47 However, it must be observed that in Hong Kong Bank of Australia Ltd v Murphy the applicants were the new trustees for investors, yet the Court of Appeal applied the same tests as for a liquidator.
48 Although I appreciate that receivers are the appointees of a secured creditor, I must also take into account that receivers, under the Corporations Act have public duties thrust on them by law and in many ways act as public representatives. In the present case, ASIC has endorsed the receivers' process and the liquidator is aware of it.
49 Given that here we are dealing with receivers whose prime responsibilities are to the company's secured creditor and not the public, the applicants put that justification for an examination in this case must be diminished. I consider that whilst the matter may influence the exercise of the court's discretion in a borderline case, the only vital significance of the person applying for issue of the summons not being a court-appointed liquidator is that the court looks more deeply into the motives and purpose of the examination.
50 I appreciate that what might be termed part (a) of the second limb of McLelland CJ in Eq's statement in the GPI Leisure case set out above would appear to vindicate the applicants' case. However, I agree with Mr Forster that the fact that the insurer in the instant case would be the actual defendant in any foreseeable action, not just an insurer standing behind a third party defendant, makes it distinguishable.
51 Thus I consider both of the cases said to throw light on the present case distinguishable.
52 I am thus thrown back on first principles.
53 Apart from matters connected with the privilege argument, the fact that the proposed defendant is an insurer rather than a trader appears to me to be of little significance. One bristles at the suggestion that commercial people should have to disclose their case to an outsider, but I am bound by decisions which say that the fact is of no great significance in this type of matter.
54 I will consider questions of oppression related to matters of privilege in the following section. However, for the above reasons, my view is that otherwise there is no abuse of process or oppression warranting the setting aside of the summonses.
55 B. I thus pass to consideration of the submissions focussed on privilege.
56 The applicants submitted that the examination under s 596B and production of documents under SCR, Part 36 rule 12 would be subject to a claim of legal professional privilege. There was no dispute between the parties that privilege, as contained in the Evidence Act 1995, (Cth) ss 118 and 119 attaches to those two provisions. However, it is not clear whether it applies in the circumstances of this case and even if it does, whether it should be a reason for discharging the summonses.
57 Section 118 of the Evidence Act deals with what is commonly referred to as "legal advice privilege". It prevents the disclosure of a confidential communication made between a client and his or her lawyer, between two or more lawyers acting for the client or a confidential document prepared by the client or the lawyer for the dominant purpose of the lawyer providing legal advice to the client.
58 Section 119 of the Act deals with what is usually referred to as "litigation privilege". The section prevents the disclosure of a confidential communication between a client or his or her lawyer, and a third party that was made, or the contents of a document that was prepared for the dominant purpose of the client being provided with professional legal services in relation to legal proceedings that are in existence or at least reasonably contemplated.
59 The documents contained in the schedule to the orders for production include documents prepared by two of the experts summoned to be examined, Crawford & Company (Australia) Pty Ltd (Crawford) and McKensey Mining Services Pty Ltd (McKensey), who were retained by QBE's solicitors with respect to Southland's claims.
60 There is no actual litigation on foot between Southland and QBE. However, litigation is clearly likely to break out between the parties who are each considering their position.
61 The first question here is one of legal advice privilege under s 118 of the Evidence Act.
62 As I noted earlier, QBE through its solicitors, retained Crawford and McKensey even before a claim was made under the policy. It obviously made commercial common sense to do so because of the value of obtaining material as soon after the incident as possible.
63 The opponents says that insurers often act in this way, but it has never been the law that privilege attaches to reports of such investigations.
64 The applicants say that the nature of the functions of the experts after 23 December 2003 was an integral part of the process of QBE obtaining legal advice as to its position. It needed to supply its lawyers with the facts in order to gain appropriate advice.
65 In Pratt Holdings Pty Ltd v Commissioner of Taxation (2004) 207 ALR 217, 219, Finn J said:
"It is well accepted that if a person prepares and then makes a documentary communication to a legal adviser for the dominant purpose of obtaining legal advice, that documentary communication attracts legal professional privilege: Esso Resources Ltd v FCT (1999) 201 CLR 49. It is equally well accepted that if a person directs or authorises a third party (an agent) to prepare and then make a documentary communication on that person's behalf to a legal adviser for the dominant purpose of obtaining legal advice, that documentary communication by the agent attracts legal professional privilege: Australian Rugby Union Ltd v Hospitality Group Pty Ltd (1999) 165 ALR 253. But it is not accepted that, if a person (a principal) directs or authorises a third party who is not an employee of that person to prepare a documentary communication for the dominant purpose of its being communicated by the principal and not directly by the third party to a legal adviser for the purpose of obtaining legal advice, that documentary communication from the third party to the principal attracts legal professional privilege."
66 The Full Federal Court in Pratt considered whether the last proposition, based on Wheeler v Le Marchant (1881) 17 Ch D 675 was still correct in Australian law. Finn and Stone JJ, with whom Merkel J agreed, held it was not.
67 Thus, where a client instructs an expert to prepare a report for the client to transmit to a lawyer for the purpose of obtaining legal advice, the report may well not be privileged.
68 However, the facts of the instant case are that it was the solicitors, not QBE itself who commissioned the expert report and that the solicitors asked the experts to report direct to the solicitors so that they could provide advice to QBE.
69 It will be remembered that in Pratt the third party experts were retained by the client itself, which then provided the experts' reports to its solicitors for the purpose of receiving advice from them.
70 Sutton's Insurance Law in Australia, 3rd ed (LBC, 1999) states at [15.98] that:
"Documents created so that the insurer can be informed generally and can in the ordinary course of business investigate any claim that might be made before deciding what to do … are not privileged in contrast to the situation where the reports are prepared at a time when litigation is either likely or anticipated."
71 Sutton's statement is supported by copious authority; see eg Vardas v South British Insurance Co Ltd [1984] 2 NSWLR 652, 656.
72 In Nickmar Pty Ltd v Preservatrice Skandia Insurance Ltd (1985) 3 NSWLR 44 at 56E, Wood J held that reports obtained from third party experts who were retained by solicitors, but on the explicit instructions of the client, attracted legal advice privilege.
73 It must be noted that Wheeler was followed in Nickmar and is still generally regarded as good law.
74 In DSE (Holdings) Pty Ltd v InterTan Inc (2003) 135 FCR 151, Allsop J said at 179 that it was a question of fact whether despite the form of the request, the client had requested the third party to communicate with the solicitor either information derived from the client or even information generated by the third party.
75 The material in the instant case suggests that the solicitors merely obtained general instructions to do what was in their view required to protect the insurers and that the solicitors retained loss assessors and other experts on their own initiative based on previous experience with respect to such incidents.
76 Should I extend the philosophy exhibited by the Full Federal Court in Pratt to say that the privilege should cover the present situation?
77 In my view this question should be answered "No". It is clear that a line has to be drawn somewhere and that the authorities as I understand them indicate that cases where the solicitor, acting within general instructions, of his or her own initiative seeks a report from an expert, that report falls outside legal advice privilege.
78 I should add that I am making this determination for the purpose of considering whether the question of privilege leads to the view that the summonses are oppressive or an abuse of process. The person conducting the examination may still need to rule on the material before him or her whether, on the facts, privilege applies or not.
79 The next matter to consider is whether the reports come within litigation privilege.
80 For there to be litigation privilege pursuant to s 119 of the Evidence Act, all the documents listed in the schedule to the orders for production and any evidence given in examination would need to have been communicated for the dominant purpose of use in, or in relation to, litigation that was either in existence or at least anticipated or in reasonable contemplation at the time the documents or evidence were communicated: Mitsubishi Electric Australia Pty Ltd v Victorian Workcover Authority (2002) 4 VR 332.
81 Both s 119 and the authorities make clear that litigation privilege covers third party communications whether or not the third party is an agent of the client, so long as the above test is satisfied.
82 There is no actual litigation current between Southland and QBE (though there is litigation between Thiess and QBE). The question thus is whether there is a "real prospect" that litigation will occur. This means that there is more than just a mere possibility of litigation, though, the prospect need not get to the stage of being more likely than not: Mitsubishi Electric at 341.
83 The opponents suggest that, at some time after January 2004, the point may well have been reached when litigation was a real prospect, but when this stage was reached, it is impossible to assess on the current evidence, though it was most likely not as early as January 2004. I accept this suggestion.
84 The applicants sought to rely on Re Highgrade Traders Ltd [1984] BCLC 151 for the proposition that litigation privilege applies to documents brought into existence for the purpose of enabling solicitors to advise whether a claim shall be made or resisted. However, as I understand the judgment in that case, the Court of Appeal did not negate the need for litigation to be reasonably in prospect (see the judgment of Oliver LJ, with whom Goff LJ agreed, at 172).