Hypec Electronics Pty Ltd (In Liq)

[2006] NSWSC 704

CITATION:	Hypec Electronics Pty Ltd (In Liq) [2006] NSWSC 704
HEARING DATE(S):	10/07/06
JUDGMENT DATE :	10 July 2006
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
EX TEMPORE JUDGMENT DATE:	07/10/2006
DECISION:	See paragraph 6
CATCHWORDS:	CORPORATIONS - winding up - examinations by liquidators - orders for production of documents - orders sought in respect of solicitors - need for mechanism for determination of claims for privilege before order for production made
LEGISLATION CITED:	Civil Procedure Act 2005, s.68 Corporations Act 2001 (Cth) ss.596A, 596B Supreme Court Rules 1970, Part 36 rule 13
CASES CITED:	Metyard v Love (2005) 224 ALR 588
PARTIES:	John Duncan Green as liquidator of Hypec Electronics Pty Limited - Applicant
FILE NUMBER(S):	SC 1933/01
COUNSEL:	Mr P.B. Walsh - Applicant
SOLICITORS:	Deacons - Applicant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

MONDAY, 10 JULY 2006

1933/01 IN THE MATTER OF HYPEC ELECTRONICS PTY LIMITED (IN LIQUIDATION)

JUDGMENT

1 The applicant is the liquidator of Hypec Electronics Pty Limited. By his amended interlocutory process filed on 6 July 2006, he applies for the issue of examination summonses under ss.596A and 596B of the Corporations Act (2001) (Cth) and also makes application under s.68 of the Civil Procedure Act 2005 for orders requiring the production of documents.

2 The persons to whom the orders for production would be directed are the persons in respect of whom examination summonses are sought. Four of these persons are solicitors and there is an apprehension that some or all of the documents they would be required to produce by an order for production would be the subject of client legal privilege or legal professional privilege belonging to the relevant client or clients.

3 The Registrar has dealt with the application insofar as it concerns persons other than the four solicitors. The Registrar has referred the balance of the application to the Corporations Judge because it raises issues that were recently addressed by the Court of Appeal in Metyard v Love (2005) 224 ALR 588.

4 In that case, Basten JA, with whom Beazley JA agreed and Santow JA also agreed as to the relevant aspect, drew attention to the difficulties that arise where application is made for an order for production of documents that are potentially subject to privilege. Basten JA said at paragraphs [130] – [133], referring to Part 36 rule 13 of the Supreme Court Rules 1970 (which was substantially similar to the present s.68):

“[130] The consequences of that conclusion must be assessed by reference to the statutory scheme under which orders for production were made. Part 36, r 13 applies both to orders for production and production on notice under Part 36, r 16. The latter rule provides that a party served with a notice ‘shall, unless the court otherwise orders, produce the document or thing in accordance with the notice’: r 16(1). The effect of r 13(2) is, it would appear, that no order relieving the party under r 16 is necessary: rather, where privilege is invoked, the rule ‘shall not require’ production of the document, until the Court has directed that production ‘shall not be prevented’ by sub-r 13(2). Whether a similar approach is to be adopted in relation to an order for production under r 12 is less clear. Sub-rule 13(3) does not say that in such a case the order ‘shall not require’ production of a privileged document, but rather that the Court ‘shall not compel’ such production, unless and until it directs that the production shall not be prevented. On one construction, the order is unenforceable, pending further consideration by the Court; on the other construction, an order should not be made in the first place seeking to compel production of documents the subject of privilege.

[131] In Re BPTC Ltd (in liq) (No. 5) (1993) 10 ACSR 756, Bryson J adverted to the nature of these difficulties, in practical terms, at 759(15)-(30). His Honour was concerned in particular in that case with a complaint as to the excessive scope of the orders for production, made under Part 36, r 12. After referring to the need for affidavit evidence showing the ground on which the order should be made, his Honour continued at (20):
‘… and further there will be instances where it is not appropriate to act ex parte but the Registrar or other judicial officer should require notice of motion to be given to the party to be affected. More formal procedure would be appropriate where the call for documents is very extensive and compliance might be difficult. There would also be instances where it can be foreseen that there is likely to be some claim for public interest privilege or legal professional privilege, or other dispute.
These comments are appropriate in the present case.


[132] Once it is understood that the operation of Part 36 r 13, in relation to an order for production under r 12, precludes the Court from compelling production, even to itself, of a document subject to client legal privilege, an order having that effect should not have been made. Of course, it is not possible for this Court to say that particular documents are the subject of privilege: that issue has yet to be litigated. The mechanism for addressing these issues is by no means clear. In the present case the procedural issues have been blurred by the fact that each summons and order for production was made by the Deputy Registrar in the one, proceeding and each was challenged by way of ‘interlocutory process’ prescribed with respect to an examination summons only. Given the importance of the issues raised by client legal privilege, and the absence of a clear procedure by which to raise the issues, in my view the preferable conclusion is that an order for production under Part 36 r 12 should not be made ex parte where it may be anticipated that such questions will arise or, in the alternative, the order should make express exception for documents subject to privilege. The fact that a claim for privilege was likely to be raised in the present circumstances was known to the Opponents when they sought the orders and should, in accordance with the obligations of a party seeking ex parte relief, have been disclosed to the Deputy Registrar. Whether or not those possibilities were disclosed is not known.

[133] In my view the orders for production should be set aside on the basis that it has been established that they are likely to extend to documents which cannot properly be the subject of an order for production, which documents are likely to form a significant proportion of those subject to the order. It was not suggested by the Opponents that the categories of documents subject to privilege could readily be severed, or that the orders could be saved in part if the conclusion of the Court favoured the submissions of the Claimants. Accordingly the orders for production should be set aside.”

5 It is thus made clear that the court should not, in cases of apprehended claims for protection by way of legal professional privilege, simply make an order for production ex parte on the application of the liquidator. Rather, it must put in place some mechanism whereby privilege claims may be brought forward and examined before any compulsion is exerted by means of an order of the court.

6 Mr P.B. Walsh of counsel, who has appeared for the liquidator this morning, has outlined a regime which would achieve that purpose and be consistent with the parameters which the Court of Appeal has indicated. That regime is embodied in the orders which I now make as follows:

1. The liquidator must not later than 14 July 2006 serve the amended interlocutory process filed on 6 July 2006 on each of the persons mentioned in paragraphs 3(j), 3(k), 3(l) and 3(n) thereof, together with a separate affidavit going to the basis of the contention that each such person is within s.596B of the Corporations Act vis-à-vis the winding up of Hypec Electronics Pty Limited.
2. Subject to service being effected in accordance with order 1, any affidavit of any of the persons concerned seeking to set out the basis on which production of documents would be resisted on the ground of client legal privilege or legal professional privilege is to be served on the liquidator by 21 July 2006.
3. The amended interlocutory process be listed for mention before the Corporations Judge at 10 am on Monday 31 July 2006.

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