Apple Computer Australia v Wily

Judgment - EX TEMPORE 1By notice to produce dated 4 March 2013, the defendant, Mrs Najwa Najjar, seeks production of any agreement for the funding of certain matters including any agreement dated 12 February 2013. The Plaintiffs, Lorie Najjar & Sons Pty Limited (in liq) ("Company") and Peter Krejci, in his capacity as liquidator of the Company, make an oral application to set aside the notice to produce under the Uniform Civil Procedure Rules 2005 (NSW) r 1.9 on the basis that the production of the relevant document, or documents, would disclose "privileged information" as defined in the Dictionary to the Uniform Civil Procedure Rules. A document would be "privileged information" for the purposes of that definition where its admission into evidence would be excluded under, inter alia, s 119 of the Evidence Act 1995 (NSW): Westpac Banking Corporation v 789 Ten Pty Ltd [2005] NSWCA 321; (2005) 55 ACSR 519. 2The real question raised by this application is whether the relevant document is properly the subject of a claim for the legal professional privilege under s 119 of the Evidence Act, on the basis that it is a confidential document that was prepared for the dominant purpose of the client (here, the liquidator and/or the Company) being provided with professional legal services relating to, relevantly, an Australian proceeding in which the client is a party. 3Mr To, who appears with Mr Miller, made submissions on behalf of the Company and the liquidator in support of a claim for legal professional privilege under s 119 of the Evidence Act. Mr To drew attention to the decision of Santow J in Re Global Medical Imaging Management Ltd (in liq) [2001] NSWSC 476 in respect of the application of s 119 of the Evidence Act to litigation funding agreements. His Honour there noted at [6], but did not accept, the possibility that a funding agreement would be treated as provided not for the dominant purpose of the provision of legal services but the anterior purpose of funding such services. That observation was, of course, a generalisation and did not deal with the position in respect of any particular funding agreement, other than the funding agreement that was before his Honour in those proceedings. His Honour pointed to the connection of a funding agreement "of this sort" with the subject matter of legal advice that might be given and the nature of the services to be provided; noted that the funding agreement in issue before him had the potential to reveal the litigant's likely legal strategy and the potential availability of legal advice and that one could (at [8]): "infer from a funding agreement the likelihood of tactical advice being given of a particular kind at different stages of the litigation, or, for that matter, of the likelihood of an appeal being advised or not advised." 4The Company and the liquidator rightly pointed out that his Honour's judgment has been followed in several decisions of this Court and the Federal Court of Australia including: Apple Computer Australia v Wily [2002] NSWSC 855; Re Bauhaus Pyrmont Pty Ltd (in liq) [2006] NSWSC 543; Green as Liquidator of Arimco Mining Pty Ltd v CGU [2008] NSWSC 390 and Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (No 2) [2009] FCA 449; (2009) 180 FCR 1; (2009) 256 ALR 416 at [27], where the Court noted that a funding agreement may be privileged. I too will follow the decision in Re Global Medical Imaging Management (in liq) above, although it seems to me that the reasoning in that decision requires somewhat closer scrutiny to determine what it decided and what it did not. 5The submissions made by the liquidator and the Company tended to treat that decision as establishing a proposition of law that funding agreements were subject to legal professional privilege; and, since this was a funding agreement, then it followed that it was protected by legal professional privilege. However, as Bergin J noted in Rickard Constructions Pty Ltd v Rickard Halles Moretti Pty Ltd [2006] NSWSC 234 at [36], the decision of Santow J in Re Global Medical Imaging Management Ltd: "is not authority for the relationship between a funder of litigation and the funded party is a confidential relationship. Rather it may be authority for the more limited proposition that a funding agreement may satisfy the requirements of s 119 of the Act, depending on the particular terms of that agreement. It will depend on the facts of each case." 6It seems to me that observation is plainly correct. The question that, in a particular case, the Court has to determine is whether a particular agreement satisfies the criteria specified in s 119 of the Evidence Act, including that it was prepared for the dominant purpose there specified. That will depend on the particular circumstances on which the particular agreement was entered into and, very likely, on its terms, since it cannot be assumed that all documents headed "funding agreement" are the same. 7In CSR Ltd v Eddy [2008] NSWCA 83; (2008) 70 NSWLR 725 Basten JA in turn referred to the decision in Cook v Pasminco Ltd (No 2) [2000] FCA 1819; (2000) 107 FCR 44, to which Santow J had also referred in Re Global Medical Imaging Management Ltd, and Basten JA observed that (at [66]): "There is no doubt that a funding agreement, whether with a third party or with a lawyer, may be characterised as a confidential document and may indeed be prepared for the dominant purpose of obtaining legal services. However, the nature of the connection must be assessed according to the purposes of the statutory provision. The purpose is the same as the purpose of the general law protection and, for reasons already noted, does not extend to a document the purpose of which is to create the relationship. Different issues may arise in relation to documents prepared for or provided to a litigation funder." 8In the same case, Hodgson JA observed at [7] that, if an agreement contained material which expressly or impliedly conveyed legal advice or views about the tactics or strategy, then that material may be privileged. 9In Marshall v Prescott (No 4) [2012] NSWSC 992, Bellew J reviewed the authorities to which I have referred above and noted at [84]: "What emerges from an examination of the authorities is that whilst a document in the nature of [a funding agreement] may be characterised as confidential, and may be prepared for the dominant purpose of obtaining legal services, each case must be determined on its own facts. In particular, the nature of the connection between the preparation of the document, and the dominant purpose of obtaining legal services, must be assessed. If the document is merely one which does nothing more than create a relationship, then it is likely that no privilege will attach to it." 10In that case, his Honour upheld the claim for legal professional privilege in the particular funding agreement in issue, noting that the provisions for confidentiality in that agreement (also present in this case) were not conclusive but were a relevant matter to be taken into account; that the document there in issue had the potential to reveal the strategy to be adopted; that the document fulfilled the purpose of providing legal services, at least in terms of the capacity to fund them; and that the document had an obvious connection with advice to be provided by the lawyers going beyond specifying the rates for work to be carried out. 11It is, of course, common to seek to establish the purpose for which a document was prepared, in order to establish a claim for legal professional privilege, by leading evidence to that effect, which can in an appropriate case be tested by cross-examination. The liquidator did not lead such evidence in this case. Mr Najjar's counsel invited me to inspect the relevant document and other counsel indicated they had no objection to that course. In the event that course has not proved entirely satisfactory, since it has left the Court to seek to infer matters of purpose absent direct evidence of them. 12I have reviewed the funding and indemnity agreement in issue in the proceedings. It is plainly intended to be confidential, since there is a detailed confidentiality regime included in it, so one requirement for the claim for legal professional privilege in s 119 of the Evidence Act is satisfied. It appears it was prepared for at least a purpose of documenting a funding arrangement which was reached after the retainer of solicitors previously acting for the liquidator was terminated and new solicitors were retained, and in that sense was a necessary or at least desirable matter to be established for the continuing conduct of the proceedings. 13However, I do not understand the authorities to which I have referred above to treat that as in itself sufficient to establish legal professional privilege for the purposes of s 119 of the Evidence Act. The emphasis on the need to have regard to the statutory purpose of that section in CSR Ltd v Eddy is inconsistent with a simplistic approach which treats any document prepared for the purpose of conduct of proceedings as subject to legal professional privilege and in Re Global Medical Imaging Management, Santow J placed weight on the substantive matters of strategy and legal advice that might be disclosed. In Marshall v Prescott Bellew J similarly treated the fact that the agreement allowed a capacity to provide services as relevant but not determinative. It seems to me that a contrary approach would lead to results that might properly be characterised as absurd. For example, a client may lease an office to store documents which are to be used in litigation; the existence of somewhere to store those documents is necessary to the conduct of litigation, as the funding of litigation is necessary to its conduct, but it does not seem to me it would be consistent with the authorities to which I have referred to treat the lease of the office as subject to legal professional privilege, notwithstanding the lease document was, in one sense, brought into existence for the conduct of the proceedings and is necessary to their conduct. 14In the present case, the funding agreement does not seem to me to disclose anything as to the strategy of the litigation or the advice likely to be offered, and in that respect is distinct from the agreements which have been referred to in several of the cases to which I have referred. It is, in my view, no more and no less than a document providing a funding regime in relatively straightforward terms. It does not, for example, provide information as to the manner in which the liquidator will conduct the proceedings or as to any consideration of prospects or strategy or provide any guidance as to how decisions will be made, if particular events occur in the proceedings. I can draw the conclusion the funding agreement does not disclose such matters of strategy or prospects with greater confidence where neither the liquidator nor his legal representatives have given evidence to identify any such aspect which might, in fact, be disclosed, or otherwise to support the claim for legal professional privilege. 15I do not consider that, in these circumstances, the funding agreement is protected by legal professional privilege. That is not to say that other funding agreements, considered by other judges in their particular circumstances would not be the subject to a claim for privilege. 16I should add that Mr Sahade, who appears for Mr Najjar, raised but did not develop another argument which does not seem to have been put in Global Medical Imaging Management or the cases which referred to it. Mr Sahade submitted that, if the funding agreement was privileged, at least the liquidator and the Company could object to its tender in any attempt by the funder to enforce it. Mr To responded that, at that point, legal professional privilege could be waived, although that response had the difficulty that it would be open to the liquidator and the company, but not the funder, to waive a privilege which was that of the liquidator and the company. The answer to that submission seems to me to be s 121(3) of the Evidence Act, so that privilege in the funding agreement, if it were otherwise established, would not prevent a party from adducing evidence of it in order to establish a right arising from it. I would, therefore, not have accepted Mr Sahade's argument that the funding agreement was not privileged on that basis, had legal professional privilege otherwise been established. 17Mr To also submitted the funding agreement was not relevant and specifically requested I rule as to its relevance. That proposition was put on the basis that Mrs Najjar now sought to stay the winding up, rather than terminate it, until there is clarity as to the amount of the liquidator's fees that would need to be addressed in any termination of the winding up. 18In Portal Software International v Bodsworth [2005] NSWSC 1115 at [19]-[26], Brereton J noted the Court's power to set aside a notice to produce was an instance of its power to regulate its own processes and in particular to intervene in a case of an abuse of process; that lack of relevance is a sufficient ground to set aside a notice to produce; that it is sufficient to support relevance that a document could "possibly throw light" on the issues in the substantive proceedings or that it is "on the cards" that it will do so; and that a notice to produce has traditionally been treated somewhat more liberally than a subpoena to a third party in that regard. In my view, the notice to produce the relevant documents should not be set aside on the basis of lack of relevance, since it is at least on the cards that the funding agreement will throw light on the exercise of the Court's discretion whether to stay the winding up, since the extent of any liability for costs of the liquidator may be a relevant consideration in that context, noting that it is certainly a relevant consideration in respect of a termination of the winding up. 19In any event, a second basis of relevance has emerged, when I was invited to, with the consent of all parties, inspect that agreement. I have drawn the attention of counsel for the liquidators to Recital J of the agreement, the content of which is presently not known to Mrs Najjar or her advisors. The content of that recital is, in my view, capable of affecting the Court's exercise of a discretion to stay or terminate the winding up or grant other relief. I have foreshadowed to the liquidator's counsel that, subject to any submissions the liquidator may make, the Court may itself wish to afford the opportunity to the liquidator to make submissions as to the implications of that recital, having regard to the principles in Re Allebart Pty Limited (in liq); Re Home Holdings Pty Limited (in liq) [1971] 1 NSWLR 24 at 30 and in numerous cases which have followed it, including in the case of voluntary liquidations: see Austin & Black's Annotations to the Corporations Act [5.473], [5.503]. I am conscious, in making that observation, that I have been informed the funding agreement was previously approved by the Court. However, there is presently no evidence before me as to whether Recital J was specifically drawn to the Court's attention in any application for such approval, which would presumably have been made on an ex parte basis. 20I have, of course, not heard substantive submissions as to those matters and have formed only preliminary views, which may be altered by further submissions about them. However, the fact the issues have arisen indicates it is on the cards the funding agreement would be relevant to the application for relief on this alternative basis and on that basis also I would not set aside the notice to produce by reason of any lack of relevance. 21The liquidator did not advance separate submissions as to a costs agreement with his solicitors and as to fee disclosure letters given by counsel, which were also included in MFI 1 and were also subject to a claim for legal professional privilege. The former seems to me to be subject to a proper claim for legal provisional privilege, so far as it would disclose the liquidator's work plan for the proceedings. The fee disclosure letters given by counsel do not seem to be relevant. I will not order that those three documents be produced. 22I will, subject to hearing counsel as to the proper form of order, therefore, order the funding agreement, which is included in the envelope marked MFI 1, be made available to the defendants and their legal representatives for inspection.