Molenaar v Andonovski

[2020] NSWSC 1258

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Molenaar v Andonovski [2020] NSWSC 1258

Hearing dates:

On the papers

Date of orders:

15 September 2020

Decision date:

15 September 2020

Jurisdiction:

Equity

Before:

Ward CJ in Eq

Decision:

1.   Permit access by the plaintiffs to the following documents, redacted where necessary in accordance with these orders.

(i)   In relation to the documents listed in the Pikes & Verekers privilege table (produced in Packet S-13):

(a)   email of 7 December 2018 from Ms Pecipajkovski to Mr Green and copied to Mr Peter Andonovski; and

(ii)   In relation to the documents listed in the HLB Mann Judd privilege table (produced in Packet S-18):

(a)   email of 14 February 2019 from Ms Ilijic to Ms Hold and Mr Green;

(b)   email chain of communications of 14 February 2019, being the email from Ms Ilijic to Ms Hold and Mr Green, Mr Green’s reply (copied also to Mr Newhouse) and Ms Ilijic’s subsequent reply, except for the email from Mr Green to Ms ilijic and Ms Hold (copied to Mr Newhouse) of 1:31 PM;

(c)   email chain of communications dated 14 February 2019, being the same chain of emails as referred to in item (b), with a further reply from Ms Ilijic, except for the email from Mr Green to Ms ilijic and Ms Hold (copied to Mr Newhouse) of 1:31 PM;

(d)   email chain of communications dated from 14 to 20 February 2019, being the same chain of emails as referred to in items (b) and (c), with further reply communications, except for the email from Mr Green to Ms ilijic and Ms Hold (copied to Mr Newhouse) of 1:31 PM;

(e)   email chain of communications dated between 8 and 11 March 2019 between Ms Hold, Mr Andonovski, Ms Pecipajkovski, Mr Peter Andonovski and Mr Newhouse (and copied to Mr Green); and

(f) email chain of communications dated 27 March 2019, but only the page numbered “1” of the printed email chain.

2.   Costs of the application be costs in the cause.

Catchwords:

EVIDENCE — Privileges — Client legal privilege — Legal advice and litigation — waiver

EVIDENCE — Privileges — Common interest privilege

Evidence — Company books and records — s247A of Corporations Act 2001 (Cth)

CIVIL PROCEDURE — Subpoenas — To produce documents or things — Privilege and other claims concerning access to produced documents

Legislation Cited:

Evidence Act 1995 (NSW), ss 118, 119, 122, 125, 126

Corporations Act 2001 (Cth), s 247A

Cases Cited:

Areva NC (Australia) Pty Ltd v Summit Resources (Australia) Pty Ltd (No 2) [2008] WASC 10

Czerwinksi v Syrena Royal Pty Ltd (No 1) [2000] VSC 125; (2000) 34 ACSR 245

Eastmark Holdings Pty Ltd v Kabraji (No 3) [2012] NSWSC 1463

Hanks v Admiralty Resources NL (No 2) [2011] FCA 1464

Kang v Kwan [2001] NSWSC 698

Marshall v Prescott [2013] NSWCA 152

R v Cox and Railton (1884) 14 QBD 153; [1881-5] All ER Rep 68

Rinehart v Rinehart [2020] NSWSC 60

Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365

Schreuder v Murray (No 2) (2009) 41 WAR 169; [2009] WASCA 145

Yunghanns v Elfic Pty Ltd (No 2) [2000] 1 VR 92; [2000] VSC 113

Category:

Procedural and other rulings

Parties:

Trevereaux Molenaar (First Plaintiff)
Molenaar Real Estate Pty Ltd (Second Plaintiff)
Jordan Peter Andonovski (First Defendant)

Representation:

Counsel:
MJ Harris (Plaintiffs)
R Tassell (Defendant)
Solicitors:
Jemmeson & Fisher (Plaintiffs)
Pikes & Verekers Lawyers (Defendant)

File Number(s):

2017/00212491

Publication restriction:

Nil

Judgment

1. HER HONOUR: This matter was referred to me by the Expedition List Judge for determination of a discrete issue that has arisen in relation to the plaintiffs’ application for access to documents produced by a firm of solicitors (Pikes & Verekers Lawyers) and a firm of accountants (HLB Mann Judd) in answer to subpoenas issued by the plaintiffs in these proceedings. The first defendant (Jordan Peter Andonovski) objects to the plaintiffs (Trevereaux Molenaar and Molenaar Real Estate Pty Ltd (Molenaar Real Estate)) having access to the documents listed in schedules prepared by the first defendants (the privilege tables) over which he claims client legal privilege.

2. The parties agreed that the issue of access to the documents in question could be dealt with on the papers and that I would inspect the documents for that purpose (which I have done). The parties have also provided brief written submissions.

Background

3. The background to the present application, as I understand it from the material served on this application (and I here make no findings in relation to any disputed factual matters), is that there was a dispute between the parties relating to the sale of a real estate business.

4. The plaintiffs commenced proceedings by statement of claim in this Court on 12 July 2017, seeking to enforce the terms of Heads of Agreement dated 17 February 2017 (the Heads of Agreement) to which all the parties to the proceeding were signatories.

5. The Heads of Agreement, as I understand it, provided for a restructure of the then third to eighth defendants (see the description of the defendants at [7] below) to enable Mr Andonovski and/or the second defendant to acquire Molenaar Real Estate’s shares in each of those companies; and for the making of a number of payments to the plaintiffs, some of which were based on a valuation of Molenaar Real Estate. The relevant assets the subject of the Heads of Agreement thus related to the acquisition of the rent roll business of the company.

6. HLB Mann Judd is an accounting firm that was involved in that valuation.

7. The allegation made in the substantive proceedings was that the defendants (Mr Andonovski, the first defendant; Nice Real Estate Pty Ltd, the second defendant; Monarco Pty Ltd as trustee for the Monarco Unit Trust (Monarco), the third defendant; Riviara Pty Ltd as trustee for Riviara Unit Trust, the fourth defendant; Monarco Property Management Services Pty Ltd (Monarco Property Management Services), the fifth defendant; Cube Marketing Pty Ltd, the sixth defendant; Monarco Property Management Pty Ltd, the seventh defendant; and Liberty Property Sales Pty Ltd, the eighth defendant) failed to perform their obligations under the Heads of Agreement.

8. Pikes & Verekers Lawyers appeared on behalf of all the defendants in the litigation from 8 August 2017 until October 2019 (to which, see below).

9. The particular circumstances that have led to the current application arose after Mr Molenaar (in performance, he says, of his obligation under the Heads of Agreement) resigned his directorship of each of the third to eighth defendants (which, as events transpired, made it possible – although the plaintiffs say that this was in breach of the relevant shareholder and unitholder agreements and was without the necessary authority – for the rent roll assets to be transferred without Molenaar Real Estate’s consent).

10. By notice of motion filed on 3 December 2018 and served on Pikes & Verekers Lawyers (as lawyers for the first to eighth defendants) on 5 December 2018 (the 3 December 2018 motion), the plaintiffs sought an interlocutory injunction to restrain the sale, disposition or transfer of the rent roll assets. The 3 December 2018 motion was made returnable on 31 January 2019.

11. In the interim, however, the rent roll assets were sold to related entities of Mr Andonovski. The plaintiffs say that this was in breach of the shareholder and unitholder agreements which mandated that there be two directors of the relevant companies and that there be the consent of all shareholders or unitholders to the sale of assets worth more than $5,000. The plaintiffs contend that, in the absence of the plaintiffs’ interests in a director role, Mr Andonovski, as sole director, had no authority unilaterally to sell the rent roll assets in the absence of consent of Molenaar Real Estate.

12. The hearing of the substantive proceedings took place last year. By the time of the trial, the second to eighth defendants were in liquidation and Mr Andonovski, by his own petition, was bankrupt.

13. Mr Steven Nicols of Nicols + Brien was appointed as voluntary administrator of both Monarco and Monarco Property Management Services on 28 March 2019 and as liquidator of those companies on 30 April 2019. Each remains under his control as its liquidator.

14. Pikes & Verekers Lawyers did not receive instructions to act for Mr Nicols in the substantive proceeding and ceased to act for Mr Andonovski in the substantive proceedings on 9 October 2019. Mr Andonovski’s trustee in bankruptcy appeared on the first day of the trial. As I understand it, all evidence was tendered on that day. Mr Andonovski’s trustee in bankruptcy did not then appear on the second day of the trial.

15. Sackar J made orders on 19 December 2019, including that Mr Andonovski held certain proceeds of the sale of the rent roll assets on trust for Molenaar Real Estate.

16. It seems that what then happened was that a notice of motion was filed by the plaintiffs on 26 March 2020, seeking orders that Mr Andonovski be found guilty of contempt. That contempt motion has not yet been listed for hearing. There are two charges of contempt alleged in the statement of charge attached to the notice of motion. In essence, those contempt charges are that, on 10 December 2018 and having received notice on 5 December 2018 of the 3 December 2018 motion, Mr Andonovski (in his capacity as sole director of each of the former second to eighth defendants in the proceedings) conducted himself in a manner that had a real tendency to interfere with the administration of justice by causing Monarco (charge 1) or Monarco Property Management Services (charge 2) to enter into a contract of sale dated 10 December 2018 to sell its rent roll to a related entity and caused that defendant to settle that contract of sale on 13 December 2018. It is contended that, by such conduct, Mr Andonovski usurped the Court’s function of judicial determination of the 3 December 2018 motion and the making of orders in terms of the interlocutory relief sought in that notice of motion.

17. The plaintiffs have issued various subpoenas in the context of their 3 December 2018 motion. Relevantly, the two subpoenas here in issue are: a subpoena issued on 3 June 2020 to the proper officer of Pikes & Verekers Lawyers; and a subpoena issued also on that date to the proper officer of HLB Mann Judd. Documents have been produced in answer to those subpoenas, over some of which client legal privilege has been claimed by Mr Andonovski. Insofar as the privilege in any of those documents rests with any of the companies now in liquidation, Pikes & Verekers Lawyers has claimed privilege on the basis that the firm has not received any instructions from Mr Nicols to waive privilege on behalf of Monarco or Monarco Property Management Services.

18. The matter came before me for directions on 17 August 2020. I directed Mr Andonovski to file and serve an affidavit going to the claim for legal professional privilege and made directions for the exchange of brief written submissions.

19. I have considered that material and the documents over which privilege is claimed.

The claim for client legal privilege

20. Mr Andonovski asserts a claim for client legal privilege over the two packets of documents produced on subpoena to which reference has been made above (Packet S-13, being documents produced by Pikes & Verekers Lawyers; and Packet S-18, being documents produced by HLB Mann Judd).

21. As adverted to above, Pikes & Verekers Lawyers (as the former solicitors for each of Monarco and Monarco Property Management Services) also assert privilege over Packet S-13 and Packet S-18 because no instructions have been received from the liquidator of Monarco and Monarco Property Management Services to waive privilege. In that connection, there is attached to the submissions served by Mr Andonovski a copy of a letter from Pikes & Verekers Lawyers to Mr Nicols sent by email on 19 August 2020, to which (as at the date of the submissions) no reply had been received.

22. Mr Andonovski relies principally on an affidavit sworn and filed on 24 August 2020 by Mr Robert John Tassell, the solicitor acting for Mr Andonovski on the contempt motion and a partner in the firm Pikes & Verekers Lawyers. In that affidavit, Mr Tassell has deposed to the claim for privilege in relation to those documents. Mr Tassell has deposed that a partner of his (Mr Mark Green) and a senior associate in the firm (Ms Jennifer Hold) had carriage of the substantive proceedings. Mr Tassell has further deposed that he ceased to act for Mr Andonovski in the substantive proceedings on 9 October 2019.

23. Annexure B to Mr Tassell’s 24 August 2020 affidavit is a table (the Pikes & Verekers privilege table) setting out, in respect of the documents in Packet S-13 produced by Pikes & Verekers, a date and brief description of each document; and the bases for the claim for privilege.

24. The documents listed in the Pikes & Verekers privilege table cover the period from 6 December 2018 to 13 February 2019, during which time the substantive proceedings were on foot.

25. Mr Tassell has identified the documents listed in the Pikes & Verekers privilege table as containing confidential communications between lawyers at Pikes & Verekers (principally, if not exclusively, Mr Green and Ms Hold) and: Mr Andonovski; officers of Monarco and Monarco Property Management Services (being Mr Andonovski and the companies’ then General Manager, Ms Susie Pecipajkovski); the then accountants for each of Monarco, Monarco Property Management Services and Mr Andonovski (being Mr Andrew Newhouse and Ms Brooke llijic, each of HLB Mann Judd); or Mr Peter Andonovski, the father of Mr Andonovski (identified by Mr Tassell as a solicitor and “informal adviser” to Mr Andonovski).

26. It is noted that Monarco and Monarco Property Management Services continued to trade until Mr Nicols was appointed as liquidator to the respective companies on 30 April 2019.

27. For the reasons set out in relation to each document in the Pikes & Verekers privilege table, Mr Andonovski maintains that each of the documents in Packet S-13 is subject to client legal privilege pursuant to s 119 of the Evidence Act 1995 (NSW) (Evidence Act) in that each was a confidential communication for the dominant purpose of the client being provided with professional legal services relating to an Australian proceeding between: a lawyer and a client (Mr Andonovski; Monarco (that is, from or to one of its officers, Mr Andonovski and/or Ms Pecipajkovski); Monarco Property Management Services (that is, from or to one of its officers, Mr Andonovski and/or Ms Pecipajkovski); or another person (as adverted to, Mr Newhouse, Ms llijic or Mr Peter Andonovski).

28. Annexure D to Mr Tassell’s 24 August 2020 affidavit is a table (the HLB Mann Judd privilege table) setting out similar information in respect of the documents in Packet S-18 produced by HLB Mann Judd. The documents listed in the HLB Mann Judd privilege table also cover the period from 6 December 2018 to 27 March 2019.

29. For the reasons set out in relation to each document in the HLB Mann Judd privilege table, Mr Andonovski maintains that each of the documents in Packet S-18 is subject to client legal privilege pursuant to s 119 of the Evidence Act in that each was a confidential communication for the dominant purpose of the client being provided with professional legal services relating to an Australian proceeding between: a lawyer and a client (Mr Andonovski; Monarco (that is, from or to one of its officers, Mr Andonovski and/or Ms Pecipajkovski); Monarco Property Management Services (that is, from or to one of its officers, Mr Andonovski and/or Ms Pecipajkovski); or another person (again, as adverted to, Mr Newhouse, Ms llijic or Mr Peter Andonovski).

30. A further affidavit was sworn by Mr Tassell on 28 August 2020 in relation to the claim for client legal privilege.

31. Meanwhile, the plaintiffs rely on an affidavit sworn on 28 August 2020 by Ms Lisa Jemmeson (a solicitor in the firm of solicitors acting for the plaintiffs in the proceedings, Jemmeson and Fisher).

Submissions and some observations

32. It is convenient next to adumbrate the parties’ respective submissions.

Plaintiffs’ submissions

33. Broadly speaking, the plaintiffs identify a number of bases on which they argue that inspection of the various documents should be permitted.

34. First, it is said that no client legal privilege attaches to each of the documents because Mr Andonovski has failed to satisfy the requirements for a claim of client legal privilege (in particular, it is said that the communications were not confidential, were not professional communications and/or were not for the requisite dominant purpose).

35. Second, if (contrary to their first submission) any client legal privilege does exist in respect of the documents, then Molenaar Real Estate, as the 50% shareholder of each of Monarco and Monarco Property Management Services, claims common interest privilege over those documents.

36. Third, it is said that, by operation of s 125 of the Evidence Act, any privilege was lost in circumstances where the communication was made or the document provided for advice was in furtherance of a deliberate abuse of power by Mr Andonovski, as the sole director of each of Monarco and Monarco Property Management Services. That abuse is said to have been to usurp the Court’s function of judicial determination of the 3 December 2013 motion (and the making of the orders in terms of the interlocutory orders sought) and/or to usurp the shareholders/unitholders agreement, which required the consent of Molenaar Real Estate to sell the rent roll assets owned by each of Monarco and Monarco Property Management Services.

37. Fourth, it is contended that, by operation of s 126 of the Evidence Act, the documents are necessary to adduce evidence of a communication or document to enable a proper understanding of another communication or document which has lost privilege.

38. Finally, it is said that, by operation of s 247A of the Corporations Act 2001 (Cth) (Corporations Act), the documents are books of the companies and, as a 50% shareholder of the relevant companies, Molenaar Real Estate is entitled to see those documents. I interpose to observe that the plaintiffs, throughout submissions and in a letter dated 24 June 2020 to Pikes & Verekers Lawyers (as to which, see further below), refer to “s 247”, which I have taken to be a reference to s 247A (“Order for inspection of books of company or registered managed investment scheme”) — the Corporations Act not presently containing any s 247.

39. As to particular documents, the plaintiffs’ submissions are as follows.

Pikes & Verekers Lawyers documents – Packet S-13

40. The plaintiffs identify two groups of documents listed in the Pikes & Verekers privilege table: the December 2018 communications; and the February to March 2019 communications.

December 2018 communications

41. As to the December 2018 communication, it is to be recalled that, on 5 December 2018, the 3 December 2018 motion was served.

42. The plaintiffs note that the first of the documents over which privilege is claimed is an email sent on 6 December 2018, by Ms Hold of Pikes & Verekers Lawyers to Mr Andonovski, Mr Peter Andonovski and Ms Pecipajkovski.

43. Mr Tassell has deposed that the email was sent to Ms Pecipajkovski, as the General Manager, and to Mr Peter Andonovski, as an informal legal adviser to Mr Andonovski (as noted above, Mr Peter Andonovski being both a practising lawyer and the father of Mr Andonovski). The claim for privilege is that this is a confidential communication between a lawyer (Pikes & Verekers) and client (Mr Andonovski) and others for the dominant purpose of the client being provided with professional legal services relating to an Australian proceeding.

44. Meanwhile, the plaintiffs say that Ms Pecipajkovski and Mr Peter Andonovski were also the directors of Serengeti Property Management Pty Ltd (Serengeti Property) which was the buyer of the rent roll assets from Monarco and Monarco Property Management Services (referring to the written sale agreements dated 10 December 2018, which, as adverted to above, were settled on 13 December 2018) (the Sale Agreements).

41. The plaintiffs say that, in that context and the client legal privilege claim being a claim under s 119 of the Evidence Act, the reasonable inference to draw is that the email communication was about service of the 3 December 2018 motion and the effect that would have on Monarco and Monarco Property Management Services’s ability to sell the rent roll to Serengeti Property. It is submitted that the true capacity in which Ms Pecipajkovski and Mr Peter Andonovski were recipients of that email was as directors of Serengeti Property and not otherwise. It is noted that Serengeti Property was a related entity of Mr Andonovski, but not Monarco or Monarco Property Management Services. It is said that Ms Pecipajkovski returned all her records, including those for Serengeti Property, to Pikes & Verekers Lawyers and HLB Mann Judd. For these reasons, it is submitted that the 6 December 2018 communication was not confidential.

42. The second document is an email sent on 7 December 2018 by Ms Pecipajkovski to Pikes & Verekers Lawyers (copied to Mr Peter Andonovski) said to be for the dominant purpose of Pikes & Verekers Lawyers providing legal advice to the client (Mr Andonovski) (that is, a claim for client legal privilege under s 118 of the Evidence Act).

43. The plaintiffs say that this document was likely to be the Sale Agreements being sent by Ms Pecipajkovski, as the director of Seregenti Property, to Pikes & Verekers for them to advise their ‘clients’ about its terms. It is noted that Pikes & Verekers Lawyers did not draw up the Sale Agreements; rather, the Sale Agreements were in the form of template agreements drafted by Jemmeson Fisher and said to be part of that firm’s intellectual property. It is said that that template sale agreement was used by Jemmeson Fisher at the time Ms Pecipajkovski’s daughter, Elizabeth, and her friend, Ms Tanya Delkou, were employees of Jemmeson Fisher. Ms Jemmeson has assumed that, for Ms Pecipajkovski to have used this template sale agreement, one or both of those employees prior to leaving Jemmeson Fisher must have taken copies of it for their use in the future. It is noted that Jemmeson Fisher did not act for any of Serengeti Property, Monarco or Monarco Property Management Services. It is submitted that, for those reasons, the Sale Agreements sent to Pikes & Verekers by Serengeti Property to advise the sellers of the rent roll asset, Monarco and Monarco Property Management Services, was (or were) not confidential.

44. I interpolate here to note that this argument, as I understand it, goes nowhere, unless, at the very least, the first assumption on which it is based (that the email was forwarding a copy of the Sale Agreements) is made good. Nor is it appropriate here to enter into debate as to how it is that a template document from Jemmeson Fisher may have been used for the purposes of preparation of the Sale Agreements.

45. The plaintiffs note that Pikes & Verekers has not listed in the schedule any diary notes or internal communications in relation to the communications of 6 or 7 December 2018 or the advice in respect of the terms of the Sale Agreements. It is said that no explanation has been provided for the absence of production of those documents and that it would be unusual for a law firm not to have contemporaneous notes of that kind.

46. I interpolate here to observe that it is not clear how a complaint about what has not been produced assists matters on the present application other than if it is being raised in support of the assertion that the communication was not to a “client” and, even then, I have difficulty seeing how a lack of diary notes or internal communications supports that conclusion.

47. In any event, it is submitted by the plaintiffs that if Mr Peter Andonovski, as a recipient of each of the 6 and 7 December 2018 emails, received those emails in his “professional capacity as an informal adviser” to Mr Andonovski (I interpose to observe a contradiction in terms here, perhaps) and that, accordingly, a retainer existed by consensus and Mr Peter Andonovski was therefore bound by his professional obligations to retain client documents for seven years, then accordingly Mr Peter Andonovski ought to be in possession of all communications which he has been included in and are now contained in the S-13 Packet. It is noted that Mr Peter Andonovski has not produced any documents in response to his subpoena, stating he has no such documents. The plaintiffs say that there are a number of possible inferences that may be drawn from this: first, that Mr Peter Andonovski has breached his solicitor duties to retain client documents by destroying those documents “for whatever reason”; second, that, as an officer of the Court, he has made a false statement to the Court; or, third, that he received those documents as a director of Serengeti Property. It is submitted that, given the contemporaneous events, it may be more likely that he received them as a director of Serengeti Property.

48. Pausing again here, it is a serious matter to allege that an officer of the Court has made a false statement to the Court (and, even that they have breached other professional duties). I do not accept that there is any basis on which I could properly draw such an inference on the material before me at this stage and nor would I do so without giving Mr Peter Andonovski an opportunity to be heard on that issue. I do not consider that the inferences thrown up by the plaintiffs as possible inferences can properly be taken into account in the way that is here suggested.

49. With that said, and returning to the plaintiffs submissions, it is said that the “real” clients for the purpose of any advice about the sale of the rent roll assets were the companies that owned the rent roll assets (it will be recalled, Monarco and Monarco Property Management Services) and that any advice given to Mr Andonovski was in his capacity as director of those companies. The plaintiffs say that Mr Andonovski has no standing to claim client legal privilege for, or on behalf of, Monarco or Monarco Property Management Services, both of which are in liquidation. The plaintiffs say that an examination of the documents produced by the liquidator under subpoena shows that the liquidator is not in possession of any of these communications, despite (it is said) these being company books for the purpose of s 247A of the Corporations Act and, therefore, documents that ought to have been provided to the liquidator by Mr Andonovski. It is said that these documents were clearly in Mr Andonovski’s possession, care and control to provide to the liquidator.

50. There is, therefore, said to be no issue that the 6 or 7 December 2018 communications were of a professional nature.

February to March 2019 communications

55. As to the February to March 2019 communications, the claim for client legal privilege is here made under s 118 of the Evidence Act.

56. The plaintiffs note that, by letter dated 25 February 2019, Pikes & Verekers wrote to Jemmeson Fisher about the sale of the rent roll assets (a copy of this letter having been produced by the liquidator). The plaintiffs say that this letter makes clear that HLB Mann Judd was completing the financial statements of the third to eighth defendants and expected to have them completed by the end of February 2019, if not by mid-March 2019. It is noted that this was a reconstruction of the financial statements.

57. The plaintiffs say that the liquidator does not have the February to March communications (as they have not been produced by the liquidator under subpoena). They say that Mr Andonovski has no standing to claim privilege over those documents which relate to the preparation of those financial statements.

58. It is further said that there can be no confidentiality about the preparation of those financial statements, as the clients were and could only be the third to eighth defendants. The plaintiffs say that, upon completion of those financial statements (which were not provided by Pikes & Verekers Lawyers or HLB Mann Judd to Jemmeson Fisher), Mr Andonovski “unilaterally and without prior notice or consultation” placed each of the third to eighth defendants into administration. It is said that HLB Mann Judd had previously told Pikes & Verekers Lawyers and Mr Andonovski on 2 May 2018 that the third to eighth defendants were insolvent but that no steps were taken then to place the third to eighth defendants into administration.

HLB Mann Judd communications – Packet S-18

59. The plaintiffs note that HLB Mann Judd (but not Pikes & Verekers Lawyers) has claimed privilege over communications commencing 8 February 2019 to 27 March 2019. It is said that the inference to be drawn is that Pikes & Verekers Lawyers does not consider those documents to be confidential and subject to a claim of client legal privilege.

60. I interpolate to observe that it is not clear to me whether that material has elsewhere been produced by Pikes & Verekers Lawyers, in which case any confidentiality in the documents would have been lost. However, I assume that it has not. Otherwise, as I understand it, the plaintiffs make no separate submissions as to the basis on which access to these documents should be granted from the submissions identified broadly above in relation to the Pikes & Verekers Lawyers documents.

Claim to common interest privilege

61. The plaintiffs refer to a letter dated 24 June 2020 from Jemmeson Fisher to Pikes & Verekers Lawyers (the Jemmeson Fisher letter), setting out the basis for the claim of common interest privilege.

62. In essence, what is argued in relation to common interest privilege is that, during the relevant period, Pikes & Verekers Lawyers acted for Mr Andonovski and a number of companies now in liquidation, including companies of which Molenaar Real Estate is a 50% shareholder.

63. It is submitted that any legal advice given by Pikes & Verekers Lawyers to Mr Andonovski (in whatever capacity) and the companies now in liquidation as to the notice of motion would be the subject of a claim of common interest privilege for the following reasons. First, that the notice of motion affected the ability to govern the conduct relating to shareholders rights under the shareholders agreement by restricting any process under the shareholders agreement that would have permitted the sale of the rent roll asset under it. Second, that there is a joint interest in such advice (which, it is noted, is an exception to client legal privilege) (reference being made to Schreuder v Murray (No 2) (2009) 41 WAR 169; [2009] WASCA 145 at [86] per Pullin JA; Eastmark Holdings Pty Ltd v Kabraji (No 3) [2012] NSWSC 1463 at [67]-[86] per Hallen J); Yunghanns v Elfic Pty Ltd (No 2) [2000] 1 VR 92; [2000] VSC 113 at [20] per Warren J, as her Honour then was).

Claim that privilege lost under s 125 of the Evidence Act

64. As to the loss of privilege under s 125 of the Evidence Act, reliance is placed on the principles articulated in R v Cox and Railton (1884) 14 QBD 153; [1881-5] All ER Rep 68 and Kang v Kwan [2001] NSWSC 698 (see at [37] per Santow J, as his Honour then was).

65. As noted, the plaintiffs’ argument is that documents referable to the conduct said to amount to contempt cannot be the subject of a privilege claim.

Claim that privilege lost by reference to s 126 of the Evidence Act

66. As to s 126 of the Evidence Act, it is noted in the Jemmeson Fisher letter referred to above that this provision operates where a document has already lost any privilege and it is necessary to refer to other communications or documents in order to get a proper understanding of the first communication or document, in which case privilege in respect of the other documents is also lost.

Application of the above principles to the classes of documents over which privilege is now claimed

67. As noted, in the Jemmeson Fisher letter, the solicitors for the plaintiffs addressed the categories of documents sought under the subpoena to Pikes & Verekers Lawyers by reference to the above (prefaced with the observation that many of the classes of documents may be company records and therefore subject to inspection by Molenaar Real Estate as a shareholder under s 247A of the Corporations Act).

68. It is convenient here to excerpt the relevant portions of that letter. Relevantly, the letter was in the following terms:

1(a) There can be no privilege over a document receipting delivery of the Notice of Motion - it is not a confidential communication and therefore s.118 [Evidence Act] cannot apply. It is simply the email which served the Notice of Motion, which is in the possession, care and control of [Pikes & Verekers Lawyers], as the recipient of the email.

1(b)   If the Notice of Motion was simply forwarded to Andonovski without advice, then similarly, there can be no privilege over that communication for the same reason. It cannot be said to be confidential or convey any legal advice. As a record of the companies (in liq), then arguably s.247 CA would apply.

1(c)   If the email which forwarded the Notice of Motion included advice about:

(a)   rights to sell the rent roll asset, then common interest privilege exists. All shareholders are affected by the sale of the rent roll asset particularly given the Shareholders Agreement prescribed the preconditions that needed to be satisfied for a sale to proceed;

1(b) selling at undervalue ( [sic] by notice of the Court Orders and the separate determination of the Liquidator) for the purpose of prejudicing the plaintiffs' ability to recover damages from the sale of the rent roll to enforce any judgment debt then s.125 EA may apply to waive privilege.

1(d) If the email which forwarded the Notice of Motion included advice about the consequence of disposal of the rent roll asset prior to any judicial ruling on the Notice of Motion, to the effect that such conduct would thwart the court's power to judicially [sic] determine the Notice of Motion, it may be consequential advice to any advice given under 1(c) above, and so s.126 EA might apply.

1(e) Any response from Andonovski may be subject to common interest privilege and s.126 EA. It affects the governance of the companies (in liq) and so the Molenaar Shareholder's rights under the Shareholders Agreement. If Andonovski [sic] response was that he intended to proceed to sell the rent roll asset, irrespective of any advice not to, then that response might also be captured by s.125, as it may be a communication to further the commission of an act that rendered Andonovski liable to a civil penalty of contempt: s125(1)(a) EA.

1(f) Any Intention may be subject to common interest privilege and s.126 EA.

1(g) Any discussions could be subject to a common interest privilege and s.126 EA, and possibly s.125(1)(a).

1(h) Any response by [Pikes & Verekers Lawyers] could be subject to a common interest privilege and s.126 EA.

2(a) Any instructions to draft a sale document, would be subject to a common interest privilege and s.126 EA.

2(b) Any advice about the terms of the contract of sale may also [sic] subject to a common interest privilege and s.126 EA.

2(c) Any draft contract of sale may also [sic] subject to a common interest privilege and s.126 EA.

3(a) Any record of Andonovski informing [Pikes & Verekers Lawyers] that the rent roll was going to be sold to Andonovski other [sic] company, was arguably not confidential. Any confidentiality that might have been attached to it must have been waived by [Pikes & Verekers Lawyers]' letter dated 25 February 2019, when [Pikes & Verekers Lawyers] informed Jemmeson Fisher that the rent roll asset had been sold. Even if it was confidential, arguably such a record was subject to a common interest privilege and s.126 EA.

3(b) Any advice not to settle a contract of sale affected the conduct of the companies (in liq) and therefore rights that the Molenaar Shareholder had under the Shareholders Agreement. That communication would be subject to a common interest privilege and s.126 EA.

3(c) Similarly, any advice to terminate would be subject to common interest privilege and s.126.

3(d)   Any record that Andonovski informed [Pikes & Verekers Lawyers] that the rent roll had been sold was arguably not confidential. Any confidentiality was lost once [Pikes & Verekers Lawyers] wrote to Jemmeson Fisher on 25 February 2019.

3(e) The amount and distribution of the sale proceeds follows from the sale. Such information is subject to a common interest privilege by the Molenaar Shareholder and Molenaar has an interest by being personally liable as a guarantor under the Macquarie Bank facility. Section 126 EA might also apply.

3(f) Instructions by Andonovski to withhold information would be subject to a common interest privilege and may be intended to further an abuse of power by Andonovski, as the sole director, intended to thwart Molenaar and the Molenaar Shareholder from injuncting the sale by urgently having the Notice of Motion listed for hearing. The purpose would be to put the assets beyond reach of a creditor; s.125 EA.

4(a) Any communication between [Pikes & Verekers Lawyers] and Peter Andonovski and Susan Pecipajkovski may be subject to a common interest privilege and s.126 EA.

4(b) Any communication about the possible consequences of the sale by [Pikes & Verekers Lawyers] to Peter Andonovski and Susan Pecipajkovski would arguably be ‘advice’ and may be the subject of a claim by them or Serengeti of client legal privilege. That may be problematic for [Pikes & Verekers Lawyers] as the firm would then be acting for vendor and purchaser. Without fully considering our Solicitors Rules regarding conflicting interests of clients, then again, common interest privilege and s.126EA may apply.

[…]

69. As can be seen from the above extract, there is a degree of supposition on the part of the plaintiffs as to what are comprised in the communications over which client legal privilege is claimed.

Section 247A of the Corporations Act

70. Again, the plaintiffs rely as to the basis for this ground on what was set out in the Jemmeson Fisher letter (as to which, see the decision of Gordon J, her Honour then a Justice of the Federal Court of Australia, in Hanks v Admiralty Resources NL (No 2) [2011] FCA 1464; and see also Czerwinksi v Syrena Royal Pty Ltd (No 1) [2000] VSC 125; (2000) 34 ACSR 245 at [14] per Warren J, as her Honour then was; Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365 at [86] per Barrett J, as his Honour then was; and Areva NC (Australia) Pty Ltd v Summit Resources (Australia) Pty Ltd (No 2) [2008] WASC 10 at [24] per Martin CJ).

Further ground

71. Furthermore, the plaintiffs say that, although not directly related to the 3 December 2018 motion, the February to March 2018 communications are relevant to Mr Molenaar proving his debt to the liquidator, who has used HLB Mann Judd’s reconstructed financial statements. It is said that those financial statements do not record the payments made by Mr Molenaar to the Australian Tax Office (ATO) for the third to eighth defendants under a payment arrangement with the ATO for some years. It is said that Mr Molenaar has ongoing problems with the liquidator about the amount of debt the Monarco group of companies owes him, one issue being these tax payments. It is submitted that, for this purpose, these communications fall within the common interest privilege, s 122(3) of the Evidence Act and/or as company books under s 247A of the Corporations Act, and therefore are not subject to any client legal privilege claim by Mr Andonovski.

First defendant’s position

72. I have summarised the position of Mr Andonovski, as emerges from the affidavit evidence (see at [20]-[31]). Mr Andonovski has not otherwise put on submissions.

Determination

73. As is apparent from at least some of the submissions for the plaintiffs, and as noted in relation to the extract of the Jemmeson Fisher letter set out above (at [68]), there is (not surprisingly, perhaps) an element of supposition as to the content of the communications in respect of which privilege is claimed. Fortunately, I am not in the position of having to make assumptions as to the documents because, as indicated above, I have reviewed the communications.

73. It seems to me, without wishing to disclose the content of various of the communications, evident on their face that, in various of the communications, there is advice being provided to Mr Andonovski, either in relation to the commencement of the litigation or in relation to the responses to be made to the plaintiffs’ solicitors in relation to matters relating to the restructuring of the accounts.

74. I do not regard the fact that Mr Peter Andonovski and Ms Pecipajkovski were copied into certain of the communications as inconsistent with the advice being provided to Mr Andonovski on a confidential and professional basis. I do not consider that it can be concluded from the content of the communications that the communications were being provided to those other individuals as associated with Serengeti Property.

75. Nevertheless, I consider that there is one communication (that being the second document in the Pikes & Verekers privilege table – the 7 December 2018 email) in respect of which privilege has been lost on the basis that its content discloses that it is in furtherance of conduct that is here claimed to be a contempt or an abuse of process of the Court.

76. The other documents in respect of which I consider access should be granted are communications going to the manner in which the accounts were to be drawn or how moneys were to be accounted for in the books and records of companies in which Molenaar Real Estate was a 50% shareholder. I would exercise the discretion to permit access to those documents as part of the company records (and because it may be relevant to explain how the accounts were ultimately drawn, which in part may be relevant to the requirement for Mr Molenaar to comply with reporting obligations to the ATO). I note that this will comprise the bulk of the remaining communications involving HLB Mann Judd.

77. Having identified those documents, I should say that what I consider to be properly the subject of the claim for privilege, and over which privilege has not been waived, are communications forwarding the notice of motion and communications as to the legal proceedings themselves (and even if they are, or might be, said to be company records, other than for the documents referred to above, I would not exercise the discretion to make them available to the party with whom the litigation is on foot, at least in the absence of a properly contested application pursuant to s 247A of the Corporations Act (as to the test on which, see Rinehart v Rinehart [2020] NSWSC 60)). In that regard, I would here emphasise that, to my mind, a party seeking to access documents pursuant to s 247A should bring a properly formulated application.

78. As to the fact that the liquidator has not waived client legal privilege in any of the material, the liquidator has had the opportunity to maintain a claim for privilege. If he has chosen not to do so, so be it. The privilege is not that of Pikes & Verekers Lawyers to assert. It is for the client to assert or to waive, as the case may be. Again, the liquidator has had an opportunity to do so.

79. Given the conclusion that I have reached, it is not necessary to delve into the submissions in relation to common interest privilege. I simply note that the analysis for the purposes of common interest privilege (as considered by Barrett JA in Marshall v Prescott [2013] NSWCA 152, there in the context of the common interest privilege arising in aid of litigation - see from [58]ff), includes the following (see at [63]-[64]):

63.   A succinct description of the necessary process of analysis appears in the judgment of McKechnie J in the Irish case of Hansfield Developments v Irish Asphalt Ltd [2009] IEHC 420 at [53]. The first step, it was said, is to determine by normal standards whether the document would be privileged in the hands of the party communicating the information, assuming that no disclosure had in fact been made. If it is found that the documents would be so privileged, the court must proceed to the second step which is to ask whether the relationship between the parties was sufficiently close that the transmission of documents should not be held to amount to an implied waiver of the privilege. The nature of that assessment was described in this way (also at [53]):

“In considering this the Court should take into account the relationship between the parties, as well as the nature and purpose of the disclosure and whether there could be held to be an objective intention to waive privilege on the part of the holder.”

64.   McKechnie J continued:

“Privilege should not be overborne lightly, and therefore the ultimate question must be whether it is reasonable in the circumstances to conclude that there was an implied waiver of the privilege. If such an implied waiver cannot be found, the Court should not otherwise interfere.”

81. The preceding is sufficient to dispose of the application.

Conclusion

82. Therefore, I will permit access to the following documents over which privilege was claimed but not otherwise:

1. In relation to the documents listed in the Pikes & Verekers privilege table (produced in Packet S-13):

1. email of 7 December 2018 from Ms Pecipajkovski to Mr Green and copied to Mr Peter Andonovski; and

2. In relation to the documents listed in the HLB Mann Judd privilege table (produced in Packet S-18):

1. email of 14 February 2019 from Ms Ilijic to Ms Hold and Mr Green;

2. email chain of communications of 14 February 2019, being the email from Ms Ilijic to Ms Hold and Mr Green, Mr Green’s reply (copied also to Mr Newhouse) and Ms Ilijic’s subsequent reply, except for the email from Mr Green to Ms Ilijic and Ms Hold (copied to Mr Newhouse) of 1:31 PM;

3. email chain of communications dated 14 February 2019, being the same chain of emails as referred to in item (b), with a further reply from Ms Ilijic, except for the email from Mr Green to Ms Ilijic and Ms Hold (copied to Mr Newhouse) of 1:31 PM;

4. email chain of communications dated from 14 to 20 February 2019, being the same chain of emails as referred to in items (b) and (c), with further reply communications, except for the email from Mr Green to Ms ilijic and Ms Hold (copied to Mr Newhouse) of 1:31 PM;

5. email chain of communications dated between 8 and 11 March 2019 between Ms Hold, Mr Andonovski, Ms Pecipajkovski, Mr Peter Andonovski and Mr Newhouse (and copied to Mr Green); and

6. email chain of communications dated 27 March 2019, but only the page numbered “1” of the printed email chain.

83. I have where I consider necessary, caused to have redacted those communications to which access is not permitted.

84. I will permit access to be granted accordingly. The parties should liaise with my associate for that purpose.

85. I consider that the costs of the application should be costs in the cause. I will now cause the file to be returned to the Expedition List Judge.

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Amendments

16 September 2020 - Amendment to date in Order 1(ii)(f)

Decision last updated: 16 September 2020