In the matter of Metal Storm Limited (in liquidation) (receivers and managers appointed)

[2019] NSWSC 1667

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Metal Storm Limited (in liquidation) (receivers and managers appointed) [2019] NSWSC 1667
Hearing dates:	27 November 2019
Date of orders:	29 November 2019
Decision date:	29 November 2019
Jurisdiction:	Equity - Corporations List
Before:	Rees J
Decision:	Privilege not established
Catchwords:	EVIDENCE — Privilege — Litigation privilege — Communication between solicitor and expert — Report prepared and served but expert no longer proposed to be called — Expert then proposed to be called by other side — Dominant purpose of detailing aspects of expert’s retainer — Dominant purpose not providing professional legal services within s 119 of the Evidence Act — Claim for privilege not made out.
Legislation Cited:	Evidence Act 1995 (NSW), s 119 Legal Profession Act 2004 (NSW) Legal Profession Uniform Law (NSW), s 6
Cases Cited:	789Ten Pty Ltd v Westpac Banking Corporation Ltd (2005) 215 ALR 131; [2005] NSWSC 123 Archer Capital 4A Pty Ltd (as trustee for the Archer Capital Trust 4A) v Sage Group plc (No 2) (2013) 306 ALR 384; [2013] FCA 1098 AWB Ltd v Cole (No 5) (2006) 155 FCR 30; [2006] FCA 1234 Domain Paper (Australia) Pty Ltd v Galloway [2014] FCA 936 Grant v Downs (1976) 135 CLR 674 Law Society of New South Wales v Bruce (1996) 40 NSWLR 77 Mitsubishi Electric Australia Pty Ltd v Victoria WorkCover Authority (2002) 4 VR 332; [2002] VSCA 59
Category:	Procedural and other rulings
Parties:	Australian Special Opportunity Fund, LP  (Cross-Claimant)   Equity Trustees Wealth Services Limited (ACN 006 132 332)  (Cross-Defendant)
Representation:	Counsel: Mr I Jackman SC / Mr D Klineberg / Ms C Roberts (Cross-Claimant) Mr A McGrath SC / Mr D Krochmalik / Ms JD Williams (Cross-Defendant)   Solicitors: Atanaskovic Hartnell (Cross-Claimant) Ashurst (Cross-Defendant)
File Number(s):	2013/377450

Judgment

1. HER HONOUR: I have been asked to determine whether a claim for litigation privilege made by the cross-claimant, The Australian Special Opportunity Fund LP (ASOF), is well-founded. The claim is made over three documents comprising communications between ASOF’s solicitor and an expert witness whom ASOF has decided not to call. The claim is challenged by the cross-defendant, Equity Trustees Wealth Services Limited (Equity Trustees).

Facts

2. In April 2017, ASOF filed an affidavit of John Young attaching an expert report. In about mid-November 2019, ASOF decided not to rely on Mr Young’s report and informed Equity Trustees, who approached Mr Young to see whether he would give evidence in their case. On 16 November 2019, Mr Young sent an email to the solicitors for both parties asking whether there was any problem with him giving evidence for Equity Trustees. Mr Young also forwarded to both parties a portion of a letter from ASOF’s former solicitors, retaining him on 23 November 2016. ASOF’s solicitor replied that, although he would respond more completely the next day, Mr Young’s obligation of confidentiality was said to be owed to ASOF rather than ASOF’s former solicitors. On 17 November 2019, Mr Young rejoined, saying that he considered his contract with ASOF’s former solicitors to be invalidated for non-payment and also considered that his company, JY Strategies LLC, had no contract with ASOF.

3. On 18 November 2019, ASOF’s solicitors sent an email to Mr Young attaching a letter over which a claim for privilege is made.

4. On 20 November 2019, Equity Trustees’ solicitors communicated with ASOF’s solicitors and Mr Young, seeking to ascertain whether ASOF’s solicitors had written to Mr Young “more completely” as indicated and also suggesting to Mr Young that he was at liberty to be called as Equity Trustees’ witness.

5. On 21 November 2019, Mr Young sent an email to ASOF’s solicitor over which a claim for privilege is made. On 22 November 2019 at 7.17 am, ASOF’s solicitor replied to Mr Young and a claim for privilege is made over that email as well.

6. At 10.40 am on 22 November 2019, Mr Young sent an email to Equity Trustees’ solicitor advising:

I have been sent a letter from [ASOF’s] firm insisting that I have a confidentiality obligation and threatening the pursuit of legal remedies with regard to breach of confidentiality. … I cannot afford to participate any further in this process.

7. Equity Trustees asked Mr Young for a copy of the letter to which he referred and gave various assurances that it was not seeking to infringe upon his obligations of confidentiality and also suggested that, if he gave evidence, he was subject to various protections under Australian law. Mr Young replied:

… I am absolutely not prepared to get into any fights or litigation over this. [ASOF’s] firm was clear about pursuing legal remedies. … I am not prepared to engage any further in this matter.

8. On 22 November 2019, Equity Trustees served a Notice to Produce on ASOF calling for communications with Mr Young from 1 November 2019 on. On 26 November 2019, the final hearing in these proceedings commenced.

Evidence and submissions

9. An affidavit has been sworn by ASOF’s solicitor in support of the claim for privilege, deposing at [6]:

Each of those documents is a confidential communication between me as a lawyer acting for ASOF and Mr Young that was made for the dominant purpose of ASOF being provided with professional legal services relating to the present proceedings before the Supreme Court of New South Wales in which ASOF is a party.

Equity Trustees’ solicitor has also sworn an affidavit noting that at no point since about mid-November 2019 has ASOF or its solicitors indicated that they intend to call Mr Young as a witness or rely on his expert report.

10. ASOF submitted that the evidence of its solicitor clearly supported a claim for litigation privilege and the mere fact that a party decides not to call a witness does not have the result that any communications with that witness fall outside section 119 of the Evidence Act 1995 (NSW). Equity Trustees submitted that, as ASOF had already made a decision not to call Mr Young at the time of the communications in question, then any communications with Mr Young after having made that decision did not satisfy the requirements of section 119. Rather, Equity Trustees was concerned that the communications may have been directed to deterring Mr Young from giving evidence at all. Equity Trustees submitted that the Court should inspect the documents and ASOF did not oppose this course, and I have done so.

Law

11. Section 119(a) of the Evidence Act provides:

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

(a)   a confidential communication … between a lawyer acting for the client and another person, that was made …

for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party.

ASOF’s solicitor has identified the relevant proceedings referred to in the chaussette as being the final hearing presently in progress before me.

12. I have not found a case with similar facts to those at hand, but the principles are not controversial. ASOF bears the onus of establishing its claim for privilege and this is not achieved simply by resort to a verbal formula or ritual: Grant v Downs (1976) 135 CLR 674 at 689 per Stephen, Mason and Murphy JJ; Mitsubishi Electric Australia Pty Ltd v Victoria WorkCover Authority (2002) 4 VR 332; [2002] VSCA 59 at [11] per Batt JA, with whom Charles and Callaway JJA agreed. As Young J explained in AWB Ltd v Cole (No 5) (2006) 155 FCR 30; [2006] FCA 1234 at [30]: (citations omitted)

… The onus might be discharged by evidence as to the circumstances and context in which the communications occurred or the documents were brought into existence, or by evidence as to the purposes of the person who made the communication, or authored the document, or procured its creation. It might also be discharged by reference to the nature of the documents, supported by argument or submissions …

The purpose for which a document is brought into existence is a question of fact that must be determined objectively.

See also Domain Paper (Australia) Pty Ltd v Galloway [2014] FCA 936; Archer Capital 4A Pty Ltd (as trustee for the Archer Capital Trust 4A) v Sage Group plc (No 2) (2013) 306 ALR 384; [2013] FCA 1098 per Wigney J at [13]-[14].

13. In 789Ten Pty Ltd v Westpac Banking Corporation Ltd (2005) 215 ALR 131; [2005] NSWSC 123, Bergin J noted at [41] that “professional legal services” is not defined in the Act and her Honour had regard to a definition in the then Legal Profession Act 2004 (NSW) (now in section 6 of the Legal Profession Uniform Law (NSW)). At [44]:

Although the term “professional legal service” is not defined in the Act, the term “legal services” is defined in the Legal Profession Act 2004 as “work done, or business transacted, in the ordinary course of legal practice”. I accept that the provision of a legal opinion as to whether the estimate of a possible settlement is reasonable in all the circumstances is the provision of “professional legal services” within the meaning of that term in the Act. I will assume that the opinion or professional legal service was “relating to” the proceedings.

14. Her Honour, at [41], relied on the following exposition of “in relation to” from Law Society of New South Wales v Bruce (1996) 40 NSWLR 77 at 84, per Giles CJ at Comm D:

The phrase “in relation to” is wide, satisfied by a connection or association between the two things in question: R v Murphy (1985) 158 CLR 596 at 611. It should not be read down unless there be compelling reason to do so: Fountain v Alexander (1982) 150 CLR 615 at 629. That it may be read down recognises that the context of the phrase or the purpose it serves may require that the relationship be of a particular kind, sometimes described as an appropriate or relevant relationship … This has been seen as a difference between a “mere”, “remote and merely incidental”, or “coincidental” connection and an appropriate or relevant relationship: … Other forms of words may be found intended to express what is ultimately a question of degree … which words cannot readily express, and reference to an appropriate or relevant relationship may not be particularly helpful. However, a notion of directness will normally be illicit.

I accept that a relatively loose connection between the communication and the “professional legal services” is sufficient to enliven the provision.

15. The question of fact is whether the communications between ASOF’s solicitor and Mr Young were for the dominant purpose of ASOF being provided with professional legal services relating to these proceedings. The affidavit of ASOF’s solicitor does not assist greatly as he has recited the words of section 119(a) but has not provided underlying facts to support a finding as to how these communications are the embodiment of that section.

16. Having read the three documents, it seems to me that the dominant purpose of the communications was for ASOF’s solicitors to inform Mr Young of ASOF’s position in respect of his retainer of 23 November 2016: the parties to the retainer, its terms, whether the retainer remained on foot, the obligations of the parties and whether each had performed their obligations, the suggested contractual consequences of Mr Young’s actions, both past and contemplated, and what ASOF had instructed its solicitors to do about this.

17. It is not clear, on the face of the documents, how this purpose falls within the description of providing ASOF with professional legal services relating to these proceedings. The affidavit of ASOF’s solicitors does not provide other facts which shed light on the matter. Whilst an ancillary effect of the communications, perhaps unintended, was to discourage Mr Young from giving evidence, the dominant purpose is to put forward a contractual construction of Mr Young’s retainer in circumstances where the client has decided not to use his services further in these proceedings. It does not appear to me on the available evidence to meet the requirements of section 119(b). ASOF has not discharged the onus of establishing litigation privilege.

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