FEDERAL COURT OF AUSTRALIA

Perazzoli v BankSA (No 4) [2016] FCA 725

ORDERS

THE COURT ORDERS THAT:

1.    On the application by the applicants, Order 2 of the Orders made on 7 June 2016 is set aside pursuant to r 39.05(c) of the Federal Court Rules 2011 (Cth) (the Rules).

2.    Leave is given to the applicants to appeal from Order 1 of the Orders made on 7 June 2016 in respect of the proposed grounds of appeal as set out in [10] of the Reasons for Judgment published with these Orders but confined to:

(a)    the proposed ground 1 headed “Advice Privilege” save that the proposed ground 1.3 should be amended to exclude the words “and materials” in line 1; and

(b)    the proposed ground 2 headed “Litigation Privilege” but confined to the proposed ground 2.3 (including the introduction lines to ground 2), but deleting the words “and materials” in line 1 ground 2.3, so that leave to appeal from the said Orders is not given in respect of proposed grounds 2.1 and 2.2.

3.    Leave is given to the first respondent to cross-appeal from the said orders (or to file a notice of cross-contention in relation to the said orders) on the grounds specified in its Draft Motion of cross-appeal appended to its written submissions dated 20 May 2016.

4.    There be no order as to the costs of the applicants on their application pursuant to r 39.05(c) of the Rules to set aside Order 1 of the Orders made on 7 June 2016, including the further application for leave to appeal.

5.    The costs of the first respondent on its application for leave to cross-appeal follow the outcome of the proposed cross-appeal, unless the Full Court otherwise orders.

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

REASONS FOR JUDGMENT

MANSFIELD J:

LEAVE TO APPEAL

1    It is not common, where leave to appeal is given from an interlocutory decision, that reasons for doing so are published. This is not a typical circumstance as appears from the following reasons.

2    On 7 June 2016, this Court made orders to give effect to its rulings on a vigorously contested and extensive dispute on a claim by the Applicants to legal professional privilege. The judgment on the principal issues was given on 16 March 2016: Perazzoli v BankSA (No 2) [2016] FCA 260 (the Privilege Judgment).

3    The judgment on 7 June 2016 made orders for costs in relation to those issues.

4    The judgment on 7 June 2016 also considered, and rejected, the applicants’ application for leave to appeal from the orders made: Perazzoli v BankSA (No 3) [2016] FCA 677 (the Leave Judgment). That application was considered on the written submissions of the parties. The order refusing leave to appeal has been sealed: rule 39.32(1) of the Federal Court Rules 2011 (Cth).

5    The applicants have now applied under r 39.05(c) for that order to be set aside. It is accepted that, although the Court has power to do so, it should only do so in exceptional circumstances: Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300, and it is a power to be exercised with great caution having regard to the strong public interest in the finality of litigation: McAdam v Robertson (1999) 73 SASR 360 at [39].

6    It is apparent from the Leave Judgment that the applicants had made relatively cursory submissions in support of the application for leave to appeal. It now appears that they had adopted that course because, as between themselves and the first respondent (BankSA), it had been accepted that BankSA would not oppose the application for leave to appeal, and the applicants would not oppose the proposed BankSA notice of cross-appeal. That understanding had informed the extent to which the applicants developed their submissions on the application for leave to appeal. That circumstance indicates that the justice of the case may require the opportunity to make further submissions. It also indicates that, at that time, the considerations of finality, especially in relation to interlocutory disputes, are not particularly significant, as both parties were content to anticipate undergoing the passage of an appeal from the orders made on their interlocutory dispute about privilege, rather than to revert to the primary present focus of the proceeding, which is itself an application by BankSA summarily to dismiss the applicants’ proceeding against it.

7    Nevertheless, the discretion is that of the Court whether to revisit the Leave Judgment and to re-exercise the discretion to grant leave to appeal from the orders. As the Court pointed out at a hearing to procure consensus between the parties as to the form of the orders (which consensus was reached), when the application for leave to appeal was first made, on issues such as those addressed in the Privilege Judgment, it would be reluctant to grant leave to appeal if the proposed appeal raised other than matters of principle and if the proposed appeal might require the Full Court to revisit the qualitative assessment of the character of particular documents or categories of documents or to revisit the evidentiary material in reaching the conclusions reached on the character of certain categories of documents.

8    Having regard to the circumstances explaining the relatively cursory written submissions first made on the application for leave to appeal, it is in my view appropriate to entertain again the application for leave to appeal. As I have noted, the strong public interest in the finality of litigation, especially on interlocutory disputes, is not so forceful in the present circumstances. Nevertheless, it remains an important consideration as to whether the leave to appeal should be granted. Preceding the Privilege Judgment, there had already been an extensive dispute about whether there should be compliance with the subpoenas which were issued also in relation to the interlocutory summary dismissal application: Perazzoli v BankSA [2015] FCA 373.

9    So the present application is for leave to appeal from an interlocutory ruling on privilege, after an interlocutory ruling on the validity of subpoenas requiring the production of documents (over which, largely, privilege was then claimed), for the purposes of an interlocutory hearing to summarily dismiss the applicants’ claim. When that application is heard, it will only resolve the proceeding if it is successful. To state that obvious position is to highlight the public interest in avoiding the potential for further skirmishing before getting to address the claim itself.

10    The applicants have taken the opportunity to refine their proposed grounds of appeal. They are now expressed as follows:

Advice Privilege

1.    The learned Judge erred in law by failing to correctly apply the test to determine the existence of a solicitor-client relationship between GMG Legal Services Pty Ltd (GMG) (on the one hand) and the Appellants and group members (on the other) between 1 October 2009 and 30 June 2013:

1.1    The question in law was whether the Appellants and group members had come to stand in a relationship of trust and confidence with GMG. No retainer or engagement (formal or informal) with GMG was required (see Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (No 2) (2009) 180 FCR 1 at [19]).

1.2    The Judge wrongly required proof of a retainer or engagement (or the indicia of a retainer or engagement) with GMG as a prerequisite to any finding about the existence of a solicitor-client relationship (Reasons [68], [73], [78] and [81]).

1.3    On the findings and materials before the Court (Reasons [19], [40]-[41], [47]-48], [56]-[65], [75], [93]-[94] and [129]-[150]), the learned Judge should have concluded that GMG was providing legal advice to the Appellants and group members about recovery of their lost investments from 1 October 2009 pursuant to a relationship of trust and confidence (cf Reasons [60], [68], [73], [76], [78], [81], [82], [84], [136], [138] and [145]-[146].

1.4    Further, the learned Judge erred in law by adding the additional requirement that it be proved that the dominant purpose for the direct communications in the period 1 October 2009 to 30 June 2013 was to serve a particular solicitor-client relationship, whereas if the requisite relationship of trust and confidence was established the solicitor’s purpose in communicating with a client is not relevant (see Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (No 2) (2009) 180 FCR 1 at [16], cf Reasons [131]-[132]).

Litigation Privilege

2.    The learned Judge erred in law by failing to correctly apply the test to determine whether documents brought into existence in the period 1 October 2009 to 30 June 2013 were the subject of litigation privilege:

2.1    The question in law was whether a claim by the Appellants and group members was more than a “mere possibility” from October 2009 (see Ensham Resources v AIOI Insurance Company (2012) 209 FCF 1 at [53]-[57].

2.2    The learned Judge wrongly equated the “real prospect of litigation” formulation with whether the Appellants and group members were financially able and likely to bring a claim by reason of litigation funding from 30 June 2013 (Reasons [87]-[89]).

2.3    On the findings and materials before the Court (Reasons [19], [40]-[41], [47]-[48], [56]-[65], [69]-[71], [75], [81], [87]-[89], [93], [97], [106], [129]-[150], [156], [174] and [179]) the learned Judge should have concluded that there was a real prospect of litigation from 1 October 2009, together with an assembly of relevant documentary material, the taking and recording of statements of potential witnesses, and the drawing of briefs for the getting of advice about the prospects of a claim from counsel from October 2009.

11    The proposed notice of appeal focuses on the two main issues argued. The orders sought are simply that order 1 of the orders made on 7 June 2016 be set aside, so that (it appears to be asserted) if either proposed ground of appeal succeeds then all the contentious privilege issues will be resolved favourably to the applicants.

12    I observe that that is not correct. The Schedules of documents referred to in the Privilege Judgment included Annexure 1 to the Notice of Opposition, which covers all the documents and is headed “Advice Privilege” and Annexure 2 which covers only some of those documents and is headed “Litigation Privilege”.

13    I revert to the exercise of the discretion having regard to the two matters identified in Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 399.

14    As to there being a sufficient doubt to warrant reconsideration by the Full Court, I note that the section of the Privilege Judgment recording “The Relevant Principles” at [20]-[38] is not referred to in the proposed grounds of appeal. Nevertheless, as pointed out by BankSA in its opposition now to granting leave to appeal, both grounds assert an error of law. The point of grounds 1.1 and 1.2 is that the necessary solicitor-client relationship was not in fact properly considered because it can exist without any formal or informal solicitor-client reliance or engagement. As to that, see the Privilege Judgment at [30] and [77]. That is based on the case of Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (No 2) (2009) 180 FCR 1 at [19]. The circumstances of that case were different from the present: see eg at [21] and [23]. It is not appropriate to comment further on that case. In this matter, there were competing factual propositions about the nature of the relationship: see Privilege Judgment at [61]-[64] and [67]. The findings had to accommodate the direct evidence of the solicitor, referred to at [66]. Nevertheless, I accept there may be some scope for argument that, on the findings, the applicants established the necessary relationship between the “Appellants and group members” (the words in ground of appeal 1.3) to permit the applicants leave to argue that, on the findings as made, that relationship should have been found to exist.

15    I will give leave to appeal on the proposed ground of appeal 1, subject to the qualification that ground 1.3 should be amended to exclude “and materials”. I intend that, unless the Full Court permits otherwise, the applicants should not be permitted to re-explore the primary evidentiary material to seek findings or inferences of fact which are not otherwise expressly made in the Privilege Judgment. If that were to have been sought, I would have refused leave to appeal, having regard to the principles requiring finality of interlocutory hearings, even though the Privilege Judgment addressed substantive and not merely procedural issues. The description of the status of the present application at [9] above is significant.

16    I do not give leave to appeal in respect of ground 2 in its present terms. Ground 2.1 does not accurately state the law as requiring a “mere possibility”. Ensham Resources Pty Ltd v AIOI Insurance Company Ltd (2012) 209 FCR 1 at [51]-[57] in the judgment of Lander and Jagot JJ makes that clear. Nor does it accurately record the reasons, especially at [28]-[29] and [87]-[89]. I do not consider that ground 2.2 of the proposed grounds of appeal accurately reflects the approach in the Privilege Judgment. If the proposed ground 2.3 were to be amended to delete “and materials” in line one, so that it were to be argued that, on the findings in the Privilege Judgment, the applicants had discharged the onus of showing that there was a real prospect of litigation prior to 30 June 2013, I would be prepared to grant leave to appeal on that topic.

17    I will grant leave to appeal on the proposed ground 2 (3 lines) confined to ground 2.3, but deleting the words “and materials”.

18    I have not referred in any detail to the issue of substantial injustice if leave to appeal were not granted. Given the nature of the issues considered in the Privilege Judgment, I think that criterion is satisfied.

LEAVE TO CROSS APPEAL

19    BankSA has also sought leave to cross-appeal to challenge the finding at [124] of the Privilege Judgment that there was not a colourable case of abuse of process, and a misuse of the documents produced by BankSA in response to the examination orders in connection with the current proceedings by the lawyers then acting for the Trustee. It does not seek to challenge the intermediate findings of fact. It accepts that the proposed cross-appeal can be disposed of without material recourse to the evidence. If it is successful, the order would be that it have leave to uplift, inspect and copy the documents contained in Annexure 3 to the Notice of Opposition.

20    As consideration of its application is not complicated by the need to set aside orders under r 39.05, I propose to give leave to appeal. I will not give detailed reasons for that ruling. BankSA contends on the finding in the Privilege Judgment that at least one of the purposes of the examinations and production of documents was the investigation of a potential class action against BankSA, so the investigations were being undertaken by the solicitors at their own instigation (that is, in contra-distinction to their performance of a retainer for the Trustee).

21    In my view, the Privilege Judgment is attended with sufficient doubt on that issue as to warrant the grant of leave to appeal.

22    There may be injustice to BankSA if leave to cross-appeal is not given. If the applicants succeed on their proposed appeal, BankSA may nevertheless be entitled to access the documents listed in the Annexure 3 referred to. I am also satisfied that those documents may inform the purpose of the examinations under s 81 of the Bankruptcy Act 1966 (Cth) and of the summonses to BankSA to produce its records to the Trustee.

23    In case the documents referred to in Order 1 of the Orders made on 7 June 2016 encompass the documents in Annexure 3 of the Notice of Opposition, so that it is only if the applicant’s proposed appeal succeeds that it is necessary to pursue the proposed cross-appeal, I indicate that this ruling extends to any notice of cross-contention made by BankSA on the applicants’ proposed appeal.

COSTS

24    The costs of the applicants of their application pursuant to r 39.05(c) and of their refined application for leave to appeal addressed in these reasons should, in the circumstances, be borne by them. BankSA said it took the position that it was an ex parte application originally, so there should be no order in its favour on this step. The costs of the appeal itself will of course be decided by the Full Court.

25    The costs of BankSA on its application for leave to cross-appeal should abide the outcome of its cross-appeal, unless the Full Court otherwise orders. The applicants made no submission on the BankSA application for leave to appeal.

Associate:

Dated:    23 June 2016