In these proceedings, the plaintiff, Mr John White (Mr White) seeks to recover principal and interest allegedly owing under a loan of $2 million made to the first defendant (Data Transfer Services Pty Ltd, or DTS) and under a guarantee of that loan by the second defendant, Mr Maher Mina (Mr Mina).
DTS and Mr Mina admit that they entered into a Deed of Loan and Guarantee with Mr White on or about 22 August 2014 but deny that any moneys are owing to Mr White.
In their Amended Commercial List Response, DTS and Mr Mina state that Mr White offered to provide a $2 million loan in the terms of the Deed of Loan and Guarantee by way of vendor finance for the purchase of certain business assets by one of Mr Mina's companies. Although the Deed of Loan and Guarantee was executed on or about 22 August 2014, the loan did not proceed because Mr Mina came into funds from another source from which he paid $2 million to Mr White on 2 September 2014 for the purchase of the business assets.
That is the basis on which DTS and Mr Mina contend that there is no amount owing under the Deed of Loan and Guarantee by DTS (as borrower) or by Mr Mina (as guarantor).
Mr Mina has been the sole director of DTS at all relevant times.
In an affidavit sworn on 3 November 2020 and filed and served in these proceedings, Mr Mina has deposed to discussions he had with Mr White from about May 2013 concerning the potential sale of Mr White's mail distribution business (JW Mailing Services) to Mr Mina or his company. Mr Mina had been operating similar mail distribution businesses for many years, DTS was then operating a mail distribution business out of premises at North Parramatta.
According to Mr Mina, he was not in a position to finance the purchase of JW Mailing Services during 2013 because his assets were the subject of Family Court proceedings with his former wife. It was in that context that Mr Mina says Mr White raised with him in early December 2013 the possibility of vendor finance for Mr Mina to purchase the JW Mailing Services business. Mr Mina says that he did not take up the offer of vendor finance, but left the possibility open.
Mr Mina deposes that, by May 2014, he had retained solicitors to act for him in negotiations for the purchase of the JW Mailing Services business, but he had not reached any agreement with Mr White as to the terms of the proposed purchase or any vendor finance. By mid-2014, some of Mr Mina's assets had been transferred into his sole name pursuant to orders made in his Family Court proceedings, and he took steps to sell one of those properties. He intended to use the proceeds of sale to pay part of the purchase price for the JW Mailing Services business.
Mr Mina deposes that, on 29 May 2014, he received a draft Deed of Loan and Guarantee from his solicitors who told him that they had received it from Mr White's solicitors. Mr Mina's affidavit continues:
"36. In June 2014 I instructed my solicitors to agree to incorporate the draft Deed of Loan and Guarantee into the draft contract for the sale of Mr White's business. I did so because I had not ruled out the prospect of needing vendor finance to complete the purchase, but I considered that possibility extremely unlikely. This was because I was very confident of having access to sufficient assets and finance at the conclusion of my divorce proceedings to fund a purchase.
…
40. On about 18 August 2014 I instructed my solicitor, Stewart Gough of Matthews Folbigg Lawyers to send a draft contract for the sale of Mr White's business to his solicitors setting out a purchase price of $2,650,000. This amount represented the total proposed price that I was then willing to pay in respect of the business. At no time before or after making this offer did I negotiate with Mr White on the basis that I would pay any amount, by way of vendor finance or otherwise, in addition to whatever amount was agreed to be included on the front page of the final contract for the sale of the business."
Mr Mina then deposes to a conversation he had with Mr White on 22 August 2014 in which Mr White complained that he was tired of waiting for Mr Mina to proceed with the purchase of his business. According to Mr Mina, Mr White said: "If you don't sign the Deed of Loan to show that you're serious about buying my business I will call the whole deal off." Mr Mina says that he replied: "Ok John, just let me ring my solicitor to discuss this." Mr Mina's affidavit continues:
"42. Later that day I signed the Deed of Loan and Guarantee at my solicitor's office in Parramatta. I say that at this time I was still confident of obtaining all of the funds I would need to purchase the business from Mr White from my own sources rather than through vendor finance. I signed the Deed of Loan and Guarantee in order to placate Mr White and to stop him from carrying out his threat to end negotiations with me. I had formed the view that if vendor finance was not required and I was in a position to pay the purchase price in full by other means, the Deed of Loan and Guarantee would be thereby of no effect."
Mr Mina then deposes to paying from the proceeds of sale of his property the sum of $2 million to Mr White on 2 September 2014 in part payment of the purchase price for JW Mailing Services. Mr Mina deposes that contracts for the sale of the business had not been exchanged, but the purchase price had been agreed as $3 million by that time. According to Mr Mina, contracts for the sale and purchase of JW Mailing Services have never been exchanged.
There is a dispute between the parties about the purchase price for JW Mailing Services. Mr White's position is that he provided vendor finance of $2 million, and that the purchase price otherwise payable for JW Mailing Services was thereby reduced by $2 million. Mr White relies on the acknowledgment recorded in the Deed that the borrower had received the loan of $2 million.
Matthew Folbigg Lawyers are the solicitors for DTS and Mr Mina in these proceedings. They also acted for Mr Mina and DTS in relation to the negotiations concerning the potential acquisition of JW Mailing Services.
On 23 July 2021, the plaintiff issued a subpoena to Matthew Folbigg Lawyers requiring production of:
"All documents recording communications or meetings, including file notes, between either defendant and Matthews Folbigg Lawyers referring to:
(a) the proposed purchase from the plaintiff of the business known as 'JW Mailing Services'; or
(b) the draft of executed contract for sale in respect of that business; or
(c) the draft or executed Deed of Loan and Guarantee, being the document executed on or about 22 August 2014,
between 19 June 2013 and 2 October 2014."
A notice to produce the same documents for inspection by the plaintiff was issued pursuant to Uniform Civil Procedure Rules 2005 (NSW), r 21.10 and served on the defendants on 26 July 2021.
On 9 August 2021, the defendants and Matthews Folbigg Lawyers produced one set of documents in response to the notice to produce and subpoena, together with a list itemising 74 documents in respect of which client legal privilege is claimed pursuant to s 118 of the Evidence Act 1995 (NSW). The documents in respect of which privilege is claimed were subsequently produced to the Court in packet S2.
Mr Mina swore an affidavit on 6 August 2021 in support of the claim for privilege.
On 20 August 2021, the plaintiff filed a notice of motion seeking an order that he be permitted to inspect and copy the documents produced in Packet S2.
Section 118 of the Evidence Act is the sole basis of the claim for privilege in relation to each of the 74 documents. That is, the defendants claim that the documents are or contain confidential communications made between the defendants and their solicitors, or are confidential documents prepared, for the dominant purpose of the solicitors providing legal advice to them.
The plaintiff's solicitor prepared a schedule of the 74 documents, together with a summary of Mr Mina's evidence in his 6 August 2021 affidavit in support of the claim for privilege in relation to each document. A copy of that schedule is Annexure A to these reasons.
It was common ground between the parties that the party claiming privilege bears the onus of proving that the communication or document was prepared for the dominant purpose of the defendants being provided with legal advice. The privilege is a fundamental right that will not be allowed to be undermined by an overly narrow or technical approach to identifying the legal advice that is the basis for the privilege. Legal advice is not limited to formal advice as to the law, but extends to advice as to what should prudently and sensibly be done in the relevant legal context. Communications containing legal advice, containing a specific request for legal advice, or that form part of a continuum of communications between lawyer and client aimed at keeping both informed so that advice may be sought and given as required, may be regarded as being communications for the purpose of legal advice. Professional discourse between solicitor and client in relation to the transactions covered by the client's instructions may therefore be regarded as for the purpose of giving and receiving legal advice, in the absence of contrary indications: DSE Holdings Pty Ltd v Intertan Inc (2003) 135 FCR 151; [2003] FCA 1191 at [30]-[71]; BWO19 v Minister for Immigration, Citizenship, Migrant Services & Multicultural Affairs [2020] FCAFC 181 at [62]-[63].
The dominant purpose is the paramount purpose that dominates over any other purpose. The onus of the party claiming privilege might be discharged by evidence as to the circumstances and context in which the communications occurred or the documents were brought into existence, evidence as to the purpose of person who made the communication or created the document or procured the creation of the document, or by reference to the nature of the documents. Mere assertions of privilege, or assertions of purpose, do not suffice. However, in determining the claim, the Court is not confined to express statements made in support of the claim. The Court is entitled to draw inferences from facts that are proved or not disputed: see Hastie Group Ltd (in liq) v Moore [2016] NSWCA 305 at [12]-[17], [32]-[34] per Beazley P (as Her Excellency then was) and Macfarlan JA.
The plaintiff submits that the defendants' evidence does not establish the basis of the privilege claim, with the exception of six of the 74 documents (items 1, 10, 23, 24, 49 and 60 of Annexure A). The defendants submit that Mr Mina's evidence in his 6 August 2021 affidavit provides sufficient information about each of the 74 documents and its purpose to establish the claims for privilege.
The plaintiff notes that the six documents referred to above are described in Mr Mina's 6 August 2021 affidavit as having been created for the sole purpose of obtaining advice, whereas the description of the purpose for which the other 68 documents were created does not use the language "sole purpose". On that basis, the plaintiff submits: "The fair reading of the privilege affidavit is that 6 documents were prepared with the stated 'sole purpose' but that the other documents were not. In relation to the other 68 out of 74 documents, the evidence states a purpose (implicitly not the sole purpose) and does not provide further information to enable the Court to conclude that the stated purpose is dominant. Various items are said to be privileged as they were created for the purpose of 'obtaining advice' or 'requesting instructions' or 'requesting advice', but without stating that that was their dominant purpose." The plaintiff submits that privilege has not been established in relation to items 3, 5, 11, 14-18, 22, 25, 27-28, 35, 39-41, 53, 55-56, 61-62 and 64 in Annexure A for those reasons.
With respect, those submissions fail to engage with the principles referred to at [21]-[22] above in a meaningful way in the context of the discussions and negotiations in which the defendants were engaged for the potential purchase of the plaintiff's business in during the period after May 2013 and having regard to the role of Matthews Folbigg Lawyers as the defendants' solicitors in relation to that transaction.
Any description of the purpose of the creation of the documents as the "sole purpose" or "dominant purpose" would be a mere assertion. Rather than making such assertions, Mr Mina's 6 August 2021 affidavit describes the substance of the purpose for which each document was created. This approach does not support the inference which the plaintiff contends that the purpose described by Mr Mina was not the sole purpose. In any event, the question is whether the stated purpose was the dominant purpose.
In my opinion, Mr Mina's evidence in relation to each of items 3, 5, 11, 14-18, 22, 25, 27-28, 35, 39-41, 53, 55-56, 61-62 and 64, considered in the context of discussions and negotiations concerning the potential acquisition of JW Mailing Services and the role of Matthews Folbigg Solicitors as the solicitors acting for the defendants in relation to that transaction, establishes that those documents were privileged when they were created. The substance of Mr Mina's evidence concerning the purpose of each of those documents is summarised in Annexure A. I provide the following illustrative examples by way of further explanation of the reasons for my opinion in relation to items 3, 5, 11, 14-18, 22, 25, 27-28, 35, 39-41, 53, 55-56, 61-62 and 64.
Item 14 is an email sent by Mr Mina to Matthews Folbigg Lawyers on 28 May 2014 that Mr Mina deposes contains a request for advice about certain clauses in the draft contract for the purchase of JW Mailing Services. In the context of the matters referred to at [8]-[9] above, and the nature of the communication being an email between the prospective purchaser and their solicitor at a time when the terms of the purchase had not been agreed, Mr Mina's description of the request for advice that was the purpose of the email can readily be inferred to be the dominant purpose of the email. I am therefore of the opinion that the description of the document in Mr Mina's 6 August 2021 affidavit is sufficient to establish the privilege claim.
Item 16 is an email sent by Matthews Folbigg Lawyers to Mr Mina on 1 June 2014 that Mr Mina deposes requests instructions from him that were required to settle Matthew Folbigg's advice about aspects of the proposed purchase of JW Mailing Services, including the transfer of staff and the use of trusts. Again, in the context of the matters referred to at [8]-[9] above and having regard to the parties to the communication and their roles in relation to the prospective purchase, Mr Mina's description of the purpose of the email can readily be inferred to be the dominant purpose of the communication.
Item 53 is an email from Matthews Folbigg Lawyers to Mr Mina dated 19 August 2014 that Mr Mina deposes was sent to him as a report and advice on discussions with the vendor's solicitor and to seek Mr Mina's instructions about the purchase. Applying the principles at [21]-[22] and in the context of the matters referred to at [8]-[9] above, this description does not give rise to any questions about whether the request for instructions warrants characterising the email as having a purpose other than legal advice within the scope of Mr Mina's instructions concerning the transaction in relation to which the solicitors were retained.
In relation to items 2, 4, 6-9, 12, 18, 20-21, 26, 29-32, 34, 42-43, 45-48, 50-52, 54, 57-59, 63, 65-68 and 71-74 of Annexure A, the plaintiff submits Mr Mina's evidence that those documents "contain advice" is insufficient to establish that legal advice was the dominant purpose for the creation of the documents because the "advice" is not described as legal advice, as opposed to commercial advice, and Mr Mina does not expressly say that legal advice was the dominant purpose. I have already addressed the second aspect of this submission at [26] above. As to the first aspect of the submission, I have reviewed Mr Mina's evidence in relation to all of these items. Having regard to the scope of legal advice that is relevant when considering claims for client legal privilege (see [21]) above, the contextual matters referred to at [8]-[9] above, the fact that the communications occurred in the context of a solicitor and client relationship in which Matthews Folbigg Lawyers were acting as the defendants' solicitors in relation to the potential acquisition of JW Mailing Services that was the subject of ongoing negotiations, Mr Mina's evidence about the subject matter of the advice in each item, [1] and the absence of any indication that the defendants (who were already operating a mailing services business) sought or are likely to have sought commercial advice from their solicitors, I consider that Mr Mina's evidence is sufficient to discharge the defendants' onus of proving the requisite dominant purpose for the creation of these items.
Item 19 of Annexure A is an email dated 4 June 2014 that Mr Mina deposes "Matthews Folbigg Lawyers was copied into by way of update to my instructions about the Purchase". It seems to me that this document evidences two communications - one between Mr Mina and the direct recipient and one between Mr Mina and the solicitors acting for him on the transaction. It is the second communication that is relevant for present purposes. On the basis of Mr Mina's description of the purpose of the communication, and having regard to the transactional context and the solicitor-client relationship in which the communication occurred, I infer that the dominant purpose of the communication was for Mr Mina to be provided with legal advice as and when required in relation to the transaction then under negotiation. The same applies in relation to communications that are described as "updates" from the solicitors to Mr Mina or "updates" from Mr Mina to the solicitors concerning his instructions (items 7, 33 and 44 of Annexure A).
I reject the plaintiff's submission that communications such as item 36 that merely attach a draft contract for the purchase of JW Mailing Services are not privileged. Draft documents of this nature passing between a solicitor and client would tend to result in disclosure of privileged communications: see DSE Holdings Pty Ltd v Intertan Inc, supra, at [46]-[51].
I also reject the plaintiff's submission that items 37, 38, 69 and 70 "on their face, are not created for the protected purpose". In my opinion, that submission misunderstands the scope of legal advice that is protected by the privilege: see [21] above.
That leaves only item 13 in Annexure A, about which the plaintiff made no specific submission. In his 6 August 2021 affidavit, Mr Mina deposes that he has engaged Matthews Folbigg Lawyers since about 2002 to act for him in relation to various matters, including the acquisition of JW Mailing Services. Mr Mina deposes that item 13 is an email that he sent to Matthews Folbigg Lawyers on 22 May 2014 providing instructions and an update about the purchase of JW Mailing Services and also including advice about various matters that are unrelated to that purchase. To the extent that it concerns instructions and an update relating to the purchase, the email was created for the purpose of legal advice for the same reasons explained at [32] above. To the extent that it contains advice concerning other matters, I infer from the context of the long-standing solicitor-client relationship in which the email was sent that it was for the purpose of legal advice in the sense referred to at [21] above. It is not necessary that the email be created for the dominant purpose of providing legal advice in relation to the JW Mailing Services acquisition. It is sufficient that email was for the dominant purpose of legal advice.
Both parties submitted that it is open to the Court to inspect the 74 documents (over 900 pages) in order to determine whether they are privileged. I have not found it necessary to do so in order to determine whether the documents were privileged at the time of their creation.
I now turn to the question whether privilege has been waived in any of the 74 documents by Mr Mina's evidence in his 3 November 2020 affidavit referred to above.
The plaintiff submits that Mr Mina has exposed to scrutiny his state of mind when he signed the Deed of Loan and Guarantee on 22 August 2014. It is submitted that the last sentence of paragraph 42 of Mr Mina's affidavit sworn on 3 November 2020 is referring to a view that he had formed in his solicitors' office when he signed the Deed, and that context and the language of the sentence itself ("and would thereby be of no effect") indicates that his view had been informed by legal advice. It follows, in the plaintiff's submission that, having exposed to scrutiny Mr Mina's state of mind to which legal advice is likely to have contributed, the defendants "can not withhold the advice from their opponent". In support of that submission, the plaintiff refers to Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405 at 411.
The defendants submit that the privilege has not been waived and that paragraph 42 of Mr Mina's 3 November 2020 affidavit does not give rise to an inference that his "view" referred to in that paragraph was informed by legal advice.
The principles to be applied in determining whether client legal privilege has been waived were recently summarised by Macfarlan JA, with the concurrence of McCallum JA and Simpson AJA, in GR Capital Group Pty Ltd v Xinfeng Australia International Investment Pty Ltd [2020] NSWCA 266. After extensively reviewing the authorities at [21]-[56], his Honour said (at [57]):
"I draw from these authorities the following propositions of present relevance:
(1) The test is one of inconsistency between the privilege holder's conduct and its maintenance of the privilege, not one of general fairness or of relevance to an issue in the proceedings.
(2) Enquiring whether the privilege holder has made express or implied assertions about the contents of the confidential communications, and whether its conduct has therefore 'laid open the communications to scrutiny', assists in ensuring that the court's focus is on inconsistency rather than simply relevance. If the privilege holder is understood to be asserting something about the contents of the communications, it is but a short step to conclude that it would be inconsistent for it to prevent those contents being scrutinised.
(3) On the other hand mere relevance of the content of the privileged communications to an issue raised in the proceedings by the privilege holder does not equate to inconsistency - something more is needed. It is of the essence of legal professional privilege that, if maintainable, it entitles a party to withhold potentially relevant documents from inspection by the other party.
(4) The determination of whether there has been an express or implied assertion about the contents of privileged communications giving rise to a relevant inconsistency is an evaluative decision to be made after consideration of the whole of the circumstances of the case. No hard and fast rules can be formulated. Those circumstances will include the degree of relevance of any advice to the issues in the proceedings, the centrality of the relevant issues in the proceedings and the likelihood of advice having been given, informed, as the High Court said in Mann v Carnell, by considerations of fairness.
(5) Having considered all those circumstances, the court must decide whether it would be inconsistent with the privilege holder's conduct for it to maintain privilege. The line between relevance to an issue and inconsistency in this context may be very fine and therefore one on which views might well differ."
I accept that, by his evidence in paragraph 42 of his affidavit, Mr Mina has exposed scrutiny to his state of mind when he signed the Deed of Loan and Guarantee. I also accept that his state of mind is a significant issue in the proceedings. The plaintiff's case that the loan was in fact made relies on the acknowledgement clause in the Deed and an alleged reduction of the amount payable to complete the purchase of his business (on the basis that $2 million of the purchase price was the subject of vendor finance on the terms of the Deed). The defendants' case that the loan was not made relies on Mr Mina's evidence as to his state of mind and reasons for signing the Deed of Loan and Guarantee, the contention that the purchase price ultimately agreed was lower than alleged by the plaintiff and the payment of $2 million allegedly made to the plaintiff towards that purchase price on 2 September 2014.
Applying s 122 of the Evidence Act and the principles summarised at [40] above, it does not follow from Mr Mina exposing his state of mind as at 22 August 2014 to scrutiny that he has waived privilege in all communications between the defendants and their solicitors within the scope of the subpoena and notice to produce during the period between 19 June 2013 and 2 October 2014. However, I accept the plaintiff's submission that Mr Mina's evidence in the last sentence of paragraph 42 of his affidavit, read in the context of his evidence that he told Mr White that he would ring his solicitor (that is, Mr Mina's solicitor) to discuss whether he would accede to Mr White's request to sign the Deed of Loan and Guarantee and his evidence that he was present in his solicitor's office when he signed that document, together with the nature of the view that Mr Mina says that he had formed and the language in which he expresses that view, is an implied assertion that he had received legal advice to the effect set out in the last sentence of paragraph 42 of his affidavit. In my opinion, that implied assertion, in circumstances where the state of mind that Mr Mina claims to have formed on 22 August 2014 is a significant matter relied on by the defendants, is inconsistent with the maintenance of the privilege in any communications for the purpose of legal advice being provided to the defendants about the proposed execution of the Deed of Loan and Guarantee on 22 August 2014.
By reason of their date, items 57 to 60 in Annexure A potentially fall within the class of communications identified above. I have inspected items 57 to 60 and am satisfied that privilege has been waived in relation to item 57 (being an email from Mr Stewart Gough of Matthew Folbigg Lawyers to Mr Mina dated 22 August 2013 at 11.22am with an attached draft Deed of Loan and Guarantee) and item 60 (being a file note prepared by "SFG" dated 22 August 2014) for the reasons explained immediately above.
For those reasons, I make the following orders:
1. Grant leave to the defendants to uplift subpoena packet S2, extract the documents comprising items 57 and 60 in Part 1 of the List of Documents attached to the affidavit of Maher Mina of 5 paragraphs sworn on 6 August 2021 and place those documents in new subpoena packet S2A.
2. Direct the defendants to take the steps referred to in (1) above by 1pm on 3 September 2021.
3. Order that the plaintiff be permitted to inspect the documents in subpoena packet S2A from 2pm on 3 September 2021.
4. Order that the plaintiff's notice of motion filed on 20 August 2021 is otherwise dismissed.
5. Costs reserved.
[2]
Endnote
For example: "advice from Matthews Folbigg Lawyers about the draft contract for the Purchase" (item 8); "advice about employment considerations and a draft Labour on Hire Agreement provided by Matthews Folbigg Lawyers in connection with my instructions about the Purchase" (item 21); "a draft contract amended following my instructions to Matthews Folbigg Lawyers and advice about certain aspects of the Purchase" (item 30); "a draft contract for the purchase that was prepared and sent by Matthews Folbigg Lawyers. It also contains advice about the draft contract." (item 43); "advice from Matthews Folbigg lawyers about financial arrangements related to the Purchase and an update about correspondence sent to the vendor's solicitor" (item 50); "documentation provided by Matthews Folbigg Lawyers in relation to the Purchase and advice about the documentation" (item 57); "a record of instructions regarding employment considerations that I have to Matthews Folbigg Lawyers in teleconference and the advice provided as a result of those instructions" (item 66).
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Decision last updated: 02 September 2021