AHI Healthcare Systems Pty Limited v Clinical Associates of Australia Ltd

JUDGMENT:

• 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION

Matter No IRC 908 of 2000 AHI HEALTHCARE SYSTEMS PTY LIMITED AND ANOR V CLINCIAL ASSOCIATES OF AUSTRALIA LIMITED AND ANOR Notice of Motion - Application under s106 of the Industrial Relations 1996 INTERLOCUTORY JUDGMENT

1 On 4 July 2000 Solicitors for Clinical Associates of Australia Limited ("CAA") and Pacific Healthcare Limited (UK) ("PHL"), the first and second respondents in the substantive proceedings in matter number 908 of 2000 (and the applicants in this notice of motion), moved the Court to make the following orders: 1) that the hearing of proceedings no. IRC 908 of 2000 commencing on 14 August 2000 be vacated;

2. that the respondents be given leave to amend their replies filed 28 March 2000;

3. that directions be made for the filing and serving of the amended replies, further pleadings and affidavits;

4. that the costs of this motion be costs in the cause;

5. to restore on three days written notice." 2 The Notice of Motion came on for hearing on 12 July 2000 and given the nature of the application I have endeavoured to provide a ruling as quickly as possible. 3 The grounds relied upon by CAA and PHL were essentially related to the fact that the applicants in the substantive proceedings (AHI Healthcare Systems Pty Limited ("AHI") and Michael Joseph McGrath ("McGrath") had, on 21 June 2000, filed an amended Summons for Relief under s 106 of the Industrial Relations Act 1996 ("the Act") and that consequently more time was needed to adequately prepare the respondents' case. In seeking to have the hearing of the proceedings vacated, CAA and PHL agreed to release AHI and McGrath from compliance with the restraint of trade provision in clause 18 of the consultancy agreement, which is at the centre of the substantive proceedings and from clause 8 of a deed of covenant, which is also the subject of the substantive proceedings. In the Notice of Motion it was said that the hearing, which is set down for five days commencing 14 August 2000, would take an estimated two to three weeks.

4 The application to vacate the dates set down for hearing was opposed by AHI and McGrath.

5 Before going to the submissions of counsel for the applicants and respondents it is relevant to set out the chronology of the main developments so far in the substantive proceedings since the time the Summons for Relief by AHI and McGrath was filed:

DATE EVENT 6 March 2000 Summons for Relief under s 106 filed by AHI and McGrath (matter no. 908/2000) 7 March 2000 Notice of Motion by AHI and McGrath for hearing to be expedited 14 March 2000 Notice of Motion stood over generally 28 March 2000 Replies to Summons by CAA and PHL 10 April 2000 Responses by AHI and McGrath to Reply to Summons by CAA and PHL 17 April 2000 Conciliation. Conciliation unsuccessful. Certificate issued by Schmidt J 27 April 2000 Before Boland J. Orders by consent: set down for hearing 14-18 August 2000; Applicants to file affidavit in chief by 11 May; Respondents to reply by 8 June; Applicants to reply by 22 June. 26 May 2000 Summons for Relief under s 106 in the nature of a cross claim filed by CAA and PHL (matter no. 2342 of 2000) 19 June 2000 Before Boland J Consent orders made that: both Summonses be heard together & evidence in one proceedings be evidence in the other. Consent Directions made relating to filing and serving of affidavits in 2342/2000; Consent Direction that applicants in 908/2000 file an amended summons incorporating previously foreshadowed amendments within 7 days 5 July 2000 Before Boland J. Return date for summonses to produce. Claims of privilege foreshadowed. Notice of Motion to vacate hearing dates set down for 12 July 2000

6 Mr G Hatcher of counsel for CAA and PHL referred to an affidavit by Anthony Joseph Woods, solicitor for CAA and PHL, supporting the notice of motion to vacate. Mr Hatcher elaborated on the grounds set out in the affidavit. He submitted that while CAA and PHL did not oppose leave to amend the summons his clients would be prejudiced if they were not given the opportunity of another 4 to 6 weeks to prepare their case in the light of the amended summons. He argued that the amendments to the summons were more than matters of construction and would require additional evidence. Mr Hatcher submitted that the new claim by AHI that the consultancy agreement was for a term of five years and that AHI is entitled to be paid for the balance of unpaid fees as if the consultancy agreement had run its full term is a significant amendment that will require re-interviewing a number of witnesses, some of whom are overseas. Mr Hatcher pointed to the significantly increased claim for compensation from $772,888 in the original summons to $1,780,972 in the amended summons and that this would influence the approach and the strategy to be taken in preparing and presenting his clients' case. Moreover, he argued that interviews with witnesses to date had opened up new lines of inquiry and that it was likely that additional witnesses would be called by the respondents in the substantive proceedings.

7 Mr Hatcher referred to Sali v SPC Ltd and Anor (1993) 67 ALJR 841 and The State of Queensland v J L Holdings Pty Limited (1996) 189 CLR 146. He drew attention to the following passage in Sali v SPC Ltd at 843 - 844 per Brennan, Deane and McHugh JJ: "In Maxwell v Keun , the English Court of Appeal held that, although an appellate court will be slow to interfere with the discretion of a trial judge to refuse an adjournment, it will do so if the refusal will result in a denial of justice to the applicant and the adjournment will not result in any injustice to any other party. That proposition has since become firmly established and has been applied by appellate courts on many occasions. Moreover, the judgment of Atkin LJ in Maxwell has also been taken to establish a further proposition: an adjournment which, if refused, would result in a serious injustice to the applicant should only be refused if that is the only way that justice can be done to another party in the action. However, both propositions were formulated when court lists were not as congested as they are today and the concept of case management had not developed into the sophisticated art that it has now become.

In determining whether to grant an adjournment, the judge of a busy court is entitled to consider the effect of an adjournment on court resources and the competing claims by litigants in other cases awaiting hearing in the court as well as the interests of the parties. As Deane J pointed out in Squire v Rogers this "may require knowledge of the working of the listing system of the particular court or judge and the importance in the proper working of that system of adherence to dates fixed for hearing". What might be perceived as an injustice to a party when considered only in the context of an action between parties may not be so when considered in a context which includes the claims of other litigants and the public interest in achieving the most efficient use of court resources." 8 In J L Holdings Mr Hatcher referred to a passage at 154 per Dawson, Gaudron and McHugh JJ: "It may be said at once that in the passage which we have cited from Sali v SPC Ltd, Toohey and Gaudron JJ are not to be taken as sanctioning any departure from the principles established in Cropper v Smith and accepted in Clough and Rogers v Frog. Sali v SPC Ltd was a case concerning the refusal of an adjournment in relation to which the proper principles of case management may have a particular relevance. However, nothing in that case suggests that those principles might be employed, except perhaps in extreme circumstances, to shut a party out from litigating an issue which is fairly arguable. Case management is not an end in itself. It is an important and useful aid for ensuring the prompt and efficient disposal of litigation. But it ought always to be borne in mind, even in changing times, that the ultimate aim of a court is the attainment of justice and no principle of case management can be allowed to supplant that aim."

9 Mr Hatcher argued that his clients should be permitted the necessary time to properly prepare their case. He informed the Court that his instructions were that in agreeing to leave to amend the summons his clients were not fully aware of the nature of the amendments, although it might be noted that Mr Hatcher did not submit, as I understand him, that his clients had been ambushed by the amendments to the original summons.

10 Mr J N West, Queens Counsel and with him Mr A B Gotting of counsel for AHI and McGrath, submitted that no case had been made out to vacate the hearing dates set for August 2000.

11 Mr West submitted that there were five weeks to go before the hearing of the matter and that this was sufficient time in the circumstances to prepare for and make out a case. Mr West referred to the affidavit of Anthony Joseph Woods and contended that although it referred to the need to re-interview three overseas witnesses and one witness who frequently travels between Australia and the United Kingdom, the affidavit did not say why and how there was any particular difficulty in doing this. Mr West submitted that although the interviews of witnesses to date may have opened up new lines of inquiry and may lead to the need to call further witnesses, this was not a proper basis for vacating the hearing in August.

12 Mr West submitted that the amendment to the summons the effect of which is to claim the balance of unpaid fees under the Consultancy Agreement to 30 June 2004 and thereby increase this aspect of the claim from $772,888 in the original summons to $1,780,972 was an issue to be determined on the face of the contract. He says in any event the fundamental issue is not new because it is already an issue in the trial and this is apparent from par 23 of the original summons and from the respondents' reply.

13 In relation to the waiver of the restraint of trade provisions of the Consultancy Agreement and the Deed of Covenant Mr West said this waiver could have been given at the outset. In the meantime, AHI and McGrath had been restrained from competing with CAA and had suffered loss. Mr West submitted that CAA and PHL should not be given any credit for the fact that they are now prepared to waive the restraint of trade provisions in return for an extension of time to prepare their case. The fact that CAA and PHL needed more time was, in effect, a predicament of their own making.

14 Mr West indicated that upon his instructions, the solicitors for CAA and PHL were made aware of the nature of the proposed amendments to the summons prior to obtaining their consent for leave to amend. Mr West noted that the affidavit of Mr Woods did not say that there had been no discussion between the solicitors for the respective parties about the nature of the amendments to the summons.

15 Putting aside the question of whether CAA and PHL were aware of, or understood, the nature of the proposed amendments prior to consenting to leave to amend, I am not persuaded that a case has been made out to vacate the hearing commencing on 14 August 2000.

16 The original summons was filed on 6 March 2000 and replies were filed on 28 March 2000. The applicants in the substantive proceedings filed their responses on 10 April 2000. The hearing dates were set by consent on 27 April 2000. The affidavit of McGrath was filed on 22 May 2000. Even acknowledging that AHI and McGrath had been late in filing their affidavit, CAA and PHL are yet to file their affidavits, despite directions that these affidavits would be filed and served by 8 June 2000. No objection to the timetable was taken by CAA and PHL at the directions hearing on 19 June 2000.

17 There remains a period of five weeks before the matter goes to trial and nothing has been put to me that would lead to a conclusion that Mr Hatcher's clients would be prejudiced if the hearing was to proceed as scheduled. There is no material that would indicate that the collection and proofing of additional evidence to address the amendments to the summons is fraught with particular difficulty or could not be done within the available time frame. Furthermore, unlike the State of Queensland in J L Holdings it is not as though CAA and PHL are prevented from litigating an issue which is fairly arguable.

18 I acknowledge this matter is coming on for hearing earlier than would ordinarily be the case in respect of applications under s 106 of the Act. This is because CAA and PHL have, to date, cooperated in expediting the matter. CAA and PHL now say the reason for expedition disappears because CAA and PHL have waived the restraint provisions of the Consultancy Agreement and the Deed of Covenant. Putting aside Mr West's criticism that if the restraint provisions can be waived now they could have been waived at the outset thus avoiding loss and inconvenience to McGrath, the dates for the trial have now been set. Given that I have found that there is no prejudice to CAA and PHL, nor any injustice arising, I will proceed to hear the matter as scheduled (and agreed) commencing on 14 August 2000.

19 I also acknowledge that it may be that the trial does proceed for more than the five days originally estimated. I do not think, however, this is a reason in itself to vacate the five days in August for the sake of hearing the matter in one block sometime next year - because that is the earliest it could be done. The Court would be most reluctant to waste five valuable hearing days unless there were very strong grounds for doing so. Those grounds are not evident on this notice of motion.

20 On 22 June 2000 summonses to produce documents were issued by Solicitors for AHI and McGrath to PriceWaterhouseCoopers ("PWC") and William S. Cutbush. In 1999 PWC had acted on behalf of CAA in preparing the due diligence report that was required to be included in the prospectus in order that an initial public offering of CAA could take place. Mr Cutbush had been a director of CAA. The documents sought to be produced by PWC were commercial files and any documents relating to preparation for the public float of CAA. The documents sought to be produced by Mr Cutbush were: 1) documents in relation to the proposed float of CAA in the period 1 July to 31 December 1999; and

2. documents relating to his appointment and resignation as a director of CAA; and

3. documents in relation to the performance of duties as a director of CAA. 21 Legal professional privilege was claimed by CAA and PHL in respect of a number of the documents the subject of the summonses. The documents in respect of which privilege was claimed and a supporting affidavit by Katrina Margaret Frances Raymond, a solicitor acting for CAA and PHL and for Mr Cutbush in relation to the summons for production, were tendered in the proceedings on 12 July.

22 I have inspected the documents. The documents in respect of which privilege is claimed by CAA in relation to documents provided to Mr Cutbush in his capacity as a director of CAA contain two memoranda of advice from Deacons, Graham & James ("DGJ"), the solicitors who acted for CAA in the preparation for the initial public offering of CAA. They contain legal advice from DJG to CAA on certain issues relating to the initial public offering of CAA.

23 The documents in respect of which privilege is claimed by CAA in relation to documents produced by PWC contain: 1) what Ms Raymond deposes in her affidavit as "draft legal documentation prepared by DGJ on behalf of the first respondent in preparation for the initial public offering of the first respondent";

2. a facsimile, from a person who Ms Raymond describes in her affidavit as "the director" of CAA, to DGJ seeking legal advice on various issues associated with the initial public offering of CAA;

3. what Ms Raymond deposes in her affidavit as "draft legal documentation in relation to a legal transaction between the ANZ Bank and the first respondent" . It is not clear from the terms of the documentation itself or the affidavit of Ms Raymond that the documentation constitutes legal advice.

24 Legal professional privilege is available in respect of confidential documents prepared for the dominant purpose of a lawyer providing legal advice to a client or providing professional legal services relating to pending or anticipated litigation in which the client is or may be, or was or might have been, a party: ss 118,119 of the Evidence Act 1995; Baker v Campbell (1983) 153 CLR 53; Esso Australia Resources Ltd v The Commissioner of Taxation [1999] HCA 67. Documents which constitute or evidence transactions are not caught by the privilege: Baker v Campbell per Murphy J at 86, Deane J at 112; O'Reilly v Commissioners of State Bank of Victoria (1982) 44 ALR 27 per Mason J at 41.

25 I am satisfied that the documents exhibited and marked "KMR1" and "KMR2" in these proceedings are privileged from inspection by the applicants in the substantive proceedings except as to the "draft legal documentation in relation to a legal transaction between the ANZ Bank and the first respondent". I would need to be satisfied that this documentation was prepared for the dominant purpose of a lawyer providing legal advice to a client or were part of professional legal services relating to pending or anticipated litigation.

26 I will set this matter down for further direction, if that be necessary, and to deal with the outstanding issue of privilege at 9.30 am 19 July 2000. I will also call on matter no. 2342 of 2000 to identify any issues that may need to be addressed in relation to it.

27 Leave is given to the respondents in the substantive proceedings to amend their replies filed 28 march 2000.

28 The issue of costs is reserved to the substantive hearing.

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