Counsel for the Applicants and Second to Thirteenth Respondents: Mr B Walker with Mr A Psaltis and Ms D Tay
[2]
Solicitor for the Applicants and Second to Thirteenth Respondents: Bartley Cohen
[3]
Counsel for the Fourteenth to Twentieth Respondents: Mr D O'Brien with Mr D Marckwald
[4]
Solicitor for the Fourteenth to Twentieth Respondents: Colin Biggers & Paisley
[5]
Counsel for the Twenty-Second and Twenty-Third Respondents: Mr T Pincus
[6]
Solicitor for the Twenty-Second and Twenty-Third Respondents: Hall & Wilcox
[7]
ORDERS
QUD 93 of 2022
IN THE MATTER OF GGPG PTY LTD ACN 609 675 505 (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION)
CIP GROUP PTY LTD ACN 610 483 577
First Applicant
BETWEEN: CIP 1 PTY LTD ACN 611 408 710
Second Applicant
PYRMONT PORTFOLIO PTY LTD ACN 608 496 617
Third Applicant
SHAN NGAI SO
First Respondent
AND: GGPG PTY LTD ACN 609 675 505 (RECEIVER AND MANAGER APPOINTED)
Second Respondent
PARK RIDGE 94 PTY LTD ACN 616 893 924 (RECEIVER AND MANAGER APPOINTED) (and others named in the Schedule)
Third Respondent
[8]
order made by: COLLIER ACJ
DATE OF ORDER: 12 December 2024
[9]
THE COURT ORDERS THAT:
By 4.00pm on 17 December 2024, pursuant to r 20.32 of the Federal Court Rules 2011 (Cth), the applicants and the second to thirteenth respondents are to produce, by electronic means:
to the first respondent, the documents:
identified in Annexure A1 of the submissions of the applicants and the 2nd to 13th respondents dated 19 August 2024; and
identified in Annexure 1 to these orders;
to all parties to the proceeding, the documents:
identified in rows 1 to 6, 8 to 10, 12, 14 to 16, 20 to 38, 41, 44, 48 to 95, 97 to 104, and 106 to 112 of Annexure R.C to the reply submissions of the applicants and 2nd to 13th respondents dated 30 August 2024 (Reply Submissions);
identified in annexure R.D (all rows) to the Reply Submissions;
From the documents which have been produced to the court by Nicholsons Solicitors, and which are identified on page 7 of the affidavit of Matthew John Russell dated 11 June 2024:
the parties to the proceeding have leave to uplift the dot point diary note of without prejudice meeting dated 25 November 2019 - prepared by Matthew Russell; and
the first respondent has leave to uplift the two emails from Mr Whiteman to Mr Russell dated 5 June 2017.
Costs be reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Annexure 1
RCV.003.010.7511
RCV.003.033.6432
RCV.003.033.6434
RCV.001.004.8015
RCV.003.045.2738)
RCV.001.005.9032
RCV.001.005.9033
RCV.001.005.9034
RCV.001.005.9035
RCV.001.005.9036
RCV.001.005.9037
RCV.003.034.1281
RCV.003.034.1297
RCV.003.034.1844
RCV.003.034.1845
RCV.003.034.1846
RCV.003.034.1851
RCV.003.035.8720
RCV.003.035.8721
[10]
REASONS FOR JUDGMENT
COLLIER ACJ:
The substantive proceedings in this matter essentially concern a dispute between corporations engaged in a land development business. Claims of oppressive conduct in respect of the operation of the second to thirteenth respondents have been made, as well as claims of breach of fiduciary duty by Mr Shan Ngai So who was the controller of the fourteenth to seventeenth respondents. Relevant background facts were set out in detail by Derrington J in CIP Group Pty Ltd v So [2022] FCA 1490.
Following discussions between relevant parties, at the hearing of 4 September 2024 the parties were able to agree on a limited number of issues for resolution. In a document marked MFI-1 in the proceeding, these issues were identified as follows:
Privilege in documents held by companies of which Mr So is a director:
So interests' submissions dated 19 August 2024 at [32]-[35], [79].
Applicants and 2nd-13th respondents' response dated 30 August 2024 at [6]-[17].
Company privilege claims to be made by the liquidator where companies are in liquidation:
So interests' submissions at [36]-[39].
Applicants and 2nd-13th respondents' response at [18]-[25].
Sufficiency of proof of privilege claims by third parties (Berich/Tseng):
So interests' submissions at [43].
Applicants and 2nd-13th respondents' response at [26]-[30].
Documents referred to in annexure R.C to the applicants and 2nd-13th respondents' response submissions (which if ordered by the Court will be produced to the Court by the applicants and 2nd-13th respondents).
Application of the fraud exception to the Axis Hookey loan documents:
So interests' submissions at [58]-[65].
Applicants and 2nd-13th respondents' response at [51]-[60].
Documents referred to in Annexure R.D to the applicants and 2nd-13th respondents' response submissions (which if ordered by the Court will be produced to the Court by the applicants and 2nd-13th respondents).
Privilege in the Nicholsons diary note:
So interests' submissions at [68]-[76].
Applicants and 2nd-13th respondents' response at [64]-[72].
Document is produced by Nicholsons to the Court pursuant to an application for non-party discovery on 11 June 2024.
At the hearing of 4 September 2024 the parties agreed that reasons were required only in respect of my decision regarding Issues (1) and (2). In respect of Issues (3), (4) and (5), the parties were content for me to make orders as I considered appropriate without the need for reasons.
[11]
Issue 1: Privilege in documents held by companies of which Mr So is a director
Issue 1 concerns the assertion of privilege over documents where it is not in dispute that the privilege belongs to companies of which Mr So is a director. I understand that these documents are in the possession of the applicants and the 2nd-13th respondents (together, the Clancy Parties) represented by law firm Bartley Cohen.
The starting position of Mr So (the 1st respondent) and his associated entities (the 14th-17th respondents) (So interests) who seek discovery of these documents is that, as a director of the companies asserting privilege over the documents, Mr So is entitled to those documents. I note that law firm Colin Biggers & Paisley acts for the So interests.
Reasons given by the Clancy Parties for the refusal to give access to these documents to the So interests are, in summary:
Directors are not always entitled to access privileged information in exercise of their access rights, and the issue will be fact dependent: Hammond v Quayeyeware Pty Ltd (2021) 389 ALR 248; [2021] FCA 293 (Hammond) at [200].
At common law, the general right of access of a director of a corporate body to documents in the body's possession exists as a consequence of a director's due diligence obligations, to enable that person effectively to carry out his or her duties as a director. The Court has a discretion as to whether to assist a director in enforcing that general right which will generally be exercised for the benefit of the corporation: South Australia v Barrett (1995) 64 SASR 73 (Barrett).
The privilege will apply against a director when the director seeks inspection in his or her private or personal capacity.
A corporation has the right to maintain legal professional privilege immunity against a director in respect of confidential advice to the corporation relating to a dispute between the corporation and the director, in which the interests of the company and the director are adverse: Barrett at 83-84.
Mr So seeks access to privileged documents in his personal capacity for the purpose of defending this litigation and not for the purpose of discharging his obligations as a director.
The Clancy Parties allege that Mr So breached duties as a director of the 2nd-13th respondents, including that he was acting in a position of conflict in seeking to have those companies enter into written loans, securities and mortgages with the 17th respondent (of which Mr So was the sole director). It follows that in respect of privileged documents about the negotiation of loans, securities and mortgages, Mr So was not acting in a position of commonality of interest with the 2nd-13th respondents, and accordingly he is not entitled to see these documents.
Colin Biggers & Paisley not only acts for Mr So, but for the 14th-17th respondents (included in the So interests), and the 18th-20th respondents who are not included in the So interests. None of the 14th-20th respondents are entitled to see the privileged documents, nor have they explained an entitlement to do so. If the documents are produced to Colin Biggers & Paisley those lawyers will have knowledge of the contents of privileged documents which can only be used by one of their eight clients in the proceedings.
In response, Ms Lois Bullen, solicitor with Colin Biggers & Paisley, annexed correspondence between Colin Biggers & Paisley and Bartley Cohen to her affidavit dated 6 August 2024. Relevantly in that correspondence was a letter dated 5 August 2024 in which Ms Bullen proposed as follows:
To advance the issue, our clients propose that the documents over which the Carver's entities claim privilege, be produced by your clients by consent on the basis that:
The documents will be held on an e-discovery platform maintained by Sky Discovery;
CBP's clients, other than Mr So, do not and will not have any access to the e-discovery platform maintained by Sky Discovery; and
CBP will not provide to its clients, other than to Mr So, any of the documents over which the Carver's entities claim privilege.
At the hearing Mr O'Brien for the So interests directed the Court's attention to s 198F(1) of the Corporations Act 2001 (Cth).
Mr O'Brien submitted that the decision in Barrett pre-dated the enactment of s 198F of the Corporations Act, and that the proposed quarantining of documentation made available to Mr So from the other respondents for whom Colin Biggers & Paisley acted would address any concerns of the Clancy Parties.
In the circumstances it is appropriate to turn immediately to s 198F of the Corporations Act. Section 198F(1) provides:
Right of access to company books
Right while director
(1) A director of a company may inspect the books of the company (other than its financial records) at all reasonable times for the purposes of a legal proceeding:
(a) to which the person is a party; or
(b) that the person proposes in good faith to bring; or
(c) that the person has reason to believe will be brought against them.
Note 1: Section 290 gives the director a right of access to financial records.
...
The Explanatory Memorandum to the Corporate Law Economic Reform Program Bill 1998 (Cth) which introduced s 198F relevantly provides:
Right of Access to Company Books
6.5 Proposed section 198F is designed to ensure that directors (and former directors) will have sufficient legally enforceable rights of access to company documents.
6.6 At common law, a director has a right of access to all company information necessary to enable the director to discharge his or her fiduciary or statutory obligations (State of South Australia v Barrett (1995) 13 ACLC 1369, 1372, 1376; Kriewaldt v Independent Direction Ltd (1995) 14 ACLC 73, 75). However, such information may only be used by the director for the purposes of the company (Barrett, supra, at 1372, 1376; Kriewaldt, supra, at 76). For example, if a director is being sued by the company for an alleged breach of duty owed to the company, it can be difficult for the director to demonstrate that access to documents (perhaps crucial to their defence) would be 'for the purposes of the company'. This can particularly be a problem for retired directors.
6.7 Proposed section 198F will allow current and retired directors a legally enforceable right of access at all reasonable times to the books of the company in which they are or were a director (proposed subsections 198F(1) and (2)). The right of access is to continue for a period of 7 years after a person ceases to be a director of the company (proposed subsection 198F(2)).
6.8 The right of inspection (other than for financial records) is limited to where the director requires access for the purposes of a legal proceeding to which the director is a party, or proposes in good faith to bring, or has a reasonable belief will be brought against them (proposed subsection 198F(1).
6.9 A person authorised to inspect the books of the company for the purposes of a legal proceeding may make copies of the books for the purposes of the proceedings (proposed subsection 198F(3)). The company must not refuse access to a person in the exercise of their rights to inspect or take copies of the books (proposed subsection 198F(4)).
[12]
Issue 2: Company privilege claims to be made by the liquidator where companies are in liquidation
The So interests relevantly submit as follows:
There are 4 documents for which privilege is claimed on behalf of companies in liquidation, being:
(a) Axis North (RCV.001.004.8015 and RCV.003.045.2738); and
(b) PRDM (RCV.003.035.8720 and RCV.003.035.8721).
In respect of these documents, there is a further reason why they should be produced.
The effect of a winding-up order is that the powers of the directors in the company cease, and the directors cannot assert a claim of legal professional privilege on behalf of the company so as to prevent the production of documents to a third party.
For the above 4 documents to which the privilege belongs to a company in liquidation, the Clancy Entities (and Mr Clancy, as a former director of Axis North and PRDM) are not entitled to claim privilege for those documents. The Clancy Parties have filed no evidence that the liquidator claims privilege over the documents. The documents should be produced.
(footnotes omitted)
The So interests rely on the decision in Whittenbury v Vocation Limited (No 2) [2020] FCA 653 (Whittenbury).
The position of the Clancy interests is as follows:
The principle identified in paragraph 38 of the So interests' submissions has been stated too broadly.
It is conceptually inaccurate to say that in a winding up the powers formerly exercisable by company officers are transferred to the liquidator, although this is in a general sense loosely descriptive of what occurs. The officer of a liquidator is a statutory office, and the liquidator's powers derive solely from the relevant statute: Butterell v Docker Smith Pty Ltd & anor (1997) 41 NSWLR 129 at 137-138 (McLellan CJ).
Thus, it is necessary to identify the source of power for a liquidator to assert or waive privilege.
In Mercantile Credits Ltd v Dallhold Investments Pty Ltd (1994) 53 FCR 339, Sackville J considered the decision of Re Stanhill Consolidated Ltd [1967] VR 749, in which the parties had acknowledged that there were certain cases in which a liquidator could appropriately waive privilege, including where legal proceedings had been instituted or defended by him in the name of the company: at 345. Consistently with this, his Honour considered (without expressing a concluded view) that it was doubtful whether a liquidator has power to assert or waive legal professional privilege simply as a matter of course. Rather, it was necessary to identify a source of power for the assertion or waiver of privilege, which in some cases would be the power conferred on the liquidator by s 477(2) of the Corporations Act to bring or defend legal proceedings: at 347. This position was adopted by Williams J in Re Electronic Learning System International Pty Ltd (in liq) [1998] 2 Qd R 144 at 145.
There does not appear to be any authority which deals with the question of who has the power to assert or waive privilege where a company is in liquidation but another party has derivative leave to bring proceedings on the company's behalf. This may be because the statutory derivative action regime does not apply to a company in liquidation: Chahwan v Euphoric Pty Ltd (2008) 227 FLR 43; [2008] NSWCA 52.
It is the applicants who have the power to bring these proceedings in the name of Axis North and PRDM. Thus, insofar as the liquidator of those companies generally has power under s 477(2)(a) of the Corporations Act 2001 (Cth) to bring and defend any legal proceeding in the name and on behalf of those companies, that power must be subject to the order of the Court giving leave to another person to do so.
It follows from the authorities above that the power to assert and waive privilege in proceedings on behalf of a company, if outside the control of its directors, is conferred on the person who has the power to bring and defend legal proceedings in the name and on behalf of those companies. In these proceedings, the persons with that power are the applicants. Put another way, the liquidator of Axis North and PRDM does not have the power to assert or waive privilege in these proceedings because they are not empowered, pursuant to s 477(2)(a), to bring these legal proceedings in the name and on behalf of Axis North and PRDM.
The applicants are entitled to maintain the claim of privilege over the four documents identified in paragraph 36 of the So interests' submissions. They should not be produced.
The Clancy interests also relied on Worrell & anor (as trustees of estate of Fleming) v Woods (1999) 90 FCR 264 at [9(vi)].
In Whittenbury in the context of a claim of privilege referable to documents in the possession of companies in liquidation, Middleton J relevantly said:
In my view, the liquidators of Vocation no longer maintain any privilege claim in respect of those 12 documents, and the evidence sought to be adduced by the [non-executive directors] NEDs cannot be deployed by them to establish a claim of privilege where the privilege holder itself no longer makes such a claim. The privilege is that of the company, not of the NEDs; the former non-executive directors have no standing to advance a privilege claim on behalf of Vocation which the company itself no longer advances.
…
In my view, it is essential for liquidators of Vocation to unequivocally claim the privilege. The NEDs have no standing or basis to claim the privilege.
…
I should make it clear that it cannot be doubted that liquidators are able to make a claim for legal professional privilege or to waive the privilege.
However, I am also of the view that liquidators must form a view that whatever action they take will be in the interests of creditors or the company. This has not occurred in this proceeding. The only basis for the liquidators of Vocation's approach is they are 'not funded to press any claims' for privilege in respect of the 12 documents.
As to the role of liquidators in claims for legal professional privilege, in Re Dallhold Investments Pty Limited [1994] FCA 738; (1994) 53 FCR 339 at 347-348, Sackville J said:
Although I do not wish to express a concluded view on the matter, I think it is doubtful whether a liquidator has power to assert or waive legal professional privilege, in respect of communications to and from the company, simply as a matter of course. It is, in my view, necessary to identify a source of power for the assertion or waiver of privilege, and for the liquidator to act pursuant to that power. In some cases the source will be a specific power conferred on the liquidator by s 477(2) of the Corporations Law, such as the liquidator's power to bring or defend legal proceedings: s 477(2)(a). Once the liquidator becomes the litigant, his or her position appears to be no different in relation to compulsory process than that of any other litigant in the proceedings: see Hartogen Energy Ltd (In liq) v Australian Gas Light Co [1992] FCA 322; (1992) 36 FCR 557 at 566.
Alternatively, the liquidator's powers may derive from the general language of s 477(2)(m). I do not think that the language of the section is necessarily of such breadth that the liquidator can assert or waive legal professional privilege without consideration of the particular circumstances. It seems to me that the better view is that s 477(2)(m) can be invoked only where the liquidator forms a judgment that it is or may be in the interests of creditors or the company to assert or waive legal professional privilege. Without being exhaustive, I think that the liquidator could form the necessary judgment on the ground that the assertion or waiver of privilege (as the case may be) would or might be of assistance in exercising or discharging the liquidator's powers or duties. If, however, the liquidator does form that judgment, I think that s 477(2)(m) authorises the liquidator to assert or waive legal professional privilege.
In framing directions, it must be remembered that the liquidator is to use his or her own discretion in the exercise of the statutory powers and functions. Section 479(4) of the Corporations Law provides that, subject to the remainder of the Part:
"the liquidator shall use his or her own discretion in the management of affairs and property of the company and the distribution of its property."
In my view, it is open to the liquidator both to assert and waive legal professional privilege on behalf of the company, provided the liquidator forms the view, in good faith, that to do so is or may be in the interests of creditors or of the company. ...
Whilst Sackville J did not express a concluded view, the observations he made are sound and in my view, correct. In the context of any liquidation, the liquidator has certain powers and duties, but these can only be exercised after a bona fide consideration of the options available. It may well be that a liquidator (for instance) may not make a claim of legal professional privilege to avoid needlessly protracting a liquidation - see s 480 of the Corporations Act 2001 (Cth) (the 'Corporations Act'). If a relatively aggrieved person is dissatisfied with a decision of a liquidator, there is an avenue to appeal such a decision: see s 1321 of the Corporations Act.
As a general proposition, and consistently with the decision in Whittenbury, an assertion of privilege in respect of documents in the possession of the company in liquidation must be made by the liquidator. As observed in both Whittenbury and Re Dallhold Investments Pty Limited (1994) 53 FCR 339; [1994] FCA 738, where a company in liquidation is the subject of litigation, it is generally for the liquidator to assert privilege in relation to relevant documents and to identify the basis on which the privilege is asserted. This is because the powers formerly exercisable by company officers in respect of the company have devolved to the liquidator. It follows as a general rule that it is not open to the directors of the company in liquidation to seek to assert privilege on behalf of the company in respect of corporate documents sought in litigation with the company.
However, the circumstances are different where a company has entered liquidation and, pursuant to s 236 of the Corporations Act, the Court has granted leave to a nominated entity (including a former director) to bring proceedings on the company's behalf or to intervene in such proceedings.
Part 2F.1A of the Corporations Act is plainly remedial legislation, granting effective rights to conduct litigation to persons in the classes described in that Part: see Karam & Ors v ANZ Banking Group Limited & Anor [2000] NSWSC 596 at [31], Advent Investors Pty Ltd v Goldhirsch [2001] VSC 59 at [37]. It is well-settled that legal professional privilege is not a rule of evidence but a substantive rule of law: Carter v Managing Partner Northmore Hale Davy & Leake (1995) 183 CLR 121.
It is further well-settled that privilege claimed in respect of documents sought in litigation belongs to the "client". As observed by Kirby J in Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 141 ALR 545 at 608, privilege not only protects the client's interests, but also the entire community in the proper administration of justice (see also Mann v Carnell (1999) 168 ALR 86 at [28], Baker v Campbell [1983] 153 CLR 52 at 128). As McHugh J further observed in Carter at 161:
… By protecting the confidentiality of communications between lawyer and client, the doctrine protects the rights and privacy of persons including corporations by ensuring unreserved freedom of communication with professional lawyers who can advise them of their rights under the law and, where necessary, take action on their behalf to defend or enforce those rights. The doctrine is a natural, if not necessary, corollary of the rule of law and a potent force for ensuring that the equal protection of the law is a reality.
(emphasis added)
In the present case where the applicants were granted leave on 16 December 2022 (as modified on 10 March 2023) to bring proceedings in the name of the 2nd-13th respondents for the claims made, those companies are the "clients", but decisions in respect of the litigation as concerns those companies are made by the applicants on behalf of those companies. This plainly would extend to a decision concerning whether privilege should be claimed in respect of corporate documents in defending or enforcing claims against or by the relevant companies.
The liquidator has, I understand, not asserted an interest in the litigation, nor identified the power by which any privilege in respect of documents could be claimed.
I am satisfied that the applicants are entitled to maintain the claim of privilege over the four documents identified in paragraph 36 of the So interests' submissions. Those documents should not be produced.
[13]
Issues 3, 4 and 5
In respect of the documents the subject of Issues 3, 4 and 5, I rule as follows.
In respect of Issue 3: I am not satisfied that privilege in respect of these documents has been substantiated. It is appropriate that these documents be produced.
In respect of Issue 4: I am not satisfied that privilege in respect of these documents has been substantiated. It is appropriate that these documents be produced.
In respect of Issue 5: I am not satisfied that privilege in respect of this document has been substantiated. It is appropriate that this document be produced.
The parties made no submissions as to costs in respect of these issues. I consider that the appropriate order is that costs be reserved.
I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Acting Chief Justice Collier.
[14]
Associate:
Dated: 12 December 2024
SCHEDULE OF PARTIES
QUD 93 of 2022
Respondents
Fourth Respondent: PARK RIDGE 96 AND 98 PTY LTD ACN 618 802 618 (RECEIVER AND MANAGER APPOINTED)
Fifth Respondent: PARK RIDGE 132 PTY LTD ACN 619 053 735 (RECEIVER AND MANAGER APPOINTED)
Sixth Respondent: 168 PARK RIDGE PTY LTD ACN 619 549 334 168 (RECEIVER AND MANAGER APPOINTED)
Seventh Respondent: PARK RIDGE 180 PTY LTD ACN 616 431 157 (RECEIVER AND MANAGER APPOINTED)
Eighth Respondent: ROCHEDALE HOLDINGS PTY LTD ACN 610 535 076 (RECEIVER AND MANAGER APPOINTED)
Ninth Respondent: ROCHEDALE HOLDINGS NO. 1 PTY LTD ACN 610 550 199 (RECEIVER AND MANAGER APPOINTED)
Tenth Respondent: GGPG DEVELOPMENTS (NO. 48) PTY LTD ACN 608 771 857 (RECEIVER AND MANAGER APPOINTED)
Eleventh Respondent: PARK RIDGE DEVELOPMENT MANAGEMENT PTY LTD ACN 627 401 094 (RECEIVER AND MANAGER APPOINTED)
Twelfth Respondent: COORPAROO HOLDINGS PTY LTD ACN 609 979 446 (RECEIVER AND MANAGER APPOINTED)
Thirteenth Respondent: AXIS NORTH PTY LTD ACN 609 653 821 (RECEIVER AND MANAGER APPOINTED)
Fourteenth Respondent: SIP GROUP PTY LTD ACN 610 480 914 (RECEIVER AND MANAGER APPOINTED)
Fifteenth Respondent: SIP 1 PTY LTD ACN 611 408 925 (RECEIVER AND MANAGER APPOINTED)
Sixteenth Respondent: MT FAMILY PTY LTD ACN 605 720 947
Seventeenth Respondent: ULTIMATE INVESTMENT PORTFOLIO PTY LTD ACN 611 531 778
Eighteenth Respondent: UIP 1 PTY LTD ACN 655 578 733
Nineteenth Respondent: LAI WAH WONG
Twentieth Respondent: SUK KUEN LEUNG
Twenty First Respondent: SEL PROPERTY INVESTMENTS PTY LTD ACN 612 436 950
Twenty Second Respondent: PAUL WONG
Twenty Third Respondent: THYNNE & MACARTNEY (A FIRM)
In Sharpe v Grobbel [2017] NSWSC 1065 Brereton J observed:
Moreover, directors are entitled, at common law, to access the books and records of the company as a necessary incident of the office of director, in order that they may properly perform their duties. The statutory right of access under Corporations Act, s 198F, now permits access for the purpose of legal proceedings to which a director or former director is or may become a party, notwithstanding that the director's purpose may be a private one. For present purposes I am content to accept, without deciding, that consistently with the authorities on s 247A, s 198F may not abrogate legal professional privilege and thus may not override legal professional privilege in respect of advice to the company in connection with a dispute between it and the director. But subject to that exception, a company cannot insist on privilege against its director.
(footnotes omitted, emphasis added)
The effect of s 198F as explained by Brereton J in Sharpe v Grobbel was accepted by Meek J in Re CGB Labour Hire Pty Ltd (In Liq) [2023] NSWSC 17 at [151]-[152].
In Hammond Banks-Smith J examined Sharpe v Grobbel and further observed at [195]:
…I do not consider directors' rights of access, whether statutory or at common law, override or abrogate a company's right to maintain legal professional privilege immunity against a director in respect of confidential advice to the company relating to a dispute between it and the director.
Her Honour continued:
Whose privilege is it anyway?
Generally, disclosure by the company to its directors involves no waiver of privilege because it is disclosure by the company to its 'mind and will'. As explained by Sheller JA in Farrow Mortgage Services Pty Ltd (In liq) v Webb [1996] NSWSC 259; (1995) 39 NSWLR 601 at 608‑609:
The privilege attached to legal advice obtained by a company is not lost when the advice is disclosed to its directors but this is not because of their common interest. The company can only manifest its acts and intentions by the actions and declarations of human beings: Black v Smallwood [1966] HCA 2; (1966) 117 CLR 52 at 61, Tesco Supermarkets Ltd v Nattrass [1971] UKHL 1; [1972] AC 153 at 171. The directors' knowledge of the decision to obtain advice and the contents of that advice cannot be treated as a disclosure to a party separate from the company itself. The directors receive and act upon this information as the mind and directing will of the company. Accordingly the disclosure involves no waiver of the company's privilege.
Therefore, where a company obtains advice through the request of the directors (or some of them) as its directing mind and will, there is no separation of the legal entities. The privilege belongs to the company, and not to the directors.
There are various other reasons why a company might provide access to privileged material to its directors, albeit that the company and its directors are separate legal entities. The company may do so without waiving that privilege where, for example, there is a commonality of interest in receipt of the advice or where there is joint privilege (see, for example, Pioneer Concrete (NSW) Pty Ltd v Webb (1995) 18 ACSR 418 at 423).
Generally, commonality of interest may be assumed, particularly as it is the directors who need to evaluate and act on advice in the performance of their duties, but it may be defeated. In his article The Corporation, its Former Directors and Legal Professional Privilege [1997] BondLawRw 2; (1997) 9 Bond LR 10, Nicholas Iles described the potential for commonality of interest to be defeated as follows (at 24‑25):
... there may be specific occasion where there is no 'commonality of interest', even among existing directors. As the cases show, such occasions will be few and far between. Nonetheless, it is conceivable that advice might be sought in the name of the corporation by a majority of directors who apprehend a breach of duty to the corporation by a hostile minority and in respect of which the latter cannot sensibly assert a 'commonality of interest'. The best example of this is where the corporation has identified breaches of duty on the part of certain directors and has sought and obtained legal advice on the corporation's entitlement to sue.
So, it does not follow that directors will always be entitled to access privileged information in exercise of their access rights. The issue will be fact dependant. It is therefore necessary to understand the basis upon which Quay purports to maintain privilege against Ms Hammond.
In Hammond, Banks-Smith J was satisfied that the company in question could withhold privileged material from its director Ms Hammond, for the following reasons:
I consider that Quay is entitled to withhold privileged legal advice obtained for the purpose of the claims the subject of the Elevate Proceedings and the First Access Proceedings from Ms Hammond on the basis that the advice was confidential to Quay and at all material times her position in the litigation was hostile to Quay's interests.
Taking into account the given assumptions (see [208]‑[211] above), confidentiality clearly attached to the legal advice when it was created. The advice was always privileged. At the time the advice was apparently prepared and provided, Quay and Ms Hammond were adversaries with different interests. At that time, it must have been intended by Quay that confidentiality was to be maintained against the very person who was an adverse party in the litigation. Quay was entitled to seek confidential legal advice about any claim it might have against Ms Hammond or to defend the claim being brought against it by Ms Hammond, without the fear that such advice would be provided to her. So, it follows, this is not a case where the corporation assumed all its directors would evaluate and act upon the legal advice (see [199] above). To the contrary, it can be inferred that Quay sought the advice on the basis it would not be provided to Ms Hammond. In this regard it is important to recall that a sub‑committee was formed (see [31]‑[34] above). Even if there was a commonality of interest between Quay and the majority directors in seeking the advice, in the adversarial circumstances of that context - litigation or anticipated litigation - such commonality did not extend to Ms Hammond.
If privilege in advice obtained by a company in such circumstances could not be maintained against hostile directors, then the company would in effect be constrained in its ability to seek and obtain legal advice and the content of such advice may well be compromised. Indeed, one can envisage that if the majority directors who sought the advice (or authorised that course) on behalf of Quay and the lawyers they retained had understood at the time that all legal advice would be disclosed to Ms Hammond, the content of any advice given may have been very different and potentially qualified.
At the heart of this issue lies the importance of the capacity of a client to seek confidential legal advice: the 'need of laymen for professional assistance in the protection, enforcement or creation of their legal rights' and the furtherance of the administration of justice through the fostering of trust and candour, referred to in Attorney General (NT) v Maurice; and the overarching public interest in the administration of justice, a public interest that is paramount to the more general public interest which requires the production of evidence for the purpose of litigation, as affirmed in Glencore International AG. The conclusion I have reached is consistent with that paramount public interest.
(emphasis added)
In Archer Capital 4A Pty Ltd (as trustee for Archer Capital Trust 4A) v Sage Group plc (No 3) (2013) 306 ALR 414; [2013] FCA 1160 Wigney J said:
[119] In relation to the question of whether Mr Reed has relevant documents held by the two MYOB companies within his power, in the discovery context power means a presently enforceable legal right to obtain access to or inspect the relevant documents. In its written submissions, Sage relies on the fact that as a director of the two MYOB companies, Mr Reed has common law and statutory rights of access to company documents. However, the preponderance of authority is to the effect that the right of access, both at common law and pursuant to either s 198F or s 290 of the Corporations Act, is limited to circumstances where the right is to be exercised to enable the director to carry out his duties as a director (South Australia v Barrett (1995) 64 SASR 73 at 76 ; Mcdougall v On Q Group Ltd [2007] VSC 184 at [7] ) or, in the case of s 198F, in circumstances where a proceeding to which the director is, or proposes to be, a party, is a proceeding relating to the director's capacity as a director of the company (Hardcastle v Advanced Mining Technologies Pty Ltd [2001] FCA 1846 at [25]; Tan v St George Bank Ltd [2005] WASC 143 at [46]-[47]; Stern v Sekers [2010] NSWSC 59 at [252]-[255] (Stern)). As Ward J put it in Stern (at [255]):
[255] The statutory right of access extends to all documents, financial reports and records, and any other record of information providing it falls within the phrase "of the company"; s 9 of the Corporations Act. It seems difficult to believe that a provision designed to ameliorate the difficulty faced by a director at common law in obtaining access to documents necessary to defend himself or herself against an action for breach of duty by the company (because the information may be used only for the purposes of the company), could be relied upon by a director to obtain access to potentially highly confidential company documents solely for the purpose of producing those on discovery in proceedings unconnected with the company or the director's role or conduct as a director.
(emphasis added)
In summary, these authorities support the proposition that s 198F of the Corporations Act allows a director, as a matter of right, to access company documents, provided that the documents do not contain confidential advice to the company in connection with a dispute between the company and the director seeking the documents.
I understand from the uncontested submissions of Mr O'Brien KC at the hearing before me on 4 September 2024, that the documents the subject of the claim of privilege referable to Issue 1 in the present case do not constitute documents produced for the purposes of this litigation, and do not contain advice in respect of this litigation. I further do not understand that those documents were prepared at a time when Mr So and the Clancy interests were adversaries with different interests, such that it must have been intended by the Clancy interests that confidentiality was to be maintained against Mr So in respect of the documents, in the terms explained by Banks-Smith J in Hammond.
In those circumstances I am satisfied that Mr So is entitled pursuant to s 198F of the Corporations Act to access the relevant documents, and that the Clancy interests are not entitled to assert privilege against Mr So in respect of those documents.
I am mindful, however, of the submission of the Clancy interests concerning the fact that the lawyers for Mr So also represent the 14th-17th respondents (included in the So interests) and the 18th-20th respondents who are not included in the So interests, and that none of those respondents have identified an entitlement to see the documents the subject of the privilege claim. While this may be the case, I am not persuaded that the knowledge of the lawyers of the contents of those document, which can only be used by one of their clients, would somehow contaminate the representation of the lawyers of the 14th-20th respondents as the submissions of the Clancy interests suggest. Commonly, for example, orders are made for evidence which is commercial-in-confidence to be made available to lawyers but not parties: see, by way of illustration, the discussion of the Court of Appeal of Western Australia in The Australian Statistician v Leighton Contractors Pty Ltd [2008] WASCA 34 at [49]-[50]. I see no reason to qualify the orders sought by reason of the further representation of the 14th-20th respondents by Collin, Biggers & Paisley.