9 The Evidence Act 1995 (NSW) has reformulated the law concerning what it calls client legal privilege. It includes the following provisions:
" 118. Legal advice
Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of:
(a) a confidential communication made between the client and a lawyer, or
(b) a confidential communication made between 2 or more lawyers acting for the client, or
(c) the contents of a confidential document (whether delivered or not) prepared by the client or a lawyer,
for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client.
124. Loss of client legal privilege: joint clients
(1) This section only applies to a civil proceeding in connection with which 2 or more parties have, before the commencement of the proceeding, jointly retained a lawyer in relation to the same matter.
(2) This Division does not prevent one of those parties from adducing evidence of:
(a) a communication made by any one of them to the lawyer, or
(b) the contents of a confidential document prepared by or at the direction or request of any one of them,
in connection with that matter."
10 The Dictionary to the Evidence Act 1995 says, "Civil proceeding means a proceeding other than a criminal proceeding."
11 It was not submitted to me that there was any difference of substance between the common law consequences of joint retainer of a solicitor, and the consequences under the Evidence Act 1995 of joint retainer, so far as the liquidator's ability to find out communications for the purpose of legal advice is concerned.
12 The second basis on which the liquidator alleged no privilege exists is that, as between Doran Constructions and any entity which was present at the meeting, there was no confidentiality. The basis for this submission was the statement of McLelland J in Stockbridge v Lupton (supra) at page 5 that: "There will be no privilege where the presence of a third party indicates that the communications were not confidential." (See also Cross on Evidence, Australian Edition, current electronic version, para [25255], Re: Griffin (1887) 8 LR (NSW) 132) Here, it was said, there was no confidentiality which could be asserted against Doran Constructions, because the directors of Doran Constructions, its eyes and ears, were present at the meeting, taking in what was said.
13 The third basis on which the liquidator alleges that no legal professional privilege claim can now be made is that, if it ever existed, it has been waived.
14 Counsel for both parties accepted that there was no difficulty, as a matter of principle, about legal professional privilege being available in the course of such an examination, in appropriate circumstances (Re: Transequity Ltd (in Liq) (1991) TasR 308; Re: BPTC Ltd (in Liq) (1992) 7 ACSR 539; Re: Compass Airlines Pty Ltd (1992) 35 FCR 447).
The Liquidator's First Basis for Contesting that Privilege Existed - Was There a Joint Retainer?
15 There is no dispute between the parties about the relevant legal principle. Whether the liquidator's first ground succeeds depends on a decision of fact about whether there was, or was not, a joint retainer. This is a decision which I am called on to make on the basis of fairly incomplete evidence.
Mr Linz's Evidence at the Examination
16 One item of evidence is a transcript of an examination of Mr Linz on 24 March 1999. He gave evidence that he had been present at a meeting held in the boardroom at "Doran's". Also present were the four Doran brothers (who, it is common ground, were the directors of Doran Constructions, Doran Holdings, and Doran Constructions (Australia)), Mr Brad Joyce, and Mr Chris Freeman.
"And what was the purpose of the meeting? --- It was to discuss the loan accounts between Doran Holdings and Doran Constructions and Doran Constructions (Australia)." (T153).
17 Mr Linz said the meeting probably lasted an hour or more, and that he made no notes of the meeting. He says he was asked to come to the meeting by Brad Joyce.
"Now why did you take no note of the meeting Mr Linz? --- Because I was only asked to give advice on one specific matter.
Yes, when were you asked to give that advice? --- Well obviously before the meeting, I can't remember how long before the meeting I was asked.
Who asked you to give that advice? --- Brad Joyce.
And was the request to give the advice in writing? --- No.
And what was the specific matter you were asked to give advice on? --- Transaction in general but in particular under what circumstances would it be considered inappropriate.
Would what be considered inappropriate? --- The - a transaction between a forgiveness or a round robin of these loan accounts between the companies, repayment of loans.
What did Mr Joyce say to you as best you can recall that you were asked to then give advice about? --- Um, he was continuing with the rationalisation of the group which had been going on for a number of years. He wanted to tidy up loan accounts. Continued to tidy up loan accounts between the entities. He was - the company was about to take action against the University and he wanted to make sure that everything was tidy within the companies and he wanted to know under what circumstances - or just to ensure that those transactions, that the repayment of loans - in what circumstances they would be seen to be voidable. He didn't actually ask that but that's what he meant.
What did he ask? --- Um, I can't remember. It would be something in the vernacular to that effect." (T154-155)
"Yes, and no doubt you would have been concerned to ensure that the advice you gave was correct advice? --- Well the advice I - well what I gave Brad was a copy of certain copies of the Corporations Law in terms of voidable transactions and gave him a brief explanation of that, but also noting that I am not a lawyer, nor was I an insolvency expert, so really I could - my advice went no further than that." (T155)
… "Did you after the meeting record anywhere what advice you had given at the meeting? --- Um, I did not.
Nowhere at all? --- Well frankly it was unnecessary because Chris Freeman in fact gave - attended the same meeting and explained better than what I could the law in that regard.
I see, so you went to a meeting down in the boardroom and do you recall whether there was anything else discussed at this meeting while you were there other than this issue of a round robin of payments? --- I can remember Chris explaining that the directors would have to think in terms of each company and the reasonableness of the transaction for each of those companies.
Do you recall any other topics being discussed? --- Well, that was discussed and - and issues of, um, the rational continue - part of the continuing rationalisation of the Doran Group would have been discussed. Just the simplification of the Group was discussed." (T156)
18 Mr Linz later gave evidence that the meeting in question took place on 1 November 1994, and that he had signed the audit report for the year ended 30 June 1994 on 28 October. (From the context, it is clear enough that this audit report is on one or more of the Doran companies, but it is not clear which one or ones.)
19 Mr Linz gave evidence that he had seen a minute of 1 November 1994. His evidence continued:
"You didn't attend any such meeting on 1 November 1994, did you, where there was a resolution in the form that appears in that minute? --- No. It's - it's difficult to say and let me explain why. I attended a meeting of the brothers and Chris Freeman at around about that time, I can remember that. Whether that was - whether I - whether that was the directors' meeting and I only attended part of it or I attended the whole of it, I cannot remember.
Well, let me put it to you very clearly, Mr Linz. Have you ever attended a meeting where Paul, Peter, John and Michael Leo Doran were present, where it was resolved that on behalf of Doran Constructions repayment of $4.1 million from Doran Holdings would be demanded forthwith? --- I - I can remember those transactions being discussed and decisions made at that meeting. Whether that's the same meeting as - as the directors' meeting or whether they had one immediately after I left, I don't know." (T160 )
20 The "minute" which was referred to in that evidence was later identified as being minutes of a meeting of directors of Doran Constructions held on 1 November 1994. (T161)
21 Mr Linz gave evidence of his recollection of the meeting:
"I can remember Brad Joyce describing the transaction. I can remember - oh, the situation and the transaction. I can remember Chris Freeman explaining about each company having to make its individual - the Directors of each company having to make up - make the decision for that individual company and there - and discussion in relation to that. And I can remember discussion as to the transactions which were proposed in that minute.
So what can you recall Mr Joyce outlining? --- Um, the figures that are in - in that minute.
As best you can recall, tell us what he said? --- Ah, I can remember 4.1 million but I can't remember the amount in respect of Doran Property Services. Um, I can remember um an analysis - an analysis of the loans between the companies and, um, what would need to happen for um, ah, to enable DCA to be able to repay its loan and for Doran Holdings to repay its loan." (T162)
22 Mr Linz said that Mr Joyce was the first person he could recall addressing the meeting in relation to the proposal. His recollection of what Mr Joyce said was:
"Um, I can remember um, discussion that this was a continuation of the rationalisation which Ernst & Young had commenced. That there needed to be a tidying - a continued tidying up of the Group in terms of inter-group loan accounts. Um, I think Ernst & Young and the banks had - had both commented upon that issue."
23 Mr Linz could not remember any comments from, or questions from, the Doran brothers at the meeting, though he said that he was sure that they would have asked questions. When asked about what Mr Freeman said, his evidence was:
"Um, I can remember, as I've already repeated I think three times, that he explained that it was the responsibilities of the Directors to make decisions in respect of each individual Company. I can remember him explaining that the transaction would have to be of a commercial nature. I'd be guessing to go further than that."
Mr Freeman's Evidence at the Examination, and the Deputy Registrar's Ruling
24 Another item of evidence, is evidence which was given by Mr Freeman in his examination on 22 May 2001. He gave evidence that he had commenced a professional association with the Doran family about 1975, 1976 or 1977. He had, over the years, acted for each of the four Doran brothers and for various companies in the Doran group of companies. He had acted for Doran Constructions, but was not its only solicitor. Doran Constructions had used two other firms of solicitors (one after the other) for building construction litigation. Mr Freeman had done some legal work concerning building construction for Doran Constructions, and had also done some work of a type which a commercial solicitor might perform. He said:
"Q Has it ever been your practice to have retainer agreements with either the Doran individuals or the Doran companies?
A Never.
Q You certainly render fee notes to them?
A From time to time I do yes.
Q And how do you determine to whom within the group the fee note is issued in cases where more than one company is involved in the transaction?
A Sometimes with great difficulty. It depends, I suppose, who the lead client is.
Q But in cases where more than one of the Doran companies or individuals is involved in the transactions you broadly considered yourself to be retained by each of them, is that right?
A I suppose the answer to that would have to be yes." (T7-8)
25 Mr Freeman gave evidence that he had retained files relating to Doran Constructions from about 1985. His general practice for rendering fees to the Doran Group and the Doran individuals was, when he rendered a fee note, to make a copy of the fee note and put it in the appropriate file.
26 Mr Freeman gave evidence that he was aware of a series of transactions in November 1994 by which Doran Constructions was repaid a debt by Doran Holdings and lent money on to Doran Constructions (Australia). (T15) He said he recalled being present at a meeting prior to the transactions, in which the transactions were discussed, and the subject of the discussion was the reason for the transaction. When asked, "And part of the discussion related to whether or not the transaction would be vulnerable to being set aside at the suit of a future liquidator?" he claimed legal professional privilege.
"Q But you have a recollection of what was said at the meeting?
A Some of it.
Q And the people - the entities which were to be involved in the transaction were Doran Holdings, Doran Constructions and Doran Constructions Australia, that's correct isn't it?
A Yes.
Q And the four Doran brothers were at that stage directors of each of those three entities, is that correct?
A Yes.
Q The purpose of the meeting was to obtain from yourself and Mr Lindtz, the accountant, advice as to whether or not the transaction should be entered into by those three companies?
A Not correct.
Q What was the purpose of the meeting?
A I think I might have to claim privilege on that one too, I think.
Q What's the basis for the claim of privilege?
A The basic claim of privilege is that I was asked there to give certain advice, which I gave, but everything that went into that meeting was used by me to work out whether in fact I should give that advice, and what that advice should be.
Q I think I missed part of your answer. Could you repeat it please?
A Yes, when I was called to the meeting to give certain advice. What went on in that meeting and the things that happened in that meeting were used by me as the basis for that advice.
Q Who called you to the meeting?
A I cannot now recall.
Q One of the Doran brothers?
A Not necessarily.
Q And when you say the things that went on in that meeting you mean you were given instructions in the meeting and you provided advice on the basis of those instructions?
A That is correct.
Q And you have no formal record which indicates by whom in the Doran Group you were retained on that occasion, do you?
A No.
Q Have you formed a view by whom you were retained on that occasions?
A No, definitely not.
Q To the best of your recollection sitting here today you were retained as you always were to act for all the relevant entities in the Doran Group who were interested in the transaction?
A That would normally be the situation, and I'd have to say yes, I would have to say yes.
Q So to the extent that Doran Constructions was one of the parties interested in the transaction you were there to advise the directors of Doran Constructions?
A Yes I was there to advise the directors of Doran Constructions.
Q And you were there to consider the best interests of Doran Constructions?
A I don't think that's my role.
Q Well you were acting, were you, to the best of your recollection now for the four directors of the three companies and for each of the three companies?
A Yes.
Q Including Doran Constructions?
A Including Doran Constructions. Sorry, I should refer - should probably clarify that. You've got to look at time too, because there were times when I certainly was not acting for Doran Constructions, I was acting more for, say, Doran Holdings, because they had three companies and the directors were -
Q We are talking about one meeting.
A That's right, but there were various parts in the meeting, obviously.
Q Why do you say it's privileged?"
27 Mr Gelbart, counsel appearing for the examinee, volunteered to answer that question, and was permitted by the Deputy Registrar to do so. While Mr Gelbart's explanation is imperfectly transcribed in the transcript which was tendered before me, the gist of it seems to be that during various parts of the meeting Mr Freeman acted for different entities, that sometimes he was giving advice to directors in relation to their own position, in which case those directors could claim privilege, while at other times he was giving advice to companies other than Doran Constructions, in which case those companies other than Doran Constructions could claim privilege in relation to that particular item of advice.
28 The Deputy Registrar, well aware of where the questioning of Mr Freeman had been leading, said "Yes, of course, but the series of questions that have just been put to the examinee has been for the purpose of trying to -" Mr Gelbart, also alive to the direction the questioning had been heading in to such an extent that he did not even need to have the Deputy Registrar finish her sentence, said: "Yes, but perhaps that's the explanation which Mr Freeman has…".
29 Counsel for the liquidator sought to resume the questions. There followed the segment of transcript which gave rise to the ruling of the Registrar which is challenged in the present hearing.
"Q Mr Freeman, you have a recollection of some parts of the advice you gave in that meeting, is that correct?
A Yes.
Q And you have a recollection of some of the things that were said to you at that meeting?
A Yes.
Q And you agree that amongst others you were retained by Doran Constructions?
A Yes, at certain times within that meeting, yes.
Q And what was said to you at the meeting, and what advice did you give at the meeting?
A I claim legal professional privilege."
30 Mr Braham, counsel for the liquidator, thereupon asked for a ruling on that question. He asserted that there was a joint retainer of Mr Freeman, by companies including Doran Constructions, and that the liquidator, as the successor in title of that joint privilege, was entitled to know what was said. Mr Gelbart asserted that, "On Mr Freeman's evidence the meeting was segmented. Various parts of the meeting dealt with various issues and with various companies". In consequence, he said a question which sought to probe the entirety of the advice given at the meeting was not permissible, though there could be no objection to advice which was tendered at the meeting to Doran Constructions. Mr Braham responded saying:
"Mr Freeman has not said that the meeting was segmented. He said at different times he was giving advice, in relation to different matters, but the meeting wasn't segmented in - there were six people there, they were there for the whole meeting, all six of them. The subject of discussion was one transaction, and there were three parties to that transaction, and that's why he was there to advise. It's artificial to say some of what he said was privileged to Doran Holdings when he was there to advise four directors, each of whom was a director of each of the three companies in relation to a transaction in respect of which three companies were participating. It's a classic case of joint privilege."
31 Mr Freeman then, and apparently from the witness box, joined in the argument. He said:
"When you look at the meeting the meeting does actually segment, because as my friend rightly pointed out at the time you have the transaction that flows from one company to another company and up through a third company, so there must be the segmentation through that transaction. And while my friend says that it is artificial to say - because we're all in the same room and because we're all directors of one company that that entitles him to information concerning Doran Holdings, for example, or Doran Constructions Australia, and the advice that was given there, I think would be completely and utterly wrong."
32 This statement, expressed in the language of conclusion and submission, rather than of giving evidence of primary fact, was responded to by the Deputy Registrar saying:
"Right, so your evidence is that there is a distinction, and if you were called to give evidence that in your mind there is a clear distinction between certain advice that you gave that went to the three separate entities and that there are some matters upon which you provided advice that do not touch upon Doran Constructions."
33 To this Mr Freeman replied:
"Yes, and there is also a further matter which is weighing very heavily upon me, and that is the actual four Doran brothers. I have sought instructions to be released from the privilege and I have been told in no uncertain terms that I must continue to claim the privilege, and that I must continue to claim the privilege even in relation to what was said in relation to Doran Constructions because the nature of that could well be what my friend is endeavouring to establish now - although I'm not saying that it is, but it could well be - what action should the directors of Doran Constructions have taken."
34 The Deputy Registrar then gave the ruling which is challenged in this hearing.
"What I'm going to do is require you to answer any question that is put to you about the advice given at that meeting or what was said that touches on Doran Constructions in any way if it - whether or not it also concerns another entity. So that only in those clear cases where the advice that you gave did not touch upon Doran Constructions in any way, would you be entitled to claim that privilege. Otherwise there is a joint privilege, the liquidator is entitled to the information, the world at large is not entitled to the information, but the liquidator is a joint privilege holder."
35 Mr Braham then asked some questions which went to the question of waiver of privilege. He established from Mr Freeman that Mr Freeman had been in court when Mr Linz was examined about the meeting, and that both Mr Freeman and counsel appearing in that examination also acted for the Doran brothers.
"Q There was no objection taken to the questions asked about what occurred at the meeting when the evidence was given by Mr Lindzt, was there?
A No I don't think that would have been proper to do so, or I was led to believe by counsel that it wasn't proper to do so."
36 There was evidence about Mr Freeman's involvement, in November and December 1997, in giving advice about what should occur in relation to the external administration of Doran Constructions. The evidence was that the advice was given mainly to Paul Doran, not in writing, "usually over the telephone. I'd get a call from Paul and he'd ask me questions.". Mr Freeman issued a fee note on 16 December 1997, to Doran Constructions Pty Ltd, which related to those conversations that he had with Paul Doran as to what steps should be taken.
37 It seems to me that the informality with which advice was given on that occasion, and the way in which, notwithstanding that, the fee note was rendered to Doran Constructions, may provide some assistance on the present problem.
38 Later, (T32) the Deputy Registrar explained her earlier ruling as being that:
"…the examinee is to provide an answer to any question which touches on the advice given to Doran Constructions, whether or not it also could be regarded as advice to Doran Holdings and Doran Constructions Australia. Only those matters which go to advice given to Doran Holdings or Doran Constructions Australia exclusively need not be answered."
39 And again at T33.
"Gelbart: It is only the advice which was given to Doran Constructions?
Deputy Registrar: No, its anything that touches on Doran Constructions - it's anything of common interest. It is only advice exclusively given to other entities, exclusively, that must not be canvassed."
40 She confirmed (T33) that advice given to directors in their personal capacity would still be privileged.
41 Counsel for the liquidator then sought to proceed with the examination, consistently with the ruling which had been given.
"Q …What advice did you give to Doran Constructions or to Doran Constructions jointly with its directors, or to Doran Constructions jointly with Doran Holdings, Doran Constructions Australia or other parties?
A That on the information before me I could see no problem with proceeding with the transaction.
Q Did you address the question on whether or not the transaction might be set aside by a liquidator in the future?
A Yes.
Q What did you say in respect of that possibility?
A …That each company within the Group must be looked at separately and that the directors must be satisfied that this transaction will not cause an insolvency to occur or lead to an insolvency occurring or be done with the intent to defeat or defraud creditors.
Q Did you make particular reference to the fact that consideration would, in light of the nature of the transaction, would centre on Doran Constructions and its creditors?
A No, not in particular. I made it very plain that each company must be looked at individually.
Q But this was not a transaction that could possibly have operated to the detriment of Doran Holdings or its creditors could it?
A That really is not my position to make that decision.
Q Did you give any specific advice about whether or not the transaction contained a risk of being set aside by a liquidator in the future?
A Not that I can recall in that way, no.
Q Did you give any advice about whether the transaction was in the best interests of Doran Constructions?
A I'm not in a position to give that advice.
Q …Did the directors say anything to you which suggested to you that they had considered the best interests of Doran Constructions?
A Not as such, no.
Q Was the transaction reduced to writing to your knowledge?
A To my knowledge the only written part of the transaction is in the minutes I think. I may be wrong, there may be some accounting record. I don't know.
Q Was the purpose of the transaction discussed in the meeting.
A Here I'd have to claim privilege as to at least part of it, as to that part that affects Doran Holdings and Doran Constructions Australia.
Q Did anyone in the meeting tell you what the purpose of the transaction was?
A Yes.
Q Who told you what the purpose of the transaction was?
A I cannot now recall.
Q One of the Doran brothers?
A Not necessarily.
Q What did they tell you was the purpose of the transaction?"
42 Before that question was answered, there was debate between counsel as to whether the answer would be privileged. The Deputy Registrar then said (T35):
"I'll advise the examinee on this issue, that if the advice was given solely to one of the entities that was represented at that conference, then you needn't provide an answer to the court. If it touched on matters concerning Doran Constructions and constitutes in part, at least, advice to Doran Constructions, you are required to answer that question."
43 Mr Freeman requested further assistance from the Registrar, and said:
"The first part I would say related solely to Doran Holdings and I just wonder if my friend could leave me alone just to speak to you for a moment on this particular issue. Is this convenient?"
44 The Deputy Registrar was, understandably, unwilling to take up this novel suggestion.