Singtel Optus Pty Limited v Weston

Judgment 1HIS HONOUR : This application concerns claims by the respondents to privilege against the inspection of documents produced pursuant to subpoenas and notices to produce. 2In the proceedings the plaintiffs seek the removal of the defendant as special purpose liquidator of One.Tel Limited (In Liq) ("One.Tel") and an inquiry into his conduct as special purpose liquidator. The plaintiffs are Singtel Optus Pty Limited ("Singtel Optus") and certain of its subsidiaries. The plaintiffs, or at least some of them, are substantial creditors of One.Tel. 3For a considerable period there were disputes between the defendant and the committee of inspection of One.Tel. In the proceedings for the removal of the defendant as special purpose liquidator and for an inquiry into his conduct the defendant has served notices to produce on the plaintiffs and on at least one company (Telstra Corporation Limited ("Telstra")) that entered an appearance, although not named as a party, and has served subpoenas for the production of documents. Subpoenas have been issued to members of the committee of inspection and to certain of the creditors of One.Tel. 4The plaintiffs and members of the committee of inspection have claimed privilege in respect of documents produced by the plaintiffs, by members of the committee, and by three creditors of One.Tel, namely, Telstra, Cisco Systems Capital Australia Pty Limited ("Cisco") and Roadhound Electronics Pty Limited ("Roadhound Electronics"). 5Initially privilege was claimed over more than 3,000 documents. I refused to make an order that the respondents swear an affidavit explaining how privilege attached to each of the documents, but directed that the documents in question be produced to the courts so that they could be inspected so as to assess the claims of privilege. The respondents produced schedules of the documents describing the nature of the document, the parties to whom the communication was sent and the grounds on which privilege was claimed. The grounds on which privilege was claimed were specified by reference to the Evidence Act 1995, although the respondents contended that the claims for privilege should be determined according to the common law. References to the Evidence Act were treated as shorthand expression of claims for legal professional privilege, or as identifying grounds upon which privilege was not lost by reason of documents or communications being conveyed to third parties. 6The respondents reviewed their initial claims of privilege. In the course of that review they said that they waived privilege over many documents, numbering in the hundreds, without conceding that the claims for privilege had not been properly made in the first instance. 7Claims for privilege have been made by the plaintiffs and by four current and one former member of the committee of inspection, namely, Ms Barbara Galloon, Mr John Deloughery, Mr Gary Phillips, Mr Ben Sharma and Mr Alexander Roth. They are not parties to the present proceedings. 8At all relevant times up to November 2009 the committee of inspection consisted of Ms Galloon, Mr Deloughery, Mr Phillips and Mr Roth. On 10 November 2009 Mr Sharma (of Roadhound Electronics) and Ms Laver (of Telstra) were appointed to the committee. Mr Roth resigned on 20 November 2009. Ms Laver also subsequently resigned from the committee. 9Ms Galloon is an accountant employed by Optus Administration Pty Limited ("Optus"). It is a company in the same group of companies as the plaintiffs. It is a wholly owned subsidiary of the first plaintiff, Singtel Optus. In about September 2007, Ms Galloon approached a Mr Stuart Salier for him to provide her with advice and assistance in relation to her role as a member of the committee of inspection. Many of the documents which are the subject of the disputed claim for privilege were copied to Mr Salier. Mr Salier is a solicitor. He acted from time to time as legal adviser to Ms Galloon. He also acted as legal adviser to Singtel Optus Pty Limited and its subsidiaries. He assisted Ms Galloon and other members of the committee of inspection to obtain legal advice from Baker & McKenzie. Baker & McKenzie were retained in March 2008 to act for members of the committee of inspection. Mr Salier deposed that he also acted as a " conduit " to communicate instructions from Ms Galloon and other members of the committee of inspection to Baker & McKenzie and to communicate advice from Baker & McKenzie to Ms Galloon and other members of the committee. He sometimes participated in discussions between members of the committee in relation to the legal advice received from Baker & McKenzie. 10The defendant submits that disclosure of instructions or otherwise privileged communications from members of the committee to Mr Salier, or the disclosure of legal advice provided for members of the committee to Mr Salier, resulted in a waiver of privilege, unless the communication was to Mr Salier in his capacity as legal adviser to Ms Galloon. The defendant also submits that disclosure of legal advice or otherwise privileged communications between the plaintiffs and their lawyers to members of the committee resulted in a waiver of privilege. 11Mr Bruce Hambrett of Baker & McKenzie was retained to act for the members of the committee of inspection in March 2008. He deposed that Baker & McKenzie's retainer was to advise members of the committee generally regarding legal matters relevant to their activities as members of the committee and to act for the members of the committee in respect of various proceedings or contemplated proceedings relating to the special purpose liquidation of One.Tel, including proceedings involving the defendant. 12Another partner of Baker & McKenzie, Ms Maria O'Brien, was the solicitor for Optus Mobile Pty Limited (the third plaintiff) in the proceedings from October 2008. From March 2010 Baker & McKenzie also provided legal services to the plaintiffs in respect of the current proceedings. 13Some of the claims of privilege are based on the communications being for the dominant purpose of a lawyer providing legal advice to the client. Some of the claims are based on the communications or document being confidential communications or documents prepared for the dominant purpose of use in actual or anticipated litigation. 14Members of the committee of inspection have been involved in several pieces of litigation since October 2008. In October and November 2008 and in 2010 members of the committee of inspection were parties to interlocutory processes in proceedings known as Onefone Australia Pty Limited & Ors v One.Tel Limited (In Liq) & Ors (86446 of 2003) ("the Onefone proceeding"). Those applications concerned the defendant's claim for approval for remuneration. Members of the committee also filed an interlocutory process in the Onefone proceeding on or about 19 August 2009 seeking orders to amend confidentiality orders previously made by the court. On 26 August 2009 orders were made in respect of that interlocutory process. On 15 October 2009 the general purpose liquidators of One.Tel commenced an application in respect of material to be circulated to creditors and the chairing of an annual general meeting of creditors of One.Tel. Members of the committee were involved in that litigation. On 26 May 2010 members of the committee and Singtel Optus or its subsidiaries brought an application in the Onefone proceeding regarding access to the defendant's litigation funding agreement. That application was referred to the Court of Appeal which delivered judgment on 1 July 2010. 15The plaintiffs were not parties to those applications. As creditors of One.Tel they had a commercial interest in the conduct of the special purpose liquidation. The essential function of the defendant as special purpose liquidator was to investigate and then pursue any rights of action that exist in relation to the cancellation of the renounceable rights issue announced to the Stock Exchange by One.Tel on 17 May 2001 to be underwritten by Publishing and Broadcasting Limited and News Limited, and in relation to the decision to appoint voluntary administrators to One.Tel on 29 May 2001. The manner in which such possible rights of action have been investigated and pursued by the special purpose liquidator has been controversial. The plaintiffs claim, amongst other things, that the defendant has acted unreasonably in not seeking approval of the committee of inspection, or the body of creditors generally, to his entry into a litigation funding agreement for the prosecution of the renounceable rights issue proceedings ("RRI proceedings") and in refusing to disclose details of the funding agreement. The plaintiffs complain that the defendant has unreasonably failed to explore settlement options in relation to the RRI proceedings whilst at the same time seeking to secure litigation funding. The plaintiffs complain about the level of the defendant's remuneration and disbursements and legal expenses that are said to exceed $11.234 million up to 30 April 2010. The plaintiffs complain that the defendant has charged and received remuneration for tasks that do not fall within the scope of the powers conferred on him and has retained remuneration paid to him out of the assets of One.Tel on the basis of a circular resolution of some members of the committee of inspection that was held to be invalid. The plaintiffs complain that the special purpose liquidator has published serious and false information concerning members of the committee of inspection and has published misleading statements in connection with an annual general meeting of creditors of One.Tel held on 10 November 2009. The plaintiffs contend that the defendant has unreasonably opposed and defended applications made by the committee of inspection and by the general purpose liquidators in 2008 and 2009. They contend that there has been a breakdown in the relationship between the defendant and the members of the committee of inspection and that creditors of the company have lost confidence in the defendant's ability to discharge his functions. 16The claims for privilege fall into seven categories. First, Telstra produced documents pursuant to a notice to produce issued by the defendant. Privilege is claimed by the plaintiffs in respect of one document produced by Telstra. Members of the committee of inspection claim privilege in respect of six documents. 17Secondly, documents were produced by Mr Deloughery (a member of the committee of inspection) pursuant to subpoena. The plaintiffs claim privilege with respect to two documents produced by him. He and other members of the committee claim privilege in respect of other documents. 18Thirdly, documents were produced on subpoena by Mr Gary Phillips. The plaintiffs claim privilege over seven documents. Mr Phillips and other members of the committee of inspection claim privilege over a large number of other documents. 19Fourthly, documents were produced on subpoena by Cisco. The plaintiffs claim privilege over four documents produced by Cisco. 20Fifthly, the plaintiffs claim privilege over one document and members of the committee claim privilege in respect of a further six documents produced on subpoena by Roadhound Electronics. 21Sixthly, Mr Roth claims privilege in respect of over 700 documents produced by him on subpoena. 22Seventhly, the plaintiffs claim privilege over almost 1,000 documents produced by them pursuant to notices to produce. Members of the committee of inspection also claim privilege over more than 1,200 documents produced by the plaintiffs. 23All the documents for which privilege is claimed have been produced for my inspection. In the course of oral submissions I was taken to a number of documents by counsel for the defendant. This was primarily in the course of counsel seeking to make good a submission that there had been a waiver of privilege by the disclosure of documents to Mr Salier. In the course of that review I identified only one document in respect of which I considered it doubtful that a claim for privilege arose. All of the other documents to which I was taken were clearly privileged, although there is a question as to whether privilege was waived by disclosure to persons between whom there was not a relationship of lawyer and client. I subsequently carried out a further sampling of the documents to satisfy myself that the respondents had taken a proper approach in relation to their claims for privilege. I also " scanned lightly " the other documents. In this respect I followed the approach taken by Brereton J in Carbotech-Australia Pty Ltd v Yates [2008] NSWSC 1151 at [19], albeit in respect of 33 volumes of documents. I found only one isolated instance in which I was not satisfied that documents for which privilege was claimed were privileged (referred to at [46] below). 24There is an initial question whether the present application for inspection is to be dealt with in accordance with the Evidence Act 1995 or the common law. In Carbotech-Australia Pty Ltd v Yates Brereton J held that whilst r 1.9 of the Uniform Civil Procedure Rules 2005 had the result that the Evidence Act applied to the initial stage of production of documents to the court under subpoena, neither the Evidence Act nor the Uniform Civil Procedure Rules applied at the subsequent stage of inspection of documents. Hence rules of common law applied to questions of the availability of privilege and the waiver of privilege at the stage of inspection. Subsequently, the Evidence Act was amended to include s 131A. It provides: " 131A Application of Part to preliminary proceedings of courts (1) If: (a) a person is required by a disclosure requirement to give information, or to produce a document, which would result in the disclosure of a communication, a document or its contents or other information of a kind referred to in Division 1, 1A, 1C or 3, and (b) the person objects to giving that information or 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 giving information or 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 information or a document and includes the following: (a) a summons or subpoena to produce documents or give evidence, (b) pre-trial discovery, (c) non-party discovery, (d) interrogatories, (e) a notice to produce, (f) a request to produce a document under Division 1 of Part 4.6. " 25In Waugh Asset Management v Merrill Lynch [2010] NSWSC 197 McDougall J held that s 131A also applied at the stage of production and did not apply at the second stage where inspection is sought of documents produced to the court, so that the relevant principles to be applied were those of the common law (at [9]-[12]). I followed his Honour's decision in d'Apice v Gutkovich (No. 1) [2010] NSWSC 1336 at [10], as did Adams J in Alderman v Zurich [2011] NSWSC 754 at [12]. 26However, in TransGrid v Members Lloyd's Syndicate 3210 [2011] NSWSC 301, Ball J, without deciding the question, raised doubts as to whether this was the better construction of s 131A (at [10]). On further consideration I consider that those doubts are well founded. Relevantly subs 131A(1) applies where a person is required by a " disclosure requirement " to " produce " a document. Prima facie , as McDougall J held, the section applies at the stage of production. However, the definition of " disclosure requirement " as meaning a process or an order that requires the " disclosure " of a document, including by way of production of a document on subpoena or a notice to produce, indicates that the draftsman intended the section to apply to the entire process by which the production of a document on subpoena or by notice to produce (or by the other means referred to in subs 131A(2)) would result in the disclosure of the document. 27The doubt as to the scope of s 131A having been raised in TransGrid v Members of Lloyd's Syndicate 3210 , I think that I am justified in not following the earlier line of decisions (including my own), all of which were delivered ex tempore. In my view, where the objection to inspection is taken by the person required to produce the document on subpoena or notice to produce, the Evidence Act , and not the common law, applies. 28However, as Allsop P held in State of New South Wales v Public Transport Ticketing Corporation [2011] NSWCA 60 at [32] and as the terms of s 131A clearly provide, the section only applies where the person objecting to disclosure on the ground of privilege is the same person who was required to produce the document. The section does not apply when a claim for privilege is made by persons other than the person required to produce the documents. In such cases the common law applies. 29In the circumstances of this case there is no different outcome, either as to availability of privilege, or as to whether privilege has been waived, depending on whether it is the common law or the Evidence Act that applies. This will not always be so.