Stage 3 Productions Pty Ltd (in liq) & Anor v Pulbrook

[2007] VSC 548

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 6491 of 2006

STAGE 3 PRODUCTIONS PTY LTD (IN LIQUIDATION) (ACN 005 325 815)	First Plaintiff
And
LEONARD ANTHONY MILNER (In his capacity as Liquidator of STAGE 3 PRODUCTIONS PTY LTD (IN LIQUIDATION) (ACN 005 325 815)	Second Plaintiff
v
DAVID LISLE PULBROOK	Defendant

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JUDGE:	HARPER J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	7 DECEMBER 2007
DATE OF JUDGMENT:	18 DECEMBER 2007
CASE MAY BE CITED AS:	STAGE 3 PRODUCTIONS PTY LTD (IN LIQUIDATION) v PULBROOK
MEDIUM NEUTRAL CITATION:	[2007] VSC 548

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PRACTICE AND PROCEDURE – Legal Professional privilege – Admission made by solicitors for the defendant and incorporated in defence – Admission later withdrawn by permission of Master - Circumstances in which admission made and then withdrawn – Whether privilege waived.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J. Richardson	Gadens Lawyers
For the Defendant	Mr C. Moller	Madgwicks Lawyers

HIS HONOUR:

1. The first plaintiff, Stage 3 Productions Pty Ltd, is in liquidation.  The second plaintiff is the liquidator.  The plaintiffs claim that the company lent the defendant, David Pulbrook, the sum of approximately $970,000.  The debt is, they allege, now repayable.

1. Mr Pulbrook filed a defence in which he admitted, in effect, that he was the borrower of the moneys in question.  Even now, in an affidavit sworn on 11 October 2007, he accepts “that the books of the company identify me as a debtor of the company in respect of the amounts paid to me.”[1]  Nevertheless, he has withdrawn his formal admission.  His present defence, amended pursuant to orders made by Master Kings on 12 November 2007 and headed “third further amended defence”, now asserts “that the total of amounts paid to him by the first plaintiff less amounts paid by him to the first plaintiff … was about $970,000 and further says that the amounts so paid to him were on account of dividends.”[2]

   [1]Affidavit of David Lisle Pulbrook sworn 11 October 2004 at [5].

   [2]Third Further Amended Defence dated 19 November 2007.

1. The explanation for the change in position is not particularly illuminating.  In his affidavit, which was sworn some time before the third further amended defence was filed, Mr Pulbrook says:

I am aware that a second further amended defence has been filed on my behalf and that, by reason of paragraph 5 of that defence, I have admitted receiving a net total of about $970,000 from Stage 3 Productions.  At the time of receiving the moneys making up that sum, it was not my understanding that they would be repayable by me, on demand or otherwise.  I was (and remain) the sole director and shareholder of the company.  I regarded the moneys as dividends to which I was entitled.  I certainly did not intend that the moneys should be lent to me, with a corresponding obligation on my part to repay them.  There was never any loan agreement, in writing or otherwise, between me and the company.  That is why I have stated in paragraph 4 of my answers to interrogatories dated 20 February 2000 that I do not admit a loan agreement, but acknowledge receipt of the payments.

It has been pointed out to me that the pleading in paragraph 5 of my defence alleges that the sum of $970,000 was “repayable on demand”.  As I have said, that was not my understanding.  However, I left it to my lawyers to draft the defence as they saw fit.

Similarly, ... the books of the company … were prepared by my, and the company’s, accountants …  I did not instruct them to treat the payments as loans.  Rather, that is the way they determined to treat them.  They were the accountants and the experts, and I left matters of accounting to them.[3]

[3]Affidavit of David Lisle Pulbrook sworn 11 October 2004 at [3] -[5].

1. A further affidavit is in evidence.  It was sworn by Catherine Anne Watt, a solicitor acting on behalf of Mr Pulbrook, on 9 October 2007.  In it, she deposes to the fact that the admission in the second further amended defence that the funds in question were lent to Mr Pulbrook “was drafted on the basis of the first plaintiff’s books and records, which treated the payment of this sum to the defendant as a loan.”  Ms Watt continues by deposing that “[t]he admission that the amount was ‘repayable on demand’ was made having regard to the principles stated in Ogilvie v Adams[4] and VL Finance Pty Ltd v Legudi[5], and my understanding (and the understanding of counsel for the defendant) that the accounts reflected the true position.”

   [4][1981] VR 1,041.

   [5](2003) 54 ATR 221.

1. On receipt of these affidavits, the plaintiffs issued a summons dated 7 November 2007.  By it, they sought an order that the defendant “make discovery of all communications between himself and his legal advisers, whether present or former, relating to the matters in dispute in this proceeding.”

1. The summons was heard by the Master on 12 November.  She declined to make the order sought.  The plaintiffs appealed by notice of appeal dated 19 November 2007.  It is that appeal which is now before me.

1. The plaintiffs submit that Mr Pulbrook has waived privilege in the relevant communications.  Put as widely as it is in the summons, this cannot be so.  At most, the defendant has waived his privilege in those communications which concerned the original making of the admission and its subsequent withdrawal. 

1. The plaintiffs rely on a passage from the judgment of Sackville J in Seven Network Ltd v News Ltd (No 10).[6]   His Honour there said:

… the waiver of legal professional privilege on the grounds of implied consent will involve questions of degree …  [T]he court will have to take a number of factors into account.  These include:

·the centrality (or otherwise) to the proceedings of the issue to which the privileged communications are said to relate;

·if the issue involves a state of mind or belief, the likelihood that legal advice played a significant part in the foundation of that state of mind or belief;  and

·whether there is any apparent inconsistency between the position taken by the party claiming privilege (whether at the trial or earlier) and the likely contents of the privileged communications.

[6][2005] FCA 1721 at [48].

1. The plaintiffs point out, correctly, that the central issue in this case is the proper characterisation of the sum of $970,000 (or thereabouts).  On this basis, they further submit that the admission and acknowledgement of debt are also fundamental to the case.

1. This latter proposition is true only up to a point.  The admission may once have been important to the plaintiffs’ chances of success (although the defendant has pleaded the statute of limitations as applying to any loan) but the order of Master Kings on 12 November was, as I have already noted, that the defendant be permitted to withdraw his admission.  The proceeding will therefore go to trial on the new basis.  It follows, in my opinion, that any advice which Mr Pulbrook may have received from his legal team about the admission and its withdrawal relates principally to a point that has already been determined.  That advice (assuming any was given) may also of course have addressed the question whether the plaintiff received the relevant funds as a loan or a dividend;  but that is a matter of mixed law and fact which cannot be resolved by reference only to a legal practitioner’s opinion. 

1. It is true that an inquiry into the advice given to Mr Pulbrook might reveal the basis upon which that advice was given; and that may lead to further inquiries, leading in turn to admissible evidence.  But the advice itself cannot go to the central issue (the characterisation of the funds received by the defendant) unless (which is highly unlikely) it were to be received by the Court as expert evidence which the legal practitioner or practitioners are qualified to give. 

1. In any event, in my opinion the appeal fails on another point.  The defendant has not referred to any advice as the basis of any decision made by him to either make or withdraw his admission.  He has sworn that the decision to make the admission was not his but his solicitors’.  He has not said that he was given any advice at all – still less, any advice upon which he acted.  Nor has he identified any advice which resulted in his instructing his legal practitioners to seek leave to withdraw the admission. 

1. In Mann v Carnell[7] Gleeson CJ and Gaudron, Gummow and Callinan JJ noted that disputes about implied waiver (as in this case) usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is designed to protect.  So clients who seek to explain or justify their conduct – that being a central issue in the case - by reference to legal advice given to them by their legal practitioners cannot consistently with that position maintain at the same time, by asserting legal professional privilege, the confidentiality of that advice.    

   [7](1999) 201 CLR 1 at [29].

1. As I have noted, Mr Pulbrook does not suggest that that decision was based upon certain advice which he then refuses to disclose.  But even if he did, evidence of the advice could go only to his credit, because it is not central to any remaining issue. 

1. For these reasons, there has been no waiver of privilege, and the appeal must be dismissed.

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