O'MEARA v FWV Stanke Holdings Pty Ltd (No 2) - [2007] SASC 294

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
O'MEARA v FWV STANKE HOLDINGS PTY LTD (No 2)
[2007] SASC 294
Reasons for Decision of The Honourable Justice Vanstone
8 August 2007
CORPORATIONS - MEMBERSHIP, RIGHTS AND REMEDIES - MEMBERS' REMEDIES AND INTERNAL DISPUTES - PROCEEDINGS ON BEHALF OF COMPANY BY MEMBER - STATUTORY DERIVATIVE ACTION
PROCEDURE - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - PRODUCTION AND INSPECTION
Application by defendant to action under s 237 Corporations Act for discovery and production of various documents by plaintiff - whether legal professional privilege waived - whether legal opinion constitutes expert report as contemplated by Supreme Court Rule 160 - whether disclosure of various other documents required. Held: application refused.
Corporations Act 2001 (Cth), s 237; Supreme Court Civil Rules 2006 r 136, r 160, referred to.
Oberdan v Commonwealth Bank of Australia (1999) 75 SASR 152; Mann v Carnell (1999) 201 CLR 1, applied.
Bennett v Chief Executive Officer of the Australian Customs Service (2004) 140 FCR 101; Attorney-General for the Northern Territory v Maurice & Ors (1986) 161 CLR 475; Carpenter v Pioneer Park Pty Ltd (in liq) [2004] NSWSC 1007; (2004) 211 ALR 457; Carpenter v Pioneer Park Pty Ltd (in liq) and Anor [2004] NSWSC 973; (2004) 51 ACSR 245; Chahwan v Euphoric Pty Ltd [2006] NSWSC 1002, considered.

O'MEARA v FWV STANKE HOLDINGS PTY LTD (No 2)
[2007] SASC 294
Civil
Application for production of documents

VANSTONE J: The plaintiff, Mrs O’Meara, has applied, pursuant to s 237 Corporations Act 2001 (Cth), for leave to take responsibility on behalf of the defendant for its defence in action number 1565 of 2005. The trial of that action is to be heard later this year.
By interlocutory process filed 24 July 2007 (FDN 17) the defendant seeks an order that Mrs O’Meara produce copies of documents falling into a number of separate categories. Those categories include documents which would, in the normal course, be covered by legal professional privilege, documents relied upon for the purpose of admissions which the plaintiff proposes that the defendant company make if she is successful in her s 237 Corporations Act 2001 application, all documents in Mrs O’Meara’s possession relating to action number 1565 and various documents relating to Mrs O’Meara’s financial position. The orders sought extend to a request that a copy of the file of the solicitors of Mrs O’Meara be produced to the defendant’s solicitors.
The principal Supreme Court Rule raised by the application is r 136 which is entitled “Obligation to disclose documents”. It provides, relevantly, as follows:
136(1)     Each party must disclose the documents that are, or have been, in the party’s possession and –
(a)     are directly relevant to any issue raised in the pleadings; or
(b)     are to be disclosed by order of the Court.
…
Speaking of the predecessor to r 136, Lander J in Oberdan v Commonwealth Bank of Australia (1999) 75 SASR 152, 159 made the following observation:
An order for discovery therefore involves the exercise of a discretion on the part of the Court: Burma Oil Co Ltd v Governor and Co of the Bank of England [1980] AC 1090 at 1141.
In exercising that discretion the Court ultimately must determine whether the justice of the case requires a party to be put to the task of satisfying the obligation to make discovery to the extent provided in r 58.
In exercising the discretion to order discovery or further and better discovery it is necessary to bear in mind that almost always discovery is a burden to any party. It requires first an understanding of the issues raised in the pleadings and secondly a thorough search of that party’s records …
No pleadings have been filed in this matter. The application turns, then, on whether having regard to the justice of the case an order should be made.
The affidavit filed by Mrs O’Meara in support of her s 237 application sets out the background to her application and addresses each of the criteria specified by s 237(2) Corporations Act. It also contains her position in respect of fulfilment of those criteria. It annexes a number of documents on which she relies.
The underlying action, number 1565, is an oppression claim brought by a shareholder, namely JHV Stanke Properties Pty Ltd (“JHV”) against two companies which I shall call “the fishing companies”, certain directors of the fishing companies and, as well, the other two shareholders of the fishing companies, namely the current applicant, FWV Stanke Holdings Pty Ltd (“FWV”) and RCV Stanke Estates Pty Ltd (“RCV”). I shall refer to the three shareholders of the fishing companies as “the family companies”. JHV alleges that the affairs of the fishing companies have been conducted in a manner which is oppressive to JHV by reason of decisions taken in the course of the business they run, the use of company assets, their failure to pay dividends, and other matters. JHV seeks relief including an order for an account and inquiry of profits and that its shares in the fishing companies be bought by the other family companies.
For the most part the fishing companies and the directors of the fishing companies admit the allegations. However they justify the way in which the business of the fishing companies has been conducted by reason of what is referred to as a “conventional understanding”.
FWV has filed a defence in which it does not plead to a number of the allegations. If Mrs O’Meara were to take over conduct of FWV’s defence it would be with a view to FWV supporting JHV’s claim and seeking similar relief on its own behalf.
I deal first with the issue of solicitor’s advice to the plaintiff and “file notes, memoranda and records” relating to it. A comprehensive advice dated 3 July 2007 tendered to Mrs O’Meara by her solicitors, Messrs Lipman Karas, was annexed to the affidavit Mrs O’Meara filed in support of her s 237 application. The use which Mrs O’Meara seeks to make of that advice is as a foundation for her beliefs that there are good reasons for her application and for the actions she proposes if she is successful in that application, and that it is in the defendant’s best interests that she be successful. It is accepted on both sides that by publishing that advice by filing it, Mrs O’Meara effectively waived privilege in relation to it. The defendant argues that such waiver either expressly or implicitly extended to all legal advice Mrs O’Meara had received and all documents associated with the provision of that advice.
Mr M A Frayne for the defendant provided me with a helpful analysis of the leading cases dealing with waiver of legal professional privilege. Ultimately the relevant principles were not disputed. It is in their application to the matter at hand that the parties differed.
I take the relevant principle to be encapsulated in the following statement by Gleeson CJ, Gaudron, Gummow and Callinan JJ in Mann v Carnell (1999) 201 CLR 1, 13:
Legal professional privilege exists to protect the confidentiality of communications between lawyer and client. It is the client who is entitled to the benefit of such confidentiality, and who may relinquish that entitlement. It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilege.
Therefore, the question to be decided is whether Mrs O’Meara’s disclosure of the advice of 3 July is inconsistent with the maintenance by her of a claim of privilege over any other such advice she may previously have received. It is important to note that the 3 July advice is a complete document. It is not merely the gist or substance of the advice or a part or a fragment of the whole. (cf. Bennett v Chief Executive Officer of the Australian Customs Service (2004) 140 FCR 101.) It does not imply that there is any further document of a complementary nature. In other words, it purports to stand alone. It does not refer to, or depend on, any “associated material” of a like nature. (See Attorney-General for the Northern Territory v Maurice & Ors (1986) 161 CLR 475 per Gibbs CJ at 482.)
In order to determine whether there is any inconsistency inherent in Mrs O’Meara’s position it is necessary to consider again the purpose for which she disclosed the advice. In her affidavit in support of her application Mrs O’Meara refers to the advice as having resulted in her believing the following:
3.1FWV is in a similar position and has similar interests to those of JHV in the Proceedings.
3.2JHV’s claim has good prospects of success.
3.3The only viable position for FWV to adopt with respect to the Proceedings is to support JHV and to seek similar relief to that sought by JHV on its own behalf.
3.4Because I have a significant financial interest in FWV, this being by far my most valuable asset, FWV’s interests must be properly protected and to the extent reasonably possible, enhanced.
3.5It is unlikely that the directors of FWV will cause its approach in the litigation to change, due to their preferment of other interests over those of FWV.
3.6It is in FWV’s best interests that I be granted leave to take over conduct of FWV’s defence of the Proceedings and to cause FWV to join in support with JHV and to seek similar relief.
I notice that in Carpenter v Pioneer Park Pty Ltd (in liq) [2004] NSWSC 1007; (2004) 211 ALR 457 a comparable advice was tendered by the applicant for similar purposes. Barrett J considered that the advices went to the issues of good faith and whether there was a serious question to be tried.
The advice to Mrs O’Meara, her affidavit and the originating process all bear the date 3 July 2007. It is plain that Mrs O’Meara’s contention is that this particular advice is the one which activated her as at the time her s 237 proceedings were filed. Whatever advice she received prior to that time, in whatever form, whether from Messrs Lipman Karas or from any other source, does not seem to me to have any relevance. Accordingly there seems to me to be no inconsistency with Mrs O’Meara’s continued claim of privilege over other communications between herself and her lawyers. That finding disposes of the argument based on legal professional privilege.
In support of his further argument that any “documentary material” relied on as a basis for provision of the legal opinion should be produced, Mr Frayne likened the legal opinion to an expert’s report and thereby sought to impose upon Mrs O’Meara the obligations found in r 160. That rule deals with pre-trial disclosure of expert reports. It provides:
160 (1) A party must, before the relevant time limit—
(a)obtain all expert reports that the party intends to obtain for the purposes of the trial of the action; and
(b)serve on every other party to the action a copy of each expert report in the party's possession relevant to the subject matter of an action (whether the party intends to rely on it at the trial or not).
…
(5)A party who has disclosed an expert report, and proposes to rely on evidence from the expert at the trial, must, at the request of another party, provide the party making the request with—
(a)a copy of documentary material (including material in the form of computer data) on which an expert has relied for making a report; and
(b)details of any fee or benefit the expert has received, or is or will become entitled to receive, for preparation of the report or giving evidence on behalf of the party; and
(c)details of any communications relevant to the preparation of the report—
(i)between the party, or any representative of the party, and the expert; and
(ii)between the expert and another expert.
…
I do not think the suggested analogy is a good one. Rule 160 is plainly concerned with reports provided by persons whom a party will or might call as an expert witness during the trial. Such reports are prepared to assist in proof of the truth of the conclusions contained in them. It follows that documentary material or factual assumptions on which opinions in them are based should be identified and disclosed. The provision of the Lipman Karas advice and its disclosure have a quite different purpose. Mrs O’Meara relies on it to justify her stance in making her application, but that is the extent of its role so far as the court is concerned. I do not consider that r 160 has any relevance in the current application.
The next body of documents sought are those upon which Mrs O’Meara relies in respect of the admissions she proposes the company would make were she successful in her application. Counsel for Mrs O’Meara puts that there is no separate body of factual material upon which reliance has been placed. Rather the same facts asserted by JHV and accepted in the defence of the fishing companies are the basis of those admissions. The real issue in the matter will be whether there is anything in the nature of a conventional understanding which regulates the business of the fishing companies and the family companies and if so, its effect. During argument counsel took me through the admissions of the fishing companies and their directors. In my view the point is well made. No other source of information is relied upon or indicated.
A further order sought is for a list of (and production of) “all file notes, memoranda and correspondence whether electronic or otherwise which are or have been in the possession of Mrs O’Meara in relation to any matter in connection with proceedings in action 1565 of 2005 including all correspondence between directors, servants, agents or solicitors of [JHV] and Mrs O’Meara her servants or agents including her solicitors.” What relevance such items might have to the current proceedings is not demonstrated. The breadth of the request suggests that the very limited nature of the s 237 process is being overlooked. As Barrett J said in Carpenter v Pioneer Park Pty Ltd (in liq) and Another [2004] NSWSC 973; (2004) 51 ACSR 245 at 249 in respect of such an application:
The court’s function is essentially a screening function. It must assess against specified criteria the litigation proposal the applicant has in mind for the company. If that proposal is found by the court to meet the criteria, it must grant leave enabling the applicant to pursue it for the company.
In Chahwan v Euphoric Pty Ltd [2006] NSWSC 1002 the same judge enlarged on this. His Honour said at [27] that the process was “designed to exclude cases with insufficient prospects of success to warrant the proceedings being pursued”. In my mind to grant the order for production sought would be to either allow the s 237 application to descend into the oppression litigation, or to allow the defendant to undertake a fishing expedition. No relevance is demonstrated.
Further orders sought are for production of copies of Mrs O’Meara’s tax returns for the last three financial years and all records relating to her assets and liabilities. In my mind the request seems an extraordinarily wide one. It is said to be founded on a wish to explore her financial position in circumstances where she has indicated a preparedness (although qualified) to take responsibility for meeting the costs incurred by FWV from the point at which she assumes control of its defence onwards.
I do not think the request has been shown to be justified. There would appear to be no dispute that Mrs O’Meara is a substantial shareholder in FWV which in turn is a substantial shareholder in each of the fishing companies. The value of the assets of one of the fishing companies is said to run to some millions of dollars. She is also a beneficiary to her father’s estate in company with her brother. Her father had substantial landholdings. It is true that they are claimed by the fishing companies to be beneficially held by them. But either way, Mrs O’Meara enjoys an interest in substantial assets. In these circumstances I would not regard the indemnity she has offered as worthless. If there is any question over her liquidity then that can be attributed to the fact that the assets of those estates have not been distributed, notwithstanding that her parents died in 1995 and 2001. Mrs O’Meara’s brother John is the executor of those estates.
The other orders sought relate to the copying and production of “the file of Lipman Karas”. Mr Frayne did not elaborate on the purpose for which such a file might be required. No doubt there is more than one file at that firm in relation to Mrs O’Meara. But more importantly, it is not demonstrated how the contents of any such file might be relevant to the application.
In the circumstances I am not prepared to make any of the orders sought. I dismiss the application.