Nipps (Administrator) v Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd

Federal Court of Australia|2021-06-23|Before: Banks-Smith J, McKerracher J

The defendant's interlocutory application dated 21 May 2021 be dismissed.
The question of costs, if any, be reserved to the docket judge. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MCKERRACHER J: 1 On 1 May 2021, the first plaintiffs, Messrs Nipps and Wight, were appointed Administrators of the second plaintiff (Adaman Resources) by resolution of its directors. The circumstances of this resolution, and the actions of the directors leading up to it have given rise to a series of applications and legal challenges, including the present dispute over a claim of legal professional privilege. 2 The proceedings are docketed to Banks-Smith J, as are separate proceedings brought by Remagen Lend ADA Pty Ltd and its sole director and shareholder Mr Simon Raftery. A claim of legal professional privilege has been made by three directors of Adaman Resources and its company secretary (together, the Interested Parties) over certain documents. Remagen disputes that claim. On 3 June 2021, her Honour heard Remagen and the Interested Parties on the claim of privilege over nine documents. In a comprehensive and detailed judgment, her Honour held that one of the documents (Document 9) was privileged and exempt from production, and ordered further that Documents 1 to 8 should be inspected by a different judge in order to determine the claim (for reasons that will become apparent). 3 These reasons should therefore be read together with her Honour's decision in Nipps (Administrator) v Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd (Administrators Appointed) (No 3) [2021] FCA 628, which sets out the detailed background to the issues in dispute. However, for the purposes of my ruling, having examined the disputed documents, the relevant facts are also summarised below and another of her Honour's previous decisions in the proceedings is also referred to. For the reasons that follow, I consider the privilege claimed over all eight documents should stand such that they are immune from production and inspection of them is precluded.

BACKGROUND 4 Adaman Resources is a privately owned resource investment company and the parent of the Adaman Group. Through its Subsidiaries (the fourth to eighth plaintiffs), and Adaman Minerals (the third plaintiff), Adaman Resources operates a number of gold mining projects in Western Australia. On the same day as Adaman Resources (and Adaman Minerals) were placed into administration, the Subsidiaries were also purportedly placed into administration. The Administrators' appointment to the Subsidiaries alone was confirmed by the docket judge on 14 May 2021 in Nipps (Administrator) v Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd (Administrators Appointed) [2021] FCA 520 (Adaman (No 1)). 5 The Administrators' application for confirmation of their appointment to the entire Adaman Group (the subject of Adaman (No 1)) was brought on an urgent basis. Shortly before an urgent hearing of the application on 6 May 2021, one of Adaman Resource's shareholders, Remagen, sought to join itself to the proceedings and oppose the application. Her Honour allowed Remagen's joinder at the hearing. As her Honour indicated (at [10]) in Adaman (No 1), Remagen and its sole director, Mr Raftery, sought to agitate the following: (1) whether the removal of Mr Raftery as a director of Adaman Resources on 30 April 2021 and a dilution of his shareholding was invalid; (2) whether the incumbent directors of Adaman Resources were entitled to rely upon an emergency power in the constitution to resolve to appoint the Administrators; (3) whether the board of Adaman Resources was entitled to resolve to appoint administrators to Adaman Resources in the absence of a resolution of its shareholders, having regard to the terms of a shareholders' agreement dated 18 November 2019 between itself and its shareholders on incorporation; (4) whether the board of Adaman Resources acted bona fide in exercising their powers to pass the resolution in that they relied upon a demand made by a related company, SMS Innovative Mining Pty Ltd as the catalyst for the appointment in circumstances where (Remagen contends) the debt to SMS was not owed; (5) whether Adaman Resources and Adaman Minerals were insolvent; and (6) whether the independence of the Administrators was compromised in some manner. 6 Remagen sought discovery of documents in relation to these issues. It was noted in Adaman (No 1) per Banks-Smith J (at [13]) that: [Her Honour] received correspondence over the following days that indicated that the informal document production was not completed as anticipated and that, further, the incumbent directors of Adaman Resources sought to limit inspection of some of the documents by Remagen on the basis of legal professional privilege. The directors sought and obtained separate legal representation in that regard. 7 Her Honour heard and delivered Adaman (No 1) on 14 May 2021. In the interim, on 11 May 2021, Remagen and Mr Raftery commenced separate proceedings against Adaman Resources, its Administrators, its remaining directors and its other shareholders seeking, amongst an array of other relief: (a) a declaration that the Administrators were invalidly appointed to Adaman Resources (or an order that the administration should end); and (b) a declaration that the purported removal of Mr Raftery as a director of Adaman Resources was invalid for various reasons. 8 Remagen did not however contest the appointment of the Administrators to the Subsidiaries and so her Honour proceeded in Adaman (No 1) to approve their appointment in that regard. 9 The appointment of the Administrators to Adaman Resources remains a live issue in this proceeding and in Remagen's further proceeding (WAD 106 of 2021). 10 Both matters have been referred to mediation to occur on the first practicable date after 19 July 2021.

THE PRIVILEGE CLAIM 11 Legal professional privilege is claimed by three of Adaman Resources' directors, Messrs Rowsthorn, Sweeney and Anderson as well as the company secretary and chief financial officer, Mr Fitzgerald (the Interested Parties) over a series of email communications and attachments primarily sent between them and a lawyer, Mr Madders, as well as three other individuals as follows: (a) Mr Bradshaw, chief executive officer of Adaman Resources. Mr Bradshaw is not a director; (b) Mr Wight, one of the Administrators. Though at the time of the communications Mr Wight had not yet been appointed as an Administrator; and (c) Mr Bowden, Partner, Gilbert + Tobin. In his affidavit sworn in support of the privilege claim, Mr Madders describes Mr Bowden as Mr Wight's lawyer. However, the Declaration of Independence, Relevant Relationships and Indemnities suggests that Gilbert + Tobin was advising Adaman Resources at that time: Adaman (No 3) (at [47]-[49]). 12 Mr Madders is employed as an in-house lawyer by a company (Blondie Trading Pty Ltd) within the Rivet Group, of which Mr Rowsthorn is said to be the chief executive officer, majority shareholder and chairman. Another company within the Rivet Group (Rivet Finco Pty Ltd), is a secured creditor of one of the Subsidiaries: Adaman (No 3) (at [9]) and Adaman (No 1) (at [31(o)] and [32]). 13 Banks-Smith J delivered judgment on the privilege claim in Adaman (No 3) on 10 June 2021. There, her Honour ordered that Documents 1 to 8 be produced to enable inspection by a different judge, and that document 9 was the subject of advice privilege and immune from production. 14 Much of the debate before her Honour concerned the capacity in which the Interested Parties were receiving legal advice from Mr Madders, whether personally or on behalf of Adaman Resources, noting that there was no suggestion that he acted for all of the company's directors (Mr Raftery had not at the time of engagement of Mr Madders, been purportedly removed from his position as a director). 15 Her Honour relevantly found as follows: (a) a lawyer-client relationship existed between Mr Madders and the Interested Parties (at [37]) and there was sufficient independence between the parties to attract legal professional privilege (at [59]); and (b) Mr Madders provided legal advice to the Interested Parties personally, and not to Adaman Resources (at [37]). 16 Her Honour expressed concerns however about the inclusion in the emails of individuals other than the Interested Parties, where such inclusion was not adequately explained: (a) Documents 1, 2, 3 and 4 were provided to Mr Bradshaw and the reason for this provision was not adequately addressed. Her Honour considered that 'assessment of the merits of the claim for privilege would be aided by requiring the Interested Parties to produce the relevant documents for inspection by a judge of this Court to adjudicate the privilege claim. The documents might bear something on their face that assists in determining that question' (at [62]-[63]); and (b) Documents 5, 6 and 7 were provided to Mr Wight and Document 8 was provided to both Mr Wight and Mr Bowden of Gilbert + Tobin. Her Honour considered (at [64]) that 'a review of the documents may assist in understanding the context in which it is claimed the advice contained in the communications was confidential and provided without any waiver of privilege.'

EXAMINATION 17 I have had the opportunity to examine the eight documents, including their attachments. 18 I have taken into account the content of the parties' affidavits going to the privilege claim and their submissions. The only observation I would add to those set out in Adaman (No 3) is that the affidavit of Mr Dundas, lawyer, filed on behalf of Remagen annexes screenshots of the Rivet Group's website which reveals that Mr Sweeney also holds the position of executive director of the Rivet Group and Mr Anderson is also the chief financial officer of the Rivet Group. I address this further below. 19 The approach I have taken to determining the questions of privilege and possible waiver of privilege in relation to the eight documents is very much guided by the principles set out in Adaman (No 3). I respectfully agree with the principles set out by Banks-Smith J. I particularly reiterate and set out now from Adaman (No 3) the following passages which I have taken into account in examining the question of privilege in relation to the documents (at [30]-[35]): 30 Legal professional privilege extends to any document prepared by a lawyer or client from which there might be inferred the nature of the confidential advice sought or given: Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 at 569 (Gummow J). 31 Confidential communications between a client and third party made for the purpose of the lawyer providing advice to the client may remain privileged notwithstanding that the advice is also communicated to a third party who is not an agent of the client: Pratt Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 122; (2004) 136 FCR 357 at [41]-[42] (Finn J). The question is what was the intended use (or uses) for which the communications were brought into existence. If a communication is made for the dominant purpose of a client seeking and obtaining legal advice from its lawyer, the dominant purpose test will be satisfied: Archer Capital 4A Pty Ltd as trustee for the Archer Capital Trust 4A v Sage Group plc (No 2) [2013] FCA 1098 at [22] (Wigney J); Pratt Holdings at [35]; and State of New South Wales v Betfair Pty Ltd [2009] FCAFC 160; (2009) 180 FCR 543 at [29], [40] (Kenny, Stone and Middleton JJ). 32 It follows that if a communication is not solely as between lawyer and client but as between multiple persons, for example where a document is communicated by its author to several other persons, including the author's legal adviser by (for example) a circular email, it is also important to ask what was the dominant purpose of that email communication: AWB (No 1) at [107], [114]. 33 Further, the inclusion of a third party in a communications between a client and a lawyer will not waive privilege unless the inclusion of a third party in the communication means that the communication is no longer confidential. That question will be answered by determining whether the person who made the communication, or the person to whom the communication was made, was under an express or implied obligation not to disclose its contents: Slea Pty Ltd v Connective Services Pty Ltd [2017] VSC 361 at [23] (Almond J). 34 Legal professional privilege may be waived expressly or impliedly if anything is done that is inconsistent with the maintenance of the confidentiality of the communication where the Court, informed by considerations of fairness, considers that the conduct is inconsistent with the maintenance of the privilege: Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 at [28]-[29] (Gleeson CJ, Gaudron, Gummow and Callinan JJ). 35 The onus of establishing waiver lies upon the party seeking to displace the existence of the legal professional privilege: Betfair at [29], [40]. I also refer to and repeat what I said in Carna Group Pty Ltd v The Griffin Coal Mining Company (No 2) [2019] FCA 2209 (at [9]-[16]) which concerned a privilege claim under the Evidence Act 1995 (Cth). 20 In applying those principles to the eight documents which may be treated cumulatively, there is no doubt that the confidential advice was being given to the Interested Parties in their personal capacity, even though aspects of the communications concerned the activities of Adaman Resources. I consider this finding is strengthened by the fact that each of Messrs Rowsthorn, Sweeney and Anderson along with Mr Madders held positions in the Rivet Group. Directors can, of course, seek their own personal advice in their capacity as directors as to their position vis a vis duties to the company. All the documents fall into this category. All of the documents were very clearly intended to be kept confidential. 21 For completeness, I agree with the conclusion in Adaman (No 3) (at [40]) that the distinction between Mr Fitzgerald's position and those of the other Interested Parties within Adaman Resources does not indicate that the advice was given to the company as opposed to those four individuals personally. I note as well that Mr Madders deposed to the fact that his terms of employment with the Rivet Group do not limit his ability to advise external individuals (or entities). 22 There is also no evidence to call into question the independence of the advice given. The advice is not directed to or concerned with the creditor-debtor relationship that exists between a company in the Rivet Group and one of the Subsidiaries. Mr Madders further deposes to the fact that he was introduced to Messrs Sweeney, Anderson and Fitzgerald by Mr Rowsthorn shortly after the commencement of his employment in March 2021. Mr Madders was not cross-examined on his affidavit. 23 There is nothing in the communication to any of Messrs Bradshaw, Wight or Bowden which, on the face of the documents or in any other proven way, suggests that confidentiality or legal professional privilege was waived or intended to be waived. As revealed from the face of the documents and the enclosures, they were intended to retain their confidentiality in the transmission to those third persons. That was a point that was emphasised. In each instance, the dominant purpose was the provision of confidential legal advice to the Interested Parties on the topics already set out in Adaman (No 3) (at [38]-[39]). I infer from the content of the documents and attachments that further communication of the content to the restricted category of third parties was not only confidential but also confined to the purpose of enabling those three persons to be familiar with the advice given to the Interested Parties in their capacity as directors of Adaman Resources. Nothing in this purpose suggests a waiver of privilege. There is no unfairness in the privilege being preserved. 24 It follows that the Interested Parties are entitled to claim legal professional privilege in respect of Documents 1 to 8 and that privilege has not been waived.

CONCLUSION 25 Remagen's interlocutory application of 21 May 2021 will be dismissed. The question of costs, if any, will be reserved to the docket judge. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McKerracher.

SCHEDULE OF PARTIES WAD 95 of 2021 Plaintiffs Fourth Plaintiff: ADAMAN GOLD HOLD CO PTY LTD (ADMINISTRATORS APPOINTED) ACN 628 443 470 Fifth Plaintiff: ADAMAN GOLD PTY LTD (ADMINISTRATORS APPOINTED) ACN 626 160 316 Sixth Plaintiff: GOLDLAKE HOLDINGS PTY LTD (ADMINISTRATORS APPOINTED) ACN 620 531 133 Seventh Plaintiff: HOPSTORM PTY LTD (ADMINISTRATORS APPOINTED) ACN 620 534 957 Eighth Plaintiff: KIRKALOCKA GOLD SPV PTY LTD (ADMINISTRATORS APPOINTED) ACN 626 160 816

Interested parties DANIEL JOHN SWEENEY MARK ROWSTHORN NICHOLAS MALCOLM ANDERSON JOHN FITZGERALD

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