In the matter of Iris Diversified Property Pty Ltd (in liquidation)

[2019] NSWSC 1593

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Iris Diversified Property Pty Ltd (in liquidation) [2019] NSWSC 1593
Hearing dates:	13 November 2019
Decision date:	18 November 2019
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	The examination summonses not be set aside. The orders for production in narrowed form not be set aside although parties to be heard as to their terms. Parties to be heard as to costs.
Catchwords:	EVIDENCE – privilege – client legal privilege – where documents previously produced to liquidators of former trustee under s 530B of the Corporations Act 2001 (Cth) – whether current trustee can claim privilege.   CORPORATIONS – winding up – public examination of directors, officers and others – where solicitor acting for major creditor also acts for liquidators – where liquidators will retain independent solicitor to instruct counsel for purposes of conducting examinations – whether examination summonses should be set aside.
Legislation Cited:	- Corporations Act 2001 (Cth) ss 181, 184, 530A, 530B, 596A, 596B - Evidence Act 1995 (NSW) ss 118, 119 - Insolvency Practice Schedule (Corporations) - Supreme Court (Corporations) Rules 1999 (NSW) r 11.5 - Uniform Civil Procedure Rules 2005 (NSW) rr 1.12, 36.16(2)(b)
Cases Cited:	- Australian Securities and Investments Commission (ASIC) v Lindberg [2009] VSCA 234; (2009) 25 VR 398 - AWB Limited v Australian Securities and Investments Commission [2008] FCA 1877 - Caratti v Harris and Kirman as joint liquidators of GH1 Pty Ltd [2019] FCAFC 124 - Commissioner of Taxation v Donoghue [2015] FCAFC 183 - Cowell v British American Tobacco Australia Services Ltd [2007] VSCA 301 - Crescent Farm (Sidcup) Sports Ltd v Sterling Offices Ltd [1972] Ch 553 - Farrow Mortgage Services Pty Ltd (in liq) v Webb (1996) 39 NSWLR 601 - Hancock v Rinehart (Privilege) [2016] NSWSC 12 - Kimberley Diamonds Ltd v Arnautovic [2017] FCAFC 91; (2017) 252 FCR 244 - Krok v Szaintop Homes Pty Ltd (No 1) [2011] VSC 16 - Meteyard v Love [2005] NSWCA 444 - Re Bridgeport – Advisers & Asset Managers Pty Ltd [2005] NSWSC 757; (2005) 221 ALR 146 - Re Cardinal Group Pty Ltd (in liq) [2018] NSWSC 748 - Re Doran Constructions Pty Ltd (in liq) [2002] NSWSC 215; (2002) 194 ALR 101 - Re Global Advanced Metals Pty Ltd [2019] NSWSC 1545 - Re Iris Diversified Property Pty Ltd (in liq) (2019) NSWSC 1482 - Re Ji Woo International Education Centre Pty Ltd [2019] NSWSC 93 - Re Londonderry’s Settlement [1965] Ch 918; [1964] 3 All ER 855 - Re New Tel Ltd (in liq); Evans v Wainter Pty Ltd [2005] FCAFC 114; (2005) 145 FCR 176 - Re Trio Capital Ltd (in liq) [2011] NSWSC 1483 - Schreuder v Murray (No 2) [2009] WASCA 145 ; (2009) 41 WAR 169 - Sharpe v Grobbel [2017] NSWSC 1065 - Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2008] NSWSC 1070 - Trevorrow v State of South Australia (No 4) [2006] SASC 42; (2006) 94 SASR 64 - Wily Re LED (South Coast) Pty Ltd [2009] NSWSC 946; (2009) 76 NSWLR 428
Texts Cited:	- S Odgers, Uniform Evidence Law (Lawbook Co, 14th ed, 2019)
Category:	Procedural and other rulings
Parties:	The Owners – Strata Plan 84741 (Plaintiff) Iris Diversified Property Pty Ltd (in liq) (First Defendant) Henry Peter McKenna (Second Defendant) Wassim Arnaout (First Applicant) Rodney Paul Hawkins (Second Applicant) Iris Diversified Investments Pty Ltd (Third Applicant) Iris Group Management Pty Ltd (Fourth Applicant) Iris Hotel Business Pty Ltd (Fifth Applicant) Iris Hotel Group Pty Ltd (Sixth Applicant) IDI SPV7 Pty Ltd (Seventh Applicant) Brendan Warren Jones (Eighth Applicant) Christopher Palmer and Liam Thomas Bailey as liquidators of Iris Diversified Property Pty Ltd (in liq) (Respondents)
Representation:	Counsel: J R Clarke SC/E L Beechey (Applicants) R D Glasson (Respondents)   Solicitors: McCullough Robertson (Applicants) O’Neill Partners (Respondents)
File Number(s):	2017/359162 (003)

Judgment

1. By Amended Interlocutory Process filed by leave on 14 October 2019, the Applicants apply for a range of relief. The First Applicant, Mr Wassim Arnaout, is the sole director of Iris Diversified Property Pty Ltd (in liq) (“IDP”) and the sole director and shareholder of various other companies in the “Iris Group” (Nielsen 23.9.19 [13]). The Second Applicant is Mr Rodney Hawkins, who was an employed solicitor with Henry Davis York (“HDY”) from 2006 until July 2017 and has been general counsel for the Iris Group from July 2017 to date (Nielsen 23.9.19 [14]). The Third–Seventh Applicants are several other companies in the Iris Group. The Eighth Applicant is Mr Brendan Jones, who is a partner in Pitcher Partners NSW Pty Ltd (“Pitcher Partners”) and provides advice to the Iris Group of companies (Munstermann 11.10.19 [7]).

2. The Applicants seek orders extending the time for the Second and Eighth Applicants, Messrs Hawkins and Jones, to apply for an order under r 11.5 of the Supreme Court (Corporations) Rules 1999 (NSW) in respect of an application to set aside the liquidators’ examinations. They also seek orders that examination summonses served on Messrs Hawkins, Arnaout and Jones be set aside and that orders for production served on Mr Arnaout, Iris Diversified Investments Pty Ltd (“IDI”) and other associated companies be set aside, and that orders for production served on each of Norton Rose Fulbright (“NRF”) and Pitcher Partners be set aside.

3. This application was conducted with a degree of urgency and this judgment has had to be delivered within a short time. Part of the application, seeking access to the liquidators’ affidavit in support of the examination, was heard on 24 October 2019 and judgment in that application was delivered on that date (Re Iris Diversified Property Pty Ltd (in liq) (2019) NSWSC 1482) (“Earlier Judgment”); the remainder of the application was heard on 13 November 2019; and the examinations are set down for several days commencing on 26 November 2019. It is obviously preferable that the opportunity to use those dates is not lost, by reason of any delay in determining this application, where that would likely delay any examinations into next year, and the allocation of the examination dates to this matter which are lost would likely deprive other members of the community of the use of those dates. Given the urgency of the matter, I have focussed in this judgment on the matters necessary to determine the application, without any disrespect to the range and complexity of the issues raised by the Applicants.

4. By a second Interlocutory Process filed 2 October 2019, the Applicants seek the “return” of certain documents over which they claim legal professional privilege, a declaration regarding that privilege and associated relief, and an order under the Insolvency Practice Schedule (Corporations) that the liquidators produce certain documents to IDI as a creditor of IDP. This judgment may have an impact on the first of those applications, so far as its premise is that the Applicants can assert a claim for legal professional privilege to restrict the use of the relevant documents, or require the liquidators to “return” documents which the liquidators have properly obtained by the exercise of statutory powers under s 530B of the Corporations Act 2001 (Cth). By a further Interlocutory Process filed, by leave, at this hearing, the liquidators seek an order that they be appointed as receivers of relevant documents. That application may be a counterpoint to the Applicants’ claim for an order for the return of the relevant documents. Those applications have not yet been heard and remain to be determined.

Background and affidavit evidence

5. I set out the background facts to this application in the Earlier Judgment (at [6]ff) and summarised the evidence read by the Applicants and the liquidators on that application, some of which was also read on this application. I should first say something further as to the background facts, and then identify the affidavits read in this application.

6. IDP was previously the trustee of the Iris Diversified Property Unit Trust (“Trust”). The Trust was constituted by a deed dated 28 December 2007, and the sole beneficiary was IDI. IDI was the trustee of the latter trust, and Mr Arnaout was the sole director of IDP and IDI. Clause 34.2.2.1 of the trust deed for the Trust provides, in common form, for the automatic removal of a trustee on liquidation and permits the unitholder to appoint another trustee.

7. In August 2014, The Owners – Strata Plan 84741 (“Owners Corporation”), the body corporate of an apartment building, commenced litigation against the builder, Nazero Constructions Pty Ltd (which was subsequently placed in liquidation) and the developer, IDP, as trustee of the Trust in respect of defects in the building. At about that time, IDP transferred a substantial property, the Clovelly Hotel, to a related entity. The liquidators contend that, while the proceedings were on foot, a resolution was also passed to distribute the net income of the Trust of $2.812 million to IDI and that amount was set off against a loan from IDP to Iris Group Management Pty Ltd (“IGM”). The liquidators contend that transaction appears to be an alienation of IDP’s sole asset and that no contingency was made or money retained to take any account of a possible judgment in the Owners Corporation’s favour in the ongoing proceedings. In late 2017, the Owners Corporation obtained judgments against IDP for a total of about $1.8 million, inclusive of costs and interest.

8. On 11 or 12 October 2017 Mr Arnaout, as sole director of IDP, resolved to wind up IDP and appointed Mr McKenna of Jirsch Sutherland as liquidator. IDP ceased to be the trustee of the Trust by reason of its winding up and, on 18 October 2017, Mr Arnaout, as sole director of IDI, resolved to appoint Iris Hotel Group Pty Ltd (“IHG”) as the new trustee of the Trust in place of IDP, and that appointment was accepted by resolution of Mr Arnaout as the sole director of IHG. The Owners Corporation is the only creditor of IDP that is not a related party and is owed about 90% of its total debt of approximately $2 million. A related entity of IDP also claims a debt of $207,000, about 10% of IDP’s total debt.

9. The Court later ordered that Mr McKenna be removed as liquidator of IDP and replaced by the current liquidators. Mr O’Neill, who had acted as solicitor for the Owners Corporation since at least November 2017, and represented it in the application for the removal of the former liquidator, subsequently also acted for the liquidators. Mr O’Neill’s evidence is that he commenced acting for the liquidators in mid-June 2018 (O’Neill 18.10.19 [24]), although there is a dispute as to that matter.

10. On 17 October 2018, the liquidators issued a notice under s 530B of the Corporations Act to NRF, the successor firm to HDY, which required it to produce to the liquidators, relevantly:

“All files opened by Henry Davis York Lawyers (now merged with Norton Rose Fulbright) concerning the legal and commercial affairs of the Company and the Trust.”

It is common ground that NRF or HDY had previously acted for IDP, in its capacity as trustee of the Trust, in the proceedings between the Owners Corporation and IDP. There is evidence that HDY had also acted for other companies in the Iris Group for a substantial period (Nielsen 23.9.19 [14], [17]). The liquidators did not inform IHG as the new trustee of the notice issued to NRF or of the pending production of documents by NRF (Nielsen 23.9.19 [27]). The Applicants emphasise that matter, but the criticisms made of the liquidators in that respect neglect the fact that IHG could previously have informed NRF of its claim to legal professional privilege in the “Files” (as defined), to allow NRF to give any necessary notice to IHG in that respect. On 21 November 2018, NRF produced documents in response to the notice to the liquidators. The parties referred to those documents as the “Files” and I will adopt the same approach.

11. The liquidators then provided electronic documents from the Files and one hard copy file to Mr O’Neill and Mr O’Neill provided a Dropbox link to correspondence from the electronic files to a representative of the Owners Corporation. It appears that the representative of the Owners Corporation was unable to open most of the relevant documents. There is a dispute as to whether Mr O’Neill or his firm subsequently provided a working Dropbox link to the Owners Corporation. I am not satisfied that it has been established that he or it did so.

12. The parties led evidence as to the extent of steps taken by Mr O’Neill to subsequently review the relevant documents, but nothing turns on that matter where I find below that IHG as the current trustee cannot assert any claim for legal professional privilege to resist the liquidators’ use of the Files, so far as IDP was the client, to determine whether to conduct or in conducting the examinations. The parties also address the circumstances in which the Applicants became aware that NRF had produced the Files to the liquidators, a claim then asserted by Mr Hawkins that the liquidators were not entitled to possession of the documents or to waive privilege in them; a standstill agreement then reached between the parties; and the extent of disclosure of those matters to the Registrar when the examination orders and orders for production were sought. I referred to several of those matters in the Earlier Judgment, and address them further below to the extent necessary.

13. The Applicants rely on the affidavits dated 23 September 2019, 2 October 2019 and 8 and 13 November 2019 of Mr Nielsen, who is a solicitor acting for them, and also on the affidavit dated 11 October 2019 of Mr Munstermann, also a solicitor acting for them. The liquidators rely on Mr O’Neill’s affidavits dated 18 October 2019 and 12 November 2019. I adopt my summary in the Earlier Judgment of the affidavit evidence previously read in the earlier application, without repeating it, for the purposes of this judgment.

14. By his further affidavit dated 8 November 2019 read in this application, Mr Nielsen provided further information as to the circumstances in which Mr Arnaout and entities within the Iris Group engaged HDY “for the provision of legal services and litigation (or anticipated litigation)”. Mr Nielsen gave evidence, on information and belief from Mr Hawkins, who was then the solicitor acting for the Iris Group, that several files were opened by HDY in which he was the lawyer acting on behalf of HDY in relation to an Iris Group company or Mr Arnaout. He also attached a schedule setting out Mr Hawkins’ recollection of the nature of the relevant engagement. Mr Nielsen also addresses subsequent correspondence with the solicitors acting for the liquidators, by which the Files produced by NRF to the liquidators pursuant to the notice under s 530B of the Act were made available to the solicitors acting for the Applicants, including hard copy files, electronic printed files and electronic files. Mr Nielsen refers to his review of those documents, and, in a schedule to his affidavit, provides a description of them which, at least in parts, discloses the subject matter of the advice that was received.

15. Mr Nielsen also addresses Mr O’Neill’s evidence that he was acting for the liquidators as well as the Owners Corporation from 14 June 2018 and gives evidence, on information and belief from Mr Hawkins, that Mr Hawkins was not informed between 14 June 2018 and 9 September 2019, by Mr O’Neill or anyone else, that Mr O’Neill acted for the liquidators. Ultimately, little turns on that matter given the conclusions that I reach below on other grounds. However, I would accept Mr O’Neill’s evidence that he was, albeit in a somewhat informal way, acting for the liquidators from mid-June 2018, as well as the Owners Corporation, although he had not recorded his retainer to writing at that time and had not been required to undertake a significant amount of work for the liquidators in that period, where they were then attending to many aspects of the liquidation themselves.

16. By a further affidavit dated 13 November 2019, Mr Nielsen annexed a copy of an email dated 4 August 2015 from Mr Hawkins, then of HDY, to Mr Sam Arnaout attaching a copy of a letter dated 4 August 2015 to HDY. The entire text of that email was redacted, based on a claim for legal professional privilege, so that its content is not available to the Court, although it is obviously already available to IDP and the liquidators by reason that IDP was the client and the Files containing that email would be produced from the liquidators. Mr Clarke, who appears with Ms Beechey for the Applicants, urged me to draw inferences from the date on which the email was sent and the nature of the attachment to it as to the content of the redacted material. I do not consider that I should do so.

17. By a further affidavit dated 12 November 2019, Mr O’Neill addressed matters raised in the Applicants’ submissions, including express or implied criticisms of the liquidators’ and his conduct; indicated that the liquidators proposed to narrow the orders for production served on IGM, IDI and NRF; and corrected part of his earlier description of the confidential affidavit of the liquidators sworn in support of the application for examination orders.

18. Mr O’Neill was cross-examined at considerable length, although I had initially made an order limiting the time for his cross-examination to one hour. I subsequently extended that time at Mr Clarke’s request. I had raised with Mr Clarke, before that cross-examination, the risk that that cross-examination might have limited utility if the Applicants were ultimately unable to establish that IHG as the current trustee was entitled to assert a claim for legal professional privilege as against IDP or the liquidators, where the existence of that claim was the premise of criticisms made of the liquidators’ and Mr O’Neill’s conduct. In the event, that premise was not established.

19. Mr O’Neill was cross-examined as to whether he attended a creditor’s meeting of the Company on 28 September 2018 in his capacity as solicitor for the liquidators or in his capacity as solicitor for the Owners Corporation (T13). It seems clear enough that he attended that meeting only in the latter capacity, but that is not inconsistent with his being retained by the liquidators in respect of other matters. He was also cross-examined as to the process for negotiating a funding agreement between the Owners Corporation and the liquidators, where I accept that he was also acting on behalf of the Owners Corporation, although I also accept his evidence that the process was not contentious (T15ff). Mr O’Neill’s evidence, which I accept, was that he considered that he was retained by the liquidators from June 2018 when he was approached to act for the liquidators and indicated that he could do so (T17). Mr O’Neill referred, both in his affidavit evidence and in cross-examination, to work undertaken for the liquidators in that period which was consistent with his then being retained by them (T18), although he also referred to several matters to which the liquidators attended without his assistance. These arrangements were somewhat informal, but that is not particularly surprising where the liquidators had previously retained Mr O’Neill in other matters over many years (T20-21) and, as Mr Glasson, who appeared for the liquidators points out, there was no statutory requirement for a written costs agreement between a solicitor and a liquidator. He accepted that he was then billing the Owners Corporation for the work, which was the manner in which the funding arrangements of the liquidators was implemented (T19).

20. Mr O’Neill was also cross-examined as to whether he knew that, when documents were produced by NRF in response to the notice issued by the liquidators under s 530B of the Act, they would include privileged communications in respect of the litigation between IDP, as trustee of the Trust, and the Owners Corporation. Mr O’Neill acknowledged that the documents produced would potentially have that character, but also noted the obvious, that the relevant client was IDP to which the liquidators had been appointed (T25). Mr O’Neill was further cross-examined at length as to this issue, but that cross-examination was underpinned by premises that are ultimately not established, that the relevant privilege was then that of IHG to the exclusion of IDP, and that the liquidators’ exercise of the statutory right to require production of those documents infringed on IHG’s rights.

11. Mr O’Neill did not, in cross-examination, significantly recognise the distinction between the liquidators’ entitlement to access to documents, in order to pursue claims available to the liquidators or IDP for the benefit of its creditors and Trust creditors and the Owners Corporation’s position as a creditor in that regard (see, for example, T26). I will return to the significance of that matter below. Mr O’Neill was also cross-examined at some length as to his access to some of the documents that have been produced by NRF to the liquidators (T30ff). I accept Mr O’Neill’s evidence that there were difficulties in accessing documents that were originally produced in electronic form and then uploaded to a Dropbox account maintained by his firm, although I also recognise that the evidence as to this issue was not entirely clear. Mr O’Neill acknowledged that he provided Dropbox access to electronic documents on one occasion to the representatives of the Owners Corporation, who had the same difficulty in accessing the documents as he did (T40). Mr O’Neill also accepted that he had accessed the relevant documents in a joint capacity as solicitor for the liquidators and the Owners Corporation (T44). I accept that evidence was a truthful account of his approach, and it is inconsistent with his accessing the documents only for the purposes of the Owners Corporation, but also discloses that he did not sufficiently recognise the fact that he should have focussed only on his role as solicitor for the liquidators in accessing those documents. I return to that question below.

Whether IDP or IHG or both can claim or waive legal professional privilege in the Files

22. The Applicants’ claim to set aside the examination summonses and orders for production, which I address below, substantially turned on a preliminary question, whether the liquidators’ use of Files in determining whether to conduct the examinations and in conducting them would be inconsistent with a claim for legal professional privilege in them, which IHG as the current trustee was entitled to assert to the exclusion of, or possibly jointly with, IDP as the former trustee.

23. The Applicants’ submissions as to these matters depend on the premise that documents contained in the Files produced by NRF to the liquidators were subject to legal professional privilege. I will assume, without deciding, the correctness of that proposition for the purposes of this judgment, although the form of Mr Nielsen’s evidence might well not have been sufficient to establish legal professional privilege in particular documents in the Files had it been necessary to determine that matter: Hancock v Rinehart (Privilege) [2016] NSWSC 12; Re Global Advanced Metals Pty Ltd [2019] NSWSC 1545 at [7]ff. It is not necessary to determine which particular documents in the Files would have supported a claim for legal professional privilege, given the conclusions that I reach on other grounds below.

24. First, the Applicants contend that IHG as the current trustee has the sole ability to assert or waive a claim for legal professional privilege in legal advice obtained by IDP on behalf of the Trust. I described that issue in the Earlier Judgment (at [16]) as follows:

“Mr Clarke draws attention to what he describes as a complex question as to whether, in these circumstances, IDP as the former trustee has the ability to claim legal professional privilege or the current trustee has that privilege, and, to the extent that IDP has the ability to claim that privilege, whether it is to be claimed in the interests of the trust. That turns upon issues addressed by Brereton J in Hancock v Rinehart (Trust documents) [2018] NSWSC 1684 and, in a further decision delivered after I had heard this application and delivered my oral ex tempore judgment, by Ward CJ in Eq in Hancock v Rinehart [2019] NSWSC 1451. While that question is complex, it would also be commonplace in the insolvency of corporate trustees of trading trusts, given the extent to which trading trusts are now used in business activities and the ubiquitous provision in trust deeds which provides for vacation of the trustee’s office on the appointment of a liquidator. That question would arise in every case in which the liquidator of a corporate trustee sought production of documents relating to the trust’s affairs where its office had been vacated by a vacation provision. In this context, it may raise the further question, which did not arise in the Hancock v Rinehart decisions, whether the liquidators could properly be appointed as receivers of the trust assets generally or the files for which it was the client in particular, and how that possibility would impact on the powers of the former and present trustee and the exercise of the Court’s powers.”

25. The Applicants’ primary submission is that IHG as the current trustee of the Trust has the sole right to assert, or to waive, privilege in the Files as to which IDP was the client, to the exclusion of IDP as the former trustee of the Trust. That question is anterior to the further questions whether the liquidators could use the Files to determine to conduct, or in conducting, liquidators’ examinations in respect of statutory causes of action available to IDP, where the liquidators now possess the Files pursuant to their exercise of statutory rights under s 530B of the Act, and whether the examinations or orders for production should be set aside.

26. The outcome for which the Applicants contended was clear enough, but they had real difficulty in identifying the means by which that outcome was said to come about, so that a claim to legal professional privilege previously open to IDP as client ceased to be available to it and became available to IHG in its place. Mr Clarke eschewed a submission that that occurred instantaneously on vacation of the office of the former trustee or the appointment of the new trustee but did not identify whether it occurred, for example, when a former trustee came to hold documents as bare trustee for a new trustee, or transferred possession of documents to the new trustee, or required some further action of the former trustee, the new trustee or the Court.

27. The Applicants rely, first on an observation of Brereton J in Hancock v Rinehart (Privilege) above at [6], and particularly the sentence that I have italicised below, that:

“Moreover, Mrs Rinehart is not entitled to maintain against Bianca — as a beneficiary, and a fortiori as replacement trustee — a claim of privilege in respect of trust documents: Bianca as new trustee is as much entitled to them as her predecessor, Mrs Rinehart. Legal advice obtained by a trustee for guidance in the administration of the trust or the proper exercise of trust powers belongs to the trust, not to the trustee personally. On the other hand, advice obtained for the trustee’s personal assistance, such as in resisting litigation brought against the trustee by a beneficiary, belongs to the trustee alone. Thus to make good her claim, Mrs Rinehart must establish not only that the disputed documents were privileged, but that the privilege was hers personally, and not that of the trustee of the trust.” [footnotes omitted]

28. It seems to me that the first sentence of this paragraph rightly recognises the principle that a former trustee could not assert privilege against a replacement trustee, in the case of a joint privilege, reflecting the observation at the end of the sentence that the replacement trustee has as much entitlement to the documents as to the former trustee. That proposition does not support a contention that the replacement trustee has such an entitlement to the exclusion of the former trustee. The second sentence has an element of metaphor about it, in expressing the view that advice “belongs to the trust”. That is, as Mr Clarke fairly accepted, to be understood as indicating that such advice belongs to the trustee, in its capacity as trustee rather than personally, since a trust itself is not a legal entity. That proposition does not establish that a former trustee cannot deal with privilege in advice as to which it was the client, at least where it has possession of the advice, subject to any applicable trust duties. His Honour also referred to several authorities in support of the observation I have quoted above, namely Re Londonderry’s Settlement [1965] Ch 918 at 933; [1964] 3 All ER 855, where the Court of Appeal considered whether certain documents were trust documents available for a beneficiary’s inspection; and Krok v Szaintop Homes Pty Ltd (No 1) [2011] VSC 16 at [28] and Schreuder v Murray (No 2) [2009] WASCA 145; (2009) 41 WAR 169 at [91], which deal with the position as to a joint privilege between trustee and beneficiary. These decisions do not seem to me to assist with the issues that arise on a change of trustee following the former trustee’s insolvency.

29. Mr Clarke submits, by reference to the observation that I have quoted above from Hancock v Rinehart (Privilege) above that:

“It follows that the right to waive any such privilege is not that of the former trustee, but the new trustee of the trust.”

It is not apparent to me why that follows from that observation, at least as a proposition of universal application. Mr Clarke ultimately acknowledged in submissions that such a proposition would at least be subject to limitations of scope, qualifications and exceptions. These might include, for example, the position where a former trustee relied on legal advice it had obtained to assert a right of indemnity in respect of trust assets, or to claim remuneration as trustee, or, relevantly for present purposes, to advance a statutory cause of action that is vested in it and is not assignable to a new trustee, including, relevantly, claims for breach of statutory director’s duties under ss 181-184 of the Corporations Act.

30. Mr Glasson responds that the issue in Hancock v Rinehart (Privilege) above was whether the former trustee could assert a claim for privilege over documents to resist access by the new trustee, as distinct from the present position where the new trustee seeks to rely on privilege to prevent use of documents by the former trustee, which had the relevant privilege at the time it came into existence. Mr Glasson also fairly recognises that Brereton J held in that decision that a former trustee is not entitled to maintain a claim for privilege against the current trustee in order to resist production of documents to the current trustee, at least so far as they are documents relating to IDI’s performance of the Trust. Of course, the liquidators do not here seek to assert any claim for privilege so as to prevent access by the current trustee to the Files.

31. A second element of the Applicants’ submission turns on the proposition that any legal professional privilege should be asserted in the interests of the Trust, and therefore it should be asserted or waived by IHG. That submission does not assist the Applicants here. The question here is ultimately not whether privilege should be asserted or waived, but whether IDP’s liquidators are entitled to use advices obtained by IDP to pursue statutory claims of IDP for the benefit of Trust creditors where those advices are in their possession. Second, the Applicants assumed, but did not seek to establish and did not establish, that it was in the interests of the Trust to assert the privilege. That is not self-evident, where any claims by IDP are directed to recovery of assets held by IDP as trustee to meet a judgment debt owed to Trust creditors, and there is no reason to assume that it is not in the interests of the Trust to seek to recover assets of the Trust to meet a judgment debt in favour of Trust creditors.

32. Mr Glasson responds by emphasising that IDP was the “client” of NRF, and that the legal professional privilege, at the time any advices were created and provided to IDP, was that of IDP. Mr Glasson also rightly points out that a trust is, of course, not a separate legal entity under Australian law and does not have a separate legal personality to the trustee, so that the relevant privilege is properly that of the trustee, albeit in that capacity, rather than of the “trust”. Mr Glasson also rightly points out that, in other areas of trust law, the replacement of a trustee does not bring about, in itself, the alteration of the parties to any contract. Mr Glasson also submits, unsurprisingly, that there could be no objection to the production to IDP by its solicitors of documents to which only IDP had a claim for privilege. Mr Glasson also points out that Mr Clarke does not refer to, and neither party has been able to identify, any authority for any proposition that a successor trustee can rely on legal professional privilege to prevent the production of documents to its predecessor as trustee.

33. Mr Clarke also relies on an observation of Goff J in Crescent Farm (Sidcup) Sports Ltd v Sterling Offices Ltd [1972] Ch 553 at 562 that legal professional privilege of a predecessor in title enures for the benefit of his successor. That case was directed to the position as between a sub-purchaser and a third party which acquired land from the sub-purchaser, and the cases to which his Honour referred largely appear to have been directed to the position as to a successor in title to real property. In submissions, Mr Clarke had difficulty in identifying who would be a “successor in title” within the suggested principle, beyond suggesting that it might extend to the executor of a deceased and would apply in this case. Mr Glasson responds that the decision in Crescent Farm (Sidcup) Sports Ltd above was not directed to the position of a trust or a replacement trustee and that the liquidators, in any event, do not say that IHG as new trustee of the Trust has no right to the documents, including to assert privilege against true third parties, as distinct from IDP or the liquidators. Mr Glasson emphasises that the liquidators’ position is that IDP has the right to any privilege in the Files because it was its privilege, as the relevant client, at the time they were created. In my view, that decision does not establish a principle of general application that a successor trustee has, without any act of the former trustee or order of the Court, the right or capacity to deal with legal professional privilege in advice obtained by the former trustee to the exclusion of that former trustee.

34. I am therefore not persuaded that the Applicants have established the existence of a principle that has the consequence that IHG as the current trustee of the Trust has the sole right to assert, or to waive, privilege in the Files as to which IDP was the client, to the exclusion of IDP as the former trustee of the Trust. If such a principle turns upon the exercise of the privilege in the interests of the trust, then its exercise by a former trustee seeking to bring in recoveries for Trust creditors may advance those interests. Even if such a principle were established, Mr Clarke accepted that it would have limitations, qualifications and exceptions, and I am not persuaded that it would extend so far as to cause legal professional privilege in advice obtained by a former trustee as client to vest in a new trustee controlled by a target of the investigation, in the commonplace situation where the trustee of a trading trust is removed on insolvency, and a liquidator of that former trustee seeks to investigate statutory causes of action which may be available to the former trustee to bring in recoveries for trust creditors. In any event, as I noted above, the ultimate question is here a different one, namely whether the liquidators could use the Files to determine to conduct, or in conducting, liquidators’ examinations in respect of statutory causes of action available to IDP, where they now possess the Files pursuant to their exercise of statutory rights under s 530B of the Act. I will return to that question below.

35. Mr Clarke alternatively raises the possibility that there may be a joint privilege between IDP as the former trustee and beneficiaries of the Trust, or between IHG as the current trustee and beneficiaries, or, possibly and by extension, between IDP as former trustee and IHG as current trustee. I described that issue in the Earlier Judgment (at [17]) as follows:

“Mr Clarke also raises the possibility that there may have been joint privilege held by other parties, but that presently has little or no evidentiary support and is raised as no more than a possibility. So far as documents produced may extend to other companies within the Iris Group, there is little evidence as to the extent of them or whether they were of such a nature that a substantial volume of legally professionally privileged material would be produced, although it is no doubt a possibility that, given the scope of the orders for production, some such material would be produced. Mr Clarke also referred, as I had noted above, to a number of other possibilities, including, that there may be joint privilege with a beneficiary. Mr Clarke seeks to advance that matter as a proposition of law, although it is not entirely clear how such a proposition of law could arise independently of any underlying facts. He also refers to the possibility of joint advice with other persons, such as the director in respect of insolvency, and I have referred to that issue above.”

36. Mr Clarke submitted that a joint privilege arises when a group of persons in a formal legal relationship, such as trustee and beneficiary, communicate with a lawyer on a matter relating to a relationship and that it follows that the Files which go to the administration of the Trust may be the subject of a joint privilege with the unitholder of the Trust, and that joint privilege could not be waived by only one of the joint privilege holders: Farrow Mortgage Services Pty Ltd (in liq) v Webb (1996) 39 NSWLR 601 at 608. Mr Glasson responds that the Applicants assert, but have not established by evidence, the possible existence of joint privilege between IDI and beneficiaries of the Trust and that such a joint privilege, if it existed, would provide no basis to prevent use of the Files by the liquidators, where the relevant privilege would also be IDP’s privilege. Mr Glasson also rightly points out that no question of waiver of privilege would arise at the point that IDP, as NRF’s client, or its liquidators, calls for production of the Files, where IDP, or IDP and IDI jointly, or IDP and IDI and the beneficiaries jointly, have legal professional privilege in documents contained in them.

37. Mr Clarke also recognised a further possibility that each of IDP as former trustee and IHG as the current trustee may have the ability to claim or waive legal professional privilege in respect of advices obtained by the former trustee in its capacity as trustee. However, the position here is different from the more common position where there is a joint and contemporaneous retainer of solicitors by multiple parties at the same time, with the result that the parties then cannot claim privilege against each other in respect of communications made during the subsistence of the joint retainer: example, Re Doran Constructions Pty Ltd (in liq) [2002] NSWSC 215; (2002) 194 ALR 101 at [7]; Schreuder v Murray (No 2) above at [9]; Sharpe v Grobbel [2017] NSWSC 1065 at [14] and the authorities there noted. There is no such joint retainer here, because only IDP, as trustee of the Trust, and not IHG as the replacement trustee, retained NRF at the relevant time.

38. It seems to me that any question of joint privilege must depend on whether the relevant legal advices were in fact obtained jointly by IDP and beneficiaries, since it can scarcely be the case that a trustee cannot ever waive privilege in advice that it alone obtained, because the (potentially many) beneficiaries of a trust have declined to consent, or not responded to a request for consent, to its doing so. The Applicants did not establish that fact in respect of any particular document or categories of documents contained in the Files, in respect of which IDP was the relevant client. Mr Clarke did not identify any other principled basis for a finding that a joint privilege existed between the former trustee and a replacement trustee, extending to the position where the liquidators of IDP as the former trustee seeks to investigate statutory causes of action which may be available to the former trustee for the benefit of Trust creditors. In any event, if such a joint privilege existed, it seems to me that IHG could not rely on it to object to the use of the Files, so far as IDP was NRF’s client, in determining whether to conduct or conducting the examinations for the reasons noted below.

The significance of the liquidators’ possession of the Files

39. It also seems to me that IHG as the current trustee cannot object to the use of the information contained in the Files produced by NRF, so far as IDP was the relevant client, in the examinations, on a further basis. I raised with Mr Clarke, in his closing submissions, the potential significance of the fact that the Files were produced to the liquidators pursuant to their statutory rights to delivery of documents under s 530B of the Act. I then allowed the parties an opportunity for further written submissions as to a consequential question, namely:

“… whether the [Files] continue to have the requisite confidentiality as against the liquidator[s] that is necessary to support a claim for legal professional privilege; whether that claim is available to prevent use of those documents so far as the liquidator[s] already ha[ve] them; and whether the use of those documents would amount to a “disclosure” for the purposes of ss 118-119 of the Evidence Act to the extent that it rather than the general law applies: see Trevorrow v State of South Australia (No 4) [[2006] SASC 42;] (2006) 94 SASR 64 at [11]; Cowell v British American Tobacco Australia Services Ltd [2007] VSCA 301 at [32]; AWB Limited v ASIC [2008] FCA 1877 at [34]; Commissioner of Taxation v Donoghue [2015] FCAFC 183 at [54]ff; and Odgers Uniform Evidence Law [1.3.0390].”

40. Section 530B of the Corporations Act relevantly provides that a person is not entitled, as against the liquidator of a company, to retain possession of books of that company, with an exception that is not presently relevant; that a person must not engage in conduct that results in hindering or obstructing a liquidator of a company in obtaining possession of the company’s books; the liquidator may give a person a written notice requiring that person to deliver to the liquidator, as specified in the notice, books so specified that are in the person’s possession; and the person must comply with that notice, unless that person is entitled, as against the company and the liquidator, to retain possession of the books. A failure to comply with that section is an offence of strict liability. That section reflects a public policy that directors and other persons who have control of the affairs of a company should be required to fulfil basic requirements such as delivery to a liquidator of all of the company’s books: Explanatory Memorandum to the Corporate Law Reform Bill 1992 [829].

41. It is common ground that the liquidators gave a notice under s 530B of the Act to NRF, requiring NRF to deliver specified documents that were in NRF’s possession to them. There was no suggestion that NRF, as IDP’s solicitor, was entitled, as against IDP or the liquidators, to retain possession of the Files, and it did not seek to do so, but instead complied with that notice as it was bound to do. The liquidators thereby obtained possession of the Files pursuant to their statutory power to do so.

42. Mr Clarke submits that the liquidators should have given notice to IHG of their requirement for production of the Files by NRF, to allow NRF to assert a claim for privilege. I do not accept that submission. First, the legislature could have but did not impose such a requirement in the terms of the section. Second, there is no reason to think that it would have been obvious to a liquidator, and it does not appear to have occurred to NRF, that IHG rather than NRF’s client, IDP, could assert such a claim. Third, and most importantly, it was open to IHG to advise NRF of any claim that it was entitled to assert legal professional privilege in the Files on its appointment as trustee or thereafter. The Applicants do not contend either that IHG had informed NRF of that claim or that NRF disregarded that claim in producing the Files to the liquidators. IHG did not need notice from the liquidators to take that course.

43. I first address the questions whether the Files continue to have the requisite confidentiality as against the liquidators that is necessary to support a claim for legal professional privilege and whether that claim is available to prevent use of those documents so far as the liquidators already have them. In supplementary submissions as to those questions, the Applicants draw attention to well-established principles as to the significance of legal professional privilege. They rightly submit that there is no suggestion that s 530B of the Act, in itself, abrogates legal professional privilege. I accept that submission, although I note that the authorities to which I refer below establish that the production of documents pursuant to statutory powers, whether or not those powers were validly exercised, may permit the recipient of those documents to use them and tender them notwithstanding any such privilege.

44. The Applicants submit that the documents in the Files that are the “property of the Trust” were not able to be obtained by the liquidators under s 530B of the Act. They submit that the power to obtain document production under that section is limited to documents which belong to a company and point out that the documents sought in that notice included documents concerning the affairs of the Trust as well as the affairs of IDP. They submit that the relevant documents belonged to IGM (presumably, the intended reference is to IHG) as the new trustee of the Trust and to the beneficiaries of the Trust at the time the notice was issued. This submission seems to me to have three difficulties. The first is that it misapplies the metaphor used by Brereton J in Hancock v Rinehart (Privilege) above, by seeking to treat documents as property of a “trust”, when the trust is not a legal entity that is capable of owning such property. The second is that, so far as it depends upon the proposition that the documents belong to IHG as the new trustee, no step that had brought about a transfer of property in them or possession of them to IHG has been established. The third and most fundamental difficulty with that submission is that the application of the principles which I address below does not depend upon the validity of the exercise of a statutory power by which documents came into a party’s possession, but upon the fact that they have done so.

45. Next, the Applicants submit that IGM as trustee (presumably, again a reference to IHG as the new trustee) did not act inconsistently with the maintenance of the privilege when NRF produced the Files to the liquidators, so as to give rise to a waiver of privilege. That submission does not assist the Applicants, where the principles which I address below do not depend upon any question of waiver of legal professional privilege.

46. The Applicants also submit that the Files were received by the liquidators in circumstances where they ought not to have been produced to them; they were not produced with the authority of the trustee of the Trust and the Files ought to have been “returned” to the new trustee of the Trust. These propositions also do not seem to me to assist the Applicants. The Files were produced to the liquidators where they had exercised a statutory power under s 530B to require their production, and the application of the principles noted below does not depend on the validity of the exercise of that power. While the Files were not produced with IHG’s authority, they were produced with the authority of NRF’s client, IDP, exercised by its liquidator in giving the relevant notice. IHG was not then the owner of the Files, since no step to transfer ownership of them to IHG had occurred, and any requirement that IDP transfer them to IHG, arising from a duty of cooperation of the kind to which I have referred above, would likely have been qualified by the liquidators’ ongoing investigations. I have addressed the further submission that the liquidators did not inform IHG of the requirement for production above.

47. The Applicants also point to steps subsequently taken by them to seek to protect legal professional privilege and confidence in the Files. It seems to me that this submission also does not assist the Applicants, quite apart from the obvious difficulty in IHG establishing that it can assert a duty of confidentiality in advice obtained by IDP as against IDP. In AWB Limited v Australian Securities and Investments Commission [2008] FCA 1877 and Australian Securities and Investments Commission (ASIC) v Lindberg [2009] VSCA 234; (2009) 25 VR 398, which I address below, AWB took prompt steps to seek to protect privilege and confidentiality in information that was produced to the Australian Securities and Investments Commission and the Australian Federal Police, but was unable to do so for the reasons noted below.

48. The Applicants also point to the Court’s jurisdiction to restrain a breach of confidentiality where a person comes into the possession of information subject to a duty of confidence. That submission, however, has the difficulty that the Applicants have taken no steps to restrain such a breach here, nor it is apparent how any duty of confidentiality could prevent the transfer of documents held by IDP’s solicitor, in respect of a retainer by IDP, to IDP, or IDP’s use of such documents. The Applicants’ further submission that the documents continue to have the requisite confidentiality as against the liquidators that is necessary to support a claim for legal professional privilege, once they have been produced to the liquidators, is plainly inconsistent with the observations of the Court of Appeal of the Supreme Court of Victoria in Australian Securities and Investments Commission (ASIC) v Lindberg above, to which I refer below.

49. Mr Glasson responds that the Applicants do not seek, and have never sought, to restrain the use of the Files produced by NRF, as to which IDP was the client, on the basis of confidentiality, and he rightly points out that the application to set aside the examination summonses and orders for production was brought by reference to principles of legal professional privilege. Mr Glasson also submits, consistent with the authorities to which I refer below, that legal professional privilege does not confer a right to restrain the use of documents in the hands of a third party, and such restraint can only be based on a claim relying on a breach of confidentiality by that third party. Mr Glasson submits, by reference to the decisions in Trevorrow v State of South Australia (No 4) [2006] SASC 42; (2006) 94 SASR 64, Cowell v British American Tobacco Australia Services Ltd [2007] VSCA 301, AWB Limited v Australian Securities and Investments Commission above and Commissioner of Taxation v Donoghue [2015] FCAFC 183 that, even if the Files were subject to legal professional privilege, once they had come into the liquidators’ possession, and even if the exercise of power under s 530B of the Act was invalid or later reversed, any privilege in the Files did not prevent the liquidators from making use of that information. I now address those authorities.

50. In Trevorrow v State of South Australia (No 4) above at [11], Doyle CJ observed that:

“A claim of legal professional privilege in respect of a document is a claim of an entitlement to refuse to produce documents to a litigant for inspection, or to refuse to produce them to a court. The plaintiff had no need to call on the defendant to produce the 11 documents in question. He had copies of them, and could prove the documents by tendering the copies as secondary evidence of the contents: Calcraft v Guest [1898] 1 QB 759. On this point I refer to the discussion in Cross on Evidence (7th Australian Edition, Butterworths, 2004) at [25025]. The claim of legal professional privilege was not, of itself, an obstacle to the tender of the documents. I refer to the observations on this aspect of the matter in Baker v Campbell (1983) 153 CLR 52 at 67–68 Gibbs CJ (diss); at 80 Mason J (diss); at 101 and 109–110 Brennan J (diss); at 129 Dawson J. Although three of these references are to dissenting judgments, those judgments reflect the true state of the law.”

51. That decision was quoted, with approval, by the Court of Appeal in Cowell v British American Tobacco Australia Services Ltd above at [32] as follows:

“… although it is now accepted that legal professional privilege is more than just a rule of evidence or procedure, it is clear that it is not to be characterised as a rule of law conferring individual rights sounding in damages or an injunction to restrain an apprehended or continued breach. Consequently, once information in a privileged document has come into the hands of a party to litigation, even as a result of compulsive process which is later reversed, the fact that the document was and remains privileged does not of itself prevent that party from making use of the information.” [citations omitted]

52. The decision in Cowell v British American Tobacco Australia Services Ltd above was in turn applied by Gordon J in AWB Limited v Australian Securities and Investments Commission above, in an analogous situation to this case, where ASIC had obtained possession of information that was subject to a claim for legal professional privilege by AWB, by the exercise of its compulsory examination powers under the Australian Securities and Investments Commission Act 2001 (Cth). Her Honour there observed (at [34]) that:

“… the fact of the matter is that ASIC now has possession of information which, at least in theory, could be subject to a valid claim of privilege by AWB. The question then is whether ASIC is entitled to make use of that information, notwithstanding the possible privilege claim, and the answer to that question is yes.”

53. In Australian Securities and Investments Commission (ASIC) v Lindberg above at [51], the Court of Appeal of the Supreme Court of Victoria recognised that a party who is required to produce information under a compulsory power (as distinct from a third party) should be given the opportunity to assert a claim to legal professional privilege. As I noted above, there is no suggestion that IHG did not have the opportunity to give notice to NRF of any claim to legal professional privilege over the Files after it was appointed as trustee, nor that NRF disregarded any such notice that it had been given. There is also no suggestion that NRF did not have the opportunity to assert privilege on behalf of its client. It is not surprising it did not seek to do so where its client, IDP, had, by its liquidators, itself required the production of the Files. I have not accepted Mr Clarke’s submission that the liquidators were obliged to give notice of the requirement for production to IHG, where there was no statutory requirement for them to do so, and IHG did not need such notice to allow it to advise NRF, following its appointment as trustee, of any claim that it was entitled to assert legal professional privilege in the Files.

54. Importantly, the Court of Appeal then observed that:

“The principle is not one which applies or is capable of applying to a situation in which the authority has already obtained possession of the documents from third persons and it does not extend to creating a right to such a practical and realistic opportunity to claim privilege by some other person. The principle cannot extend that far, in my view, because the legal position is, as I have said, that once such documents come into the possession of another party, the privilege is lost or cannot be asserted except in the context of a claim in equity to protect confidentiality.” [footnote omitted]

55. These principles were once again recognised in Commissioner of Taxation v Donoghue above at [54]ff, where the Full Court of the Federal Court observed that legal professional privilege did not itself provide any basis to constrain the use of privileged documents that were in a person’s possession, although equity may restrain their publication in an appropriate case under principles of breach of confidentiality.

56. I recognise that the Applicants point out that an officer’s ability to assert legal professional privilege over documents provided to a liquidator after he had delivered books in his possession to a liquidator, under s 530A of the Act, was assumed in Caratti v Harris and Kirman as joint liquidators of GH1 Pty Ltd [2019] FCAFC 124 at [82] and [89]. That submission is fairly put in that way, since the Court there merely observed (at [82]) that the evidence was not sufficient to establish a claim for privilege and (at [99]) that any legitimate claim to legal professional privilege could be protected by a proposed regime to preserve the right to object to inspection of particular documents. That case also did not involve the distinguishing feature of this case, that the relevant documents were produced to the liquidator of the company which was the solicitor’s client.

57. Here, the Applicants have not brought substantive proceedings seeking to restrain the use of the Files based on any claim for breach of confidentiality by IDP or the liquidators although they do, in an application which is yet to be determined, seek an order for the “return” of the Files to IHG as the current trustee, on the basis that IHG has property in the Files. It is very difficult to see how the content of the Files, so far as IDP was the client and they had been produced to the liquidators in response to a statutory requirement, can be confidential to IHG as against IDP and the liquidators, so as to support a claim for legal professional privilege in them against IDP or the liquidators. It also seems to me that the case law to which I have referred above, including appellate authority that I should follow, establishes that, once the Files were in the liquidators’ possession by the exercise of a statutory authority to obtain them, and irrespective of whether that power was validly exercised, the liquidators were entitled to use them in the examinations, irrespective of any claim for legal professional privilege by IHG in respect of them.

58. I now turn to the question whether the use of those documents would amount to a “disclosure” for the purposes of ss 118-119 of the Evidence Act 1995 (NSW) to the extent that it rather than the general law applies, which was a matter to which the parties gave little attention. In supplementary submissions, the Applicants submit that the use of relevant documents would amount to a disclosure for the purposes of ss 118-119 of the Evidence Act, without explaining how there can be such a disclosure if each of IDP, the liquidators and the examinees are aware of the content of the documents. Mr Glasson responds, by reference to Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2008] NSWSC 1070, that it is not possible to disclose something to a person that is already known or possessed by that person. Mr Glasson submits that the use of the documents, in the relevant circumstances, would not amount to a disclosure for the purposes of ss 118-119 of the Evidence Act, to the extent that those sections rather than the general law apply.

59. It seems to me that, so far as the availability of legal professional privilege is to be determined by reference to ss 118 and 119 of the Evidence Act, as distinct from the general law, the prohibition on adducing evidence which is the subject of legal professional privilege in those sections applies only where the evidence would result in a disclosure in the relevant sense: see S Odgers, Uniform Evidence Law (Lawbook Co, 14th ed, 2019) [EA.118.150]. The Applicants made no attempt to establish that any particular documents produced by NRF to the liquidators would not already be known, not only to IDP as the client but also to IHG as the current trustee and each of the relevant examinees. It follows that IHG could not establish a claim for privilege within those sections against the liquidators or IDP, where there would be no “disclosure” (within the language of those sections) of the relevant documents by their use by a liquidator in examinations of persons who already knew their contents: Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd above at [19].

55. For these reasons, it is not open to IHG as the current trustee to object to the liquidators’ use of the Files produced by NRF in determining whether to conduct or in conducting the examinations, so far as they contain documents where IDP was the client, on the basis of legal professional privilege. The essential premise of the Applicants’ objection to the examination orders and orders for production (as narrowed in the course of the hearing) is therefore not established.

Whether time should be extended for Messrs Hawkins and Jones to bring an application to set aside the examination summonses

61. As I noted above, the Applicants seek orders extending the time for Messrs Hawkins and Jones to apply for an order under r 11.5 of the Corporations Rules in respect of an application to set aside the liquidators’ examinations. Mr Glasson did not oppose that application.

62. Rule 11.5 deals with an application to set aside an examination summons and relevantly provides that:

“(1)    This rule applies if a person is served with an examination summons.

(2)    Within 3 days after the person is served with the examination summons, the person may apply to the Court for an order discharging the summons by filing:

(a)   an interlocutory process seeking an order discharging the summons, and

(b)   an affidavit stating the facts in support of the interlocutory process.

(3)   As soon as practicable after filing the interlocutory process seeking the order and the supporting affidavit, the person must serve a copy of the interlocutory process and the supporting affidavit on:

(a)    the person who applied for the examination, and

(b)    unless that person is ASIC or a person authorised by ASIC--ASIC.”

63. I dealt with the scope of that rule in Re Ji Woo International Education Centre Pty Ltd [2019] NSWSC 93 as follows:

“[Counsel] submitted, and I accept, that the relevance of an application for any delay by the Applicants is to whether it is just and fair to grant the extension of time that is sought, in respect of the examination summonses: Iovanescu v McDermott [2004] NSWCA 106 at [16]. [Counsel] also submitted that a satisfactory explanation of delay is not a pre-condition to the exercise of the power to extend time. I accept that submission, at least in the sense that time may more readily be extended for a meritorious application, even if there is a less satisfactory explanation for delay. [Counsel] also referred to the observation of Emmett J in Commonwealth v Sheahan [2004] FCA 1301 at [28] that an extension of time “should only be granted where there is a satisfactory explanation provided for delay and the delay has not caused prejudice of an irreparable nature”, and to his Honour’s recognition of the absence of prejudice to the liquidator as a significant factor in that case. [Counsel] also rightly drew attention to the treatment of the relevant issues by Barrett J in Re Bridgeport – Advisers and Asset Managers Pty Ltd [2005] NSWSC 757, where his Honour recognised that r 11.5 of the Corporations Rules exhibits “an expectation of prompt action”, and also noted that compliance with that rule was not a pre-condition to invoking the jurisdiction, by contrast with the time limit under s 459G of the Corporations Act for the filing of applications to set aside a creditor’s statutory demand. [Counsel] also rightly recognised that extensions of time were refused in Re 82-84 Belmore Street Pty Ltd (in liq) [2014] NSWSC 1701 and in Re Cardinal Group Pty Ltd (in liq) [2018] NSWSC 748, in each case in circumstances where the Court was satisfied of the lack of merit of the underlying application.”

In that case, an extension of time to bring an application to set aside examination summonses was also not granted where the application lacked merit.

64. Mr Clarke fairly accepted that the Court must be satisfied that a basis for that extension is established. He rightly points out that the discretionary power to extend time under r 1.12 of the Uniform Civil Procedure Rules 2005 (NSW) can be exercised to extend the time limit in r 11.5 of the Corporations Rules: Re Bridgeport – Advisers & Asset Managers Pty Ltd [2005] NSWSC 757; (2005) 221 ALR 146 at [9]-[11], [48]; Re Ji Woo International Education Centre Pty Ltd above at [22]. He points out, and I accept, that relevant factors in the exercise of the discretion include: the extent of the applicant’s delay; the explanation for that delay; the prospects of the applications and the absence of evidence of prejudice to the liquidator if the extension were granted. He also points out that Mr Hawkins was served with an examination summons on 12 September 2019; Mr Jones was served with an examination summons on 16 September 2019, and the original Interlocutory Process filed on 23 September 2019 sought the setting aside of both Mr Hawkins’ and Mr Jones’ summonses, but Mr Jones was not an Applicant at that time and only became a party to the application when the Amended Interlocutory Process adding him as an Applicant was filed in Court at the directions hearing on 14 October 2019. He submits, by reference to evidence, that the application was brought within 3 days of Mr Hawkins and Mr Jones becoming aware of the 3 day time limit and that Mr Hawkins and the Iris Group had intended, from 12 September 2019 onwards, to bring an application to set aside Mr Hawkins’, Mr Jones’ and Mr Arnaout’s examination summonses once the examination summons had been served on Mr Arnaout. He points out that Mr Arnaout was served on 19 September 2019 and the application was brought within the requisite 3 days after that service. He submits, and I accept, that there is no evidence before the Court of any prejudice to the liquidators caused by the delay in bringing the application to set aside the examination summonses.

65. For the reasons noted below, I am not persuaded that a basis to set aside the examination summonses could be established, and that tends against the orders sought for an extension of time. Notwithstanding the difficulties with the prospects of the applications to set aside the examinations, I am satisfied that the extension of time to bring them should be granted, where the delay was limited and there would be no prejudice to the liquidators if the extension was granted. It seems to me that the extension of time sought by Messrs Hawkins and Jones should be granted to allow their applications to set aside the examinations to be determined on their merits.

Whether the examinations should be set aside

66. As I noted above, Messrs Hawkins, Arnaout and Jones seek orders that the examination summonses addressed to them be set aside. Mr Arnaout brought that application within the requisite time, and I have extended the time for Messrs Hawkins and Jones to bring such applications. The Applicants submit and Mr Glasson accepts that each of Messrs Arnaout, Hawkins and Jones have standing to set aside the examination summonses issued to them personally. I accept that each of Messrs Arnaout, Hawkins and Jones have standing to set aside the examination summonses addressed to them.

67. The question whether the examinations should be set aside must be approached in the context of the statutory purpose of liquidator’s examinations. I noted the principles applicable to that question in the Earlier Judgment but I should say something further as to those principles here. An applicant for an examination order under s 596A of the Act is required to satisfy two criteria, relevantly, that it is an “eligible applicant” and that the person to be examined was, during the specified period, an officer or provisional liquidator of the corporation and that, if those criteria were met, the Court must issue a summons. Both of those criteria were met in respect of the liquidators’ application for the issue of an examination order to Mr Arnaout. An examination order that satisfies the requirement of s 596A of the Act may nonetheless be discharged if it is found that the applicant for that order had an improper purpose in securing that order or if that order otherwise amounts to an abuse of process: Kimberley Diamonds Ltd v Arnautovic [2017] FCAFC 91; (2017) 252 FCR 244 at [30]. An examination order may be made in respect of other persons where the Court is satisfied of the matters set out in s 596B of the Act.

68. As I noted in the Earlier Judgment, the purpose and scope of liquidator’s examinations and the circumstances in which they may be set aside was summarised in Re New Tel Ltd (in liq);Evans v Wainter Pty Ltd [2005] FCAFC 114; (2005) 145 FCR 176 at [252] where Lander J (Ryan and Crennan JJ concurring) observed that:

“1.   The power given to the court to summon a person for examination is a coercive power.

2.   The purpose of the power is to be gleaned from the legislation.

3.   The following legitimate purposes emerge:

3.1   First, an examination is designed to serve the purpose of enabling an eligible applicant to gather information to assist the eligible applicant in the administration of the corporation.

3.2   Second, it assists the corporation’s administrators to identify the corporation’s assets, both tangible and intangible. It also allows the corporation’s liabilities to be identified.

3.3   Third, the purpose is to protect the interests of the corporation’s creditors.

3.4   Fourth, it serves the purpose of enabling evidence and information to be obtained to support the bringing of proceedings against examinable officers and other persons in connection with the examinable affairs of the corporation.

3.5   Fifth, it assists in the regulation of corporations by providing a public forum for the examination of examinable officers of corporations.

4.   If an eligible applicant applies for an order for the examination of a person for a purpose unconnected with the purposes authorised by the legislation that will be an abuse of process and the order, if obtained, will be set aside.

5.   The procedure may not be used to allow a party to obtain a forensic advantage and, if it is, any order obtained will be set aside.

6.   The procedure may not be used as a dress rehearsal for the cross-examination of a person in a pending or subsequent action. However, it is not improper to seek an order of the Court to summon a person for examination whilst litigation is pending against that person or entities connected with that person.

7.   The question whether in any particular case the applicant has used the procedure abusively will depend upon the applicant’s purpose in seeking the order and all of the surrounding circumstances. It will not be an abuse unless an offensive purpose is at least the predominant purpose.

8.   It will be an offensive purpose if the application cannot be characterised as being for the benefit of the corporation, its contributories or creditors.

9.   A creditor may, if first authorised by ASIC, apply to the Court for an order to summon for examination a person for the purpose of obtaining information in relation to a debt owed to the creditor if such an examination would be in the interests of the corporation or its creditors as a whole.

10.   A creditor may not use the procedure for the purpose of obtaining a forensic advantage which would not have been available to the creditor if the corporation had not gone into administration.”

That analysis was adopted by Barrett J in Wily Re LED (South Coast) Pty Ltd [2009] NSWSC 946; (2009) 76 NSWLR 428 at [36] and by Gleeson JA in Re Cardinal Group Pty Ltd (in liq) [2018] NSWSC 748 at [15]; see also Re Ji Woo International Education Centre Pty Ltd above at [16].

69. The first basis of the claim to set aside the relevant examinations turned on the matters as to legal professional privilege which I have addressed above. The Applicants submit, first, that the application for the examination summonses and the orders for production should be set aside because they were sought after the liquidators and the Owners Corporation had reviewed the litigation file relating to proceedings between the Owners Corporation and IDP and a substantial volume of email correspondence from the Files produced by NRF. Mr Clarke submits that the review of those Files was inappropriate where the client legal professional privilege in those documents belonged to IHG as the current trustee of the Trust, or it belonged to the current trustee and the beneficiaries jointly, or it belonged to the former trustee and the current trustee jointly.

70. I have not accepted the premise of that submission above, at least so far as it depends on a contention that the liquidators could not use the Files, so far as IDP was the client, to determine whether to conduct, or in conducting, the examinations. Assuming, without deciding, that the liquidators and Mr O’Neill had reviewed the documents to the extent that the Applicants contend, they were entitled to do so and to use those documents in seeking examination summonses and conducting the examinations, given the conclusions as to privilege which I have reached above and where the Files had been produced to them by the exercise of their statutory right to require their production under s 530B of the Act.

71. Mr Clarke also submits that it was not appropriate for documents from the Files to be shared with the Owners Corporation, or its solicitor, who had no entitlement to see privileged documents of the Trust. It seems to me that it was, at the least, imprudent for Mr O’Neill to make the relevant documents available to the Owners Corporation, but nothing turns on that for present purposes, where the Applicants have not established that the representative of the Owners Corporation was able to access more than a few documents, or that she made any use of those documents in a manner that was adverse to any of the Applicants or that in any way affected the application for the examination orders and orders for production; and the liquidators will now retain an independent solicitor to instruct Counsel in respect of the examinations. I do not accept the Applicants’ submission that it was inappropriate for the liquidators to make relevant documents available to Mr O’Neill where I have accepted his evidence that he was then retained by the liquidators, and it is not to the point that he was also retained by the Owners Corporation in respect of overlapping matters. Where the Courts will permit a liquidator to retain a solicitor who also acts for a major creditor, there would be substantial inconsistency in then proceeding on the basis that a liquidator who does so cannot make relevant documents available to that solicitor, including for the purposes of the conduct of examinations or litigation.

72. I also do not accept the submission that the solicitor acting for the liquidators and also the Owners Corporation “has had access to privileged information to which he should not have had access”, where the confidentiality necessary to support the privilege, at least as against the liquidators had been lost on production of the Files to the liquidators, pursuant to their statutory right to obtain them, and the liquidators were entitled to make those documents available to Mr O’Neill as their solicitor for the reasons noted above. Even if, as the Applicants contend, the Court could not be satisfied that the information gained through that access has not informed the application for examination summonses and orders for production, nothing turns on that. Given my findings above, the liquidators and their legal adviser would have been entitled to have regard to the Files produced to them under s 530B of the Act in determining whether to proceed with the examination summonses and orders for production, and are also entitled to have regard to those documents in informing the conduct of the examinations.

73. The Applicants also submit that:

“If this Court finds that the right to claim privilege is held by IHG as trustee, or that it is held jointly by IHG and another such that the [l]iquidators did not have the unilateral right to waive privilege by providing the documents to the Owners Corporation, then each of the examination summonses and the orders for production should be set aside because the [l]iquidators, the Owners Corporation and their joint solicitor have had access to IHG’s privileged documents. The knowledge of the contents of those documents cannot simply be put out of one’s mind in applying for examination summonses and orders for production. Nor can it be put out of one’s mind in conducting the public examinations.”

74. Mr Clarke rightly did not press several aspects of that submission, accepting that it was not necessary for him to establish (and it seems to me that he could not have established) that there was any “waiver” of privilege by the liquidators, although he did contend that the liquidators had inappropriately provided documents to the Owners Corporation and thereby put the privilege at risk. I have not accepted the submission that the Files were “IHG’s privileged documents” above and I have held the liquidators were entitled to access the documents for the relevant purposes although it is not clear that they have done so to any substantial extent. Neither the liquidators nor their representative are under any obligation to seek to put these matters out of their minds in conducting the examinations, although Mr O’Neill will not now be involved in doing so. These matters do not support an order setting aside the examinations or orders for production.

75. Mr Glasson responds that Mr Arnaout was a director of IDP, and a summons for examination was properly issued to him on the basis that the liquidators had standing to seek that summons and he was an officer of the corporation at the relevant time. For the reasons noted above, no abuse of process has been established, in the circumstances, that would support setting aside that examination order. Mr Glasson also takes issue with the contention that Mr O’Neill and the liquidators have in fact reviewed the whole of the file relating to the proceedings between the Owners Corporation and IDP and a substantial volume of other correspondence, and submits that the review undertaken was more limited in several respects. It is not necessary to determine that question, so far as review by the liquidators or their solicitor is concerned, because they would have been entitled to review the relevant documents for the reasons noted above. I have addressed the question of access by a representative of the Owners Corporation to emails in the Dropbox above.

76. Mr Glasson also submits that there is no factual basis for a submission that there is any material risk that information subject to legal professional privilege has been used to inform the issue of the examination summonses or the production orders or will inform the examinations. I also need not address that question, where on the findings that I have reached above, the liquidators would have been entitled to have regard to the privileged documents that had been produced to them, so far as IDP was the client, for that purpose.

77. The Applicants also criticise the extent of disclosure made by the liquidators in seeking the examination orders and orders for production from the Registrar. They submit that:

“Further, on an ex parte application, the liquidators are obliged to provide full and frank disclosure to the Registrar of anything that may affect the Registrar’s decision (Re Trevor (No 2) [2017] FCA 927; 122 ACSR 418). The applicants submit that the Court should not be satisfied that the position regarding access to privileged documents was properly disclosed to the Registrar. It should have been disclosed to the Registrar that, not only had IHG claimed privilege over the Files, but that the solicitor for the liquidators and for the Owners Corporation, and representatives of the Owners Corporation, had already reviewed the Files.”

78. I had addressed Mr O’Neill’s evidence as to disclosure to the Registrar in the Earlier Judgment but I should summarise it here, so far as it is relevant to this aspect of the application. Mr O’Neill referred, in his first affidavit, to the circumstances of the application for examination orders and to the liquidators’ affidavit in support of that application and to correspondence between the Applicants’ solicitors and Mr O’Neill in respect of what had been disclosed there to the Registrar at the time the examination orders were sought, and confirms the truth and correctness of the information provided in a letter to the Applicants’ solicitors. The evidence is directed to Mr O’Neill’s response to a letter dated 30 September 2019 from the Applicants’ solicitors which identified a number of matters which they contended would have the result that the examination summonses should be set aside, if they had not been disclosed to the Registrar (Ex A2, 147). By Mr O’Neill’s letter dated 13 October 2019 (Ex R1, 150), he addressed each of those matters and indicated that all but one of them had been disclosed and the other had not been disclosed because it was not known by the liquidators prior to receipt of the letter from the Applicants’ solicitors.

78. Mr O’Neill’s first affidavit also sets out the extensive disclosure made, when he appeared in person before the Corporations Registrar to seek the issue of the examination summonses and document production orders, as to the issues in respect of legal professional privilege. That disclosure included specific reference to the fact that there was a dispute as to access to documents by IDP in its capacity as former trustee of the Trust, where the current trustee claimed that it, rather than IDP, was now entitled to make any determination as to that legal professional privilege. Although Mr O’Neill was cross-examined, as I noted above, I accept his affidavit evidence as to these matters which was not significantly undermined by his cross-examination.

79. It seems to me that the Applicants’ submissions as to non-disclosure to the Registrar have at least two factual difficulties. The first is that Mr O’Neill’s evidence as to what was in fact disclosed to the Registrar, including the fact of the dispute as to the claim for privilege and whether the former trustee or the current trustee could make it, was not undermined by his cross-examination. Mr Glasson submits, by reference to authority, that the liquidators were not obliged to go further than Mr O’Neill did to hypothesise the range of legal arguments that might be put in respect of the issue as to legal professional privilege which they had disclosed to the Registrar. I accept that submission, and it also seems to me that Mr O’Neill could not have reasonably anticipated the range of issues that have in fact been raised in this case, in a situation which arises from a commonplace vacation of the office of a corporate trustee on its insolvency.

80. In oral submissions, Mr Glasson also submitted that the disclosure made by Mr O’Neill to the Registrar was adequate, where the issue of legal professional privilege was squarely raised and also pointed to Mr O’Neill’s evidence, in his most recent affidavit, that there was reference to “further review” in the evidence in support of the liquidators’ examinations (T85). It is not necessary to address the adequacy of the reference to “further review” to disclose any earlier review, where my findings above have the consequence the liquidators would have been entitled to have reviewed the Files, so far as IDP was the client, and whether they or their solicitor had then done so was not a material matter requiring disclosure in the application for the examination orders or orders for production.

81. On the findings that I have reached, it seems to me that the liquidators adequately informed the Registrar of relevant matters. In the event, the foreshadowed dispute as to the claim for legal professional privilege will not now arise in the examinations, in respect of documents held in the Files as to which IDP was the client, because it has been determined by this judgment in a manner that binds the Applicants.

82. For these reasons, Mr Arnaout, Mr Hawkins and Mr Jones cannot succeed in the application to set aside the examination summonses.

Whether the orders for production should be set aside

84. Mr Arnaout and five companies within the Iris Group, seek to set aside the orders for production issued in respect of each of them in aid of the examinations. I also accept that the Court has power to set aside an order for production, where it is made ex parte, under r 36.16(2)(b) of the Uniform Civil Procedure Rules. I also accept that each of the Applicants has standing to apply to set aside the orders directed to that Applicant.

85. The Applicants also seek to set aside orders for production addressed to Pitcher Partners and NRF. Mr Glasson contests the Applicants’ standing to set aside those orders for production. I will assume, without deciding, that IHG as the current trustee has a sufficient interest to set aside the orders for production addressed to NRF. It seems to me likely, as the Applicants contend, that Mr Hawkins also has sufficient interest to do so, where it is likely that he will be examined by reference to documents produced by NRF, in respect of his previous carriage of the proceedings between the Owners Corporation and IDP and the steps allegedly taken by IDP to dispose of its property while those proceedings were on foot. The Applicants also submit, and I accept, that Mr Jones has sufficient interest to set aside the orders for production addressed to Pitcher Partners where he is a partner in that firm, and it would be expected that he would be examined as to the documents produced by Pitcher Partners.

86. A question might well have arisen as to the scope of those orders for examination, to the extent that they sought production of advices obtained by other companies within the Iris Group, but the liquidators have since restricted them to seek production of documents only in respect of IDP, and I need not now address that question.

87. After the liquidators circulated revised orders for production to give effect to that position, the Applicants advised the Court that they maintained their objection to all of the orders for production on the basis that they involved a misuse of privileged information of IHG. I have rejected that submission above. The Applicants also maintained an objection to paragraph 8 of the further revised orders for production addressed to Mr Arnaout, by reference to privilege that may be claimed by Mr Arnaout in his capacity as a director. Mr Arnaout cannot rely on privilege in the examinations, if the relevant retainer was by IDP alone, for the reasons noted above, or if HDY was jointly retained by IDP and Mr Arnaout, having regard to the authorities noted above. The evidence does not establish that Mr Arnaout had separately retained HDY in respect of the advices or categories of advices given by that firm which the liquidators now seek to have produced. The basis for that objection is therefore not established.

88. Mr Clarke also submitted that the Registrar should not have made the orders for production ex parte, or should have made express exception for documents subject to IHG’s legal professional privilege, where it was anticipated that questions in relation to legal professional privilege would arise in respect of the documents produced by NRF: Meteyard v Love [2005] NSWCA 444 at [132]. In response, Mr Glasson rightly drew attention to the doubt expressed by White J (as his Honour then was) in Re Trio Capital Ltd (in liq) [2011] NSWSC 1483 at [29]–[31], as to aspects of the observations in that case. His Honour also there noted that the corollary of the observations in Meteyard v Love above, if they are correct, is that the approach contemplated by that case would not apply if the documents which may be the subject of a claim for privilege do not form a significant proportion of the documents required for production, and orders for production should not then be set aside.

89. In the event, the Applicants’ further submissions recognise that this issue has been partly displaced by the narrowed scope of the liquidators’ revised orders for production, and I need only address the Applicants’ continued objections to those narrower orders. The Applicants maintain their objection to the revised order for production addressed to NRF on the basis of a suggested failure to comply with the obligations arising from Meteyard v Love above so far as IDP claims legal professional privilege over the Files. However, they fairly accepted that, if (as is the case) they were not successful in establishing that IHG could assert legal professional privilege in the relevant circumstances, then the revised order for production to NRF was not contrary to the principle in Meteyard v Love above. The Applicants accepted that the revised orders for production addressed to the several Iris Group companies and Mr Arnaout were otherwise not contrary to the principle in Meteyard v Love above. Mr Glasson also rightly points out that there is no evidence, including in Mr Nielsen’s recent affidavits that seek to establish a claim for privilege, that any of the documents produced by Pitcher Partners are subject to a claim for legal professional privilege.

90. The Applicants have not established that the orders for production, in the narrowed form now proposed by the Applicants, should be set aside. However, I will hear the parties as to any continuing dispute as to whether the form of the amendments proposed by the liquidators adequately give effect to the expressed intent of that limitation. It appears that Pitcher Partners has already produced documents, although access to those documents has not yet been granted. The Applicants seek first access to the documents produced, in order to identify and make any privilege claims in respect of any privileged documents. I will allow a short period for first access by the Applicants, on terms that (1) first access does not extend to the Files, as to which the Applicants previously had access and (2) no further claim for privilege may be made by the Applicants in respect of any document that was also contained in the Files as to which IDP alone, or IDP and an Applicant jointly, was the relevant client. The second limitation reflects the findings that I have reached above.

Summary

91. In summary, I have held that it is not open to IHG as the current trustee to object to the liquidators’ use of the Files produced by NRF in determining whether to conduct or in conducting the examinations, so far as they contain documents where IDP was the client, alone or jointly with other Applicants. The examination summonses should not be set aside, on the basis that the liquidators will retain an independent solicitor rather than Mr O’Neill to instruct Counsel in respect of the conduct of the examinations. The orders for production, in the narrowed form now proposed by the liquidators, should not be set aside, although I will hear the parties briefly as to any remaining dispute as to their terms. I will allow a short period for first access by the Applicants, on terms that (1) that first access does not extend to the Files, as to which the Applicants previously had access and (2) no further claim for privilege may be made by the Applicants in respect of any document that was also contained in the Files as to which IDP alone, or IDP and an Applicant jointly, was the relevant client. I will, as Mr Clarke requested, hear the parties as to costs after they have had an opportunity to review this judgment.

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Decision last updated: 21 November 2019