FEDERAL COURT OF AUSTRALIA

Ann Street Mezzanine Pty Ltd (In Liquidation) v Beck [2009] FCA 1325

PRACTICE AND PROCEDURE – discovery – redaction – legal professional privilege –irrelevance.

ANN STREET MEZZANINE PTY LTD (IN LIQUIDATION) (ACN 102 854 866) v CEDRIC RICHARD PALMER BECK & OTHERS (According to the attached Schedule of Parties)

NORMAN PHILLIP CAREY & OTHERS (According to the attached Schedule of Parties) v FREEHILLS, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION and COMMONWEALTH OF AUSTRALIA

VID 485 of 2008

GOLDBERG J

17 NOVEMBER 2009

MELBOURNE

THE COURT ORDERS THAT:

1.         The second cross respondent make available to the fourth defendant and the cross claimants within 7 days of the date of this order, copies of the documents referred to in the annexure to this order with the sections therein in respect of which the second cross respondent’s claim for protection from production is shown therein as “claim rejected” or “relevant” unmasked.

2.         Each party bear their own costs of and incidental to the hearing of this application.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

1                          The fourth defendant, Mr Norman Carey, and the twenty‑six cross claimants filed a motion on 24 September 2009 seeking orders that the second cross respondent, Australian Securities and Investments Commission (“ASIC”) produce to the Court and make available to the fourth defendant and the cross claimants the documents or copies of the documents referred to and identified in the list of documents affirmed on 21 August 2009 and filed and served by ASIC on 25 August 2009.

2                          On 4 August 2009 Finkelstein J made a number of orders including the following:

1.         By 14 August 2009, the second-cross respondent (ASIC) make discovery to the fourth defendant and the cross-claimants of any reports of investigations prepared by ASIC pursuant to sections 16 or 17 of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) in relation to its investigations into the Westpoint Group (as defined in the plaintiff’s statement of claim) carried out between 1 January 2003 and 31 December 2005.

2.         By 14 August 2009, ASIC make discovery to the fourth defendant and the cross-claimants of any minutes of meetings of ASIC held prior to 22 November 2005 relating to the decision of ASIC to make application to the Federal Court of Australia in or about November and December 2005 to wind up York Street Mezzanine Pty Ltd and Ann Street Mezzanine Pty Ltd.

3.         By 14 August 2009, ASIC make discovery to the fourth defendant, the cross‑claimants and the first cross-respondent of KPMG’s audit files relating to its audit of the Mezzanine Companies and any members of the Westpoint Group (as defined in the plaintiff’s statement of claim) for the year ended 30 June 2005 (including all correspondence or records of correspondence to and from KPMG during the period in which the work was carried out).

…

5.         In relation to any documents discovered pursuant to these orders:

(a)        Such discovery:

(i)         shall be made by producing documents to the extent they are relevant to the issues in the proceedings referred to in Annexure B to these orders (“Directors Actions”) and which are not subject to claims for privilege or other objection to inspection; and

(ii)        may be made by producing documents for inspection in hard copy or electronic form together with an affidavit stating that the documents which have been produced pursuant to these orders are, to the deponent’s best belief, all the documents that satisfy the categories for which discovery is required;

(b)        Inspection of the documents discovered pursuant to paragraphs 1 and 2 of these orders is limited to the fourth defendant and the cross claimants; and

(c)        Leave is granted for the discovered documents to be used for the purposes of the Directors’ Actions.”

3                          In the documents which ASIC discovered pursuant to par 2 of the order it masked sections of the documents which it contends are not relevant to the issues in the proceeding or which are privileged from production on the ground of legal profession privilege. 

4                          In its list of documents ASIC discovered no documents under par 1 of the order of Finkelstein J.  In respect of par 2 of that order ASIC discovered the following:

“Extracts from minutes of meetings of ASIC held prior to 22 November 2005 relating to the decision of ASIC to make application to the Federal Court of Australia in or about November or December 2005 to wind up York Street Mezzanine and Ann Street Mezzanine Pty Ltd masked or redacted to remove portions of those minutes which are not relevant to the issues in this proceeding or which are subject to claims for privilege.”

There were then set out extracts from minutes and progress reports submitted in respect of ten “NAT” and “NECC” meetings.

5                          The fourth defendant and the cross claimants sought from ASIC copies of the masked sections of the documents discovered which dealt with:

(a)        the financial position of the Westpoint Group or any of its members;

(b)        any internal or external reports as to the financial position of the Westpoint Group or any of its members;

(c)        any advice from Deloittes in relation to the Westpoint Group or any of its members.

6                          In an affidavit affirmed on 2 November 2009 Louise Anne Macaulay, a lawyer employed by ASIC, set out the basis upon which ASIC claimed that the documents were privileged from production on the ground of legal professional privilege.  ASIC’s claim was based upon two categories.  The category described as “P1” referred to:

“The aspects of ASIC’s investigations concerning Westpoint which contained or referred to legal advice provided to ASIC are those concerning:

(a)       Advice provided by counsel in relation to alleged misleading and deceptive conduct in information memoranda issued by the Westpoint Group and commencing proceedings with respect to that conduct.  Masking has been undertaken in respect of this issue in relation to the following portions of the documents discovered (by reference to the number of documents in the affidavit of documents):

…”

The category described as “P2” referred to:

“The aspects of ASIC’s investigations concerning Westpoint which consisted of a confidential communication made in relation to and for the purposes of ASIC obtaining legal advice in connection with anticipated litigation are those concerning ASIC seeking legal advice and expert evidence in relation to various issues regarding the Westpoint Group, including its solvency, and/or reporting on that advice or steps taken in preparation for legal proceedings.  Masking has been undertaken in respect of this issue in relation to the following portions of the documents discovered (by reference to the numbering of documents in my affidavit of documents):

…”

7                          The documents discovered by ASIC pursuant to par 2 of the order of 4 August 2009 were masked and each item which was masked was annotated by reference to one or other of the notations “R1”, “R2”, “R3”, “P1” and “P2”.  Those annotations described the basis for the masking in the following terms:  

“R1”    Irrelevant on the basis the masked portion does not relate to any aspect of any Westpoint investigation.

Each of the minutes of meetings which have been discovered recorded discussion which occurred at those meetings in respect of confidential investigations which were being conducted by ASIC at the time which were unrelated to the Westpoint Group or any company in the Westpoint Group.

“R2”    Irrelevant on the basis that the content of the portion masked, while referring to the Westpoint Group, relates to aspects of ASIC’s investigations which are not related to the decision of ASIC to make the winding up applications.

“R3”    Irrelevant on the basis that the content of the portion masked, while referring to the Westpoint Group, relates to aspects of ASIC’s investigations which concern only matters of project management, administration and resourcing of ASIC’s investigations and which are not related to the decision of ASIC to make the winding up applications.  In addition, ASIC reserves its rights in relation to claims for Public Interest Immunity in relation to these portions of the documents.

“P1”    Privileged on the basis the portion contains or refers to the contents of legal advice provided to ASIC. 

“P2”    Privileged on the basis the portion consists of a confidential communication made in relation to and for the purposes of ASIC obtaining legal advice in connection with anticipated litigation.”

8                          In her affidavit Ms Macaulay set out the basis upon which the claim for legal professional privilege was made.  The fourth respondent and the cross claimants criticised Ms Macaulay’s explanations in this respect and submitted that an insufficient basis had been established for making the claim for legal professional privilege in respect of the masked sections of the documents.

9                          I accept that in order to justify a claim for protection from production of documents on the ground of legal professional privilege a party has to do more than simply utter the litany “legal professional privilege”.  I am satisfied that ASIC has done more than simply utter that litany although in a number of respects the stated basis for the claim was lacking in particularity or detail.

10                        Nevertheless, I am satisfied that ASIC has disclosed a sufficient basis for maintaining a claim for legal professional privilege which requires me to examine the documents myself and satisfy myself whether the claim has been properly based and should be upheld. 

11                        In the course of his submissions, Senior Counsel for the fourth defendant and the cross claimants submitted that two broad issues arose, namely:

·          were the masked portions irrelevant?

·          had ASIC discharged the onus of asserting and proving privilege?

It was submitted that Ms Macaulay’s affidavit misstated the test or approach to be adopted in determining whether the masked sections were irrelevant.  There is substance in that submission.  The documents may be relevant, that is they may relate to the decision of ASIC to make the application referred to in par 2 of Finkelstein J’s order notwithstanding that they do not contain any references to “the actual financial position of the Westpoint Group or any of its members”, as deposed to by Ms Macaulay.  In any event I not bound by Ms Macaulay’s explanations in relation to the masked sections or by her characterisation of them.  The parties agreed that it was for me to determine whether the claims for masking the sections of the documents on the basis of irrelevance or legal professional privilege should be upheld or rejected. 

12                        I have considered the masked sections of the discovered documents and approached the issue whether the claim for legal professional privilege should be upheld on the basis of the authorities and principles referred to by Senior Counsel for the fourth defendant and the cross claimants.  I have not considered the issue of relevance by reference to whether the masked sections contain any reference to “the actual financial position of the Westpoint Group or any of its members”.  Rather, I have considered the issue of relevance more broadly and whether the masked sections contain material which refers to investigations and considerations of the solvency of the Westpoint Group which had a connection with or bore upon ASIC’s decision to apply to the Court to wind up the two companies.

13                        I have set out in the annexure to these reasons my conclusion and finding in relation to each masked section.  The fourth defendant and the cross claimants did not challenge those sections marked with the annotation “R1”.  The page numbers in the annexure refer to the pagination adopted by the fourth defendant and the cross claimants in their annotation of Annexure DJH‑20 to the affidavit of Daniel Joseph Hirsch sworn 23 September 2009 which I have cross‑referenced to the page number of each individual document.

14                        I will hear the parties as to the form of order that should be made consistently with these reasons.  I would propose that in relation to each masked section in respect of which I have rejected ASIC’s claim that there be an order that ASIC produce to the fourth defendant and the cross claimants copies of those documents in respect of which ASIC’s claim has been rejected without the masking of those sections.

15                        I will hear the parties as to the appropriate order as to costs which should be made.

Associate:

Dated:         17 November 2009

SCHEDULE OF PARTIES

ANN STREET MEZZANINE PTY LTD (IN LIQUIDATION) (ACN 102 854 866)                   Plaintiff

CEDRIC RICHARD PALMER BECK                                                                            First Defendant

JOHN NORMAN DIXON                                                                                          Second Defendant

GRAEME JOHN RUNDLE                                                                                           Third Defendant

NORMAN PHILLIP CAREY                                                                                      Fourth Defendant

LYNETTE ROCHELLE SCHIFTAN                                                                               Fifth Defendant

NEEDLERS END NOMINEES PTY LTD (ACN 008 828 304)                                     Sixth Defendant

KEBBEL CAPITAL PTY LTD (ACN 106 196 481)                                                 Seventh Defendant

PALENTIA PTY LTD (ACN 099 289 326)                                                                 Eighth Defendant

CONICAL HILL NOMINEES PTY LTD (ACN 103 113 999)                                      Ninth Defendant

HESTER BROOK PTY LTD (ACN 072 676 914)                                                        Tenth Defendant

ANNA HARRIS                                                                                                       Eleventh Defendant

TURTLE BAY NOMINEES PTY LTD (ACN 119 633 457)                                      Twelfth Defendant

SUGARLOAF HILL NOMINEES PTY LTD(ACN 130 302 859)                         Thirteenth Defendant

NORMAN PHILLIP CAREY                                                                                  First Cross Claimant

QUARTZ NOMINEES PTY LTD (ACN 008 859 103)                                      Second Cross Claimant

atf THE QUARTZ TRUST

HECA NOMINEES PTY LTD (ACN 053 581 874)                                              Third Cross Claimant

ACEBID PTY LTD (ACN 074 566 046)                                                             Fourth Cross Claimant

ANDRIANNI PTY LTD (ACN 005 458 720)                                                        Fifth Cross Claimant

atf THE ADRIANA TRUST

ANN STREET BRISBANE PTY LTD (ACN 101 943 711)                                   Sixth Cross Claimant

atf THE ANN STREET BRISBANE TRUST

BENNALONG HOLDINGS PTY LTD (ACN 008 741 008)                             Seventh Cross Claimant

DOSIUS PTY LTD (ACN 009 449 450)                                                              Eighth Cross Claimant

EARLMIST PTY LTD (RECEIVER & MANAGER APPOINTED)                       Ninth Cross Claimant

(CONTROLLER APPOINTED) (ACN 069 056 926)

atf THE EARLMIST UNIT TRUST

ETNAS PTY LTD (ACN 056 599 350)                                                                Tenth Cross Claimant

atf THE ETNAS TRUST

HEALTHCARE PROPERTIES PTY LTD (ACN 074 501 955)                        Eleventh Cross Claimant

atf THE HEALTHCARE PROPERTIES TRUST

HUNTINGDALE VILLAGE PTY LTD (RECEIVER &                                     Twelfth Cross Claimant

MANAGER APPOINTED) (ACN 085 048 531)

atf THE HUNTINGDALE VILLAGE UNIT TRUST

JEVWOOD PTY LTD (ACN 074 525 321)                                                   Thirteenth Cross Claimant

K.I.S REALTY PTY LTD (ACN 100 871 314)                                             Fourteenth Cross Claimant

KEEP IT SIMPLE INVESTMENTS (GLOBAL) PTY LTD                              Fifteenth Cross Claimant

(ACN 100 871 270)

NORTH SYDNEY DEVELOPMENT PTY LTD                                             Sixteenth Cross Claimant

(CONTROLLER APPOINTED) (ACN 107 037 838)

atf THE NORTH SYDNEY DEVELOPMENT TRUST

PAQUERO PTY LTD (ACN 003 540 556)                                                Seventeenth Cross Claimant

PARAGON APARTMENTS PTY LTD (RECEIVER &                                Eighteenth Cross Claimant

MANAGER APPOINTED) (ACN 087 200 413)

RENAISSANCE MEZZANINE PTY LTD (ACN 110 978 491)                    Nineteenth Cross Claimant

ROMPRIDE PTY LTD (ACN 074 524 824)                                                  Twentieth Cross Claimant

atf THE ERLEY UNIT TRUST

SCOTS CHURCH DEVELOPMENT LTD(RECEIVER &                         Twenty-first Cross Claimant

MANAGER APPOINTED) (ACN 091 686 323)

SILKCHIME PTY LTD (RECEIVER & MANAGER                             Twenty-second Cross Claimant

APPOINTED) (ACN 066 849 429)

atf THE SILKCHIME UNIT TRUST

VANNIN PTY LTD (RECEIVER & MANAGER                                      Twenty-third Cross Claimant

APPOINTED) (ACN 067 610 271)

atf THE HAY FAMILY TRUST

WARWICK ENTERTAINMENT CENTRE PTY LTD                            Twenty-fourth Cross Claimant

(RECEIVER & MANAGER APPOINTED) (ACN 054 246 918)

atf THE WARWICK ENTERTAINMENT CENTRE UNIT TRUST

WESTPOINT FINANCIAL SERVICES PTY LTD                                     Twenty-fifth Cross Claimant

(ACN 074 148 324)

WESTPOINT MANAGEMENT (CENTREWAYS)                                     Twenty-sixth Cross Claimant

PTY LTD (ACN 082 349 068)

atf THE CENTREWAYS REFURBISHMENT SYNDICATION TRUST

FREEHILLS                                                                                                      First Cross Respondent

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION          Second Cross Respondent

COMMONWEALTH OF AUSTRALIA                                                            Third Cross Respondent

ANNEXURE

PRIVILEGED DOCUMENTS

Document 3.1

Document 5.1

Document 6

Document 6.1

Document 7

Document 7.1

Document 8

Document 8.1

Document 9.1

Document 10

Document 10.1

Document 10.2

RELEVANCE DOCUMENTS

Document 3.1

Document 3.2

Document 5.1

Document 6

Document 6.1

Document 7

Document 7.1

Document 8.1

Document 9.1

Document 10

Document 10.1