Crisp v G.S.F Australia Pty Ltd, in the matter of Foodlife Inventory Holdings Pty Ltd

The documents over which privilege is claimed 3 Pursuant to directions made by the Court on 30 August 2006, GSF filed a set of particulars of documents produced by Turks over which legal professional privilege is claimed. The listed and described documents essentially cover the period from 8 May 2002 through until 13 June 2002. There are two later documents: one is not the subject of a claim for privilege and comprises account ledgers from Turks; the other document is a handwritten note of 15 February 2006, which is the subject of a privilege claim, but the plaintiff does not contest this claim or press for the production of that document. 4 The affidavit material before the Court includes affidavits sworn by Mr Michael Chan on 9 December 2005 and Mr Kenneth Dixon on 9 December 2005. Those affidavits describe advice that GSF obtained from P.W. Turk & Associates, now Turks, in May 2002 and early June 2002 concerning the recovery of a debt from Foodlife. Those affidavits, and the description of the documents in the GSF's particulars of documents, establish a prima facie claim to privilege in respect of the documents produced by Turks. The context makes it fairly plain that the documents in question relate to the obtaining of instructions and the provision of advice in relation to the recovery of a debt owed by Foodlife to GSF. 5 There is no reason not to accept that the documents prima facie attract privilege. The critical issue that arises is whether that privilege has been waived by virtue of certain disclosures made by GSF. Before I turn to those disclosures, it is convenient to refer to the defence raised by GSF. The claim brought by the liquidator of Foodlife against GSF concerns the recovery of an alleged preference payment. In its defence GSF relies upon s 588FG of the Corporations Act 2001 (Cth). Section 588FG(2) provides: '(2) A court is not to make under section 588FF an order materially prejudicing a right or interest of a person if the transaction is not an unfair loan to the company, or an unreasonable director‑related transaction of the company, and it is proved that: (a) the person became a party to the transaction in good faith; and (b) at the time when the person became such a party: (i) the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and (ii) a reasonable person in the person's circumstances would have had no such grounds for so suspecting; and (c) the person has provided valuable consideration under the transaction or has changed his, her or its position in reliance on the transaction.' 6 In its defence dated 4 October 2005, GSF alleges that: 'if the transactions alleged by the plaintiff took place as alleged: (a) the defendant became a party to those transactions in good faith; (b) at the time of the transactions the defendant had no reasonable grounds for suspecting that the plaintiff was insolvent or would become insolvent and a reasonable person in the defendant's circumstances would have had no such grounds for so suspecting; and (c) the defendant provided valuable consideration of the transactions.' 7 In his affidavit of 9 December 2005, Mr Chan deposed that GSF sought advice from Turks in connection with collecting the Foodlife debt on or about 9 May 2002. Mr Chan exhibited to his affidavit an email from Ms Dorman of Turks advising that GSF would be best served by serving a creditor's statutory demand for payment under the Corporations Act. Mr Chan deposed that when this recommendation was made on 9 May 2002, he had never before heard of a creditor's statutory demand. Further, he said that he was not advised by Ms Dorman, nor did he believe otherwise, that the creditor's statutory demand or the winding up of Foodlife had anything to do with whether or not Foodlife was insolvent. He said he just believed that this was an aggressive means to collect the debt, which was what GSF was interested in. 8 Mr Chan exhibited to his affidavit an email dated 9 May 2002 from Ms Dorman in which she advised that she had sent a letter of demand to Foodlife and that if the payment was not made in full she would proceed to serve a statutory demand. Mr Chan's affidavit also exhibited a letter dated 4 June 2002 which confirmed the service of the statutory demand on Foodlife on 15 May 2002. In that letter Ms Dorman advised that Foodlife had until 5 June 2002 to make suitable arrangements for the payment of the debt in full or to file an application to satisfy the demand. 9 Mr Dixon's affidavit of 9 December 2005 also contains a description of the advice provided by Turks in May 2002. He also deposed that he did not believe that the statutory demand had anything to do with the solvency of Foodlife but rather was a device to compel rapid payment. 10 On the hearing of this application, the plaintiff supplemented this affidavit evidence by tendering extracts of the transcripts of the public examination of Mr Chan and Mr Dixon. The evidence given by Mr Chan in the public examination was to the same basic effect as his affidavit of 9 December 2005, save that it referred in a little more detail to the process of giving instructions to Ms Dorman. The same may be said of Mr Dixon's transcript. 11 In addition, the plaintiff tendered a memorandum of fees that Turks rendered to GSF in respect of work done over the period from 9 May 2002 to 22 May 2002. The memorandum of fees was produced by GSF without any claim for privilege in the context of the public examinations. The memorandum is not of great assistance, except that it describes in more detail the steps that were taken by the solicitors in obtaining instructions and in providing advice. Finally, the plaintiff tendered a letter of 13 June 2002 from Turks to GSF. In the letter Turks advised that it had been contacted by a representative of Foodlife and Turks advised that the moneys had been paid in full. As a result Turks closed the file.

Disposition of the application 12 The essential submission made by the plaintiff is that the disclosures made by GSF in the affidavits of Mr Chan and Mr Dixon, and in the context of the public examinations, have the consequence that legal professional privilege has been waived over the documents produced by Turks pursuant to the subpoenas which are listed in the particulars, with the exception of the last document bearing the much later date of 15 February 2006. The plaintiff submitted that GSF had chosen to disclose some of its legal advice in support of its defence of good faith in recovering the debt from Foodlife. 13 It is submitted that having disclosed particular legal advices, the inconsistency principle referred to in Mann v Carnell (1999) 201 CLR 1 has the consequence that GSF must disclose all of its communications with its solicitors, Turks, relating to the same subject matter and the same issue, namely the recovery of a debt from Foodlife by giving a statutory demand. Further, the plaintiff submitted that having deployed some of the advice in support of its defence of good faith, it would be unfair for GSF to withhold the balance of the communications, dealing with the same subject matter, from scrutiny. 14 GSF submitted that the advices which have been disclosed ought to be regarded as separate and distinct from the instructions that were given, and the communications that took place, in connection with or leading up to the giving of that advice. It was submitted that these other associated documents need not be considered in order to understand of the advice that has been disclosed. Further, it was submitted that documents recording instructions and the like are not to be regarded as documents that were necessary inputs into the advice that has been disclosed. Reliance was placed by GSF on the decision of the Court of Appeal in Victoria in British American Tobacco Australia Services Ltd v Cowell (2002) 7 VR 524. 15 These submissions do not take into account the parallel principle that a party in litigation may expose its legal advice to discovery and production by making it relevant to an issue in the proceeding. In this case, by raising the defence based on s 588FG, GSF has put in issue whether it acted in good faith and without suspecting insolvency when it pursued the recommended course of serving a statutory demand. Having pleaded that matter into relevance, it has effectively exposed its legal advice on that very matter to scrutiny. The position is compounded by the disclosure of some of the advice without disclosing all of the communications that took place between GSF and its solicitors. 16 The principle of issue waiver, which has application where a party pleads legal advice into issue and thereby imputedly waives privilege, is a long standing one: see Thomason v Campbelltown Municipal Council (1939) 39 SR (NSW) 347 per Jordan CJ. The principle of issue waiver was recently considered and applied by the Full Court of this Court in Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341 ('Rio Tinto'). In that case, the Commissioner of Taxation was held to have imputedly waived privilege by filing particulars that referred to advice provided by the Australian Government Solicitor and Counsel: at 363 [74]. 17 In my opinion, whether one approaches the issues by applying the principles of associated material waiver as described in Attorney-General (NT) v Maurice (1986) 161 CLR 475at 482, 484, 488 and 498-499, or by applying the principles of issue waiver as discussed by the Full Court in the Rio Tinto case, one arrives at the same result. GSF has imputedly waived any legal professional privilege attaching to documents numbered 1 to 44 inclusive in its particulars of documents produced by Turks over which legal professional privilege is claimed. Accordingly, those documents must be produced pursuant to the two subpoenas. 18 No other objection has been taken to either of the subpoena as it seems they do not catch any documents to which the defendant takes exception, save for those listed in these particulars. 19 Legal professional privilege is, however, maintainable in document numbered 46, being the document of 15 February 2006, and it need not be produced under subpoena. 20 Some of the documents in the particulars of documents are also referred to in the list of discovered documents. The claim for legal professional privilege in the context of discovery over those documents is likewise not established, and those documents must be produced for inspection.

Orders 21 Accordingly, I will order that GSF produce for inspection by the plaintiff the documents listed in paragraphs 1 to 45 of the document entitled 'Particulars of Documents Produced by Turks Over Which Legal Professional Privilege is Claimed', the Court having held that any privilege attaching to those documents has been waived by GSF. I will order that the plaintiff's notice of motion dated 22 September 2006 be otherwise dismissed. 22 I will also make directions in this proceeding and order that GSF pay the plaintiff's costs of the hearing of this day. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Young.

Counsel for the Defendant: Dr S McNicol with M Rosenblatt