FEDERAL COURT OF AUSTRALIA

Archer Capital 4A Pty Ltd as trustee for the Archer Capital Trust 4A v Sage Group plc (No 3) [2013] FCA 1160

THE COURT ORDERS THAT:

1.    The applicants produce two documents, identified by their barcode numbers (ARC.003.005.9759 and ARC.019.001.0237 and attachment ARC.019.001. 0240), for inspection within one week of the making of this order.

2.    The interlocutory application is otherwise dismissed.

3.    The respondents pay the applicants costs of, and incidental to, the interlocutory application.

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

REASONS FOR JUDGMENT

1    The principal proceedings in this matter are listed for trial to commence before the docket Judge on 25 November 2013. The proceedings concern claims by the applicants arising from a proposed transaction whereby the respondent, The Sage Group PLC (Sage) would acquire shares held by the applicants in MYOB Cayman Pty Ltd (MYOB Cayman), the holding company of a group of companies that developed and sold well known accounting and business software. When that acquisition (the Proposed Transaction) did not proceed, the applicants commenced these proceedings claiming damages from Sage for breach of contract, misleading and deceptive conduct and an action in estoppel. Further background relating to the action is contained in two earlier judgments relating to other pre-trial matters [2013] FCA 1029 at [3]-[7]; [2013] FCA 1098 at [2].

2    This interlocutory application, filed on 12 August 2012, is the third application heard by me in relation to discovery, the inspection of documents and legal professional privilege. In this application, Sage seeks various orders concerning discovery by the applicants, including an order requiring further discovery by reference to specified categories of documents, and orders in relation to the inspection of documents, including various categories of documents in respect of which the applicants have made claims of legal professional privilege. The making of these orders is opposed by the applicants. As the discovery and inspection orders raise different issues, I will deal with them separately.

Inspection Of Documents Claimed To Be Privileged

3    In paragraph 4 of the interlocutory application, Sage seeks an order pursuant to r 20.14 of the Federal Court Rules 2011 (Cth) (the Rules) that the applicants produce for inspection all documents referred to in Part 2 of the applicants’ lists of documents dated 1 May 2013 and 26 June 2013. Part 2 of the lists of documents lists all documents in respect of which the applicants claim protection from disclosure by reason of legal professional privilege. The inspection order ultimately pursued by Sage on this application was considerably narrower than this. It was limited to the following categories of documents:

(a)    Documents that bear upon the truth or otherwise of the allegations the applicants have made of their state of mind and reasons for acting as they did in paragraphs 70, 71, 76 and 77 of the Amended Statement of Claim (ASOC) (State of Mind documents);

(b)    Documents that were sent by or to the Fourth to Fifty-first applicants (non-Archer applicants documents);

(c)    Documents that were sent by or to representatives of Ernst & Young (E & Y) or Ernst and Young Law Pty Ltd (E & Y Law) (E & Y documents);

(d)    Documents sent by or to the Australian branch of UBS AG (UBS) (UBS documents); and

(e)    Documents sent by or to “Maples FS.” (the Maples FS documents).

4    Sage contends that documents within these categories are either not privileged (in the case of the non-Archer applicants documents and the E & Y documents) or that any privilege that attached to them has been waived by the conduct of the applicants (in the case of the state of mind documents and the UBS documents). Different issues arise, and different evidence is relied on, in relation to the competing contentions concerning privilege and waiver in respect of each of the four categories of documents.

The State of Mind documents

5    The essence of Sage’s contention in relation to the State of Mind documents is that there has been an implied waiver in respect of documents dealing with, or relating to, the applicants’ pleaded state of mind and reasons for acting as they did. Sage contends that, by their conduct, the applicants have directly or indirectly put the contents of otherwise privileged communications relating to their state of mind in issue in the proceedings. By so doing, they have acted inconsistently with the confidentiality that legal professional privilege is designed to protect. Two aspects of the applicants’ conduct are relied upon by Sage: first, pleading a cause of action that involves or puts in issue the applicants’ state of mind in relation to a legal issue; and second, indicating an intention to call evidence at trial from their solicitor in relation to his (and therefore the applicants’) state of mind in relation to that issue.

Relevant principles - implied or issue waver

6    The relevant principles in relation to implied waiver are, at least now, relatively easy to state. They are not, however, always so easy to apply. This matter is a case in point.

7    As this application is made pre-trial, the common law of legal professional privilege and waiver applies: Esso Australia Resources v Commissioner of Taxation (1999) 201 CLR 49 at [17]-[28] and [64]. At common law, a person who would otherwise be able to make a claim of privilege in respect of a communication may cease to be able to maintain that claim by reason of conduct that expressly or impliedly waives that claim. In the case of implied waiver, the basic principle turns on whether the conduct on the part of the holder of the privilege is inconsistent with the maintenance of confidentiality.

8    In Mann v Carnell (1999) 201 CLR 1 at [29] (Mann), the principle of implied waiver was put by the majority of the High Court in the following terms:

Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect… What brings about the waiver is the inconsistency, which the courts, where necessary informed by consideration of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.

9    The authorities in relation to implied waiver establish that a relevant inconsistency with the continued confidentiality of a communication can arise where the privilege holder directly or indirectly puts in issue the character or contents of the communication in the litigation. It is unnecessary to refer to the relevant authorities at length. They were exhaustively reviewed by Allsop J (as his Honour the Chief Justice then was) in DSE (Holdings) Pty Limited v Intertan Inc (2003) 127 FCR 499 (DSE) and by the Full Court of this Court in Commissioner of Taxation v Rio Tinto Limited (2006) 151 FCR 341 (Rio Tinto). In Rio Tinto, the Full Court put the guiding principle in the following terms at [52]:

These authorities show that, where issue or implied waiver is made out, the privilege holder has expressly or impliedly made an assertion about the contents of an otherwise privileged communication for the purpose of mounting a case or substantiating a defence. Where the privilege holder has put the contents of the otherwise privileged communication in issue, such an act can be regarded as inconsistent with the confidentiality that would otherwise pertain to the communication.

10    In DSE, Allsop J said (at [58]) that an implied waiver will arise where:

the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication.

11    Whilst DSE was decided before Mann, the Full Court in Rio Tinto at [61] cited with approval Allsop J’s “somewhat more descriptiv[e]” statement of the governing principle.

12    The governing principle of implied waiver requires a “fact-based inquiry”: Rio Tinto at [61]. Each case will turn on its own facts and circumstances: Rio Tinto at [45], [47]. The Court is required to “analyse the acts or omissions of the privilege holder that are said to be inconsistent with the maintenance of the privilege”: Rio Tinto at [45]. Other cases in which implied waiver has been considered provide limited guidance unless they arise out of similar facts: Rio Tinto at [45].

13    Three points relevant to the application of the relevant principles of implied waiver to the facts and circumstances of this matter should be emphasised. First, it is at least questionable whether legal advice can properly be said to be an issue in a proceeding merely because it might be relevant to an issue in the proceedings: Adelaide Steamship Co Limited v Spalvins (1998) 81 FCR 360 at 371: cited with approval in Rio Tinto at [53]. In Council of the NSW Bar Association v Archer (2008) 72 NSWLR 236, (Archer) Hodgson JA said, at [48]:

It is not enough to bring about a waiver of client legal privilege that the client is bringing proceedings in which the content of the privileged communications could, as a reasonable possibility, be relevant and of assistance to the other party. For the client to do this is not inconsistent with the maintenance of the privilege, and does not give rise to unfairness of the type in question. What would involve inconsistency and relevant unfairness is the making of express or implied assertions about the content of the privileged communications, while at the same time seeking to maintain the privilege. In this respect, it may be sufficient that the client is making assertions about the client’s state of mind, in circumstances where there were confidential communications likely to have affected that state of mind.

14    The second point to emphasise relates to the last sentence of the passage from the judgment of Hodgson JA in Archer that is extracted in the previous paragraph. Sage, in its submissions, places particular emphasis on this sentence and the approval and emphasis given to it by the NSW Court of Appeal in Cooper v Hobbs [2013] NSWCA 70 (Cooper), McColl JA (Bergin CJ in Eq agreeing) at [72]. Sage submits, in effect, that this sentence is directly applicable to this matter because the applicants are making assertions in their pleadings about their state of mind in circumstances where confidential communications are likely to have affected that state of mind.

15    Four observations can, however, be made about this sentence in Hodgson JA’s judgment in Archer. First, Hodgson JA uses the word “may”, not “will”. His Honour was not suggesting that all cases where assertions are made about a client’s state of mind in circumstances where privileged documents are likely to have affected that state of mind will give rise to an implied waiver. Second, this is supported by the fact that, as pointed out by the Full Court in Rio Tinto, each matter will turn on its own facts and not much is to be gained by reference to other implied waiver cases unless they arise out of similar facts. Third, the facts and circumstances in both Archer and Cooper were significantly different to the facts of this case; and fourth, generalisations about types of cases, including cases where a party puts its state of mind in issue, should not distract from the primary question. As the Full Court in Rio Tinto put it (at [65]):

As the previous examination of the authorities shows, the question is not whether the Commissioner has put his state of mind in issue but whether he has directly or indirectly put the contents of the otherwise privileged communications in issue in the litigation, either in making a claim or by way of defence. Put another way, to adapt Allsop J’s language in DSE, has the Commissioner (being the privilege holder) made an assertion as part of his or her case in the litigation that lays open the privileged documents to scrutiny, with the consequence that an inconsistency arises between the making of the assertion and the maintenance of the privilege?

16    The third point relating to the application of the principles of implied waiver to the facts and circumstances of this matter concerns the situation where applied waiver is asserted on the basis that a party has pleaded a case which puts its state of mind, including reliance, in issue. In such cases, Sage relies on the so called “evaluative approach” of Hodgson CJ in Eq in Wayne Lawrence Pty Limited v Hunt [1999] NSWSC 1044 (Wayne Lawrence). In Wayne Lawrence, Hodgson CJ in Eq said (at [12]):

[I]t seems to me still that the question of whether the advancing of a person’s state of mind is to be taken as consenting the giving of evidence of confidential communication, or as waiving privilege, is a matter of degree in each case. It does not seem to me that the assertion of a belief must, in all circumstances, be taken as consenting to evidence being led of any legal advice or confidential communication that could be relevant to whether such a belief was held or the reasonableness of such belief. It seems to me that factors relevant to whether that consent is to be considered as having been given, or whether privilege is taken to have been waived, would include the significance of the belief to the case as a whole; the relevance of the reasonableness of the belief to the case as a whole; the probability or otherwise of the legal advice being relevant to the holding to that belief, or being relevant to its reasonableness; and in circumstances where the Court inspects the legal advice in question in order to make a decision, the extent to which the legal advice does in fact bear upon the holding of the belief or its reasonableness, and the extent to which the legal advice relevant to those matters is inextricably bound up with legal advice going to other questions as to which there has been no consent or waiver. It seems to me that, on the basis of all those matters at least, the Court has to make a judgment as to what is reasonable, and what is fair in the particular case.

17    Wayne Lawrence was decided before Mann, which explains the reference, in the last sentence of the above extract, to the relevant judgment of the court being “what is reasonable, and what is fair in the particular case”. Nonetheless, in Chen v City Convenience Leasing Proprietary Limited [2005] NSWCA 297 (Chen), Gzell J (with whom Bryson JA and Windeyer J relevantly agreed), having referred to the judgment of Hodgson CJ in Eq in Wayne Lawrence, said (at [41]):

I doubt that a different result will follow from the sort of question referred to in Wayne Lawrence and the sort of question that needs to be answered in order to determine whether there is inconsistency between the conduct of a party and maintenance of client legal privilege as discussed in Mann. In a case like the present one in which reliance upon representations is alleged, questions such as the following need to be explored: Were representations made to the party by and on behalf of the opponent? Does the party say that he or she relied upon the representations and altered his or her course of conduct? Is reliance upon the representations a central, or merely peripheral, aspect of the party’s case? Is it likely that the party received legal advice that had a bearing on the allegation of reliance? Was it likely that the legal advice might raise doubts as to the allegations of reliance or any losses or damage alleged to have been suffered?

18    The approach of Gzell J in Chen also appears to have met with the approval of Besanko J in SA E.Med Pty Ltd v Calvary Healthcare Adelaide Ltd (No 2) [2011] FCA 835 at [23]-[25].

19    A number of points may be made in relation to this. First, whilst it is correct, as Gzell J pointed out, that in DSE Allsop J referred to the relevant passage from Wayne Lawrence as part of his Honour’s extensive review of the authorities, all his Honour said in relation to Wayne Lawrence was (at [103]) “[i]t is clear from these passages that his Honour was of the view that more was involved in the assessment than merely the putting of the matter in issue”: see also in this respect Sackville J in Seven Network Ltd v News Ltd (2006) 227 ALR 704 at [41] (Seven Network). Second, whilst the Full Court in Rio Tinto referred with approval to much of what was said by Allsop J in DSE, the Full Court did not refer to Wayne Lawrence.

20    More significantly, I have some difficulty reconciling the so called evaluative approach with other statements made by Allsop J in DSE and the approach taken by the Full Court in Rio Tinto. The question posed in the passages from Wayne Lawrence and Chen in my view tend to suggest that in cases where a state of mind is pleaded by a party and it is likely that legal advice which might be relevant to that state of mind was obtained by that party, it is likely that implied waiver will be established. Yet in DSE, Allsop J said, after reviewing the authorities decided prior to Mann, (at [95]):

I would have thought that it is too broad a statement to say that a pleading of a state of mind to which legal advice is or might be materially relevant is an adequate surrogate for the expression of principle in Mann v Carnell.

21    His Honour also said (at [97]) that the view that “relevance to an issue is the proper test is, as a general proposition, difficult to reconcile with Mann v Carnell”. His Honour also expressed agreement with what was said by Heerey J in Equuscorp Pty Limited v Kanisha Corp Limited [1999] ATPR 41-697 at 42-894, including that “[t]he bare fact of asserting reliance does not expressly or impliedly assert that the plaintiff relied, or did not rely, on some privileged communication”.

22    In my opinion, there may be no difficulty with the evaluative approach in Wayne Lawrence and Chen if the questions that are posed are seen as no more than questions that might assist in determining the ultimate question, namely, whether the privilege holder has expressly or impliedly made an assertion about the contents of an otherwise privileged communication for the purpose of mounting a case or substantiating a defence. In my view, however, the questions have a tendency to distract or deflect attention from that test. The questions posed as part of the so-called evaluative approach should not be used as a surrogate for the expression of principle in DSE and Rio Tinto.

23    I note in this context that in Seven Network, Sackville J, whilst his Honour ultimately did not need to decide the point, expressed some doubt that the evaluative approach “precisely reflects the content of the inconsistency principle” (at [46]).

24    Whatever may be the position in relation to the evaluative approach in Wayne Lawrence and Chen, it is, in my opinion, tolerably clear that the mere fact that a party pleads a cause of action that includes their state of mind as a material fact, or otherwise puts their state of mind in issue in the proceedings, does not necessarily give rise to an implied waiver in respect of legal advice that may have been received by the party, even if that legal advice may be relevant to the party’s state of mind. This was the position taken by Yates J in Ferella v Official Trustee in Bankruptcy (2010) 188 FCR 68 at [65] where his Honour said:

However the question is not simply whether the holder of the privilege has put that person’s state of mind in issue but whether that person has directly or indirectly put the contents of the otherwise privileged communication in issue: see [Rio Tinto] at [65]. Indeed, even the fact that the holder privilege makes clear that the advice was relevant or contributed to a particular course of conduct would not be sufficient to waive the privilege unless, possibly, the contents of the legal advice (and not merely the fact of the advice) are specifically put in issue by relying on the contents of the advice to vindicate a claimed state of mind: [Rio Tinto] at [67].

25    Likewise in Austral Dutch Kaolin Pty Ltd v Hanjin P&C Co Ltd [2011] FCA 638 at [22], Greenwood J said:

As legal professional privilege is an important common law right or common law immunity (Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 at [11], [44] McHugh J [85] Kirby J; Baker v Campbell (1983) 153 CLR 52 at 74) and common law principles apply to these interlocutory questions (Mann v Carnell [27], [41], [143] and [144]), a party ought not to be denied that right as a result of an implied construct simply by pleading a claim to a remedial right based upon a cause of action in which a state of mind is put in issue unless the party expressly pleads reliance upon a privileged communication as a material fact (or particularises a material fact by reference to an otherwise privileged communication) or the very nature of the claim itself demonstrates clear inconsistency of treatment such as where a client sues his or her lawyer for negligence asserting a sequence of instructions and at the same time seeks to deny, on the ground of legal professional privilege, the disclosure by his or her lawyer of those communications in a forensic analytical process.

26    In this passage, Greenwood J refers to an example of a claim the very nature of which demonstrates inconsistency with the maintenance of confidentiality in respect of otherwise privileged communications. The example given by Greenwood J is a case where a client sues a lawyer for negligence. An action for negligent advice will put in issue the very advice received by the client. Other examples of such actions include some actions raising allegations of undue influence or actions for rectification where the content of a communication between the lawyer and client or the content of advice received by the client is directly raised by the nature of the allegation. The decision in SA E.Med provides an example of such a rectification case. In such cases, by commencing the action the privilege holder puts in issue the content of the very advice received: see Adelaide Steamship at 371-372. However, as the Full Court observed in Rio Tinto, it is dangerous to generalise from other cases of implied waiver unless they arise from the same facts. There is no closed or categorical list of types of actions that by their very nature give rise to implied waiver. Each case will turn on its own facts and circumstances.

Evidence and Submissions

27    In support of its case of implied waiver, Sage relies essentially on two matters; first, on those paragraphs of the ASOC that plead the applicants’ state of mind and reliance; and second, on two statements of anticipated evidence of the applicants’ solicitor, Mr Thomas Story.

28    In relation to the pleadings, Sage contends that by pleading a case which puts their state of mind in issue, the applicants have directly or indirectly made assertions about their state of mind in circumstances where confidential communications are likely to have affected that state of mind. The anticipated evidence of Mr Story is relied upon in two ways; first, as establishing the likelihood that Mr Story had provided advice to the applicants that would be relevant to their alleged state of mind; and second, as establishing that the applicants intend to lead evidence of Mr Story’s state of mind to prove their case. The latter conduct is said to amount to conduct inconsistent with the maintenance of confidentiality in relation to communications bearing on both Mr Story’s and the applicants’ state of mind.

29    To the extent that the applicants’ case of implied waiver is based upon the pleadings, it is necessary to consider the applicants’ pleaded case in some more detail. Critical to the applicants’ case is a letter, said to constitute a final offer by Sage to purchase the applicants’ MYOB shares, which was sent by Sage at 7:25 pm on the 15 August 2011. The terms of the letter are critical because the applicants allege, in general terms, that it constituted a contractual offer capable of acceptance (the Final Offer) and also contained a number of representations that provide the basis for the pleaded estoppel and misleading or deceptive conduct causes of action (the Representations).

30    The terms of the Final Offer are pleaded in paragraph 41 of the ASOC in the following terms:

41.    At 7.25 pm on 15 August 2011, Sage submitted its final offer for the share capital of MYOB (the Final Offer). The final offer (among other things):

(a)    had the subject heading “Sage Final Offer to Acquire MYOB”;

(b)    did not include the sentences that had been included in the Indicative Offer and the Formal Offer of the type referred to in paragraphs 18(k) and 23(c)(v) above to the effect that the letter does not comprise an offer that is capable of acceptance to form a binding agreement, and does not bind Sage or create any obligations on Sage;

(c)    was marked “Subject to Contract”; and

(d)    stated that:

(i)    Sage was “pleased to submit to you a final offer … for the acquisition of 100% of the fully diluted share capital of MYOB”;

(ii)    Sage offered to pay $1.35 billion cash consideration for 100% of the fully diluted share capital of MYOB on the pricing basis set out in the prevailing draft of the Share Sale Agreement;

(iii)    Sage had received full board approval for the Final Offer;

(iv)    in making the offer Sage had assumed significant additional economic cost in the form of additional risks such as ACCC approval;

(v)    it presented a high degree of certainty for MYOB’s shareholders;

(vi)    it was only conditional on matters Archer knew it would be conditional upon, namely:

(A)    the matters set out in the Share Sale Agreement, such as the requisite foreign investment approvals in Australia and New Zealand where applications have been submitted and where Sage “fully expect approvals in the ordinary course”;

(B)    a review of the ‘black box due diligence’ material;

(C)    finalisation of Sage’s due diligence reports following review of the black box due diligence material to enable submission of the due diligence reports to warranty insurers; and

(D)    agreement on the share sale agreement “… where great progress has been made” and where Sage’s “… legal advisors plan to meet Allens tonight to close out the small number of technical points, subject to your advice”;

(vii)    it was not conditional upon Sage achieving an understanding with management;

(viii)    it represented an attractive and de-risked transaction for MYOB’s shareholders; and

(ix)    It would expire at 5 pm on Thursday, 18 August 2011.

Particulars

(A)    Letter from Sage to Gray dated 15 august 2011

31    The representations alleged to have been made in the Final Offer, together with some prior communications, are pleaded in paragraph 44 of the ASOC in the following terms:

44.    By reason of making the statements referred to at paragraph 41 above, and the additional statements referred to at paragraphs 29, 30 and 34, Sage represented to the Applicants that if the Final Offer was accepted by Archer:

(a)    it would pay the Applicants $1.35 billion for 100% of the fully diluted share capital of MYOB on the pricing basis set out in the prevailing draft of the Share Sale Agreement (Representation A);

(b)    it would pay the above amount subject only to the fulfilment of the conditions identified in the Final Offer (Representation B);

(c)    it would allow a reasonable period for the conditions referred to in the Final Offer to be fulfilled (Representation C);

(d)    the offer was final, certain and capable of acceptance and Sage required no other approvals to complete the purchase (Representation D); and

(e)    Sage had determined that it would not seek shareholder approval as a condition precedent to it completing the purchase referred to in the Final Offer (Representation E),

(together, the Representations).

32    The crux of the applicants’ estoppel case is pleaded in paragraphs 70 and 71 of the ASOC in the following terms:

70.    As a result of and induced by the Representations, the Applicants assumed that if the Final Offer was accepted by Archer:

(a)    Sage would pay the Applicants $1.35 billion for 100% of the fully diluted share capital of MYOB on the pricing basis set out in the prevailing draft of the Share Sale Agreement;

(b)    Sage would pay the above amount subject only to the fulfilment of the conditions identified in the Final Offer;

(c)    Sage would allow a reasonable period for the conditions referred to in the Final Offer to be fulfilled;

(d)    the offer was final, certain and capable of acceptance and Sage required no other approvals,

(the Assumed Legal Relationship).

71.    As a result of and in reliance upon the Representations and the Assumed Legal Relationship, Archer acted to its determent in that:

(a)    it permitted Sage to have access to the black box due diligence materials;

(b)    it discontinued its negotiations with other prospective purchasers of the MYOB business and, as such lost the opportunity to:

(i)    insist upon Sage providing a final and binding offer on the terms of the Final Offer (assuming, which is denied, that the Final Offer was not an offer capable of acceptance to form a binding contract); and

(ii)    continue to negotiate with the other prospective purchasers including Bain, KKR and/or H&F and thereby seek to elicit improved consideration to be paid by the final purchaser.

(c)    as a result of telling bidders that their offers had been unsuccessful and discontinuing negotiations with them, Archer was unable to re-establish meaningful negotiations with any of the prospective bidders other than Bain;

(d)    had it continued to maintain a competitive bidding process with the prospective purchasers of the business it would have improved the consideration ultimately paid.

33    In its submissions, Sage points in particular to paragraph 70(d) of the ASOC because it involves not simply an assumed fact, but an assumption in relation to the legal effect of the Final Offer and the Representations.

34    The Representations are also the foundation for the applicants’ misleading and deceptive conduct claim: see ASOC [74]-[76]. Importantly, in paragraph 76A of the ASOC it is alleged that the applicant engaged in conduct in reliance on the Representations.

35    Paragraph 76A of the ASOC repeats paragraphs [53]-[68] and [70]-[75], these being paragraphs that set out certain conduct of the applicants after the making of the Representations. The applicants allege they suffered loss and damage by reason of what they did in reliance on the Representations: ASOC [77].

36    Sage’s submission is that, having regard to these parts of the pleadings, it is clear that the foundation of the applicants’ case is their subjective belief that once they accepted the Final Offer, a certain legal state of affairs existed, and their reliance on that belief. The applicants’ state of mind and reliance are central, not merely peripheral, issues in the case.

37    In relation to the evidence of Mr Story, the applicants have served two (unsigned) statements of anticipated evidence of Mr Story. They have also advised Sage that they intend to call Mr Story to give evidence in accordance with those statements. Sage relies on parts of Mr Story’s statement of intended evidence that indicate that his evidence will be that Allens was retained by MYOB Cayman to provide advice in relation to the sale of its share capital, that Mr Story was the responsible partner of Allens in relation to the matter, that he took instructions from MYOB executives and from Archer Capital Pty Limited (Archer Capital) in relation to the potential sale and that Allens’ role in relation to the transaction included, relevantly, drafting and negotiating the sale documentation and advising Archer Capital and the MYOB shareholders in relation to the Proposed Transaction. Sage submits that, in the circumstances, if Mr Story formed a view one way or the other about whether the applicants’ acceptance of the Final Offer gave rise to a binding contract, he would have been obliged to communicate that opinion to the applicants, or it would be extraordinary if he did not. It follows, so it is submitted, that it is highly likely that there will be communications sent to the applicants by Mr Story which would be relevant to the applicants’ state of mind as to the effect of their acceptance of the Final Offer. Such communications would also be relevant to any assumptions the applicants might have made as to the legal state of affairs following their acceptance, and their reliance on the Representations said to have been made in the Final Offer.

38    Indeed, Sage submits that given the nature and scope of Mr Story’s retainer, any knowledge, opinion or belief that Mr Story might have had in relation to the legal position can be imputed to the applicants. It would follow that any communications containing or referring to his opinion or beliefs would be directly relevant. In this respect, Sage relies on Sargent v ASL Developments Ltd (1974) 131 CLR 634 and Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) and (No 10) (2009) 39 WAR 1 at [6186]-[6194] as authorities relating to the circumstances in which the knowledge or opinions of a solicitor can be imputed to the client.

39    Having regard to the pleadings and the anticipated evidence of Mr Story, Sage contends that the answers to the questions posed in Wayne Lawrence and Chen point inexorably to implied waiver.

40    There is a second aspect of Mr Story’s anticipated evidence that Sage relies on to establish conduct on the part of the applicants which is inconsistent with the maintenance of privilege in respect of any communications that might bear upon the knowledge, opinion or belief of Mr Story and the applicants in relation to the effect of the applicants’ acceptance of the Final Offer. The alleged inconsistency is said to arise from the anticipated evidence of Mr Story in relation to a conversation he had with a solicitor who was acting for Sage in relation to the Proposed Transaction, Mr Michael Reede. The relevant conversation occurred at about 4.10pm on 18 August 2011. In Mr Story’s first statement of anticipated evidence, the following account is given of that conversation (at [72]):

72.    On or around Thursday 18 August 2011, I had a conversation with Reede in words to the following effect:

Story:    In terms of signing the share sale agreement, Archer want it signed up as soon as possible. Can Sage sign the agreement and we will then hold it in escrow until you are ready to announce the deal to the market?

Reede:    We don’t want to sign until we are ready to announce this to the market. There are a lot of things that Sage need to do internally before they will be ready to announce this deal.

Story:    Can Sage sign and have Allen & Overy hold it in escrow?

Reede:    No, we’ll need to announce as soon as we sign, and we’re not going to be ready until Friday morning in the UK.

41    Sage has served a statement of anticipated evidence of Mr Reede which (at [84]) contains the following account of what appears to be the same exchange between Mr Reede and Mr Story:

84.    Before we began to discuss the clauses of the SSA, the following exchange took place:

Story:    Archer want to sign an agreement. I need to ask again, is Sage able to enter into an escrow agreement?

Me:    Absolutely not. If we are bound, we are required to make an announcement and we can’t be bound until Friday evening when we are ready to announce. There are many things we need to do to prepare.

Story:    Can Sage sign and A&O hold the signed copy until Friday?

Me:    Not subject to any escrow or arrangement with anyone else.

42    The applicants have served a further statement of anticipated evidence of Mr Story that responds to Mr Reede’s version of the conversations. It includes, relevantly, the following paragraphs:

Paragraph 84 of the Reede statement

20.    In relation to the conversation set out at paragraph 84 of Reede’s statement, my recollection of that conversation is as set out at paragraph 72 of my statement.

21.    I disagree in particular with Reede’s assertion that he said words to the effect: “If we are bound, we are required to make an announcement and we can’t be bound until Friday evening when we are ready to announce.” In particular, I have no recollection of Reede drawing any distinction in relation to when Sage may be ‘bound’. I believe I would recall such a statement if it had been made and would have raised an issue about it with Reede because it was inconsistent with my understanding of the position.

22.    At no point in time did any representative of Sage or any of its advisers make any statement in my presence to the effect that Sage’s desire to delay signing the SSA until Friday 19 August 2011 was because Sage did not regard itself as or want to be legally bound until that time. I understood Sage’s concern to be an administrative one, namely that it did not want to sign until ready to release an announcement to the market and undertake communications with its shareholders and other stakeholders in respect of the transaction. I assumed that Sage had considered its UK disclosure obligations and were satisfied that an approach of that nature was appropriate. (Emphasis by underlining added)

43    Sage contends that this evidence, in particular the parts emphasised in the above extract, concerns Mr Story’s own state of mind as to whether there was a binding agreement in place between Sage and the applicants. Sage points to other parts of Mr Story’s anticipated evidence that also, according to Sage, refer to his state of mind concerning the negotiations and finalisations of the share sale agreement. Sage submits that the conduct of the applicants in positively relying on their own solicitor’s state of mind is inconsistent with the maintenance of confidentiality in contemporaneous documents that bear upon this evidence.

44    The applicants submit that they have not made any express or implied assertions about the contents of an otherwise privileged communication, or put the contents of any such communication in issue. The applicants point to the fact that the pleadings do not refer to any privileged communications, or any legal advice, or indeed to anything to do with their solicitors. Nor is there any indication in either the pleadings, or in Mr Story’s anticipated evidence, that he gave legal advice on the question of whether acceptance of the Final Offer gave rise to a binding contract. The applicants submit that the authorities post Rio Tinto demonstrate that the mere fact that a party pleads a misrepresentation, estoppel or reliance case does not give rise to any implied waiver of any otherwise privileged communication that might touch on that case.

45    In relation to the anticipated evidence of Mr Story, the applicants submit that it is premature to consider whether anticipated evidence gives rise to a waiver because that evidence may not be led or given at trial. Even if Mr Story is called to give evidence, he may not give evidence relating to his state of mind, let alone evidence that raises for scrutiny any confidential communications. Reliance is also placed on the fact that the evidence that Sage points to as raising Mr Story’s state of mind is simply responsive to, or a denial of, Mr Reede’s evidence relating to a conversation.

Consideration

46    In my opinion, at this stage of the proceedings the applicants have not engaged in any conduct inconsistent with the maintenance of confidentiality over communications with their solicitors. They have not expressly or impliedly made an assertion, or brought a case, which is either about the contents of an otherwise privileged communication, or which necessarily lays open any confidential communication to scrutiny.

47    In relation to the applicants’ pleaded case, in my opinion the mere fact that the applicants have pleaded a case which involves their reliance upon representations, or their state of mind, or assumptions they claim to have made as a result of the alleged conduct of the respondent, does not give rise to an implied waiver. The fact that the pleadings raise an issue concerning the applicants’ state of mind does not alone give rise to the type of inconsistency necessary to give rise to a waiver of all otherwise privileged communications that might be relevant to that issue.

48    It may be accepted that the applicants’ pleaded case is somewhat out of the ordinary because the pleaded state of mind includes a belief or an assumption about the legal effect of the Final Offer or the legal state of affairs following its acceptance. On that basis, it could perhaps be said to be more likely that confidential communications might be materially relevant to that issue. However, relevance to an issue is not the proper test for implied waiver. More is involved in the assessment of issue or implied waiver than merely putting state of mind in issue, even if that state of mind involves a belief, opinion or assumption concerning the law. The ASOC does not refer in any way to legal advice or any privileged communication, let alone the contents of any such communication. The applicants do not plead in any way that their beliefs, opinions or assumptions were influenced in any way by legal advice. The pleadings make no direct reference to the involvement of the applicants’ lawyers. In these circumstances it is not possible to conclude that by their pleadings alone the applicants have expressly or impliedly made an assertion about a privileged communication, or otherwise necessarily laid open to scrutiny any confidential communication.

49    For the reasons already given, the series of questions posed in Wayne Lawrence and Chen should not be approached as a surrogate for the proper test for implied or issue waiver. Answers to those questions may, in an appropriate case, provide some assistance in answering the proper question, which is whether an expressed or implied assertion has been made about the contents of the privileged communication. In this matter, based on the pleadings alone, the answers to the questions posed in Wayne Lawrence and Chen do not compel a finding that there has been a waiver. In particular, in my opinion it cannot necessarily be concluded from the pleadings alone that it was likely that the applicants received legal advice in relation to the legal effect of the Final Offer and its acceptance. Nor can it necessarily be inferred that any legal advice received would or might raise doubts about the applicants’ beliefs, assumptions or reliance on the Final Offer.

50    In relation to Mr Story, I reject Sage’s submission that for the purposes of considering implied waiver, the matter can be approached on the basis that any belief or opinion held by Mr Story is directly relevant, even if not communicated to the applicants, because it can be imputed to the applicants. The authorities relied on by Sage in this respect consider the question whether the knowledge, beliefs or opinions of a solicitor can be imputed to a client in circumstances that are distinguishable from the present circumstances. It may perhaps be accepted that if information which made it clear that the Final Offer was not “final, certain and capable of acceptance” was provided to Mr Story by Sage or its representatives, Mr Story’s knowledge of that information, and perhaps his opinions or beliefs relating to it, might be imputed to the applicants. That is not, however, what Sage relevantly contends occurred here. Rather, Sage contends, in effect, that in any case where a party raises in its pleadings an issue concerning their belief as to a state of affairs, or their reliance on representations, privilege is waived in respect of communications between the party and its solicitor on the basis that the solicitor might have formed an opinion about the relevant state of affairs or the representations, even if that opinion was not communicated to the client, because that opinion can be imputed to the client. In my opinion, that contention should be rejected. It is amongst other things, inconsistent with the principle that, in order to establish implied waiver, more is involved than merely putting a party’s state of mind in issue.

51    The issue raised by Mr Story’s anticipated evidence is different and, at least potentially, more difficult. In the second statement of anticipated evidence of Mr Story, Mr Story’s state of mind, belief or understanding as to the “position” concerning whether Sage may be “bound” by its acceptance of the Final Offer is indirectly, if not directly, put in issue. Whilst this is in the context of Mr Story’s response to Mr Reede’s version of a conversation, it nevertheless potentially opens up to scrutiny Mr Story’s belief or understanding as to the legal state of affairs. The question is whether by serving what is only a statement of anticipated evidence, the applicants have either made an assertion about the contents of a confidential communication involving Mr Story, or have laid open such a communication to scrutiny, or have otherwise acted inconsistently with the maintenance of the confidentiality of such a communication.

52    There are two potential difficulties standing in the way of the applicants’ case that the answer to one or more of these questions is “yes”. First, whilst the anticipated evidence of Mr Story refers to his understanding of the relevant position, it does not in any way suggest that his understanding was the subject of any confidential communications with his clients. In the absence of any reference to such a communication, it is difficult to see how this evidence alone amounts to an assertion about a privileged communication, or lays any such communication open to scrutiny.

53    Second, all that has happened thus far is that an unsigned statement of anticipated evidence of Mr Story has been served. The applicants may ultimately decide not call Mr Story to give evidence at the trial, or he may be called but not be asked, and might not give, evidence about his understanding or belief. He might even give different evidence. In these circumstances, there is merit in the applicants’ submission that it is premature to consider whether evidence that Mr Story might give results in an implied waiver. That is a matter that can only be determined at trial if and when evidence of this nature is led. In the circumstances, the serving of an unsigned statement of intended evidence does not amount to a waiver of privilege in relation to all communications that might bear on this anticipated evidence.

54    It is important that I should add, however, that whilst it may ultimately be a matter for the trial Judge, in my opinion if evidence of Mr Story’s understanding as set out in his statement of anticipated evidence is led at trial, it may well lead to a situation where the content of confidential communications could be said to be laid open to scrutiny, thereby resulting in inconsistency in the Mann sense. If Mr Story is permitted to and does give evidence of his understanding of the state of affairs following acceptance of the Final Offer, it is difficult to see why Sage would not be permitted to test this evidence by questioning Mr Story about any communications he might have had in which he referred to that understanding. That would most likely include otherwise confidential privileged communications with the applicants or their representatives. In those circumstances, by opening up an issue about Mr Story’s understanding of the position following the acceptance of the Final Offer, it could well be said that the applicants have also laid open to scrutiny the content of any otherwise privileged communications on this topic. That would be inconsistent with the maintenance of the confidentiality of such communications. That is so because the assessment of inconsistency is to be informed, where necessary, by considerations of fairness. Arguably it would be unfair not to permit Sage to explore the content of relevant communications in these circumstances on the basis that they were privileged. As I have said, however, that would be an assessment that may have to be made at trial by the trial Judge having regard to the nature of the evidence and the circumstances in which it is led. It may be accepted that if this occurs at trial, it may lead to delays arising from the need for the applicants to collate, and the need for Sage to have time to inspect, any communications relevant to this issue. Whilst such delays would be unfortunate, the possibility that this might occur does not provide a basis for finding implied waiver at this pre-trial stage.

55    For these reasons, at this pre-trial stage, I am not satisfied that there has been an implied waiver of communications involving Mr Story that might bear on the applicants’ relevant state of mind at the time.

56    I should add that I was not invited by either party to inspect any of the documents relevant to the determination of Sage’s contentions concerning implied waiver. No submissions were directed to specific documents and no provision was made for me to inspect any documents potentially relevant to this issue.

The Non-Archer applicants documents

57    Sage has accepted, for the purposes of the applicants’ privilege claims, that Allens were providing legal advice to the first to third applicants (the Archer applicants). Sage contends, however, that there is no evidence that Allens was engaged or retained by any of the fourth to fifty-first applicants (the non-Archer applicants). It therefore has not been established that they were clients of Allens.

58    Sage points to Allens’ retainer letter dated 21 March 2011 in relation to Allens’ appointment to provide legal services in relation to “MYOB monetisation options.” That letter, which is addressed to the Chief Financial Officer of MYOB, indicates that Allens “will be acting for MYOB Cayman Islands Limited and you, Tim Reed and executives of Archer (including Andrew Gray and Frank Heckes) will instruct us in that matter.” The work to be performed is specified as including legal advice. There is no reference in the letter to instructions being provided by, or advice being provided to, the non-Archer applicants.

59    In these circumstances Sage submits that the privilege claims in respect of documents sent by or to the non-Archer applicants should not be upheld and inspection should be permitted.

60    The applicants rely primarily on the evidence of Mr Story’s understanding of who he (as the responsible partner at Allens) was acting for in light of the exit arrangements set out in the Shareholders Deed between the MYOB shareholders. That evidence, given on information and belief in the affidavit of Mr Harris dated 4 September 2013, is as follows (at [28] and [29]):

28.    I am informed by Story and believe:

(a)    In March 2001 Allens (known then as Allens Arthur Robinson) was engaged by MYOB through Archer Capital to provide Australian law advice in relation to options under which the existing shareholders in MYOB could seek to exit their investment in that business. In general terms, the options being considered were:

(i)    a sale of the shares in MYOB;

(ii)    a sale of the assets of MYOB; or

(iii)    a recapitalisation of that company.

Those options were also referred to as options for the ‘monetisation’ of the shareholders’ investment in MYOB.

    …

(d)    From at or around the commencement of Allens’ engagement in relation to the potential monetisation options, it was Story’s understanding that:

(i)    the following entities were together the majority shareholders of MYOB:

(A)    Archer Capital 4A as trustee for the Archer Capital Trust 4A;

(B)    Archer Capital 4B as trustee for the Archer Capital Trust 4B; and

(C)    Archer Capital 4C as trustee for the Archer Capital Trust 4C, (the Archer Investors);

(ii)    Archer Capital was the manager and agent for the Archer Investors pursuant to management agreements signed between those parties;

(iii)    Mr Andrew Gray (Gray), Mr Greg Minton and Mr Peter Wiggs (all of Archer Capital) were Directors of MYOB (the Archer Directors);

(iv)    the shareholders of MYOB were parties to a Shareholders Deed which granted certain rights to, and imposed certain obligations on, the parties;

(v)    the Shareholders Deed afforded the Archer Investors rights in relation to “Exit Arrangements” which included that the Archer Investors could, on written notice to the shareholders (an Exit Proposal), effect a sale of MYOB, including by way of a sale of 100% of the share capital in MYOB;

(vi)    the Shareholders Deed imposed an obligation on each of MYOB’s shareholders, when issued with an Exit Proposal, to participate in and cooperate with the Archer Investors to effect that proposal; and

(vii)    the Shareholders Deed imposed obligations on the shareholders to keep information provided to them in relation to the Shareholders Deed confidential.

29.    I am further informed by Story and believe that:

(a)    early in Allens’ engagement, the Archer Investors decided to pursue the monetisation option of a sale of 100% of the shares of MYOB;

(b)    Story understood and acted on the basis that in relation to any sale of the shares in MYOB he was acting for Archer Capital as manager and agent of the Archer Investors and, as a result of the exit arrangements in the Shareholders Deed which would mean that all shareholders would ultimately be a party to any agreement for the sale of the shares in MYOB, on behalf of all of the shareholders of MYOB in negotiating and finalising the terms of any share sale transaction;

(c)    Story also understood that, given these circumstances, there was a common interest among the shareholders of MYOB in relation to any share sale orchestrated by the Archer Investors;

(d)    Allens took instructions from:

(i)    Archer Capital both in its capacity as the manager and agent of the Archer Investors and as the controller of the majority interest in MYOB; and

(ii)    executives of MYOB, including Mr Tim Reede and Mr Simon Martin.

61    The relevant terms of the Shareholders Deed, to which both the Archer applicants and the non-Archer applicants were parties, in substance provide as follows:

    At any time, the Archer investors were able to give a written notice (Exit Notice) of their intentions to sell the whole, or substantially all, of the MYOB shares (clause 22.1). The Archer applicants are the Archer investors.

    If an Exit Notice was given, each shareholder was required to work together in good faith to ensure the Exit Proposal was effected, including appointing financial and legal advisers, as the directors appointed by the Archer investors determined to be necessary or desirable for purpose of effecting the Exit Proposal (clause 22.1(b)). The non-Archer applicants were shareholders at the relevant time.

    The non-Archer investors (as shareholders) effectively appointed the Archer applicants’ directors as their attorneys for the purpose of giving effect to the Exit Proposal (clause 22.2).

62    Sage submits that Mr Story’s understanding of Allens’ relationship with the non-Archer applicants, if relevant, is flawed. The mere fact that the non-Archer applicants, as shareholders, could be forced to participate in the share sale did not make them Allens’ clients and, in any event, the Exit Notices were not issued until after the alleged sale agreement was made.

63    Sage’s challenge to the privilege claim is directed solely to the proposition that the non-Archer applicants were not clients of Allens for the purpose of the privilege claim. No attention was directed to specific documents or communications. Aside from the point in relation to the scope of Allens’ retainer, it is not contended that the dominant purpose test was not satisfied in respect of any of the non-Archer applicant documents. It was not suggested by Sage that I should inspect any document relating to the challenge to this category of documents; nor was I invited to inspect any documents by the applicants. In this context it is also relevant to note the evidence of Mr Harris is that given the large number of documents the subject of the challenge and the confined nature of the challenge, the applicants had not attempted to file evidence in relation to the individual circumstances of the creation of each of the documents the subject of the privilege claims. The applicants requested the opportunity to prepare such evidence if necessary. Sage did not appear to take issue with the absence of specific evidence in relation to the creation of each document, at least in relation to this category of documents.

Relevant Principles

64    Given the specific nature of the challenge, the relevant principles are those that relate to the circumstances when a party may be a client for the purposes of a claim of legal professional privilege.

65    In Apple v Wily [2002] NSWSC 855 (Apple), Barrett J held (at [7]) that whether a solicitor and client relationship exists is to be determined by reference to the intentions of the parties objectively ascertained. In the absence of a formal or express retainer, the existence of such a relationship can be implied or inferred: Apple at [8]. After considering the nature and rationale of legal professional privilege at common law, Barrett J concluded (at [11]):

“Client”, in its ordinary signification, must therefore be regarded as referring to a person who, in respect of some legal matter within the scope of professional services normally provided by lawyers, has, with the consent of a lawyer, come to stand in a relationship of trust and confidence to the lawyer entailing duties of the lawyer to promote the person’s interests, to protect the person’s rights and to respect the person’s confidences. The privilege exists so that a person may consult his legal adviser in the knowledge to that confidentiality will prevail.

66    This passage from Barrett J’s judgment in Apple was referred to with approval by Finkelstein J in Brookfield Multiplex Limited v the International Litigation Funding Partners Pty Ltd (No 2) (2009) 180 FCR 1 (Brookfield). His Honour concluded that, whatever may be necessary to create the required “relationship of trust and confidence”, it is clear that a retainer need not exist.

67    In Brookfield, Finkelstein J also gave consideration, in this context, to the kinds of communications that may be privileged where there is no formal retainer between the relevant lawyer and “client”. His Honour concluded that if the relevant communication is a communication to the lawyer “it will be privileged if it is confidential and provided to the lawyer in his professional capacity” (at [20]). In relation to communications from the lawyer, his Honour found that unsolicited legal advice would not be protected because it would therefore not be regarded as having been made during a professional relationship and would not be considered to be confidential. However, his Honour said (at [21]):

If, on the other hand, the advice is given in pursuance of a request, whether express or implied, made of the lawyer in his professional capacity, or if the circumstances are such that the “client” would reasonably expect to be given such advice, then it will be privileged.

68    Also of potential relevance to this matter is that privilege may attach to communications between a lawyer and a party who, whilst not a client of the lawyer, had a shared interest with the client in the subject matter of the communications. In Farrow Mortgage Services (In Liq) v Webb (1996) 39 NSWLR 601 Sheller JA (with whom Waddell A-JA agreed) referred to the principle of shared or similar interest privilege in the following terms (at 608):

Two or more persons may join in communicating with the legal adviser for the purpose of retaining his or her services or obtaining his or her advice. The privilege which protects these communications from disclosure belongs to all the persons who joined in seeking the service or obtaining the advice. The privilege is a joint privilege. So is it also if one of a group of persons in a formal legal relationship communicates with a legal adviser about a matter in which the members of the group share an interest. Communications by one partner about the affairs of the partnership or a trustee about the affairs of the trust are examples. Implicit in the relationship is the duty or obligation to disclose to other parties thereto the content of the communication. Accordingly no privilege attaches to such communications as against others who, with the client, share an interest in the subject matter of communication. But the parties together are entitled to maintain privilege “against the rest of the world”: Phipson, par 20-28 and par 20-29. (Emphasis by underlining added)

Consideration

69    It is, with respect to the parties, difficult for the Court to resolve this issue in circumstances where no real attention has been given to the number or nature of the communications involving the non-Archer applicants, and without the Court having the opportunity to inspect some or all of the documents within this category of documents.

70    It is clear that there was no retainer between Allens and the non-Archer applicants. It can be inferred, however, that given the nature of the Proposed Transaction in respect of which Allens was providing advice, the terms of the Shareholders Deed, and the evidence of Mr Story’s understanding, the non-Archer applicants were relevantly clients of Allens in the broad sense discussed by Barrett J in Apple and Finkelstein J in Brookfield.

71    The Proposed Transaction was no doubt an “Exit Proposal” for the purposes of the Shareholder Deed, and whilst Exit Notices may not have been given until the latter stages of the negotiations, it is open to infer that Allens, the Archer applicants, and, more importantly, the non-Archer applicants, were proceeding on the basis that Allens had been, or would be, appointed pursuant to the Shareholders Deed to advise all the shareholders in relation to the Proposed Transaction. It follows that, in relation the Proposed Transaction or Exit Proposal, the non-Archer applicants had, with the consent of Allens, come to stand in a relationship of trust and confidence entailing duties on the part of Allens to protect their interests, protect their rights and respect their confidences in relation to the Proposed Transaction. It may be inferred that any relevant communications between Allens and the non-Archer applicants occurred in that context. Sage has not pointed to any evidence that would suggest otherwise.

72    In respect of the communications themselves, it is open to infer from the nature of the relationship between Allens, the Archer applicants and the non-Archer applicants in the context of the Proposed Transaction and the Shareholders Deed, that communications from the non-Archer applicants to Allens would have been both confidential and provided to Allens in its professional capacity. In respect of communications from Allens, there is no evidence to suggest that these communications involved, or were likely to have involved, unsolicited legal advice. Rather, it may be inferred that the communications were either sent at the request of the non-Archer applicants, or that the circumstances were such that the non-Archer applicants would reasonably expect Allens to give them advice concerning the Proposed Transaction. There is no evidence to suggest otherwise.

73    Even if these inferences were not readily available, in my opinion the relationship between the Archer applicants and the non-Archer applicants, in the context of the Proposed Transaction and the Shareholders Deed, was one where they had a shared or similar interest in the subject of the communications with Allens. That shared interest included the terms of the proposed sale of the MYOB shares to Sage. The Archer and non-Archer applicants were, by reason of the Shareholders Deed, in a legal relationship and, when it came to the Proposed Transaction, they shared a common or joint interest. In these circumstances, even if the non-Archer applicants were not clients of Allens, nonetheless they, and the Archer applicants, are entitled to maintain a claim of joint or common interest privilege in relation to these communications.

The Ernst & Young Documents

74    Sage challenges the applicants’ privilege claims in relation to documents sent to and by E & Y and E & Y Law. In its written submissions, Sage points to the existence of E & Y engagement letters dated March and July 2011. These letters relate to the provision of due diligence services. Sage submits that documents sent or received by E & Y and E & Y Law that relate to due diligence services, which are services of a non legal kind, would not be privileged.

75    To support its privilege claim in relation to the E & Y documents, the applicants rely on information and belief evidence from Mr Harris in relation to the E & Y retainer and the general nature of the E & Y documents in respect of which privilege is claimed. In relation to the retainer, a partner of E & Y Law, Mr Ian Scott, has informed Mr Harris that in or around July 2011 E & Y Law was engaged by MYOB and Archer Capital to provide tax law advice in relation to the proposed sale of the MYOB Group. Mr Scott is a solicitor admitted to practice in NSW and was the responsible partner in respect of work conducted by E & Y Law pursuant to this retainer.

76    In relation to the E & Y documents the subject of the privilege claim, Mr Harris has been informed by a solicitor working under his supervision who has inspected the documents that are the subject of Sage’s challenge, as identified in Sage’s written submissions, that each of the documents record communications “for the apparent dominant purpose of providing information to Allens and/or E & Y Law to enable those lawyers to provide legal advice to” MYOB and Archer Capital. The communications relate, in general terms, to legal advice being provided by Allens or E & Y Law as to “the disclosure of information to potential acquirers of the MYOB business, tax aspects of the proposed transactions, and financial information relevant to the preparation of the legal documentation.”

77    Sage submits that there is no evidence, information and belief or otherwise, from the authors of the relevant documents relating to the purpose of the documents. In circumstances where the only evidence concerning the documents comes from a solicitor who has examined them, Sage invites the Court to inspect the documents.

78    As indicated earlier, the absence of evidence from the authors of the documents is explained by Mr Harris as being the result of the large number of documents involved and the limited time the applicants have had to file evidence in relation to this application. In these circumstances, and having regard to the general evidence that has been filed, it is appropriate for the Court to inspect the documents.

79    Having inspected the documents, I uphold the privilege claim in relation to the E & Y documents. The inspection reveals that the documents, on their face, broadly correspond to the descriptions given by the solicitor who has examined the documents. The communications recorded in these documents either contain legal advice from E & Y Law or Allens in relation to various aspects of the Proposed Transaction, or the apparent dominant purpose of the communication is the giving or obtaining of such advice.

80    Sage did not ultimately press a submission contained in its written submissions concerning waiver of privilege in relation to tax advice given by E & Y Law.

The UBS documents

81    Sage’s challenge to the privilege claims relating to the documents authored by or sent to UBS largely mirrors a challenge the applicants mounted to privilege claims made by Sage in respect of documents authored by or sent to Sage’s financial adviser, in relation to the Proposed Transaction, Deutsche Bank. Indeed, Sage characterises its challenge to the privilege claimed over the UBS documents as “wholly defensive”: if it is found that documents sent by or to Deutsche Bank are not privileged, the same conclusion would apply to documents sent by or to UBS. Sage submits that there is no basis to distinguish the position of UBS as part of the applicants’ apparent “deal team” from the position of Deutsche Bank as part of Sage’s deal team.

82    In Archer Capital 4A Pty Limited as trustee for the Archer Capital Trust 4A v Sage Group PLC (No 2) [2013] FCA 1098 (Archer v Sage (No. 2)), the applicants’ challenge to Sage’s privilege claims with respect to documents sent by or to Deutsche Bank was rejected and the privilege claims upheld. The relevant principles concerning privilege claims relating to third party communications were considered at some length at paragraphs [17]-[24] of that judgment. It is unnecessary to restate those principles here. It was concluded that the evidence showed that Deutsche Bank was relevantly Sage’s agent for the purpose of communicating with Sage’s lawyers and that the dominant purpose of the relevant communications was the provision of legal advice to Sage. In relation to waiver, it was found that as the disclosure of documents to Deutsche Bank were confidential disclosures to Deutsche Bank in its capacity part of Sage’s “deal team”, there was no inconsistency between the disclosures and the maintenance of the confidentiality in the documents.

83    The relevant question in relation to Sage’s challenge to the privilege claims in respect of the UBS documents is whether the relationship and dealings between UBS and the applicants in relation to the Proposed Transaction were materially different to the relationship and dealings between Deutsche Bank and Sage. If there is no material difference, Sage effectively accepts that the privilege claims in relation to the UBS documents should be upheld.

84    The applicants rely on the evidence of Mr Harris, based on what he has been told by Mr Aiden Allen, a director of UBS, about the relationship between UBS and the applicants and the role of UBS in relation to the Proposed Transaction. The evidence establishes that in or around February 2011, UBS was engaged to act as financial adviser and staple finance provider in relation to potential transactions under which the existing investors in MYOB would realise the value of their investment. That process was referred to as the consideration of potential “monetisation options.” While no formal engagement letter was entered into at the time of this engagement, it was Mr Allen’s understanding that throughout the engagement UBS was acting for MYOB, its shareholders and Archer Capital. Throughout the retainer, Mr Allen was working under the assumption that Archer Capital was the manager of the Archer investors and was working to effect a transaction on behalf of all shareholders. Mr Allen was aware that the Archer investors, as the majority shareholders and as part of the arrangements between the MYOB shareholders, had the ability to effect the sale of 100% of the shares in MYOB. In acting pursuant to the retainer, Mr Allen considered that he was acting as an agent of MYOB, its shareholders and Archer Capital, in so far as he understands that term. Mr Allen was aware that in the course of the UBS retainer he would be provided with access to confidential information, including confidential legal advice, and that he was under an obligation to maintain confidentiality of that information except where instructed otherwise.

85    The applicants also rely on a statement of intended evidence of Mr Allen and a draft letter from UBS to Archer Capital and MYOB Cayman, that sets out the terms of UBS’s engagement. The draft letter is dated 29 August 2011. Unsurprisingly, the draft engagement letter imposes confidentiality obligations on UBS in respect of any information it obtained in the course of the engagement.

86    The applicants’ submission is that their relationship and dealings with UBS are distinguishable from the relationship and dealings between Sage and Deutsche Bank in two potentially relevant respects. First, it is pointed out that the applicants have pleaded that UBS was their agent (see ASOC at [12]), whereas Sage, in its defence, has denied that Deutsche Bank was its agent. Second, the applicants submit that Deutsche Bank had a dual role in relation to the Proposed Transaction, which included it acting as a financier, not just acting as Sage’s financial adviser and a member of the relevant deal team. UBS had no such dual role.

87    Sage’s primary submission is that there is no basis for distinguishing the position of UBS from that of Deutsche Bank. It points out, however, that the argument for privilege not applying to the UBS documents is stronger because, unlike the position with Deutsche Bank, UBS had no written contract with its client. Sage also points out that in a statement of anticipated evidence of Mr Andrew Gray, Managing Director of Archer Capital, it is said that Mr Allen’s “pitch” for an adviser role for UBS included the statement that the role of UBS would be as an independent contractor, not agent. The draft retainer letter contains a term to this effect.

Consideration

88    Resolution of Sage’s challenge to the privilege claims over communications involving UBS requires consideration of two questions: first, whether the communications are privileged in the first place; and second, if so, whether that privilege has been waived as a result of disclosure to UBS.

89    The question concerning waiver can be answered shortly. In my opinion, the evidence does not reveal any material difference between Deutsche Bank’s position as part of Sage’s “deal team” and the position of UBS as part of the applicants’ deal team. The available inference from the evidence is that any disclosure of documents to, and any communications involving, UBS was a disclosure or communication which was made on a confidential basis for the limited purposes of UBS assisting and advising the applicants in relation to the Proposed Transaction in consultation with the applicants’ other advisers, including its lawyers, Allens. The relationship between UBS and the applicants was similar to the relationship between the client, lawyers and investment bank advisers considered by Allsop J in DSE (Holdings) Pty Ltd v Intertan Inc (2003) 135 FCR 15 (DSE 2); (and see Archer v Sage (No 2) at [101]-[102]). This inference is supported by the information and belief evidence of Mr Harris to the effect that Mr Allen of UBS was aware that he was under an obligation to maintain confidentiality in relation to confidential information he received in the course of UBS’s retainer. In the circumstances, disclosure to UBS does not amount to conduct inconsistent with the maintenance of confidentiality which legal professional privilege is designed to protect: Mann [28]-[29].

90    The question of whether the communications involving UBS are privileged in the first place is more difficult. That is because the applicants have not led any evidence from the authors or recipients of the relevant communications in relation to the nature or purpose of the communications. As indicated earlier, Mr Harris’ evidence is that specific evidence in relation to the purpose of individual communications was not able to be attended to by the applicants because of the large number of documents involved in the privilege challenge and the limited time the applicants had to file evidence in response. In these circumstances, it is necessary and appropriate for the Court to inspect the relevant documents to determine whether it is possible to infer the purpose of each communication from the content of the documents themselves, considered together with the general evidence concerning the role and involvement of UBS.

91    Inspection of the relevant UBS documents reveals that, almost without exception, the communications are email communications which in most cases form part of a chain of emails which include various representatives of the applicants and their advisers, including Allens. The general subject matter of the communications is the consideration and negotiation of various aspects of the Proposed Transaction, including the terms of various documents.

92    As I did when inspecting the Deutsche Bank documents the subject of privilege claims by Sage, in inspecting the UBS communications I have had regard to the observations of Allsop J in DSE 2 at [21] and [45] in relation to the typical nature of the relationship between the client, lawyers and investment bank advisers in complex commercial transactions and the broad concept of legal advice in that context as including “advice as to what should prudently and sensibly be done in the relevant legal framework.”: see also Archer v Sage No 2 at [50]-[51].

93    With those considerations in mind, my inspection of the UBS documents revealed that the nature and content of the documents themselves, read in the context of general evidence concerning the role of UBS, supports the inference that UBS and Allens were together acting as the agents of the applicants to give and receive views and information to and from each other for the purpose of Allens giving legal advice to the applicant in respect of various aspects of the Proposed Transaction. Legal advice sought from and provided by Allens was sought and provided in conjunction with, and with relevant input from, UBS. The limited agency between the applicants and, relevantly, UBS, was similar to the agency found to exist between the client and its investment bank adviser in DSE 2, and the agency found to exist between Sage and Deutsche: see Archer v Sage (No. 2) at [43].

94    Putting agency aside, it must be said that in the case of a handful of the relevant UBS documents, it is difficult to infer from the document itself that the dominant purpose of the communication was the provision of legal advice by Allens. These communications appear to be fairly innocuous communications that concern essentially administrative issues or arrangements between the respective advisers and the applicants’ representatives. I would include within this category of documents the following documents (using barcode references): ARC.0001.001.0345; ARC.002.001.2260; ARC.002.001.2534; ARC.002.001.3482; ARC.002.001.3486; ARC.003.005.6190; ARC.003.005.8955; ARC.003.007.6855; ARC.003.007.7507; and ARC.003.008.3784. Given the context in which these communications occurred, including the limited agency relationship between the applicants and UBS in relation to such communications, in my opinion the privilege claim in relation to these documents nonetheless should be upheld.

95    In any event, in relation to these small number of documents, given the limited nature of Sage’s “defensive” challenge to privilege in relation the UBS documents, the evidence of Mr Harris in relation to why the applicants have not led specific evidence in relation to individual documents and the absence of complaint or criticism from Sage in relation to that position, I would not be prepared to grant Sage access to these few documents without giving the applicants the opportunity of filing evidence relating to the purpose and nature of these documents.

96    In these circumstances, I decline to order the applicants to produce for inspection the relevant UBS documents.

Maples FS documents

97    Sage challenges the applicants’ privilege claim in respect of all documents authored by “Maples FS”. The basis of the challenge is that Maples FS is a corporate services firm based in the Cayman Islands. Accordingly, Sage submits that the basis of the privilege claim is unclear. There is no evidence relating to the nature or purpose of the Maples FS documents the subject of the claim. I was invited to inspect the relevant Maples FS documents on this basis.

98    The applicants rely on information and belief evidence of Mr Harris in relation to the role of “Maples and Calder” in relation to the Proposed Transaction. Maples and Calder is a law firm apparently based in the Cayman Islands. A partner of that firm, Mr Andreas Haug, has informed Mr Harris that in July 2011 Maples and Calder was relevantly retained by the applicants, through Allens, to provide legal advice to MYOB and Archer Capital (in its capacity as the manager of the Archer investors) in relation to Cayman Islands corporate law and regulatory issues.

99    I have inspected the Maples documents in respect of which there is a privilege claim. They reveal that “Maples FS” is in fact “Maples Fiduciary Services”. That firm is a separate entity to the law firm Maples and Calder. Two of the documents (ARC.003.005.9759 and ARC.019.001.0237 and attachment ARC.019.001.0240) contain email communications between Allens and offices of Maples FS concerning purely administrative matters relating to the MYOB Cayman members list. In my opinion there is no basis for concluding that these communications were for the dominant purpose of legal advice being provided to the applicants. Whilst these emails appear to have been copied to a lawyer at Maples and Calder, and were sent to lawyers at Allens, that alone does not mean that they are privileged. The privilege claims in respect of these two documents have not been made out. Accordingly, they should be made available for inspection by Sage.

100    The remaining Maples FS documents include email communications between Allens and a person who was or is apparently a lawyer at Maples and Calder. Though they are fairly marginal, these communications appear to include or relate to legal advice concerning a document and its execution in the Cayman Islands. Accordingly the privileg claim in relation to these documents is upheld and inspection is denied.

THE DISCOVERY APPLICATION

101    Paragraph one of the interlocutory application seeks an order for standard, or alternatively particular, discovery pursuant to, respectively, r 20.14 and r 20.21 of the Rules, in respect of 12 categories of documents. Ultimately, Sage pressed for discovery in respect of only two of these categories of documents: categories 8 and 11.

102    On 1 March 2013, the docket Judge ordered the parties to give discovery by 26 April 2013. The applicants served a list of documents on 1 May 2013 and, following correspondence between the parties, a supplementary list of documents on 8 July 2013 and a further supplementary list of documents on 30 July 2013. It is perhaps an understatement to say that the adequacy of the applicants’ discovery has been a bone of contention between the parties. There has been voluminous correspondence between the respective solicitors. None of that correspondence assists in resolving the remaining dispute between the parties in relation to categories 8 and 11.

103    Category 8 is in the following terms:

The financial statements for Bain Capital Abacus Parent Pty Limited (renamed MYOB Group Pty Limited), MYOB Holdings Pty Limited and its subsidiaries for any period from 1 January 2012 onwards.

104    There is no dispute that the applicants have not discovered any documents that might fall within this category. Sage says that such documents should be discovered because they are directly relevant to the issues raised by the pleadings or in the affidavit. The applicants deny that documents within this category are relevant.

105    The damages allegedly suffered by the applicants are particularised in paragraph 69 of the ASOC in the following terms:

(i)    The difference between:

(A)    the sum of $1.35 billion that Sage would have been obliged to pay for 100 % of the fully diluted share capital or MYOB pursuant to the Sale Agreement; and

(B)    the net value of the consideration received by the Applicants pursuant to the Bain Sale Agreement,

which amount will be quantified in due course by way of an expert report.

(ii)    The transaction costs associated with reopening negotiations with Bain and finalising and documenting that alternate arrangement.

106    A matter that complicates, to an extent, the assessment of damages as particularised by the applicants is that the consideration received by the applicants’ pursuant to the Bain sale agreement included vendor notes with a total face value upon issue of AUD $150million. The applicants have served an expert report from a chartered accountant, Mr Michael Potter, in which Mr Potter expresses an opinion in relation to the value of the consideration received by the applicants from Bain. In relation to the valuation of what Mr Potter refers to as the “deferred component” of the consideration, being the vendor notes, Mr Potter applies the discounted cash flow methodology. That methodology takes into account the time value of money and, relevantly, risk associated with the repayment of the cash flows of the MYOB business.

107    In section six of his report, Mr Potter assesses the risk component involved in valuing the notes. Much of his analysis is based on financial forecasts provided by the applicants to potential purchasers (MYOB forecast). However, Mr Potter then goes on to compare the MYOB forecast with further data that became available subsequent to the acquisition. At paragraph 6.15 of his report Mr Potter says:

6.15 Further current performance data for MYOB would assist the analysis and alter the opinions I have expressed in this report. If the actual trading performance continues to be materially less than the forecast the risk of repayment of the notes may increase.

108    Sage has served an expert report of Mr Tony Samuel. Like Mr Potter, Mr Samuel expresses opinions in his report in relation to, relevantly, the value of the consideration the applicants received from Bain. He also expresses agreement or disagreement with various assumptions made and opinions arrived at by Mr Potter. Importantly, Mr Samuel takes issue with the section of Mr Potter’s report where Mr Potter compares the MYOB forecast with post-acquisition financial data. At paragraph 165 of his report, Mr Samuel says:

165. In this section of his report Mr Potter considers how the MYOB forecast compares with a more recent forecast and the actual financial performance of the MYOB business since the acquisition by Bain. Clearly this analysis introduces hindsight whereby information is relied upon which would not have been known as at the time of the acquisition. There is an inherent inconsistency here between the determining the discount rate as at the valuation date and using hindsight to assess risk as at that date. In my view if hindsight is relevant, all events subsequent to the evaluation date should be considered. (Emphasis by underlining added)

109    Thus, Mr Samuel takes issue with the relevance of the post-acquisition financial information for the purpose of arriving at a valuation as at the date of the sale to Bain. Mr Samuel nonetheless goes on to critique various conclusions or opinions arrived at by Mr Potter based on the post-acquisition financial information. In doing so, Mr Samuel relies on further financial information that was not available when Mr Potter prepared his report.

110    Mr Potter has prepared a further report which replies to Mr Samuel’s report. In his reply report, Mr Potter addresses some of Mr Samuel’s criticisms of his, Mr Potter’s, first report. He specifically responds to Mr Samuel’s criticisms of that part of his first report that analysed actual trading results following acquisition for the purpose of arriving at the discount rate. Mr Potter analyses the further information used by Mr Samuel in his report.

111    Sage submits that the category 8 documents are directly relevant to the dispute between the respective experts concerning the valuation of the notes. Further financial data, it is submitted, would be material to these opinions. The applicants contend that further MYOB financial information is not directly relevant because the value of the consideration received by the applicants from Bain is to be assessed at the date of acquisition. Subsequent financial data is not relevant to that issue.

112    The applicants’ submission in this regard appears to be somewhat inconsistent with paragraph 6.15 of Mr Potter’s first report extracted above. Ironically, however, the applicants’ submission is supported by Mr Samuel’s observation at paragraph 165 of his report, also extracted above. To use Mr Samuel’s words “there is an inherent inconsistency here between determining a discount rate as at the valuation date and using hindsight to assess risk as at that date.” It is true that Mr Samuel then does goes on to say that “if hindsight is relevant, all events subsequent to the valuation date should be considered”. However, in my opinion there must be a limit to that reasoning. Otherwise financial information released on the very eve of the hearing of this matter could be used to either support or dispute the existing valuations. I doubt that further post-acquisition financial data is relevant, let alone directly relevant, to an assessment of the value of the consideration received by the applicants from Bain at the date of the acquisition. Even if some post-acquisition financial data might be relevant, I doubt that financial information that only became available following Mr Samuel’s report, which itself was dated almost 18 months after the acquisition, could possibly be relevant.

113    In these circumstances, I do not consider that the category 8 documents are directly relevant to the issues raised by the pleadings or in the affidavits. Even if they were, in my view they would be of such marginal relevance that I would, in any event, refuse to order discovery of them in the exercise of the Court’s discretion given that the overriding purpose of the Rules is to facilitate the just resolution of disputes as “quickly, inexpensively and efficiently as possible”: section 37M of the Federal Court of Australia Act 1976 (Cth). I therefore decline to require the applicants’ to give discovery of the category 8 documents.

114    Category 11 of the proposed further discovery is in the following terms:

All directly relevant documents held by MYOB Group Pty Limited (ACN 153 094 958) or MYOB Holdings Pty Limited (ACN 152 570 431) (or any related body corporate, as that term is defined in the Corporations Act 2001, of either of those entities) which are within the possession, custody or power of the Forty-Ninth applicant or any of the Applicants.

115    The dispute in relation to this category of documents relates to whether documents held by MYOB Group Pty Limited or MYOB Holdings Pty Limited or any related body corporate are within the possession, custody or power of Mr Timothy Reed, who is the forty-ninth applicant, solely on the basis that he is a director of both of those companies.

116    Sage argues that it should be inferred that, as a director of the two MYOB companies, Mr Reed must at some stage have had custody of documents otherwise held by the MYOB companies. Alternatively, it is contended that by reason of either or both of s 198F and s 290 of the Corporations Act 2001 (Cth) (Corporations Act), Mr Reed has the power to obtain access to and inspect the documents.

117    In the discovery context, possession means physical possession by a person in circumstances where the person has a legal right of possession. Custody, on the other hand, means the physical or corporeal holding of a document regardless of the legal right to possession and regardless of whether the person is constrained by contract from dealing with the document: Federal Commissioner of Taxation v Australia and New Zealand Banking Group Limited (1979) 143 CLR 499 at 519-520; B v B [1979] 1 All ER 801 (B v B). Sage contends that Mr Reed has relevant financial records of the MYOB companies in his custody and the fact that he only has them in his custody in his capacity as a director does not alter his discovery obligations.

118    There can be little doubt that a director who happens to have physical possession of books and records of the company has custody of them for the purposes of discovery. The difficulty for Sage, however, is that there is no evidence that Mr Reed has relevant documents of the MYOB companies in his physical possession. Nor is there any evidence from which that can be inferred. It is merely a matter of conjecture or speculation. Sage relies on a passage from the judgment in B v B (at 807) that suggests that a director may be required to discover company documents if they have at some stage been in his or her possession. Even if that is correct, there is no evidence to suggest that Mr Reed has ever had physical custody or possession of any relevant documents held by the two MYOB companies.

119    In relation to the question of whether Mr Reed has relevant documents held by the two MYOB companies within his power, in the discovery context power means a presently enforceable legal right to obtain access to or inspect the relevant documents. In its written submissions, Sage relies on the fact that as a director of the two MYOB companies, Mr Reed has common law and statutory rights of access to company documents. However, the preponderance of authority is to the effect that the right of access, both at common law and pursuant to either s 198F or s 290 of the Corporations Act, is limited to circumstances where the right is to be exercised to enable the director to carry out his duties as a director (South Australia v Barrett (1995) 64 SASR 73 at 76; Mcdougall v On Q Group Ltd v [2007] VSC 184 at [7]) or, in the case of section 198F, in circumstances where a proceeding to which the director is, or proposes to be, a party, is a proceeding relating to the director’s capacity as a director of the company (Hardcastle v Advanced Mining Technologies Pty Ltd [2001] FCA 1846 at [25]; Tan v St George Bank [2005] WASC 143 at [46]-[47]; Stern v Sekers [2010] NSWSC 59 at [252]-[255]). As Ward J put it in Stern v Sekers (at [255]):

The statutory right of access extends to all documents, financial reports and records, and any other record of information providing it falls within the phrase “of the company”; s 9 of the Corporations Act. It seems difficult to believe that a provision designed to ameliorate the difficulty faced by a director at common law in obtaining access to documents necessary to defend himself or herself against an action for breach of duty by the company (because the information may be used only for the purposes of the company), could be relied upon by a director to obtain access to potentially highly confidential company documents solely for the purpose of producing those on discovery in proceedings unconnected with the company or the director’s role or conduct as a director.

120    Mr Reed is a party to these proceedings in his personal capacity, not in his capacity as a director of the two MYOB companies of which he is a director. The proceedings are not relevantly connected to the two MYOB companies or Mr Reed’s role or conduct as a director of them. In these circumstances, in my opinion, Mr Reed does not relevantly have the legal right to obtain for inspection relevant documents held by the MYOB companies, either at common law or under the Corporations Act. It follows that Sage’s submission that Mr Reed has the possession, custody or power to obtain relevant documents from the MYOB companies for discovery must be rejected. No order for discovery of the category 11 documents should be made.

UBS Subpoena

121    Sage seeks leave to issue a subpoena to UBS. The form of the proposed subpoena was initially attached to the interlocutory application. Following the hearing of the interlocutory application, and as a result of exchanges that occurred during that hearing, Sage refined and narrowed the scope of the proposed subpoena. A revised subpoena was subsequently provided to the Court on 18 September 2013, together with further written submissions of the parties. The applicants do not oppose the grant of leave to issue the subpoena to UBS per se, but submit that paragraphs 2 and 3 of the proposed subpoena are impermissibly broad because they will capture documents not relevant to the issues in the proceedings.

122    The test of relevance in the context of a subpoena is whether the material sought has apparent relevance to the issues in the principal proceedings; that is adjectival as distinct from substantive relevance; or whether the material sought is reasonably likely to add in the end to the relevant evidence in the case; or whether it appears to be “on the cards” that the documents sought will materially assist the party who requested the subpoena to be issued: Campaign Master (UK) Limited v Forty Two International Pty Limited (No 4) [2010] FCA 398 (Campaign Master) at [39] and the cases there cited. Apparent relevance is addressed by considering, primarily, the issues raised by the pleadings: Campaign Master at [40] and the cases there cited.

123    The terms of the proposed subpoena to UBS should be considered in the context of the evidence, summarised earlier in this judgment, concerning the role of UBS in relation to the Proposed Transaction. Relevant also is the fact that Sage sought discovery of relevant documents in the possession or custody of UBS on the basis that, as UBS is said to have been acting as the agent of the applicants, documents held by UBS were in the control of the applicants. The applicants contend, however, that UBS has refused to give the applicants documents for the purposes of discovery.

124    In my opinion, the terms of paragraph 2 of the proposed subpoena to UBS are impermissibly broad. The terms of paragraph 2 are so broad that it is likely that the subpoena will capture documents which, on virtually any view, would be unlikely to be relevant to the issues in the proceedings. It will, for example, capture documents “produced” by UBS for its own internal purposes, albeit pursuant to its engagement, and never communicated to the applicants. It will also capture documents received by UBS from third parties, or sent by UBS to third parties, that would not, or would not be likely to, have any adjectival relevance to the issues in the pleadings. The mere fact that the relevant time period in paragraph 2 has been narrowed to a fairly confined period may reduce the number of documents likely to be produced in answer to the subpoena. The narrow time period, however, does not alter the fact that the terms of paragraph 2 are not limited in such a way as to ensure that only documents that are reasonably likely to add, in the end, to the relevant evidence will be caught by the subpoena.

125    I would be prepared to consider granting leave to issue a subpoena to UBS which included a paragraph similar to paragraph 2 if it was limited by reference to the identity of relevant persons to whom documents were sent, or from whom documents were received, or more importantly, by reference to subject matters that may bear on the issues in dispute in the proceedings. Some degree of specificity is required.

126    Paragraph 3 of the proposed UBS subpoena is in the following terms:

All documents comprising or referring to any valuation of:

(a)    the shares in, or assets of, MYOB created in the period 1 January 2011 to 30 September 2011; or

(b)    the offers for the purchase of the shares in, or assets of, MYOB made by:

(i)    the Sage Group plc on 15 August 2011; or

(ii)    Bain Capital partners, LLC on 16 August 2011; or

(iii)    Bronte Bidco Pty Limited (an entity associated with KKR Australia Pty Limited) on 19 August 2011; or

(c)    the consideration that the Applicants received pursuant to a share sale agreement dated 29 September 2011 between the Applicants and Bain Capital Abacus Acquisition Pty Limited.

127    In my opinion, valuations prepared by UBS, if any exist, and even if communicated to the applicants, are unlikely to have any adjectival or apparent relevance to the issues in the proceedings. Sage submits, in effect, that such valuations may be relevant to the assessment of damages. Specifically, it is contended that documents produced in answer to paragraph 3 are likely to be relevant to assessing the opinions, assumption or methodology arrived at or utilised by the applicants’ expert, Mr Potter, in valuing the consideration received from Bain. In my opinion, that is a matter of mere conjecture or speculation. Even assuming someone at UBS did produce valuations which utilised a different methodology, or used different assumptions, or arrived at different conclusions, it is difficult to see what use Sage could make use of such valuations at the hearing. It is difficult to see how Sage could simply tender such valuations in their case as going to the issue of whether Mr Potter’s, or Mr Samuel’s, or some other valuation should be accepted. The most that could perhaps be said is that such material, if it exists, might provide some material upon which Mr Potter could be cross-examined. I am, however, unable to accept that it is “on the cards” that such material exists or would be likely to assist Sage’s case in any way. Accordingly, I would decline to grant leave to issue a subpoena to UBS which includes paragraph 3 of the proposed subpoena.

Compliance with Previous Discovery Order

128    Paragraph 2 of the interlocutory application seeks an order that the first to third, forty-first and forty-fifth applicants comply with the discovery order made by the docket Judge on 1 March 2013 by serving a list of documents verified by affidavit in accordance with r 20.22 of the Rules. Sage contends that the applicants named in this proposed order have not properly verified lists of documents that have been served.

129    Putting aside the fact that I doubt that it is necessary or appropriate for me to make an order that in effect merely requires a party to comply with an order previously made, the circumstances do not, in any event, warrant the making of this order. In relation to the verifying affidavits of the first to third applicants, the first to third applicants are trustees of trusts. In that capacity, they have entered into a management agreement with Archer Capital which appoints Archer Capital manager of the trusts. The management agreement provides that Archer Capital may appoint a person to perform relevant obligations of the manager. The verifying affidavits of the first to third applicants have been sworn by Ms Stacey Kelly, who is General Counsel of Archer Capital. Ms Kelly supervised and collated the documents in the possession of the first to third applicants for the purpose of discovery. I am satisfied that she has relevantly been appointed by Archer Capital, as manager under the management agreement, to perform the obligations of the first to third applicants, as trustees of the relevant trusts, in relation to discovery. As such, she is an appropriate officer of the first to third applicants to swear a verifying affidavit for the purposes of r 20.22. If there was any doubt about that, I would in any event make an order pursuant to r 20.22(2) specifying Ms Kelly as a person who could make an affidavit pursuant to that rule.

130    In relation to the forty-first applicant, there is evidence that a liquidator has been appointed to that company, that the company’s only function was to hold treasury stock which could be issued to the management of MYOB Cayman, and that it no longer holds any such stock. The company has never, and is not currently, holding any records. Nor has it ever created or received documents or correspondence in relation to the matters in dispute between the parties. In these circumstances, I decline to make any further orders in relation to discovery or the verification of discovery by the forty-first applicant.

Conclusion and Orders

131    For the reasons I have given:

(a)    I decline to make any further orders in relation to discovery by the applicants, including any further orders in relation to the verification by affidavit of the lists already served;

(b)    I will order that the applicants produce two documents, identified by their barcode numbers (ARC.003.005.9759 and ARC.019.001.0237 and attachment ARC.019.001.0240), for inspection within one week of the making of this order;

(c)    I do not propose to grant leave to Sage to file a subpoena to UBS in the form provided to the Court, though I would be prepared to consider granting leave to issue a subpoena to UBS which includes paragraph 1 and a more defined and confined version of the existing paragraph 2.

132    The interlocutory application should otherwise be dismissed. As the applicants have been the successful party, other than in a very minor respect, it is appropriate that Sage be ordered to pay the costs of the applicants of, and incidental to, the interlocutory application.

Associate:

Dated:     8 November 2013

SCHEDULE 1

Second Applicant:    ARCHER CAPITAL 4B PTY LTD AS TRUSTEE FOR THE ARCHER CAPITAL TRUST 4B

Third Applicant:    ARCHER CAPITAL 4C PTY LTD AS TRUSTEE FOR THE ARCHER CAPITAL TRUST 4C

Fourth Applicant:    HARBOURVEST PARTNERS 2007 V-DIRECT B.V.

Fifth Applicant:    HARBOURVEST INTERNATIONAL PRIVATE EQUITY PARTNERS V-DIRECT FUND L.P.

Sixth Applicant:    HARBOURVEST PARTNERS 2007 DIRECT FUND L.P.

Seventh Applicant:    LENTESCO PACKAGING PTY LIMITED IN ITS CAPACITY AS TRUSTEE OF THE MYOB UNIT TRUST

Eighth Applicant:    SQUADRON ASIA PACIFIC II NV

Ninth Applicant:    SQUADRON NE ASIA HOLDINGS II LIMITED

Tenth Applicant:    ADAM FERGUSON

Eleventh Applicant:    ALEXANDER BRUCE CAMERON IN HIS CAPACITY AS TRUSTEE OF THE HIGHLAND INVESTMENT TRUST

Twelfth Applicant:    ALLISON WATTS

Thirteenth Applicant:    AMBA DARLA HOLDINGS PTY LIMITED ACN 136 023 517 IN ITS CAPACITY AS TRUSTEE OF THE LA FAMILIA MUNOZ TRUST

Fourteenth Applicant:    ANDREW BIRCH

Fifteenth Applicant:    ANDREW BIRCH AND CHERYL SING IN THEIR CAPACITY AS TRUSTEES OF THE BIRCH SING SUPERANNUATION FUND ABN 85 093 663 531

Sixteenth Applicant:    BIGGLES ENTERPRISES PTY LTD AS TRUSTEE FOR THE KATZEFF FAMILY TRUST ABN 64 417 131 510

Seventeenth Applicant:    BIRCHSING PTY LTD ACN 075 688 934 IN ITS CAPACITY AS TRUSTEE OF THE BS3 TRUST

Eighteenth Applicant:    CHRISTOPHER TRACEY

Nineteenth Applicant:    DOMINIC O'HANLON

Twentieth Applicant:    DOMINIC O'HANLON IN HIS CAPACITY AS TRUSTEE OF THE O'HANLON SUPERANNUATION FUND

Twenty First Applicant:    ELENA GREENWELL

Twenty Second Applicant:    ESTELA RODRIGUEZ

Twenty Third Applicant:    FERGATRON CONSULTING PTY LIMITED ACN 128 273 389 IN ITS CAPACITY AS TRUSTEE OF THE FERGUSON CONSULTING FAMILY TRUST

Twenty Fourth Applicant:    GARRY JOHN DOWD & JULIE ANNE DOWD IN THEIR CAPACITY AS TRUSTEES OF THE GAJU SUPERANNUATION FUND

Twenty Fifth Applicant:    GIOVANNA MARIA OSTACCHINI

Twenty Sixth Applicant:    GJED PTY LTD ACN 125 789 111 IN ITS CAPACITY AS TRUSTEE OF THE DENT & EDMEADS SUPERANNUATION FUND

Twenty Seventh Applicant:    GRANT LINGWOOD-SMITH

Twenty Eighth Applicant:    IAN BOYLAN

Twenty Ninth Applicant:    INFOTREK INVESTMENTS PTY LIMITED ACN 136 379 336 IN ITS CAPACITY AS TRUSTEE OF THE AD STEVENSON FAMILY SUPER FUND

Thirtieth Applicant:    JEAN MULLIGAN

Thirty First Applicant:    JEMATE PTY LIMITED ACN 114 290 845 IN ITS CAPACITY AS TRUSTEE OF THE JST SUPERANNUATION FUND

Thirty Second Applicant:    JGDE PTY LIMITED ACN 136 366 393 IN ITS CAPACITY AS TRUSTEE OF THE DENT & EDMEADS FAMILY TRUST

Thirty Third Applicant:    JOHN MOSS

Thirty Fourth Applicant:    JOHN RICHARD MOSS AND ELAINE JANE MOSS AS TRUSTEES OF THE MOSS FAMILY TRUST

Thirty Fifth Applicant:    JULIE STELLA TASSONE

Thirty Sixth Applicant:    KAREN O'HANLON

Thirty Seventh Applicant:    KEVIN RAWLINGS

Thirty Eighth Applicant:    LISA BELL

Thirty Ninth Applicant:    MATTHEW MULLIGAN

Fortieth Applicant:    MATTHEW JAMES TOMLINSON

Forty First Applicant:    MYOB FINANCE 2 PTY LTD

Forty Second Applicant:    PAUL GREENWELL

Forty Third Applicant:    SCOTT GARDINER

Forty Fourth Applicant:    SHOWER INNOVATIONS PTY LIMITED ACN 093 605 228 IN ITS CAPACITY AS TRUSTEE OF THE FINNIN SUPERANNUATION FUND

Forty Fifth Applicant:    SIMON MARTIN

Forty Sixth Applicant:    SIMON RAIK-ALLEN

Forty Seventh Applicant:    SUZANNE DAMMS

Forty Eighth Applicant:    TIMOTHY MOLLOY

Forty Ninth Applicant:    TIMOTHY REED

Fiftieth Applicant:    TREVOR FAIRWEATHER AND NICOLE FAIRWEATHER IN THEIR CAPACITY AS TRUSTEES OF THE FAIRWEATHER FAMILY TRUST

Fifty First Applicant:    TREVOR FAIRWEATHER IN HIS CAPACITY AS TRUSTEE OF THE FAIRWEATHER SUPERANNUATION FUND