Evidence - General - Inspection - Property in possession of non-party - Jurisdiction - Document - Inspection by servants or agents of plaintiff corporation - Whether material to the proper determination of the question in dispute. Evidence Act 1910, s26(1). Persson v Heathwoods Pty Ltd (1967) 68 SR (NSW) 27, Evatt v Australian Consolidated Press Ltd (1970) 1 NSWR 97, Barton v Australian Consolidated Press Ltd (1970) 3 NSWR 141, Nathan v MJF Constructions [1986] VicRp 8; (1986) VR 75, followed.

Practice - Tasmania - Practice under Rules of Supreme Court - Interlocutory orders as to mandamus, injunctions or interim preservation of property - Order 56 - Inspection of property - Documents in possession of non-party - Jurisdiction - Comparison with jurisdiction under Evidence Act 1910, 26(1). Rules of the Supreme Court, O56 r4.

Solicitors for Plaintiff\Applicant: Finlay Watchorn

Solicitors for Defendant\Respondent: Simmons Wolfhagen

Counsel for respondent Blake Dawson Waldron: C A Cunningham

Solicitors for respondent Blake Dawson Waldron: Simmons

Wolfhagen

Counsel for respondent Ernst and Young: C B Adams

Solicitors for respondent Ernst and Young: Page Seager

Counsel for respondent NAB: R E Hudson

Solicitors for respondent NAB: Butler, McIntyre and Butler

CRAWFORD J The plaintiff has applied for orders requiring nine entities being persons, companies and firms, none of whom is a party to the action, to produce certain documents for inspection and copying by the plaintiff's legal advisers.

2. A separate application was filed with respect to each of those entities. Counsel for the plaintiff informed me that the applications addressed to Paul Gwynn, Robert Ward and Associated Broadcasting Services Ltd had not been served and conceded that I should not hear them. As a result I did not do so.

3. Three of the entities to whom applications were directed appeared at the hearing by counsel. They were Ernst and Young which is a firm of Melbourne chartered accountants, Blake Dawson Waldron which is a firm of Sydney solicitors and National Australia Bank of Melbourne. The remaining three persons to whom applications were directed, namely Peter Sherman, Dean Royston McVeigh and Owen Glyndwr Jenkins did not appear at the hearing. Counsel for the plaintiff informed me that they had been served with the respective applications and undertook to file affidavits of service on those three people. On that basis I agreed, with the concurrence of all counsel who were present, to embark on a hearing at the same time of the six applications directed respectively to Ernst and Young, Blake Dawson Waldron, National Australia Bank, Peter Sherman, Dean Royston McVeigh and Owen Glyndwr Jenkins.

4. Affidavits have been filed for the purpose of establishing that Peter Sherman, Dean Royston McVeigh and Owen Glyndwr Jenkins were served with the applications respectively addressed to them and I will deal with each. I note that each of the plaintiff's interlocutory applications shows in its title the names of the plaintiff and the defendant. It is addressed to the defendant and to the particular entity or person whose documents the plaintiff seeks to have produced for inspection and copying. Each application states that the plaintiff applies for an order that the particular named entity or person produce certain documents for inspection and copying by the plaintiff's legal advisers.

5. The application addressed to Mr Sherman describes him as Mr Peter Sherman of 43 Carpenter Street, Brighton, Victoria. An affidavit of Michael John Bookman, a Melbourne process server, states that on 26 May 1994 he served Mr Sherman with a sealed copy of the application and of an affidavit of Kevin Francis Lloyd sworn on 19 May 1994 by leaving them with him personally at the Brighton address. A copy of the application is annexed to the affidavit. Its notice of hearing states that the application had been set down for hearing before the Master in Hobart on 10 June at 9.30 am. The court's record shows that at that time Mr Sherman was called and did not appear and the Master adjourned the hearing to 28 June which was the day upon which I embarked on the hearing of the six applications. I conclude that Mr Sherman has been properly served with the application addressed to him.

6. The application addressed to Mr McVeigh describes him as Mr Dean Royston McVeigh, Receiver and Manager of KPMG Peat Marwick, chartered accountants, 161 Collins Street, Melbourne, Victoria 3000. An affidavit of Michael John Bookman states that on 26 May he served KPMG Peat Marwick with a sealed copy of the application and the affidavit of Mr Lloyd by leaving them with Maureen Staples at 2nd Floor, 161 Collins Street, Melbourne. The affidavit does not establish that Mr McVeigh was served with the application. There is also an affidavit of Sarah Alexandra Merrick in which the deponent relates a telephone conversation she had on 23 June with a Mr Michael O'Connor of KPMG Peat Marwick, chartered accountants, 161 Collins Street, Melbourne. In the course of the conversation Mr O'Connor told the deponent that Mr McVeigh was no longer working for KPMG Peat Marwick.

7. There was no evidence that Mr McVeigh has been served with the application directed to him. As a result it is inappropriate that I consider the application further.

8. The application relating to Mr Jenkins describes him as Mr Owen Glyndwr Jenkins, Liquidator of Filmpac Holdings Ltd of Jenkins Peake and Co, 1st Floor, Lexen Building, 200 Malop Street, Geelong, Victoria, 3220. An affidavit of Mr Bookman states that on 26 May 1994 he served Mr Jenkins with a sealed copy of the application and the affidavit of Mr Lloyd by leaving them with a female receptionist at Jenkins Peake and Co, 200 Malop Street, Geelong.

9. I am not persuaded by admissible evidence that Mr Jenkins has been served with the application addressed to him and I will not consider it further.

10. The pleadings and affidavit evidence reveal the plaintiff's case against the defendant to be the following. The plaintiff is an English company which distributes films. The defendant is an Australian broadcasting company. On or about 5 May 1989 the plaintiff entered into an agreement with Filmpac Holdings Ltd ("Filmpac") which gave Filmpac the right to distribute nine of the plaintiff's films in Australia. Under the terms of the agreement Filmpac was to pay money to the plaintiff including royalties and certain guaranteed minimum sums.

11. Prior to entering into the agreement the plaintiff was concerned about the credit worthiness of Filmpac. The defendant owned all of the shares in Associated Broadcasting Services Ltd which in turn owned 50 per cent of Filmpac. It is the plaintiff's case that in order to induce it to enter into the agreement with Filmpac the defendant gave undertakings in a letter (which I will call "the letter of comfort") addressed to the plaintiff and dated 4 May 1989. The letter was signed by the defendant's finance director and omitting formal parts was in these terms:

"We advise that ENT is the beneficial owner of 50% of the

issued voting share capital of Filmpac Holdings Limited

('Filmpac') and confirm to you that we are aware of, and

approve of the proposed agreement (a copy of which is

attached) ('the Agreement') that Filmpac is proposing to

enter into with you to acquire the rights to distribute a

Package of Nine Films on the terms set out therein.

In order to induce Rank Film Distributors Limited to enter

into the Agreement with Filmpac (and in consideration

thereof) ENT agrees that it will not without the consent of

Rank Film Distributors Limited reduce its percentage holding

of share capital in Filmpac as long as any part of the total

Minimum Guarantee payable under the Agreement remains unpaid

and that it is interested in the continuing successful

operation of Filmpac. ENT further agrees that it will ensure

that Filmpac is at all times maintained in a viable position

to meet all its financial obligations to you including all

monies owing to Rank Film Distributors Limited under the

Agreement made with Filmpac Holdings Limited and that such

obligations will be met.

This letter will be governed by and construed in accordance

with English Law."

12. In the statement of claim the plaintiff alleges that by the undertaking the defendant promised and agreed that:

(a) it would ensure that Filmpac was at all times maintained

in a viable position to meet all its financial obligations to

the plaintiff, including all money owing to the plaintiff

under the agreement; and

(b) it would ensure that all the financial obligations owed

by Filmpac to the plaintiff would be met.

13. Filmpac did not meet some of its financial obligations to the plaintiff under the agreement. It went into liquidation and has since been deregistered. The plaintiff claims that the defendant breached its promises and agreements by not ensuring that Filmpac was maintained in a viable position to meet all its financial obligations to the plaintiff, including all money owing to the plaintiff under the agreement, and by not ensuring that all Filmpac's financial obligations to the plaintiff were met. The plaintiff has sued the defendant for its loss. In the alternative the plaintiff has based its claim on the Trade Practices Act 1974 (Cth), s52, asserting that the representations made by the defendant in the letter were misleading or deceptive, or likely to mislead or deceive, and induced the plaintiff to enter into the agreement with Filmpac.

14. The defence simply denies the material facts asserted in the statement of claim. However, affidavit evidence explains that the defendant has declined to honour the letter of comfort on the basis that it is binding in honour only.

15. All of the applications seek an order that the person named in it, not being a party to the action, "produce for inspection and copying by the Plaintiff's legal advisers at an address to be determined by the Court" certain documents. The description of the documents is in some cases general and in some cases specific. Counsel for the plaintiff submitted that I have jurisdiction to make the orders under both the Evidence Act 1910, s26 and the Rules of Court O56, r4. Section 26 is in these terms:

"26 (1) Any party to any proceeding shall be at liberty to

apply to a court or judge, or person acting judicially, for

a rule or order for the inspection by himself, or by his

witnesses, or by the jury, of any real or personal property

the inspection of which may be material to the proper

determination of the question in dispute or the making of

any inquiry. It shall be lawful for the court or a judge, or

such person as aforesaid, if it or he think fit, to make such

rule or order upon such terms as to costs and otherwise as

such court, judge, or person may direct.

Provided always, that nothing in this section contained shall

affect the provisions of any Act as to obtaining a view by

jury.

(2) Whenever any proceeding shall be pending in the Supreme

Court in any jurisdiction, or in any court under the Local

Courts Act 1896, the court or a judge thereof may, upon the

application of any party to the proceeding, compel the

opposite party to allow the applicant to inspect all

documents in the custody or under the control of such

opposite party relating to the proceeding, and, if necessary

to take examined copies of the same, in all cases in which

prior to 6th October 1853 a discovery might have been

obtained by filing a bill or by any other proceeding in a

court of equity at the instance of such applicant."

16. Documents plainly fall within the description of "personal property" and there is nothing in subs(1) to limit property which may be inspected pursuant to a rule or order under it to property owned, possessed or controlled by a party to the litigation. That the subsection should not be so limited is supported by the provisions of subs(2) which are expressly limited to inspection and copying of documents in the custody or control of a party to the proceedings.

17. There is ample authority for the proposition that the Evidence Act 1910, s26(1) authorises the making of an order for the inspection of property in the ownership or possession of a person who is not a party to the proceedings. It was so held by the New South Wales Court of Appeal in Persson v Heathwoods Pty Ltd (1967) 68 SR(NSW) 27 with regard to the Common Law Procedure Act 1899 (NSW), s104(1) which was similarly worded in material respects. It has been so held with regard to documents. Evatt v Australian Consolidated Press Ltd (1970) 1 NSWR 97; Barton v Australian Consolidated Press Ltd (1970) 3 NSWR 141; Nathan v MJF Constructions [1986] VicRp 8; (1986) VR 75. I propose to follow those authorities and apply them to s26(1).

18. In Grapulin v Cartons and Corrugated Papers Pty Ltd (1961) SR(NSW) 348 it was held by the Full Court that the authority given by the Common Law Procedure Act 1899 (NSW), s104 for an order "for the inspection by the jury or by such party or by his witnesses" extended to the making of an order allowing inspection of the property by the party personally, the party in that case being a woman who was the plaintiff, but did not extend to the making of an order authorising inspection by her counsel or solicitor. Although I should normally follow the Full Court of another State, I am persuaded by the force of what fell from Nicholson J in Nathan v MJF Constructions [1986] VicRp 8; (1986) VR 75 at 82 that in the case of an application under s26(1) by a party which is a corporation, the order may authorise inspection by that corporation's servants or agents. Nicholson J said:

"Before leaving the discussion of s13 it is, I think,

necessary to touch upon the actual decision of the New South

Wales Full Court in Grapulin's Case. In that case, the Court

decided that the word 'party' appearing in s104 was confined

to the litigants themselves and did not extend to their

counsel, solicitors or agents. With the greatest of respect

to the distinguished members of that Court, I find myself

unable to accept or follow that decision, in so far as it

might be said to apply to s13 of the Victorian Act. In my

view, to confine the meaning of the word 'party' to the

litigant in person is unwarranted, and in the case of a

corporation unworkable, and I cannot accept that the

legislature intended such a result ... I am not prepared to

follow that decision."

19. Order 56, rr 4, 6 and 7, so far as they are relevant, are:

"4 The Court or a judge may, upon the application of any

party to a cause or matter, and upon such terms as may be

just, make any order for the detention, preservation, or

inspection of any property or thing, being the subject of

such cause or matter, or as to which any question may arise

therein, and, for all or any of the purposes aforesaid, may

authorize any persons to enter upon or into any land or

building in the possession of any party to such cause or

matter, and, for all or any of the purposes aforesaid, may

authorize any samples to be taken, or any observations to be

made or experiment to be tried, which may be necessary or

expedient for the purpose of obtaining full information of

evidence.

6 The provisions of rule 4 of this Order shall apply to

inspection by a jury ...

7 (1) An application for an order ... under rules 3 or 4 of

this Order, may be made to the Court or a judge by any party.

(2) If the application is by the plaintiff ... for an order

under rules 3 or 4 of this Order, it may be made after notice

to the defendant at any time after the issue of the writ of

summons, and, if it be by any other party, then on notice to

the plaintiff and at any time after appearance by the party

making the application."

20. There are conflicting authorities concerning whether an order may be made under r4 permitting inspection of property in the possession of a person who is not a party. In England it was held by the Court of Appeal in Shaw v Smith (1886) 18 QBD 193 that a similar rule did not even authorise the inspection by one defendant of the property of another defendant if there were no rights which had to be adjusted between them in the action and to which such inspection was material. Lindley J agreed that a literal reading was to the contrary but considered at 200 that:

"The right to discovery or inspection must have some

foundation and must depend on some other right. It cannot

exist, I think, apart from any community of interest or any

question of rights to be adjusted between the parties. The

mere fact that persons are co-defendants does not give the

right, as it appears to me, in the absence of any community

of interest or right to be adjusted between them".

21. However in Penfold v Pearlberg (1955) 1 WLR 1068 Roxburgh J, without referring to or being referred to Shaw v Smith, held that the English O50, r3, which was substantially the same as the Tasmanian O56, r4, plainly authorised the making of an order for the inspection of land in the possession of a person who was not a party to the action. The decision was arguably weakened by the fact that the order was made against a party to the action and was expressed to be subject to the consent of the person in possession.

22. In Nathan v MJF Constructions [1986] VicRp 8; (1986) VR 75 Nicholson J held that the Victorian O50, r3, which is virtually identical to the Tasmanian r4, gave power to order inspection of documents in the possession of a third party. In Hyland v AGC (Wholesale) Pty Ltd [1983] VicRp 18; (1983) VR 222 Murphy J was more concerned with the aspect of preserving property when he made an order that a non-party should not destroy or part with possession of certain documents and his Honour declined to make an order permitting inspection of those documents on an ex parte basis.

23. It has however been held by other courts that there is no power in rules similar to r4 to make orders against non-parties. It was so held in Lascelles v Wellington Newspapers Ltd (1981) 1 NZLR 440 where Davison CJ said that no authority had been cited for permitting the making of an order directly against a non-party and his Honour referred to Shaw v Smith (supra). In Thiess v TCN Channel Nine Pty Ltd (No2) (1992) 1 Qd R 237 Shepherdson J held that the Queensland O58, r1, which is virtually identical to O56, r4, did not authorise the making of an order for inspection against a person who was not a party to the litigation, relying on Shaw v Smith, Lascelles v Wellington Newspapers Ltd and Douihech v Findlay (1990) 1 WLR 269 in preference to Penfold v Pearlberg (1955) 1 WLR 1068, Hyland v AGC (Wholesale) Pty Ltd and Nathan v MJF Constructions.

24. I tend to the view that r4 does authorise the making of an order concerning property owned or possessed by a non-party but at the same time it seems to me that the occasions upon which such an order might be authorised will be less than the occasions on which an order for inspection against a non-party might be made under the Evidence Act 1910, s26(1). Prima facie, r4 is directed to the "detention, preservation, or inspection" of property which is "the subject of such cause or matter, or as to which any question may arise therein". On the other hand, s26(1) provides the basis for the making of an order as whether the inspection of the property "may be material to the proper determination of the question in dispute" in the proceedings. In my view if the plaintiff cannot obtain inspection under s26(1) in this case, it will necessarily fail to obtain an order for inspection under r4 because of the limitations on the power to make an order for inspection in that rule. It is therefore unnecessary for me to determine whether r4 authorises the making of an order against a non-party for the inspection of documents owned or possessed by that non-party.

25. The application seeks an order that within ten days Mr Sherman produce for inspection and copying by the plaintiff's legal advisers, at an address to be determined by the court, all telexes, letters, facsimiles, file notes, notes of telephone conversations, memoranda, working papers, diaries, notes of meetings, and any other documents which are in his possession, custody or power, referring or relating to the letter sent by the defendant ENT, to the plaintiff Rank, dated 4 May 1989, (the letter of comfort), and without prejudice to the generality of the foregoing a deed of indemnity between Filmpac, Mr P F Sherman, Mr R F Ward and Mr P Gwynn and the defendant in return for the letter. The application also seeks an order that the costs of and incidental to the application as between the plaintiff and Mr Sherman and the provision of conduct money be provided for and that the costs of and incidental to the application as between the plaintiff and the defendant (including those costs of the plaintiff to Mr Sherman) be costs in the cause.

26. The defendant has provided the plaintiff with discovery of documents and as a result the plaintiff has learned much of what transpired between Filmpac and the defendant leading to the letter of comfort. By letter dated 13 January 1989 Mr Sherman, who was the chairman of directors of Filmpac, wrote on Filmpac's letter-head to Mr McQuestin, the managing director of the defendant, advising that Filmpac had the opportunity of acquiring distribution rights to pictures from the plaintiff. The plaintiff had initially required a bank guarantee for Filmpac's liabilities which would be created under a distribution agreement. Mr Sherman advised that "short of this security, they would like a guarantee from the shareholders of Filmpac and we have left them with the idea that we will provide them with some type of wording from ENT, that 'comforts' Rank but we do not have any shareholders' guarantee in mind". Mr Sherman asked that the defendant consider providing a "letter of comfort" to the plaintiff and advised that he believed that the plaintiff might find it acceptable. Mr Sherman said that he would not ask ENT to provide a guarantee and that "a 'letter of comfort' which is not a legal contingent liability is as much as I would request of you".

27. By letter dated 6 February 1989 Mr Sherman wrote once again on Filmpac's letter-head to the defendant's finance director advising that Rank had "pushed very hard on a guarantee by ENT, but I insisted on the letter of comfort as the best we could offer, and accordingly sent them the letter of comfort in the wording that you signed for the NAB". He also advised that the plaintiff had responded with the wording for a letter of comfort and Mr Sherman enclosed it with the letter stating that Rank had asked that it be executed simultaneously with a formal agreement (presumably between the plaintiff and Filmpac) and that the letter of comfort be accompanied by a certified copy of the relevant resolution of the defendant's Board.

28. The minutes of a meeting of the board of directors of Filmpac held on 14 February 1989 record that one of the directors, Mr E A Rouse, who was also the chairman of directors of the defendant, tabled an opinion from the defendant's lawyers "commenting on the proposed draft letter of comfort that Rank Distributors are seeking from ENT. The suggested changes were discussed and agreed upon and would be provided to Rank to seek their agreement". Further facts concerning that meeting are dealt with when I consider the application to Blake Dawson Waldron.

29. By letter sent by facsimile from California on 19 February 1989 Mr Sherman wrote to the defendant's finance director advising that the plaintiff would not accept an amendment to the letter of comfort whereby the words "it is our policy" would replace the words "it will ensure" in the second sentence in the second paragraph and that "unfortunately" the plaintiff was insistent on this point. Mr Sherman said that "if it assists you, Paul, Robert and I will personally give you a 'back to back' letter in exactly the same terms as you give to Rank". I take the reference to Paul and Robert to be to Mr Gwynn and Mr Ward who were fellow directors of Filmpac. The relevant part of the letter concluded by Mr Sherman stating his belief that "this point is a break point in the negotiations with Rank" and that "Rank believe they have given considerable ground to accommodate us and will go no further".

30. The "letter of comfort" having been given, the minutes of a meeting of the defendant's directors on 25 May 1989 record a resolution to approve the affixing of the defendant's common seal to a:

"Deed of Indemnity between Filmpac Holdings Ltd, P F Sherman,

R F Ward and P Gwynn to ENT Limited in return for a Letter of

Comfort dated May 4, 1989 in favour of Rank Film Distributors

Ltd for a total of US$4,000,000."

31. All of the documents to which I have referred, with the exception of the deed of indemnity referred to in the minutes of the meeting held on 25 May 1989 have been discovered by the defendant to the plaintiff and made available by the defendant for the plaintiff's inspection. On 1 June 1993 the plaintiff's solicitors wrote to the defendant's solicitors asking inter alia that the defendant discover the deed of indemnity and any correspondence relating to it. On 22 July 1993 the defendant's solicitors replied saying that "as a result of all proper enquiries our client has been unable to locate the document, or any correspondence relating thereto."

32. There is no evidence tending to suggest that Mr Sherman has possession or control of any documents of the nature the plaintiff seeks to have him ordered to produce. There is no evidence of any communication made with him on behalf of the plaintiff in an attempt to ascertain what if any documents he might be able to produce. In this connection I note however that I should not take into account, as admissible evidence, the letter to the Registrar which appears on the court file, purportedly from Mr Sherman, which says "I have no documents whatsoever relating to this matter". There is no evidence to suggest that Mr Sherman could produce for inspection, to adopt the words of the Evidence Act 1910, s26(1), "property the inspection of which may be material to the proper determination of the question in dispute". I ought not make an order under s26(1) for the inspection of property unless persuaded that it may be material to the proper determination of the question or questions in dispute in the action. If I made the order sought by the plaintiff I would be doing so blindly, not knowing whether Mr Sherman has documents of the kind sought which are material and which the order would cause to be produced.

33. The order sought by the plaintiff is in very wide terms. Indeed it is in the nature of a general order for discovery and that is not authorised by the terms of s26(1), which gives me jurisdiction to make an order for the inspection of property. Although the section extends to inspection of property in the possession or control of a person who is not a party to the action there should, at least in the usual case, be some evidence to show that the property is in the possession or control of that person, and that it is material in the sense required by the subsection, before he or she is ordered to produce it.

34. I am not persuaded that this is an appropriate case, on the evidence, for the making of an order under s26(1). The application will be dismissed.

35. Ernst and Young are chartered accountants. The application, in its amended form, seeks an order that within ten days the proper officer of Ernst and Young produce for inspection and copying by the plaintiff's legal advisers at an address to be determined by the court all telexes, letters, facsimiles, file notes, notes of telephone conversations, memoranda, working papers, notes of meetings, and any other documents coming into existence between 17 November 1989 and 11 December 1989 which are in its possession, custody or power, referring or relating to a letter sent by Ernst and Young to the defendant dated 11 December 1989 and the report provided by Ernst and Young of the same date. Orders providing for costs and conduct money are also sought.

36. The evidence shows that Ernst and Young were the auditors of the defendant and Filmpac at the relevant times. The defendant has discovered to the plaintiff a letter dated 11 December 1989 from Ernst and Young to the defendant's finance director to which was attached a copy of a report of Ernst and Young in respect of Filmpac. The report was also dated 11 December 1989. It said that it was prepared for the directors of Filmpac and the defendant. The report related to the bad financial position of Filmpac, whether and in what circumstances it might continue to trade and the effect on it should a receiver and manager be appointed. Counsel for the plaintiff referred to par4.6 of the report which contained the following:

"In view of the anticipated substantial shortfall that would

arise in this situation, it is highly likely that the Bank

will call upon ENT to make up any deficiency under the letter

of comfort issued by ENT on behalf of Filmpac. We understand

that ENT has sought its own legal advice on its potential

liability under this scenario. Our understanding is that any

attempt by the Bank to obtain payment by ENT under the letter

of comfort would be strenuously defended by ENT. We have not

attempted to assess the likely chances of being able to

defend any action that might be taken by the Bank other than

to comment that there must be an element of risk involved,

together with substantial associated legal costs. The Bank

would pursue any guarantors personally for any remaining

shortfall."

37. The letter of comfort referred to could not be the one which is the subject of this action for the latter is addressed to the plaintiff and not to any bank. The plaintiff's causes of action against the defendant are based on the defendant's agreements and undertakings allegedly contained in the defendant's letter of comfort dated 4 May 1989 which was addressed to the plaintiff. If the defendant is liable to the plaintiff it will only be liable for whatever it did prior to or on 4 May 1989. Nothing which occurred thereafter could amount to a cause of action against the defendant as the basis for this action.

38. Under the Evidence Act 1910, s26(1) I have jurisdiction to order the inspection of property which may be material to the proper determination of the questions in dispute. There is no evidence that Ernst and Young have any documents of the nature sought which would or might be so material. The application seeks only documents which came into existence between 17 November 1989 and 11 December 1989, over six months after the date of the letter of comfort from the defendant to the plaintiff. Insufficient materiality has been shown by the plaintiff to justify the exercise of my jurisdiction under s26(1). The application addressed to Ernst and Young will be dismissed.

39. The application seeks an order that within ten days the managing partner of Blake Dawson Waldron produce for inspection and copying by the plaintiff's legal advisers at an address to be determined by the court, a letter of advice from Blake Dawson Waldron to the defendant dated 13 February 1989 which was tabled at a board meeting of Filmpac held on 14 February 1989, and any enclosures thereto and any letter or other document to which that letter was responding. Orders providing for costs and conduct money were also sought.

40. The document which was tabled at the Filmpac board meeting was a copy of a letter sent by Blake Dawson Waldron to their client, the defendant. On the evidence Blake Dawson Waldron are unlikely to have possession of it and to be able to produce it. However they might be able to produce their own copy of the letter and the original of the letter from the defendant to which that letter was responding. I will assume that the plaintiff intends to have the solicitors produce those documents.

41. As previously noted by me when dealing with the application directed to Mr Sherman, it appears from the minutes of a Filmpac board meeting held on 14 February 1989 that a director, Mr E A Rouse, who was also the defendant's chairman, "tabled an opinion from the lawyers to ENT, commenting on the proposed draft letter of comfort that Rank Distributors are seeking from ENT. The suggested changes were discussed and agreed upon and would be provided to Rank to seek their agreement". According to the minutes seven persons were present. Five of them were directors of Filmpac and of them two were also directors of the defendant, Mr E A Rouse, the defendant's chairman of directors and Mr D McQuestin, the defendant's managing director. Also recorded as being "in attendance" were Mr R Booth, Filmpac's secretary, and Mr B Clark, who was the defendant's finance director. The defendant owned all of the shares in Associated Broadcasting Services Ltd which in turn owned 50 percent of Filmpac.

42. In the course of discovery of documents the defendant disclosed to the plaintiff an undated and unsigned memorandum entitled "Comparison of Receivership and Wind Down" which contains the following passage:

"The difference to Filmpac between an immediate Receivership

and an orderly wind down is $5 million, excluding payment of

interest. In addition to this, there is an additional

commitment by ENT to Rank of at least $2.5 million under the

comfort letter.

Unfortunately, I believe it is recognised that the Rank

comfort letter is even stronger than the one to the NAB, and

is probably enforceable. I refer to the advice by Blake

Dawson Waldron as set out in their letter of 13th February,

1989."

43. The plaintiff says that there is good reason to believe that the letter dated 13 February 1989 from the solicitors, Blake Dawson Waldron, to their client, the defendant, advised that the proposed letter of comfort would be enforceable by the plaintiff against the defendant.

44. In an affidavit by Mr Germano, the finance manager of the defendant, it is stated that a letter dated 10 February 1989 was forwarded from Mr Brian Clark, then a director of the defendant, to Blake Dawson Waldron by facsimile transmission for the sole purpose of obtaining legal advice. In response the defendant received the letter of advice dated 13 February 1989 from Blake Dawson Waldron. The defendant claims legal professional privilege in relation to its letter of 10 February 1989 and Blake Dawson Waldron's letter dated 13 February 1989 and maintains that it has not and does not waive that claim of privilege. An affidavit of Mr J M Kriewaldt, a partner in Blake Dawson Waldron, generally confirms the circumstances in which the letter of 13 February 1989 was provided, and in particular that the sole purpose of it was to give legal advice.

45. Counsel for the plaintiff conceded that the correspondence which passed between the defendant and its solicitors was originally the subject of legal professional privilege and that in order to obtain production of the documents the evidence must show that the defendant has waived its right to that privilege. He submitted that the evidence does show a waiver and he pointed to the fact that there is nothing in Mr Kriewaldt's affidavit (or Mr Germano's) to explain why the copy of the letter from Blake Dawson Waldron was tabled at Filmpac's board meeting. No claim has been made by the defendant that the tabling was inadvertent or a mistake. The contents of the letter of advice from Blake Dawson Waldron were therefore produced and disclosed to a third party, Filmpac, by whom the legal advice was not sought and to whom it was not given.

46. Counsel for the defendant submitted that there was no explicit waiver of the privilege which was attached to the communication to the defendant from its solicitors and no waiver should be implied or inferred. He pointed to what he described as the commonality of interest each of those at the meeting had.

47. When legal professional privilege applies, it enables the client to keep the communication from disclosure. Because there arises a conflict between the public interest in ensuring the availability of all relevant evidence in a particular case and the public interest in the administration of justice through effective legal representation, the privilege is confined within strict limits. Grant v Downs [1976] HCA 63; (1976) 135 CLR 674 at 685. The limiting effect of legal professional privilege on the availability of evidence otherwise relevant is confined by (inter alia) the doctrine of waiver. A litigant can waive his privilege directly through intentionally disclosing protected material. It is the plaintiff's argument that this is such a case. A litigant can also lose the protection through a waiver by implication, which occurs when, by reason of some conduct on the privilege holder's part, it becomes unfair to maintain the privilege. Attorney-General for the Northern Territory v Maurice [1986] HCA 80; (1986) 161 CLR 475 at 487. This is not a case of implied waiver, nor is it a case of inadvertent or unintentional disclosure of a privileged communication as was the case in Hooker Corporation Ltd v Darling Harbour Authority (1987) 9 NSWLR 538. If it was, questions of fairness might arise.

48. In my opinion the defendant's claim to a "common interest" privilege should succeed. Such a claim was recognised in Buttes Gas and Oil Co v Hammer (No 3) (1981) QB 223 and was explained in Bulk Materials (Coal Handling) Services Pty Ltd v Coal and Allied Operations Pty Ltd (1988) 13 NSWLR 689. In the former case at 267 Brightman LJ said that "if two parties with a common interest and a common solicitor exchange information for the dominant purpose of informing each other of the facts, or the issues, or advice received, ... the documents or copies containing that information are privileged from production in the hands of each." I agree with Giles J in Bulk Materials (Coal Handling) Services Pty Ltd v Coal and Allied Operations Pty Ltd (supra) at 695 that there is no need for a common solicitor for a "common interest" privilege to be successfully maintained.

49. The common interest the defendant and Filmpac had in the advice received by the defendant from its solicitors was in securing for Filmpac, for the perceived benefit of Filmpac and the defendant, a distribution agreement with the plaintiff upon such terms and conditions, and subject to such undertakings from the defendant to the plaintiff, as might be negotiated with the plaintiff by Filmpac on its own behalf and on behalf of the defendant. Indeed the evidence suggests that Filmpac acted as an intermediary and as an agent for the defendant in the negotiations with the plaintiff and on that basis alone it is arguable that there was no waiver of privilege by the defendant. A company can only act by its servants and agents and the disclosure of the contents of the letter of advice to Filmpac might be said to be disclosure to its agent for the purposes of the defendant's negotiations, through the agency of Filmpac, with the plaintiff.

50. For these reasons the application directed to Blake Dawson Waldron will be dismissed.

51. The application to the bank seeks an order that within ten days the proper officer of the bank produce for inspection and copying by the plaintiff's legal advisers at an address to be determined by the court:

(a) all documents in its possession or control being or

evidencing the terms of the following facilities and/or any

extension thereof granted to Filmpac by the bank:

$

Multi-Option Credit Facility 2,300,000

Overdraft 1,000,000

Bills/Accepted/Discounted and/or Overdraft 4,000,000

Guarantee by the Bank 950,000

Fully drawn Advance and/or Bills

Accepted/Discounted 1,700,000

Standby Line of Credit 300,000

Staff Mastercard Allocation 50,000

Foreign Exchange Facility 3,000,000

13,300,000

(b) A letter dated 18 October 1988 from Associated

Broadcasting Services Ltd ("ABS") to the bank as support for

the facility (sic) granted to Filmpac by the bank.

(c) All documents coming into existence between 1 July 1988

and 1 July 1990 including correspondence, notes and working

papers referring or relating to that letter including

without prejudice to the generality of the foregoing:

(i) negotiations between the bank, the defendant, ABS and

Filmpac or any of them concerning that letter;

(ii) the drafting of that letter;

(iii) demands made by the bank requiring payment to be made

pursuant to that letter and/or any or all of the facilities

listed in par(a) above.

52. Orders providing for costs and conduct money were also sought.

53. Certain facts were stated in pars13 and 14 of an affidavit of the plaintiff's solicitor, Mr Lloyd. Counsel for the bank objected to them claiming that they were irrelevant. Counsel for the plaintiff claimed that they were relevant and formed the basis of the plaintiff's application to the bank. It is appropriate that I receive them into evidence and I will do so. If they justify the granting of the plaintiff's application then they are relevant.

54. Mr Lloyd did not state how he had come to know some of the facts in his affidavit. The application is an interlocutory one and by the Rules of Court, O41, r3(1) a deponent is not confined to stating facts within his or her own knowledge provided that he or she states the source of his or her information and the grounds of his or her belief. Some of his affidavit did not comply with that rule. However no objection was taken by anyone to his evidence being received on that basis.

55. By his affidavit Mr Lloyd attested that the bank was Filmpac's banker and in the course of providing the various facilities listed above, the bank obtained a letter of comfort from ABS as Filmpac's parent. He did not state the date of that letter of comfort and there is no evidence to suggest it was dated 18 October 1988, as suggested in the application, or any other date. Mr Lloyd referred in his affidavit to some documents, which suggest to me a conclusion that the defendant, ENT, provided the bank with a letter of comfort rather than ABS.

56. In the letter dated 6 February 1989 from Mr Sherman (chairman of Filmpac) to the defendant's finance director he said:

"Rank have finally agreed to accept the comfort letter

essentially with the same wording as your letter to the

National Australia Bank for our general borrowings.

We had tried them out on different concepts such as that

mentioned by Edmond, "(presumably this is a reference to Mr E

A Rouse, a director of Filmpac and chairman of directors of

the defendant) "but at the end of the day the best we could

get was the comfort letter.

They pushed very hard on a guarantee by ENT, but I insisted

on the letter of comfort as the best we could offer, and

accordingly sent them the letter of comfort in the wording

that you signed for the NAB.

They have responded today with the wording in the form set

out in the enclosed letter and I hope you are in agreement

with it."

57. Also in the course of discovery the defendant disclosed a memorandum dated 16 June 1989 from its finance director, Mr B J Clark, to two of its directors, Mr E A Rouse and Mr D M McQuestin. The memorandum contained Mr Clark's "proposal" concerning Filmpac. It referred to "our current exposure to Filmpac" as including:

"Letter of Comfort to National Bank 10,000,000

Letter of Comfort to Rank US$4 million @ 75c 5,300,000"

58. Part of Mr Clark's proposal was to transfer "our shares in Filmpac to them at a nominal value". It is not clear who "them" were. Mr Clark also proposed "that we are discharged from our Letters of Comfort to the National Bank and to Rank (this may be achieved by them arranging another partner)."

59. In the Ernst and Young report of 11 December 1989 to the defendant, to which I made mention earlier, reference was made to the likelihood of "the Bank" calling upon the defendant "to make up any deficiency under the letter of comfort issued by ENT on behalf of Filmpac" and to the understanding that the defendant would strenuously defend any attempt to obtain payment from it under that letter.

60. All of this evidence suggests that the defendant had provided an earlier letter of comfort to the bank. The only reference to a letter of comfort from ABS is in Mr Lloyd's affidavit. There is no evidence that a letter from ABS to the bank, and documents relating to it and to the facilities it supported, have any relevance to the issues arising in this action between the plaintiff and the defendant to the extent that they may be material to the proper determination of the questions in dispute. On the basis of the evidence insufficient materiality has been shown by the plaintiff to justify the exercise of my discretion under s26(1) and the granting of the application. I speculate that the application and Mr Lloyd's affidavit may have erroneously referred to ABS as the author of the letter of comfort instead of ENT. But I can do no more than speculate about that.

61. However at this stage I do not propose to dismiss the application against the bank. Counsel for the bank did not raise the basis upon which I have determined that the application should not be granted. Instead his submissions were expressed as if the application was seeking inspection of a letter of comfort from the defendant to the bank and documents relating to it. The plaintiff's counsel addressed no submissions concerning the basis upon which I have determined that the application should not be granted and I am prepared to allow such submissions to be made. The further hearing of the application will therefore be adjourned to a date to be fixed..

62. I have so far found it unnecessary to deal with the grounds upon which counsel for the bank submitted I should exercise my discretion against the plaintiff.