Re Southland Coal Pty Ltd

[2005] NSWSC 259

CITATION:	Re Southland Coal Pty Ltd [2005] NSWSC 259
HEARING DATE(S):	21 February 2005
JUDGMENT DATE :	31 March 2005
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Young CJ in Eq
DECISION:	Application to set aside summonses for examination dismissed.

CATCHWORDS:	CORPORATIONS [319]- Examination- Examination of officers of and experts retained by solicitors for company's insurer- Whether oppressive or abuse of process. EVIDENCE [72]- Privilege- Insurer's solicitors retain experts after disaster but before claim made- Whether reports privileged.
LEGISLATION CITED:	Corporations Act 2001 (Cth) s 596B Evidence Act 1995, ss 118, 119
CASES CITED:	DSE (Holdings) Pty Ltd v InterTan Inc (2003) 135 FCR 151 Gerah Imports Pty Ltd v Duke Group Pty Ltd (1993) 116 FLR 479; 12 ACSR 513 Grosvenor Hill v Barber (1994) 12 ACSR 646 Hamilton v Oades (1989) 166 CLR 486 Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512 Kelly v Murphy (1993) 12 ACSR 365 Mitsubishi Electric Australia Pty Ltd v Victorian Workcover Authority (2002) 4 VR 332 Nickmar Pty Ltd v Preservatrice Skandia Insurance Ltd (1985) 3 NSWLR 44 Pratt Holdings Pty Ltd v Commissioner of Taxation (2004) 207 ALR 217 Re Allstate Explorations NL (2003) 46 ACSR 379 Re BPTC Ltd (1993) 10 ACSR 756 Re Global Medical Imaging Management Ltd [2001] NSWSC 481 Re GPI Leisure Corporation Ltd (1994) 12 ACLC 815 Re Highgrade Traders Ltd [1984] BCLC 151 Re Hugh J Roberts Pty Ltd (1970) 91 WN (NSW) 537 Re Interchase Corporation Ltd (1996) 21 ACSR 375 Re Spedley Securities Ltd; Ex parte Potts (1990) 2 ACSR 152 Sherlock v Permanent Trustee of Australia Ltd (1996) 22 ACSR 16 Sydney Airports Corporation Ltd v Qantas Airways Ltd [2005] NSWCA 47 Vardas v South British Insurance Co Ltd [1984] 2 NSWLR 652 Wheeler v Le Marchant (1881) 17 Ch D 675
PARTIES:	Alan Meteyard (1st Applicant), Lawrence Holland (2nd Applicant) Andrew Bart (3rd Applicant), Guy Raynal (4th Applicant), Bruce McKensey (5th Applicant), Crawford & Company (Australia) Pty Limited (6th Applicant), McKensey Mining Services Pty Limited (7th Applicant), QBE Insurance (Australia) Limited (8th Applicant) Andrew John Love, Peter Ivan Felix Geroff and Alan Edward Lewis in their capacity as Receivers and Managers of Southland Coal Pty Limited (Receivers and Managers Appointed) (In Liquidation) (Opponents)
FILE NUMBER(S):	SC 1091/05
COUNSEL:	Dr A S Bell and P Kulevski (Applicants) R G Forster SC and Ms J A Soars (Opponents)
SOLICITORS:	Wotton & Kearney (Applicants) Henry Davis York (Opponents)

LOWER COURT JURISDICTION:

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

YOUNG CJ in EQ

Thursday 31 March 2005

1091/05 – RE SOUTHLAND COAL PTY LIMITED

JUDGMENT

1 HIS HONOUR: I am dealing with a series of applications to set aside a series of summonses for examination under s 596B of the Corporations Act 2001 (Cth) which were served on various officers of the QBE insurance group and expert consultants retained by them including a loss assessor.

2 The summonses were issued by a Deputy Registrar on application of the receivers and managers of Southland Coal Pty Ltd (“Southland”), persons authorised by ASIC to apply for such relief. Southland is now in liquidation.

3 Technically, the summonses were issued for examination of a person. However, in accordance with the usual practice, orders for production under Part 36(12) of the Supreme Court Rules were issued as supplementary to the examination summonses (see Re BPTC Ltd (1993) 10 ACSR 756). I will, for convenience, merely refer to “the summonses” as covering both the examination summonses and the orders for production.

4 The basal facts behind the present dispute are that QBE was Southland’s insurer in respect of 70% of the special risk attaching to a coal mine in the Hunter Valley.

5 The mine was operated as a joint venture between Southland and Thiess Pty Ltd.

6 There was a spontaneous combustion incident at the mine on 24 December 2003 which led to the closure of the mine and various claims being made by Thiess and Southland against QBE under the relevant policies, the first claim being made on 24 February 2004.

7 On becoming aware of the incident and in early January 2004, before formal claims had been lodged, QBE through its solicitors, retained the consultants against whom summonses have been issued, to report on the incident and alleged loss.

8 Since that time, there have been negotiations. No litigation has yet been commenced by Southland, though Thiess commenced proceedings against QBE in December 2004.

9 The interlocutory process to set aside the summonses was filed on 10 February 2005 and was heard by me on 21 February 2005. Dr AS Bell and Mr P Kulevski appeared for the persons summonsed whom I will designate “applicants” and Mr RG Forster SC and Ms JA Soars for the opponents.

10 Initially the opponents protested that the process to set aside the summonses was not filed within due time. However, during the oral argument this objection was abandoned and I made an order extending the time.

11 Dr Bell presented three heads of argument, submitting that if any of these were accepted the summonses should be set aside. The heads of submissions were:

A. The summonses were an abuse of process;

B. The material sought to be obtained was protected by privilege;

C. The summonses were oppressive.

12 The first and third of these heads overlap. I will first deal with them and then with privilege.

13 A and C. The first basis on which the applicants seek to discharge the examination summonses is that they say they are an abuse of process or oppressive.

14 There is no doubt that these are proper reasons for setting aside summonses issued under s 596B of the Act; see eg Re Hugh J Roberts Pty Ltd (1970) 91 WN (NSW) 537.

15 There is also no doubt that, whilst the general principles governing the issue of summonses are laid down by the Act, the court retains discretions to ensure as far as possible that the processes authorised by the Act are not employed oppressively.

16 It seems clear that the onus of establishing whether there has been abuse of process or oppression is on the applicants: Re Global Medical Imaging Management Ltd [2001] NSWSC 481 [13].

17 That onus may be a heavy one. This is suggested by the example of oppression given by LW Street J in Hugh J Roberts at 541-2, a passage endorsed by the Court of Appeal in Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512 at 519:

“An attempt, where litigation is either contemplated or commenced, to summon the prospective or existing defendant’s probable witnesses and examine them simply for the purpose of destroying their credit would exceed the legitimate use of the process. Beyond stating this extreme instance, I consider it unsafe to generalize — very often the gathering of information quite properly involves testing the reliability or credit of the examinee from whom the information is being obtained.”

18 It is put that the examination is an abuse of process or oppressive because it falls outside the scope of what is permitted under s 596B of the Corporations Act . Section 596B(1) states that:

"(1) The Court may summon a person for examination about a corporation's examinable affairs if:
(a) an eligible applicant applies for the summons; and

(b) the Court is satisfied that the person:
(i) has taken part or been concerned in examinable affairs of the corporation and has been, or may have been, guilty of misconduct in relation to the corporation; or

(ii) may be able to give information about examinable affairs of the corporation."

19 While it is clear that the receivers are eligible applicants by reason of the written authorisation for examination they obtained from ASIC (see definition of ”eligible applicant” in s 9), it is far from clear whether the internal affairs of an insurance company (and the expert companies it hires for the purpose of investigating a claim) which has issued a policy to a corporation to which the examination relates, falls within the meaning of “a corporation’s examinable affairs”.

20 The definition of “examinable affairs” for the purpose of s 596B appears in s 9 of the Act which says that “examinable affairs”, in relation to a corporation means:

"(a) the promotion, formation, management, administration or winding up of the corporation; or

(b) any other affairs of the corporation (including anything that is included in the corporation's affairs because of section 53); or

(c) the business affairs of a connected entity of the corporation, in so far as they are, or appear to be, relevant to the corporation or to anything that is included in the corporation's examinable affairs because of paragraph (a) or (b)."

21 Section 53(a) indicates that the affairs of a body corporate include:

"the promotion, formation, membership, control, business, trading, transactions and dealings (whether alone or jointly with any other person or persons and including transactions and dealings as agent, bailee or trustee), property (whether held alone or jointly with any other person or persons and including property held as agent, bailee or trustee), liabilities (including liabilities owed jointly with any other person or persons and liabilities as trustee), profits and other income, receipts, losses, outgoings and expenditure of the body … ."

22 Thus the examination of QBE and the experts it has retained can only be permitted if they are “connected entities” of Southland, pursuant to part (c) of the definition of “examinable affairs”.

23 The applicants accept that the concept of "examinable affairs" is one of broad compass; see eg Gerah Imports Pty Ltd v Duke Group Pty Ltd (1993) 116 FLR 479; 12 ACSR 513 and Re Allstate Explorations NL (2003) 46 ACSR 379. However, they say, there must be limits.

24 The applicants also accept, and indeed it is really uncontroversial that an insurance policy, being a chose in action, forms part of the property of a corporation and is therefore within the scope of the extended definition contained in s 53 of "examinable affairs": Grosvenor Hill v Barber (1994) 12 ACSR 646 at 650 and Re Interchase Corporation Ltd (1996) 21 ACSR 375 at 378.

25 The applicants put that, whilst the existence of a policy of insurance is a relevant matter, the internal workings of the insurer including the material it has amassed in response to a company’s claim is not.

26 Clearly an insurer’s investigations with respect to an insured’s claim on a policy are, prima facie, “relevant” or at least “appear to be relevant” to the insured’s policy (part (c) of the definition of "examinable affairs"). However, the scope of what is permitted by an examination of those investigations is not so easily established.

27 Counsel for both parties referred me to two apparently conflicting cases on this point, Re GPI Leisure Corporation Ltd (1994) 12 ACLC 815, a decision of M H McLelland CJ in Eq, the other, Re Interchase Corporation Ltd (1996) 21 ACSR 375, a decision of Kiefel J in the Federal Court of Australia.

28 The GPI Leisure case involved the examination under s 596B of a partner of a firm of solicitors by liquidators of a company who alleged that the solicitors had breached certain duties owed to the company. The solicitors sought to have the orders for production set aside to the extent that they related to indemnity insurance held by the firm, on the basis that they went beyond the examinable affairs of the company. McLelland CJ in Eq upheld that submission and in the course of his judgment (at 817) said:

“It is one thing to permit the liquidator to use the process of the Court to compel persons alleged to be liable to GPIL to answer questions about the existence of insurance policies which may be available to indemnify such persons in respect of any such liability, and to compel the production of such policies and ancillary documents such as renewal certificates."

His Honour then referred to Gerah Imports v The Duke Group (1993) 116 FLR 479 at 487; 12 ACSR 513 at 520 (South Australian Full Supreme Court) and 68 ALJR 196 (an application for stay before High Court of Australia); Grosvenor Hill v Barber (1994) 12 ACSR 646 at 655-7; with a cautionary cross-reference to Kelly v Murphy (1993) 12 ACSR 365 at 372-3.

29 His Honour then contrasted this situation by saying that it is quite another matter -

"to permit the liquidator to use such process to compel answers to questions, and to compel the production of documents, in order to conduct an investigation into other matters such as, for example, (a) the merits of any dispute between the insured and the insurer as to whether a policy has been avoided for non-disclosure, or whether conditions of indemnity in the policy have been fulfilled (I should stress that these are hypothetical examples); or (b) confidential disclosures by the insured to the insurer made in order to protect the insured’s right to indemnity under a policy (which may not be protected by legal professional privilege - cf Bulk Materials (Coal Handling) Services Pty Ltd v Coal and Allied Operations (1988) 13 NSWLR 689).”

30 In Re Interchase Corporation Ltd (1996) 21 ACSR 375, examination of the defendant’s insurers was sought for the purpose of determining whether they would indemnify the defendant in the event that the plaintiff liquidators were successful in an action brought for the incorrect valuation of a shopping centre. The insurers applied to have the examination summons discharged.

31 Kiefel J dismissed the insurer’s applications. She approached the problem of who might be examined under s 596B simply by asking (at 378) whether the examinee is able to give information about the examinable affairs of the corporation. Her Honour ruled, as with respect was obvious, that an examination to discover the existence or validity of a defendant’s insurance policy in order to determine whether the defendant can meet any judgment against it is sufficiently “about” a corporation’s property to be examinable under s 596B.

32 Kiefel J does not appear to have had the GPI Leisure case cited to her. She relied substantially on the decision of the Full Federal Court in Grosvenor Hill v Barber (supra) that dealt with essentially the same factual situation as Re Interchase. The Full Court in Grosvenor Hill had made quite clear, at 650, that information that sheds light on the prospects of success of contemplated litigation by the corporation would be information with respect to “examinable affairs” for the purpose of s 596B.

33 Another decision with respect to examination summonses and insurance companies is that of the English Court of Appeal in Re Highgrade Traders Ltd [1984] BCLC 151. In that case, the court, as a matter of discretion, set aside the summons to a Mr Alexander, the insurer’s claims manager, on the basis that the insurer could not be made to reveal privileged information.

34 Dr Bell says that the authority of the GPI case has never been questioned and that I should follow it. He further says that, when one examines Kiefel J’s decision, it is irrelevant to the present facts. The GPI case was one where the judge declined to allow a liquidator to delve into the internal affairs of the company’s insurer. The Interchase case was one where the company was suing a third party.

35 Mr Forster distinguishes the GPI case as one where the company was seeking to examine the defendant’s insurer (not its own insurer) as to whether the defendant was worth suing.

36 It is clear that it is no basic objection to the issue of an examination summons on the ground of oppression that the liquidator may ascertain the strength of the case of a person with whom the company is involved in litigation; see eg Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512; Sherlock v Permanent Trustee of Australia Ltd (1996) 22 ACSR 16.

37 The applicants further submitted that an examination would be an abuse of process because it would compel the applicants to give evidence of possible defences in a threatened action for breach of contract brought by the opponents, and as such would be a “dry run” of cross examination of the applicants' witnesses. It may also be a “back door” method of obtaining pre-trial discovery, they said. Reliance was placed on Mason CJ’s judgment in Hamilton v Oades (1989) 166 CLR 486 at 498 for this proposition.

38 It must be recognised that what Mason CJ said in Hamilton v Oades was with reference to the passage in Hugh J Roberts I have quoted at [17]. That is to say, the court will restrain an examination for an improper purpose, but usually only in exceptional cases.

39 While it is clear that Mason CJ said that if disclosure of defences or de facto discovery were obtained by way of an examination, the examination may be restrained as an abuse of process, it does not follow that the examination must be restrained if there is a chance that this will occur.

40 The applicants say that because Thiess has already commenced litigation and the opponents have impliedly threatened litigation themselves, it is clear that the opponents only purpose in seeking an examination under section 596B is to achieve exactly what Mason CJ in Hamilton says is forbidden. I do not agree.

41 Dr Bell puts that, whilst it might be reasonable for court-appointed liquidators, who are neutral people who come in cold to the administration of a company, to establish facts by examination of officers, it by no means follows that receivers appointed by a secured creditor are in the same plight. In the former case, he says, the public interest must prevail. However, there is no reason why the interests of the mortgagees should enjoy the same status.

42 The applicants note the reliance placed on the status of an independent liquidator acting in the public interest that underlay the decision of the Full Federal Court in Grosvenor Hill, where, at 651, the Court said:

“A liquidator, when engaged in litigation on behalf of a company which is being wound up, or when contemplating instituting such litigation, is not in the same position as an ordinary litigant. The liquidator comes to the company as an officer of the court under a duty and responsibility to get in and maximise the assets of the company for distribution for the benefit of creditors. In the discharge of his of her duty and function, the liquidator comes to the company with limited or no knowledge of the company’s assets, business and affairs. The liquidator is therefore in a position of disadvantage to make informed decisions of both a legal and a commercial nature necessary to carry out the winding up.”

43 The applicants submitted that the receivers in this case, unlike a court-appointed liquidator, are by no means “in the dark’ in relation to Southland’s affairs. They are fully aware of the existence and details of Southland’s policy with QBE and have been kept abreast of QBE’s investigations into Southland’s claims. QBE indicated that it would be able to give the receivers an answer with respect to indemnity by 25 February 2005 and in fact did so.

44 The applicants say that when one looks at the basal purpose of this sort of examination, an application such as the present made by a receiver is outside it. I note that in Hugh J Roberts, LW Street J said at 540:

“The liquidator is given by the statute this special authority to proceed by way of private examination to obtain information which he needs for the due winding up of the company, the affairs of which he has the responsibility of administrating.”

Receivers with some knowledge of the affairs of the company because they are its controllers, are not placed in the same position of ignorance as a court-appointed liquidator coming cold into the company.

45 Courts have recognised the need to balance competing public interests when deciding whether to allow a s 596B examination. In Re Spedley Securities Ltd; Ex parte Potts (1990) 2 ACSR 152 at 154, applying Mason CJ’s judgment in Hamilton v Oades (1989) 166 CLR 486 at 496-497, I explained that the court must balance the need for ensuring the liquidator is able to collect all information to carry out his public responsibility in the interests of the creditors and the public on the one hand with the interests of justice in protecting the witness on the other.

46 I consider that there is some validity in this submission, though not as much as Dr Bell would have it. Indeed I have in previous cases looked at discretionary matters with more searching eyes where the summons has been issued at the behest of a liquidator appointed in a voluntary winding up.

47 However, it must be observed that in Hong Kong Bank of Australia Ltd v Murphy the applicants were the new trustees for investors, yet the Court of Appeal applied the same tests as for a liquidator.

48 Although I appreciate that receivers are the appointees of a secured creditor, I must also take into account that receivers, under the Corporations Act have public duties thrust on them by law and in many ways act as public representatives. In the present case, ASIC has endorsed the receivers’ process and the liquidator is aware of it.

49 Given that here we are dealing with receivers whose prime responsibilities are to the company’s secured creditor and not the public, the applicants put that justification for an examination in this case must be diminished. I consider that whilst the matter may influence the exercise of the court’s discretion in a borderline case, the only vital significance of the person applying for issue of the summons not being a court-appointed liquidator is that the court looks more deeply into the motives and purpose of the examination.

50 I appreciate that what might be termed part (a) of the second limb of McLelland CJ in Eq’s statement in the GPI Leisure case set out above would appear to vindicate the applicants’ case. However, I agree with Mr Forster that the fact that the insurer in the instant case would be the actual defendant in any foreseeable action, not just an insurer standing behind a third party defendant, makes it distinguishable.

51 Thus I consider both of the cases said to throw light on the present case distinguishable.

52 I am thus thrown back on first principles.

53 Apart from matters connected with the privilege argument, the fact that the proposed defendant is an insurer rather than a trader appears to me to be of little significance. One bristles at the suggestion that commercial people should have to disclose their case to an outsider, but I am bound by decisions which say that the fact is of no great significance in this type of matter.

54 I will consider questions of oppression related to matters of privilege in the following section. However, for the above reasons, my view is that otherwise there is no abuse of process or oppression warranting the setting aside of the summonses.

55 B. I thus pass to consideration of the submissions focussed on privilege.

56 The applicants submitted that the examination under s 596B and production of documents under SCR, Part 36 rule 12 would be subject to a claim of legal professional privilege. There was no dispute between the parties that privilege, as contained in the Evidence Act 1995, (Cth) ss 118 and 119 attaches to those two provisions. However, it is not clear whether it applies in the circumstances of this case and even if it does, whether it should be a reason for discharging the summonses.

57 Section 118 of the Evidence Act deals with what is commonly referred to as “legal advice privilege”. It prevents the disclosure of a confidential communication made between a client and his or her lawyer, between two or more lawyers acting for the client or a confidential document prepared by the client or the lawyer for the dominant purpose of the lawyer providing legal advice to the client.

58 Section 119 of the Act deals with what is usually referred to as “litigation privilege”. The section prevents the disclosure of a confidential communication between a client or his or her lawyer, and a third party that was made, or the contents of a document that was prepared for the dominant purpose of the client being provided with professional legal services in relation to legal proceedings that are in existence or at least reasonably contemplated.

59 The documents contained in the schedule to the orders for production include documents prepared by two of the experts summoned to be examined, Crawford & Company (Australia) Pty Ltd (Crawford) and McKensey Mining Services Pty Ltd (McKensey), who were retained by QBE’s solicitors with respect to Southland’s claims.

60 There is no actual litigation on foot between Southland and QBE. However, litigation is clearly likely to break out between the parties who are each considering their position.

61 The first question here is one of legal advice privilege under s 118 of the Evidence Act.

62 As I noted earlier, QBE through its solicitors, retained Crawford and McKensey even before a claim was made under the policy. It obviously made commercial common sense to do so because of the value of obtaining material as soon after the incident as possible.

63 The opponents says that insurers often act in this way, but it has never been the law that privilege attaches to reports of such investigations.

64 The applicants say that the nature of the functions of the experts after 23 December 2003 was an integral part of the process of QBE obtaining legal advice as to its position. It needed to supply its lawyers with the facts in order to gain appropriate advice.

65 In Pratt Holdings Pty Ltd v Commissioner of Taxation (2004) 207 ALR 217, 219, Finn J said:

“It is well accepted that if a person prepares and then makes a documentary communication to a legal adviser for the dominant purpose of obtaining legal advice, that documentary communication attracts legal professional privilege: Esso Resources Ltd v FCT (1999) 201 CLR 49. It is equally well accepted that if a person directs or authorises a third party (an agent) to prepare and then make a documentary communication on that person’s behalf to a legal adviser for the dominant purpose of obtaining legal advice, that documentary communication by the agent attracts legal professional privilege: Australian Rugby Union Ltd v Hospitality Group Pty Ltd (1999) 165 ALR 253. But it is not accepted that, if a person (a principal) directs or authorises a third party who is not an employee of that person to prepare a documentary communication for the dominant purpose of its being communicated by the principal and not directly by the third party to a legal adviser for the purpose of obtaining legal advice, that documentary communication from the third party to the principal attracts legal professional privilege.”

66 The Full Federal Court in Pratt considered whether the last proposition, based on Wheeler v Le Marchant (1881) 17 Ch D 675 was still correct in Australian law. Finn and Stone JJ, with whom Merkel J agreed, held it was not.

67 Thus, where a client instructs an expert to prepare a report for the client to transmit to a lawyer for the purpose of obtaining legal advice, the report may well not be privileged.

68 However, the facts of the instant case are that it was the solicitors, not QBE itself who commissioned the expert report and that the solicitors asked the experts to report direct to the solicitors so that they could provide advice to QBE.

69 It will be remembered that in Pratt the third party experts were retained by the client itself, which then provided the experts’ reports to its solicitors for the purpose of receiving advice from them.

70 Sutton’s Insurance Law in Australia, 3rd ed (LBC, 1999) states at [15.98] that:

“Documents created so that the insurer can be informed generally and can in the ordinary course of business investigate any claim that might be made before deciding what to do … are not privileged in contrast to the situation where the reports are prepared at a time when litigation is either likely or anticipated.”

71 Sutton’s statement is supported by copious authority; see eg Vardas v South British Insurance Co Ltd [1984] 2 NSWLR 652, 656.

72 In Nickmar Pty Ltd v Preservatrice Skandia Insurance Ltd (1985) 3 NSWLR 44 at 56E, Wood J held that reports obtained from third party experts who were retained by solicitors, but on the explicit instructions of the client, attracted legal advice privilege.

73 It must be noted that Wheeler was followed in Nickmar and is still generally regarded as good law.

74 In DSE (Holdings) Pty Ltd v InterTan Inc (2003) 135 FCR 151, Allsop J said at 179 that it was a question of fact whether despite the form of the request, the client had requested the third party to communicate with the solicitor either information derived from the client or even information generated by the third party.

75 The material in the instant case suggests that the solicitors merely obtained general instructions to do what was in their view required to protect the insurers and that the solicitors retained loss assessors and other experts on their own initiative based on previous experience with respect to such incidents.

76 Should I extend the philosophy exhibited by the Full Federal Court in Pratt to say that the privilege should cover the present situation?

77 In my view this question should be answered “No”. It is clear that a line has to be drawn somewhere and that the authorities as I understand them indicate that cases where the solicitor, acting within general instructions, of his or her own initiative seeks a report from an expert, that report falls outside legal advice privilege.

78 I should add that I am making this determination for the purpose of considering whether the question of privilege leads to the view that the summonses are oppressive or an abuse of process. The person conducting the examination may still need to rule on the material before him or her whether, on the facts, privilege applies or not.

79 The next matter to consider is whether the reports come within litigation privilege.

80 For there to be litigation privilege pursuant to s 119 of the Evidence Act, all the documents listed in the schedule to the orders for production and any evidence given in examination would need to have been communicated for the dominant purpose of use in, or in relation to, litigation that was either in existence or at least anticipated or in reasonable contemplation at the time the documents or evidence were communicated: Mitsubishi Electric Australia Pty Ltd v Victorian Workcover Authority (2002) 4 VR 332.

81 Both s 119 and the authorities make clear that litigation privilege covers third party communications whether or not the third party is an agent of the client, so long as the above test is satisfied.

82 There is no actual litigation current between Southland and QBE (though there is litigation between Thiess and QBE). The question thus is whether there is a “real prospect” that litigation will occur. This means that there is more than just a mere possibility of litigation, though, the prospect need not get to the stage of being more likely than not: Mitsubishi Electric at 341.

83 The opponents suggest that, at some time after January 2004, the point may well have been reached when litigation was a real prospect, but when this stage was reached, it is impossible to assess on the current evidence, though it was most likely not as early as January 2004. I accept this suggestion.

84 The applicants sought to rely on Re Highgrade Traders Ltd [1984] BCLC 151 for the proposition that litigation privilege applies to documents brought into existence for the purpose of enabling solicitors to advise whether a claim shall be made or resisted. However, as I understand the judgment in that case, the Court of Appeal did not negate the need for litigation to be reasonably in prospect (see the judgment of Oliver LJ, with whom Goff LJ agreed, at 172).

85 I also adopt the opponents’ submission that the probabilities are that, even if some documents in the hands of the proposed examinees are privileged, there will be some documents not in that category about which examinees may be questioned.

86 I note that no issue of dominant purpose was raised in argument, cf Sydney Airports Corporation Ltd v Qantas Airways Ltd [2005] NSWCA 47.

87 It follows that, at least apart from special cases, the appropriate course is for the examination to proceed and for the person before whom the examination is held to rule on privilege question by question, document by document; see Re Allstate Exporations NL (2003) 46 ACSR 379.

88 I must now deal with an issue that I left hanging before dealing with privilege and that is whether, in the light of the problems with privileged documents, the summonses should be set aside as oppressive.

89 This is the course that the English Court of Appeal took in Re Highgrade Traders. Opponents' counsel have urged me not to follow this approach, especially in the light of the approach taken in local cases such as Re Allstate Exporations NL.

90 I adopt this submission. However, in view of my rulings on privilege, the question does not arise.

91 One further matter on which I must comment is the applicants’ submission that the fact that privilege would be claimed over most documents and answers given at the examination would mean that it would be a long, drawn out and expensive one. Furthermore, a considerable amount of time and money would have to be spent by the applicants in preparing for the examination. Thus, it would be oppressive to have to comply with the summonses.

92 Whilst the prefatory averments in the preceding paragraph are regrettably true, they do not give rise to oppression making it appropriate to set aside the summonses.

93 Accordingly, the challenges to the issue of the summonses fail.

94 The interlocutory processes must be dismissed with costs and a new date fixed for the return of the summonses.

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