Liquorland (Australia) Pty Ltd v Anghie (No. 3)
[2003] VSC 166
•6 June 2003
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 6974 of 2001
| LIQUORLAND (AUSTRALIA) PTY LTD (ACN 007 512 414) and AUSTRALIAN LIQUOR GROUP LTD (ACN 089 094 557) | Plaintiffs |
| v | |
| MICHAEL LEE ANGHIE and others and ROGER CHRISTIAN STEINEPREIS and others | Defendants Third Parties |
AND BETWEEN:
| MICHAEL LEE ANGHIE and OTHERS | Plaintiffs by Counterclaim |
| v | |
| LIQUORLAND (AUSTRALIA) PTY LTD | Defendants by Counterclaim |
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JUDGE: | BYRNE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10 April 2003 | |
DATE OF JUDGMENT: | 6 June 2003 | |
CASE MAY BE CITED AS: | Liquorland (Australia) Pty Ltd v Anghie (No. 3) | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 166 | |
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Evidence – legal professional privilege – waiver by client – issue waiver – subsidiary of client puts its state of mind in issue in its pleading – whether privilege waived with respect to legal communication to client which contributed to its own state of mind.
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APPEARANCES: | Counsel | Solicitors |
| For the first and thirdnamed Defendants | Mr M.R. Pearce | Norton Gledhill |
| For Coles Myer Ltd | Mr Jonathan Beach QC and Mr Louie Hawas | Freehills |
HIS HONOUR:
This litigation arises out of a takeover by the firstnamed plaintiff, Liquorland (Australia) Pty Ltd (“Liquorland”), of the secondnamed plaintiff, Australian Liquor Group Ltd (“ALG”), in 2001. The takeover commenced in April 2001 with a formal announcement by Coles Myer Ltd (“Coles Myer”), the parent company of Liquorland, and was completed on 18 July 2001 when the share purchases were compiled. After the takeover, Liquorland complained that certain financial information previously provided by ALG overstated its true position so that its purchase was at an overvalue. It has, therefore, sued the former directors of ALG, including Michael Lee Anghie, the firstnamed defendant, and Malcolm Robert Higgs, the thirdnamed defendant, seeking damages.
On 4 April 2003, I published my reasons[1] for concluding that Liquorland had waived the legal professional privilege which otherwise attached to certain documents passing between it and its legal advisers by putting in issue in this proceeding its state of mind. The defendants, Anghie and Higgs, now seek to press this conclusion a step further. They seek production of like documents in the possession of Coles Myer Ltd.
[1][2003] VSC 73.
The ASIC search shows that, at the time of the takeover and now, Coles Myer held and holds all of the issued shares in Liquorland. At the time of the takeover there were four directors of Liquorland, none of whom was a director of Coles Myer; one of them was also a secretary of Coles Myer. Liquorland then had two secretaries who were also the two secretaries of Coles Myer.
In this proceeding, Hansen J on 15 March 2002 ordered that Coles Myer give limited non-party discovery. This it did, by list dated 28 March 2002, claiming legal professional privilege with respect to a number of documents. By paragraphs 11 to 23 of its summons filed on 16 April 2002, the defendants Anghie and Higgs seek production of these documents.
The applicants adapt for this purpose my conclusion[2] of 4 April 2003 contending that it would be relevantly unfair for Liquorland at the direction of Coles Myer to put in issue its state of mind as to whether the facts known to it (Liquorland) amounted to a material adverse change entitling it to withdraw its takeover offer and as to its right to withdraw its takeover offer, and at the same time for Coles Myer to assert privilege with respect to any legal communication which is likely to have a bearing upon these very matters. This contention involves my lifting the corporate veil in two respects. I must treat the legal communication which may affect the state of mind of Coles Myer as affecting that of its subsidiary, for it is the state of mind of Liquorland that is in issue in this litigation. Second, I must treat the forensic decision of Liquorland to put its state of mind in issue as a decision of Coles Myer.
[2][2003] VSC 73 at [44].
There is a good deal of evidence that Coles Myer was directing the takeover. It made the initial announcement on behalf of its subsidiary and it devised the takeover strategy. It is, therefore, not surprising that it sought and obtained legal advice with respect to the takeover and, later, with respect to the resultant litigation.
The cases to which I was referred, dealing with discovery obligations of a party with respect to documents of a parent or subsidiary, turn for the most part on a question of fact: whether the documents were in the possession or power of the litigant company.
In the present case, the documents are not in the possession of the litigant Liquorland. But this is beside the point because, in non-party discovery, the obligation to make discovery exists with respect to the documents in the possession or power of the non-party, in this case Coles Myer. Nor can it be denied that they are relevant to a question in the proceeding, for they are included in the Coles Myer list.
The basis for the claim for privilege is as follows:
“The documents are privileged on the grounds that they are the subject of a claim for legal professional privilege on the basis that they are, or contain a record of, confidential communications or documents brought into existence for the dominant purpose of:
(a)enabling CML or the Plaintiffs to obtain, or CML’s and the Plaintiffs’ legal advisers to give, legal advice; or
(b)use in litigation either actual or within CML’s or the Plaintiffs’ reasonable contemplation,
and in respect of which privilege has not been waived.”
The case of Liquorland is that it believed that the financial information provided by ALG in the course of the takeover was accurate and complete and that it was led by this to complete the takeover. Put another way, it is that Liquorland was unaware of the true financial position of ALG or that it was unaware that such knowledge as it had amounted in law to a material change entitling it to withdraw its offer, or that it was unaware of its right to withdraw as a result of its knowledge of the true position of ALG. Let it be assumed that there is no evidence to challenge these assertions insofar as they are made with respect to Liquorland’s state of mind on these matters. Let it be assumed also for present purposes that the parent company had legal advice on these matters which affected its state of mind but that it permitted Liquorland to proceed with the takeover without telling it or its directors of this advice. In these circumstances, the submission put on behalf of Coles Myer is that it may assert privilege and withhold the documents.
To my mind, two matters tell against this submission. First, it is the contention of the defendants Anghie and Higgs that the knowledge of Coles Myer is the knowledge of Liquorland. They make this contention notwithstanding that the companies have no common directors. They say that both the control evidently exercised by the parent company and the presence of common office bearers point to this conclusion. I express no view as to their prospects of making out this contention. It is sufficient for my purpose that it is seriously propounded and that, on the evidence available, it cannot be dismissed as fanciful. Second, there is credible evidence that Coles Myer approved and directed this litigation by Liquorland. Again, to the degree of satisfaction required on an application such as this, I am satisfied that Coles Myer was implicated in the Liquorland plea that put its state of mind in issue. Indeed, it is difficult to imagine Coles Myer giving a direction for the litigation to commence without their directing that this matter be alleged. It is, after all, an essential part of the causes of action upon which Liquorland relies.
As was the case in Maronis Holdings Ltd v Nippon Credit Australia Ltd[3], I am satisfied that there was a very close association between Liquorland and its parent company with respect to both of these matters. I am satisfied that the association was such that the two companies should be treated as the one for the purposes of assessing whether it would be relevantly unfair for Liquorland to put its state of mind in issue and at the same time for Coles Myer to assert privilege with respect to any legal communication which is likely to have had a bearing on these very matters.
[3][2000] NSWSC 836.
I consider, therefore, that the conclusions which I have reached with respect to waiver of the privilege asserted by Liquorland are equally applicable to the privilege asserted by Coles Myer in its non-party discovery. I will hear counsel further as to the terms of the orders which should be made to give effect to these conclusions.
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