Hastie Group Ltd (In liq) v Moore & ors

Mr Crosbie's r 1.12 evidence

1. Mr Crosbie's affidavits, relied on in the hearings for each of the applications under r 1.12, set out the reasons why the statements of claim had not been served. Those affidavits, and the submissions put to the Registrars (one Registrar heard two of the applications; the third was heard by a different Registrar) emphasised the attempts made by the liquidators to obtain funding for the proceedings. They emphasised also the possibility of compulsory examinations, and the need for funding for any such examinations.
2. Thus, in essence, the liquidators were putting to the Court that they had used all reasonable efforts to obtain funding, but that, at the time each application was made, had not succeeded in getting it. The affidavits set out the dealings between the liquidators (or their representatives) and various prospective litigation funders.
3. In those circumstances, the unspoken but clear premises of the applications were that: 1. the liquidators had done all they could to get funding; and 2. they had done so with reasonable diligence and expedition.
4. The applications under r 1.12 recognised - in two cases, explicitly - that the defendants could move under r 12.11. Thus, they recognised that the supportive evidence might receive much closer scrutiny than it had in the ex parte applications. I do not mean by that to suggest that the Registrars did not consider the material carefully. What I mean is that there was no forensic examination of the kind that would normally occur in a contested application inter partes.
5. There was a subsidiary point made by the evidence: the need, at various times, to get legal advice. That is not of any present relevance, for reasons that I hope will become apparent.

Two substantive issues

1. In broad terms, it seems to me, there are two substantial answers to the claims for privilege in respect of the documents that relate to searches for litigation funding. One is that it has not been shown that the bulk of the material in question is in any event privileged. The other is that any privilege has been waived.

Privilege

1. The documents in categories 2, 3, 5, 7, 8 and 9 (the categories by reference to which the parties addressed the issues before me) all refer to events before any litigation funding agreement was made. Some of them relate to dealings with entities who declined to provide funding. I am prepared to accept (but do not need to find) that most, if not all, of the relevant documents could be described as "confidential" within s 117 of the Evidence Act 1995 (NSW). But it does not follow, simply from an assumption (or a finding) of confidentiality, that there is any relevant relationship between those documents and the provision of professional legal services within s 119 of the Evidence Act. The privilege claimed for these documents is privilege under s 119.
2. Litigation funding agreements, and the question of privilege attaching to them, have been considered in numerous cases. The recent decision of Black J in In the matter of Lori Najjar & Sons Pty Limited (in liquidation) (No 5) [2013] NSWSC 1336 refers to many of those decisions. As his Honour pointed out, analysis often starts with the judgment of Santow J in Re Global Medical Imaging Management Ltd (in liq) [2001] NSWSC 476. Unfortunately, there has developed a tendency to treat what Santow J said as establishing some general principle that funding agreements are privileged. The fallacy in that approach was pointed out by Bergin J in Rickard Constructions Pty Limited v Rickard Hailes Moretti Pty Limited [2006] NSWSC 234 at [36]. Her Honour said that the decision in Re Global Medical Imaging is authority, at most, for the limited proposition that a funding agreement may satisfy the requirements of s 119 of the Evidence Act. Whether it does so would depend upon the particular terms of the agreement and on the facts of the particular case. I respectfully agree with that comment, as did Black J Lori Najjar at [6]. His Honour said that the question: will depend on the particular circumstances [in] which the particular agreement was entered into and, very likely, on its terms, since it cannot be assumed that all documents headed 'funding agreement' are the same.
3. In CSR Ltd v Eddy (2008) 70 NSWLR 725, Basten JA referred at [66] to the question of the possible privilege attaching to funding agreements. His Honour accepted that a funding agreement could be classed as confidential, and indeed could have been prepared for the dominant purpose of obtaining legal services. However, his Honour said, the nature of the connection (between the document and the provision of legal services) "must be assessed according to the purpose of the statutory provision". As his Honour said, that purpose "does not extend to a document the purpose of which is to create the relationship". Finally (for present purposes) his Honour noted that "[d]ifferent issues may arise in relation to documents prepared for or provided to a litigation funder".
4. Hodgson JA observed, in the same case at [7], that if an agreement set out material that expressly or impliedly disclosed legal advice or views about tactics or strategy, then that material could be privileged (by implication, even if the agreement as a whole were not). A fortiori, I think, if there is expressed or implied disclosure of legal advice or views about prospects, the same would apply.
5. The need for a case by case, and fact-specific, analysis was emphasised by Bellew J in Marshall v Prescott (No 4) [2012] NSWSC 992 at [84]: What emerges from an examination of the authorities is that whilst a document in the nature of document 20 may be characterised as confidential, and may be prepared for the dominant purpose of obtaining legal services, each case must be determined on its own facts. In particular, the nature of the connection between the preparation of the document, and the dominant purpose of obtaining legal services, must be assessed. If the document is merely one which does nothing more than create a relationship, then it is likely that no privilege will attach to it. I have examined document 20 carefully with these principles in mind. As a result, a number of matters emerge.
6. I agree with what his Honour there said.
7. The cases to which I have referred dealt with litigation funding agreements. In this case, the documents in issue relate to preliminary steps: inquiries, searches or applications for funding; the progress of those steps; and things done by the liquidators to satisfy the needs or inquiries of the various funders to whom application was made. There is in my view a very strong argument for applying to those documents Basten JA's proposition that the statutory purpose does not extend to them, because their purpose is (at best) to create (or, perhaps, lead to the creation of) a relationship under which legal professional services may later be provided.
8. I accept, as Hodgson JA pointed out in CSR, that privilege may attach if and to the extent that the documents reveal, expressly or by implication, legal advice or views as to prospects, strategy, tactics and the like.
9. Although the latest affidavits make attempts to assert privilege on that basis, they do not sit well or consistently with the original descriptions given. Nor do they sit well or consistently with other evidence on the application. I accept Mr Shearer's submissions (he appeared with Ms O'Halloran of Counsel for the defendants) in that regard. Even in the most recent affidavits, the evidence is of such a broad-brush nature as, in context, to be singularly unpersuasive.
10. In my view, privilege has not been established, although the possibility that there may be skerricks of privileged material within the documents cannot be entirely discarded.

Waiver

1. This issue calls up s 122 of the Evidence Act. I set it out: 122 Loss of client legal privilege: consent and related matters (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 the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120. (3) Without limiting subsection (2), a client or party is taken to have so acted if: (a) the client or party knowingly and voluntarily disclosed the substance of the evidence to another person, or (b) the substance of the evidence has been disclosed with the express or implied consent of the client or party. (4) The reference in subsection (3) (a) to a knowing and voluntary disclosure does not include a reference to a disclosure by a person who was, at the time of the disclosure, an employee or agent of the client or party, or of a lawyer of the client or party, unless the employee or agent was authorised by the client, party or lawyer to make the disclosure. (5) A client or party is not taken to have acted in a manner inconsistent with the client or party objecting to the adducing of the evidence merely because: (a) the substance of the evidence has been disclosed: (i) in the course of making a confidential communication or preparing a confidential document, or (ii) as a result of duress or deception, or (iii) under compulsion of law, or (iv) if the client or party is a body established by, or a person holding an office under, an Australian law - to the Minister, or the Minister of the Commonwealth, the State or Territory, administering the law, or part of the law, under which the body is established or the office is held, or (b) of a disclosure by a client to another person if the disclosure concerns a matter in relation to which the same lawyer is providing, or is to provide, professional legal services to both the client and the other person, or (c) of a disclosure to a person with whom the client or party had, at the time of the disclosure, a common interest relating to the proceeding or an anticipated or pending proceeding in an Australian court or a foreign court. (6) This Division does not prevent the adducing of evidence of a document that a witness has used to try to revive the witness's memory about a fact or opinion or has used as mentioned in section 32 (Attempts to revive memory in court) or 33 (Evidence given by police officers).
2. Section 122 effectively codifies the pre-existing common law test of waiver. The issue is not fairness. It is inconsistency. However, in an appropriate case, the analysis of inconsistency may be informed by considerations of fairness. The Full Court of the Federal Court of Australia made this clear in Macquarie Bank Limited v Arup Pty Limited [2016] FCAFC 117 at [29]: In determining whether there has been an implied waiver of privilege, the Court's focus will be on whether there has been conduct that is inconsistent with the maintenance of confidentiality in the communication over which privilege is asserted. An assessment of whether there has been an implied waiver will be informed by considerations of forensic unfairness.
3. Many cases on s 122 focus on subs (3). The Full Court's analysis in Macquarie Bank at [26] to [28] refers to some of those cases. However, subs (3) provides for particular applications, but does not confine the scope, of subs (2). And as Allsop J pointed out in DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499 at [58], there may be implied waiver arising when the party claiming privilege acts in such a way that it necessarily lays open to scrutiny the confidential communication so that, as a result, an inconsistency arises between the Act and the maintenance of the confidence "informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication".
4. Here, as I have said, the plaintiffs deployed Mr Crosbie's affidavits to show that they had done all that they reasonably could do, and had done so with reasonable expedition and diligence. They did so knowing that those issues might be revisited in a contested application under r 12.11. In those circumstances, it seems to me, the plaintiffs cannot maintain the two following propositions with any consistency: 1. the evidence of Mr Crosbie in the r 1.12 applications shows that the plaintiffs acted in the manner I have described; but 2. the defendants should not have access to the underlying material to test that proposition.
5. In my view, that inconsistency is made even clearer by the summary way in which the documents are described. In a contested application, it may very well be that the relevant material would have been objected to and rejected, thereby putting the plaintiffs to the choice of either revealing the material or, in all likelihood, not succeeding in obtaining an extension of time. That however is at best a subsidiary consideration.
6. In my view, considerations of fairness in the conduct of litigation make it plain that the two propositions to which I have referred cannot stand consistently together.
7. That conclusion is fortified by reference to the ex parte character of the applications and the duties of frankness and candour thereby attracted. The plaintiffs cannot say that their applications should be so described and, consistently, that the defendants should not be able to test that proposition by reference to the underlying material that the plaintiffs deployed.
8. It follows, in my view, that any privilege existing in the documents has been waived, with the exception of what might be called incidental privilege attaching to particular parts of them referring to legal advice et cetera.

Conclusions on the r 21.10 notices to produce

1. The defendants have made good their case for access to documents in categories 2, 3, 5, 7, 8 and 9. If it should be the case that any of those documents reveals legal advice or views in relation to prospects, strategy or tactics (as I have said, a matter on which the evidence is unsatisfactory) the relevant parts may be redacted.
2. The remaining documents referred to in those notices to produce are a retainer letter to an expert and legal advice (of counsel). In each case, the claim is made under s 119. In each case, in my view, confidentiality may be inferred. And in each case, I think, the necessary link exists with the provision of professional legal services.
3. In my view, the way in which those two remaining documents were deployed does not waive privilege.

The r 34.1 notices to produce

1. The documents referred to in categories 2 (to the extent that the claim for privilege is pressed), 3, 5, 7, 11, 15 and 16 are all said to be privileged under s 119. Again, those documents relate to dealings with prospective litigation funders. In my view, essentially for the reasons I have given: 1. the claim for privilege is not made out; and 2. in any event, to the extent that the documents may be privileged (with the limited or incidental exceptions to which I have referred), that privilege has been waived.
2. Again, the documents may be redacted if and to the extent that they reveal legal advice on prospects, strategy or tactics.
3. The document in category 15 is a costs estimate. Mr Crosbie has sworn that it deals with the "strategy in connection with" those proceedings. In my view, the claim for privilege is made good.

Other issues

1. There were many other issues debated. For reasons that will be clear, I do not propose to deal with them.
2. My present view is that the defendants, having had almost total success, should have their costs. I will however hear the parties on that if necessary.
3. The evidence on the applications is to be returned.
4. I will leave it to the parties to arrange the production of documents to the extent that I have held the defendants have made good their claims for production.

[Counsel addressed on costs.]

1. The plaintiffs suggest that the costs of the applications should be the costs in the r 12.11 application. The defendants say that there was a discrete event, and its costs should follow their success on that event.
2. The plaintiffs did not suggest that the documents should not be produced because they were not relevant. Nor could that submission be sustained, having regard to the way in which they were deployed. In those circumstances, it seems to me, there is no justification for linking the outcome of the costs application to the outcome of the r 12.11 applications. On the contrary, I think, costs should indeed follow the event.

Orders

1. I make the following orders: 1. direct the plaintiffs to produce to the defendants, within a time to be agreed between them, the documents in respect of which I have held any privilege existing has been waived. 2. Note that the plaintiffs may redact incidental parts of those documents in the manner that I have described. 3. Order the plaintiffs to pay the defendants' costs of the applications for access. 4. Direct that the exhibits on the applications be handed out. 5. Reserve liberty to apply in respect of production.

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: 16 September 2016