FEDERAL COURT OF AUSTRALIA

Lock, in the matter of Cedenco JV Australia Pty Ltd (in liq) [2017] FCA 1306

ORDERS

THE COURT ORDERS THAT:

1.    The plaintiffs’ application dated 11 August 2017 be dismissed.

2.    The plaintiffs and ASIC be heard as to costs and any other orders.

3.    Mr Sharp bear his own costs of the application, but is not liable for the costs of any other party.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BESANKO J:

INTRODUCTION

1    The plaintiffs in this proceeding are Mr Ian Russell Lock and Mr John Sheahan. On 6 May 2010, the plaintiffs were appointed as administrators of Cedenco JV Australia Pty Ltd (CJVA), SK Foods Australia Pty Ltd (SKFA), and SS Farms Australia Pty Ltd (SSFA). Except where it is necessary to distinguish between these entities, I will refer to them as the companies. On 11 August 2010, the plaintiffs were appointed as joint and several liquidators of each of the companies pursuant to ss 439C(c) and 446A of the Corporations Act 2001 (Cth) (the Act).

2    On 14 May 2009, Mr Bradley Sharp was appointed the trustee in bankruptcy of SK Foods LP (SKFLP). SKFLP was a limited partnership of SKPM Corporation and the Scott Salyer Revocable Trust (SSR). SKFLP is a creditor of each of the companies and owns the majority of the shares in SKFA. It had 900 creditors who, according to Mr Sharp, were owed “collectively $214 million”.

3    On 2 June 2015, the plaintiffs commenced a proceeding in this Court seeking various orders under the Act concerning their remuneration, first as administrators of each company, and then as liquidators of each company (SAD 152/2015). The orders were sought under s 1322(4)(a) of the Act. The plaintiffs discontinued that proceeding on 2 July 2015.

4    On 13 July 2015, the plaintiffs commenced this proceeding. Again, they seek orders under s 1322(4)(a) of the Act in respect of their remuneration, first as administrators, and then as liquidators of each of the three companies. In the alternative, they seek orders that the Court fix their remuneration as administrators (s 449E(1)(c)) and liquidators (s 511(1)). The Australian Securities and Investments Commission (ASIC) has intervened in the proceeding under s 1330 of the Act and it has filed a lengthy Notice of Objection. Both parties have filed a document setting out what that party considers to be the issues of fact and law for decision. The plaintiffs’ conduct of the administrations and liquidations is in issue as are their claims for remuneration. The plaintiffs and ASIC have each filed affidavits containing the evidence which they propose to call at trial. For example, ASIC has filed a number of affidavits from experts in the field of company administrations and liquidations giving their opinions as to standard or usual rates of charges. At one point, the plaintiffs sought to cross-examine these experts, but they subsequently abandoned that application. ASIC has filed an affidavit of Mr Sharp sworn on 26 October 2016. It is fair to say that Mr Sharp is and has been for some time dissatisfied with the plaintiffs’ conduct of the liquidations and with their claims for remuneration.

5    The trial of the proceeding is listed to commence on 27 November 2017.

6    It is clear, I think, that the plaintiffs are and have been concerned for some time about Mr Sharp’s involvement in ASIC’s decision to intervene in this proceeding. They made an application for documents under the Freedom of Information Act 1982 (Cth) which seems to have been largely unsuccessful. On 2 March 2017, the plaintiffs served a Notice to Produce documents on ASIC pursuant to r 30.28 of the Federal Court Rules 2011 (Cth) (the Rules). On 7 April 2017, ASIC produced to the Court the documents which were the subject of the Notice to Produce. The documents were divided into two categories, being those over which legal professional privilege was not claimed (Schedule 1) and those over which such privilege was claimed (Schedule 2). The question whether the plaintiffs should be given the right to inspect the documents was set down for argument on 5 May 2017. There was no need for argument as the parties agreed to the plaintiffs being given the right to inspect the documents in Schedule 1 and the application for inspection being otherwise dismissed. Orders to that effect were made on 5 May 2017.

7    The plaintiffs considered the documents in Schedule 1 and decided they should also be given the right to inspect the documents in Schedule 2. On 11 August 2017, they issued an Interlocutory process in which they sought, among other orders, an order that they be given the right to inspect the documents in Schedule 2. That is the application which is the subject of these reasons and orders.

THE PLAINTIFFS’ INTERLOCUTORY PROCESS DATED 11 AUGUST 2017

8    In their Interlocutory process, the plaintiffs seek the following orders, relevantly:

…

2.    An order that the plaintiffs have leave to uplift, copy and inspect those documents marked “B” which are listed in schedule 2 in the letter from the Australian Securities and Investments Commission’s (“ASIC’s”) solicitors to the Associate to Justice Besanko dated 7 April 2017 (over which a claim for privilege by the Australian Securities and Investments Commission is made).

3.    An order that ASIC, deliver to the Court all:

3.1    documents and materials, including draft witness statements and/or draft affidavits, received from or compiled from information received on or since 25 March 2014 from, Mr Bradley Sharp and or SK Foods LP, including from their servants or agents, and which are in ASIC’s possession, power, custody or control; and

3.2    originals, copies of and materials including draft witness statements and/or draft affidavits compiled from information contained in, document 37 (including the attachments thereto) of the documents marked “B” which are listed in schedule 1 in the letter from ASIC’s solicitors to the Associate to Justice Besanko dated 7 April 2017.

9    The order sought in paragraph 2 relates to the documents in Schedule 2. There are 63 documents and they are communications between on the one hand, ASIC and its solicitors, Corrs Chambers Westgarth, and on the other, solicitors for Mr Sharp (Norton Rose Fulbright Australia (Norton Rose)) and Nuti Hart LLP between 16 December 2014 and 27 February 2017. ASIC conceded the relevance of these documents to the issues in the proceeding. For the sake of brevity, I will refer to these documents as “the disputed documents”.

10    The plaintiffs contend that legal professional privilege does not attach to the disputed documents. It advances two arguments. The first argument relates to only three of the documents (61, 62, and 63) which were all created on 16 December 2014. That was before legal proceedings were on foot or (so the plaintiffs submitted) even contemplated and could not be the subject of legal professional privilege. I reject that argument for reasons given below. The plaintiffs’ principal argument was that legal professional privilege did not attach to any of the documents because they were created in furtherance of, or to facilitate, what the plaintiffs referred to as an “iniquitous” purpose of Mr Sharp. In other words, the communications were not privileged because they were created in furtherance of, or to facilitate what is referred to by way of shorthand as a crime or fraud. Subject to their argument concerning documents 61, 62 and 63, the plaintiffs accept that the disputed documents are covered by legal professional privilege should their argument that the documents were created in furtherance of, or to facilitate, a crime or fraud, fail.

11    The orders sought in paragraph 3 are unusual. When I raised this with the parties they said they were keen to deal with the merits of the matter and, as I understood ASIC’s submission, it was that it was not taking any point of form. I am prepared to proceed in that way as I have decided that the orders should not be made for other reasons.

12    The submissions on the Interlocutory process were heard on 12 September 2017. I was told that Mr Sharp had been given some details of the plaintiffs’ application and that a solicitor from Norton Rose was present in Court during the submissions. Nevertheless, I was concerned about whether Mr Sharp should be given full and proper notice of the application in view of the seriousness of the allegations involving him as they were developed. I raised this with the parties at the conclusion of submissions.

13    The plaintiffs gave notice of the application to Mr Sharp and by interlocutory application dated 28 September 2017, he applied to intervene in the Interlocutory process. I granted him leave to intervene for the reasons set out below. There was a subsequent hearing at which senior counsel for Mr Sharp made submissions and senior counsel for the plaintiffs responded. ASIC did not appear on that occasion.

14    Before turning to examine the issues, it is convenient to identify the facts to the extent they are relevant to this application.

THE FACTS

15    The following is a statement of certain key events in the administrations and liquidations. It is brief and general and based on the plaintiffs’ evidence. Such a statement is sufficient for present purposes.

16    On a date prior to Mr Sharp’s appointment as trustee in bankruptcy of SKFLP, there was a purported spin off of SKFLP’s interests in foreign subsidiaries to the partners of SKFLP, Mr Salyer as trustee of the SSR and SKPM Corporation. These foreign subsidiaries included the companies and the assets purportedly assigned included the shareholding in SKFA and an intercompany debt owed by SKFA pursuant to a promissory note in favour of SKFLP.

17    On 9 November 2009, the ANZ Bank appointed joint and several receivers and managers to the companies pursuant to fixed and floating charges in favour of the ANZ Bank.

18    In the period from their appointment up to approximately late 2011, the plaintiffs undertook investigations into the spin off and potential claims against the former directors and financiers of the companies. The plaintiffs allege that this was done with the support and encouragement of Mr Sharp who contended that the spin off either did not take place or was ineffective or otherwise void as a fraudulent or unauthorised pre-bankruptcy transaction.

19    Various proofs of debt, a proof of equity claim and proofs were lodged in the liquidations in relation to the shareholding in SKFA and the ownership of the intercompany debt.

20    The plaintiffs dealt with these proofs and there were appeals to this Court, including an appeal by Mr Sharp.

21    In or about January 2012, the plaintiffs conveyed a view to Mr Sharp contrary to the view he (Mr Sharp) took as to the effectiveness of the spin off. Mr Sharp issued legal proceedings in this Court seeking various orders, including an order for the review of the plaintiffs’ remuneration under s 504 of the Act. The application for that order was later withdrawn. The proceeding otherwise went to judgment and Mr Sharp was successful in obtaining orders to the effect that the shares in SKFA were not validly transferred and SKFLP remained the owner of 100 shares and the entitlement to a majority proportion of the surplus funds in the winding up and, to the effect that the intercompany debt was not validly assigned and remained owing to SKFLP. The parties referred to these proceedings as the Equity proceedings and I will also refer to them in that way.

22    On 1 August 2012, a partner at Norton Rose wrote to the plaintiffs advising them that he had been instructed to act for Mr Sharp. On 12 November 2012, Norton Rose, on behalf of Mr Sharp, wrote to ASIC complaining about the conduct of the plaintiffs, including a complaint about the plaintiffs’ remuneration. Between 15 November 2012 and 26 November 2012, Norton Rose provided further information and documents to ASIC in support of Mr Sharp’s complaints. On 18 February 2013, Norton Rose, on behalf of Mr Sharp, wrote to ASIC making further complaints about the plaintiffs’ conduct.

23    On 15 May 2013, the Commissioner of the Australian Federal Police commenced a proceeding in the Supreme Court of Victoria seeking to restrain and seize the funds held by the plaintiffs as proceeds of crime (POCA proceedings).

24    On 22 May 2013, Norton Rose, on behalf of Mr Sharp, wrote to ASIC making further complaints about the plaintiffs’ conduct, including a complaint about the plaintiffs apparently providing material to the Australian Federal Police.

25    On 10 July 2013, Mr Sharp commenced a proceeding in this Court seeking orders for the removal of the plaintiffs as liquidators of the companies under s 503 of the Act. On the same day, he filed an affidavit in the POCA proceedings making what the plaintiffs described as serious allegations against them.

26    On 11 July 2013, Norton Rose, on behalf of Mr Sharp, provided a copy of his application in the POCA proceedings and affidavit in support to ASIC.

27    On 26 July 2013, Norton Rose, on behalf of Mr Sharp, wrote to ASIC making further complaints about the plaintiffs’ conduct and asking ASIC to intervene in the removal proceedings and support the application.

28    In November 2013, a settlement was reached between the plaintiffs, Mr Sharp, the Australian Federal Police and other parties in resolution of all proceedings between them, including the POCA proceedings, the removal proceedings and the Equity proceedings.

29    The settlement was effected by a deed dated November 2013. I will refer to this as “the November 2013 deed”. Under cl 3.14 of the deed, the plaintiffs were to complete the liquidations of the three companies on or before 31 March 2014 and they were to file all necessary documents with each company’s respective corporate regulator in Australia and New Zealand for the deregistration of the companies by that date. The plaintiffs were not to incur or claim or pay more than $750,000 in remuneration and expenses in aggregate in respect of the remainder of the liquidations of any of the companies. They were to make interim distributions to the creditors and shareholders in the liquidations of the companies by paying such interim distributions to the Australian Financial Services Agency (AFSA) and retaining no more than $750,000 in aggregate in respect of those liquidations after the further interim distributions. Clause 4 provided for various releases upon Mr Sharp and Mr Greeley obtaining the approval of the United States Bankruptcy Court. It is in the following terms, relevantly:

4.2    Subject only to clause 4.4, each Party releases each other Party from any Claim in relation to the circumstances recited in this Deed or any allegation or circumstance arising out of or in any way connected with the Proceeds Proceeding which they now have, have had in the past, may have, or, but for this Deed, could or might have had.

4.3    Subject only to clause 4.4, each Party (except the Commissioner) releases each other Party (except the Commissioner) from any Claim relating to or in any way connected with SKFA, SS Farms Australia, Cedenco, Cedenco Ohakune and/or Ex Ced of any nature which they now have, had had in the past, may have, or, but for this deed, could or might have had.

4.4    The above releases do not apply to any:

(a)    obligation or acknowledgement arising under this Deed;

(b)    Claim between SKFA, SS Farms Australia, Cedenco, Cedenco Ohakune and/or Ex Ced, or any one or more of them; and

(c)    of the fees and expenses which have been or which are to be incurred by Sheahan and Lock consistent with the terms of this Deed.

30    The releases are releases from any “Claim”. That word is defined in the definitions clause of the deed (cl 1.1) as follows:

Claim means any present or future, actual or contingent, claim, cause of action, complaint, liability, cost or expense that any party has or might have relating to any facts, matters or circumstances arising on or before the date of this Deed whether or not the facts, matters or circumstances giving rise to that Claim are known to that person or to any other person at the date of this Deed;

31    Consent orders were made in the POCA proceedings in terms of the orders set out in Annexure 4 to the November 2013 deed. The plaintiffs’ case is that following those orders, all monies held by the companies, save for the aggregate amount of $750,000, were forfeited to AFSA which, in turn, on paid those monies to Mr Greeley, SKFLP and Mr Sharp with a balance being retained by the Commonwealth.

32    On 22 November 2013, Norton Rose sent an email to ASIC. In that email they advised ASIC that “SK Foods” had settled. They went on to say:

During the course of the AFP’s proceeds of crime litigation I became aware of conduct of the liquidators that I found disturbing and worthy of investigation by ASIC. I became aware of this information through documents produced under the compulsory processes of the Supreme Court of Victoria so I cannot volunteer them to you.

I would like ASIC to issue a notice on me under section 19 of the ASIC Act so that I can provide this information to you.

33    On 20 March 2014, Norton Rose sent a letter to the plaintiffs. In that letter they said, inter alia:

1.2    You are obliged to seek approval of the entirety of your currently unapproved remuneration. The deed of settlement and release (Deed) entered into between, amongst other parties, our clients, you and Australia and New Zealand Banking Group Limited and the ANZ Bank New Zealand Limited on 20 November 2013 does not change this. Firstly, you are unable to contract out of your statutory obligation to seek approval in the usual way after satisfying the usual disclosure requirements prescribed by the Corporations Act 2001 (Cth). Secondly, at the request of your former solicitors, clause 4.4(c) was inserted into the Deed so that the releases in clause 4 did not apply to “any … fees and expenses which have been or which are to be incurred by Sheahan and Lock consistent with the terms of this Deed”.

…

1.6    We are instructed to bring your breach of the Corporations Act to the attention of the Australian Securities and Investments Commission.

34    On the same day, Norton Rose sent an email to ASIC which contained, among other statements, the following:

Further to my previous complaints about the unlawful conduct of the liquidators of SK Foods Australia Pty Limited (in liquidation) (SKFA) and related entities I would like to bring to your attention a very obvious breach of the remuneration rules.

…

It appears that the Liquidators have paid themselves nearly $400,000 from SKFA and a further $117,000 from SS Farms Australia for which they did not have creditor or court approval.

35    The email then goes on to refer to circumstances suggesting the plaintiffs had paid themselves more than a cap on their remuneration or fees apparently fixed at meetings of the creditors of the companies in about November 2012.

36    The email then states:

You will be aware that in November/December 2013 many of the disputes between my client, the liquidators, the receivers and the Australian Federal Police were resolved by a deed of settlement. I believe I have provided a copy of that deed to you. The Liquidators may believe that the deed of settlement authorised them to pay themselves the unapproved remuneration. If so, they are wrong. As the attached letter points out:

...

I request that ASIC investigate this payment of unapproved remuneration by the liquidators and consider taking disciplinary action against them for this breach of the Corporations Act.

37    On 24 March 2014, the plaintiffs’ then solicitors wrote to Norton Rose in the following terms:

Our clients have instructed us that in light of the overall settlement achieved between the parties, as approved by the Court, there was an implicit agreement from Mr Sharp that the fees that the Liquidators would incur in completing their administration were approved by Mr Sharp. Having now considered the matters set out in your letter, that appears not to be the case and as a result, the Liquidators have now repaid all relevant moneys into the liquidation bank accounts.

So that there is no uncertainty in relation to the approval of the remuneration of their fees for completing their administration of the relevant companies, the Liquidators are preparing a remuneration report which will be presented to shareholders and creditors and for which approval will be sought at the meeting scheduled to be held on Friday, 28 March 2014.

A copy of the remuneration report will be provided to Mr Sharp, and Mr Sharp either in person or by proxy will be entitled to attend the creditors’ meeting.

38    On 25 March 2014, the plaintiffs themselves wrote to Norton Rose addressing that firm’s letter dated 20 March 2014. The plaintiffs asserted that Mr Sharp had already approved their fees “as evidenced by the email chain attached herewith, which formed part of the negotiations leading to the deed of settlement dated 20 November 2013 …”. The plaintiffs asked Norton Rose to confirm that they had referred the matter to ASIC as foreshadowed in Norton Rose’s letter dated 20 March 2014. The plaintiffs said that if Norton Rose had done so, they asked that the firm bring the “attached email chain” to ASIC’s attention. Under the heading, “Clause 4.4(c) of the Deed”, the plaintiffs said:

With reference to clause 4.4(c) of the Deed, this clause was inserted at our request so that the Companies were not released from liability for our fees and costs. Your characterisation of this clause is misconstrued.

39    On 11 April 2014, Norton Rose wrote a detailed letter to the plaintiffs setting out comments with respect to the following: inadequacy of remuneration reports; repayment of excess remuneration; reconciliation of the amount paid to the official trustee; conduct of previous creditors’ meeting to approve remuneration; withholding tax; and proposed resolutions to be put at the meeting of creditors on 17 April 2014.

40    On 15 April 2014, Norton Rose sent an email to ASIC. The first paragraph contains a sufficient description for present purposes of the matters raised in that email:

Further to my emails below, I wish to notify ASIC of additional misconduct of John Sheahan and Ian Lock (Liquidators) as liquidators of SK Foods Australia Pty Ltd (SKFA), SS Farms Australia Pty Ltd (SSFA) and Cedenco JV Australia Pty Ltd (CJV) (together companies). This conduct relates to:

•    a possible violation of the Liquidator’s duty to avoid conflicts of interest in voting for their remuneration; and

•    inadequate remuneration reports.

41    On 23 June 2014, Norton Rose sent an email to ASIC. The email was in the following terms:

You will appreciate that various aspects of the conduct of John Sheahan and Ian Lock, the liquidators in this matter, have been the subject of very significant criticisms by my client. Those criticisms have been raised with ASIC by way of formal complaint about the conduct of the liquidators. Those complaints included a detailed analysis of relevant facts and law and were supported by evidence.

The first complaint was lodged with ASIC on 12 November 2012; approximately 20 months ago.

To date we have no substantive response from ASIC to any of our complaints. We do not know whether ASIC has even investigated our complaints. If those investigations did occur, we do not know whether ASIC has taken (or intends to take) any steps against the liquidators, the subject of the complaints.

I would appreciate it if ASIC would respond to this email by:

1.    informing me of the steps it has taken in response to the complaints that have been lodged; and

2.    whether ASIC is intending to take or has taken any disciplinary action against the liquidators.

42    It is helpful at this point to note the complaints which were made by Norton Rose on behalf of Mr Sharp on 12 November 2012 and referred to in the above email. Those complaints are summarised in paragraph 1.4 of Norton Rose’s letter to ASIC dated 12 November 2012.

1.4    Our client is concerned that Messrs Sheahan & Lock:

(1)    had prior relationships with the Companies, the Salyer Interests and advisors, such that they are not independent of those parties, and are acting contrary to the interests of creditors as a whole;

(2)    failed to disclose, in their declaration of independence, relevant relationships and indemnities (DIRRI), those prior relationships and, despite being informed of the misleading nature of their DIRRI, have failed to provide an amended DIRRI;

(3)    have billed fees in excess of $5,204,468.38, and have incurred legal fees in excess of $3,576,268.37 yet have failed to realise a single asset of the companies. In that regard we note that Mark Korda and Craig Shepherd of KordaMentha were appointed as receivers and managers of the Companies on 9 November 2009, continue in that role to date and have billed substantially less in fees and expenses.

(4)    have conducted extensive investigations, both in Australia and overseas, in relation to:

(a)    potential claims against Australia and New Zealand Banking Group Limited (ANZ AU) and ANZ Bank New Zealand Limited (ANZ NZ) that, on any view:

(i)    could never bring any benefit to creditors; and

(ii)    would still see ANZ AU and ANZ NZ receive 100¢ in the dollar on the debts owed to them;

(b)    the dispute between the Salyer Interests and SK Foods LP:

(i)    to assist the Salyer Interests to the detriment of our client and SK Foods LP; and

(ii)    in circumstances where:

(A)    Messrs Sheahan & Lock (and the creditors as a whole) had no interest in that dispute; and

(B)    Messrs Sheahan & Lock were never in a position to be the arbiter of that dispute;

43    On 1 July 2014, ASIC sent an email to Norton Rose which contained the following:

Because of confidentiality reasons, I am unable to provide you with any specific information about what steps ASIC has taken or intends to take other than to confirm that our inquiries are continuing into the concerns you have raised. …

ASIC is thankful for the material you have given us to date.

ASIC asked to be advised by Norton Rose when the latter received the plaintiffs’ court application seeking determination of their remuneration.

44    Norton Rose sent a response to ASIC on the same day stating that all they were seeking was confirmation that ASIC was taking Mr Sharp’s complaints seriously and was investigating those complaints.

45    On 29 August 2014, the plaintiffs and Mr Sharp entered into a deed of settlement and release. I will refer to this as “the August 2014 deed”. Under the heading of “Introduction” in the August 2014 deed, the following appears:

A.    The liquidators, Mr Sharp and SKFLP have been in dispute concerning the conduct of the liquidations of the companies, including as to the meaning and effect of the deed of settlement and release to which each of them are parties executed on 19 November 2013 and the quantum, and entitlement of the liquidators in respect of their remuneration and the costs and expenses of the liquidations of the companies.

B.    The parties have now reached agreement in full and final settlement of all remaining matters in dispute between them on the terms set out herein.

46    The deed uses the term, “Remuneration Amount” and defines that term to mean a total sum of $100,000 including GST. Clause 5 of the deed is in the following terms:

5.    Meeting and resolution

5.1    At any meeting of creditors of SKFA, CJVA and/or SSFA convened by the Liquidators, Mr Sharp and SKFLP will cast their votes as creditors and/or members to the full extent of their voting entitlements in favour of any resolution or resolutions seeking approval for the remuneration of the Liquidators in the Liquidations in the Remuneration Amount.

5.2    Neither Mr Sharp nor SKFLP will take any step whatsoever to oppose or to counsel, assist, procure or persuade any other person or entity to oppose, any application to a Court brought by the Liquidators for approval of their remuneration in the Liquidations in the Remuneration Amount.

5.3    Immediately after the Remuneration Amount is approved for payment in accordance with the Corporations Act 2001 (Cth) the Liquidators must pay the Retention Amount to AFSA in accordance with the terms of the Forfeiture Order.

47    Clause 6 provides for a release and discharge. It is in the following terms:

6.    Release and discharge

Mr Sharp and SKFLP hereby release and discharge the Liquidators, and the Liquidators hereby release and discharge Mr Sharp and SKFLP, from any Claim in any way arising out of or in relation to the subject matter of this Deed, the Liquidations, the conduct of the Liquidations, the Companies, the costs and expenses of the Liquidations and the entitlement of the Liquidators to remuneration in respect of the Liquidations.

48    The word “Claims” is defined in cl 1 as follows:

Claims means any present or future, actual or contingent, demand, claim, cause of action, complaint, liability, cost or expense whatsoever arising out of relating to any facts, matters, or circumstances arising on or before the date of this Deed whether or not the facts, matters or circumstances are known at the date of this Deed.

49    On 19 May 2015, Norton Rose sent an email to ASIC. They referred to Mr Sharp’s first complaint to ASIC about the plaintiffs made on 12 November 2012. They went on to say:

In the intervening 910 days my periodic enquiries have been met with responses to the effect that ASIC is continuing to investigate. I have received no substantive response to the complaint. Surely, after all this time, ASIC must have made a decision in response to those complaints one way or the other.

Has ASIC taken, or does ASIC intend to take, disciplinary action against John Sheahan and Ian Lock in relation to the breaches of duty that my client has alleged and provided evidence to substantiate? If not, why not?

50    On 5 August 2015, Norton Rose sent an email to Corrs Chambers Westgarth. The email was in the following terms:

You will be aware that I act for Bradley Sharp, the liquidating trustee of the SK Foods LP. My client stands to receive, either directly or indirectly, all surplus money from the liquidation of the three Australian companies. Ultimately, my client (and through him, the creditors he represents) is the only person interested in the liquidations of the Australian companies.

As you point out, the liquidators are now seeking orders fixing their remuneration. It follows inexorably that the liquidators accept that the remuneration they have previously paid themselves was not properly authorised. In those circumstances, I am surprised that the liquidators have not repaid the entirety of their remuneration into the liquidation funds of the Australian companies: see Australian Securities and Investments Commission v Dunner [2013] FCA 872 at [100] and paragraph 16.3 of the Australian Restructuring, Insolvency and Turnaround Association’s Code of Professional Practice (3rd ed). Nor have the liquidators provided “an explanation as to why the fees were improperly taken”, which explanation paragraph 16.3 requires be provided at the time the remuneration is repaid. The obligation to repay improperly approved remuneration is mandatory – in Dunner, Middleton J referred to a “responsibility to comply” with both the Corporations Act and the Code.

Given the latest Court application, the failure of the liquidators to refund the entirety of their remuneration is arguably a breach of their legal obligations for which they should be disciplined.

51    As I have said, Mr Sharp has sworn an affidavit in this proceeding which is to be relied on by ASIC at the trial. Mr Sharp sets out details of events since he was appointed “Chapter 11 Trustee in Bankruptcy of SKFLP”.

MR SHARP’S APPLICATION TO INTERVENE

52    Mr Sharp’s application was for leave to intervene in the plaintiffs’ Interlocutory process, not in the proceeding generally. ASIC did not seek to be heard on the application. After hearing from the plaintiffs and Mr Sharp, I made the following order:

1.    Mr Bradley D Sharp is granted leave to intervene in respect of the application made by the plaintiffs by way of interlocutory process dated 11 August 2017, to make the submissions in the document filed on 9 October 2017 and the submissions made this day, subject to any further order.

53    There was a dispute between the parties as to the appropriate order for costs should Mr Sharp be granted leave to intervene. I reserved my decision on that question. I think the appropriate order for costs is that Mr Sharp should be responsible for his own costs, but at the same time, not be responsible for the costs of either the plaintiffs or ASIC. My reasons for the orders I made and the order as to costs I will make are as follows.

54    Rule 9.12 of the Federal Court Rules 2011 (Cth) provides as follows:

(1)    A person may apply to the Court for leave to intervene in a proceeding with such rights, privileges and liabilities (including liabilities for costs) as may be determined by the Court.

(2)    The Court may have regard to:

(a)    whether the intervener’s contribution will be useful and different from the contribution of the parties to the proceeding; and

(b)    whether the intervention might unreasonably interfere with the ability of the parties to conduct the proceeding as the parties wish; and

(c)    any other matter that the Court considers relevant.

(3)    When giving leave, the Court may specify the form of assistance to be given by the intervener and the manner of participation of the intervener, including:

(a)    the matters that the intervener may raise; and

(b)    whether the intervener’s submissions are to be oral, in writing, or both.

55    It seemed to me that of the relevant considerations, the most powerful was in favour of granting Mr Sharp leave to intervene. Mr Sharp’s conduct is at the centre of the plaintiffs’ argument that legal professional privilege did not attach to the disputed documents. He is alleged to have breached two deeds and a finding, even at a prima facie level, has the potential to have significant consequences for him. Furthermore, he is alleged to have had an improper purpose and, if nothing else, that could have consequences for him in terms of damage to his reputation.

56    In addition, I was satisfied from his written submissions that he would make a useful and different contribution from that of the plaintiffs and ASIC to the resolution of the issues raised by the plaintiffs’ Interlocutory process. I think it is almost inevitable that there will be some overlap in the submissions made, but I identify the matters advanced by Mr Sharp which I consider useful and different as follows:

(1)    Mr Sharp put forward additional correspondence which adds to the picture in terms of the relevant events;

(2)    Mr Sharp put forward a different or, at least, more developed argument as to the scope of cl 4.4 of the November 2013 deed;

(3)    Mr Sharp drew my attention to s 504 of the Act which is relevant. That provides that Mr Sharp himself could have taken action seeking to have the plaintiffs’ remuneration reduced; and

(4)    Mr Sharp adduced evidence, which I accept, that he personally will not benefit from a reduction in the plaintiffs’ remuneration and that the fees he is incurring are covered by funds he already holds.

57    The application for leave to intervene will have some effect on the orderly progression of this matter to trial and that is a factor against a grant of leave. However, it is outweighed by the factors in favour of a grant of leave. As to costs, Mr Sharp has a legitimate and reasonable interest in the outcome of the Interlocutory process and his involvement has not exceeded that interest. He should not be exposed to the costs of the other parties. On the other hand, ASIC has made detailed submissions on the Interlocutory process and he should bear his own costs of his application in any event.

PARAGRAPH 2

58    ASIC submitted that the plaintiffs’ Interlocutory process in relation to the disputed documents should be refused because, on 5 May 2017, the Court made an order dismissing an application for access to the documents. That was done by consent and before the plaintiffs had inspected the documents in Schedule 1 (see [6]-[7] above). The plaintiffs said that it was only on inspecting the documents in Schedule 1 that they realised the level of Mr Sharp’s involvement and decided to pursue an application for the right to inspect the disputed documents. The plaintiffs might be criticised for not inspecting the documents in Schedule 1 before consenting to an order dismissing their previous application, but I cannot see that there is any legal bar to their present application with respect to the disputed documents. As a matter of discretion, I will allow them to pursue their application, noting that any prejudice can be dealt with by an order for costs.

59    I start with the plaintiffs’ argument in relation to documents 61, 62 and 63.

60    As I have said, the plaintiffs submit that the three documents were created before any proceeding was commenced and could not be the subject of legal professional privilege. ASIC adduced evidence on this matter which I accept. The plaintiffs’ solicitors wrote to ASIC on 22 April 2014 advising ASIC that they had been instructed by the plaintiffs to make an application to the Court under s 511 of the Act for approval of their outstanding fees. In July 2014, ASIC briefed senior counsel to advise ASIC in relation to matters which were the subject of this proceeding and, in particular, ASIC’s concerns about the remuneration and expenses charged by the plaintiffs in respect of the three companies. In December 2014, senior counsel sought further instructions and ASIC wrote to Norton Rose seeking the information requested by senior counsel for the purpose of providing legal advice to ASIC. That is document 63, and documents 61 and 62 are Norton Rose’s responses to ASIC’s request for information. On the basis of that evidence, I am satisfied that, subject to the plaintiffs’ principal argument, the three documents are protected by legal professional privilege.

61    The plaintiffs’ principal argument was that the Court should conclude to the necessary level of satisfaction (see [75] below) that the communications between the solicitors for Mr Sharp and ASIC (or at least those emanating from the solicitors for Mr Sharp) were:

8.1    not created for the dominant purpose of obtaining information and evidence for use in litigation; and/or

8.2    created for the purpose of trying to bring about a reduction in the Plaintiffs’ remuneration, and to obtain a financial advantage for Mr Sharp in his capacity as trustee of SK Foods LP, contrary to the terms of deeds entered into by Mr Sharp.

62    The plaintiffs’ principal argument raises the following three issues:

(1)    Have the plaintiffs established to the necessary level of satisfaction that by his communications with ASIC, Mr Sharp has acted in breach of one or both deeds?

(2)    If yes to (1), have the plaintiffs established to the necessary level of satisfaction that Mr Sharp’s purpose was “improper” as understood by reference to the authorities?

(3)    If yes to (1) and (2), is ASIC’s privilege affected by Mr Sharp’s purpose such that the disputed documents are not privileged?

63    The presence of a crime or fraud is sometimes referred to as an exception to legal professional privilege when perhaps more accurately, they are circumstances in which the privilege does not arise (Carter v The Managing Partner Northmore Hale Davy & Leake and Others (1995) 183 CLR 121 at 163). The important point for present purposes is that the onus is on the party challenging the claim of privilege (the plaintiffs in this case) to bring the case within the relevant principles.

64    Before considering the issues, I will state what I understand to be the relevant principles.

The Relevant Principles

65    In The Attorney-General for the Northern Territory of Australia v Kearney (1985) 158 CLR 500 (Kearney), Gibbs CJ discussed the exception to legal professional privilege where communications by a client were for the purpose of being guided or helped in the commission of a crime or fraud. The Chief Justice considered whether the exception went beyond the commission of a crime or fraud. His Honour referred to the judgment of Goff J (as his Lordship then was) in Crescent Farm (Sidcup) Sports Ltd v Sterling Offices Ltd [1972] Ch 553 (Crescent Farm) where Goff J held that communications made between solicitor and client for the purpose of committing a breach of contract or furthering a conspiracy to commit a breach of contract did not cease to be privileged. The Chief Justice referred to authorities which suggested that the exception to legal professional privilege was not restricted to the commission of a crime or fraud. He was of the view that the exception extended to communications made for the purpose of carrying out a fraud on justice or to frustrate the processes of the law itself or to further an illegal purpose (at 514-515). The Chief Justice did not find it necessary to decide if the principle stated by Goff J in Crescent Farm was too narrow a statement of the principle or whether the modern United States view that it included the commission of a tort was too wide a statement of the principle.

66    The Chief Justice also addressed the issue of the extent to which the alleged matters must be established in order to engage the exception. He said that the charge must be clearly made and there must be prima facie evidence in support of it.

67    Justices Mason and Brennan agreed with the Chief Justice’s conclusion that the exception applied where what was alleged was a deliberate abuse of statutory power with the consequences that others were prevented from exercising their rights under the law. Their Honours referred to a prima facie finding being sufficient (at 515-516).

68    Justice Wilson said that the exception arises where the professional relationship is abused in a manner involving dishonesty that goes to the heart of the relationship (at 524). His Honour spoke of a “prima facie finding” of a matter which would engage the exception (at 525). Justice Dawson did not consider that exercising the power to make regulations with an ulterior purpose in mind involved fraudulent or illegal conduct within the exception (at 530, 534).

69    In Commissioner of Australian Federal Police and Another v Propend Finance Pty Limited and Others (1997) 188 CLR 501, the principal issue considered by the High Court was whether a copy of a document could be the subject of legal professional privilege even though the original of the document was not. There was an allegation in that case that the original documents had been created for or in furtherance of an illegal purpose. Brennan CJ said that it was open to a party resisting a claim for legal professional privilege to show reasonable grounds for believing that the communication effected by the document for which legal professional privilege was claimed was made for some illegal or improper purpose, that is to say, a purpose contrary to the public interest. The Chief Justice said that he put the test in terms of “reasonable grounds for believing” because the test was objective and it was not necessary to prove the ulterior purpose. It was sufficient to establish a prima facie case or something that gave colour to the charge (at 515).

70    Justice Dawson said that it was not necessary to prove that the communication was undertaken to further a crime or fraud in order to exclude the privilege. His Honour said that the threshold for the displacement of the privilege was placed a considerable distance short of proof of the allegation of crime or fraud (at 522). Justice Toohey said that prima facie evidence of an illegal or improper purpose will be sufficient (at 534). Justice Gaudron spoke to similar effect (at 547). Justice McHugh referred to an illegal purpose or fraud and the need to adduce prima facie evidence of that in order to displace the privilege (at 556). Justice Kirby referred to something more than surmise and conjecture on the one hand, and something less than full proof of illegality on the other.

71    In Watson v McLernon Group (Insurances) Pty Ltd [2000] NSWSC 306 at [115], Hodgson CJ in Eq said that a mere breach of contract would not be sufficient to establish an improper purpose and that proof of dishonesty was an essential element.

72    I turn to the authorities which have addressed the third issue. In R v Central Criminal Court, Ex parte Francis & Francis [1989] 1 AC 346 (Francis), the House of Lords held that legal professional privilege was excluded with respect to documents held by a person’s solicitors and relating to that person’s dealings in particular property where a suspected drug trafficker had the intention by acquiring property for the person to further the criminal purpose of concealing the proceeds of drug trafficking. The person and his solicitors were innocent of any involvement in, or knowledge, of wrongdoing. Nevertheless, the House of Lords held that legal professional privilege had been lost. To some extent, the case must be seen as having been decided in its particular statutory context. Lord Goff of Chievely delivered the leading speech of the majority. There was no doubt that a criminal or fraudulent purpose of the client was sufficient to exclude the privilege even where the solicitor was entirely innocent. The more difficult point was whether the privilege was excluded where the client was also innocent, albeit being used as a tool by a third party. Lord Goff said that the exception applied where the innocent party was being used as an instrument by the third party or was a beneficiary of the third party’s conduct because that was consistent with the public interest rationale of the privilege. Such communications should not be protected because that would be injurious to the interests of justice (at 396). Lord Goff said that the type of case he was considering was likely to be most exceptional (at 397).

73    This approach of the House of Lords was applied by North J in Clements, Dunne and Bell Pty Ltd v Commissioner, Australian Federal Police [2001] FCA 1858; (2001) 48 ATR 650, a case concerned with an improper or illegal scheme involving employee benefit schemes. North J held that the exception to legal professional privilege was engaged in the case of schemes which allegedly contravened Part IVA of the Income Tax Assessment Act 1936 (Cth) (at 695). North J referred at length to Lord Goff’s speech in Francis and then said that he agreed with Lord Goff that the public interest considerations which lie behind legal professional privilege supported the conclusion that the privilege did not apply where the documents formed part of the implementation of fraudulent conduct by third parties (at 698).

74    My conclusions from these authorities are as follows. The outer boundaries of the crime and fraud exception have not been authoritatively determined. Certainly, criminal conduct, illegal conduct, fraud, a fraud on justice and frustrating the processes of the law are included. An improper purpose is probably sufficient, although there is a question as to what is meant by improper. A breach of contract without more is not sufficient. All of the grounds involve a level of moral obloquy or, at least, a serious departure from right and proper conduct. A mere breach of contract does not have these characteristics, although having said that, the facts of a particular case may often throw up something more (one way or another) than a mere breach of contract.

75    The level of proof required is a prima facie case or prima facie evidence. It is not necessary to prove the allegations. In my opinion, a reasonable level of satisfaction must be attained and, I think, in determining whether that has been attained, the Court is entitled to, and indeed should, take into account the seriousness of the allegations.

76    Legal professional privilege may be lost by the conduct of a third party even where the client and solicitor are innocent, but such cases are likely to be rare and arise where the client is the tool or instrument of the third party or the beneficiary of that party’s conduct.

Analysis

77    I do not need to determine finally the first and third issues because I am not satisfied to the requisite degree that Mr Sharp’s purpose was improper in the relevant sense, even assuming that Mr Sharp’s conduct involved a breach of one or both deeds. I will outline the respective arguments in relation to the deeds and comment on their strengths and weaknesses because I think that is relevant to any inferences drawn as to Mr Sharp’s state of mind. However, I will not finally decide the points of construction because I do not need to and because some difficult points of construction are raised in circumstances where I think further submissions, and, possibly evidence, would be of assistance. I will then address the second issue. I will not address the third issue.

78    It seems to me that a relevant background matter is that it is not immediately apparent to me that a complaint to ASIC of the nature made on 12 November 2012 (see [42] above) can be withdrawn. I expect that factual allegations can be withdrawn or not pressed, but one might expect it would be done in a different way to that set out in the deeds. This point is relevant, but not decisive and may be no more than a matter supporting ASIC’s submissions about the meaning of the word “complaint” and the use in the deeds of the legal concept of a release.

79    The plaintiffs submitted that by cl 4.2 of the November 2013 deed, they were released from any claim concerning their remuneration and expenses and that included any complaint about their remuneration and expenses. Clause 1.1 defines claim so as to include “complaint” and, the plaintiffs submitted, that includes a complaint to ASIC about the plaintiffs’ remuneration and expenses. The deed embodied an attempt by the parties to resolve all outstanding disputes between them.

80    ASIC submitted that a complaint made to it was not within the release in cl 4.2. The context suggested that complaint meant some form of initiating document in a legal proceeding. The concept of a release is well-understood in the law (see, for example, McDermott v Black and Another (1940) 63 CLR 161; Heydon JD, Leeming MJ, Turner PG, Meagher, Gummow and Lehane’s: Equity, Doctrines and Remedies (5th ed, LexisNexis, 2015) Ch 35) and one would not ordinarily talk in terms of releasing a complaint to a body such as ASIC, rather than (if such a complaint was to be included within the parties’ agreement) withdrawing a complaint or not making a complaint. Furthermore, a complaint can mean an initiating document in a legal proceeding so the word has work to do. There is force in these submissions.

81    Mr Sharp submitted that cl 4.4 exempted the plaintiffs’ remuneration and expenses from the release. Clause 4.2 was subject to cl 4.4 and the latter clause provided that the releases did not apply to any “of the fees and expenses which have been or which are to be incurred by Sheehan and Lock consistent with the terms of this Deed”. Furthermore, Mr Sharp submitted that the conduct of the plaintiffs after he had complained to ASIC was not that of parties who believed they had resolved all outstanding disputes by the deed.

82    In response, the plaintiffs submitted that the exception in cl 4.4 was limited to outstanding fees and fees to be incurred and that, in this respect, the cap in cl 3.14 provided the relevant context. The plaintiffs were not to incur or claim any more than $750,000 in remuneration and expenses. It was to that subject matter that the exception to the release was directed.

83    As I understood it, the plaintiffs put similar arguments as to the effect of cl 6 of the August 2014 deed and the definition of the word “complaint” and ASIC put similar arguments in response. ASIC submitted that cl 5 and, in particular, cl 5.2 does not assist the plaintiffs because the clause only applies to the Remuneration Amount which is defined in cl 1 as meaning “a total sum of $100,000 including GST”.

84    The plaintiffs’ case, it will be recalled, was that Mr Sharp’s purpose was to bring about a reduction in the plaintiffs’ remuneration and to obtain a financial advantage for Mr Sharp in his capacity as trustee of SKFLP, contrary to the terms of deeds entered into by Mr Sharp. When I use the expression below that I am not satisfied, it is to the extent necessary as previously described. The other point to note is that a number of my conclusions must of necessity be provisional. I have not seen the plaintiffs or Mr Sharp give evidence, including under cross-examination.

85    I am not satisfied that Mr Sharp’s purpose was to bring about a reduction in the plaintiffs’ remuneration and to obtain a financial advantage for himself in his capacity as trustee of SKFLP. The evidence is that he did not stand to gain anything by his conduct. He was a trustee and bound by the trust to distribute any monies received accordingly. As to his own fees, the evidence is that he held sufficient funds to cover his fees. Furthermore, the tenor of the correspondence is that Mr Sharp is as concerned about the plaintiffs being disciplined for their conduct as much as he is about the plaintiffs’ remuneration. Of course, the two cannot be easily separated and, in one sense, a number of complaints such as complaints of unnecessary investigations and a lack of independence can be seen to have consequences in terms of the plaintiffs’ remuneration which may inure to the benefit of the estate of which Mr Sharp is trustee. Nevertheless, the correspondence such as the Norton Rose letter dated 12 November 2012 (para 1.4), the Norton Rose letter dated 20 March 2014 and the Norton Rose letter dated 19 May 2015 suggests that possible disciplinary action against the plaintiffs for misconduct is what is at the forefront of Mr Sharp’s mind and not financial gain. That conclusion is supported by the fact Mr Sharp could have brought his own proceeding under s 504(1) of the Act for a review of the plaintiffs’ remuneration by the Court at least before he entered into the November 2013 deed or the August 2014 deed. Again, this matter is not decisive because Mr Sharp may have sought to avoid the costs implications of such an action, but nevertheless, it is a factor.

86    Once the conclusion is reached that Mr Sharp is not acting for financial gain, then the plaintiffs’ case becomes very difficult. Even if a deliberate and knowing breach of contract is sufficient to constitute or amount to iniquity, I am not satisfied that that has been shown. In reaching that conclusion, I rely on a number of matters. First, as I have said, the proper construction of the deeds is not immediately apparent and that is particularly the case with the November 2013 deed. Secondly, and relevant to Mr Sharp’s state of mind, is that he acted quite openly on and after 20 March 2014. Thirdly, the plaintiffs, although they asserted their interpretation of the November 2013 deed in correspondence, seemed to accept that the position was not entirely clear. That is not to use post-contractual conduct to interpret the deed, but to consider their conduct for the purpose of assessing their state of mind and, by inference, that of Mr Sharp as to what was and what was not within the terms of the contract.

87    In my opinion, the disputed documents are protected by legal professional privilege and the order sought in paragraph 2 must be refused.

PARAGRAPH 3

88    By paragraph 3.1, the plaintiffs seek an order that ASIC deliver to the Court all documents and materials, including draft witness statements and/or draft affidavits, received or compiled from information received on or since 25 March 2014 from Mr Sharp and/or SK Foods LP.

89    As to these documents, Ms King in her affidavit sworn on 21 August 2017 and relied on by ASIC said the following:

22.    The documents and materials described in paragraph 3.1 appear to include:

(a)    the Schedule 1 documents and Schedule 2 documents produced to the Court on 7 April 2017 (and, in respect of which Schedule 2 documents ASIC maintains a claim for legal professional privilege);

(b)    draft versions of the affidavit of Mr Bradley Sharp which was ultimately sworn on 26 October 2016 and filed in these proceedings. For the avoidance of doubt I am instructed that ASIC maintains a claim for legal professional privilege over those drafts;

(c)    communications passing between Corrs and Mr Sharp’s legal representatives after 2 March 2017 (the date of the plaintiffs’ notice to produce) in relation to:

i.    the plaintiffs’ notice to produce dated 2 March 2017 (including communications from Mr Sharp’s legal representatives to the plaintiffs' legal representatives, copied to Corrs);

ii.    Mr Sharp’s available dates for the hearing and travel arrangements to attend the hearing; and

(d)    communications passing between ASIC and a third party in relation to matters other than the three subject matters listed at paragraph 1 of the plaintiffs’ notice to produce, being:

i.    the conduct of the plaintiffs in connection with the administrations and/or liquidations of SK Foods Australia Pty Ltd (in liquidation), Cedenco JV Australia Pty Ltd (in liquidation) and/or SS Farms Australia Pty Ltd (in liquidation);

ii.    the costs and expenses of those administrations and/or liquidations;

iii.    the entitlement of the plaintiffs to remuneration in respect of those administrations and/or liquidations,

for example, in relation to the plaintiffs' application for access to certain documents pursuant to the Freedom of Information Act 1982 (Cth).

90    Ms King states that, subject to some narrow exceptions, the documents will be the subject of legal professional privilege.

91    I agree with ASIC’s submission that an order in terms of paragraph 3.1 should not be made because the documents within the proposed order have already been produced to the Court and inspected by the plaintiffs or are the subject of a valid claim for legal professional privilege. Furthermore, ASIC does raise a relevance objection to these documents and, as to at least some of the documents, it is difficult to see their relevance.

92    By paragraph 3.2, the plaintiffs seek an order requiring ASIC to produce to the Court originals, copies of and materials, including draft witness statements and/or draft affidavits compiled from information contained in document 37 (including the attachments thereto).

93    Document 37 is an email from Norton Rose to ASIC dated 6 September 2013 with an attachment being an affidavit of Mr Scott Bruce Foreman sworn on 6 September 2013. Mr Foreman is a solicitor employed by a firm of solicitors (not the plaintiffs’ solicitors in this action) acting for the respondents in removal proceedings. Mr Foreman’s affidavit does no more, in effect, than annex four pieces of correspondence. The plaintiffs submitted without contradiction by ASIC or Mr Sharp, that Mr Foreman’s affidavit was neither read nor relied on in open court. It is clear that Norton Rose sent the affidavit to ASIC as part of a request to ASIC that they intervene in removal proceedings.

94    The plaintiffs’ submission is that Mr Sharp provided Mr Foreman’s affidavit to ASIC in breach of the undertaking not to use documents obtained in a proceeding other than for a purpose in the proceeding (Harman v Secretary of State for Home Department [1983] 1 AC 280 (Harman); Hearne and Another v Street and Others (2008) 235 CLR 125). As I understand it, the plaintiffs submitted that, although not suggesting ASIC was complicit in this, ASIC ought not be permitted to use material derived from a document provided to it in breach of the Harman undertaking.

95    ASIC’s response to this submission was as follows. First, it alleged that there are no witness statements or affidavits which were drafted or compiled from information contained in document 37. Ms King’s evidence in her affidavit sworn on 21 August 2017 is as follows:

23.    In relation to the documents described in paragraph 3.2 of the plaintiffs’ interlocutory process, from the inquiries and searches referred to in paragraph 20, I am informed and believe that:

(a)    no witness statements or affidavits were drafted or compiled from information contained in document 37 in the list of Schedule 1 documents; and

(b)    Corrs did not receive a copy of document 37 in the list of Schedule 1 documents until on or around 5 April 2017, when it received materials from ASIC for the purpose of preparing a response to the plaintiffs’ Notice to Produce dated 2 March 2017.

24.    Document 37 in the list of Schedule 1 documents is an email from David Porter of Norton Rose to ASIC dated 6 September 2013, attaching an affidavit of Scott Bruce Foreman, filed in Federal Court proceeding NSD1331/2013.

25.    From my review of the attachments to the affidavit of Mr Foreman, it appears that:

(a)    attachment ‘SBF-1’ to Mr Foreman’s affidavit is a copy of a letter, which is attached at page 63C to the affidavit of John Sheahan filed on 8 March 2016 in these proceedings;

(b)    attachment ‘SBF-2’ to Mr Foreman’s affidavit is a copy of a letter, which is attached at page 65C to Mr Sheahan's 8 March 2016 affidavit; and

(c)    attachment ‘SBF-4’ to Mr Foreman’s affidavit is a copy of a letter, which is attached at page 87C to Mr Sheahan’s 8 March 2016 affidavit.

96    Secondly, Mr Sharp or SK Foods LP did not breach the Harman undertaking because they did not use the affidavit outside the proceeding. They used it within the proceeding because they were urging ASIC to intervene in the proceeding.

97    Mr Sharp supported those submissions and also made the point that all Mr Foreman’s affidavit did was exhibit correspondence and that correspondence itself could have been provided to ASIC by Mr Sharp without breaching any obligation. The submission was that, effectively, the matter goes nowhere.

98    I am not prepared to make the order sought in paragraph 3.2 because I accept Ms King’s evidence that no witness statements or affidavits were compiled from the information contained in document 37 and, even assuming there was a breach of the Harman undertaking, I am not satisfied that the document led to the creation of any other relevant documents. The orders sought in paragraph 3 are refused.

CONCLUSION

99    For these reasons, the plaintiffs’ application dated 11 August 2017 should be dismissed. I will hear the plaintiffs and ASIC as to costs and any other orders. Mr Sharp must bear his own costs, but is not liable for the costs of any other party.

Associate:    

Dated:    13 November 2017

SCHEDULE OF PARTIES