Balzan Group Pty Ltd atf the Balzan Family Trust v IPM Group Pty Ltd

Solicitors: Carmody Lawyers (plaintiff) Rockcliffs Solicitors (second defendant) File Number(s): 2014/199938

Judgment 1By interlocutory process filed on 2 October 2014 the second defendant in these proceedings, NA Merchant Pty Ltd atf the Merchant Family Trust, seeks an order that its legal representatives have access to the documents produced on subpoena by Dr J A Cordaro, general practitioner, and Dr Varad Kumar, consultant psychiatrist. 2The proceedings were commenced by originating process filed on 7 July 2014 in which the plaintiff, Balzan Group Pty Ltd atf the Balzan Family Trust, seeks an order for the winding up of the defendant, IPM Group Pty Ltd pursuant to ss 233(1)(a), 461(1)(e), 461(1)(f) or 451(1)(k) of the Corporations Act, 2001 (Cth). 3By consent on 18 August 2014 an order was made joining the second defendant as a party to the proceedings. 4For the purposes of the present application it is sufficient to note that the plaintiff and the second defendant in essence conducted an equal partnership through the vehicle of the first defendant. The relationship between the principals of the plaintiff and the second defendant, Mr Troy Balzan and Mr Nathan Merchant, has broken down entirely, and the first defendant's business had ceased. The purpose of the proceedings is to deal with the consequences of those events. 5By amended interlocutory process filed by leave on 18 August 2014 the second defendant seeks, among other relief, an order pursuant to s 233 of the Corporations Act that Mr Balzan be removed as a director of the first defendant. 6I note from the amended interlocutory process that the application is made by Mr Merchant as well as the second defendant. Order 1 sought is that both Mr Merchant and the second defendant be given leave to intervene in the proceedings for the purpose of acting on behalf of the first defendant, and causing it to bring proceedings against a number of parties including Mr Balzan. As I understand it, Mr Merchant is not yet a party to the proceedings. As I have noted above, the interlocutory application that is now before the court appears to have been filed by the second defendant. I therefore merely observe that the outcome of the present application should bind Mr Merchant as much as it does the second defendant. 7The plaintiff was given leave to file an amended originating process on 17 October 2014. The plaintiff added to its claim for an order that the first defendant be wound up an alternative claim to the effect that Mr Balzan and Mr Merchant appoint alternative directors of the first defendant, to act in their stead, and that an independent director of that company be appointed. 8It is sufficient to note that the effect of the relevant relief sought by both the plaintiff and the second defendant will be that, in any event, Mr Balzan will not continue to act as a director of the first defendant for the purpose of the conduct of its affairs. 9The second defendant served subpoenas on Dr Cordaro and Dr Kumar to produce to the court their clinical notes and records in relation to the treatment that they have given to Mr Balzan. The subpoenas were answered by the two doctors on 27 and 29 August 2014 respectively. 10By arrangement between the solicitors for the plaintiff and the second defendant, on each occasion the court was asked to make orders that the plaintiff have first right of access to the documents produced by the two doctors for a period of 7 days. That period expired on 3 September 2014 for Dr Cordaro and on 5 September 2014 for Dr Kumar. 11Dr Cordaro forwarded a letter to the court dated 23 August 2014, together with the subpoenaed documents. The material part of the letter stated: As treating medical practitioner for Troy Balzan for the past four years, I respectfully submit to the court that his medical file contains information of a sensitive and confidential nature, which may not necessarily be relevant to the nature of the proceedings, and which, if released to another party will potentially cause damage to the personal reputation of Troy Balzan. I consider such information as confidential between doctor and patient and would request, in the medical interests of my patient, that such information not be released to another party. 12On 4 September 2014 a solicitor acting for the second defendant, Ms Bianca Marie Williamson, commenced to inspect the documents produced by Dr Cordaro. A note of the result of her inspection is Annexure A to her affidavit sworn on 1 October 2014. 13Also on 4 September 2014 the plaintiff's solicitor wrote a letter to the Registrar in which he objected in accordance with UCPR r 33.9(6) to any other parties to the proceedings being allowed to inspect the documents produced on subpoena by the two doctors. The solicitor set out the grounds for the plaintiff's objection in detail. 14Ms Williamson ceased her inspection of Dr Cordaro's clinical notes when she received notice that a Registrar had directed that no party other than the plaintiff should have access to the documents produced on subpoena by the two doctors until further order of the court. 15The evidence did not go into the circumstances in which Ms Williamson commenced her inspection of Dr Cordaro's clinical notes. I infer that she did so because the 7 days first access given to the plaintiff had elapsed, without the plaintiff taking any step to prevent the first defendant having access to the documents. It is possible that there was some misunderstanding between the solicitors for the parties, as the solicitor for the plaintiff did not write to the Registrar objecting to the defendants having access to the documents produced on subpoena by the doctors until 4 September 2014. It is not necessary to give any further consideration to this issue. No criticism has been made of either solicitor. The determination of the entitlement of the second defendant to have further access to the documents produced by the doctors is not affected by the fact that Ms Williamson has already had partial access to the documents produced by Dr Cordaro. 16At the hearing I made the following order: The file note dated 4 September 2014 which is annexure A to the affidavit of Bianca Marie Williamson sworn 1 October 2014 shall be kept confidential to the plaintiff and its legal advisers and the legal advisors of the second defendant and no access will be given to any other persons to that document without an order of a judge of the court. 17The parties contested the second defendant's interlocutory process principally on the issue of whether or not the documents produced by the two doctors contained protected confidences. I was not asked to inspect any of the documents. There is some evidence as to the contents of the documents produced by Dr Cordaro, in the form of the summary produced by Ms Williamson. There is no evidence of the contents of the documents produced by Dr Kumar. 18My review of Ms Williamson's summary of the documents produced by Dr Cordaro suggests that almost all of the information contained in the documents records confidential communications from Mr Balzan to Dr Cordaro. However, it appears on balance that some of the information that is recorded in the documents does not consist of records of communications, but of observations made by Dr Cordaro in the course of treating Mr Balzan. 19While I have no basis for making any positive finding in relation to the contents of the documents produced by Dr Kumar, for the purposes of the present interlocutory proceedings, and given the nature of the doctor's specialty, I will infer that most of the information recorded consists of the substance of communications, although it is possible that there will also be records of Dr Kumar's observations, and other factual matters. I infer from the way the second defendant has approached this application that it accepts this proposition. 20It may be, therefore, that the entitlement of the second defendant to inspect the documents produced by the two doctors does not solely depend on whether or not the second defendant should be allowed to inspect protected confidences. However, as the plaintiff has objected to inspection being permitted under UCPR r 33.9(6), the general principle will apply that inspection should not be permitted unless and until the party who procured the issue of the subpoenas identifies a legitimate forensic purpose for inspecting the documents, the onus being on that party: New South Wales Commissioner of Police v Tuxford [2002] NSWCA 139. 21It will be convenient now to consider the principles that apply to the question whether access should be permitted to the documents that have been produced in so far as they record or disclose protected confidences. 22Section 131A of the Evidence Act 1995 (NSW) relevantly provides: 131A Application of Part to preliminary proceedings of courts (1) If: (a) a person is required by a disclosure requirement to give information, or to produce a document, which would result in the disclosure of a communication, a document or its contents or other information of a kind referred to in Division 1, 1A, 1C or 3, and (b) the person objects to giving that information or providing that document, the court must determine the objection by applying the provisions of this Part (other than sections 123 and 128) with any necessary modifications as if the objection to giving information or producing the document were an objection to the giving or adducing of evidence. (2) In this section, disclosure requirement means a process or order of a court that requires the disclosure of information or a document and includes the following: (a) a summons or subpoena to produce documents or give evidence... 23Division 1A concerns professional relationship privilege, which is dealt with in ss 126A to 126F. The relevant provisions are ss 126A and 126B. The former includes: 126A Definitions (1) In this Division: harm includes actual physical bodily harm, financial loss, stress or shock, damage to reputation or emotional or psychological harm (such as shame, humiliation and fear). protected confidence means a communication made by a person in confidence to another person (in this Division called the confidant): (a) in the course of a relationship in which the confidant was acting in a professional capacity, and (b) when the confidant was under an express or implied obligation not to disclose its contents, whether or not the obligation arises under law or can be inferred from the nature of the relationship between the person and the confidant. protected confider means a person who made a protected confidence... 24The information in the clinical notes and records produced by Dr Cordaro and Dr Kumar for the most part falls within the definition of "protected confidence" in s 126A. It is clear that the doctors were acting in a professional capacity in their relationship with Mr Balzan. There is no question that doctors, by reason of their relationship with their patients, are under an implied obligation not to disclose the contents of any communications made by patients in confidence to them. 25Section 126B materially provides: 126B Exclusion of evidence of protected confidences (1) The court may direct that evidence not be adduced in a proceeding if the court finds that adducing it would disclose: (a) a protected confidence, or (b) the contents of a document recording a protected confidence, or... (2) The court may give such a direction... (b) on the application of the protected confider or confidant concerned (whether or not either is a party). (3) The court must give such a direction if it is satisfied that: (a) it is likely that harm would or might be caused (whether directly or indirectly) to a protected confider if the evidence is adduced, and (b) the nature and extent of the harm outweighs the desirability of the evidence being given. (4) Without limiting the matters that the court may take into account for the purposes of this section, it is to take into account the following matters: (a) the probative value of the evidence in the proceeding, (b) the importance of the evidence in the proceeding, (c) the nature and gravity of the relevant offence, cause of action or defence and the nature of the subject matter of the proceeding, (d) the availability of any other evidence concerning the matters to which the protected confidence or protected identity information relates, (e) the likely effect of adducing evidence of the protected confidence or protected identity information, including the likelihood of harm, and the nature and extent of harm that would be caused to the protected confider, (f) the means (including any ancillary orders that may be made under section 126E) available to the court to limit the harm or extent of the harm that is likely to be caused if evidence of the protected confidence or the protected identity information is disclosed, (g) if the proceeding is a criminal proceeding-whether the party seeking to adduce evidence of the protected confidence or protected identity information is a defendant or the prosecutor, (h) whether the substance of the protected confidence or the protected identity information has already been disclosed by the protected confider or any other person, (i) the public interest in preserving the confidentiality of protected confidences, (j) the public interest in preserving the confidentiality of protected identity information. (5) The court must state its reasons for giving or refusing to give a direction under this section. 26Uniform Civil Procedure Rules 2005 r 1.9 effectively mirrors these statutory provisions, albeit at the stage of production rather than inspection. A person may object to producing a document on the ground that the document is a privileged document, and a person so objecting may not be compelled to produce the document unless and until the objection is overruled. The definitions of "privileged document" and "privileged information", so far as is presently relevant, encompass information that discloses a protected confidence within s 126B of the Evidence Act. 27The parties relied on evidence to support their opposing positions in relation to the second defendant's interlocutory process. 28The second defendant relies upon the affidavit of Ms Williamson to which I have referred above. Ms Williamson explained the circumstances in which she inspected Dr Cordaro's clinical notes, and prepared the summary that is annexed to her affidavit. 29The second defendant also sought to rely upon an affidavit of Mr Merchant sworn on 1 October 2014. That is a relatively substantial affidavit of some 39 pages, with about 80 pages of annexures. Senior counsel for the plaintiff objected to the reading of the entire affidavit, on the ground that its contents are irrelevant to the present application. There was insufficient time available during the hearing of the application for me to read all of the affidavit and rule on its admissibility. Accordingly, I reserved the question of whether all or any part of Mr Merchant's affidavit would be permitted to be read. Counsel for the second defendant did not have a real opportunity to make detailed submissions concerning the relevance of the affidavit. 30Mr Merchant's affidavit is largely, but not entirely, an exercise in cutting and pasting from other affidavits that have been filed in the proceedings, particularly affidavits by Mr Merchant and Mr Balzan. The relevance of the evidence is a mystery. I do not propose to rule on the affidavit paragraph by paragraph. I propose to reject the entire affidavit apart from the following. First, I will admit par 4.1.2, which contains an extract from an affidavit of Mr Balzan that constitutes an admission by him that he suffers from an identified psychological condition. There is no issue in the proceedings about whether Mr Balzan has that condition, and his senior counsel conceded the fact on the hearing of the application. I can see no point in my naming the condition in these reasons for judgment, particularly as the question at issue is whether access should be granted to parties other than the plaintiff to the clinical notes prepared by the two doctors. The second part of the affidavit that I will admit is par 10 in which Mr Merchant states that he and Mr Balzan mutually agreed to terminate the business of the first defendant on 1 April 2014. 31The plaintiff relies upon Dr Cordaro's letter to the Supreme Court dated 23 August 2014 (Exhibit A), an extract from which has been set out above. That letter has the effect of an application for a direction by a confidant for the purposes of s 126B(2)(b) of the Evidence Act and an objection for the purposes of UCPR r 1.9(3) by Doctor Cordaro. 32Dr Cordaro described his clinical notes as containing "information of a sensitive and confidential nature". A review of Ms Williamson's summary of the clinical notes strongly supports Dr Cordaro's observation. The doctor stated that it was "in the medical interests" of Mr Balzan that the information in the clinical notes not be released to another party, without explaining his reasons for that opinion. 33Dr Kumar affirmed an affidavit dated 26 August 2014, which contains a brief explanation of the circumstances in which Mr Balzan has consulted with Dr Kumar since 19 August 2012. Mr Balzan is still under Dr Kumar's care. 34In substance, Dr Kumar's affidavit is an application for a direction by a confidant for the purposes of s 126B(2)(b) of the Evidence Act, and also an objection under UCPR r 1.9(3). 35Dr Kumar expressed the opinion that if a third party (which relevantly includes the second defendant) is given access to his medical records "this will cause potentially irreversible damage to the doctor-patient relationship that I have with Mr Balzan". If that impedes Mr Balzan seeking treatment for his condition that would place him "at risk of serious harm". Further, the disclosure of the documents "would also cause Mr Balzan to experience significant psychological harm, in the form of shame and humiliation". Dr Kumar provided further reasons in support of his opinion that it would be damaging to Mr Balzan for the medical records he produced to be disclosed to any party other than the plaintiff (or Mr Balzan). 36I propose to dismiss the second defendant's interlocutory process for the following reasons. 37The first question that arises is whether I must allow the objection to the second defendant's legal representatives being allowed to inspect the documents, because, if the issue had arisen at the stage when the information in the documents was to be adduced in evidence, I would be required by s 126B(3) of the Evidence Act to be give a direction that the evidence not be adduced. The answer to that question depends upon whether I am satisfied that "it is likely that harm would or might be caused" to Mr Balzan if the evidence were adduced, and "the nature and extent of the harm outweighs the desirability of the evidence being given". 38In relation to the documents produced by Dr Kumar I accept his unchallenged evidence that if access to those documents is given to the second defendant it will cause potentially irreversible damage to the doctor-patient relationship, which would place Mr Balzan at serious risk of harm, and that Mr Balzan is likely to experience significant psychological harm, in the form of shame and humiliation. The evidence satisfies the statutory definition of "harm". While the seriousness of harm in any particular situation is obviously a relative concept, the evidence satisfies me that the harm is likely to be serious. 39Although I do not have an elaborate opinion from Dr Cordaro concerning the likely consequences of disclosure to the second defendant's legal representatives of Dr Cordaro's clinical notes, I infer from the summary prepared by Ms Williamson that disclosure of those documents will be likely to cause serious harm to Mr Balzan. 40Next, it is necessary to consider whether it would be desirable for the information in the documents to be given in evidence, and then whether the nature and extent of the harm outweighs the desirability that is identified. 41First, I accept the plaintiff's submission that, whatever order the court may make in these proceedings, the future will not involve Mr Balzan acting as an effective director of the first defendant for the purpose of conducting its affairs. The first defendant has ceased to carry on business. Whether the first defendant is wound up, or whether the business of the first defendant is acquired by the second defendant, or whether the affairs of the first defendant are conducted by alternate and independent directors, Mr Balzan will not actively act as a director. Accordingly, the application by the second defendant in its amended interlocutory process for an order removing Mr Balzan as a director of the first defendant will, if successful, not have any practical effect. 42Secondly, the plaintiff and Mr Balzan have conceded that the latter suffers from the psychological condition. The information in the documents produced by the doctors is not necessary to establish that fact. 43Thirdly, although I have rejected most of Mr Merchant's affidavit, a review of the contents of that affidavit, not as evidence on the application but for the case management purpose of identifying the evidence that is available to the second defendant (remembering that much of the affidavit takes the form of cutting and pasting from other evidence), shows that there is objective evidence available to the second defendant concerning conduct that could arguably be attributed to Mr Balzan's psychological condition. 44Fourthly, if there is any basis for removing Mr Balzan as a director, that must depend upon objective evidence as to his conduct, and not his psychological condition from a medical perspective. The mere fact that Mr Balzan suffers from a particular psychological condition does not ipso facto disqualify him from office as a director, and if his condition were managed appropriately, and if he conducted himself properly, there is no reason why he could not continue as a director of the first defendant. The entitlement of the second defendant to the orders sought should primarily depend upon evidence of Mr Balzan's conduct, rather than confidences disclosed by him to his doctors. 45Finally, if I assume the contents of Dr Cordaro's clinical notes to be representative of the documents produced by the two doctors, which I do, almost the entirety of the information provided by Mr Balzan to his doctors, while relevant in various ways to his psychological condition, provides no evidence that is probative in relation to his capacity to perform his duties as a director of the first defendant. 46I incline to the view that there would be no desirability of the information produced by the doctors being given in evidence, but if that inclination is wrong, the desirability is minimal. I am entirely satisfied that the nature and extent of the harm entirely outweighs whatever desirability of the information being given in evidence that has been established. 47I have not lost sight of the fact that the interlocutory process is limited to seeking an order that the legal representatives of the second defendant have access to the documents produced by the doctors, and not the second defendant, and thus Mr Merchant. While the limitation of inspection to the legal representatives may tend to reduce the harm that Mr Balzan will suffer, I am satisfied that the fact of disclosure to anyone will cause significant harm to Mr Balzan. 48Even if I were wrong in that view, in the exercise of my discretion under s 126B(1) of the Evidence Act, brought into effect for the purposes of this application by s 131A, I would have declined to allow the legal representatives of the second defendant to inspect the documents produced by the doctors. 49I will briefly consider the matters that s 126B(4) requires me to take into account. For the reasons that I have given above there would be little probative value in the evidence (a). The evidence would not be important, because for practical purposes Mr Balzan will not continue to act as a director of the first defendant in any event (b). Accordingly, the application for an order removing Mr Balzan as a director is of little gravity (c). Not only is other objective evidence available, but the only evidence that would truly be significant is objective evidence (d). I have already said why I have found that allowing the second defendant's legal representatives to inspect the documents would be likely to cause serious harm to Mr Balzan (e). There are no practical means available to the court to limit the extent of the harm, as it is the fact of disclosure occurring that is likely to cause the harm (f). Although Ms Williamson has reviewed documents produced by Dr Cordaro, she is subject to an implied undertaking not to use or disclose the information. The information has not relevantly already been disclosed in a way that should cause the court to permit it to be inspected by the legal representatives (h). The public interest weighs in favour of preserving the confidentiality of the protected confidences (i). 50I also reject the second defendant's application for the inspection of so much of the documents as do not record protected confidences, because I am not satisfied that the second defendant has demonstrated a legitimate forensic purpose for using any of the documents. 51I make the following orders: (1)The second defendant's interlocutory process filed on 2 October 2014 is dismissed. (2)The second defendant is ordered to pay the costs of the plaintiff in respect of the interlocutory process on the ordinary basis. (3)Exhibits may be returned in accordance with the Rules.