Southern Equities Corporation Ltd (in Liquidation) v Arthur Andersen &Co (No 7) No. Scciv-94-1474

[2002] SASC 1

SOUTHERN EQUITIES CORPORATION LTD (IN LIQUIDATION) v ARTHUR ANDERSEN & CO (NO 7)
[2002] SASC 1

Civil

1. DEBELLE J.          On 23 November 2001 I determined an application by the defendant for production and inspection of certain documents which the plaintiff claims are privileged from production on the ground of legal professional privilege.  I held that certain of the documents were privileged and also privileged from production.  However, I held that there were substantial doubts as to the propriety or validity of the claim for legal professional privilege in relation to the other documents the subject of the application.  I held that a judge or master should inspect the documents to determine if the claims for legal professional privilege are well founded.  I further decided that, as I had been the judge managing this action for at least the past three years and will not be the trial judge, I would undertake the task myself.  I therefore made orders that the plaintiff bring into court the documents for which legal professional privilege is claimed on the ground that Messrs Oates, Judge, Fox and Nizzola are in-house legal advisers.

2. The documents were delivered to my chambers under cover of a letter dated 6 December 2001 from the solicitors for the plaintiff.  A copy of the letter is attached to these reasons.  On 9 January 2002 I inspected the documents.  I have not had an earlier opportunity to do so.

   The Schedule of Documents

3. The schedule attached forms part of these reasons.  In that schedule I list the documents which were produced for inspection by me and determine whether the documents are privileged from production.  In that schedule the abbreviation “BCHL” means Bond Corporation Holdings Ltd.  There are other abbreviations in the schedule.  Those abbreviations repeat abbreviations in the documents themselves.  It is not always clear to me what the abbreviations stand for.

4. Some of the documents in the schedule are marked with an asterisk.  When dealing with this application for production I referred to a list of documents for which legal professional privilege had been claimed which was dated 29 June 1998.  It is a so-called Kadlunga list.  The documents marked with an asterisk do not appear in that list.

5. When determining whether the documents were privileged, I used the so-called “dominant purpose” test as identified in Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49, that is to say, I determined whether a communication was made or a document was prepared for the dominant purpose of a lawyer providing legal advice or legal services. In the case of each of the documents in the schedule, where I have held that the document is not privileged, I have concluded that it did not satisfy the dominant purpose test. I have not stated that in respect of each document in order to avoid unnecessary repetition.

   Not Independent Legal Advisers

6. In my reasons I held that Messrs Oates, Judge, and Fox lacked the required degree of independence to attract legal professional privilege to documents prepared by them.  Nothing I have seen in the course of inspecting the documents indicates that Oates, Judge or Fox were acting as independent legal advisers.  In most cases I refer to the lack of independence in the schedule.  In those cases where I have not, I do not mean that they did have the required degree of independence.  As a general observation, I note that none of them were acting as independent legal advisers and so legal professional privilege did not attach to the documents respectively prepared by each of them.

7. Although I had doubts whether Mr Nizzola was acting as an independent legal adviser, I did not reach a concluded view on that question.  Having inspected the documents, I am not satisfied that he was acting as an independent legal adviser.  It is apparent from the documents that he was instead discharging his duties as Executive-Group Finance.  When it is stated in the schedule that Mr Nizzola is acting as an executive, I am referring to him acting as Executive-Group Finance.  For these reasons, as well as for the other reasons in the schedule, documents prepared by him are not privileged.

8. I add, as a general observation in relation to Messrs Oates, Judge, Fox and Nizzola, that the plaintiff has not discharged the onus of proving the documents are not the subject of legal professional privilege.

   Paragraph 2.1 of Fisher Jeffries’ Letter

9. It will be noted that in para 2.1 of their letter, Messrs Fisher Jeffries assert that certain documents are not within the scope of the judgment.  The documents listed in para 2.1 have not been provided for inspection by me.  The notes in the letter concerning each document provide a better description of the document than is contained in the Kadlunga list filed on 29 June 1998.  The description of each document suggests, on its face, that the document is privileged from production on the grounds of legal professional privilege.  If the defendant seeks production of any of the documents listed in para 2.1, they will have to make a further application.

   Documents Not Produced

10. The plaintiff has not produced for inspection by me all of the documents on the Kadlunga list which were the subject of this application.  A number of those are listed in para 2.2 of the letter from Fisher Jeffries as having been produced to the defendant.  However, I believe that the defendant claims that the following documents are not privileged.

    56 0102  56 0461
      56 0372  56 0990
      56 0374  56 1117
      56 0450  56 1329

    I will hear the parties on this issue.  I will also hear the parties if the defendant asserts that it seeks further documents in the Kadlunga list.

11. I will hear the parties on the terms of the orders to give effect to these reasons.

    SCHEDULE

Document No.	Privileged? Yes/No	Comments
56 0003	No	The document is simply a report from an executive to the Board, albeit concerning legal proceedings.
56 0037	No	This is simply a report from Judge as executive assistant to Beckwith on the status of creditors of Cannon.  It is a report from an executive to his superior.
56 0038	No	This handwritten note is simply a list of tasks or questions to discuss with a third person.
56 0039	No	This is simply a report from an executive to a director.  Judge is sending Oates a copy of a report he has made to Alan Bond.
56 0060	No	Although dealing with substantial shareholders’ notices to be given by BCHL, this is simply a report from one executive to another.  It is couched in terms which show that it is not legal advice as exemplified by the frequent use of the expression “I think” under the heading “Timing”.
56 0090	No	Although headed “Privileged Legal Advice”, this is simply a report from Fox as executive assistant to John Bond, that is to say, from an executive to his superior, concerning some steps in the Hilton transaction.
56 0097 068*	No	This document is written by Fox in his capacity as personal assistant to John Bond.  Although headed “Privileged” this is a list of recommendations from an executive to his superior as to how to proceed to deal with the stamp duty question.  It lacks the required degree of independence.
56 0097 072*	No	This is simply an internal BCHL document which lists documents concerning the Hilton Hotel transaction stating documents which were released to the Australian Tax Office (“ATO”) for which privilege was either claimed or not.
56 0097 078*	No	This is a memorandum prepared by Fox following a visit by two officers of the ATO which records what occurred and, in particular, notes of a conversation concerning documents for which privilege had been claimed.  It is a record prepared by an executive of BCHL.
56 0097 081*	No	This is a set of written questions prepared by the ATO and is referred to in the previous document.  It is an ATO document and cannot therefore be privileged.  It includes some handwritten notes, presumably made by Fox for his own record.  Those notes do not convert it to a privileged document.
56 0097 106*	No	Handwritten note presumably made by Fox of conversations with officers of ATO.  They are made in his capacity as an executive of BCHL and not as a legal adviser.
56 0097 109*	No	Internal memorandum from Fox as an executive of BCHL to its then accountant.
56 0097 110*	No	For the same reasons as the previous document.
56 0097 111*	No	Copy of 56 0097 110 and there is nothing which attracts the operation of Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501.
56 0097 113*	No	Letter from Fox to Australian Government Solicitor stating documents for which privilege was claimed.  It is signed by Fox as General Manager - Eastern Operations and not as a legal adviser.
56 0098 001	No	This work book contains work notes and diagrams concerning potential means of proceeding in the Hilton Hotel transaction.  To a degree it represents Fox’s thinking as an executive.  Fox lacks the required degree of independence.  It also seems to contain reminders of steps to be undertaken.
56 0099 000	No	This is not privileged for the same reasons as the previous document.
56 0102 001	No	This memorandum is simply a report to John Bond from Fox as his executive assistant.
56 0103 001	No	These notes simply list the thinking of Fox as an executive as well as noting comments and other information.  Fox lacks the required degree of independence.
56 0106 001	No	This document is not privileged for the same reasons as the previous document.
56 0147 001	No	This memorandum to John Bond from Fox as his executive assistant is simply a report which contains advice on legal issues but is essentially a report from an executive to his superior.  Fox lacks the required degree of independence.
56 0147 002	No	This document is a copy of 56 0147 001.
56 0148 001	No	Another copy of 56 0147 001.
56 0148 002	No	Another copy of 56 0147 001.
56 0152 006	No	Another copy of 56 0147 001.
56 0152 007	No	Another copy of 56 0147 001.
56 0164 001	No	Another copy of 56 0090.
56 0164 005	No	This is the same document as 56 0090.
56 0179 001	No	This is the same document as 56 0060.
56 0180 001	No	Although this is another document which deals with the substantial shareholders’ notices to be given by BCHL, it is essentially a document from one executive to other executives of the company providing a check list of actions to be taken.  It does not purport to give legal advice and it is essentially a memo from one executive to others.  To the extent that it might contain legal advice, which I doubt, Fox lacks the required degree of independence.
56 0181 001	No	These notes simply list Fox’s thinking.  He lacks the required degree of independence.
56 0183 001	No	For the same reasons.
56 0184 001	No	For the same reasons.
56 0185 001	No	For the same reasons.
56 0186 001	No	For the same reasons.
56 0188 001	Yes	This document contains advice concerning termination of a Drilling Rig Management Agreement.  Fox probably lacks the required degree of independence but, on balance, I believe it is privileged.
56 0189 001	No	Not privileged for the same reasons as for document 56 103 001.
56 0282 001	No	This memorandum to Beckwith from his executive assistant Judge is essentially a note from an executive to his superior setting out recommendations on how to proceed with one aspect of the Allied Lyons transaction.  Although it refers to legal issues, its emphasis is on financial steps.  Further, Judge lacks the required degree of independence.
56 0283 000	No	This document from Judge as executive assistant to Beckwith contains recommendations on steps in a financial transaction.  It contains no legal advice.  In any event, Judge lacks the required degree of independence.
56 0457 001	No	This is the same document as 56 0090.
56 0457 005	No	Again, this is the same document as 56 0090.
56 0462 000*	No	This bundle of documents are the same documents as 56 0097 078 and 56 0097 081.
56 0499 275	Yes	Although this is an internal memorandum, it attaches a copy of a brief to Parker & Parker for legal advice.
56 0504	No	Although this memorandum contains advice as to restructuring a proposal to minimise stamp duty, Fox lacks the required degree of independence.  It reads like a document from one executive to another.
56 0515	No	This handwritten note is clearly not privileged.  It attaches a letter which the note states, “Hopefully this letter will convince the auditors to bring the ‘A’ notes into the balance sheet for the year ended 30 June 1987”.  It was intended to be drawn to the auditors’ attention.
56 0520	No	This notebook simply records thoughts on steps in transactions and notes of meetings.  Further, Nizzola lacks the required degree of independence.
56 0580	No	This is the same document as 56 0090.
56 0616	No	This is simply a note from one executive director to another discussing alternative proposals for the future of the employee share scheme.  Any legal comment is incidental to the discussion.  Oates was primarily a director of the company and not an in-house legal adviser and so he lacks the required degree of independence.  Documents prepared by Oates are not privileged for the reasons published on 23 November 2001.
56 0617	No	Again, this is a note from Oates as an executive director to employers of BCHL requesting that a memorandum be drafted and be sent to employees.  It suggests the contents of the memorandum.  For the reasons already expressed, Oates lacked the required degree of independence and documents he prepared are not privileged.
56 0618	No	This memorandum comments on a draft deed which had been prepared by Parker & Parker.  The comments are effectively the comments of Oates as an executive director of BCHL.  Further, for the reasons already given, this document cannot be privileged.
56 0688	No	This document does not itself indicate why it is privileged.  Attached to it is a note reading, “Instructed by David Shaw that the sole purpose for the creation of this document was the seeking of advice from Henry Lodge of P&P re share dealings”.  The note is signed “PF” and dated 29 October 1990.  The document has certain information concerning Austmark and a proposal in respect of preference shares and other transactions.  On the face of the document, there is no reason why it should be privileged.  Nothing has been proved to support the attached note.
56 0698	No	This is simply a report to the Board of BCHL of events which had occurred in relation to litigation with SGIC concerning Bell Group Ltd share indemnity.  It is a report from an executive to the Board.  On any view, Judge lacks the required degree of independence.
56 0699	No	This is simply a report to Lucas of events in the SGIC litigation already mentioned.  In any event, Judge lacks the required degree of independence.
56 0700	Not entirely	The greater part of this document is not privileged for the same reasons as apply in respect of 56 0698.  However, the last three paragraphs on page one of the memorandum report legal advice obtained by BCHL.  They are privileged and should be masked.
56 0702	No	Although this memorandum accompanies a draft affidavit (which is not attached to the memorandum in the file inspected by me) and contains requests as to what should be included in the affidavit, it is essentially a memorandum from Judge as personal assistant to Beckwith.  Judge lacks the required degree of independence.
56 0703	Yes	The document encloses a letter containing legal advice.
56 0747	No	This is the same document as 56 0282.
56 0789	No	Although the document contains some comments on legal issues, it is essentially a note from one executive to another discussing options as to how to proceed in dealing with Lloyds concerning a guarantee.
56 0790	No	This memorandum to an accountant in Price Waterhouse seeks advice on tax issues of a particular proposal.  It is written by Nizzola as an executive and not as a legal adviser.  In any event, Nizzola lacks the required degree of independence.  This communication to an accountant cannot be privileged.
56 0791	No	This is simply an internal memorandum between executives.  Further, Nizzola lacks the required degree of independence.
56 0800	No	This is a memorandum from one executive to another although both are in-house legal advisers.  It contains suggestions as to amendments to a draft guarantee.  The document refers to the fact that legal advice is being obtained on the same issues from independent legal advisers.  Again, Nizzola lacks the required degree of independence.
56 0800 004	No	This is another copy of the previous document.
56 0815	No	This is a memo enclosing a draft guarantee facility into which BCHL proposed to enter asking if Nizzola could obtain advice from Allen, Allen & Hemsley.  It is a mere internal communication and it is in no respect privileged.
56 0854	No	Although it contains a request to include a specified clause in a document, this is a memo from one executive to another suggesting steps in negotiations with Rothwells Ltd.
56 0855	No	This is simply a report prepared by Judge at Beckwith’s request to inform Alan Bond of circumstances in which BCF Ltd had not been repaid.  It is little more than a chronology.
56 0862	No	This is the same document as 56 0283.
56 0885	No	This is the same document as 56 0090.
56 0890	No	This is the same document as 56 0097.
56 0911	No	This is the same document as 56 0789.
56 0985	No	This is a memorandum from Judge as personal assistant to Beckwith discussing how to proceed with negotiations.  If any legal advice is contained in the document, which is doubtful, it is quite incidental.  Furthermore, Judge lacks the required degree of independence.
56 0990	No	This is simply a document from one executive to another outlining steps in a proposal.
56 1133	No	This is the same document as 56 0985.
56 1298	No	This memorandum states that it attaches a transcript of an interview with officers of the ATO.  It is written by Nizzola as an executive of BCHL to BCHL’s then accountants and cannot therefore be privileged.  It notes how some issues were dealt with in the interview.
56 1486	No	This document answers a question as to implications for financing of BCHL if BCHL were to transfer its investment in Heileman.  Although it contains advice as to the effect of certain documents, it is prepared to provide information as one executive to another.  Further, Nizzola lacks the required degree of independence.
56 1490*	No	For the same reasons as above.
56 1511*	No	For the same reasons as above.
56 1583*	No	This Deed of Covenant should have been disclosed.  On the face of it, there is nothing which is privileged.
56 1752*	No	This is the same document as 56 0855.
56 1783*	No	This memorandum from Nizzola to Oates identifies covenants relating to indebtedness of BCHL which might restrict its capacity to sell its investment in BBH.  Although it refers to legal documents, it is essentially a memorandum from a junior executive to a director.  Further, Nizzola lacks the required degree of independence.
56 1887	No	This memorandum from Nizzola to other executives dated 11 February 1988 answers a question whether BBH can reimburse BBI for payments made by BBI to the National Australia Bank.  It is essentially a note from one executive to other executives.  Further, Nizzola lacks the required degree of independence.
56 1973	No	This memorandum from Judge to Lucas dated 13 February 1990 answers a memorandum from Lucas by informing Lucas of events in the litigation with SGIC.  It is essentially a document providing information.  It does not provide legal advice.  It is a communication from an executive to a director.  Further, Judge lacks the required degree of independence.
56 1975	No	This memorandum from Judge to the Board of BCHL dated 2 February 1990 informs the Board of recent events in litigation with SGIC and in what is call the “Petrochemical Litigation”.  It is essentially a chronology of events with a few observations.  It is not legal advice.  Further, Judge lacks the required degree of independence.
56 1976	No	This memorandum from Judge to Peter Lucas dated 18 February 1990 encloses a copy of the judgment of Ipp J in the SGIC litigation.  Although it contains a number of comments, it does not in any respect represent legal advice.  It is a memorandum from one executive to a director.  Further, Judge lacks the required degree of independence.