MATTER : IN THE MATTER of Computer Accounting and Tax Pty Ltd (ACN 009 470 491) (in liq)

MERVYN JONATHAN KITAY in his capacity as liquidator of COMPUTER ACCOUNTING AND TAX PTY LTD (in liq)

Practice and procedure - Party to proceedings obtaining access to affidavit marked 'confidential' - Whether orders should be made for delivery up of copies of confidential affidavit

1 MASTER SANDERSON: By interlocutory process lodged 25 November 2013, the applicant seeks certain orders in relation to a confidential affidavit lodged with the court. To understand the nature of the application it is first necessary to detail the relevant background facts.

2 The applicant is the liquidator of Computer Accounting and Tax Pty Ltd (in liquidation) (CAT). On 11 January 2012, in support of an application for orders under s 477(2B) of the Corporations Act 2001 (Cth), the liquidator filed a confidential affidavit sworn 5 January 2012, which attached, amongst other things, two detailed letters of advice regarding the prospects of a potential claim against the directors of CAT namely, Mr and Mrs Frigger.

3 On 17 January 2012, Acting Master Chapman made orders to the effect the confidential affidavit and the annexures thereto were to 'remain in the court file in a sealed envelope marked confidential, such confidential affidavit not to be accessed by any person without order of this honourable court'. In circumstances where a liquidator is seeking approval of the court, such confidentiality orders are routinely made. It is not difficult to understand why.

4 Notwithstanding the confidentiality orders, in July 2013 Mrs Frigger obtained access to the confidential affidavit and in particular the privileged materials. The applicant says serious prejudice has been suffered by him as a consequence of the breach of the confidentiality orders. By this application, the liquidator seeks to minimise future prejudice to the extent possible. Some further background facts are necessary to flesh out the liquidator's position.

5 The liquidator was appointed as a provisional liquidator of CAT on 21 January 2010. He was appointed a liquidator of CAT on 6 May 2010. At the time of the appointment Mr and Mrs Frigger were the directors and sole shareholders of CAT. There is a long history of acrimony between, on the one hand, Professional Services of Australia Pty Ltd who applied to wind up CAT and the liquidator, and on the other hand, the Friggers. Over the last six years there have been a series of judgments delivered by various members of this court in relation to various proceedings between the parties.

6 Of particular significance are proceedings commenced by Mr and Mrs Frigger in November 2010. The respondent in these proceedings was the liquidator of CAT and also CAT. The Friggers sought orders regarding certain property in the name of CAT which they claimed. The liquidator procured an offer to fund the defence of the Frigger proceedings and pursue a counterclaim against the Friggers. Due to the fact that the proposed litigation funding agreement was likely to last more than three months, leave of the court to enter into such an agreement was required under s 477(2B) of the Corporations Act. An application for such leave was made in the current proceedings on 6 January 2012. It was supported by two affidavits of the liquidator. One of these was the confidential affidavit which, apart from the privileged materials, also annexed a copy of a litigation funding agreement.

7 There is no question but that the liquidator acted properly in providing to the court copies of the privileged materials. When granting leave under s 477(2B), the court is to have regard to the prospects of success of the proceedings which it is proposed will be funded: see Leigh Re King Bros [2006] NSWSC 315. The orders of Acting Master Chapman gave the liquidator authorisation to enter into the litigation funding agreement. The liquidator thought the orders of the Acting Master would protect the confidentiality of the privileged material. The liquidator then entered into the litigation funding agreement and has been pursuing the counterclaim.

8 In July 2013, a dispute arose in the Frigger proceedings as to whether the liquidator/CAT was, in light of the terms of the litigation funding agreement, entitled to an award of costs in relation to an interlocutory application by the Friggers which had failed. In order to avoid the risk that the terms of the litigation funding agreement precluded such an award of costs, the liquidator decided to vary the litigation funding agreement. To this end, a further application was made under s 447(2B) for the court to approve the proposed variation. That application was made on 4 July 2013. On 26 July 2013, McKechnie J made orders authorising the variation of the litigation funding agreement.

9 On 26 June 2013 that is, prior to the hearing before McKechnie J the solicitors for the liquidator in the Frigger proceedings wrote to Mrs Frigger advising of the intention to apply for a variation of the litigation funding agreement. (It is to be noted the solicitors acting for the liquidator in this application are not the same as the solicitors acting for the liquidator in the Frigger proceedings. Those solicitors are the firm of Holborn Lenhoff Massey.) The giving of such notice while not mandated by s 477(2B) was probably appropriate. In any event the giving of such notice could not be regarded as in any way prejudicing the liquidator's position.

10 In the course of the hearing before McKechnie J on 26 July 2013, his Honour could not locate a copy of the confidential affidavit on the court file. A copy of the transcript of the hearing before McKechnie J appears as annexure MJK1 to the affidavit of Mr Kitay filed in support of this application and dated 25 November 2013. While the fact the confidential affidavit was missing was at the time thought strange and unfortunate, nothing sinister was suspected.

11 On 7 August 2013 Mrs Frigger swore an affidavit in the Frigger proceedings which attached a copy of the confidential affidavit. Mrs Frigger had obtained access to the confidential affidavit. The liquidator made inquiries of the Supreme Court Registry. On 9 September 2013, the Principal Registrar advised the liquidator's solicitors it appeared Mrs Frigger had obtained a copy of the confidential affidavit from the court file. Inquiries had not revealed how this happened. There was no record of the Registry staff providing copies of any affidavit to Mrs Frigger. Numerous requests were made to Mrs Frigger asking her how she came to be in possession of the confidential affidavit. She did not respond. Finally, in an affidavit of February 2014 Mrs Frigger explained that after she received the letter from Holborn Lenhoff Massey advising her of the application to enter into the amended litigation funding agreement, she requested an opportunity to inspect the court file. She says the confidential affidavit was on the file. She read it and requested a copy from the court staff. This was provided. At no time did she understand what was meant by 'confidential affidavit': see par 12 of Mrs Frigger's affidavit of 14 February 2014.

12 Before proceeding further I should note two points. First, this application is not concerned with any breach by Mrs Frigger of the confidentiality orders. It must be said there are real questions about her conduct. The confidential affidavit is so entitled. There was on the file a copy of the confidentiality orders. Further and perhaps most importantly, in their letter of 26 June 2013 to Mrs Frigger, the liquidator's solicitors advised Mrs Frigger confidentiality orders had been made and she was not entitled to access the affidavit. Yet in these circumstances Mrs Frigger maintains when she came across the affidavit on the file she was unaware it was not available for inspection.

13 Second, the liquidator acknowledges that in the main the damage occasioned by inspection of the confidential affidavit and access to the privileged materials cannot be undone. The orders sought seek to limit the damage occasioned to the liquidator so far as possible.

14 In his written submissions, counsel for the liquidator spent some time reviewing the relevant authorities and establishing the legal foundation upon which this application is made. It is not necessary to review those authorities in the circumstances of this case. It is enough to say this court has inherent jurisdiction to manage its own processes. Prima facie breach of an order such as the confidentiality order made in this case requires action. Not to take such action would run counter to the interests of justice and would bring administration of the law into disrepute. But before making any orders, it is appropriate to give careful consideration to Mr and Mrs Frigger's position. When the liquidator's application was filed it was given a return date of 3 December 2013. The matter was adjourned to 5 December 2013. At that hearing, the liquidator was represented by counsel and Mrs Frigger attended. I made orders that Mr and Mrs Frigger had until 31 January 2014 to file any affidavit in opposition to the application. The matter was listed for a special appointment and the parties were directed to provide their unavailable dates. Eventually the matter was listed on 17 March 2014. At the commencement of the hearing, Mrs Frigger applied for an adjournment. I rejected the application and indicated I would provide reasons for doing so. These are those reasons.

15 Based upon the time provided to Mrs Frigger to file any affidavit material, the matter could not be listed before February 2014. Generally I asked the parties to provide their unavailable dates by close of business on the day on which I made the order that is, 5 December 2013. I may or may not have made such a request in this case. Either way, despite numerous requests Mrs Frigger did not provide unavailable dates until some time in January. When the dates were provided there were only two or three dates in February on which Mrs Frigger and her counsel of choice were available. I was unavailable on the dates specified by Mrs Frigger. Further requests were made. Mrs Frigger was tardy in providing a response. There is no question but that Mrs Frigger's inaction and prevarication delayed the listing of the matter. All this at a time when a matter of serious concern was outstanding. No real explanation was provided by Mrs Frigger as to why she had not provided unavailable dates and how it was the date set for the hearing was not suitable. In the circumstances I was not satisfied there was any justification at all for an adjournment being granted.

16 At the conclusion of submissions by counsel for the liquidator, Mrs Frigger asked for the opportunity to file written submissions. Counsel for the liquidator had filed written submissions but Mrs Frigger had not complied with the practice direction and had not filed any written submissions. Over objection from counsel for the liquidator, I gave Mrs Frigger until 16 April to file any written submissions. I also gave her leave to file an affidavit which had been provided to the liquidator's solicitors in draft form,. Further, because counsel for the liquidator had sought and was granted leave to rely on a further affidavit of the liquidator dated 14 March 2014, I indicated any affidavit filed could respond to the evidence contained in that affidavit. Counsel for the liquidator was then given until 30 April to file any submissions in answer.

17 On 22 April 2014, Mrs Frigger filed an affidavit of that date which did not comply with the orders I had made that is, it was not a sworn version of the draft affidavit she had provided to the liquidator's solicitors nor was it in any way responsive to the liquidator's affidavit of 14 March 2014. Accordingly, I have not considered Mrs Frigger's affidavit of 22 April 2014. However I have considered her submissions.

18 As I understand the submissions, it is alleged the confidential affidavit and the privileged communications are fraudulent and dishonest and should be made available to Mr and Mrs Frigger. In making this submission, Mrs Frigger appears to be relying on the decision in Crescent Farm (Sidcup) Sports Ltd v Stirling Offices Ltd (1972) Ch 553 as that decision was considered in the AttorneyGeneral for the Northern Territory of Australia v Kearney [1985] 60; [1985] HCA 60; (1985) 158 CLR 500. The submission fails for a number of reasons.

19 First, there is nothing in the confidential affidavit nor the privileged materials which in any way suggests the liquidator is engaged in some fraudulent or dishonest act. A series of wild allegations are made by Mrs Frigger in her submissions. None is it of any substance. Moreover, the allegations are so wild and incoherent as not to warrant detailed analysis.

20 Second, this is not a question strictly speaking of privilege. It may be the case in other proceedings when discovery is given, communications passing between the liquidator and his solicitors and touching matters related to the litigation, will have to be discovered. Doubtless a claim for privilege would be made. If some challenge is to be mounted to that privilege it can be done in the context of those proceedings. What happened here was a confidentiality order was made. It is pursuant to that order the confidential affidavit and the privileged materials were protected. The making of such an order does not determine the question of any privilege which might attach to any document in other proceedings.

21 Subsequent to the hearing in this matter, Mrs Frigger purported to make a further application. It was titled 'Interlocutory process for orders regarding Mr Kitay's confidential affidavit dated 5 January 2012'. It seeks certain orders and declarations in relation to the confidential affidavit. Mrs Frigger was insistent this interlocutory application ought be listed at least for mention before determination of the liquidator's application. The lodging of the application was improper. It seeks to reventilate matters which were the subject of the special appointment. For that reason the interlocutory process was not listed and will be dismissed.

22 This matter has gone on long enough. As soon as it was pointed out to Mrs Frigger she had obtained a copy of the confidential affidavit she was not entitled to possess, she should have returned it to the liquidator's solicitors. That is the beginning and the end of the matter. There can be no possible justification for her retaining possession of any copies of the confidential affidavit and the orders I will make are designed to so far as is possible put the situation to rights. Mrs Frigger should pay the costs of this application including all reserved costs. I will hear the parties as to whether those costs ought be payable on an indemnity basis.