ML Ubase Holdings Co Ltd v Trigem Computer Inc

ML Ubase Holdings Co Ltd v Trigem Computer Inc - [2007] NSWSC 859 - NSWSC 2006 case summary — Zoe

[15]

Section 126 does not specify whose understanding is to be considered, when determining whether or not a source document is reasonably necessary 'to enable a proper understanding' of a document in respect of which client legal privilege has been lost by reason of a voluntary disclosure. In my view, the legislation contemplates the application of an objective standard, rather than an assessment of the likely understanding of a particular individual, such as an expert witness who is to be called in the proceedings, or a party to the litigation. That an objective standard is to be contemplated is indicated by the phrase 'reasonably necessary' and by the fact that the alert part of the s 126 is drafted in the passive tense. A court considering whether client legal privilege has been lost under s 126 must determine for itself whether the statutory standard has been satisfied in the particular circumstances of the case. In doing so, the court will take into account the forensic purpose for which it is proposed to use the document voluntarily disclosed. 39 His Honour proceeded to say that s 126 could not be read as simply incorporating the test in Attorney-General (NT) v Maurice (1986) 161 CLR 475, (at 413): I do not think that s 126 can be read as simply incorporating, unchanged, the common law test of implied waiver. It is clear that Pt 3.10 Div 1 of the Evidence Act departs from the common law in important respects. The changes include the formulation of a new test of determining whether client legal privilege exists ... Indeed, s 122, which deals with loss of the privilege in the case of disclosure, departs from the common law test for determining whether a party has impliedly waived privilege ... therefore, it cannot be safely assumed that s 126 is intended to embody the common law test of waiver of compliant legal privilege. The fact is that the criterion specified in s 126 for determining whether client legal privilege is lost is not the same as that laid down by the High Court in Attorney General (NT) v Maurice in determining whether legal professional privilege has been impliedly waived. The task of the courts is to apply the statutory language used by Parliament and not to substitute an equivalent test here because it reflects the pre existing law ...

[17]

40 His Honour added that the expression "proper understanding" was by no means a narrow one, and includes a "complete or thorough" understanding, concluding: However, I think it fair to say that, if a privileged document is voluntarily disclosed for forensic purposes, and a thorough apprehension or appreciation of the character, significance or implications of that document requires disclosure of source documents, otherwise protected by client legal privilege, ordinarily the test laid down by s 126 of the Evidence Act will be satisfied. 41 His Honour then rejected the proposition that inspection of a source document must necessarily be reasonably necessary for a proper understanding of a report, noting that if it had been referred to for a very limited purpose, and that no further reference could assist in a proper understanding of the report, it would not satisfy the test. 42 In Tirango Nominees, the issue arose during the cross-examination of an expert accountant who had produced reports on the economic loss suffered by the applicants, based on letters of instructions from the applicants' solicitor. The witness did not identify in his report anything in the letters of instructions as influencing the opinions he offered. Cross-examining counsel called for the letters of instructions. The claim for privilege was upheld, Mansfield J holding that the calling of an expert witness did not of itself amount to the disclosure of the substance of the instructions given to that witness, although it sometimes may. His Honour rejected the proposition that even at common law, as a general rule, presentation of an expert to give evidence waived privilege in the letter of instructions (at 366): Counsel for the respondents submitted as a general proposition that, at common law, the document containing the instructions to the expert upon which the expert's report is given is available once the expert is presented to give evidence, because privilege in the letter of instructions necessarily is thereby waived. I do not accept that contention. In the limited time available, no authority directly on point has been referred to. 43 At 367, his Honour said: However, I do not consider that the High Court determined that invariably once such a document does become evidence all the documents giving rise to its creation are or should be available for inspection. Whether they should or should not be so produced will depend upon whether they do provide any foundation for the opinions expressed by the expert or whether the picture may be misleading or partial only if they are not produced. I agree with the reasons of Foster J in Dingwall v the Commonwealth (1992) 39 FCR 521 on that topic. … 44 Then his Honour referred to what Sackville J had said in Towney, and, like Sperling J in Roach v Page, recognised that the implications were not limited to expert witnesses (at 367): Section 126 does, however, have an incidental significance to this matter. Counsel for the applicant expressed in argument the concern that if the two documents called for are no longer the subject of the client legal privilege in the circumstances, there will be great difficulty in knowing 'where the line is to be drawn'. The spectre of waiver with respect to drafts, notes of discussions and other incidental materials was raised, and not simply with respect to expert witnesses but to any witness. Part of the answer to that concern may lie in the proper application of s 126 in the circumstances of any particular case. 45 In my view, what Enderby J said in Crawford v Bailey is no longer the law, if it ever was. What his Honour said is inconsistent with Dingwall and with Tirango. Moreover, it is not the test enunciated by Evidence Act, s 126. In my opinion, service and tender of an expert witness' report in proceedings does not constitute a waiver of the privilege which attaches to communications between the expert and the solicitors who instructed him or her, save to the extent that those communications are associated documents reasonably necessary to an understanding of the report. "Proper understanding" of a document or communication will sometimes, but not always require that documents to which it responds or refers be available. It may very likely be so when the primary document contains a summary or excerpt from an earlier communication, or responds to questions which are not themselves restated in it. But I do not accept that "a proper understanding of the communication or document" involves an appreciation of the manner in which the opinions contained in the document have been formed over time, or the iterations and evolutions through which they have passed. The test is concerned with the comprehensibility of the primary communication or document: if it can be completely or thoroughly understood without more, then access to the related communications or documents is not reasonably necessary.

[19]

47 Mr Jhe's final report does not refer to the associated material. In my view there is nothing in his report which cannot be understood without reference to the associated material. Counsel was unable to identify any specific part of Mr Jhe's report that the associated documents were reasonably necessary to understand, answering that they were necessary to an understanding of the whole of the report, to understand how the witness had come to the conclusions that he expressed. When asked "what is there in his report that is not capable of understanding?", the answer was, "The reasoning and basis behind a variety of the opinions ... it is not set out in the document and it is not obvious and there are no instructions". I suggested in argument that it would follow from Mr Scruby's argument that every time a witness was interviewed by counsel before being called to give evidence, the other party would be entitled to know everything that went on in that conference, whether the witness was expert or lay. Although Mr Scruby suggested that this was only so in the case of an expert witness, because expert opinions were based on processes of reasoning, it seems to me that there would not be the slightest distinction in the case of a lay witness whose evidence might have been influenced by discussion in conference which explored the witness' degree of certainty about a proposition, or might have prompted a recollection. As has been recognised by Sperling J in Roach v Page (No 17) and by Mansfield J in Tirango, privilege in the conference is not waived in that situation. 48 In the present case, Mr Jhe's report could be understood without access to any documents mentioned or referred to in it (other than the legislative material and record of proceedings in Korean courts which were exhibited to it). In particular, it was unnecessary for the purpose of understanding his report to know what instructions he had been given. I therefore upheld the claim for privilege, and upheld Trigem Australia's objection to producing the documents specified in Mr Woods' affidavit on the ground that those documents were privileged documents. 49 The legal effect of the Korean corporate reorganisation. The purpose of reorganisation proceedings under the (ROK) Corporate Reorganisation Act is to rehabilitate a business entity that is in difficulty where there is some prospect of rehabilitation. Once the Court decides to commence reorganisation proceedings (upon request from the corporation or a creditor or shareholder, it being a receiver who has power over the corporations, assets and business) and draws up a reorganisation plan containing provisions for the reduction and exemption as well as redemption of debts by instalments. If the plan is accepted by a meeting of interested persons and is confirmed by the Court, then the rights of creditors and shareholders are altered in accordance with organisation plan, and if the plan is successfully implemented, the reorganisation then comes to a close.

[61]

75 Thirdly, and decisively, Ubase is participating in the corporate reorganisation and seeking to prove its debt in the reorganisation. While it is true that a scheme of arrangement binds creditors only within the scheme jurisdiction [New Zealand Loan & Mercantile Agency Co v Morrison [1898] AC 349, 357.9; Fiske v Sterling Investment Co Pty Ltd (1977) 3 ACLR 158, 160], and that Article 4 of the Corporate Reorganisation Act provides that reorganisation proceedings in Korea shall be effective only with respect to the property of the company in Korea, and that reorganisation proceedings commenced in a foreign country shall not have any effect on property in the territory of the Republic of Korea - so that an Australian Deed of Company Arrangement would not affect property of a company in Korea - Ubase has sought to prove its claim as a creditor in the Korean corporate reorganisation, and has thus subjected itself to the scheme. As Trigem Australia submits, Ubase is seeking to take advantage of the benefits of the Korean corporate reorganisation by proving as a creditor in it, yet at the same time outflanking it by endeavouring to attach assets of Trigem Inc in Australia. In my view, Ubase ought not both have the benefit of the reconstruction by proving in it and at the same time be permitted to enforce its rights outside it. In this context, considerations analogous to those which apply on an application for a stay on grounds of forum non conveniens are pertinent. 76 It is far more just and convenient that the claims of all creditors be resolved according to the law of the place of incorporation, where there can if necessary be a general pro-rata distribution, than in New South Wales, which can deal only with the claim of one creditor against one asset, and that to the prejudice of the other creditors. Although it was submitted for Ubase that it could not be said that the creditors of Trigem Inc participating in the reorganisation would be prejudiced if the order for payment were made, the contrary is plain: if the order were made, a very large asset, which would otherwise be available for the general body of creditors, would be removed to satisfy Ubase's claim alone. Moreover, the garnishee is not an arm's length debtor to the judgment debtor, but its wholly owned subsidiary, and regardless of whether or not it is a debtor of Trigem Inc, its assets and liabilities may be of relevance to the reorganisation, since they will influence the value of Trigem Inc's assets, which include its shareholding as the holding company of Trigem Australia. The dispute has only a tangential connection with New South Wales, which is no more than the situs of an asset of the judgment debtor. In my view, the Korean jurisdiction has a much closer connection with and relationship to the issues, and is a manifestly more convenient and appropriate one for their resolution than New South Wales.

Parties

Applicant/Plaintiff:

ML Ubase Holdings Co Ltd

Respondent/Defendant:

Trigem Computer Inc

Cases Cited (19)

CITATION : ML Ubase Holdings Co Ltd v Trigem Computer Inc [2007] NSWSC 859

Attorney-General (NT) v Maurice (1986) 161 CLR 475 Australian Securities and Investments Commission v Southcorp Ltd (2003) 46 ACSR 438 Cleaver v Delta American Reinsurance Co (in liq) [2001] 2 AC 328, 240 Clyne v DCT (NSW) (1981) 150 CLR 1 Crawford v Bailey (unreported, NSWSC, Enderby J, 26 October 1990, BC9001818) D Wilson (Birmingham) Limited v Metropolitan Property Developers Ltd [1975] 2 All ER 814 De Pass v Capital Industries Corporation Ltd [1891] 1 QB 216 Dean v Dwyer (1924) 41 WN(NSW) 67 Dingwall v the Commonwealth (1992) 39 FCR 521 Fiske v Sterling Investment Co Pty Ltd (1977) 3 ACLR 158 Galbraith v Grimshaw [1910] AC 508 Hudson's Concrete Products Ltd v D B Evans (Bilston) Ltd (1961) 105 Sol Jo 281 Independent Insurance Company Ltd [2005] NSWSC 587 CASES CITED : New Cap Reinsurance Corp Ltd v Faraday Underwriting Ltd (2003) 47 ACSR 306; (2003) NSWSC 842 New Zealand Loan & Mercantile Agency Co v Morrison [1898] AC 349 Pritchard v Westminster Bank Ltd [1969] 1 All ER 999 QBE Workers Compensation (NSW) Ltd v Wandiyali ATSI Inc (in liq) (2004) 62 NSWLR 117 Rainbow v Moorgate Properties Ltd [1975] 2 All ER 821 Re Doyle (dec'd); Ex parte Brien v Doyle (1993) 41 FCR 40; 112 ALR 653, 663 Re HIH Casualty and General Insurance Ltd (2005) 215 ALR 562 Re Standard Insurance Co Ltd [1968] Qd R 118 Roach v Page (No 17) [2003] NSWSC 973 Roberts Petroleum Limited v Bernard Kenny Ltd [1983] 2 AC 192 Tirango Nominees Pty Ltd v Dairy Vale Foods Ltd (1998) 156 ALR 364 Towney v Minister for Land and Water Conservation for New South Wales (1997) 147 ALR 402 Trade Practices Commission v Sterling (1979) 36 FLR 244 Union Bank v Tuttle (1889) 15 VLR 258 Willis v Municipality of Five Dock (1895) 11 WN(NSW) 112

(1) Ordinarily the confidential briefing or instructing by a prospective litigant's lawyers of an expert to provide a report of his or her opinion to be used in the anticipated litigation attracts client legal privilege: cf Wheeler v Le Marchant (1881) 17 Ch D 675; Trade Practices Commission v Sterling (1979) 36 FLR 244 at 246; Interchase Corp Ltd (in liq) v Grosvenor Hill (Qld) Pty Ltd (No 1) [1999] 1 Qd R 141 ( Interchase ) at 151 per Pincus JA, at 160 per Thomas J. (2) Copies of documents, whether the originals are privileged or not, where the copies were made for the purpose of forming part of confidential communications between the client's lawyers and the expert witness, ordinarily attract the privilege: Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 ; 141 ALR 545 ; 91 A Crim R 451 (Propend); Interchase , per Pincus JA; Spassked Pty Ltd v Cmr of Taxation (No 4) (2002) 50 ATR 70 at [17]. (3) Documents generated unilaterally by the expert witness, such as working notes, field notes, and the witness's own drafts of his or her report, do not attract privilege because they are not in the nature of, and would not expose, communications: cf Interchase at 161-2 per Thomas J. (4) Ordinarily disclosure of the expert's report for the purpose of reliance on it in the litigation will result in an implied waiver of the privilege in respect of the brief or instructions or documents referred to in (1) and (2) above, at least if the appropriate inference to be drawn is that they were used in a way that could be said to influence the content of the report, because, in these circumstances, it would be unfair for the client to rely on the report without disclosure of the brief, instructions or documents; cf Attorney-General (NT) v Maurice (1986) 161 CLR 475 at 481 ; 69 ALR 31 at 34 per Gibbs CJ, CLR 487-8; ALR 38-9 per Mason and Brennan JJ, CLR 492-3; ALR 42-3 per Deane J, CLR 497-8; ALR 46-7 per Dawson J; Goldberg v Ng (1995) 185 CLR 83 at 98 ; 132 ALR 57 at 66 per Deane, Dawson and Gaudron JJ, CLR 109; ALR 75 per Toohey J; Instant Colour Pty Ltd v Canon Australia Pty Ltd [1995] FCA 870; BC9506842 Australian Competition and Consumer Commission v Lux Pty Ltd [2003] FCA 89; BC200300344 (ACCC v Lux) at [46]. (5) Similarly, privilege cannot be maintained in respect of documents used by an expert to form an opinion or write a report, regardless of how the expert came by the documents; Interchase at 148-50 per Pincus JA, at 161 per Thomas J. (6) It may be difficult to establish at an early stage whether documents which were before an expert witness influenced the content of his or her report, in the absence of any reference to them in the report: cf Dingwall v Commonwealth of Australia (1992) 39 FCR 521; Tirango Nominees Pty Ltd v Dairy Vale Foods Ltd (No 2) (1998) 83 FCR 397 at 400 ; 156 ALR 364 at 366; ACCC v Lux at [46]. 26 In this type of situation, there are typically two questions: The first is whether the documents in question are entitled to litigation privilege under Evidence Act, s 119, and the second is whether that privilege has been waived by service of the report.

(1986) 161 CLR 475

(1981) 150 CLR 1

(1992) 39 FCR 521

(2004) 62 NSWLR 117

(1993) 41 FCR 40

(2005) 215 ALR 562

(1998) 156 ALR 364

(1997) 147 ALR 402

(1979) 36 FLR 244

(1997) 188 CLR 501

(1995) 185 CLR 83

(1998) 83 FCR 397