. said that if legal professional privilege applies the court "has no function to perform in deciding whether the privilege otherwise advances or diminishes the public interest."

1. The evidence discloses no impropriety or unconscientious conduct by the third applicants, the liquidators, in arranging for the private interview of Mr Nicholls by Mr Ellicott on the footing that the answers to questions given by Mr Nicholls might result in the liquidators not having to proceed with examinations under s. 541 of the Code. Further, in this litigation there is a legal professional privilege from disclosure of the contents of the Transcript. The litigation is a product of the advice, some of which already had been received and inquiries which already were under way, when the interview with Mr Nicholls was conducted.

2. The substance of the submissions for the respondent is that the rule in Ex parte James, in an expanded formulation, may apply to require the court to direct a liquidator to waive legal professional privilege. It may be, in a given case, that the court, acting pursuant to sub-s. 377(5) of the Code or other enabling statutory provision, may so direct a liquidator. But if the court were to do so it would, in my view, be acting in exercise of the relevant statutory power rather than any generally formulated abstraction of the rule in Ex parte James.

3. The motion by the respondents does invoke sub-s. 377(5). However, on the material before me there is nothing to indicate that in asserting the privilege which the law gives them and in refusing to waiver privilege, the liquidators are abusing their legal rights, or, indeed, acting "unfairly" having regard to the position of the respondents as parties both resisting and making claims against Actraint and Hartogen. No reason has been shown as to why the Court should require the liquidators to abandon procedural rights which the law otherwise gives them and which may be exercised in the course of this litigation for the benefit of the creditors as a whole.
   Conclusion

4. The respondents' motion should be dismissed. The applicants are entitled to an order that items 1, 2, 3, 4, 6, 8, 9, 10, 11, 13 and 14 identified in para. 3 of Mr O'Neill's affidavit sworn herein on 12 May 1992 and items 3, 4, 5, 6, and 7 identified in para. 4 thereof are not to be produced for inspection by the respondents. The applicants have been substantially successful. The respondents should pay the costs of the applicants of both motions.