CBX2 Pty Ltd v National Australia Bank

The notice to produce

1. The notice to produce issued by NAB addressed to CBX2 dated 4 June 2015 relevantly seeks the following documents: "1 A copy of the retainer and costs agreement (including any costs disclosure or estimate) between Sullivan Fernan Lawyers Pty Ltd and the Plaintiff. 2 A copy of all tax invoices, remittance advices and receipts received or issued by the Plaintiff on account of legal services provided to it by Sullivan Fernan Lawyers Pty Ltd. 3 A copy of the retainer and costs agreement (including any costs disclosure or estimate) between Mr Anthony McQuillen and the Plaintiff. 4 A copy of all tax invoices, remittance advices and receipts received or issued by the Plaintiff on account of legal services provided to it by Mr Anthony McQuillen."
2. While the notice to produce does not stipulate the periods of time for which the documents are sought, Mr McQuillen of counsel was briefed in about November 2014 and Mr Sullivan was instructed in April 2015, so the documents sought are from those dates respectively.

The law

1. So far as the notice to produce is concerned, rule 1.9 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") relevantly reads: "1.9 Objections to production of documents and answering of questions founded on privilege (cf SCR Part 36, rule 13; DCR Part 28, rule 16) (1) This rule applies in the following circumstances: (a) if the court orders a person, by subpoena or otherwise, to produce a document to the court or to an authorised officer, (b) if a party requires another party, by notice under rule 34.1, to produce a document to the court or to an authorised officer, … (3) A person may object to producing a document on the ground that the document is a privileged document or to answering a question on the ground that the answer would disclose privileged information. (4) A person objecting under subrule (3) may not be compelled to produce the document, or to answer the question, unless and until the objection is overruled. …"
2. CBX2 has produced the documents it claims are privileged to this Court.
3. UCPR 34.1 relevantly reads: "34.1 Notice to produce to court (cf SCR Part 36, rule 16; DCR Part 28, rule 18; LCR Part 23, rule 9) (1) A party may, by notice served on another party, require the other party to produce to the court, or to any examiner: … (a1) at any time fixed by the court for the return of subpoenas, or …, any specified document or thing. (2) The other party must comply with a notice to produce: (a) by producing the notice or a copy of it, and the document or thing, to the court, or to the examiner authorised to take evidence in the proceeding as permitted by the court, at the date, time and place specified for production, or …"
4. In Norris v Kandiah [2007] NSWSC 1296 at [3] Brereton J stated: "[3] …A notice under r 34.1, appearing in Pt 34 entitled Notice to Produce to Court and following notices to produce at the hearing including opinions is a process akin to a subpoena for production... subpoenas for production are not necessarily limited to documents relevant to a fact in issue, but may extend to documents relevant to credit."
5. Similarly, Barrett J stated in Patonga Beach Holdings Pty Ltd v Lyons [2009] NSWSC 869 at [12] that, in relation to a notice to produce issued pursuant to UCPR 34.1: "[12] …The word 'specified' here means, in my view, the same as 'described' or 'identified', so that a notice under r 34.1 plays in relation to a party the role that is played under r 33 by a subpoena in relation to a non-party."
6. NAB has filed a notice of motion seeking security for costs from CBX2 on the basis that it has reason to believe that CBX2 will be unable to pay NAB's costs if NAB is successful in its defence. NAB requires sufficient security to be given for those costs and a stay of proceedings until the security is given: see s 1335 of the Corporations Act 2001 (Cth). Counsel for NAB submitted that the documents referred to in this notice to produce are relevant to the security for costs motion, which has been listed for hearing on 17 August 2015.
7. Some of the factors that the Court may consider on the application for security for costs include whether CBX2's impecuniosity was caused by NAB's conduct, whether Mr Blinkworth is a person standing behind CBX2 who is likely to benefit from the litigation and if so whether he is willing to provide the necessary security, and whether the order would stultify these proceedings: see KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 196F - 198C.
8. Mr Sullivan in his earlier affidavit at [5], [8], [9] and [11] sets out the financial position of CBX2 and Mr Blinkworth as follows: 1. CBX2 has no assets other than the funds shown in its Westpac Business One statement (the balance of funds in that account as at 23 April 2015 was $809); 2. Mr Blinkworth has no other bank accounts or any other assets other than $177.57 in a NAB account; 3. On Mr Sullivan's instructions, and from the material provided to him, it appears that neither CBX2 nor Mr Blinkworth has any present financial capacity to provide security for NAB's costs of these proceedings; 4. On Mr Sullivan's instructions, it appears that the present impecuniosity of CBX2 is attributable to NAB's conduct.
9. According to NAB, the evidence showing that CBX2's solicitors, Sullivan Fernan Lawyers ("Sullivan Fernan"), are holding funds on trust for CBX2 and/or Mr Blinkworth, and that payments have been made on their behalf to Sullivan Fernan, goes directly to the substantive issues that arise on the security for costs application. In particular, NAB argued that they go to a legitimate forensic purpose, namely, the financial position of CBX2, the worth of any undertaking given by Mr Blinkworth, and whether security would stultify the proceedings.
10. NAB submitted that having squarely put the financial position of CBX2 and Mr Blinkworth in issue, (i) whether Sullivan Fernan holds any funds for them, (ii) whether past payments have been made to Sullivan Fernan, and (iii) the quantum of any funds held or paid, are relevant issues which Sullivan Fernan's bank account statements and trust account ledger for CBX2 and Mr Blinkworth bear upon. NAB said that these documents are also relevant for the purposes of cross examining Mr Sullivan, having regard to the statements made by him concerning the extent of the assets of CBX2 and Mr Blinkworth.
11. The categories of documents sought in the notice to produce include copies of the retainer and costs agreement between Sullivan Fernan and Mr McQuillen on the one hand and CBX2 on the other, together with invoices issued to date and evidence of payments made.
12. The costs agreement, invoices and evidence of payment sought in categories 1 to 4 of the notice to produce cast light upon whether CBX2 has access to funds to maintain the litigation irrespective of its impecuniosity. It is my view that the documents sought in the notice to produce are sought for a legitimate forensic purpose and it is on the cards that they will materially assist NAB's case. These documents go to the issue of the impecuniosity of CBX2 and its sole director Mr Blinkworth, Mr Blinkworth's credit and whether an order for security would stultify the proceedings: see Norris v Kandiah at [3].

The Evidence Act

1. However, counsel for CBX2 claimed that the documents sought in paragraph [1] to [4] of the notice to produce are confidential communications under s 119 of the Evidence Act 1995 (NSW). NAB argued that there is no client legal privilege in relation to those documents.
2. Section 119 of the Evidence Act reads: "119 Litigation Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of: (a) a confidential communication between the client and another person, or between a lawyer acting for the client and another person, that was made; or (b) the contents of a confidential document (whether delivered or not) that was prepared; for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party."
3. "Legal services" is not defined in the Evidence Act. However, s 4 of the Legal Profession Act 2004 (NSW) defines "legal services" as work done, or business transacted, in the ordinary course of legal practice. Counsel for CBX2 submitted that retainers and costs agreements are documents produced in the ordinary course of legal practice.
4. Mr Sullivan (Aff, 8 July 2015 at [6] - [7]) expressed his opinion that the documents referred to in categories (1) to (4) of the notice to produce are confidential documents that were prepared for the dominant purpose of CBX2 being provided with professional legal services relating to the proceeding before the Court, and that his client, CBX2, has instructed him to object to the production of these documents. However, Mr Sullivan's opinion does not necessarily fulfil the "dominant purpose" test.
5. Southland Coal Pty Ltd (rec and mgrs apptd) (in liq) (2006) 203 FLR 1; [2006] NSWSC 899, set out some uncontested principles concerning client legal privilege. At [14] Austin J said: "[14] A formulation of the uncontested principles about client legal privilege which the parties drew to my attention, adequate for present purposes, is set out in paras (a)-(j) below. (a) Rule of substantive law - "Legal professional privilege is a rule of substantive law which may be availed of by a person to resist the giving of information or the production of documents which would reveal communications between a client and his or her lawyer made for the dominant purpose of giving or obtaining legal advice and the provision of legal services, including representation in legal proceedings" (Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543, at [9] per Gleeson CJ, Gaudron, Gummow and Hayne JJ). The "rule of substantive law" is, of course, affected by the terms of the Evidence Act where the Act applies. (b) Two-stage process - Assessing a claim for privilege under s 118 or s 119 is a two-stage process. The first step is for the court to be satisfied that the communication or contents, disclosure of which is sought to be prevented, satisfies the requirements set out in s 118 or s 119 or both sections. The second step is for the court to be satisfied that the production of the document or the unredacted part of it would result in the disclosure of a confidential communication or the confidential contents of a document. (c) Onus - The party claiming privilege bears the onus of establishing the basis of the claim and the party seeking production does not bear the onus of excluding privilege (Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority (2002) 4 VR 332 at 337; ASIC v Rich [2004] NSWSC 1089 at [2]; In the matter of Bauhaus Pyrmont Pty Ltd (in liq) [2006] NSWSC 543 at [24]). …"
6. Later, Austin J referred to whether a solicitor's belief as to dominant purpose is sufficient, and stated at [28]: "[28] In my opinion, evidence by a lawyer on information and belief about his or her client's motivation in causing a communication to occur, if allowed, will not of itself be sufficient to establish that the dominant purpose of the communication attracts legal advice or litigation privilege. But the lawyer may be in a position to give admissible evidence about the circumstances surrounding the communication, which will suffice, perhaps together with inferences from the document itself, to establish the privilege. Further, the purpose of a communication between a client and a lawyer can in some circumstances be inferred from the purpose of the lawyer's retainer (General Manager, WorkCover Authority of NSW v Law Society of NSW [2006] NSWCA 84, at [85] and [88] per McColl JA, quoting from The Sagheera [1997] 1 Lloyd's Rep 160 at 168, per Rix J); DSE (Holdings) Pty Ltd v InterTAN Inc (2003) 135 FCR 151, at [52] and [58], per Allsop J)."
7. Section 119 of the Evidence Act creates a privilege for confidential communications made, and confidential documents prepared, for a lawyer providing professional legal services relating to litigation. The making of the communication and the contents of the document prepared must be for the dominant purpose of providing those legal services. While Mr Sullivan has expressed the view that the documents sought were created for the dominant purpose of the provision of legal services, that in itself is not sufficient to establish the dominant purpose of the communication.
8. Counsel for CBX2 submitted that neither the context nor the content of s 119 provide any justification for reading down the expression "relating to" these proceedings with "legal services". According to CBX2, any documents of the description set out in NAB's notice to produce, and the subject of the claim for privilege, would not have come about were it not for this litigation and accordingly, the dominant purpose test is satisfied.
9. Counsel for NAB submitted that no issue of privilege should arise in relation to the costs agreement because costs agreements are not normally privileged. This is because the dominant purpose of the creation of such documents is typically to record the terms of the retainer, or to request payment from the client for work done, which is not a purpose that would attract privilege. NAB accepted that in some circumstances, a detailed narrative on a memoranda of fees might contain a description that might reveal the substance of advice or otherwise attract privilege. NAB's position was that if this is the case, it would have no objection to the relevant privileged portion being redacted, because what is of relevance here is the fact and quantum of payment of fees, not the content of any advice.
10. In Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (t/as Uncle Ben's of Australia) (1994) 126 ALR 58 at 68, it was held that memoranda of fees, bills of costs and solicitors trust account ledgers are not normally privileged (the reason being that the dominant purpose of the creation of such documents does not attract privilege).
11. In CSR Ltd v Eddy (2008) 70 NSWLR 725; [2008] NSWCA 83, the Court of Appeal per Basten JA at [62] stated: "[62] The purpose of client legal privilege is to protect confidential communications between client and lawyer for the purpose of obtaining legal advice and the provision of that advice and communications in relation to the conduct of litigation. The existence of a retainer between client and lawyer is not the subject of the protection, but a precondition to its operation. Accordingly, and generally speaking, the retainer will not be privileged: see Cook v Pasminco Pty Ltd (No 2) (2000) 107 FCR 44 ; [2000] FCA 1819 at [47] (Lindgren J). ..."
12. Finally, in Cross on Evidence (9th Aust Ed, 2013) at [25225], the learned author says in relation to confidential communications: ""Where the communication is in writing, the writing must have been brought into existence for one or other of these purposes. The privilege does not protect documents which constitute or evidence transactions, such as contracts or conveyances, which are not themselves the giving or receiving of advice or part of the actual or anticipated litigation. While bills of costs may be privileged, as recording the progress of a transaction and as disclosing the nature of communications, trust account ledgers are normally not, and nor are memoranda of fees, backsheets and the like which do not disclose the nature or extent of privileged material. Nor are records of time on an attendance note, time sheet or fee record, since they are not communications and have nothing to do with obtaining legal advice. So far as a costs agreement is a bundle of mutual and reciprocal commitments between instructing solicitor and client, it is not privileged, though so far as it records legal advice it is." (citation omitted)
13. As Effem Foods, Eddy and Cross on Evidence say, memoranda of fees, bills of costs, solicitors trust account ledger entries, costs agreements and retainers are not normally privileged. Such is the case here.
14. Hence, it is my view that the copies of the retainer and costs agreement between CBX2 and its solicitor and barrister, and tax invoices, remittance advices and trust account ledger entries received or issued in relation to legal services provided to CBX2, do not result in the disclosure of confidential communications. I have examined the documents produced by CBX2 to this Court. I do not think that they include any legal advice given.
15. I propose to make an order that access to those documents be granted to NAB, but before I do so, I would like to afford CBX2's legal representatives the opportunity to check the documents in the envelope to ascertain whether any portion of those documents pertain to client legal privilege and may need to be redacted.
16. Costs are reserved. The Court proposes to order that: (1) As documents referred to in paragraphs [1] to [4] of the notice to produce issued by National Australia Bank Limited to CBX2 dated 4 June 2015 have been produced to the Court, access is granted to National Australia Bank Limited to those documents. (2) Costs are reserved.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 July 2015