Commissioner of Taxation v Rio Tinto Ltd

Supreme Court of NSW|2021-05-19|Before: Williams J, Mr J

Introduction

These reasons for judgment relate to an application by the defendant in these proceedings to set aside one paragraph of a notice to produce issued by the plaintiffs on 13 May 2021 on the grounds that the paragraph does not seek documents referred to in a pleading or affidavit and is therefore not permitted by r 21.10 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), lacks a legitimate forensic purpose and requires production of documents that are the subject of client legal privilege.
After considering written submissions filed and served by the parties on 18 and 19 May 2021, I have determined that the relevant paragraph has a legitimate forensic purpose and that the defendant has waived privilege in respect of some (but not all) of the documents falling within that paragraph. The paragraph is set aside only to the extent that it seeks documents in respect of which I have found that privilege has not been waived. The paragraph, confined to the documents in respect of which privilege has been waived, requires production of specified documents within the meaning of UCPR, r 21.10.
In order to explain the reasons for my decision, it is necessary to describe the issues raised by the pleadings, and the context in which those issues have arisen, before addressing the parties' submissions in relation to each ground of the application to set aside the relevant part of the notice to produce.

Notice to produce

The plaintiffs issued the relevant notice to produce to the Liquidator under Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 21.10 on 13 May 2021. The notice required production of 14 categories of documents, of which only category 9 is in issue on the present application.
Category 9 of the notice, as amended by the plaintiffs in their submissions filed on 19 May 2021, requires production of: "Any documents in the [Liquidator's] possession, custody or power dated between December 2019 and May 2020 that passed between [the Liquidator] (including by his legal representatives) and Levitt Robinson in relation to the proposed conduct of the examination proceedings including without limitation the proposed questions and topics to be raised with examinees during the examinationstheir funding by the Funder (as defined in the Levitt Robinson letter dated 27 February 2020)."
The Liquidator applies to set aside the notice (insofar as it relates to category 9) on the following grounds: 1. the documents required by category 9 are not referred to in the Liquidator's affidavit sworn on 5 May 2021; 2. the documents sought are not relevant to a fact in issue and the plaintiffs have no legitimate forensic in requiring production of the documents in category 9; and 3. there has been no waiver of client legal privilege in respect of the documents referred to in category 9 because the mere reference to having obtained advice in paragraph 114 of the Liquidator's affidavit sworn on 5 May 2021 does not waive the privilege in the advice.
The plaintiffs oppose that application and maintain that category 9 of the notice has a legitimate forensic purpose and that privilege has been waived in relation to the documents required to be produced.

Document referred to, or any other specific document

UCPR, r 21.10 relevantly provides: "(1) Party A may, by notice served on party B, require party B to produce for inspection by party A: (a) any document or thing that is referred to in any originating process, pleading, affidavit or witness statement filed or served by party B; and (b) any other specific document or thing that is clearly identified in the notice and is relevant to a fact in issue."
I accept the Liquidator's submission that the documents sought by category 9 of the notice to produce are not referred to in the Liquidator's affidavit sworn on 5 May 2021. Nor are they referred to in the pleadings.
However, having regard to the manner in which category 9 is now to be confined so as to limit it to documents in respect of which I have determined for the reasons explained below that the Liquidator has waived client legal privilege, it is my opinion that the category requires production of specific documents or things within the meaning of UCPR, r 21.10(1)(b).
If I am wrong about the confined category 9 complying with r 21.1(b), it would be open to the plaintiffs to seek an order for discovery of documents falling with that confined category.

Alleged absence of legitimate forensic purpose

The applicable principles were recently summarised by Ward CJ in Eq in Elanor Operations Pty Ltd v Chief Commissioner of State Revenue [2020] NSWSC 840 at [42]-[45]. I gratefully adopt her Honour's summary: "42. As to the applicable legal principles on an application to set aside a subpoena or a notice to produce it is not here disputed that, for a subpoena or notice to produce to be issued there must be a legitimate forensic purpose and that the party issuing the subpoena or notice to produce bears the onus of establishing that legitimate forensic purpose (see, for example, Rinehart v Rinehart [2018] NSWSC 1102 at [43]-[50] (Rinehart); Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2019] NSWSC 410 at [52]; and Xinfeng Australia International Investment Pty Ltd v GR Capital Pty Ltd [2020] NSWSC 620 (Xingfeng) at [35]-[41]). 43. It must be able to be concluded that the documents sought could 'possibly throw light' on the issues in the case, or that it is likely that the documents will materially assist on an identified issue or that there is a reasonable basis, beyond speculation, that it is likely that they will materially assist (see, for example, ICAP Pty Ltd v Moebes [2009] NSWSC 306 at [28]-[30], per Nicholas J, affirmed on appeal in ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWCA 307 at [27], per Tobias JA, Basten JA and Handley AJA agreeing) Elsewhere it has been said that the question is whether there is a reasonable basis for supposing that the material called for will likely add in some way to the relevant evidence in the case (including whether the documents called for are capable of providing a legitimate basis for cross-examination) (see Sharpe v Grobbel [2017] NSWSC 1065 at [35], per Brereton J, as his Honour then was). 44. It is accepted that a subpoena or notice to produce will be set aside if it is being used as part of what is commonly referred to as a 'fishing expedition' (see Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1952) 72 WN (NSW) 250 at 254, per Owen J, Street CJ and Herron J agreeing) or where it is oppressive (the question of oppression to be determined as part of a multifactorial balancing exercise - i.e., balancing the degree of apparent relevance to issues in the proceedings against the likely cost or burden of production; see for example Azzi v Volvo [2006] NSWSC 283 at [6], per Brereton J, as his Honour then was; and Rinehart at [49]). (See generally on the issue: In the matter of One.Tel Ltd (in liq) - Singtel Optus Pty Ltd v Weston [2010] NSWSC 1491 at [31]-[40].) 45. It is noted by the plaintiffs that, where a subpoena or notice to produce is drafted in a manner which is objectionable, it is ordinarily not for the Court to redraft it (see Xinfeng at [41]; Lowery v Insurance Australia Ltd [2015] NSWCA 303 at [25], per Basten JA; Rinehart v Rinehart [2019] NSWSC 759 at [38). However, the same issue does not arise, for obvious reasons, to the extent of discovery that should be ordered to be provided; nor is it necessarily an inflexible rule, when approaching the extent to which compliance will be ordered in relation to a subpoena (see for example, how the matter was approached in Rinehart)."
The Liquidator submits that the documents in category 9 of the notice will not materially assist in relation to the plaintiffs' allegation that the Liquidator breached his duties by retaining Levitt Robinson, entering into the funding agreements and allegedly using the examinations to gather information to the benefit of the Franchisee Claimants. The Liquidator submits that it is the transcript of the examination proceedings that will throw light on that issue, and that category 9 is a fishing expedition.
The plaintiffs submit that the communications concerning the conduct of the examinations lie at the heart of the plaintiffs' improper purpose and bias case.
It is true that the transcripts of the examination proceedings will materially assist in relation to the plaintiffs' allegations in paragraphs 48-49 and 51 of the Further Amended Points of Claim: see [21(4)] and [21(5)] above. In my opinion, it does not follow that communications between the Liquidator (or his solicitors) and Levitt Robinson in relation to proposed questions and topics to be raised with examinees during the examinations will not materially assist. On the contrary, there is a reasonable basis for thinking that those communications, particularly when read together with the transcripts, will throw light on the issues raised in paragraphs 48-49 and 51 of the Further Amended Points of Claim. The communications are likely to reveal the reasons behind particular topics being covered, or not being covered, in the examinations and the priority or emphasis given to some topics over others. That will inform the assessment of whether the Liquidator used his examination powers for the benefit of the Franchisee Claimants and to the detriment of the Company in breach of, inter alia, a duty to be independent and impartial. It will shed light on the plaintiffs' allegations of actual and apprehended bias in paragraph 54 of the Further Amended Points of Claim.
For those reasons, I reject the Liquidator's contention that category 9 lacks a legitimate forensic purpose.

Client legal privilege

Notwithstanding the legitimate forensic purpose, category 9 of the notice to produce must be set aside to the extent that it requires production of documents that are the subject of client legal privilege.
The Liquidator's privilege claim falls to be determined in accordance with the provisions of ss 117-126 of the Evidence Act 1995 (NSW): Evidence Act, s 131A; UCPR, r 1.9.
Category 9 of the notice to produce relates to records of communications between the Liquidator and Levitt Robinson in relation to the proposed conduct of the examinations at a time when Levitt Robinson were acting as the Liquidator's solicitors in respect of the examination proceedings and the Liquidator had also engaged Piper Alderman as independent solicitors to advise him in respect of the examinations. It appears to be common ground that the documents caught by category 9 were the subject of client legal privilege at the time they were created.
In defending the plaintiffs' allegations that he placed himself in a position of conflict by engaging Levitt Robinson and by entering into the Funding Agreement, the Liquidator relies on (inter alia) his retainer of Piper Alderman to act as his independent solicitors in respect of the examinations "in order to ensure his independence" in the conduct of the examinations: see [21(4)] and [22(3)] above.
In paragraphs 84 to 86 of his affidavit sworn on 5 May 2021, the Liquidator refers to his engagement of Piper Alderman in August 2019. In paragraphs 96 to 100, the Liquidator describes certain communications between himself and members of his firm, Levitt Robinson and Piper Alderman in the process of finalising the summons seeking orders under ss 596A and 596B of the Corporations Act and the confidential affidavit in support of that application. In paragraph 99(d), the Liquidator deposes that Mr Jonathan Hidayat of Piper Alderman reviewed the draft confidential affidavit and confirmed that it was acceptable for the Liquidator to sign before the Liquidator gave instructions approving the its contents. The contents of the confidential affidavit included topics of examination, which are set out in paragraph 101 of the Liquidator's affidavit sworn on 5 May 2021.
In paragraphs 111 to 114 of his affidavit sworn on 5 May 2021, the Liquidator describes steps taken in preparation for the public examinations. The Liquidator discloses an email sent by Mr Hidayat of Piper Alderman to Levitt Robinson on 4 March 2020 requesting that the Liquidator be provided with a "potential list of questions for the examinees or details of the topics the examinees will be examined on" and that the Liquidator be "kept appraised and ... involved in the examination preparation". The Liquidator then discloses correspondence between Levitt Robinson and Piper Alderman arranging a conference with counsel briefed to conduct the examinations for the purpose of discussing proposed topics of examination and the process of the examinations. The Liquidator then deposes: "113. On 12 March 2020, Mr Teng and Ms Ling of my office attended a meeting with Mr Hidayat of Piper Alderman, Ms Georgiou, Mr Stavropoulos and Ms Hatch of Levitt Robinson, Mr Krochmalik and Mr Pritchard SC. 114. Mr Hidayat and Mr Teng informed me following the meeting that they had discussed the topics for the examinations and that they were happy with the way in which the examinations were to proceed."
In his Points of Defence to the Further Amended Points of Claim, the Liquidator pleads that Piper Alderman were present during the examination proceedings. In paragraphs 117 to 119 of his 5 May 2021 affidavit, the Liquidator deposes that he was also present during the examinations and was satisfied that the questions asked related to the examinable affairs of the Company and were not solely for the benefit of Franchisee Claimants. The Liquidator deposes that, if he had considered that the examinations went beyond permissible purposes, he would have asked Mr Hidayat of Piper Alderman or Ms Georgiou of Levitt Robinsons to stand the matter down to allow him to confer with counsel and would have instructed the examinations to be concluded if he had not been satisfied with counsel's explanation of the purpose.
The Liquidator submitted that he had not waived privilege in the communication referred to in paragraph 114 of his affidavit because that paragraph is "merely a general reference to the fact of having taken advice about the topics for the examinations and how they were to proceed and the paragraph does not disclose the substance of any of that advice." The Liquidator submitted that the purpose of the limited disclosure in paragraph 114 is to establish that the Liquidator's staff were involved in the preparation for the examinations and did simply leave everything to Levitt Robinson and counsel. It was submitted that the existence, but not the substance, of the advice given following the meeting on 12 March 2020, had been disclosed.
Alternatively, the Liquidator submitted that any waiver of privilege was limited to the advice provided by Mr Hidayat to the Liquidator following the meeting on 12 March 2020 and did not extend to all communications regarding the proposed conduct of the examination proceedings. It was submitted that the topics for examination discussed at the 12 March 2020 meeting were the only matters that might be relevant to obtain a proper understanding of the advice referred to in paragraph 114 of the Liquidator's 5 May 2021 affidavit, and category 9 of the notice to produce seeks a much broader range of documents.
The plaintiffs submitted that paragraph 114 of the Liquidator's 5 May 2021 affidavit, read together with paragraph 101 which sets out the topics for examination disclosed in the confidential affidavit, has disclosed the substance of the advice because both the topics and Mr Hidayat's advice following a meeting to discuss the topics that he was happy with the way in which the examination was to proceed. It was submitted that privilege had therefore been lost by reason of s 122(3)(a) of the Evidence Act.
The plaintiffs' submissions also relied on the alleged inconsistency between, on the one hand: 1. the Liquidator making the disclosures referred to at [41]-[42] above in his 5 May 2021 affidavit; and/or 2. the Liquidator deposing as to his state of mind as to critical matters concerning his decision to proceed with Levitt Robinson's engagement and ultimately with the examinations (referring to paragraphs 63 to 67, 99 and 118 of the 5 May 2021 affidavit), and the Liquidator maintaining privilege in the advice referred to in paragraph 114 of his affidavit, on the other hand. The plaintiffs submitted that privilege had been lost by reason of s 122(2) of the Evidence Act, s 122(2).
The Liquidator characterised his 5 May 2021 affidavit as involving limited disclosures of individual pieces of advice obtained which caused him to retain Levitt Robinson and enter into the Funding Agreement. It was submitted that these disclosures did not expressly or impliedly waive privilege in respect of all communications with Levitt Robinson in preparation for the examinations.
I reject the plaintiffs' submission that paragraphs 101 and 114 of the Liquidator's affidavit, read together, disclose the whole of the substance of the advice referred to in paragraph 114 because they disclose both the topics of the examinations and Mr Hidayat's advice concerning the conduct of the examinations in respect of those topics. It is plain from Mr Hidayat's email of 4 March 2020 referred to in paragraph 111 of the Liquidator's 5 May 2021 affidavit that an updated and/or more detailed list of proposed topics specific to each examinee had been requested, and that Mr Hidayat's advice referred to in paragraph 114 of the affidavit reflected his opinion formed after discussion of that additional information at the meeting on 12 March 2020 and not on the basis of the examination topics formulated in very general terms in the confidential affidavit sworn by the Liquidator on 10 December 2019. It follows that paragraph 114 of the Liquidator's 5 May 2021 affidavit does not disclose the whole of the substance of Mr Hidayat's advice given on or shortly after 12 March 2020, and privilege in that advice has not been lost by reason of s 122(3)(a) of the Evidence Act.
However, I reject the Liquidator's submissions that paragraph 114 of the 5 May 2021 affidavit merely establishes the involvement of the Liquidator's staff in the preparation for the examinations. In my opinion, when paragraph 114 is read in the context of the pleaded issues, the Liquidator is claiming that he received independent legal advice to the effect that the way in which the examinations were to proceed, including the detail of the topics about which each examinee was to be examined, was an appropriate use by the Liquidator of his statutory powers of examination. To that extent, the substance of the advice is disclosed in paragraph 114.
I accept the plaintiffs' submissions that this disclosure and reliance on the advice for the purpose of the Liquidator's defence is inconsistent with the Liquidator maintaining his claim for privilege in respect of any documents recording the proposed questions and topics to be raised with examinees that were discussed at the meeting on 12 March 2020 and that were the subject matter of the advice. That would extend to any list of topics and questions provided to Mr Hidayat in advance of the meeting, as requested in his 4 March 2020 email. The Liquidator pleads his retainer of Piper Alderman in his defence to the allegation that he breached his duties by entering into the Funding Agreement and retaining Levitt Robinson and in his subsequent conduct of the examination proceedings. Reading paragraph 114 together with paragraphs 117 to 119 of the 5 May 2021 affidavit, the Liquidator is impliedly asserting that his conduct in permitting the examinations to commence and continue in the manner that they did was consistent with the advice that he had received from Mr Hidayat referred to in paragraph 114. In making that assertion, the Liquidator has laid open to scrutiny the whole of the advice, and the examination topics and questions that were the subject matter of the advice, so that the plaintiffs can test in a meaningful way whether the Liquidator's conduct was in fact consistent with that advice.
It is the inconsistency that I have referred to above that results in the loss of the privilege by operation of s 122(2) of the Evidence Act in respect of any documents that passed between the Liquidator (or Piper Alderman) and Levitt Robinson during the period from 4 to 12 March 2020 (inclusive) in relation to the proposed topics and questions to be raised with examinees in the conduct of the public examinations: Hastie Group Ltd (in liq) v Moore (t/as Deloitte Touche Tohmatsu) (2016) 339 ALR 635; [2016] NSWCA 305 at [48]-[53] and the authorities there referred to (including Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341; 229 ALR 304; [2006] FCAFC 86 at [47], on which the plaintiffs' submissions relied).
However, I accept the Liquidator's submission that, to the extent that category 9 of the notice to produce requires production of other documents passing between the Liquidator (or his legal representatives) and Levitt Robinson in relation to the proposed conduct of the examination proceedings during the period between December 2019 and May 2020, privilege has not been waived in respect of those documents.
As I have already mentioned, the plaintiffs contend that the Liquidator has waived privilege in all of those documents by deposing in paragraphs 63 to 67, 99 and 118 of his 5 May 2021 affidavit as to his state of mind as to critical matters concerning his decision to proceed with Levitt Robinson's engagement and ultimately with the examinations.
I accept the plaintiffs' submission that inconsistency resulting in waiver of privilege may exist where the client claiming the privilege has made assertions about their state of mind, and communications that would otherwise be privileged are likely to have affected that state of mind. Of course, whether that inconsistency arises in any particular case depends on all of the facts of that case.
In the present case, the state of mind to which the Liquidator deposes in paragraphs 63 to 67 of his affidavit concern his state of mind in August 2019 when he decided to enter into the Funding Agreement and retained Levitt Robinson. The documents sought by category 9 of the notice to produce are documents that passed between the Liquidator and Levitt Robinson during the period from December 2019 to May 2020. Those documents are incapable of having any bearing on whether or not the Liquidator held the state of mind to which he deposes in August 2019.
The state of mind to which the Liquidator deposes in paragraph 99 of his affidavit concerns his state of mind on or about 10 December 2019 in relation to whether or not Levitt Robinson had ceased to act for the Franchisee Claimants. Category 9 of the notice to produce relates to a different time period and is not tied in any way to the question of whether Levitt Robinson was continuing to act for the Franchisee Claimants.
The state of mind to which the Liquidator deposes in paragraph 118 of his affidavit is one of the reasons why I have concluded that he has waived privilege in respect of in respect of any documents that passed between the Liquidator (or Piper Alderman) and Levitt Robinson during the period from 4 to 12 March 2020 (inclusive) in relation to the proposed topics and questions to be raised with examinees in the conduct of the public examinations: see [51]-[52] above. The Liquidator's reliance on his state of mind in permitting the examinations to proceed in the manner that they did on 17-20 March and 1 May 2020 after receiving Mr Hidayat's advice on or shortly after 12 March 2020 is not inconsistent with maintaining his claim of privilege in respect of other documents falling within the very widely drafted category 9 of the notice to produce.

Postscript

On 17 May 2021, the plaintiffs issued a subpoena to Levitt Robinson requiring production of: "Any documents between December 2018 and June 2019 recording communications passing between Levitt Robinson and [the Liquidator] (including by his solicitors) in relation to the topics or proposed topics for examinations in [the examination proceedings]."
In submissions in reply concerning the application to set aside category 9 of the notice to produce, the Liquidator raised for the first time an application to set aside the subpoena. The Liquidator's submissions were limited to a bare assertion that, if category 9 of the notice to produce were set aside then "it would necessarily follow that the Subpoena be set aside also". This assertion overlooks the fact that the subpoena and the notice to produce relate to different time periods. The subpoena requires production of documents that record communications in the period before Levitt Robinson were retained to act as solicitors for the Liquidator. This gives rise to a question whether the documents that are the subject of the subpoena were privileged at the time they were created.
I do not express any views about that question. The point is that any application that the Liquidator wishes to press to set aside the subpoena requires consideration of issues specific to the subpoena, and the plaintiffs are entitled to be heard in relation to any such application. The plaintiffs have not had an opportunity to be heard by reason of the manner in which the Liquidator has made the application.

Conclusion and orders

For all of the reasons above, I make the following order: 1. Order that category 9 of the notice to produce issued by the plaintiffs to the defendant on 13 May 2021 be set aside, except insofar as it requires production of any documents that passed between the defendant (or Piper Alderman in their capacity as solicitors for the defendant) and Levitt Robinson Solicitors during the period from 4 to 12 March 2020 (inclusive) in relation to the proposed topics and questions to be raised with examinees in the conduct of the public examinations into the affairs of Fogo Brazilia Franchise Holdings Pty Limited.

Endnotes

Further Amended Points of Claim paras 27-29, 32; Points of Defence paras 12, 13; CB 558-575.
Further Amended Points of Claim, para 32; Points of Defence, para 13.
Corporations Act, Schedule 2. 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: 24 May 2021

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