Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Limited

[2004] NSWSC 40

CITATION:	Ingot Capital Investments Pty Ltd & Ors v Macquarie Equity Capital Markets Limited & Ors [2004] NSWSC 40
HEARING DATE(S):	2nd February 2004
JUDGMENT DATE:	10 February 2004
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Bergin J at 1
DECISION:	Access granted to Originating Process, Statements of Claim and particulars. Access to affidavits denied.
CATCHWORDS:	[Client Legal Privilege] - Motion for access to documents produced on subpoena - Objection to access on ground that documents consisting of pleadings, affidavits and particulars filed and served in other proceedings are privileged and were filed and served under compulsion of law (s.122 (2) (c) Evidence Act 1995 (NSW) - Claim that pleadings and/or affidavits are not privileged so that s122 (2) (c) does not apply - Alternative application for access pursuant to Part 65 rule 7 and Practice Note 97.
LEGISLATION CITED:	Corporations Act 2001 Evidence Act 1995 Supreme Court Rules 1970 Supreme Court (Corporations) Rules 1999
CASES CITED:	Argyle Brewery Pty Ltd (t/as Craig Brewery Bar and Grill) v Darling Harbourside (Sydney) Pty Ltd (1993) 48 FCR 1 Akins v Abigroup Ltd (1998) 43 NSWLR 539 Attorney-General (NT) v Maurice (1986) 161 CLR 475 Complete Technology Pty Ltd v Toshiba (Australia) Pty Limited (1994) 53 FCR 125 Daniels Corporation International v ACCC (2002) 77 ALJR 40 eisa v Brady & Ors [2000] NSWSC 929 Esso Australia Resources Limited v The Federal Commissioner of Taxation [1999] 201 CLR 49 Glover v Australian Ultra Concrete Floors [2003] NSWCA 80 Griffin v Sogelease Australia Limited & Ors (2003) 57 NSWLR 257 Home Office v Harman [1983] 1 AC 280 Nilsen Industrial Electronics Pty Ltd v National Semiconductor Corporation (1994) 48 FCR 337 Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116 State Bank of South Australia v Smoothdale (No. 2) Ltd (1995) 64 SASR 224
PARTIES :	Parties to the Motion: Macquarie Equity Capital Markets Ltd (First Defendant Applicant) Macquarie Equities Limited (Second Defendant Applicant) Macquarie Bank Ltd (Third Defendant Applicant) Henry Davis York (Respondent)
FILE NUMBER(S):	SC 50169/01
COUNSEL:	I Jackman SC (Applicants) B Coles QC and J Renwick (Respondent)
SOLICITORS:	Mallesons Stephen Jaques (Applicants) Henry Davis York (Respondent)

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

BERGIN J

10 FEBRUARY 2004

50169/01 INGOT CAPITAL INVESTMENTS PTY LIMITED and ORS v MACQUARIE EQUITY CAPITAL MARKETS LIMITED and ORS

Background

1 The amended pleading in the present proceedings filed on 1 December 2003 includes a claim for damages against the first defendant, Macquarie Equity Capital Markets Limited, the second defendant, Macquarie Equities Limited and the third defendant, Macquarie Bank Limited (the Macquarie parties) for $41,466,373.60 for, inter alia, alleged misleading and deceptive conduct in relation to the acquisition by the plaintiffs of securities in New Cap Reinsurance Corporation Holdings Limited (NCRH). The plaintiffs allege that the Macquarie Parties made false representations on which the plaintiffs allegedly relied to acquire securities in NCRH. It is also alleged that the Macquarie Parties breached a duty of care owed to the plaintiffs and breached implied terms in sub-underwriting agreements between Macquarie Equity Capital Markets Limited (MECM) and two of the plaintiffs.

2 The claim for $41,466,373.60 is the aggregate value of all investments made by the plaintiffs in securities in NCRH. It is submitted that the plaintiffs claim that their loss is the total purchase price paid for all the securities.

3 The plaintiffs’ investments in securities in NCRH were made between 17 November 1998 and 12 March 1999. A significant majority of the plaintiffs’ investments were in converting notes of NCRH, acquired pursuant to sub-underwriting agreements with MECM and pursuant to the exercise of rights acquired on market. Those converting notes were allotted to the plaintiffs on 12 January 1999 and account for $36,125,093 of the plaintiffs’ total claimed loss.

4 NCRH was the holding company of a group of companies which conducted a reinsurance business. NCRA was the Australian operating subsidiary of the NCRH group and was an Australian licensed reinsurer. NCRH was placed into provisional liquidation by the Supreme Court of Bermuda on 21 July 1999. NCRA was placed into liquidation on 16 September 1999, having been placed into voluntary administration on 21 April 1999.

Notice of Motion

5 By Notice of Motion the Macquarie parties seek orders for access to all documents produced to the Court in response to a subpoena dated 31 October 2003 issued at the request of the Macquarie Parties to the law firm Henry Davis York (HDY). HDY are the solicitors for the liquidator of New Cap Reinsurance Corporation Limited (in liquidation) (NCRA), John Raymond Gibbons. NCRA is not a party to these proceedings. The liquidator has retained HDY to act in connection with a number of proceedings commenced on behalf of NCRA in this Court (the NCRA proceedings). The documents the subject of the Motion consist of copies of Originating processes, affidavits, Statements of Claim and responses to requests for particulars in the NCRA proceedings.

6 The Macquarie parties seek alternative orders that they be given access to the documents produced, other than the affidavits. A further alternative claim is made that the motion be deemed to be filed in each of the NCRA proceedings for an order pursuant to Part 65 rule 7 of the Supreme Court Rules (the Rules) granting leave to them to inspect and copy the originating process and supporting affidavits and particulars in each of the NCRA proceedings, and a copy of each pleading and transcript of hearing of two of the NCRH proceedings identified in paragraph 2 of the schedule to the subpoena.

7 The solicitor for the Macquarie parties, Ashley John Black, a partner of Mallesons Stephen Jaques, gave affidavit evidence in this application in relation to the issue of quantification of the plaintiffs’ loss. That evidence included the following:

8. It is my understanding that the measure of a plaintiffs’ recoverable loss, should they succeed in establishing their claim that their investment in converting notes and other securities in NCRH was made in reliance on misrepresentations allegedly made by the Macquarie parties, is the difference between the price paid for those securities and their true value at the date of the allotment of acquisition by the plaintiffs. For the significant majority of the plaintiffs’ investments, that date will be 12 January 1999, the date on which the converting notes were allotted to the plaintiffs.
9. In my opinion, based on the experience to which I refer in paragraph 2 above, the true value of converting notes and other securities in NCRH as at 12 January 1999 will depend on NCRH’s true consolidated net assets as at that date, which would in turn depend on the true value at that date of the assets and liabilities of its of its subsidiaries including NCRA. In my opinion, those assets will or may include the value of any rights of action which had already accrued at that date to NCRH or its subsidiaries, including NCRA even though proceedings in respect of those causes of action were not commenced until a later date.
10. In my opinion, based on the experience to which I refer in paragraph 2 above, the existence of a significant number of proceedings commenced by NCRA against third parties, the amount claimed pursuant to those proceedings and the prospects of success of those proceedings are matters which would be relevant to the quantification of the value of any rights of action that NCRA had at 12 January 1999 and therefore relevant to the quantification of the value of the securities in NCRH as at that date which would reflect the value of the assets of its subsidiaries.

8 Mr Black claimed in his evidence that the Macquarie Parties would be significantly prejudiced in their defences to the plaintiffs’ claims in these proceedings if they are unable to contest the plaintiffs’ claims as to the quantum of their alleged losses, by leading available evidence as to the value of any rights of action accruing to NCRA which would impact on the value of the securities acquired by the plaintiffs as at January 1999. At the moment there are no directions in the present proceedings in place for the filing of the Macquarie parties’ lay and expert witness statements. Mr Black gave evidence that he anticipates that such order would probably be made at the next directions hearing requiring the defendants to file expert witness statements by no later than June 2004. He also anticipates that it would be necessary to brief any quantification expert with documents relevant to the report by February 2004 to allow sufficient time for the preparation of the report and for the possibility of issuing further subpoenae as to matters relevant to the quantification of the plaintiffs’ losses, should the need arise.

The Subpoena

9 The schedule to the subpoena issued to HDY is in the following terms:

1. A copy of the originating process (and, where the originating process is a summons, a copy of any affidavit in support) and all particulars provided in respect of allegations in the originating process in each of the proceedings referred to in the Supreme Court of New South Wales file enquiry index annexed and marked “A”.
2. A copy of each pleading, affidavit, witness statement, transcript of hearing and written submission in:
(a) Supreme Court of New South Wales Proceedings No 2299 of 2002 between New Cap Reinsurance Corporation Limited and Vesta Fire Insurance Corporation and;
(b) Supreme Court of New South Wales Proceedings No. 2371 of 2002 between New Cap Reinsurance Corporation Limited and General Cologne Re Australia Limited & Anor.

10 Annexure “A” to the subpoena refers to 22 proceedings all brought by NCRA against various parties. The two proceedings referred to in paragraph 2 of the Schedule to the subpoena are included in that list as matters number 22 and 4 respectively.

Objection to access

11 The HDY partner responsible for supervising the conduct of many of the NCRA proceedings is Katherine Allison Merrick. Ms Merrick gave affidavit evidence claiming client legal privilege on behalf of the liquidator Mr Gibbons and NCRA as plaintiffs in the NCRA proceedings. Ms Merrick produced a Schedule, KAM1, listing the documents in respect of which the privilege claim is made. That Schedule includes the originating process and/or statement of claim, affidavits and replies to requests for further and better particulars in each of the relevant NCRA proceedings. The Schedule also details whether those documents have been filed and/or served. Three of the NCRA proceedings in which documents are sought under the subpoena were discontinued before the originating process and supporting affidavit was served. In each of the other proceedings the originating process and supporting affidavit has been served on the solicitors for the defendants in each of the proceedings. The replies to requests for particulars have been served but not filed, and some affidavits of service have not been filed or served.

12 Ms Merrick claimed that the documents had been filed and/or served pursuant to the requirements of the Corporations Law Rules, now known as the Supreme Court (Corporations) Rules 1999 (the CL Rules), or pursuant to orders of the Court. The orders to which Ms Merrick referred are annexed to her affidavit. There are seventeen orders dealing with pleadings, particulars and the filing of evidence. Seven of those orders are recorded as having been made “by consent”. None of the documents, the subject of the privilege claim, has yet been read or otherwise disclosed in open court. None of the documents has been the subject of an application by any party in the NCRA proceedings that they no longer be subject to the “usual implied undertaking” not to use the documents and the information in them except for the purposes of the specific proceedings: Home Office v Harman [1983] 1 AC 280. Ms Merrick also gave evidence that so far as she is aware none of the files in the NCRA proceedings has been the subject of an application by a non-party under Part 65 rule 7 of the Supreme Court Rules (the Rules) or Practice Note 97.

13 Ms Merrick’s unchallenged evidence included the following:

14. None of the documents described in Schedule “KAM1” has been provided to any party other than Mr Gibbons and/or his partners and staff; Mr Gibbons’ legal advisers (including in some cases foreign lawyers) and other professional advisers engaged to provide expert assistance to Mr Gibbons’ legal advisers in such a proceeding, in each case on a confidential basis and for the dominant purpose of John Gibbons as liquidator of NCRA being provided with professional legal services relating to current or anticipated proceedings to which Mr Gibbons and/or NCRA are or are likely to be a party; and where the documents are indicated on Schedule “KAM1” as having been served, the defendants and/or the solicitors representing the defendants in respect of each of the respective proceedings.
15. Further, the contents described in Schedule “KAM1” have not been published, save that in the reports prepared for the purposes of the annual meetings of creditors held pursuant to s 508 of the Corporations Act 2001 reference has been made to the fact of the commencement of the NSW Supreme Court proceedings, the discontinuance of 3 of the proceedings and the liquidator’s estimate of the net recovery from the proceedings collectively; and in the reports prepared for the purposes of the meetings of the Committee of Inspection which are held every 6 months (approximately) and at the meetings of that Committee, the claims in each of the NSW Supreme Court proceedings have been briefly outlined, including in each case the amount sought to be recovered from the relevant defendant. The reports to creditors and the reports to the Committee are provided on a confidential basis. A copy of the latest report to creditors (September 2003) was also made available for review by Mallesons Stephen Jaques for the Macquarie parties on the basis of a confidentiality undertaking and appears as a confidential exhibit “AJB2” to the affidavit of Ashley John Black sworn 18 December 2003.
16. In addition, Mr Gibbons is concerned that inspection of the documents in respect of which a claim of privilege is made, could jeopardise the chances of achieving a settlement in some or all of the NSW Supreme Court proceedings. Mr Gibbons is presently engaged in on-going without prejudice discussions and/or communications with parties to 8 of the proceedings.

The applicants’ case

14 Mr Jackman SC, for the Macquarie Parties, did not take issue with what was said in Akins v Abigroup Ltd (1998) 43 NSW LR 539, that the filing and serving of witness statements pursuant to the Commercial List Practice Note is “under compulsion of law” within the meaning of that term in s 122(2)(c) of the Evidence Act and therefore does not entail a waiver of client legal privilege. However Mr Jackman emphasised the concession in Akins v Abigroup that the documents were privileged in the first place. There is no such concession in this application by the Macquarie parties.

15 Mr Jackman also submitted that it should be noted that Akins v Abigroup was decided prior to the introduction of Part 36 rule 13(2)(a) of the Rules which makes the grounds of objection available under the Evidence Act to the adducing of evidence available in relation to the production of documents on subpoena.

16 Mr Jackman submitted that the present application is distinguishable from Akins v Abigroup Ltd for three reasons: (1) in this case none of the documents has been shown to be privileged in nature; (2) the claims that the documents were filed and served pursuant to compulsion of law, particularly pursuant to the CL Rules 2.2 and 2.4, is not sustainable because such Rules are in the nature of facultative provisions, and the decision of NCRA to comply with these Rules was entirely voluntary; and (3) a substantial number of the orders were made “by consent” and thus it is quite artificial to suggest that NCRA was acting under compulsion of law.

17 It was also submitted that the discretion to permit access to documents pursuant to Part 65 rule 7 of the Rules and Practice Note 97 reinforces the argument that “documents filed in adversarial litigation are not privileged” because if they were “the holder of the privilege could itself refuse access without the prospect of the Court overriding that claim”. It was submitted that if Part 65 rule 7 is to have any practical operation “the documents held on the Court file cannot be regarded as privileged”.

18 Finally Mr Jackman SC submitted that if Part 65 rule 7 is construed as conferring a discretion to override client legal privilege, then exceptional circumstances exist to warrant the Macquarie parties being granted access. The circumstances claimed to be exceptional are: (1) that the Macquarie parties have an interest in the documents because they are being sued for $41 million (an interest described as being “weightier” than the interest of the press, members of which have as a non-party sought access in a number of cases); (2) the interests of justice require that the Macquarie parties have access to documents relevant to the quantification of the plaintiffs’ claim; (3) the documents filed in Court will become available to the Macquarie parties at the latest if and when they are used in open Court.; and (4) it is likely that the present proceedings will be heard late in 2004 whereas the NCRA proceedings may not occur until later, thus depriving the Macquarie parties of relevant material.

Consideration

19 Mr Jackman SC submitted that the applicable test is whether a communication was made or a document was prepared for the dominant purpose of a lawyer providing legal advice or legal services; Evidence Act ss 118 and 119; Esso Australia Resources Ltd v FCT (1999) 201 CLR 49 at [35]-[61] (Gleeson CJ, Gaudron and Gummow JJ); Daniels Corporation International Ltd v ACCC (2002) 77 ALJR 40 at [9]. Mr Coles QC, for HDY, agreed.

20 In Akins v Abigroup Mason P said at 544-545:

As indicated, the privileged status of the disclosed statements was not in issue below. This concession implied that the documents were brought into existence for the sole purpose of use in legal proceedings (if the common law stated in Grant v Downs (1976) 135 CLR 674 applies) or that they were confidential documents prepared for the dominant purpose of the directors’ proceedings (if the Evidence Act 1995 applies: see s119). The fact that the statements were prepared with a view to compliance with the “usual order” does not detract from this. Indeed it reinforces it: see Smoothdale (at 226). In the appeal Deloittes sought to resile from this concession, in so far as there was a submission that there was no evidence as to the contents of the disclosed statements or the circumstances in which they were prepared. However, Deloittes should be held to this position in the light of the way the matter was fought below, given that evidence might have been led on the subject had it been put in issue.

21 In this case the matter was in issue and in this case Ms Merrick gave evidence of the circumstances in which the documents were prepared. However it was submitted that the documents presently sought under the subpoena were prepared for the additional and equally weighty purpose of the plaintiffs advancing a claim in a public forum against their adversaries. In those circumstances it was submitted that the documents should be characterised as having been prepared at least as much for that purpose as for the purpose of fulfilling the demands of the lawyer-client relationship. Such a claim was not made or raised in either Akins v Abigroup or in State Bank of South Australia v Smoothdale (No.2) Ltd (1995) 64 SASR 224.

22 Mr Jackman SC conceded that the pleadings and affidavits in draft would attract client legal privilege because at that stage the dominant purpose of the documents was for the provision of legal advice or services. However he submitted that once the pleadings or affidavits were signed they were no longer documents prepared for the dominant purpose of the lawyer providing legal advice or services. It is the step of signature on the pleadings or affidavits, prior to any filing or service of the documents, whether by compulsion of law or otherwise, that is said to be the cause of the loss of dominance of the relevant purpose. It is that step that is said to convert the documents into ones that have the “equally weighty” purpose of use in the client’s case against its adversaries.

23 Section 119 of the Evidence Act protects the “contents of a confidential document (whether delivered or not) that was prepared for the dominant purpose of the client being provided with legal services relating to” the relevant proceedings, including those that have yet to be commenced. The evidence in this case establishes that when the pleadings and affidavits were “prepared” the person(s) who prepared them in this case was/were under an express or implied obligation not to disclose their contents, thus rendering them confidential documents: s.117. The Evidence Act does not refer to the status of such documents when a signature is placed upon them

24 The particular legal services provided in this case included the marshalling of the facts to be pleaded as a cause of action in the pleadings and putting the relevant facts provided by the client to the lawyer into admissible form in an affidavit that may ultimately be read at trial. The decision as to whether the pleading is filed or the affidavit is ultimately used or read at trial will no doubt be the subject of legal advice. The documents were prepared for the dominant purpose of providing those services and those legal services relate to the proceedings. In my view, the simple fact, without more, that a signature is placed upon the documents does not establish that it changed in nature from one that ”was” prepared for the dominant purpose of providing those legal services. The inference is available that once the pleading is signed it may be filed and once the affidavit is signed it may be relied upon as evidence in the trial, but the client does not have to make that decision at the time the signature is placed upon the document. Of course in some instances a decision may have been made at the time the signature was placed upon the documents but that would have to be established by evidence. That was not done in this case.

25 I am satisfied that at the time the pleadings and the affidavits were signed and were still in the solicitors’ files they were privileged. I will deal with the copies of the pleadings and affidavits that were filed and served later in this judgment. The documents to be considered are the Originating process and supporting affidavits in each of the NCRA proceedings and the Statements of Claim in 12 of the matters. There are also replies to requests for particulars in 3 of the matters.

26 The issues in this application bring into focus the changes that have been made to the way in which the Courts now “manage” cases prior to trial. Gone are the days of the legal practitioner proofing the witness and keeping the intended evidence on the file or in the brief until the witness is called to the witness box and the evidence is extracted viva voce with the aim of the witness ‘coming up to proof’. This former practice, referred to as “trial by ambush”, has been replaced by what has been described as the “cards on the table” approach to litigation: Glover v Australian Ultra Concrete Floors [2003] NSWCA 80 at par [60]; Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116 at pars [20]-[36] and [40]-[46]. This change has been effected for a number of sound policy reasons including the aim for more efficiency in the listing and hearing of cases, the reduction in costs by providing the opportunity for a better assessment of the possible strengths or weaknesses of the case facilitating settlement at an earlier stage and the reduction in delay from commencement to conclusion of proceedings.

27 In this regime preparatory steps are taken with a view to compliance with pre-requisites for proper commencement of proceedings and/or compliance with pre-trail case management requirements reflected in the Rules, the CL Rules, the relevant Practice Notes or pursuant to orders or directions of the Court.

28 CL Rule 1.3 provides that the CL Rules apply to proceedings under the Corporations Act 2001 “unless the Court otherwise orders”. It also provides that the other rules of the Court apply “so far as they are relevant and not inconsistent with” the CL Rules. The Schedule to Ms Merrick’s affidavit claims that every Originating process was filed and served pursuant to CL Rule 2.2 and that every affidavit, except seven affidavits of service, were filed and served pursuant to CL Rule 2.4. These Rules are contained in Divisions 2 entitled “Proceedings generally” and with other relevant CL Rules for consideration provide as follows:

1.7 Substantial compliance with forms

(1) It is sufficient compliance with these Rules in relation to a document that is required to be in accordance with a form in Schedule 1 if the document is substantially in accordance with the form required or has only such variations as the nature of the case requires.
(2) Without limiting subrule (1), the Court or the Court officer must not reject a document for filing only because a term used to describe a party in the document differs from the term used in these Rules.
2.2 Originating process and interlocutory process–Forms 2 and 3
(1) Unless these rules otherwise provide, a person must make an application required or permitted by the Corporations Act to be made to the Court;
(a) if the application is not made in a proceeding already commenced in the Court – by filing an originating process; and
(b) in any other case – by filing an interlocutory process
(2) Unless the Court otherwise directs, a person may make an application to the Court in relation to a proceeding in respect of which final relief has been granted by filing interlocutory process in that proceeding.
(3) An originating process must:
(a) be in accordance with Form 2; and
(b) state:
(i) each section of the Corporations Act or the ASIC Law, or each regulation of the Corporations Regulations, under which the proceeding is brought, and
(ii) the relief sought.
(4) An interlocutory process must:
(a) be in accordance with Form 3; and
(b) state:
(i) if appropriate, each section of the Corpoations Act or the ASIC Law or each regulation of the Corporations Regulations, or each Rule of Court under which the interlocutory application is made; and
(ii) the relief sought.
2.3 Fixing of hearing
On receiving an originating process or interlocutory process, the Registrar:
(a) must fix a time, date and place for hearing and endorse those details on the originating process, and
(b) may seal a sufficient number of copies for service and proof of service.

2.4 Supporting affidavits

(1) Unless the Court otherwise directs, an originating process, or interlocutory process, must be supported by an affidavit stating the facts in support of the process.
(2) Subject to rule 2.4A, an affidavit in support of an originating process must annex or exhibit a record of a search of the records maintained by the Commission, in relation to the company that is the subject of the application to which the originating process relates, carried out no earlier than 7 days before the originating process is filed.
2.6 Form of affidavits

An affidavit must be in a form that complies with:
(a) the rules of the Court, or
(b) the rules of the Supreme Court of the State (if any) or Territory (if any) where the affidavit was sworn or affirmed, or
(c) the rules of the Federal Court of Australia.
2.7 Service of originating process or interlocutory process and

supporting affidavit

(1) As soon as practicable after filing an originating process and, in any case, at least 5 days before the date fixed for hearing, the plaintiff must serve a copy of the originating process and any supporting affidavit on:
(a) each defendant (if any) to the proceeding; and
(b) if the corporation to which the proceeding relates is not a party to the proceeding – the corporation.
(2) As soon as practicable after filing an interlocutory process and, in any case, at least 3 days before the date fixed for hearing, the applicant must serve a copy of the interlocutory process and any supporting affidavit on:
(a) each respondent (if any) to the interlocutory application; and
(b) if the corporation to which the interlocutory application relates is not a party to the interlocutory application – the corporation.

29 Form 2 that is required to be used pursuant to CL Rule 2.2(3)(a) is entitled “Originating process” and contains the statement: “On the facts stated in the supporting affidavit(s) the plaintiff claims”. There is then provision for the statement of the claims the plaintiff makes. Form 3 that is required pursuant to CL Rule 2.2(4) is entitled “Interlocutory process” and contains a similar statement.

30 Although there is provision for the application of the other rules of the Court, in my view the use of the term “must” in CL Rule 2.2 makes it mandatory for a party wishing to bring an application that is required or permitted under the Corporations Act2001, to do so by way of Originating process unless the application is to be made in a proceeding already commenced in the Court. CL Rule 2.4 in relation to the supporting affidavit does not use the term “must be filed”. It may be suggested that the use of the term “must be supported” in the Rule combined with the requirement in CL Rule 2.7 that the plaintiff “must serve” the Originating process and “any supporting affidavit” within the specified period and the reference in Form 2 to the “facts stated in the supporting affidavit” make it mandatory for a party to file the affidavit. However it is possible to “support” a claim with an affidavit without filing it. It seems to me that it may have been intended that the affidavit in “support” should be filed but the CL Rules do not require it expressly although it is certainly the case that the affidavit in support “must” be served. It is perhaps understandable in the circumstances that Ms Merrick apprehended that NCRA was required to file the supporting affidavit at the time the Originating process was filed.

31 Mr Coles QC submitted that the question, in relation to which the applicants bear the onus of proof, is whether the privilege of the Originating process and the affidavits was lost, as against third parties such as Macquarie, when filed or served in the circumstances set out in Ms Merrick’s affidavit. Mr Coles submitted that all of the documents were filed and/or served “under compulsion of law” within the meaning of that term in s 122 (2)(c) of the Evidence Act and thus the disclosure to the court or the served parties did not result in a loss of the privilege.

32 Mr Coles QC submitted there is no relevant distinction between the provisions of the Rules with which the Court was dealing in Akins v Abigroup that required service of evidence on other parties and the provisions of the CL Rules that require the filing and service of documents. It was also submitted that there was no relevant distinction between the orders made by the Court in that case and in this for the filing and service of documents.

33 In Akins v Abigroup the Court was considering the question of privilege in relation to statements of evidence rather than pleadings. Deloittes argued that privilege was lost when Abigroup knowingly and voluntarily disclosed the substance of the statements by serving them in the directors’ proceedings. It was submitted in that case that because of that knowing and voluntary disclosure s 122(2)(c) could not apply. Mason P rejected those submissions and held that the disclosure by delivery of the copies of the statements was “under compulsion of law”. After referring to the mechanism for the Court to impose appropriate sanctions for non-compliance with Practice Notes or directions or orders, Mason P said at 551:

There are good reasons why the obligations are expressed as they are. One purpose of advance disclosure of intended evidence is the promotion of early settlement. Another is the early appraisal of the opposite party with information about the matters truly in issue, thereby ensuring the saving of time and money wasted in trial by ambush.

34 In the same case Priestly JA said at 553:

Finally, in my opinion, the documents were served “under compulsion of law” within the meaning of s 122(2)(c) of the Evidence Act 1995. That admittedly gives the words a broader meaning than a strictly technical approach might produce, but I think the broader meaning is fully justified by the context. The sanctions for non-compliance with the practice requirements of the Commercial Division are not and cannot be inevitable; sometimes the abiding necessity for a fair trial will preclude the application of the direst sanctions, but the compulsion of the requirements seems to me to be very real, and properly described as one of law.

35 In State Bank of South Australia v Smoothdale (No 2) Limited (1995) 64 SASR 224 the Full Court of the Supreme Court of South Australia (King CJ, Mullighan and Nyland JJ) dealt with an appeal in which there was a claim that the delivery of signed statements and experts reports to an opponent pursuant to a court order was a waiver of legal professional privilege. There were no provisions similar to s 122 of the Evidence Act in force in South Australia. King CJ, with whom the other judges agreed, referred to the conflict that had arisen in the Federal Court with Olney J holding that the delivery of evidence pursuant to the prevailing practice of the Commercial Division of the Supreme Court of Victoria, did not amount to a general loss of privilege: Nilsen Industrial Electronics Pty Ltd v National Semiconductor Corporation (1994) 48 FCR 337; and Hill J holding that privilege had been waived by delivery of statements of evidence pursuant to a direction of the Court: Complete Technology Pty Limited v Toshiba (Australia) Pty Limited (1994) 53 FCR 125. King CJ observed that “the conflict of authority must be resolved by resort to the basic principles governing legal professional privilege” and referred to relevant portions of the judgments in Attorney-General (NT) v Maurice (1986) 161 CLR 475. King CJ said at 231:

The above principles, when applied to the present case, indicate, in my opinion, that waiver should not be imputed in consequence of compliance with the order, to any greater extent than is necessary to accomplish the purposes of the order and the Practice Note pursuant to which it was made.
I have reached the clear conclusion that the delivery of the statements pursuant to the order did not place the statements in the public domain and did not amount to use of them in a manner incompatible with the retention of confidentiality and privilege except so far as waiver was necessary to permit the use for the purposes of the case in which they were delivered in accordance with the Practice Note and order of the court.

36 It was in Attorney General v Maurice that the topic of the privilege attaching to pleadings was discussed. This arose from the analysis of the claim book that had been served on the Aboriginal Land Commissioner (the Commissioner) and the likening of it to a statement of claim. The claim book was prepared in accordance with the “procedural practice” adopted by the Commissioner pursuant to s 51 of the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth) that “except in special circumstances no date will be fixed for the hearing of an application until the claim book relating to that application has been lodged with the Commissioner’s Associate”. Deane J said that its “essential function can be equated with that of a detailed pleading which the claimants were required to prepare and make available before their claim was heard” (at 492).

37 Dawson J said at 496:

Before it emerges in its final form, successive drafts of a claim book may be privileged but this is not because of any privilege attaching to the final product. Draft pleadings in an action may be privileged, but I have never heard it suggested that a statement of claim or a defence or a reply is privileged so that the privilege is waived when it is filed or delivered to the other side. The reason why the draft may be privileged before the document is completed was early explained in Walsham v Stainton (1863) 2 H & M 1 at 4; 71 ER 357 at 358, upon the basis that, although after a pleading has been filed it becomes publici juris, the drafts “might disclose the precise character of confidential communications with the solicitor, by showing the alterations made from time to time”. In the same way a letter to the other side in litigation which is drafted in a solicitor’s office may be privileged before it is sent because it may reveal confidential communications between the solicitor and his client. Once it is sent, however, it ceases to be confidential and there is no privilege in it, not because privilege in the document is waived, but because no privilege attaches to it.

38 In Argyle Brewery Pty Ltd (t/as Craig Brewery Bar and Grill) v Darling Harbourside (Sydney) Pty Ltd (1993) 48 FCR 1 the tenant/applicant commenced proceedings against the landlord/respondent alleging misleading and deceptive conduct. In negotiations at a meeting between the parties prior to the commencement of the proceedings, representatives of the applicant placed a document on the table described firstly as: “a draft statement of claim prepared by our solicitors and we’re ready to move”, and then: “we can serve this writ tomorrow-it’s already to go”. After the litigation was commenced the landlord/respondent called for a copy of the document as a discoverable document. Beaumont J found that although the document had been described as a draft it was to be treated as a pleading in its final form that was ready to be filed and served on the adversary and had been read by the landlord at the meeting prior to it being filed and served.

39 Beaumont J referred to the portion of Dawson J’s judgment extracted above (at 5) and said (at 8) as Dawson J “has pointed out, a statement of claim is not privileged, even if drafts of it, before it reaches its final form, may be”. Although both cases were decided prior to the introduction of the Evidence Act they were decided when Rules of Court required the filing of pleadings in particular form.

40 Notwithstanding Dawson J’s experience, Mr Coles QC does claim that the pleadings in this case are privileged because their contents have been disclosed under compulsion of law, being CL Rule 2.2 in the case of the Originating process and an order of the Court in the cases of the Statements of Claim.

41 Although the Macquarie parties alternatively seek access pursuant to the process in Practice Note 97, both parties rely upon the provisions of Part 65 rule 7 and Practice Note 97 for support for their respective submissions. Part 65 rule 7(1) provides that: “A person may not search in a registry for or inspect any document or thing in any proceedings except with the leave of the Court”. Practice Note 97 issued by the former Chief Justice on 9 March 1988 includes the following:

1. Access to material in any proceedings is restricted by Part 65 rule 7 of the Supreme Court Rules 1970, except with the leave of the court

2. Access will normally be granted to non-parties in respect of:

(a) pleadings and judgments in proceedings that have been concluded, except in so far as an order has been made that they or portions of them be kept confidential:
(b) documents that record what was said or done in open court;
(c) material that was admitted into evidence; and
(d) information that would have been heard or seen by any person present in open court,
unless the Judge or registrar dealing with the application considers that the material or portions of it should be kept confidential. Access to other material will not be allowed unless a registrar or Judge is satisfied that exceptional circumstances exist.

3. It should not be assumed that material held by the Court comes within paragraph 2. Affidavits, and witness statements, that are filed in proceedings are often never read in open court. This can occur because they contain matter that is objected to and rejected on any one of a number of grounds or because the proceedings have settled before coming on for hearing. Affidavits, statements, exhibits and pleadings may contain matter that is scandalous, frivolous, vexatious, irrelevant or otherwise oppressive. Part 65 rule 5 allows the Court to order this type of matter to be struck out of a document.

4. If access to material is given prior to the conclusion of the proceedings to which it relates, material that is ultimately not read in open court or admitted into evidence would be seen. Thus, access will not normally be allowed prior to the conclusion of the proceedings.

5. Even where material has been read in open court or is included in pleadings, there may be good reason for refusing access. Material that has been rejected or not used or struck out as being scandalous, frivolous, vexatious, irrelevant or otherwise oppressive, may still be legible. Where access to material would be otherwise unobjectionable, it may concern matters that are required to be kept confidential by statute (eg the Criminal Records Act 1991) or by public interest immunity considerations (eg applications to authorise listening devices, affidavits in support of suppression orders).

42 Mr Coles QC submitted that the contents of the Practice Note are consistent with a principle that pleadings and affidavits that have been filed and served but not deployed in a hearing are privileged. I agree that the terms of paragraph 3 are consistent with the principles in Akins v Abigroup but, as I have already said, that case did not relate to pleadings.

43 In my view the granting of the discretion to make documents available, other than those usually to be made available as referred to in paragraph 2 of the Practice Note, when exceptional circumstances exist does not mean that the Court has discretion to override client legal privilege: Daniels Corporation v ACCC;Griffin v Sogelease Australia Limited & Ors (2003) 57 NSWLR 257. The terms of the Practice Note are consistent with the recognition of the implied undertakings in relation to documents created for the purpose of litigation referred to in Home Office v Harman [1983] 1 AC 280: and see eisa Ltd v Brady & Ors [2000] NSWSC 929 (Santow J). Its terms are perhaps supportive of the proposition that the affidavits and statement that are filed are privileged until they are read in open Court, but in my view, for the purposes of this application, it can be put no higher than that.

44 Although I found against Mr Jackman’s initial submission because there was a lack of evidence as to the intention at the time the signature was placed on the documents, it is a different situation when that intention is formed to make a claim against another party in the Court. There is no compulsion on a party to make a claim against another party. That decision is voluntary. When the party has decided to make a claim against another party under the Corporations Act2001 and signs an Originating process or a Statement of Claim, that is the reason for and dominant or equally weighty purpose of the document at that stage. The decision to file the claim is a decision irrespective of whether there is a requirement of law or otherwise to file it in a particular form. The mandatory requirement of the Rule is that it be in a particular form. I agree with Mr Jackman’s submission that such a document does not have the dominant relevant purpose and therefore is not privileged. The fact that the requirements of CL Rule 2.2 may be categorised as a compulsion of law is not relevant because the Originating process is not privileged so as to attract the operation of s 122(2)(c).

45 The next question is whether the supporting affidavit is in the same category as the Originating process. The CL Rules require an Originating process to be “supported” by an affidavit. Although there is a statement in Form 2 that the plaintiff makes the claims “on the facts stated in the supporting affidavit” I am not satisfied that such a reference is enough to characterise the supporting affidavit as part of the process. It is in a different category to the process in that, but for the case management requirements embodied in the CL Rule that it “must” support the Originating process and that it must be served within a specified time, there would be no necessity to file and serve it until the evidence is given. I am satisfied that the principles in Akins v Abigroup are applicable in this instance and that the affidavits are privileged from production.

46 The next category of documents is the 12 Statements of Claim. There were orders that they be filed and served and in some instances the orders were made by consent. In my view the Statements of Claim fall into the same category as the Originating process and are not privileged documents. Therefore the fact that there was a compulsion of law to file and serve them is not relevant. Consistent with these findings the affidavits of service are privileged only to the extent that they refer to or annex the Originating process or the Statements of Claim. They are privileged to the extent that they refer to or annex the affidavits in support.

47 The letters containing the responses to the requests for particulars were also dealt with in court orders. The evidence was that the letters were “served” or “provided” pursuant to the orders of the Court. However the nature of the document has to be analysed to decide whether it was privileged in the first place to be the able to attract the operation of s.122(2)(c). The drafts of such letters would be for the dominant purpose of providing legal advice or providing legal services in relation to the proceedings but the final form of the letter would in my view not have such dominant purpose. Ms Merrick did not give evidence as to whether the drafts were converted into final form because the Court ordered the letters to be filed and served or whether, prior to the Court order, there was an intention to send the letter or whether prior to the Court order the letter had been signed. If the only reason the draft was converted into a final form was because of the Court order then there may be a reasonably arguable case that the privileged material was disclosed under compulsion of law. However that is not the evidence. The evidence therefore does not establish the letters were privileged in the first place and s.122(2)(c) does not apply.

48 The only objection that has been raised on behalf of HDY is that the documents are subject to client legal privilege. I have found that objections to access are not made out in respect of the pleadings, being the Originating process and the Statements of Claim and the particulars. Access is granted to those documents. Access is denied to the affidavits.

49 As the affidavits are privileged, leave to inspect them under Part 65 rule 7 and Practice Note 97 is refused. If the parties are unable to agree on a costs order I will hear argument when the matter is next before the Court for directions on 12 March 2004.

********************

Last Modified: 02/10/2004