FEDERAL COURT OF AUSTRALIA
Kenquist Nominees Pty Limited v Campbell (No 5) [2018] FCA 853
File number: NSD 1364 of 2015 Judge: THAWLEY J Date of judgment: 18 June 2018 Catchwords: PRACTICE AND PROCEDURE – application for discovery of documents – legal advice privilege – where non-party to proceeding resisted order requiring respondents to produce discovered documents on the basis that discovery would reveal communications subject to legal advice privilege – where confidential bundle of sample documents provided to Court for examination – whether sample documents privileged
PRACTICE AND PROCEDURE – waiver of legal advice privilege – whether privilege attaching to sample documents waived by limited disclosure to third party
Cases cited: Archer Capital 4A Pty Ltd v Sage Group Plc(No 2) (2013) 306 ALR 384
Asahi Holdings (Australia) Pty Ltd v Pacific Equity Partners Pty Limited (No 4) [2014] FCA 796
Australian Rugby Union Ltd v Hospital Products (1999) 165 ALR 253
AWB Ltd v Cole (2006) 152 FCR 382
AWB Ltd v Cole (No 5) (2006) 155 FCR 30
Balabel v Air India [1988] Ch 317
Cargill Australia Ltd v Viterra Malt Pty Ltd (No 8) [2018] VSC 193
Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501
Commissioner of Taxation v PrattHoldings Pty Ltd (2004) 136 FCR 357
Commissioner of Taxation v Pratt Holdings Pty Ltd (2005) 225 ALR 266
Desane Properties Pty Ltd v New South Wales [2018] NSWSC 173
DSE (Holdings) Pty Ltd v InterTAN Inc (2003) 135 FCR 151
Esso Australia Resources Limited v Commissioner of Taxation (1999) 201 CLR 49
Gotha City v Sotheby’s [1998] 1 WLR 114
Grantv Downs (1976) 135 CLR 674
Kamasaee v Commonwealth (No 2) [2016] VSC 404
Kenquist Nominees Pty Limited v Campbell (No 2) [2016] FCA 911
Lakatoi v Walker [1999] NSWSC 156
Mann v Carnell (1999) 201 CLR 1
Osland v Secretary, Department of Justice (2008) 234 CLR 275
Date of hearing: 3 May 2018 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 113 Counsel for the Applicant: Mr A S Martin SC and Mr T L Bagley Solicitor for the Applicant: Corrs Chambers Westgarth Counsel for the First, Second and Third Respondents: Ms J D Little Solicitor for the First, Second and Third Respondents: Norton Rose Fulbright Australia Counsel for the Fourth Respondent: Mr P Jammy Solicitor for the Fourth Respondent: Wotton + Kearney Counsel for the Fifth Respondent: Mr L T Livingston Solicitor for the Fifth Respondent: Sparke Helmore Lawyers Counsel for QRxPharma Limited: Mr T Maltz Solicitor for QRxPharma Limited: Arnold Bloch Leibler ORDERS
NSD 1364 of 2015 BETWEEN: KENQUIST NOMINEES PTY LIMITED ACN 008 797 225 AS TRUSTEE FOR THE KENQUIST SUPERANNUATION FUND
Applicant
AND: PETER CAMPBELL
First Respondent
MICHAEL QUINN
Second Respondent
JOHN HOLADAY (and others named in the Schedule)
Third Respondent
QRXPHARMA…
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- Case
- [2018] FCA 853
- Decision Date
CaseChat Overview and Summary
The legal issues the court had to decide included whether the privilege applied to the documents in question and whether the privilege was waived by limited disclosure to a third party. The court had to determine whether the communications were made for the dominant purpose of giving or obtaining legal advice and whether the privilege was waived by the limited disclosure to Morgans. The court also had to consider whether the privilege was waived by the disclosure of sample documents to the court for examination.
The court concluded that Document 47, an attachment to a "host email," was a draft legal opinion and was privileged. The court rejected the argument that Morgans was authorised to use the confidential material provided to it, including the 2009 Legal Opinion, in these proceedings. The court held that the pleading by Morgans in its defence of these proceedings of the 2009 Legal Opinion was not done "in connection with" Morgans’ services to and relationship with QRx and is not a matter which was relevantly "authorised" by the statement made by Morgans in its retainer letter sent to QRx.
The court ordered the parties to file within 7 days agreed short minutes of order reflecting the reasons for decision or, failing agreement, arrange within 14 days for the matter to be relisted. This case highlights the importance of determining the dominant purpose of communications and the potential consequences of limited disclosure of privileged material.
Orders
Orders of the court
1. The parties file within 7 days agreed short minutes of order reflecting the reasons for decision or, failing agreement, arrange within 14 days for the matter to be relisted.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
Morgans was aware of the obligation of confidentiality on the members of the Due Diligence Committee, the Due Diligence Planning Memorandum having been provided to Morgans. Its executives were present when the Due Diligence Planning Memorandum was adopted by the members of the Due Diligence Committee. It does not matter that the observers did not themselves undertake an express obligation of confidentiality – cf: Australian Rugby Union Ltd v Hospital Products (1999) 165 ALR 253 at [44], per Sackville J. A reasonable participant would have understood from the circumstances that the confidentiality in sensitive information exchanged in the due diligence process should be respected. Consideration The disclosures made to Morgans were made confidentially and for a limited purpose. It may be accepted that the interests of Morgans and QRx were not completely overlapping and further that, in some limited respects, their interests were opposed. Morgans provided both management services and underwriting services. To the extent that the capital raisings were not fully subscribed and the conditions precedent were met, Morgans would have to underwrite. Both Morgans and QRx had an interest in the capital raisings going ahead and being successful. On the other hand, their interests diverged or were opposed so far as the issue or subscription price was concerned. None of the legal advice was shown to go to the subscription price nor to any dispute between QRx and Morgans. It is natural enough in this commercial context, as expanded upon below, for QRx to disclose privileged communications to Morgans without attracting the judgment that QRx’s conduct in disclosing the privileged material was inconsistent with the maintenance of confidentiality in those communications: Mann at [30]-[32]; Osland at [45]. It is true that the 2009 Underwriting Agreement did not contain an express obligation of confidentiality. However, the 27 September 2010 Morgans’ retainer under which Morgans was named “Lead Manager and Bookrunner” contained the following acknowledgement:The Company [QRx] should be aware that the Lead Manager and/or its related bodies corporate may be providing or may in the future provide financial or other services to other parties with conflicting interests. However, consistent with our long-standing policy to hold in confidence the affairs of our customers, we will not use confidential information obtained from the Company except in connection with our services to, and our relationship with, the Company, nor will we use on the Company’s behalf any confidential information obtained from any other customer. In oral submissions, Counsel for the applicant submitted that the conduct which was inconsistent with maintaining confidentiality was QRx authorising Morgans to use confidential information in connection with Morgans’ services to, and relationship with, QRx. This submission was advanced by reference to the words set out immediately above. An earlier retainer, dated 23 October 2009, contained a substantially similar acknowledgement. It was submitted that these words “authorised” Morgans to use the confidential material provided to it, including the 2009 Legal Opinion, in these proceedings. I reject that submission. Those words – which appear in the retainer letter under the heading “Certain Acknowledgements” – simply indicate that Morgans might also be providing services to other parties whose interests might conflict with those of QRx, and that Morgans would keep confidential any information obtained from QRx; Morgans would not use that information except in connection with its services to and relationship with QRx (as distinct from its services to and relationship with other clients). The pleading by Morgans in its defence of these proceedings of the 2009 Legal Opinion was not done “in connection with” Morgans’ services to and relationship with QRx and is not a matter which was relevantly “authorised” by the statement made by Morgans in its retainer letter sent to QRx.