Garratt's Ltd v Thanga Thangathurai

Shareholder and Corporate matters: Advice and documentation in relation to the shareholding structure for the various shareholders…shareholders agreements; documentation of the financial obligations owed by the corporate entities to the initial shareholders including capitalisation of debts as applicable; documentation and advice in relation to stock options scheme for executives; ensuring the corporate structure is in a state of readiness for a public flotation at the first available opportunity; and all other matters incidental and in relation thereto. Investor Documentation: I have already drafted and procured execution of Heads of Agreement and supplementary documentation for the investment by the (plaintiff in ICCT/SAT), and arranged, co-ordinated and participated in the due diligence process with (the plaintiff). My role included organisation, review and preparation of the documentation to be presented to the (plaintiff) dealing with investor queries, overview of the whole process; negotiation of legal documentation; and to prepare the legal documents as appropriate. Legal documentation will include a loan agreement; option agreement for conversion of loan into equity by (the plaintiff); shareholders agreement, attending to all company secretarial issues including preparation of minutes of meetings, securities registers, directors registers, securities certificates etc. Acting as General Legal Counsel: To review and recommend amendments to legal documentation used in the day-to-day course of business, and to provide legal advice on a day-to-day basis in relation to the conduct of the business. I believe this will include, where appropriate, review of leases for premises; preparation of employment contracts; review of licence agreement with customers including retailers; preparation and/or review of agreements with manufacturers of equipment and display units, review and preparation of finance documentation and such other matters as may require legal attention on a day-to-day basis. I do not propose to charge a fee for those services separately from the fee for acting as director and chairman. However, if specific legal work is required to be performed by way of documentation, I would then put forward a fee proposed to the Board for approval. However, SAT will necessarily retain local legal counsel on domestic matters eg. liquor licensing issues. 10 The defendant also had an interest in two Singapore companies, Buckeye Corporation Pte Ltd and Neem Infrastructure Development Pte Ltd. The defendant's personal assistant Lim Kiat Heng (Kiat) worked from the premises of the Singaporean companies. The defendant's solicitors in Singapore were P.K. Wong & Advani.

History of the pleadings 11 The main proceedings were commenced by Summons filed on 20 June 2001. The plaintiff alleges that it entered into an agreement with the defendant on 13 January 2001 that consisted of two documents being a letter of offer from the plaintiff to the defendant dated 12 January 2000 and a letter from the plaintiff to the defendant dated 13 January 2001. 12 It is alleged that the agreement provided that by 31 March 2001 the defendant would pay to the plaintiff (1) an amount equal to all the cash and other advances the plaintiff had made to or on behalf of ICCT under the LOA, between the plaintiff as lender and ICCT as borrower, together with interest accrued under the terms of the LOA; (2) the sum $100,000 for costs and expenditure incurred by the plaintiff in relation to the LOA. It is alleged the agreement also provided that by 31 March 2001 the defendant would transfer to the plaintiff the shares held by the defendant or his nominee in ICCT, representing 2.5% of the issued capital. It is alleged that by 31 March 2001 the amount payable by the defendant to the plaintiff was US$1,570,270 and that the defendant has refused to pay that amount or to transfer the shares. 13 In his defence filed on 17 August 2001 the defendant admitted the agreement pleaded on 13 January 2001 but says that there were also implied terms of the agreement and conditions precedent to its operation. The defendant alleged that a condition precedent to the operation of the agreement was that the assignments of the plaintiff's rights under the LOA and the Shareholders Deed were permitted under the LOA and the Shareholders Deed. The defendant also alleged that it was an implied term of the agreement that it would only come into effect if all parties to the LOA and Shareholders Deed consented to the agreement and consented to execute a Deed of Novation. 14 The defendant alleged certain other parties to the LOA and Shareholders Deed did not consent to the agreement and have not agreed to execute a Deed of Novation. By reason of this lack of consent the defendant claimed "performance of the Agreement in the manner contemplated and the common objective of the parties is no longer capable of being achieved" and that the Agreement had been terminated by frustration. 15 The defendant also alleged that the Agreement was entered into under the common mistake of the parties that all other parties to the LOA and the Shareholders Deed did or would consent to a novation. By reason of their lack of consent the defendant claimed the Agreement was liable to be rescinded or set aside. The defendant also alleged that the plaintiff was not entitled to assign its rights to the defendant and that there had been a total failure of consideration. 16 The defendant filed an Amended Defence on 16 November 2001 by which he alleged that the defendant was not entitled to transfer the shares to the plaintiff and the plaintiff was not entitled to assign its rights and benefits under the Shareholders Deed without the prior written consent of the other parties to the Shareholders Deed. The defendant alleged that by reason of the failure of the shareholders agreement to waive the restriction on such assignment there had been a total failure of consideration. 17 On the hearing of this Motion on 30 January 2002, by consent, the defendant was granted leave to file a Further Amended Defence and a Cross Claim. The Further Amended Defence added paragraphs 14 to 25 as follows; 14. Further and in the alternative, the Plaintiff is and was at all material times a corporation within the meaning of the Trade Practices Act 1974 (Cth) ("TPA"). 15. On or about the 12 January 2001, the Plaintiff represented to the Defendant that: (a) ICCT was in default of the Loan and Option Agreement. (b) The Plaintiff was not obligated to provide any further funding pursuant to the Loan Option Agreement. (c) The Plaintiff was entitled to call up the loan monies which it had advanced pursuant to the Loan and Option Agreement. (d) The Plaintiff was entitled to and would inform the Australian Stock Exchange ("ASX"): (i) that ICCT had defaulted under the Loan and Option Agreement; (ii) that ICCT was not performing its obligation under the Loan and Option Agreement;

(iii) that ICCT was not achieving its revenue projections;

(iv) that the technology owned and promoted by ICCT was not what ICCT claimed and promoted it to be.

(a) Unless the Defendant executed the offer that night, the Plaintiff would call a default and take the actions set out in sub-paragraph (d). Particulars The representations were made by Christopher Elmore Campbell, managing director of the Plaintiff, to the Defendant by telephone at or about 7:30 pm Singapore time on 12 January 2001. 16. The representations were made in trade or commerce. 17. Acting on the faith and truth of the representations the Defendant executed the offer which was thereupon accepted by the Plaintiff. 18. Had the representations not been made the Defendant would not have executed the offer. 19. In fact and in truth: (a) ICCT was not in default of its obligations to the Plaintiff under the Loan and Option Agreement;

(b) The Plaintiff was not entitled to call up the loan advances it had made to ICCT;

(c) The Plaintiff was obliged to make further advances to the Loan and Option Agreement and itself was in default of such obligations;

(d) The Plaintiff was liable to ICCT in respect of failures by the Plaintiff to make loan advances requested of it and required by it under the Loan and Option Agreement;

(e) The Plaintiff did not intend to make the threatened ASX announcement if the Defendant did not sign the offer;

(f) To the extent that ICCT was not achieving its revenue projections the failure was caused or materially contributed to by Garratt's default in making the loan advances required of it pursuant to the LOA. 20. Further, to the extent that the representations involved representations as to future matters, the Plaintiff had no reasonable grounds for making them. The Defendant relies on s.51A of the TPA. 21. In the premises the plaintiff engaged in misleading or deceptive conduct within the meaning of s.52 of the TPA. 22. By reason of the plaintiff's misleading or deceptive conduct the Defendant has suffered loss or damage. 23. The Defendant's claims set out in paragraphs 14-22 go to the root of and impeach the title of any claim that the Plaintiff may have against the Defendant such that it would be unjust and inequitable that the Plaintiff should be permitted to proceed with any claim it may have against the Defendant without the Defendant being able to rely on his claim as an equitable defence to the Plaintiff's claim. By reason of such matters, the Defendant is entitled in equity to set off the damage he has suffered against any claim that the Plaintiff may have against the Defendant as alleged. 24. Further and in the alternative the Agreement was entered into by the Defendant under economic duress. 25. Further and in the alternative, the Agreement is voidable on the grounds of mistake, misrepresentation, or economic duress and the Defendant elects to avoid the Agreement. 18 The Cross Claim repeats the allegations made in paragraphs 14 to 22 of the Further Amended Defence and seeks an order pursuant to section 87 of the Trade Practices Act 1974 (the TPA) that the agreement be set aside and also seeks damages and costs.

The Documents 19 The documents, the subject of the claim for privilege for which access is sought, are documents numbered 322, 323 and 328 to 365 in the defendant's list. Those documents are described in the defendant's list as follows: Doct.No. Date Description 322 26.08.00 Facsimile letter from P.K. Wong to Mike Brennan (Former Director of ICCT and SAT), Long, Levy, and the defendant's son. 323 12.12.00 File Note of P.K. Wong & Advani. 328 27.12.00 Memorandum from Pasricha to the defendant with hand written annotations. 329 28.12.00 Email from P.K. Wong to P.K. Wong, enclosing email from Pasricha to the defendant, undated. 330 Undated/ after 28.12.00 Email from P.K. Wong to Pasricha. 331 Undated Draft proposed offer from the defendant to the plaintiff with handwritten annotation. 332 Undated Draft proposed offer from the defendant to the plaintiff. 333 02.01.01 Email from Pasricha to P.K Wong with handwritten annotations. 334 02.01.01 Email from P.K Wong to Kiat. 335 02.01.01 Facsimile from Kiat to P.K Wong 336 02.01.01 Email from P.K Wong to Kiat. 337 02.01.01 Email from P.K Wong to Kiat. 338 04.01.01 Email from Pasricha to the defendant. 339 09.01.01 Facsimile from Pasricha to the defendant with handwritten annotations. 340 09.01.01 Facsimile from the defendant to P.K Wong and Advani. 341 09.01.01 Email from P.K Wong to the defendant. 342 10.01.01 Email from P.K Wong to P.K Wong, enclosing email from P.K Wong to Pasricha also dated 10.01.01. 343 Undated Email from P.K Wong to the defendant. 344 10.01.01 Email from the defendant to P.K Wong (x2) 345 10.01.01 Facsimile from Mark Wong (of P.K Wong) to the defendant. 346 Undated Draft letter from the defendant to Grant Thornton LLP. 347 11.01.01 Internal email of P.K Wong & Advani. 348 11.01.01 Internal email of P.K Wong & Advani 349 11.01.01 Email from P.K Wong to the defendant (x2). 350 11.01.01 Email from P.K Wong to the defendant (x2) 351 11.01.01 Email from P.K Wong to the defendant (x2). 352 11.01.01 Facsimile from Kiat to Mark Wong. 353 12.01.01 Facsimile from P.K Wong to the defendant. 354 12.01.01 Email from Pasricha to the defendant, cc. P.K Wong. 355 12.01.01 Email from P.K Wong to the defendant. 356 Undated but after 13.01.01 Draft letter from the defendant to the shareholders ICCT (x2) 357 Undated but after 13.01.01 Draft letter from P.K Wong to the plaintiff. 358 15.01.01 Draft letter from Pasricha to Long (x3) including with hand written annotations (x2). 359 15.01.01 Facsimile from P.K Wong & Advani to the defendant. 360 15.01.01 Email from P.K Wong to the defendant with handwritten annotations. 361 15.01.01 Email from P.K Wong to the defendant with handwritten annotations. 362 17.01.01 Email from P.K Wong & Advani to the defendant. 363 20.01.01 Facsimile from the defendant to P.K Wong. 364 29.01.01 Email from Mark Wong to the defendant. 365 30.01.01 Email from P.K Wong to the defendant.

20 In respect of document 323, 328, 331, 332, 334 to 337, 340, 341, 343 to 353, 355 to 357 and 361 to 365 the defendant makes a claim that the document constitute "(a) confidential communications between P.K Wong & Advani, and myself (or Ms Kiat on my behalf), and/or (b) confidential documents created by P.K Wong & Advani, myself, or Ms Kiat on my behalf, that were created for the dominant purpose of P.K Wong & Advani providing me with legal advice". 21 In respect of documents 328, 331, 347 and 358 the defendant stated that he had been informed by P.K Wong and verily believed that such documents contained handwritten annotations that are confidential. 22 In respect of documents 328 to 330, 333, 337 to 339, 342, 348 and 354 the defendant claims that the documents constitute (a) confidential communications between P.K Wong & Advani, Pasricha (or his employees), and/or myself or Ms Kiat (on my behalf), or (b) confidential documents created by the parties mentioned in sub paragraph (a) above, that were created for the dominant purpose of P.K Wong & Advani and/or Pasricha providing me with legal advice". 23 In respect of document 322, 358, 359 and 360 the defendant claims that the document constitute "(a) confidential communications between P.K Wong & Advani, Pasricha (or his employees), and/or persons with a common interest in ICCT, or (b) confidential documents created by the parties mentioned in sub-paragraph (a) above, that were created for the dominant purpose of Pasricha (or his employees) and/or P.K Wong & Advani providing legal advice to ICCT, wholly owned subsidiaries of ICCT or to persons with a common interest in ICCT (those persons being the founders, promoters or directors of ICCT and/or of wholly owned subsidiaries of ICCT)". In respect of those documents the defendant stated that he claimed privilege "on behalf of ICCT, as well as for myself".

Other Documents 24 Part of the claim made by the plaintiff for access to the documents is that the defendant has selectively disclosed documents that would otherwise be privileged and in such circumstances the defendant should not be allowed to maintain the claim for privilege. It is necessary to provide some detail of those documents and the surrounding documents that are not suggested to be appropriately the subject of a claim for privilege. They are Exhibit 5 on the Motion. 25 From late November 2000 it is apparent that at least the defendant was concerned about cash flow. On 5 December 2000 the defendant wrote to the plaintiff referring to the very serious cash flow problem in SAT. The defendant stated that if the plaintiff wished to withdraw from the LOA, at any time, he undertook to step into the plaintiff's "shoe". He also advised the plaintiff that he would ensure that the plaintiff was repaid in full on the basis that the plaintiff would transfer the LOA to the defendant. 26 In early December 2000, a guarantee was executed by the defendant in favour of the plaintiff in respect of a payment of $100,000 by the plaintiff to ICCT. 27 On 8 January 2001 P.K.Wong emailed to the plaintiff a copy of "the First Draft Letter of Offer" from the defendant to the plaintiff. That proposed offer was in the name of Goodgrain Group Ltd, a company incorporated in the Bahamas to the plaintiff. Subsequent drafts were in the defendant's name. 28 On 9 January 2001 P.K. Wong sent a further email to the plaintiff in which he referred to the plaintiff as "Garrat's" and the defendant as TT. That email was in the following terms: ICCT is at the cross-road. TT needs to act quickly. I believe once TT has taken on the responsibility of Garratt's by your acceptance effectively Garratt's would be looking to TT to provide the consideration being the repayment of loan on behalf of ICCT etc. and Garratt's would no longer have to look at the operation of ICCT.

ICCT would also have to confirm that ICCT releases Garratt's from responsibility under the Loan Agreement and accepts TT as the party responsible for funding under the Loan Agreement. Of course, ICCT remains liable to repay the loan to Garratt's until and unless TT has first paid the advance already made to-date. What is more important from a practical point of view is the announcement to the ASX. Your proposed draft announcement is something we would all have to view immediately. 29 An amended draft Letter of Offer was received from the plaintiff on the evening of 9 January, 2001. On 10 January, 2001 the plaintiff sent a further draft to P.K. Wong and Pasricha. On 10 January, 2001 the defendant sent an email to Long, Brennan, Levy, his son and Pasricha stating that he was extremely disturbed that SAT had not responded to an earlier letter from the plaintiff noting that Long had said that SAT was "in a financial bind". He requested urgent action, "otherwise we are going to be in default". He stated "time is of the essence". 30 On 11 January 2001 P.K. Wong sent a further draft to the plaintiff. On the same day P.K. Wong sent an email to Pasricha enclosing a "final, cleaned-up version of the agreement", asking Pasricha to review the document and confirm it was "ok" in view of the fact that there were so many versions of the agreement which had created some confusion. 31 On 12 January, 2001 P.K. Wong wrote to the defendant enclosing the final version of the Offer Letter which P.K. Wong advised the defendant that he believed would be acceptable to the plaintiff and "is the form of cl. that listed companies are generally prepared to accept." The solicitors also advised "I have also been copied with the draft announcement proposed to be made by (the plaintiff) and do not believe it to be prejudicial to ICCT. Indeed it expressly notes (the plaintiff) believes in this technology". 32 On 12 January, 2001 the plaintiff wrote to P.K. Wong and Pasricha in the following terms: "By this point in time, 11.06 pm Sydney time, 8.06 Singapore time:

1. You have advised me that TT has no objection to the draft ASX announcement that I read to him this afternoon, and which I sent you ('coded') this afternoon. I would appreciate it if you would confirm this to me via email ASAP.

2. TT advised me that he has signed the offer but he is not able to fax it to me. I have asked someone to collect it from him, but, when collected, I will not be in a position to confirm that it is correct - until it is, at least, read out to me. Nevertheless, in good faith, I am prepared to take your (P.K. Wong's) word that the letter of offer is in accordance with what has been agreed with me. I would appreciate it if you would arrange for a clean (signed) copy to be faxed to me at my office (address stated). P.K., thanks for all your help in this exercise. This has been a very tiresome exercise." 33 On 13 January 2001 P.K. Wong, as requested, sent a formal letter of offer signed by the defendant to the plaintiff via courier to the address contained in the email. That letter requested the plaintiff to confirm that the closing day for the transaction was ninety days from 13 January 2001. On 15 January 2001 the plaintiff forwarded an announcement to the ASX announcing that it had accepted from the defendant an offer to purchase its interest in ICCT. It advised that under the terms of the sale by 31 March 2001 the defendant was to pay to the plaintiff "all" that the plaintiff had loaned to ICCT, about US$1.4 million; the interest accrued at 8% per annum, about US$100,000, an additional amount of US$100,000 and was to transfer to the plaintiff shares in ICCT representing 2.5% of the issued capital of ICCT. 34 The announcement stated that the defendant would immediately assume all the plaintiff's funding and other obligations to ICCT and then stated: The acceptance of the offer is not a negative reflection on the … technology. Secret Agent Technologies, Inc., the ICCT subsidiary in the USA, has a positive outlook. Indeed, Garratt's is pleased that as part of the consideration for the sale of its interest, Garratts shall receive a 2.5 per cent share holding in ICCT. 35 On 22 January 2001 P.K. Wong wrote to the defendant at his Singapore company address enclosing the proposed draft letter to the plaintiff in relation to the Novation Agreement. That draft included the statement, "First there is no necessity for the shareholders of ICCT to be made parties to the Novation Agreement as shareholders were not made parties to the LOA".

Defendant's statement 36 During the hearing of the motion an issue arose in respect of the status of the defendant's witness statement dated 7 December 2001. The plaintiff sought to tender portions of the statement and the defendant claimed privilege over the contents of that statement as it had not been used in the proceedings by the defendant and had been filed pursuant to orders made by the Court. In those circumstances the defendant claimed that the statement was privileged. I rejected the tender of the statement: The Bell Group Ltd (In Liquidation) & Ors v Westpac Banking Corporation (1998) 86 FCR 215 at 224B-C. 37 During argument I indicated to the defendant that it seemed to me sensible to have this Motion heard in the light of the way in which the defendant intended to run the case at trial. Mr Williams SC obtained instructions during the luncheon adjournment from the defendant who is resident in California and sought and obtained a consent order requiring the defendant to indicate to the Court the portions of the statement that would be read at trial. In those circumstances the plaintiff referred to certain paragraphs in the statement although a formal tender of the document was not made. Both counsel included reference to the content of the statement in their submissions. 38 The defendant's statement includes a statement that "during the discussions" there was no reference made by any of the participants in the conversations, who were not identified in the potion of the statement proposed to be read, to any stipulation in the LOA or the Shareholder's Deed regarding limitations on the plaintiff's rights of assignment. The matter of obtaining consent from the other parties was neither raised nor discussed at all. The defendant then states that he believed at the time that if he put an offer to the plaintiff that it would be in the best interests of ICCT and the other shareholders and that the other shareholders would have no objection to him stepping in and taking over the funding obligations of the plaintiff under the LOA. 39 The portions of the statement Mr Williams indicated the defendant proposed to read at the trial excluded the first sentence of paragraph 9 and Annexure "A" to the statement. Annexure "A" was tendered by the plaintiff, without objection, and became Exhibit 6. Mr Muddle informed the Court that it had been agreed between the parties that there had been an express waiver of privilege in relation to this document. Exhibit 6 is an email dated 27 December 2000 from Pasricha to the defendant and P.K.Wong enclosing a memorandum from Pasricha to the defendant dated 27 December 2000 that included a "proposed offer" from the defendant to the plaintiff for purchase of the plaintiff's interest in ICCT. In that memorandum Pasricha stated: After my discussion with you yesterday, I had a further discussion with Chris (MD of the plaintiff) today. I tried to persuade him to relent on his requirement that in being taken out that the consideration cover the costs incurred by Garrett's (GRT) in embarking on the transaction in the first place. I continue to be unsuccessful in getting him to change his mind and accept an offer whereby he gets back the cash GRT has committed together with interest and 3% free carry equity.

However, based on my last round of discussions, there may be room for movement by trading off some of the equity for cash payment now. I give no assurance that such an offer would be acceptable, but if you are agreeable, it may be worth having a go at it.

Set out below is a revised offer reflecting my thoughts on what might be acceptable to GRT, if you are comfortable with it.

If the suggested approach below is not acceptable, then there may be some room for negotiating the A$200,000 amount for coverage of GRT costs down. 40 The covering email refers to the enclosed memorandum and offer and states: The draft offer is a little different from the position you have adopted to date that you will not reimburse GRT their costs. After further discussion with Chris, there may be room to conclude the matter by reducing the equity in exchange for a cash payment.

I understand Chris has had a lengthy conversation with PK. PK may be in a position to explain face to face Chris's thinking.

Whilst I dislike the idea of being taken advantage of, nevertheless, the solution might lie in a reduced equity kicker to GRT in exchange for cash now.

I have cc this email to PK so that he can ensure that you get a copy and can give you his thoughts as well. 41 The statement then refers to a conversation on the telephone with Campbell on 12 January 2001 in which he claims that he informed Campbell that there was too much in the offer that he needed to consider and that there was no urgency. He claims he said to Campbell that he was not comfortable with the language and that he had not had a chance to peruse it thoroughly. He asked Campbell what the hurry was and why could they not consider it after the New Year holiday, referring to the Chinese New Year. 42 The defendant claims that Campbell then said: If the offer is not signed within the hour, I will not discuss the matter any further. I have arranged to meet Garratt's chairman tomorrow morning with the view to calling a default on ICCT. ICCT will have to face all the ramifications that will flow from such a call with the attendant publicity if the offer in the terms drafted by my solicitors is not signed and delivered within the hour. 43 Paragraph 16 of the defendant's statement is in the following terms: Campbell refused any discussion on the terms of the letter of offer as drafted. I was not in a frame of mind to deal with each and every paragraph of the plaintiff's draft letter of offer nor was I given an opportunity at that time to do so. Campbell was unwilling to discuss the terms. The matter of obtaining consent of the other parties to the LOA and Shareholder's Deed was far from my mind. I assumed there would be no issue so far as the other shareholders were concerned and that they supported my proposed course. I felt as if there was a gun pointing at my head. I knew that ICCT was in desperate need of funding and would have been unable to continue as a going concern if I did not sign the offer. It was under these very stressful circumstances that I signed the letter of offer around 10.00 p.m. Singapore time. Campbell's brother in Singapore hand collected the letter of offer from my apartment.

The Motion 44 The plaintiff claims that in filing the defences and cross-claim the defendant has put in issue his state of mind at the time the agreement was entered into as an essential ingredient of his defences and cross-claim upon which the Court will have to make findings of fact. It was submitted that the evidence that the defendant intends to read at trial also puts his state of mind in issue. 45 The plaintiff focuses in particular upon the defences pursuant to s 52 of the TPA and the defence of economic duress. In the former the defendant claims that he would not have executed the letter of offer if the plaintiff had not made the alleged representations. In the latter there are no particulars provided but Mr Williams submitted that the issues will be, (a) was pressure applied, (b) was the pressure illegitimate and (c) was the illegitimate pressure a cause of the defendant signing the agreement? From the pleadings it appears that the defence of economic duress relies solely upon the alleged representations made on or about 12 January 2001. 46 The plaintiff also submitted that the defendant had selectively disclosed documents that would properly be the subject of a privilege claim and that this partial disclosure renders the claim for privilege on the balance of the documents over which the order for inspection is sought as unsustainable by reason of the unfairness to the defendant. 47 Mr Williams submitted that the relevant test in this Motion is whether the defendant has "consented" to the disclosure within the meaning of s.122(1) of the Act. This submission is based on the provisions of Part 23 Rule (1)(c), introduced by Amendment 332 commencing on 1 October 1999 applicable to this case. Part 23 governs Discovery and Inspection of Documents and Part 23 Rule (1) (c) (i) defines "privileged document" as "a document of which evidence could not be adduced in the proceedings over the objection of any person, by virtue of the operation of Part 3.10 Division 1 of the Evidence Act". 48 In Novus Australia Energy Company v Gulf Petroleum (Australia) Pty Ltd & Gulf Canada Resources Limited [2001] NSWSC 579, Hunter J, 12 July 2001, the defendants had discovered documents which referred to some legal advice and the plaintiff made application for the production of that legal advice for inspection. Hunter J said: [24] The plaintiff has argued this application on the basis that the question of privilege is to be governed by the doctrine of waiver of legal professional privilege as explained in Mann v Carnell (1999) 168 ALR 86, relying upon the decision of the High Court in Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 168 ALR 123.

[25] Esso Australia Resources was concerned with putting to rest the question, which had been the subject of conflicting decisions within the Supreme Court of New South Wales and the Federal Court of Australia, whether client legal privilege and its waiver, as conceived in Pt 3.10 of the Act, applied to pre-trial processes. In Esso Australia Resources the High Court said that it did not.

[26] However, there, the High Court was concerned with an appeal from the Federal Court of Australia, the rules of which had no counterpart for Pt 23 r 1 and 3, or Part 36 r 16 of the Supreme Court Rules, as quoted earlier in these reasons.

[27] The clear intention of those provisions and the definition within each of those parts of a privileged document, as being one of which evidence could not be adduced over an objection based upon Part 3.10 Division 1 of the Act, is to bring the concept of privilege and its waiver in pre-trial processes in this Court within the concept of client legal privilege and its waiver as espoused in the Act. 49 Section 122 of the Act relevantly provides:

"Loss of client legal privilege: consent and related matters 122. (1) This Division does not prevent the adducing of evidence given with the consent of the client or party concerned. (2) Subject to subsection (5), this Division does not prevent the adducing of evidence if a client or party has knowingly and voluntarily disclosed to another person the substance of the evidence and the disclosure was not made:

(a) in the course of making a confidential communication or preparing a confidential document; or (b) as a result of duress or deception; or (c) under compulsion of law; or (d) if the client or party is a body established by, or a person holding office under, an Australian law to the Minister, or the Minister of the State or Territory, administering the law, or the part of the law, under which the body is established or the office is held. … (4) Subject to subsection (5), this Division does not prevent the adducing of evidence if the substance of the evidence has been disclosed with the express or implied consent of the client or party to another person other than: (a) a lawyer acting for the client or party; or

(b) if the client or party is a body established by, or a person holding an office under, an Australian law the Minister, or the Minister of the State or Territory, administering the law, or the part of the law, under which the body is established or the office is held. (5) Subsections (2) and (4) do not apply to: (a) a disclosure by a client to another person if the disclosure concerns a matter in relation to which the lawyer is providing, or is to provide, professional legal services to both the client and the other person; or

(b) a disclosure to a person with whom the client or party had, at the time of the disclosure, a common interest relating to a proceeding or an anticipated or pending proceeding in an Australian court or a foreign court. 50 Although s 122 of the Act refers to the "adducing of evidence" this Motion has been argued on the basis that the concept of privilege and its waiver (or "consent") applies to the discovery process. The relevant issue for decision is whether the defendant has consented to the discovery of the documents, over which it is claiming privilege, by reason of the pleading of the defences and the cross-claim. 51 Mr Williams submitted that "consent" within s 122(1) means express consent and does not include implied or imputed consent. He submitted that the use of the term "express or implied consent" in sub-section (4) and the failure to use that term in sub-section (1) supports such an interpretation. Mr Williams did not cite any authority in support of this submission. It is not supported by Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152 (Branson and Lehane JJ, Beaumont J dissenting), or the unanimous decision of the Full Federal Court (Ryan, Carr and Marshall JJ) in Perpetual Trustees (WA) Ltd v Equuscorp Pty Ltd [1999] FCA 925. In the light of these authorities I am of the view that "consent" in s 122(1) of the Act includes conduct amounting to imputed or implied waiver. 52 In the defence of economic duress, the onus is upon the defendant to establish that pressure was applied and that the pressure went beyond what the law is prepared to countenance as legitimate. Once that is established, the onus falls upon the plaintiff to establish that such pressure made no contribution to the defendant in entering into the agreement: Crescendo Management Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40. 53 In Crescendo Management McHugh JA said at 46: The proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate? …. It is unnecessary, however, for the victim to prove that the illegitimate pressure was the sole reason for him entering into the contract. It is sufficient that the illegitimate pressure was one of the reasons for the person entering into the agreement. 54 In his learned article Economic Duress - Wearing the Clothes of Unconscionable Conduct, Journal of Contract Law, Vol. 17 No. 1 at 1, R T McKeand, analyses Crescendo and other relevant cases to reach the conclusions, at 12, relevant to this application that (1)"it is sufficient if the pressure is a cause (though not an insignificant cause) of the giving of consent, even if the consent would have been given absent the duress complained of", (2) "once the evidence establishes that the pressure applied was illegitimate, the onus falls on the person applying the pressure to show that it made no contribution to entry into the transaction" and (3) "consideration of the will of the innocent party at the time of entry and the quality of consent are not relevant beyond the inquiry into causation". 55 The range of matters that did contribute to the defendant's entry into the agreement is relevant to the question of whether the illegitimate pressure made no contribution to the defendant's entry into the contract. Once the defendant pleads this defence he puts in issue what contributed to him entering into the agreement. The economic duress defence requires findings of fact as to whether the defendant was "induced" by the illegitimate pressure into entering into the agreement. In the s 52 defence the defendant has pleaded that he would not have executed the offer if the plaintiff had not made the representations. The surrounding circumstances at the time the defendant entered into the agreement and the range of factors weighing on the defendant's mind at the time he entered into the agreement have been made central to the issues in the case by the defendant's pleadings. 56 The plaintiff relies upon Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152 (Branson and Lehane JJ, Beaumont J dissenting), in particular to the majority decision at p 168 as follows: Where, however, a party relies on a cause of action, an element of which is the party's state of mind (including the quality of the party's assent to a transaction) the party is taken to have waived privilege in respect of legal advice which the party had, before or at the time of the relevant events, material to the formation of that state of mind. 57 Mr Williams SC conceded that if Telstra v BT was decided correctly then his client's position as pleaded and as indicated in his statement falls within the above cited statement of the majority. However Mr Williams argued that I should not follow the majority in Telstra v BT and I should be persuaded to follow the approach adopted by Heerey J in Equuscorp Pty Ltd v Kamisha Corp Ltd (1999) ATPR 41-697, Conti J in John Tanner Holdings Pty Ltd v Mortgage Management Ltd (2001) 182 ALR 201, Sackville J in Australian Rugby Union Ltd v Hospitality Group Pty Ltd (1999) 165 ALR 253 and Wright J in Randell v Rockliffe (unreported, SC TAS, 9 December 1999). 58 Heery J, Sackville J and Conti J each referred to the decision of the Full Federal Court, (Black CJ, Beaumont, Sundberg, Merkel and Finkelstein JJ) in Esso Australia Resources Ltd v Commissioner of Taxation (1998) 83 FCR 511, 159 ALR 664 in which Adelaide Steamship Co Ltd v Spalvins (1998) 81 FCR 360; 152 ALR 418 was overruled. Heery J declined to follow the majority in Telstra V BT upon the basis that the majority decision had been based upon the then overruled Adelaide Steamship Co case. Heery J concluded that he was required to apply the common law test unaffected by s 122 (1) of the Act. Both Conti J and Sackville J in their respective judgments in John Tanner and Australian Rugby Union referred to and agreed with Heery J's approach in Equuscorp and declined to follow the majority in Telstra v BT. 59 The decision of the Full Federal Court (Ryan, Carr and Marshall JJ) in Perpetual Trustees (WA) Ltd v Equuscorp Pty Ltd [1999] FCA 925 which although differently named was the appeal from Heery J's judgment in Equuscorp Pty Ltd v Kamisha Corp Ltd. The appeal was decided on 7 September 1999 after Sackville J's judgment (4 August 1999) but before Conti J's judgment (6 March 2001). It is apparent that counsel before Conti J also relied upon Heery J's judgment without informing his Honour that Heery J's judgment had been overturned on appeal. Certainly there is no mention in Conti J's judgment of the appeal. 60 Wright J in Randell v Rockliffe did refer to the appeal judgment in Equuscorp stating at [13] that notwithstanding that the majority opinion in Testra v BT was unanimously followed in the appeal he was "not persuaded that the principles embraced are correct". His Honour said: [14] The Full Court in upholding the appeal, did not resort to principles of stare decisis but chose to follow Branson and Lehane JJ on the basis that their views were correct. However, they also pointed out that in the case before them there had been more than "a mere pleading of reliance". They said: "There is the added ingredient of evidence that legal advice was sought and obtained at a relevantly material time. There is also the plea of rectification". [15] With all respect to the considerable weight of opinion to the contrary in the Federal Court judgments referred to, I remain unpersuaded that Beaumont's approach was wrong. Indeed, I think it was correct and should be followed. In reaching this conclusion I have been mindful of the issues of comity and constraint to which I referred in Carrick v J [1989] Tas R 24 at 35-36. 61 In the appeal in Equuscorp the Court expressed the view that Heery J had taken a somewhat restrictive view of the guidance to be obtained from the reasons of the majority in Telstra v BT. The Court said: [9] The majority held that conduct which would amount to imputed waiver at common law came within the meaning of "consent" in s 122(1) of the Evidence Act (see 648-649). Their Honours did not identify any difference between imputed waiver at common law and implied consent within the meaning of the sub-section. They thus applied the familiar common law principles of unfairness to what they identified as issue waiver, leaving aside (at 647) the question, decided in Adelaide Steamship (at 426-429), whether the common law relating to disclosure waiver had been changed by s 122(2) and (4) which were not concerned with any principles of fairness. Beaumont J's reasoning in Telstra (at 641) on whether conduct which amounted to imputed waiver at common law would also amount to consent within s 122(1) is consistent with the view of the majority. Their Honours relevantly differed on whether the circumstances permitted a waiver of privilege to be imputed at that stage of the proceedings. The majority discussed (from the last paragraph on p 645 through to page 648) the common law position and reviewed many of the leading authorities at common law concerning imputed waiver of privilege. [10] The derivative change to the common law, temporarily worked by Adelaide Steamship and disapproved of in Esso, was that the common law relating to legal professional privilege at the discovery stage of proceedings had been changed so as to make that privilege available where the dominant, rather than the sole, purpose of a communication was the obtaining of legal advice. Furthermore, in so far as previously established principles of common law were inconsistent with the Evidence Act and its purposes, they were to be taken as modified correspondingly so as to avoid such inconsistency (see 429). The inconsistency which the Full Court identified in Adelaide Steamship related to the common law principles of unfairness in their application to disclosure waiver. As we have mentioned, the majority in Telstra construed s 122(1) of the Evidence Act on the basis that the word "consent" in that subsection extended to conduct which would amount to an imputed waiver at common law.

[12] It was common ground that the issue of imputed waiver in these proceedings was to be decided by the application of the common law principles. We can see no basis for distinguishing the present matter from the situation which arose in Telstra. 62 After referring to the s 52 of the TPA claim and the pleaded reliance the Court referred to the "added ingredient of evidence that legal advice was sought and obtained at a relevantly material time" [12]. The Court continued: [15] The authorities show that the underlying principle for imputed waiver is that there has been some conduct on the privilege holder's part whereby it becomes unfair to maintain the privilege. [16] The passage from the reasons of Black CJ and Sundberg J in Esso (at 670), which his Honour set out in his reasons, and which we have reproduced at para [5] above, refers to only one category of waiver, namely "disclosure waiver". As their Honours in that case were simply comparing the provisions of s 122(2) and s 122(4) of the Evidence Act (which are concerned with disclosure) with the position at common law, there was no need for them to consider what has been termed "issue waiver". The distinction was recognised by the majority in Telstra, though (see p 647) the same underlying principle of unfairness was held to govern whether there was imputed waiver. We agree, respectfully, with that analysis and reasoning. Their Honour's reasoning is supported by a formidable line of authority (discussed by them and which we do not propose to revisit here) which in our view applies to the present matter. The cases include Thomason v Campbelltown Municipal Council (1939) 39 SR (NSW) 347, Hong Kong Bank, Pickering v Edmunds (1994) 63 SASR 357 and Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405.

[17] In our view, the facts of the present matter reflect the requisite degree of unfairness. Equus complains that it relied on the specified representations when it executed the security document. It says that the words "letter of credit" appearing in that document do not faithfully record the common intention of the parties and that the words were used under a mutual mistake of fact. There is evidence, that at the relevant time or times, ie shortly before executing the security document, Equus sought and obtained legal advice. In our opinion, in those circumstances, it would be relevantly unfair for Equus to be allowed to maintain legal professional privilege. Equus' state of mind is central, at the very least, to its claim for rectification - see Ampolex - a case cited with apparent approval by Beaumont J in his dissenting reasons in Telstra. 63 Of the so often cited statement of Sir Frederick Jordan in Thomason at 359, Hodgson J in Standard Chartered Bank v Antico (1993) 36 NSWLR 87 said at 94: I am inclined to think that statement is a little too broad. If a party claims to set aside a transaction, on which the party has had legal advice, for undue influence, but makes no assertion whatsoever that there was any inadequacy in the legal advice about the transaction or in the party's relevant legal understanding of the transaction, it seems to me that the mere fact that some other element of undue influence is alleged would not necessarily mean that legal professional privilege is waived.

64 Standard Chartered was decided before the introduction of the Evidence Act 1995 (NSW). However after the introduction of the Act Hodgson CJ in Eq. in Wayne Lawrence Pty Limited v Hunt (t/as Hunt Musgrave and Peach) NSWSC, unreported, 19 October 1999 said at para 12: It does not seem to me that the assertion of a belief must, in all the circumstances, be taken as consenting to evidence being led of any legal advice or confidential communication that could be relevant to whether such belief was held or the reasonableness of such belief. It seems to me that factors relevant to whether that consent is to be considered as having been given, or whether privilege is taken to have been waived, would include the significance to the belief to the case as a whole; the relevance of the reasonableness of the belief to the case as a whole; the probability or otherwise of the legal advice being relevant to the holding of the belief, or being relevant to its reasonableness; and in circumstances where the court inspects the legal advice in question in order to make a decision, the extent to which the legal advice does in fact bear upon the holding of the belief or its reasonableness, and the extent to which the legal advice relevant to those matters is inextricably bound up with the legal advice going to other questions as to which there has been no consent or waiver. It seems to me that, on the basis of all those matters at least, the court has to make a judgment as to what is reasonable and what is fair in the particular case.

65 The defendant submitted that privilege is only waived when the privilege holder makes an assertion that the legal advice received had or did not have a particular quality. Certainly there are cases in which that situation pertains, for instance, the professional negligence claims, or claims seeking to set aside a settlement on the basis that such settlement was reached in contravention of instructions: Benecke v National Australia Bank (1993) 35 NSWLR 110. This submission in my view fails to appreciate the breadth of what Hodgson J said in Standard Chartered. His Honour included as an alternative, a claim that there was inadequacy in the party's relevant legal understanding of the transaction. That takes the category beyond a claim about the adequacy of the legal advice. It focuses upon the claimant's state of mind. His Honour also qualified his approach by the use of the term "necessarily". That recognises that each case must be decided on the particular circumstances of the matter. Beaumont J in Telstra v BT referred to "questions of degree" (at 157-158) and Hunter J in Novus Australia referred to a "matter of impression". Hodgson CJ in Wayne Lawrence provides more specific guidance. 66 In the present case the defendant complains that he relied upon the specified representations and that he would not have entered into the contract had the representations not been made. He claims that the parties entered into the agreement under a common mistake being that all parties to the LOA and the Shareholders Deed would consent to the signing of a Deed of Novation. He also claims by his economic duress defence that he was induced into the contract by the representations made by the plaintiff. He claims that the contract is voidable on the grounds of mistake, misrepresentation and economic duress. 67 There is the "added ingredient" of the documents in Exhibit 5 establishing that at the relevantly material time the defendant was allegedly induced into the contract by the economic duress and/or in reliance upon the representations made by the plaintiff he received legal advice in respect of the entry into the contract, the discussions with the plaintiff, a proposed ASX announcement and the Deed of Novation. . In this case the defendant raises mistake and thereby claims that he, at least, had a particular legal understanding of the transaction. I am also satisfied that in this transaction Pasricha was providing legal advice at the time of the discussions. 68 There is the further feature to this case of the defendant having indicated that he intends to read portions of the statement of 7 December 2001 at the trial in which there are statements clearly raising his state of mind at the time he entered into the contract and claims that nothing was said about the consent of the other parties in discussions which more probably than not included discussions with Pasricha in his role as solicitor. Caution needs to be adopted in relation to the contents of that statement. Mr Williams advised that his client agreed to a consent order that he indicate to the court the approach he intended to adopt at the trial in relation to the statement. Although it was not argued, there is the question whether the making of the consent order cloaks the statement with privilege because it was disclosed under compulsion of law (s.122(2)(c)). The step taken in inviting the defendant to indicate what evidence he intended to call at the trial was taken in an attempt to decide the matter in advance of the trial in the light of the views expressed by Beaumont J in Telstra v BT and Conti J in John Tanner that circumstances at the trial may justify inspection of the documents. Both counsel made submissions about the content of the statement and it may appear in the circumstances appropriate to take the defendant's indication of the evidence he intends to call at trial into account. I am of the view that in the circumstances of the indication only being given by order of the court, albiet a consent order, that I will not take the statement into account on this application. 69 In applying the guidance in Wayne Lawrence I am satisfied that the defendant's state of mind is very significant to the whole case - it is central to the defendant's defences to the plaintiff's claims and to the cross claim. I am also satisfied on the evidence before me, which excludes any reference to the defendant's statement, that it is probable that the legal advice given by P.K.Wong and Pasricha bears upon and is relevant to the defendant's state of mind. For instance in the email from the plaintiff to P.K.Wong and Pasricha the plaintiff stated that it had been advised by them that the defendant "has no objection to the draft ASX announcement that I read to him this afternoon and which I sent you ('coded') this afternoon" (Ex.5). The evidence establishes that the defendant was receiving legal advice about the very matter of the entry into the contract at and around the time he claims the representations occurred and the illegitimate pressure was applied. Some of that advice has been disclosed, for instance in Exhibit 6. I am satisfied that the pleading of the defences in this case amounts to "consent" to the discovery of documents that are material to the defendant's state of mind in entering into the contract on 13 January 2001. 70 There was a further purported claim in respect of ICCT relating to four documents. Hunter J made orders in respect of any formal claim to be made by ICCT, which were not complied with and in my view the affidavit filed by the defendant on the day of the hearing of this matter does not establish a proper claim based on s 122(5) of the Act. 71 In supplementary submissions filed on 1 February 2002, the defendant invited me to inspect the documents for the purpose of deciding this application. In supplementary submissions filed on 4 February 2002, the plaintiff made some observations about the inspection of the documents which were clarified at a further mention of the matter on 7 February 2002. The plaintiff does not oppose the inspection of the documents. The documents have been provided to the Court on 7 February 2002 and placed in a sealed envelope (MFI 1A). 72 Section 183 of the Evidence Act 1995 (NSW) provides: 183 If a question arises about the application of a provision of this Act in relation to a document or thing, the court may: (a) examine the document or thing, and (b) draw any reasonable inferences from it as well as from other matters from which inferences may properly be drawn. 73 The matter of inspecting documents is a matter for the discretion of the court. Prior to the introduction of the Act, Stephen, Mason and Murphy JJ, in Grant v Downs (1976) 135 CLR 674 expressed the view, at 689, that this power had perhaps been exercised too sparingly in the past. After the introduction of the Act and relevant to the findings I have made in this case that there has been consent to the discovery of documents material to the defendant's state of mind, is what Kirby J said in Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd & Ors (1996) 137 ALR 28 at 35: The courts will protect a client's legal professional privilege to the full extent possible and subject, in this case, only to the extent of any waiver that is established. For all I know, the documents in the envelope contain matters going beyond the substance of the assertion in the Part B statement. As the judge of trial, Rolfe J will doubtless be conscious of the need to protect any other confidences which are not the subject of waiver as s 122 of the Evidence Act provides. I did not take the respondents to dispute his Honour's power to control access to the documents so as to reveal those parts which have been held to be covered by the waiver and to protect those parts which are not. 74 A similar circumstance exists in this application. There has been no dispute that such power exists to control the access to the documents so as to reveal those documents which have been held to be the subject of the consent, and to protect those documents which are not covered by such finding. 75 I have inspected the documents for that purpose. I make an order that the plaintiff have access to documents numbered 329, 339 to 347 inclusive, 349 to 357 inclusive, 361 and 362. Document 335 in the List is in my view not an accurate description of the document however it is not one of the documents covered by the order for production. Access to the balance of the documents, the subject of the application is refused. Those documents will remain in the envelope, MFI 1A, which has been resealed and marked "privileged". The documents to which access is granted are placed in an envelope and marked MFI 1B. I will hear argument as to costs of the Motion should the parties be unable to agree on a costs order.

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