Plaintiffs v Defendants

Supreme Court of Victoria|2011-07-26|Before: KYROU J

EVIDENCE - Client legal privilege - Loss of privilege by the commission of a fraud, an offence or an act that renders a person liable to a civil penalty - Meaning of 'fraud' - Whether the client must be knowingly involved in the fraud, offence or act - Meaning of 'in furtherance of the commission of a fraud ... offence ... or act' - Whether the fraud, offence or act must be consummated - Whether the commission of the fraud, offence or act must be a fact in issue - Evidence Act 2008, ss 125, 131A.

PRACTICE AND PROCEDURE - Jurisdiction of a Judge to hear an appeal from an order of an Associate Judge on a question referred to the Associate Judge by another Judge during the trial of a proceeding - Supreme Court (General Civil Procedure) Rules 2005 (Vic), rr 77.02(1), 77.07(1).

No appearance for the First, Fifth, Sixth or Seventh Defendants

**1 This is an appeal by the plaintiffs from an order made by Randall AsJ on 21 June 2011 ('order of Randall AsJ'), which upheld claims for client legal privilege by the second, third and fourth defendants ('Holihan Defendants') in respect of a number of documents that were produced to the Court on subpoena by their former solicitor, David Roe.

2 The subpoena was filed on 28 April 2011, 18 days before the commencement of the trial of this proceeding and a related proceeding between James Hodgson as plaintiff and Amcor Ltd as defendant ('Hodgson proceeding') before Vickery J. The subpoena required Mr Roe to produce the disputed documents to the Prothonotary on 16 May 2011, the first day of the trial. On 25 May 2011, the ninth day of the trial, Vickery J referred to Randall AsJ for determination '[a]ny application in respect of [privilege] claimed as to the [documents produced by Mr Roe]'.

3 The evidence at the trial concluded on 29 June 2011 and final submissions were due to commence on 25 July 2011. James Elliott SC, who appeared with Lucy Kirwan for the plaintiffs, informed me that, if the plaintiffs are successful in the appeal, they propose to make an application to Vickery J for leave to re-open their case to enable them to lead further evidence based on the contents of the disputed documents.

4 The central issue in the appeal is whether the documents that are the subject of the order of Randall AsJ are not privileged by virtue of s 125(1)(a) of the Evidence Act 2008 ('Act'). That provision precludes documents from being privileged if they were prepared 'in furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty'.[1]

5 The plaintiffs have confined the appeal to the following documents:**

(a) documents in Mr Roe's file headed, 'Holihan, Craig Anthony, re Quadpak Pty Ltd' ('Disputed Quadpak Documents');

(b) documents in Mr Roe's file headed, 'Holihan, Craig Anthony, re Australian Corrugated Box Co Pty Limited - Restructure of Beneficial Interests' ('Disputed Restructure Documents'); and

(c) documents in Mr Roe's file headed, 'Australian Corrugated Box Co Pty Ltd and Service Containers Pty Ltd' ('Disputed Service Containers Documents').

**6 The above documents are listed in the appendix to this judgment. I will refer to them collectively as 'the Documents in Dispute'.

7 For the reasons that follow, I have concluded that the Disputed Restructure Documents and the Disputed Quadpak Documents are not privileged by virtue of s 125 of the Act.**

**8 At the commencement of the hearing of the appeal, David Collins SC, who appeared with Stewart Maiden on behalf of the Holihan Defendants, raised two threshold jurisdictional issues. The first jurisdictional issue was that, as the order of Randall AsJ was made as a result of a referral by Vickery J in the course of the trial of this proceeding, r 77.07(1) of the Supreme Court (General Civil Procedure) Rules 2005 ('Rules') requires that any appeal from that order be made to the Court of Appeal. The second jurisdictional issue was that the appeal is incompetent because the notice of appeal was filed more than five days after the making of the order of Randall AsJ.

9 The first jurisdictional issue was based on the interrelationship between rr 77.02(1) and 77.07(1)(a). Those rules relevantly provide:**

77.02 Limitations on authority

(1) Subject to [a number of rules that are not relevant] -

(a) the trial of a proceeding shall not be held before an Associate Judge; and

(b) an Associate Judge shall not give any judgment or make any order at the trial of a proceeding.

...

77.07 Appeal to Court of Appeal

(1) For the purposes of section 17(3) of the Supreme Court Act 1986, in a proceeding to which any Chapter of the Rules of the Supreme Court (except Chapter V) applies -

(a) an appeal lies to the Court of Appeal from the Trial Division constituted by an Associate Judge in respect of a matter not otherwise within the authority of an Associate Judge which is referred to an Associate Judge by a Judge of the Court...

**10 Mr Collins submitted that, during the period of the trial before Vickery J, r 77.02(1) precluded Randall AsJ from making an order in relation to the Documents in Dispute and that Randall AsJ's jurisdiction was derived solely from the referral by Vickery J. As the matter before Randall AsJ was not otherwise within his authority, so it was said, r 77.07(1)(a) conferred exclusive jurisdiction on the Court of Appeal to hear an appeal from the order of Randall AsJ.

11 Mr Collins' submission must be rejected. The expression, 'a matter not otherwise within the authority of an Associate Judge which is referred to an Associate Judge by a Judge of the Court' in r 77.07(1)(a) is confined to matters that, in the absence of a referral from a judge under r 77.05(1), would not be within the jurisdiction of an associate judge. That this is so is evident from the fact that the referral power in r 77.05(1) uses the same language as r 77.07(1)(a), namely, 'a matter ... which ... would not otherwise be within the authority of an Associate Judge'. The privilege dispute in the present case was not such a matter.

12 Rule 77.01(1) provides that, subject to the other provisions of O 77, associate judges may, in any proceeding in which the Rules apply, 'give any judgment or make any order'. Disputes in relation to claims of privilege - whether they arise on discovery or on the production of documents pursuant to subpoena - are within the jurisdiction of associate judges under r 77.01. The jurisdiction of associate judges is not dependent on a referral by a judge under r 77.05(1).

13 The commencement of the trial before Vickery J deprived associate judges of their usual jurisdiction in relation to matters arising in the proceeding only to the extent that the Rules expressly so provide. The only specific provision of the Rules on which Mr Collins relied was r 77.02(1). Paragraph (a) of that rule did not apply because the trial of the proceeding was conducted by Vickery J, and not by Randall AsJ. Paragraph (b) of r 7.02(1) did not apply because the order of Randall AsJ was not made at the trial of the proceeding.

14 The subject matter of the application before Randall AsJ was an objection to the inspection of documents produced by Mr Roe on subpoena. That objection fell to be ruled upon in accordance with s 131A of the Act, which is set out at [35] below. The question was not whether s 125 of the Act enabled the contents of the documents to be adduced in evidence at the trial of the proceeding.

15 Mr Collins submitted that the availability of an appeal de novo to a judge under r 77.06(1) from an interlocutory order of an associate judge made after the commencement of a trial before another judge would be contrary to the proper administration of justice because it would encourage the unnecessary fragmentation of the trial process.[2] In my opinion, the risk of such fragmentation can be managed by trial judges exercising caution when deciding which matters to refer to an associate judge after the commencement of a trial. In any event, the fragmentation to which Mr Collins referred would not be lessened if appeals from orders of associate judges were required to be made to the Court of Appeal rather than to a judge in the Trial Division.

16 The second jurisdictional issue can be disposed of quickly. Although Randall AsJ made a ruling on 14 June 2011 that the Documents in Dispute were privileged, he did not pronounce an order on that day. Indeed, his Honour could not do so because the schedule listing the documents that were the subject of the proposed order had not yet been finalised. In any event, the order of Randall AsJ, expressly states that it was made on 21 June 2011. In the absence of an amendment to the order, it must be taken to have been made on that day. As the notice of appeal was filed on 28 June 2011 - within five business days of the order[3] - the appeal is competent. However, to avoid all doubt, I will make an order under r 77.06(6) extending to 28 June 2011 the time for the filing of the notice of appeal.

17 For the above reasons, I have jurisdiction to hear and determine the appeal.**

Overview of this proceeding and the related Hodgson proceeding

**18 This proceeding and the related Hodgson proceeding ('two proceedings') are complex and involve voluminous documents. As I have mentioned already, the proceedings are being heard concurrently by Vickery J. His Honour made an order that the evidence in each proceeding shall also be evidence in the other proceeding.

19 For the purpose of resolving the appeal, it is not necessary for me to set out the precise details of the corporate entities, the transactions or the factual or legal matters that are in issue in the two proceedings; nor is it necessary for me to distinguish between the two proceedings. It suffices for me to provide a brief overview of the parties and the issues in the two proceedings.

20 In the two proceedings, the Amcor Group has made claims against six former senior executives of the Group - James Hodgson, Trevor Barnes, Craig Holihan, Ian Sangster, Christopher Ian Roger Bayley and Albert Mihelic ('former executives') - and several of their associated companies.

21 The Amcor Group alleges that the former executives were officers or employees of companies in the Amcor Group during the following periods:**

(a) in respect of Mr Hodgson, from at least 1 July 2000 until 13 December 2004;

(b) in respect of Mr Barnes, from 1 January 2000 until 28 October 2004;

(d) in respect of Mr Holihan, from 14 December 1998 until 31 July 2003.

**22 The Amcor Group alleges that the former executives breached their duties to the Group and acted fraudulently in relation to the sale of two Amcor businesses to companies in which the former executives held a beneficial interest.

23 One of the businesses was a packaging materials business known as the 'Service Packaging Business'. The Amcor Group sold this business to Service Packaging Pty Ltd on 1 February 2002 ('First Sale Agreement') and entered into a five-year supply agreement with that company. The sole director of Service Packaging Pty Ltd was Ian Hottes. Until the sale, Mr Hottes managed the Service Packaging Business as an employee of the Amcor Group. The Amcor Group alleges that, through a series of shareholdings and interests in trusts, after the First Sale Agreement, Mr Hottes, Mr Hodgson, Mr Barnes, Mr Sangster and Mr Bayley each beneficially owned an interest in the Service Packaging Business.

24 The Amcor Group alleges that the Service Packaging Business was sold to Service Packaging Pty Ltd at an undervalue; that the five-year supply agreement contained terms that were detrimental to the Amcor Group; and that Mr Hodgson, Mr Barnes, Mr Sangster and Mr Bayley acted fraudulently and in breach of their duties to the Amcor Group by negotiating the sale of the Service Packaging Business on behalf of the Amcor Group to an entity in which they each held a beneficial interest, without disclosing that interest to the Amcor Group.

25 The other business was a corrugated packaging business known as the 'ACB Business'. The Amcor Group sold this business to ACB Australia Pty Ltd on 2 June 2003 ('Second Sale Agreement') and entered into a five-year supply agreement with that company.[4] The sole director of ACB Australia Pty Ltd is Mr Holihan. Until the sale, Mr Holihan managed the ACB Business as an employee of the Amcor Group. The Amcor Group alleges that, through a series of shareholdings and interests in trusts, after the Second Sale Agreement, Mr Holihan, Mr Hodgson, Mr Barnes, Mr Sangster, Mr Bayley and/or Mr Mihelic each beneficially owned an interest in the ACB Business. In the alternative, the Amcor Group alleges that Mr Holihan and Mr Barnes each acquired a 50 per cent beneficial interest in the ACB Business.

26 The Amcor Group alleges that the ACB Business was sold to ACB Australia Pty Ltd at an undervalue; that the five-year supply agreement contained terms that were detrimental to the Amcor Group; and that Mr Hodgson, Mr Barnes, Mr Sangster, Mr Bayley and/or Mr Mihelic acted fraudulently and in breach of their duties to the Amcor Group by negotiating the sale of the ACB Business on behalf of the Amcor Group to an entity in which they each held a beneficial interest, without disclosing that interest to the Amcor Group.**

**27 On 16 May and 16 June 2011, Vickery J published separate rulings on privilege issues.[5] In both rulings, his Honour upheld the privilege claims.

28 On 20 June 2011, I heard a separate appeal from an order of Randall AsJ in relation to privilege claims by Mr Hodgson in respect of six documents that were produced to the Court by Mr Hodgson's former solicitors, Norton Rose Australia (formerly Deacons),[6] in response to a nonparty discovery order ('Deacons Documents'). On 10 June 2011, Randall AsJ held that the Deacons Documents were not privileged by virtue of s 125 of the Act. On 20 June 2011, I upheld Randall AsJ's decision and ordered Mr Hodgson to make the Deacons Documents available for inspection by the Amcor Group. Mr Hodgson has complied with that order.

29 The Deacons Documents included a letter of advice dated 19 December 2000 from Mark Dillman, who was then a partner of Deacons ('Mr Dillman's advice'). The letter was headed 'Business Opportunity'. An internal Deacons' memorandum indicates that the 'Business Opportunity' was the purchase of the Service Packaging Business. The letter relevantly stated:**

While the proposal you raised with me does not amount, in the strict sense, to a breach of clause 4.4 of your employment contract (which provides that you cannot without the consent of the company be engaged, concerned or interested, either directly or indirectly, in any other business competing in any material respect with the business of Amcor) because Amcor has declared its hand and said it is not interested in the businesses you are considering, there are still grounds for serious concern in terms of your long term employment with Amcor given the confidentiality provisions in your employment contract and the proposed ongoing relationship which the new ventures will have with Amcor.

In the circumstances, if you are knowingly involved in transactions between Amcor and the new entity, which are not disclosed to and approved by the Board, you are potentially in breach of your employment agreement by virtue of the conflict between your duty to Amcor and your interests in the other business (albeit that it is not spelt out in the agreement). Furthermore, the Board would no doubt consider you to be in breach of the confidentiality provisions of your employment agreement because you can use confidential information to achieve a better outcome for the new entity in terms of its negotiations with Amcor than might otherwise be achieved by somebody not in possession of the information concerning Amcor's business to which you have access. Finally, the restrictions contained in clause 11 of your employment agreement might cause you all sorts of problems upon the termination of your employment with Amcor and could well mean that any arrangements the new entity had with Amcor would have to be severed totally and, even if Amcor did not have a change of heart and enter back into the fields in which those entities operate, you would still have to sever all ties with Amcor in order to reduce the risk of the possibility of an allegation being made that you were using confidential information in your possession in carrying on those other businesses.
The bottom line is that the proposed ventures are still extremely risky in the absence of Amcor's blessings and in the event that you elect not to disclose your involvement to Amcor and Amcor finds out, I have no doubt that your employment would be terminated and that you would have a fight on your hands to recoup your accrued entitlements as at the date of termination.
Having said that, if you wish to proceed, the best way to protect your anonymity would be to establish a unit trust in which each of your families held units, and to use that vehicle to acquire the businesses.
There is still a risk, particularly in the event that you want to have some control over the destiny of the new entities while you are still employees of Amcor because in order to operate a trust you require a trustee and the most appropriate vehicle to use as the trustee of any trust (in order to minimise exposure), is a company.
If you wish to exert control over the trustee, then you would have to become, at the very least, directors of the company. In your capacity as directors of the trustee company, your involvement would be traceable through the ASIC, although the chances of that occurring are remote.
One way around that might be to establish the trustee company with the person to whom the business has been offered by Amcor as the sole director and shareholder, and then to enter into a partnership agreement with that company pursuant to which the partnership nominates the company to become the trustee of the unit trust and can regulate the manner in which the trustee acts in its conduct of the business of the trust.

In conclusion, whilst it is possible to minimise the risk of you being traced to any involvement with or association in such a new enterprise in the manner I have contemplated above, the acquisition and operating of such a business could amount to potential breaches of your contract of employment and gives rise to conflicts of duty and interest which could result in the termination of your employment and the subsequent loss of accrued entitlements, particularly if there is a claim for lost profits arising out of your involvement in the new entity.[7]

**30 According to the Deacons files, on 3 January 2001, Mr Dillman met with Mr Hodgson, Mr Bayley, Mr Sangster 'and others'.

31 The Deacons Documents also included a diagram headed 'Structure for Hodgson & Partners' that was forwarded to Mr Hodgson by Mr Dillman on 22 February 2001. The diagram referred to 'Trevor's Entity', 'Ian's Entity', 'Roger's Entity', 'Ian's Entity' and 'Jim's Entity'. It will be recalled that, in relation to the First Sale Agreement, the Amcor Group alleges that Trevor Barnes, Ian Hottes, Christopher Ian Roger Bayley (known as 'Roger Bayley'), Ian Sangster and James Hodgson acquired beneficial interests in the purchasing entity.

32 In my reasons for upholding Randall AsJ's decision, I said the following in relation to the Deacons Documents:**

For the purposes of this appeal, I need not be satisfied, on the balance of probabilities, that Mr Hodgson has committed a fraud. All that I need to be satisfied of is that there are reasonable grounds for finding that he committed a fraud and that the [Deacons] Documents were prepared in furtherance of the commission of that fraud.

Having regard to the documents to which I was referred by Mr Elliott and the contents of the [Deacons] Documents, I am satisfied that the [Deacons] Documents disclose:

(a) details of proposed transactions involving Mr Hodgson that were prima facie fraudulent within the meaning of s 125 of the Act; and

(b) legal advice on how to conceal Mr Hodgson's involvement in the proposed transactions.

As one of the issues in the proceedings currently being heard by Vickery J is whether Mr Hodgson committed a fraud, it would be inappropriate for me to provide more detailed reasons for the making of my order.[8]

33 At the hearing of the present appeal, Mr Elliott submitted that the evidence supported an inference that Mr Dillman's advice was used by the former executives to inform the ownership structure of the purchasing vehicles that were used in relation to the First Sale Agreement and the Second Sale Agreement. I will discuss this submission and the evidence below.

Relevant provisions of the Evidence Act

34 Section 125 of the Act relevantly provides:

125 Loss of client legal privilege - misconduct

(1) This Division does not prevent the adducing of evidence of -

(a) a communication made or the contents of a document prepared by a client or lawyer (or both) ... in furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty; or ...

(2) For the purposes of this section, if the commission of the fraud, offence or act ... is a fact in issue and there are reasonable grounds for finding that -

(a) the fraud, offence or act ... was committed; and

(b) a communication was made or document prepared in furtherance of the commission of the fraud, offence or act ... -

the court may find that the communication was so made or the document so prepared.

35 Section 131A of the Act relevantly provides:

131A Application of Part to preliminary proceedings of courts

(1) If -

(a) a person is required by a disclosure requirement to ... produce a document, which would result in the disclosure of a ... document or its contents or other information of a kind referred to in Division 1 or 3; and

(b) the person objects to ... providing that document -

the court must determine the objection by applying the provisions of this Part (other than sections 123 and 128) with any necessary modifications as if the objection to ... producing the document were an objection to the giving or adducing of evidence.

(2) In this section, disclosure requirement means a process or order of a court that requires the disclosure of ... a document and includes the following -

(a) a summons or subpoena to produce documents or give evidence;

(b) pre-trial discovery; ...

36 Section 134 of the Act provides:

134 Inadmissibility of evidence that must not be adduced or given

Evidence that, because of this Part, must not be adduced or given in a proceeding is not admissible in the proceeding.

37 It will be noted that s 125 refers to 'an act that renders a person liable to a civil penalty'. The Amcor Group's claims in the two proceedings include alleged breaches of the duties of care and diligence, good faith and proper use of position in ss 180, 181 and 182 of the Corporations Act 2001 (Cth). Breaches of those duties can result in the imposition of civil penalties. A person who is 'involved' in a contravention of s 181 (duty of good faith) or s 182 (duty not to misuse position) also contravenes those sections. Section 79 defines 'involved' to include being 'knowingly concerned in, or a party to, the contravention'.

Legal principles relevant to s 125 of the Evidence Act

38 The following issues relating to the scope of s 125 of the Act need to be addressed for the purposes of the appeal:

(b) whether the client must be knowingly involved in the fraud, offence or act that renders a person liable to a civil penalty;

(c) the meaning of the words 'in furtherance of' in the expression, 'in furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty';

(d) whether the fraud, offence or act that renders a person liable to a civil penalty must be consummated; and

(e) where, as here, documents are sought for the purpose of being used as evidence in a proceeding, whether s 125 can only apply where the commission of the fraud, offence or act is a fact in issue in that proceeding.

**40 At common law, a broad view was adopted regarding the meaning of fraud in the socalled 'crime or fraud exception' to privilege. Under the common law, fraud was not confined to actual dishonesty; equitable fraud involving breaches of fiduciary duty that fell short of actual dishonesty sufficed.[9]

41 There does not appear to be any binding authority on the precise meaning of 'fraud' in s 125 of the Act. In Van Der Lee v New South Wales,[10] Hodgson JA, in obiter, adhered to his Honour's 'tentative' obiter opinion expressed in Idoport Pty Ltd v National Australia Bank Ltd[11] that fraud requires an element of actual dishonesty.[12] Mason P and Santow JA agreed with his Honour on this point.[13]

42 With the greatest respect to their Honours, I can see no reason why the expression 'fraud' in s 125 of the Act should be given a narrower meaning than that given to it by the common law principles of privilege. In my opinion, a broader interpretation of s 125 is supported by important underlying legal principles as well as the terms of the provision.

43 Turning first to the underlying legal principles, as the effectual administration of justice and the advancement of the public interest lie at the heart of privilege, those considerations should inform the scope of any exceptions to the privilege.

44 The rationale for legal advice privilege is that it encourages clients to be frank with lawyers about their legal affairs. Lawyers are thus enabled to give accurate advice based on complete knowledge of the facts, which ultimately facilitates the ordering of their clients' affairs within the law. Without the protection of the privilege, clients might be guarded in what they would tell their lawyers, leading to inaccurate or incomplete legal advice and more widespread contraventions of the law.

45 Clearly, where the client seeks advice on how to contravene the law, the advice falls outside the rationale for the privilege. The same applies to advice on how to commit a fraud or an act that is sufficiently serious to warrant the imposition of pecuniary penalties pursuant to statute. In my opinion, the same also applies to advice on how to commit an equitable fraud falling short of actual dishonesty.

46 I now turn to the terms of s 125 of the Act. Section 125(1) refers to three types of conduct that preclude privilege from arising, namely, fraud, an offence or an act that renders a person liable to a civil penalty. The section refers to offences generally and is not confined either to indictable offences or to offences involving dishonesty.[14] The expression 'offence' can include a minor offence of strict liability for which the penalty is a small fine. Likewise, the section refers to an act that renders a person liable to a civil penalty without requiring that the act involve any element of dishonesty. Many statutes that provide for civil penalties for particular conduct do not require that conduct to be dishonest. An example that is relevant to the two proceedings is a breach of the duty of good faith in s 181 of the Corporations Act.

47 The fact that s 125(1) does not require that the commission of an offence or an act that renders a person liable to a civil penalty involve any dishonesty indicates that the section is intended to apply to all categories of fraud known to the law irrespective of whether dishonesty is a necessary element of such a fraud.**

Whether the client must be knowingly involved in the fraud, offence or act

**48 It appears that there is no authority on the question of whether the fraud, offence or act that renders a person liable to a civil penalty to which reference is made in s 125(1)(a) must be committed by the client who has the benefit of the privilege. There is, however, authority for the proposition that the common law so-called 'crime or fraud exception' applies to legal advice given in furtherance of a fraud committed by a third party in which the client is not knowingly involved.[15]

49 The reference in s 125(1)(a) to 'a person', rather than to 'the client', provides some support for the proposition that, consistently with the common law, the section does not require that the client be knowingly involved in the fraud, offence or act that renders a person liable to a civil penalty. So does the presence of the words, 'the client ... knew or ought reasonably to have known' in s 125(1)(b) and their absence from s 125(1)(a).

50 In my opinion, a construction of s 125(1)(a) that does not require that the client be knowingly involved in the fraud, offence or act that renders a person liable to a civil penalty would be contrary both to the public interest principles that underpin privilege and to the statutory context of the provision.

51 Privilege is a powerful immunity that can be abrogated by statute only by clear words or by necessary implication.[16] At common law, the privilege was lost if the client engaged in conduct that was inconsistent with the maintenance of the confidentiality of the privileged communication.[17] Consistent with this common law principle, s 122 of the Act evinces a clear statutory intention that the privilege is not lost by conduct unless the client or an authorised agent of the client is knowingly involved in the impugned conduct. In my opinion, the same intention underpins s 125 of the Act.

52 A client may be knowingly involved in the fraud, offence or impugned act of another person by conspiring with that person to commit the fraud, offence or act; by being a knowing participant in the other person's fraud, offence or act; or by knowingly providing other forms of assistance to that person in relation to the fraud, offence or act. Legal advice that is procured by a client for the purpose of assisting another person to commit a fraud, an offence or an act that can attract a civil penalty would fall within s 125(1)(a) and would not be privileged.

53 Where a person that is not aware of any fraudulent purpose obtains legal advice as agent for a third party that has an undisclosed fraudulent purpose in obtaining the advice, s 125(1)(a) applies because the third party is the true client even if the lawyer is not aware of his or her existence.

54 This principle may explain the decision of the House of Lords in R v Central Criminal Court; Ex parte Francis & Francis.[18] In that case, the client purchased a property with funds provided by a relative whom the police believed had procured the funds through drug trafficking. The client, who was innocent of any wrongdoing, sought legal advice about the purchase and a question subsequently arose as to whether the advice fell within a statutory provision that was held to reflect the common law socalled crime or fraud exception. The House of Lords held that it did. Lord Goff, with whom Lord Griffiths agreed, said, 'it appears to me to be immaterial to [the] exception whether it is the client himself, or a third party who is using the client as his innocent tool, who has the criminal intention'.[19]

55 In my opinion, the word 'person' in the expression, 'an act that renders a person liable to a civil penalty' in s 125(1)(a) of the Act is used to describe the type of act that falls within the section rather than to identify who must commit that act. For an act to qualify for the purposes of s 125(1)(a), it must fall within a statutory provision which provides that a person that commits that act is liable to a civil penalty.

56 As the outcome of the present case will be the same whether or not s 125 is construed as requiring the client to be knowingly involved in the fraud, offence or act that renders a person liable to a civil penalty, it is not necessary for me to express a final view on the construction issue. For the purposes of analysis, I will adopt the construction that is the most favourable for the Holihan Defendants; namely, that s 125 requires the client to be knowingly involved in the fraud, offence or act that renders a person liable to a civil penalty.**

Meaning of 'in furtherance of the commission of a fraud ... offence ... or act'

**57 There have been suggestions in some of the authorities that the expression, 'in furtherance of the commission of a fraud ... offence ... or act' does not include conduct occurring after the fraud, offence or act is completed. On this basis, acts committed for the purpose of concealing a fraud are said not to be 'in furtherance of the commission' of the fraud.[20]

58 In my opinion, there is no absolute rule that conduct occurring after a fraud, an offence or an act is completed cannot be held to be 'in furtherance of the commission' of the fraud, offence or act. Whether such conduct satisfies the expression, 'in furtherance of the commission' in s 125 will depend on the nature and purpose of the conduct.

59 The Shorter Oxford English Dictionary defines 'furtherance' as 'the fact of being helped forward; the action of helping forward; advancement, aid, assistance'. In my opinion, this definition provides a useful indication of conduct that may be held to be 'in furtherance of the commission' of a fraud, offence or act.

60 The usual consequence of a fraud is to deprive the victim of his or her money or other property. That deprivation occurs at the time that the fraudster obtains control of the property. The victim has a legal right to recover the property. Any positive steps taken by the fraudster to conceal information about the fraud or to place the property beyond the legal reach of the victim once the fraud is discovered can be in furtherance of the fraud in so far as they continue its efficacy.

61 As discussed at [44] above, the rationale of legal advice privilege is to enable clients to obtain advice from their lawyers to facilitate the organisation of their affairs within the law. Legal advice that is sought for the purpose of committing a fraud falls outside this rationale. In my opinion, so does legal advice that is sought about what positive steps can be taken to give continuing efficacy to the fraud, such as advice on positive steps to conceal the fraud or positive steps to place the relevant property beyond the reach of any court order that the victim may obtain. Advice about the taking of such steps can be described as advice prepared in furtherance of the commission of a fraud.

62 I accept that advice on the legal consequences of a past fraud, the legal remedies that may be invoked by the victim of the fraud and any legal defences that may be available in respect of any claim by the victim would not be in furtherance of the commission of the fraud.

63 The above analysis is supported by the decisions of the New South Wales Supreme Court in Watson v McLernon[21] and Carbotech-Australia Pty Ltd v Yates.[22] In the latter decision, Brereton J stated:**

if the client is obtaining legal advice in the context of an ongoing dishonest or fraudulent undertaking, so that the advice will or may impact upon or inform the client in the course of that undertaking, it will be regarded as being in furtherance of the improper purpose.[23]

Whether the fraud, offence or act must be consummated

**64 A document that is 'prepared ... for the dominant purpose of ... providing legal advice to the client'[24] can be privileged even though the purpose is not effected.[25] An example is where a client instructs a lawyer to prepare a letter of advice, but then withdraws the instruction before the lawyer has finalised the letter. Any draft letter is privileged because the dominant purpose for its preparation was the provision of legal advice. As the relevant time is the time of preparation of the document, events occurring after the preparation of the document cannot alter the original purpose.

65 In my opinion, the same principle applies to the expression 'prepared ... in furtherance of' in s 125(1)(a). Accordingly, if a document is prepared for the purpose of planning or otherwise furthering a fraud, an offence or an act that renders a person liable to a civil penalty, it does not attract privilege and this status cannot be affected by subsequent events.**

Whether the commission of the fraud, offence or act must be a fact in issue

**66 The provision in s 125 that determines whether a document is privileged is s 125(1). Section 125(2) does not set out a separate basis for precluding privilege from arising; rather, s 125(2) is a subordinate provision that assists in giving effect to s 125(1). This is confirmed by the opening words of s 125(2), namely, 'For the purposes of this section'.

67 Where the commission of a fraud, offence or act is a fact in issue in a proceeding, s 125(2) provides that, for the purposes of s 125(1), if there are reasonable grounds for finding that the fraud, offence or act was committed and that a document was prepared in furtherance of the commission of the fraud, offence or act, the Court may find that the document was so prepared.

68 Where, however, the commission of a fraud, offence or act is not a fact in issue in a proceeding, a document will not be privileged under s 125(1) if the party that alleges that the document is not privileged satisfies the Court that there is a prima facie case that a fraud, offence or act has been committed and that the document was prepared in furtherance of that fraud, offence or act.[26]

69 My conclusion at [68] above is supported by the fact that a document to which s 125 applies may be adduced for the purpose of cross-examining a witness on credit on a matter that is not pleaded in the proceeding. My conclusion is also supported by the fact that, in accordance with s 131A of the Act, s 125 is to be applied to determine privilege issues in interlocutory disputes where production of documents may be sought to assist a party to prepare its case irrespective of whether the documents are subsequently tendered as evidence at the trial. Indeed, where s 125 is applied in the context of pre-trial discovery, there may never be a trial.

70 For the above reasons, s 125 does not require that the commission of the fraud, offence or act be a fact in issue in a proceeding in order for a document that is prepared in furtherance of the commission of the fraud, offence or act to be held not to be privileged by virtue of that section.**

**71 Section 133 of the Act provides that, if a question arises under pt 3.10 of the Act relating to a document, 'the court may order that the document be produced to it and may inspect the document for the purpose of determining the question'. The Court also has inherent power to order the production of a document for inspection by the Court.[27]

72 At the hearing of the appeal, Mr Elliott submitted that I should inspect the Documents in Dispute. Mr Collins submitted that inspection of the Documents in Dispute was a matter for the exercise of the Court's discretion.

73 I decided to inspect the Documents in Dispute because of the constant changes in the Holihan Defendants' position in relation to privilege. Since Mr Roe produced his files to the Court pursuant to the subpoena dated 28 April 2011, the Holihan Defendants claimed privilege in relation to particular documents and then withdrew that claim on several occasions. As a result of this conduct and the cryptic nature of the descriptions used for some of the Documents in Dispute, I considered that it would be unsafe for me to decide the important question of whether any of the Documents in Dispute were prepared in furtherance of the commission of a fraud or an act that renders a person liable to a civil penalty without inspecting them.**

What is known independently of the Documents in Dispute

**74 The information in [ 75] to [98] below is based on the evidence given at the trial of the two proceedings and on the contents of documents that have been provided to the Amcor Group in the two proceedings.

75 An undated deed that was signed in late 2001 ('2001 Deed') was executed by Service Packaging Pty Ltd, G5 Investments Pty Ltd ('G5'), Mr Hottes, Mr Barnes, Mr Hodgson, Mr Bayley and Mr Sangster. The relevant provisions of the 2001 Deed are summarised below:**

(a) The deed stated that the parties were related to each other as follows:

(i) Mr Hottes is the sole director of Service Packaging Pty Ltd and G5;

(ii) Mr Hottes holds the five issued shares in Service Packaging Pty Ltd on trust for G5; and

(iii) Mr Hottes holds one share in G5 beneficially and the other four shares on trust for Mr Barnes, Mr Hodgson, Mr Bayley and Mr Sangster.

(b) The deed stated that Mr Hottes and Service Packaging Pty Ltd intend to enter into the First Sale Agreement for the benefit of G5, Mr Hottes, Mr Barnes, Mr Hodgson, Mr Bayley and Mr Sangster.

76 An undated deed that was signed in late 2002 ('2002 Deed') was executed by Service Packaging Pty Ltd, G5, Mr Hottes, Bankson Pty Ltd ('Bankson'), Brobel Investments Pty Ltd ('Brobel'), CBB Investments Pty Ltd ('CBB'), Merrymen Pty Ltd ('Merrymen'), Mr Barnes, Mr Hodgson, Mr Bayley and Mr Sangster. The relevant provisions of the 2002 Deed are summarised below:

(a) The deed stated that the parties were related to each other as follows:

(i) Mr Hottes is the sole director of Service Packaging Pty Ltd and G5;

(iii) Mr Sangster is the sole director of Merrymen;

(iv) Mr Hottes holds the five issued shares in Service Packaging Pty Ltd on trust for G5; and

(v) Mr Hottes holds one share in G5 beneficially and the other four shares in G5 on trust for Bankson, Brobel, CBB and Merrymen.

(b) The deed stated that Service Packaging Pty Ltd and Mr Hottes entered into the First Sale Agreement for the benefit of G5, Mr Hottes, Bankson, Brobel, CBB, Merrymen, Mr Hodgson, Mr Barnes, Mr Bayley and Mr Sangster.

(a) Mr Hodgson and his wife, Natasha Hodgson, were the directors of, and the shareholders in, Bankson; and

(b) Mr Bayley and his wife, Betty Bayley, were the directors of, and the shareholders in, CBB.

**78 In his answers to the Amcor Group's interrogatories, Mr Barnes stated that the 2001 Deed and the 2002 Deed were conditional on Mr Hottes' 'securing the machinery distributorship from 3M' and that this condition was not met. He said that, as the condition was not met, he did not consider that he had an interest in the Service Packaging Business.

79 In a letter dated 20 November 2002 to Mr Holihan about a draft of the Second Sale Agreement, Mr Roe stated that Mr Holihan intended 'that there will be several "partners" in the business and that ultimately [Mr Holihan] will have a 20% equity'.

80 A deed dated 26 May 2003 ('First 26 May 2003 Deed') was executed by Mr Holihan and Mr Barnes. The relevant provisions of the First 26 May 2003 Deed are summarised below:**

(i) Mr Holihan is the sole director of ACB Australia Pty Ltd and LeoRose Pty Ltd ('LeoRose');

(ii) LeoRose owns 80 per cent of the shares in ACB Australia Pty Ltd;

(iii) Holihan Investments Pty Ltd owns 20 per cent of the shares in ACB Australia Pty Ltd and LeoRose holds the remaining 80 per cent of the shares as trustee;

(iv) Holihan Investments Pty Ltd holds all of the shares in LeoRose as trustee for Astra Corporation Pty Ltd ('Astra');

(v) Mr Barnes is the sole director of, and shareholder in, Astra;

(vi) all shares in Astra are held by another company[28] in which there are 10 shares issued. Mr Barnes holds two of those shares beneficially and the other eight shares on trust;

(vii) Mr Holihan is not aware of the identity of the beneficial owners of the eight shares that Mr Barnes holds on trust;

(viii) ACB Australia Pty Ltd proposes to acquire the ACB Business; and

(ix) Mr Barnes makes the deed on his own behalf and on behalf of the other beneficial owners.

(b) Clause 20 of the deed stated that Mr Barnes has lodged with Mr Roe written notification of the identity of at least two of the beneficial owners, with instructions to disclose those identities to Mr Holihan at such time in the next 12 months as Mr Barnes specified. Once the identity of a beneficial owner is disclosed to Mr Holihan, that owner must ratify the deed and become a party to it.

(c) Clause 21 of the deed imposed strict confidentiality obligations, including in relation to the existence of the deed and the identity of the beneficial owners.

81 A deed dated 26 May 2003 ('Second 26 May 2003 Deed') was executed by Mr Barnes, Astra, Merrymen, Mr Sangster, Bankson, Mr Hodgson, Mrs Hodgson, Sampson Solo Pty Ltd ('Sampson'), Mr Mihelic, Meredith Mihelic, CBB, Mr Bayley, Mrs Bayley and Brobel. The relevant provisions of the Second 26 May 2003 Deed are summarised below:

(a) The deed stated that Mr Barnes and Mr Holihan executed the First 26 May 2006 Deed regarding the proposed acquisition of a business.

(b) The deed stated that Mr Barnes will hold the shares in Astra beneficially on the trusts set out in schedule 3. Schedule 3 is headed, 'Shareholdings in Brobel Investments Pty Limited' and states that 'Barnes Pty Limited' holds 10 ordinary shares as follows:

(d) Schedule 2 to the deed listed the following shareholder representatives:

(e) The deed stated that Mr Barnes is the sole director of Brobel.

**82 There exists a version of the Second 26 May 2003 Deed with the handwritten annotation, 'Cancelled 28/5/03' on each page ('Cancelled Version of the Second 26 May 2003 Deed').

83 In his answers to the Amcor Group's interrogatories, Mr Barnes stated that:**

(a) the Second 26 May 2003 Deed was signed in late May 2003; and

(b) he wrote the word 'Cancelled' on the Cancelled Version of the Second 26 May 2003 Deed on Mr Hodgson's instructions some time prior to the execution of the Second Sale Agreement.

84 In his answers to the Amcor Group's interrogatories, Mr Holihan stated that:

(a) he believes that he first saw the Second May 2003 Deed in about August 2004 and that it did not have the word 'Cancelled' written across each page; and

(b) he did not know at any time in 2002 or 2003 that Mr Hodgson, Mr Bayley, Mr Sangster and/or Mr Mihelic had taken or intended to take an interest in the ACB Business.

85 A deed dated 28 May 2003 ('28 May 2003 Deed') was executed by Mr Holihan and Mr Barnes. The 28 May 2003 Deed stated that:

(a) Mr Holihan is the sole director of ACB Australia Pty Ltd and LeoRose;

(b) LeoRose owns all the shares in ACB Australia Pty Ltd;

(c) Mr Holihan owns all the shares in LeoRose and that, of those shares, he holds five as trustee for Holihan's Investments Pty Ltd and five as trustee for Astra;

(d) Mr Barnes is the sole director of, and shareholder in, Astra; and

**86 In his answers to the Amcor Group's interrogatories, Mr Barnes stated that he signed the 28 May 2003 Deed in late 2005. In his answers, Mr Holihan stated that he signed the 28 May 2003 Deed '[o]n or around October 2005'.

87 Some time between 1 July 2004 and 30 June 2005, Mr Barnes wrote a letter to his accountant that referred to his 2004 tax return. In that letter, Mr Barnes stated that:**

(a) Astra owns 80 per cent of 'Australian Corrugated box' and that there are five shareholders in Astra, including himself;

(b) in the 2004 financial year, 'a fully franked dividend of $600,000 was declared to Astra ... of which [his] share [was] $120,000'; and

**88 By letter dated 2 July 2004, Wheeler Grenfell, accountants, provided tax advice to Mr Holihan about the existing structure of Australian Corrugated Box Co Pty Ltd (a subsidiary of ACB Australia Pty Ltd). The letter stated that the corporate structure was established in August 2003 and that a number of entities were established at that time. Attached to the letter was a diagram that stated that Holihan Investments Pty Ltd owns 20 per cent of 'Share Company "Share Co"' and that Astra owns the remaining 80 per cent.

89 During the trial before Vickery J, Mr Holihan gave the following evidence:**

(a) His joint venture arrangements with Mr Barnes commenced with the acquisition of the ACB Business and he was hopeful that other businesses would be added in the future. In November 2002, the expectation was that the company formed to purchase the ACB Business could acquire other Amcor businesses.

(b) He executed an agreement on 26 May 2003 whereby interests associated with him acquired a 20 per cent interest in a company that was to acquire the ACB Business. The other 80 per cent was to be held by him on trust for Mr Barnes and other shareholders whose identities he did not know.

(c) In May or June 2004, he felt that he was entitled to know the identities of the other shareholders. Mr Barnes told him that the secret shareholders were going to be Mr Hodgson, Mr Bayley, Mr Mihelic and Mr Sangster but they decided not to proceed. Mr Barnes told him that the shareholding in LeoRose would revert to a 50:50 split between the two of them and that Mr Roe could draft a revised shareholders' agreement to this effect.

**90 In his defence in this proceeding, Mr Holihan pleaded that the Amcor Group was aware that Mr Barnes intended to acquire a beneficial interest in the ACB Business after it was sold to ACB Australia Pty Ltd. In his answers to the Amcor Group's interrogatories, he stated that, in around March 2003, Mr Barnes told him that he had obtained Mr Hodgson's approval to take a beneficial interest in the ACB Business after it was sold.

91 On 14 November 2003, Mr Roe obtained ASIC company searches for Astra, Brobel and Quadpak Pty Ltd.

92 Quadpak Pty Ltd is a company based in Queensland. As trustee of the Carriage Family Trust, it operated a business that included the supply of gluing services ('Quadpak Business'). The directors of, and shareholders in, QuadPak Pty Ltd were Michael Carriage and his wife, Ann Carriage. In February 2004, the Amcor Group entered into a five-year contract with Quadpak Pty Ltd for the supply of gluing services. The gluing services agreement provided for the Amcor Group to sell to Quadpak Pty Ltd all of the raw material at cost price. The Amcor Group's letter offering to enter into the gluing services agreement was signed by Mr Hodgson.

93 In the 2004 financial year, the Amcor Group paid to Quadpak Pty Ltd a total of $1,965,910 and supplied raw material to the value of $137,273. In the 2005 financial year, the payments totalled $4,789,942 and the value of the raw material supplied was $500,569.

94 On 17 May 2004, Quadpak Pty Ltd's accountant sent to Mr Roe a schedule setting out a proposed 'Quadpak Structure' to include four additional beneficiaries.

95 On 20 September 2004, Mr Roe spoke to Quadpak Pty Ltd's accountant about transferring the beneficial ownership of the Quadpak Business from the Carriage Family Trust. Mr Roe's file note included the statement:**

[Transfer] 8 shares to Barnes or ... equity partners entity. He will need to check if Carriage wishes to hold their 20% [via the Carriage Family Trust] or Investment Trust No 1. I will fax structure etc for him to approve.

**96 In a letter dated 23 September 2004 to Quadpak Pty Ltd's accountant, Mr Roe stated, 'My client has suggested that, as an alternative structure, the Carriage interests retain the two ordinary shares in Quadpak, but eight new fully paid ordinary shares are issued to New Co on behalf of the purchaser.' In an undated letter to Mr Roe, Quadpak Pty Ltd's accountant stated that he was enclosing 'a schedule setting out a proposed structure to include an additional 4 beneficiaries'.

97 Quadpak Pty Ltd's accountant also acts for Mr Hodgson and Mr Bayley. The address of the accountant is the registered address of Bankson and CBB.

98 In mid 2006, Quadpak Pty Ltd terminated the gluing services agreement with the Amcor Group.**

Broad outline of the contents of the Disputed Quadpak Documents

**99 Mr Roe's file indicates that he had communications with Mr Holihan between 11 November 2003 and 18 November 2004 about a proposal for Mr Holihan and other investors to acquire beneficial interests in the Quadpak Business.

100 Document 74 is a file note of a meeting between Mr Roe and Mr Holihan on 11 November 2003. The file note indicates that Mr Holihan and some partners proposed to acquire an interest in the Quadpak Business with a view to increasing Quadpak's then isolated trading for the benefit of the new beneficial owners. The file note contains the contact details of a person named 'Roger'.

101 Document 71 contains rough notes made by Mr Roe on 14 November 2003 of a possible corporate structure to acquire the Quadpak Business. It appears from documents 91 and 92 that Mr Roe used a draft of the First 26 May 2003 Deed relating to the acquisition of the ACB Business, with the 80:20 ownership structure, as the basis for the proposed structure for the purchasing entity to be used to acquire the Quadpak Business.

102 Document 71 refers to document 76, which is a copy of schedule 3 to the Second 26 May 2003 Deed. It will be recalled from [81] above that Schedule 3 is headed, 'Shareholdings in Brobel Investments Pty Limited' and states that 'Barnes Pty Limited' holds 10 ordinary shares as follows:**

**103 It appears from document 71 that Mr Roe contemplated that interests associated with the Carriage family would own 20 per cent of the new entity that acquired the Quadpak Business and that the remaining 80 per cent would be owned by LeoRose, which, in turn, would hold 20 per cent of the beneficial interest in the new entity for Holihan Investments Pty Ltd and the remaining 80 per cent for the investors who held beneficial interests in Brobel and Astra.

105 Prima facie, it can be inferred from documents 71, 74, 76, 91 and 92 that Mr Roe contemplated that the new beneficial owners in the Quadpak Business would be Mr Carriage, Mr Holihan, Mr Bayley and one or more of Mr Hodgson, Mr Barnes, Mr Sangster and Mr Mihelic.

106 Document 73 is a diagram depicting the proposed ownership structure in relation to the Quadpak Business. The diagram indicates that a person described as 'RB' and 'Roger' - presumably Roger Bayley[29] - 'is to arrange' the new company. Mr Roe's notes next to the diagram indicate that the Quadpak Business was expected to grow after a change in beneficial ownership in early 2004. Reference is made to the Quadpak Business taking on all of the 'Spec Glue work and other work'. This may be a reference to the gluing services that Quadpak Pty Ltd provided to the Amcor Group.[30]

107 Document 77 is a revised ownership structure diagram which refers to Mr Bayley and Mr Barnes. A form of this diagram was sent to Mr Holihan on 25 November 2003.

108 Document 67 is dated 12 December 2003 and contains Mr Roe's handwritten notes. The notes refer to 'Bailey [and the] other 5 beneficial owners'.

109 Document 63 is a letter dated 2 February 2004 from Mr Roe to Mr Holihan enclosing a draft shareholders' agreement. The letter states that the draft agreement does not include a secrecy provision similar to the shareholders' agreement relating to the acquisition of the ACB Business because Mr Roe presumed that such a provision was not relevant. Prima facie, it can be inferred from this that, as at 2 February 2004, Mr Holihan was aware of the identity of the other proposed beneficial owners of the Quadpak Business. This prima facie inference is supported by the contents of Mr Roe's subsequent letters dated 27 May 2004 and 20 July 2004 to Mr Holihan. The letter dated 27 May 2004 advised Mr Holihan to discuss the issues in the letter 'with the other participants', while the letter dated 20 July 2004 advised him to impress on 'the other partners' the need to obtain their own advice about how their units are to be held in the proposed Quadpak Unit Trust.

110 Document 29 includes a file note of a meeting between Mr Roe, Mr Holihan and Mr Bayley on 5 May 2004. The note states that Mr Holihan and Mr Bayley will arrange for Mr Carriage's accountant to contact Mr Roe. Document 29 also includes a file note dated 16 July 2004 in which Mr Roe stated, 'Trustee to be Bailey (on trust (80%) partners not disclosed to Carriage)'.

111 Document 45 includes a handwritten note prepared by Mr Roe on 13 August 2004. The note refers to the supply agreement between the Quadpak Business and the Amcor Group and states that the agreement has four years left to run. It then contains the following statements: 'Structure à hide partners from Amcor', 'Roger Bayley known to [Michael Carriage]', 'Exit process as per ACB for [Mr Holihan]' and 'Need to keep involvement of individuals confidential'.

112 Document 41 indicates that, on 19 August 2004, Mr Roe sent to Mr Holihan a document described as 'amended terms of agreement'. A document headed, 'Terms of Agreement' is numbered 78. That document describes the business being acquired as, '80% of the equity in Quadpak Pty Limited and the business conducted by that company at 16 Birnam Place Ferny Grove 4055 QLD involving the manufacture of cardboard containers and products.' The purchaser is described as, 'Company to be formed by Roger Bailey and/or nominees' and the vendor is described as, 'The trustee of the Carriage Family Trust'. The document specified a settlement date of 1 October 2004 and stated that one of the conditions precedent was the continuation of the supply agreement between Quadpak Pty Ltd and the Amcor Group on the same terms and conditions.

113 Documents 29, 39 and 40 suggest that the Terms of Agreement document, or another document entitled, 'Heads of Agreement', was signed on 14 September 2004. Document 29 includes a file note dated 16 September 2004, which states, 'Partners familiar with [documents] I have listed'.

114 Prima facie, it can be inferred from the Terms of Agreement document as well as from documents 39, 40, 45 and 73, to which I have already referred, that a material motivation for the proposal by Mr Holihan, Mr Bayley and the other investors to acquire interests in the Quadpak Business was the gluing services agreement between that business and the Amcor Group. This prima facie inference is supported by the contents of documents 43 and 49B.

115 Prima facie, it can also be inferred from documents 73 and 74, to which I have already referred, that Mr Holihan and the other investors contemplated that the volume of business dealings between the Quadpak Business and the Amcor Group would increase after those investors acquired their interests in the Quadpak Business.

116 Mr Roe's file indicates that his last communication with Mr Holihan on the Quadpak transaction took place during a telephone conversation on 18 November 2004. Mr Roe's note of the telephone conversation, which is part of document 29, states, 'Hold action for present time, may revive in future.'**

Decision in relation to the Disputed Quadpak Documents

**117 In my opinion, the Disputed Quadpak Documents are not privileged by virtue of s 125 of the Act because, prima facie, they were prepared in furtherance of the commission of a fraud and a serious breach of s 182 of the Corporations Act by Mr Bayley in which Mr Holihan was 'involved' within the meaning of s 79 of the Corporations Act.[31]

118 As the issues in the two proceedings currently being heard by Vickery J include whether the former executives committed fraud and breaches of duty, it would be inappropriate for me to provide detailed reasons for the conclusion set out at [117] above. It suffices for me to provide the following brief reasons:**

(a) On 11 November 2003, when Mr Roe was first instructed to advise on the acquisition of beneficial interests in the Quadpak Business, Mr Bayley was an employee and senior executive of the Amcor Group. He retained that status until 28 October 2004.

(b) There is prima facie evidence that Mr Bayley, while he was a senior executive of the Amcor Group, saw an opportunity to increase business under the gluing services agreement between the Amcor Group and the Quadpak Business and sought to exploit that opportunity to gain an advantage for himself by acquiring a beneficial interest in the Quadpak Business without informing the Amcor Group of that acquisition.

(c) There is prima facie evidence that Mr Holihan, Mr Bayley and some of the other former executives sought to use the underlying principles and structures that were the subject of Mr Dillman's advice in relation to the acquisition of beneficial interests in the Quadpak Business and the concealment of that acquisition from the Amcor Group.

(d) There is prima facie evidence that Mr Holihan knew that, during the period that Mr Bayley remained a senior executive of the Amcor Group, it was improper for Mr Bayley to acquire a beneficial interest in the Quadpak Business and that the purpose of concealing his interest in the Quadpak Business was to prevent the Amcor Group from finding out about the improper conduct of Mr Bayley and any other former executive who was seeking to acquire such an interest.

119 For the reasons set out at [66] to [70] above, the fact that the Amcor Group has not pleaded a breach of s 182 of the Corporations Act against Mr Bayley in relation to the Quadpak Business does not mean that such a breach cannot be relied upon for the purposes of s 125(1)(a) of the Act. Likewise, for the reasons set out at [65] above, my analysis is not affected by whether or not Mr Holihan, Mr Bayley or any of the other former executives actually acquired a beneficial interest in the Quadpak Business.

Broad outline of the contents of the Disputed Restructure Documents

**120 Mr Roe's file indicates that his first communication with Mr Holihan about the ACB restructure took place on 5 May 2004 (documents 169 and 203). The file indicates that, during the 2004 calendar year, Mr Holihan beneficially owned 20 per cent of the ACB Business and other investors beneficially owned 80 per cent through various shareholding arrangements.[32]

121 On 5 May 2004, Mr Holihan, accompanied by Mr Bayley, met Mr Roe and sought advice on the tax effectiveness of the ownership structure. Between 5 May 2004 and 4 November 2004, Mr Roe provided advice to Mr Holihan on various alternative ownership structures and the costs, benefits and risks associated with each of them. On various occasions, Mr Roe communicated with accountants to assist him in advising Mr Holihan.

At a glance

Court

Decision date

Before

Source

Judgment (341 paragraphs)

Parties

Legislation Cited (14)

Cases Cited (8)