FEDERAL COURT OF AUSTRALIA

Lane v Admedus Regen Pty Limited [2016] FCA 864

ORDERS

THE COURT ORDERS THAT:

1.    The parties do provide forthwith to the Honourable Justice Barker the sample of documents referred to in these reasons to enable his Honour to consider the claims for privilege should his Honour be so minded.

2.    The plaintiffs file brief submissions on the question to be determined by Justice Barker by 4.00 pm on 3 August 2016, and the second and third defendants file brief written submission in response by 4.00 pm on 5 August 2016.

3.    Costs of the amended interlocutory application filed 21 March 2016 be reserved.

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

REASONS FOR JUDGMENT

MCKERRACHER J:

INTRODUCTION

1    These reasons relate to inspection of certain documents. It is necessary to say something about the broader dispute. Before doing so I will also note that following hearing of arguments, the Court was informed by the parties on 5 May 2016 that the dispute had been ‘settled in principle’ and that production of reasons and orders in this interlocutory dispute would not be needed. That circumstance apparently changed as the parties subsequently requested on 5 July 2016 that the discovery debate be determined and reasons be published.

The dispute

2    The plaintiffs contend that the affairs of the first defendant (Admedus Regen) have been conducted oppressively. The plaintiffs are minority shareholders of Admedus Regen. The second defendant/first cross-claimant (Admedus Limited) is an Australian Securities Exchange (ASX) listed company and majority shareholder of Admedus Regen. It owns 100% of the issued capital in Admedus Investments Pty Ltd, which, in turn, holds 100% of the issued capital in the third defendant, Admedus (Australia) Pty Ltd (Admedus Australia).

3    Three of the four directors of Admedus Regen, namely, Messrs Rodne, Catlow, Bennett and Atwell were at relevant times also directors of Admedus Limited. Mr Rodne was also a director of Admedus Australia.

4    Mr Stephen Mann was also company secretary of Admedus Investments and Admedus Australia.

5    The remaining director of Admedus Regen was at relevant times, and remains, the first plaintiff, Dr Lane, a cardiologist.

6    Admedus Regen owns intellectual property in a biotechnology product known as ADAPT. The first product derived from the ADAPT technology has been marketed as CardioCel. Other products derived from the ADAPT technology are in a development phase. CardioCel is a patch made from bovine pericardium, used, in amongst other applications, by surgeons around the world to repair holes in hearts. In January 2016, CardioCel was being marketed and sold in Europe, the United States of America, Canada, Malaysia, Hong Kong and Singapore and used, apparently, in 135 centres globally, with several thousand patients worldwide having been implanted with the CardioCel patch.

7    The plaintiffs complain that Admedus Limited, with the assistance of officers of Admedus Regen (who were also officers of Admedus Limited), misappropriated a maturing business opportunity of Admedus Regen, such that Admedus Regen, as a result of the conduct of certain of its officers, entered into uncommercial transactions with Admedus Australia, such that the value of the plaintiffs’ shares in Admedus Regen was seriously eroded. More specifically, the plaintiffs allege that Messrs Rodne and Atwill, while acting in a position of conflict, caused Admedus Regen to enter into a distribution agreement with Admedus Australia on uncommercial terms facilitating the creation of a distribution capability by Admedus Limited and its group and causing revenue to be diverted away from Admedus Regen to Admedus Limited.

8    The plaintiffs also allege that Mr Rodne, acting in a position of conflict, caused Admedus Limited to misappropriate a maturing business opportunity of Admedus Regen, namely, the purchase of 100% of the shares of Admedus Bio, which owned a state of the art bio-manufacturing facility of the CardioCel patch. This is said to have deprived Admedus Regen of a valuable asset and the manufacturing capability, and caused revenue to be diverted away from Admedus Regen to Admedus Limited.

9    It is unnecessary for the purposes of this application to deal with the details of pricing of the CardioCel patches and related sensitive commercial matters, save to observe that the plaintiffs contend the sums in issue are substantial.

10    The plaintiffs’ allegations are rejected by the defendants, other than Admedus Regen, which is effectively abiding or purporting to abide the decision of the Court.

11    The parties appear to accept that the breakdown in trust and confidence between the relevant parties inevitably means that the interests and shares of Dr Lane will have to be purchased by the remaining shareholders in the company.

12    What the dispute is essentially about is the question of price. Dr Lane complains that without access to documents, inspection of which has been withheld, it is not possible to proceed to a sensible discussion about the price for the shares owned by Dr Lane.

An application to inspect documents

13    Approximately 55,000 documents have been discovered in this proceeding already. Approximately 10% of those have been the subject of claims for various forms of privilege, predominantly legal professional privilege, either in the form of legal advice privilege, litigation privilege, or common interest privilege. The plaintiffs contend, for reasons I will discuss, that the privilege claims cannot be sustained or, alternatively, have been waived.

14    For reasons discussed below, I have concluded there has been no waiver of any privilege, but, while on their face it seems likely the documents may be privileged, a more precise answer is likely to be afforded by examination (by another judge) of a small sample of the documents. The defendants have offered that process and, in my view, it is appropriate.

RELEVANT PRINCIPLES IN RELATION TO PRIVILEGE

15    The plaintiffs rely upon the helpful review of the authorities as to legal professional privilege by Murphy JA in Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd (No 2) [2010] WASC 217, from which the following principles may be distilled:

(a)    the purpose of verification of a list of documents is to ensure that the court is provided with a reliable list of documents. The responsibility of providing a reliable list of documents is a heavy one (at [25]);

(b)    the swearing of an affidavit of discovery is a solemn occasion, and for a purpose which requires careful deliberation, both by the client giving discovery and its solicitors (at [26]);

(c)    generally, and subject to limited exceptions, a party's affidavit of discovery is 'conclusive', as against the other party, including on the question of whether the party giving discovery has or has had in its possession, custody or power any relevant documents other than those discovered (at [27]);

(d)    the person claiming and carrying the onus of establishing legal professional privilege is required to:

(i)    list each communication the subject of the claim for privilege;

(ii)    state the form in which each communication is contained, stored or recorded, whether it is an original or a copy and the date when each was made;

(iii)    identify the persons between whom the communication or communications were made; and

(iv)    provide evidence as to the basis of the claim for legal professional privilege (at [29]);

(e)    it is not sufficient for a party merely to assert a claim for privilege. The person claiming legal professional privilege must identify the basis upon which the privilege is claimed and must prove the information or documents in questions are privileged (at [30]-[31]);

(f)    the ultimate legal onus is on the party claiming privilege (at [32]);

(g)    what is required, for the purposes of a privilege claim, in properly describing discovered documents will vary depending on the nature of the document and the particular ground on which privilege is claimed (at [33]); and

(h)    the facts relied upon as giving rise to the privilege must be set out so the claim for privilege can be tested, although the facts should not be set out in such detail as would enable the contents of the documents to be ascertained indirectly (at [31]).

16    Legal professional privilege is a rule of substantive law, which a party may invoke to resist giving information or producing documents which would reveal confidential communications between a client and his or her lawyers made for the ‘dominant purpose’ of giving or obtaining legal advice for the provision of legal services, including representation in legal proceedings: Daniels Corporation International Pty Ltd v Australian Competition & Consumer Commission (2002) 213 CLR 543 per Gleeson CJ, Gaudron, Gummow and Hayne JJ (at [9]). Privilege attaches to the communication itself, rather than to a document: Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 (at 507) per Brennan CJ, (at 544) per Gaudron J, (at 553-554) per McHugh J, (at 571-572) per Gummow J, and (at 587) per Kirby J.

Legal advice and litigation privilege

17    Legal advice privilege relates to confidential communications between lawyer and client made for the dominant purpose of giving or obtaining legal advice, whether or not litigation is subsisting or within reasonable contemplation of the client. Litigation privilege, however, applies to confidential communications passing between lawyer and client or between lawyer and third parties and the confidential information or documents brought into existence for the dominant purpose of preparing for existing or contemplated litigation: Baker v Campbell (1983) 153 CLR 52 (at 108).

18    In Archer Capital 4A Pty Ltd as trustee for the Archer Capital Trust 4A v Sage Group plc (No 2) [2013] FCA 1098 Wigney J (at [50]-[51) cited Allsop J, as his Honour then was, in DSE (Holdings) Pty Ltd v Intertan Inc (2003) 135 FCR 151, saying:

50    In considering the documents, I have had regard to the multi-faceted and complex nature of the Proposed Transaction and the dealings between Sage and its advisers in relation to it. Accordingly, I have taken a common-sense and practical approach to the communications and the concept of legal advice in the context of commercial dealings. As Allsop J said in DSE (at [21]), in considering the advice limb in the context of a complex commercial transaction, it is important to recognise:

…that the nature and provision of legal advice by a firm [of solicitors] in a context of the kind here [a large commercial transaction] was no doubt multi-faceted, complex and not amenable to sharp division between what was advisory and what was merely administrative. In a transaction of this kind, the clients would expect aspects of what was done and not done that might possibly be of significance to be considered by, and discussed between and among, the experienced lawyers and the experienced investment bankers.

51    In that context, Allsop J, drawing from the observations of Taylor LJ in Balabel at 330, also took a broad approach to what constitutes legal advice. His Honour held (at [45]) that it is necessary to recognise “the form and nature of advice in a practical day to day context”:

What legal advice is, however, goes beyond formal advice as to the law. This recognition does not see the privilege extend to pure commercial advice. In any given circumstance, however, it may be impossible to disentangle the lawyers’ views of the legal framework from other reasons that all go to make up the “advice as to what should prudently and sensibly be done in the relevant legal framework” (Taylor LJ in Balabel at 330).

(emphasis in original)

19    Wigney J then dealt with the issue of the privilege claimed in communications with in-house lawyers, which also arises in the claims made in this proceeding. His Honour noted that the starting point is the decision of the High Court in Waterford v The Commonwealth (1987) 163 CLR 54. The controversy in Waterford was whether the Commonwealth could claim legal professional privilege in respect of documents the subject matter of which was legal advice obtained from a salaried government lawyer within a government department. The High Court answered that question in the affirmative.

20    Wigney J said (at [72]-[73]) that:

72    A communication between a lawyer and his or her employer is unlikely to satisfy the dominant purpose test if the lawyer was not employed as a lawyer (that is, the relationship between the lawyer and the employer was not professional) or the lawyer was not consulted in his or her professional capacity as a lawyer (for example, if they were consulted to provide commercial advice, or provide an administrative service, or were consulted as a partner or officer of the firm or company, not as a lawyer). A communication between the lawyer and his or her employer in those circumstances would not be privileged because it would not meet the dominant purpose test, not because the lawyer was not independent. On the other hand, if the relationship between the employer and lawyer was professional (in the sense that he or she was employed as a lawyer) and they were consulted in that professional context to provide legal advice, the resulting communication is likely to satisfy the dominant purpose test. It is difficult to see any reason in principle why to attract privilege in those circumstances it would be necessary to also satisfy some element of independence on the part of the employed lawyer, for example, by proving that the lawyer was not subject to pressure or other interference arising from the employment relationship. Like Katzmann J, I doubt that Waterford establishes that there is a separate or distinct requirement to prove independence in the case of privilege claims involving in-house lawyers.

73    Were it necessary for me to decide, I would err on the side of concluding that there is no separate requirement of independence in the case of privilege claims where the relevant lawyer is an employed or in-house lawyer. The better view is that any requirement of independence on the part of an in-house lawyer is an aspect of the relationship between the lawyer and the employer (client) and the capacity in which the lawyer is consulted. Legal professional privilege will attach to a confidential communication between an employer and its employed solicitor if it is established that the communication arises as a result of the employer consulting the employed solicitor in a professional capacity in relation to a professional matter that arises from the relationship of lawyer and client. In my opinion it is preferable to approach the issue in this way, rather than relying on presumptions and evidentiary onuses of the sort referred to by Gillard J and Boddice J in, respectively, Australian Hospital Care and Aquila Coal.

21    Many of the privilege claims in this dispute pertain to documents which are copies or attachments. In relation to copies of documents, legal professional privilege attaches to a copy of a document provided to a lawyer if the copy was made for the dominant purpose of obtaining legal advice or use in legal proceedings: Propend per Gaudron J (at 543-544) and Gummow J (at 571-572); Barnes v Commissioner of Taxation [2007] FCAFC 88 per Tamberlin, Stone and Siopis JJ (at [5]).

22    As to attachments, a large number of the documents (approximately 2200) in respect of which privilege is claimed are attached to a host document that is a confidential communication between either or both of Admedus Investments and Admedus Australia and their solicitors. In some instances, although the host document privilege claim has not been challenged, the privilege going to the attachment has been challenged. Privilege in the host document will extend to copy documents, drafts, notes and other materials brought into existence by the client claiming the privilege for the purpose of communication to the lawyer, whether or not they are themselves actually communicated to the lawyer: AWB Ltd v Cole (No 5) (2006) 155 FCR 30 (at [44(9)]).

23    In Propend (at 569), Gummow J confirmed that documents that record legal work carried out for the benefit of a client would also be privileged so that privilege will extend beyond the actual communication to deny access to any document prepared by a lawyer or client from which there might be inferred the nature of the advice sought or given. Obvious examples include communications between the various legal advisers of the client, draft pleadings, draft correspondence with a client or the other party, and bills of costs.

Common interest privilege

24    Some documents are subject to a claim by the defendants for common interest privilege. This claim is invoked in order to counter any suggestion that privilege has been waived by the deliberate release or communication of privileged materials (by the parties entitled to claim privilege) to another party. The question will be whether the act of disclosure was an act inconsistent with maintaining the confidence preserved by the privilege.

25    This common interest privilege claim falls to be determined under the common law, rather than under the Evidence Act 1995 (Cth). (While s 118 of the Evidence Act refers to adducing evidence in a proceeding, it does not cover all of the circumstances in which a claim for privilege might apply.)

26    In Marshall v Prescott [2013] NSWCA 152, Barrett JA, with whom McColl and Ward JJA agreed, said (at [57]):

If a document in which legal professional privilege subsists is given to someone else so that the content ceases to be confidential, the privilege is usually lost. This is because the act of giving is, in the particular circumstances, inconsistent with any continuing intention to maintain confidentiality: Mann v Carnell (above) at [13]. An exception operates, however, where the person entitled to the privilege and the person to whom the content of the document is made known have such a commonality of interest in relation to the subject matter of the privilege that sharing of the content is consistent, rather than inconsistent, with an ongoing intention to preserve confidentiality and privilege. Questions of common interest privilege usually arise (as here) when litigation is on foot or foreshadowed. The present case does not raise the question whether the concept extends beyond the litigation context.

27    Common interest privilege is not a rigidly defined concept: Farrow Mortgage Services Pty Ltd (In Liq) v Webb (1996) 39 NSWLR 601 (at 609) per Sheller JA, with whom Waddell AJA agreed. A common interest in the outcome of litigation will be sufficient to enable any party with that interest to rely upon it. For common interest privilege to apply:

(a)    the relevant communication must be subject to legal professional privilege;

(b)    the interest said to be common must be identified; and

(c)    the exchange of the information or advice, subject to legal professional privilege must relate to that interest.

28    Communication of what would otherwise be privileged material in those circumstances would not be waived where there was a necessary common interest. Such common interest will not exist where the individual interest in the relevant question are selfish and potentially adverse to each other so that there is not the necessary identity of interest: Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405 (at 410) and Media Ocean Ltd v Optus Mobile Pty Ltd (No 10) [2010] FCA 1348 (at [53]-[54]).

29    Common interest privilege is not limited to litigation or anticipated litigation: South Australia v Peat Marwick Mitchell (1995) 65 SASR 72 per Olsson J (at 77). Further, it is not necessary that parties have a common solicitor or that the identity of the interests between the parties be so close that they could have used the same lawyer: Bulk Materials (Coal Handling) Services Pty Ltd v Coal & Allied Operations Pty Ltd (1988) 13 NSWLR 689 (at 695).

30    There is a two-step process. The first requires a determination in accordance with ordinary tests as to whether the document would be privileged in the hands of the party releasing the information which it communicates. If so, the second step is to ascertain whether a person or persons to whom the document has been communicated was sufficiently close, so that the communication should not waive privilege.

Waiver of privilege

31    Despite the importance of legal professional privilege, including common interest privilege, such a privilege may be inadvertently (or deliberately) waived. For there to be a waiver of privilege, the holder of it must have acted inconsistently with maintaining the confidentiality of its communication with its lawyers: Osland v Secretary, Department of Justice (2008) 234 CLR 275 (at [45]). A company acts through its officers. There is no waiver in circumstances where the officers communicate on behalf of the company, one to the other, or to the company’s lawyers or to their own lawyers: see Farrow per Sheller JA (at 608-609), with whom Meagher JA agreed and Seven Network Limited v News Limited [2005] FCA 1342 per Graham J (at [26]). However, where the conduct itself is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect, there will be a judgement or assessment to be made in the context and circumstances of the case in light of any considerations of fairness arising from that context or those circumstances. The party asserting a waiver has the onus of proving it: New South Wales v Betfair Pty Ltd (2009) 180 FCR 543 (at [53]-[54]).

32    Admedus Limited and Admedus Australia submit, and I accept, that a party describing a document for which a claim for privilege attaches must strike a balance between, on the one hand, identifying the document by describing it sufficiently and on the other, by not disclosing its contents and risk waiving his or her claims for privilege. To require something more would be to give detail that indirectly enables the contents of the documents and potentially the advice sought or given to be ascertained.

RELEVANT BACKGROUND

33    The issue of discovery in this proceeding has been before the Court on a number of occasions. It commenced on 24 June 2015 pursuant to an order made that day. Subsequently, there have been six tranches of discovery by Admedus Limited and Admedus Australia: some 55,000 documents.

34    The plaintiffs complain that a major problem with the discovery of Admedus Limited and Admedus Australia in relation to their claims of privilege is that discovery has been made by the defendants jointly by their common company secretary Mr Mann. Mr Mann has not, according to the plaintiffs, applied his mind individually to the claims of privilege of each of the second and third defendants in respect of each of the documents and has, instead, repeated ‘incantations of privilege’ claims ‘holus bolus’ in relation to ‘large swathes’ of documents. For example, the plaintiffs say that:

(a)    Mr Mann claims privilege in terms of a document being, containing or revealing a confidential communication between Admedus Regen and its external legal advisers. He does not say which one of the three alternatives applies in relation to any particular document;

(b)    Mr Mann claims privilege in terms of documents being, containing or revealing a confidential communication between the ‘Second and - or [sic] Third Defendant’ and its external legal advisers. That creates a further overlay of permutations as to the privilege claims and the party or parties which are claiming the privilege. Had Mr Mann deposed separate affidavits of discovery on behalf of Admedus Limited and Admedus Australia, he would have been obliged to apply his mind pertinently to the issue of which of those defendants was claiming privilege in respect of each and every document and the basis there of, instead of relying upon broad privilege claims ‘in the form of incantations or mantras’;

(c)    Mr Mann claims privilege in respect particular document relying on both ‘incantations’ set out above, namely, he says of the document ‘it is contains or reveals’ a confidential communication between Admedus Regen and its external legal advisers and at the same time, the same document ‘is, contains or reveals’ a confidential communication between Admedus Limited and/or Admedus Australia and external it legal advisers; and

(d)    Mr Mann claims ‘common interest privilege’ in bald terms on behalf of apparently both the second and third defendants in relation to all of the documents over which the privilege admittedly resides in Admedus Regen.

35    The plaintiffs have challenged almost every document in respect of which privilege is claimed. I am informed (on affidavit) that steps were taken to agree the level of detail which would satisfy the plaintiffs in terms of the description of privileged documents. There is debate over whether the parties meaningly conferred on this issue.

36    Admedus Limited and Admedus Australia stress that they have listed each document over which privilege is claimed, describing the nature of the documents, the sender and recipient or parties to the document, its date and description sufficient to identify it, contrary to the plaintiffs’ assertions. They refute having made broad generic claims for privilege. In each case, the specific basis of privilege has been considered and identified. They say they have not ‘repeated incantations of privilege claims holus bolus’ as suggested by the plaintiffs. Admedus Limited and Admedus Australia submit that the plaintiffs’ suggestion that using the expression that a document ‘is, contains or reveals a confidential communication between a party and its external legal advisers’ is somehow unclear is pedantic and unhelpful. This particularly, where it is clear from reviewing the List and other information provided in relation to each document.

37    From a practical perspective, in preparing all six of their lists of documents, the second and third defendants followed Federal Court Practice Note CM6 of 1 August 2011. That is, Admedus Limited and Admedus Australia have included in the List which is the subject of this application the following details for part privileged documents listed in Sch 1A of that list and for wholly privileged documents listed in Sch 2:

(a)    document ID;

(b)    source document ID (where the document is an attachment to another document);

(c)    date;

(d)    title or description;

(e)    people/organisations from (that is, the sender or creator of the document and the organisation of whose behalf the sender/creator sent or created the document);

(f)    people/organisations to (that is, the recipient of the document and the organisation on whose behalf the person receiving the document);

(g)    people/organisations between (where no individual sender is apparent); and

(h)    grounds of privilege.

38    Admedus Limited and Admedus Australia say that at no point prior to being served with the plaintiffs’ submissions did the plaintiffs raise with them any issue with the practical approach taken in the six lists of documents, in particular for Mr Mann to swear one list of documents covering documents in both companies (Admedus Limited and Admedus Australia) was not in issue. He swore each of the documents in his capacity as Chief Financial Officer and Company Secretary of Admedus Limited, and Company Secretary of Admedus Australia.

Colour coded categories of disputed discoverable documents

39    The interlocutory application has proceeded by reference to a lengthy coloured schedule annexed to the application. The plaintiffs seek production of the documents which are shaded in red and yellow in the schedule to the application.

Documents in red

40    These are documents said by the plaintiffs to denote documents where privilege belongs to an individual or entity other than Admedus Limited or Admedus Australia. Accordingly, such documents have been identified in red where the plaintiffs contend the privilege resides in:

(a)    Admedus Regen alone;

(b)    directors and officers of Admedus Regen alone;

(c)    Admedus Regen, Admedus Limited and Admedus Australia together; and

(d)    directors and officers of Admedus Regen, Admedus Limited and Admedus Australia together.

41    The numbers of documents shaded in red only by the plaintiffs in their application are as follows:

(a)    host/source documents (7 in number);

(b)    standalone documents (37 in number); and

(c)    attachments (481 in number).

42    In relation to the red documents, the common interest privilege claims in the discovery lists produced by Admedus Limited and Admedus Australia are, the plaintiffs say, mere assertions of privilege; that is, no evidence has been provided as to the basis of a claim for common interest privilege.

43    The plaintiffs’ claim for production of these documents is on the basis that either the privilege had been waived because, in the case of documents where a claim for privilege does not reside in Admedus Limited or Admedus Australia, they have been provided by Admedus Regen to those companies for the purpose of discovery, even though it may be that the plaintiffs agreed with that approach (although for my part I am less certain that they did agree).

44    Those defendants have, however, in correspondence between the parties, elaborated on that claim, saying that the documents of Admedus Regen were given to them in circumstances that ‘[a]ll of the defendants share a common interest in the matter the subject of the proceeding.’

45    The parties have produced extensive affidavit material said to support their respective positions in this regard. Particular reliance is placed upon an affidavit of the solicitor for the plaintiffs, Mr Vallve, sworn on 29 February 2016, which annexes much of the correspondence.

46    The starting point is the correspondence from Tottle Partners (solicitors for the first defendant) of 13 August 2015. In this correspondence, Tottle Partners advised that, save as to comply with any procedural orders which may be made against it, Admedus Regen would not take an active role in the proceedings and would abide the decision of the Court. That approach is consistent with the well-established principle that in the context of oppression proceedings and derivative action primarily involving a dispute between members, the company’s funds should not be applied in the litigation, save to the extent necessary to protect its own valid interests: Ananda Marga Pracaraka Samgha Ltd v Tomar (No 2) [2010] FCA 1342 (at [112]). It followed that the company did not file a defence.

47    It was noted by Tottle Partners that due to the corporate structure of the Admedus group and the various common directorships, there were numerous documents and records common as between the defendants in the proceedings. For example, Mr Rodne and Mr Catlow, each of whom was a director of both Admedus Regen and Admedus Limited, maintained a single email account for matters pertaining for the Admedus group. Tottle Partners made it plain to the plaintiffs’ solicitors in this early correspondence that:

Accordingly, for practical purposes, the Company has provided Norton Rose Fulbright, the solicitors for Admedus Australia Pty Ltd and Admedus Limited, with a complete copy of the PST email files for each of the directors and former directors of the Company and the Company’s secretary, amongst other people, together with various other documents relevant to the subject matter of the proceedings. As those documents are now in the possession, custody and/or control of Admedus Australia Pty Ltd and Admedus Limited, they are discoverable to the extent they are relevant to the matters in issue in the proceedings.

48    Admedus Regen said it did not intend to give discovery pending inspection of the documents produced by parties other than the Company, but if there were any categories apparently missing, the company would make those available. Neither did Admedus Regen intend to inspect others’ documents and sought consent from the plaintiffs that any obligations of discovery Admedus Regen may have be deferred until after inspection of the documents produced by the parties other than Admedus Regen. The plaintiffs emphasise that there was no claim for privilege referred to in this letter. It might also be said however that there was no suggestion of waiver of any privilege.

49    Following this initial communication from Tottle Partners, there were numerous other exchanges on topics not directly relevant to the discovery issues. The parties have produced much of that material, but the next document particularly pertaining to discovery is annexed to an affidavit of Ms Steadman, a solicitor with Norton Rose Fulbright Australia whom previously acted for Admedus Limited and Admedus Australia. In a communication of 4 March 2016, Norton Rose wrote to Murcia Pestell Hillard, solicitors for the plaintiffs, raising many of the points discussed above. They started with the point dealing with attachments to a host document in respect of which no challenge to a privilege claim was raised.

50    In a letter from Tottle Partners to the plaintiffs’ solicitors of 8 March 2016, referring to the original letter of 13 August 2015, Tottle Partners made clear, as they had in the 13 August 2015 letter, that they had provided a copy of the .pst email files (a Microsoft Outlook file) for each of the directors and former directors of the company and the company secretary, amongst other people, together with various other documents relevant to the subject matter of the proceedings to the solicitors for Admedus Limited and Admedus Australia. This was to enable those defendants to give discovery, given that the documents discoverable by the defendants in the proceeding comprised essentially the same documents and to avoid Admedus Regen’s funds being unnecessarily wasted. This letter continued to note that in providing documents of Admedus Regen to Admedus Limited and Admedus Australia and their solicitors to discover, the company:

(1)    did not waive privilege in relation to any of the company’s documents; and

(2)    instructed Admedus Limited and Admedus Australia and their solicitors to:

(a)    claim, where appropriate, privilege on its behalf; and

(b)    subject to the production of those documents over which claims of privilege have been made.

51    The letter also noted that Admedus Regen recently reviewed all the documents discovered by Admedus Limited and Admedus Australia over which privilege had been asserted by Admedus Limited and Admedus Australia on Admedus Regen’s behalf, after the plaintiffs objected to the claims for such privilege.

52    Following this review, Admedus Regen provided Admedus Limited and Admedus Australia with more detailed descriptions of the documents, which were duly incorporated in the List of documents dated 16 February 2016 (List) filed and served by Admedus Limited and Admedus Australia.

53    The letter further advised:

The Company continues to maintain its claims of privilege on the basis that:

1.    the documents are, or contain or reveal a confidential communication between:

•    the Company and its external legal advisors made for the dominant purpose of giving or obtaining legal advice or the provision of legal services;

•    the Company and its in house legal counsel made for the dominant purpose of giving or obtaining legal advice or the provision of legal services;

•    the Company and its external legal advisors or third parties for the purpose of existing or anticipated litigation; and

•    the Company and its in house legal counsel for the purpose of existing or anticipated litigation; and

2.    The documents were created for the dominant purpose of giving advice or providing legal services to the Company, or the Company obtaining legal advice or the provision of legal services.

For the avoidance of doubt, we confirm that in reviewing the documents for the purpose of the List, the Company can satisfy itself that all claims of privilege made in respect of the documents are justified and have been made on a proper basis.

In the circumstances, we invite the plaintiffs to immediately withdraw their challenge to the claims of privilege made on behalf of the Company.

We put the plaintiffs on notice that if they are not prepared to do so, the Company will be compelled to take all necessary steps to defend its claims of privilege. In this regard, the Company will have no alternative but to become involved in the plaintiffs’ interlocutory application, by, at the very least, filing affidavits and submissions, briefing counsel to attend, and attending, the hearing on 22 March 2016 at 10.30 am.

54    It follows, the second and third defendants say, that Admedus Limited and Admedus Australia have Admedus Regen’s documents in their possession solely because of the way in which discovery in the matter has proceeded.

55    It also follows, the second and third defendants say, that in relation to the red documents, the plaintiffs’ complaints are confusing and Admedus Regen is entitled to maintain its privilege, subject only to the question of waiver. The second and third defendants argue that there has been no waiver, as nothing has been done in the production of those documents inconsistent with maintaining their confidentiality.

Documents in yellow

56    These are documents where it is said that the author or recipient are employees, officers or agents of Admedus Regen. The second and third defendants say that a number of documents shaded in yellow only by the plaintiffs in their application are:

(a)    host/source documents (626 in number);

(b)    standalone documents (660 in number); and

(c)    attachments (369 in number).

57    There is no consistency, Admedus Limited and Admedus Australia contend, with the approach in shading documents in yellow. As previously noted, there are many instances where no challenge has been raised to a privilege claim over a host document, but it has been challenged in relation to attachments to the host document. There are also instances where documents have been shaded in yellow by the plaintiffs where the individuals were specified on the List to be acting for a company other than Admedus Regen. Admedus Limited and Admedus Australia have sought to clarify a number of aspects of the plaintiffs’ complaint. Clarification has not been forthcoming. Admedus Limited and Admedus Australia also complain that the plaintiffs have failed to properly consider the detailed descriptions provided in the List as to the capacity on which each author and/or recipient of document is acting. There is no basis in those circumstances for the plaintiffs to assert that individuals were acting in their capacity as employees, officers or agents for Admedus Regen when the List expressly says that they are acting in some other capacity. There is, in my view, some merit in this submission.

58    The second and third defendants contend that the plaintiffs challenge to all documents shaded yellow is without foundation and ought be rejected.

Documents in green

59    These documents are those in which the author sender, or recipient is said to be a third party. Specifically, this relates to unrelated third partes.

60    The number of documents shaded in green only by the plaintiffs are as follows:

(a)    host/source documents (8 in number);

(b)    standalone documents (26 in number); and

(c)    attachments (182 in number).

61    Again, Admedus Limited and Admedus Australia complain that there are inconsistencies in the selection of documents that are shaded green on the List. The second and third defendants submit that the plaintiffs do not challenge the privilege claimed over the host document and, without more, they do not have a basis on which to challenge the privilege claim over any attachments to the host document, being copies, drafts or other documents prepared for the stated privileged purpose. They say that the third parties referred to in the green grouping have an interest in common with Admedus Limited and Admedus Australia in that documents created, sent or received by those third parties which refer to legal advice or to these proceedings would be privileged on the basis of common interest:

(a)    Chubb Insurance Company of Australia Limited, which is one of the third parties named by the plaintiffs, is the insurer for Admedus Limited and Admedus Australia. Documents created, sent or received by Chubb referring to legal advice or these proceedings are privileged on the basis of the common interest between Admedus Limited and Admedus Australia and their insurer;

(b)    Jardine Lloyd Tapson Pty Ltd (JLT) is another of the third parties named by the plaintiffs. JLT was the insurance broker to the second and third defendant companies, and documents created, sent or received by JLT which referred to legal advice or these proceedings would be privileged on the basis of the common interest between the second and third defendants and their insurer;

(c)    Avatar Brokers, another third party named by the plaintiffs, are the current insurance broker for the second and third defendants. Documents of the same character as described in (a) and (b) above would also be privileged;

(d)    Bartleet P/Global Dial is one of the third parties named by the plaintiffs. This is an entity represented by Mr Peter Bartleet, a consultant engaged by Admedus Limited on a number of different projects. Documents of the same category created, sent or received by Mr Bartleet referring to legal advice or these proceedings would be privileged on the basis of common interest between him and Admedus Limited specific to the particular project.

62    It follows, Admedus Limited and Admedus Australia say, that the plaintiffs’ challenge to all documents shaded in green is without foundation and ought be rejected.

Documents shaded with multiple colours

63    Where there is an overlap between the red and the yellow documents, those documents have been dealt with as red documents, that is, in relation to the claim of common interest privilege. There are, however, yellow documents in respect of which the privilege is claimed directly by Admedus Limited and/or Admedus Australia.

64    Documents in multiple shades are not clear. It is not clear, in particular, which shade would take precedence where a document is shaded in two or more colours, as some are.

Subsequent clarification of matters by Admedus Limited and Admedus Australia

65    Subsequent to the hearing, at my request, the second and third defendants clarified two matters. First was further information in relation to the number of documents over which privilege challenges were made by the plaintiffs in the specific categories. The second matter was the page numbers of sample documents referred to in the initial affidavit of Ms Steadman, sworn on 17 March 2016. I will simply refer to these as the Schedule Two Documents as there is a table in Sch 2 to the note of further information filed by the second and third defendants, which sets out the pages numbers of sample documents referred to in the defendants’ submissions and in Ms Steadman’s initial affidavit.

66    The information provided on this topic was as follows:

…

2    The further information provided in this note is based on the schedules to the Plaintiffs' Amended Interlocutory Process sent by email to the Court at 2:27pm on 21 March 2016 by the plaintiffs' lawyers and re-sent at 2:46pm (Plaintiffs' Amended Schedules).

3    According to the Plaintiffs' Amended Schedules, of the 5,852 privileged and part privileged documents in Parts 1A and 2 of the second and third defendants' List of documents dated 16 February 2016, approximately 4,679 documents remain the subject of a privilege challenge by the plaintiffs. Those 4,679 documents can be categorised as follows, although there is necessarily an overlap in the numbers below due to the Plaintiffs' Amended Schedules still shading the same document in more than one colour and including colour shaded documents in the schedule annexed to the Second Steadman Affidavit at annexure "MLS-47":

(a)    Attachments to privileged host communications where there is no challenge to the host document - 28 (the plaintiffs have reduced their challenges in this regard from over 2,000 documents to 28);

(b)    Confidential communications between the first defendant and its in-house counsel for the dominant purpose of giving or receiving legal advice and attachments to such - 400;

(c)    Confidential communications between the first defendant and its in-house counsel for the purpose of existing or anticipated litigation and attachments to such - 175;

(d)    Confidential communications between the first defendant and its external lawyers for the dominant purpose of giving or receiving legal advice and attachments to such - 1,689;

(e)    Confidential communications between the first defendant and its external lawyers for the dominant purpose of giving or receiving legal advice and attachments to such - 15;

(f)    Confidential communications between the second and/or third defendants and their in-house counsel for the dominant purpose of giving or receiving legal advice and attachments to such - 346;

(g)    Confidential communications between the second and/or third defendants and their in-house counsel for the purpose of existing or anticipated litigation and attachments to such - 498;

(h)    Confidential communications between the second and/or third defendants and their external lawyers for the dominant purpose of giving or receiving legal advice and attachments to such - 985;

(i)    Confidential communications between the second and/or third defendants and their external lawyers for the purpose of existing or anticipated litigation and attachments to such - 462;

(j)    Confidential communications between officers of any of the defendants in their personal capacities for the dominant purpose of giving or receiving legal advice or for the purpose of existing or anticipated litigation and attachments to such - 701;

(k)    Confidential communications between Admedus Vaccines Pty Ltd and its in-house counsel or external lawyers for the dominant purpose of giving or receiving legal advice, which refer to or reveal legal advice, or which were created for the purpose of existing or anticipated litigation and attachments to such - 4;

(l)    Documents created for the dominant purpose of giving advice or providing legal services to the first defendant or the first defendant obtaining legal advice or the provision of legal services - 4;

(m)    Documents created for the dominant purpose of giving advice or providing legal services to the second and/or third defendants or the second and/or third defendants obtaining legal advice or the provision of legal services - 4; and

(n)    Documents created for the purpose of existing or anticipated litigation against the second and third Defendants - 43.

APPLICATION OF THE PRINCIPLES

Examination of documents by the Court

67    Admedus Limited and Admedus Australia are content for the Court (preferably not the docket/trial judge) to examine the documents in issue or, more practically and efficiently, a sample of the several thousand documents in issue to assist the Court in reaching its own decision as to the circumstances in which they were brought to existence and whether or not privilege is properly claimed.

68    Categories of documents for the purpose of this process are:

    Category 1: documents shaded red only;

    Category 2: documents shaded yellow only;

    Category 3: documents shaded green only;

    Category 4: documents shaded red and yellow;

    Category 5: documents shaded red and green;

    Category 6: document s shaded yellow and green; and

    Category 7: documents shaded red, yellow and green.

69    This procedure has been followed in numerous cases. That is not to say that the Court should inspect the documents in every case where a claim is disputed. Where documents are properly described and privilege is claimed, it is for the party challenging the privilege to establish some basis that calls the privilege claim into question. If the Court is satisfied there is no basis for suggesting that privilege has been incorrectly claimed or has been waived, the Court should not inspect the documents. Ultimately, it is, of course, a matter for the Court’s discretion. I will say more on this topic below.

Privilege

70    It should be said that there is certainly further evidence to support the claim for privilege. In Ms Steadman’s 17 March 2016 affidavit she says that:

Each document over which a claim of privilege in whole or in part was to be made was reviewed by a lawyer of this firm and the party or parties in whom the privilege claim resided was considered.

71    This applied to the first four lists (it will be recalled that six lists of discovery have been given). When the fifth list of documents was prepared, Ms Steadman said:

… every document over which a claim of privilege in whole or in part was to made or maintained was again reviewed by a lawyer of this firm and the party or parties on whom privilege claim resided was considered.

72    The fifth list added a ‘grounds of privilege’ column to provide further details as to the basis of each privilege claim. She continues:

I am informed by Kate Hawkins of [Admedus Regen’s] lawyers, Tottle Partners, and believe that when [Admedus Limited’s] and [Admedus Australia’s] sixth list of documents dated 16 February 2016 (February List) was prepared, every document over which a claim of privilege in whole or in part was to be maintained by [Admedus Regen] was reviewed by Tottle Partners or by [Admedus Regen’s] in-house counsel. Detailed descriptions of the documents over which [Admedus Regen] maintained a claim of privilege were provided to me for inclusion in the February List. Those descriptions are included in the February List.

When the February List was prepared, every document over which a claim of privilege in whole or in part was to be maintained, other than [Admedus Regen’s] documents referred to [in the previous paragraph], was again reviewed by a lawyer of this firm and the party or parties in whom the privilege claim resided was considered. The February List provided a detailed description of each document over which a claim of privilege was maintained in whole or in part.

73    Ms Steadman deposes that the 5708 wholly privileged documents in the February List and 144 part privileged documents listed in Pt 1A of the February List, other than those in respect of which the claim of privilege is no longer maintained, are proper claims for privilege which are validly made and which should be maintained. She gave further details about who had examined all of the documents. Ms Steadman provided the further factual material about the third parties to whom documents had been provided in relation to the litigation and annexed the relevant correspondence, predominantly that between the solicitors for the parties to the proceeding.

74    Admedus Limited and Admedus Australia made clear to the plaintiffs, in correspondence of 1 February 2016, how it was that specific documents in respect of which queries were raised attracted the relevant privilege.

75    Similar communications were expressed in relation to waiver so as to reflect the principles set out above.

76    In the face of this information, it seems to me that the plaintiffs may face difficulty in their challenge, but this is to be resolved by consideration of a sample as explained later in these reasons.

Waiver

77    Has the privilege been waived? The August 2015 communication from Tottle Partners did not indicate there would be extensive claims for privilege (although it is correct to say that the documents have been discovered, but in respect of about 10% of them, privilege has been claimed). However, in the context of that correspondence, I do not consider that the omission of specific reference to a privilege claim means there has been any form of waiver or a departure from the content of the August 2015 communication. It does not appear to me that a claim for privilege was otherwise waived by communication or conduct.

78    That observation also applies to the debate as to common interest privilege. On its face and in applying the principles discussed (in [24]-[30] above) it seems more likely than not that there is common interest privilege as claimed. Further, in my view, the complaints as to incantations and lack of precision in descriptions by Mr Mann appear to me to be unrealistic, if not pedantic. That the records in respect of which privilege is claimed go to advice concerning the conduct of the proceedings and other legal advice does not appear to be challenged, although it is not clear that there could be a basis for challenge without examining the documents.

79    As to both waiver and common interest privilege, the plaintiffs’ contention that it is the plaintiffs looking after the interests of Admedus Regen by attacking the alleged oppression, not the remaining defendants, this argument rather begs the question as to whether there has been any oppression, something I am certainly not in any position to resolve at this stage.

Late complaints

80    The plaintiffs also raised before me a number of matters late in the piece to which which the defendants did not have adequate opportunity to respond, including the position of certain company officers. For example, reference is made to an email from Mr Bartleet in his capacity as contractor engaged by Admedus Limited in relation to the acquisition of Admedus Bio. That email is copied to Mr Julian Chick, in his capacity as a director and chairman of Admedus Limited. An Australian Securities and Investments Commission search was produced to show that there is no record of Mr Chick holding that office. This was not a topic raised in submissions and it was indicated from the bar table by the defendants that there was an error in his description, which could be rectified. Nothing turns on this point.

Equitable fraud exception

81    Also raised in exchanges on the day before the hearing and at the hearing was an argument that the fraud exception for privilege would apply to a number of documents. After the hearing, Admedus Limited and Admedus Australia responded to the plaintiffs’ belated challenge and further category of documents based on the concept of ‘equitable fraud’. Those documents were listed in the schedule handed to the Court during the hearing. The category comprises 27 documents. On this topic, the plaintiffs had referred to AWB (at [210]-[217]) to support an argument that the fraud exception applied so that there could be no claim of privilege in relation to the documents. Young J there observed (at [217]) that ‘… there must be more than a mere assertion or allegation of fraud or impropriety.’ In that case, however, Young J held that the relevant documents under consideration were prima facie brought into existence in furtherance of or as a step preparatory to an improper or dishonest purpose, in that, prima facie, the evidence established that the transaction was deliberately and dishonestly structured so as to misrepresent the true nature and purpose of certain fees and to ‘work a trickery’. Justice North also considered the circumstances on which the fraud exception would apply and considered the authorities in Clements, Dunne and Bell Pty Ltd v Commissioner, Australian Federal Police [2001] FCA 1858 (at [40]-[41]) where his Honour said:

40    In Propend Brennan J said, at 514:

“In determining whether a claim of legal professional privilege can be upheld, it is open to the party resisting the claim to show reasonable grounds for believing that the communication effected by the document for which legal professional privilege is claimed was made for some illegal or improper purpose, that is, some purpose that is contrary to the public interest.”

41    Gummow J described the scope of this limitation, at 563-564 as follows:

“[T]he privilege does not attach to a communication made as part of a criminal or unlawful proceeding or in furtherance of an illegal object. The privilege would not attach where the plaintiff sought legal assistance as a step in, or preparatory to, the commission of a crime or fraud, even though the solicitor was unaware of the purpose of the communication at the time it was made [R v Bell; Ex parte Lees (1980) 146 CLR 141 at 145]. The communication would still be ‘designed to facilitate future wrongdoing’ [Carter v Managing Partner Northmore Hale Davy & Leake (1995) 183 CLR 121 at 163]. In addition, the privilege does not protect communications made to further a deliberate abuse of statutory power and by that abuse to prevent others from exercising their rights under the law [Attorney-General (NT) v Kearney (1985) 158 CLR 580]. It follows that the operation of the privilege is not decided, as a general proposition, merely by a determination in the instant proceeding of whether facts amounting to a crime have been proved. The nature of the alleged impropriety and thus the issue of existence of the privilege will vary from case to case.”

82    There is no allegation of fraud pleaded in this matter. The allegations are to the effect that actions have been taken in conflict of duties owed to Admedus Regen. It is not possible to be satisfied ‘with sufficient probability of its truth to make it right to disallow the privilege claim’. The plaintiffs seek to support their claim by a very last minute argument, referring to a few lines in some document and with no amplification of the surrounding circumstances. Such a serious claim cannot be proven in this way.

83    In further reply submissions, the plaintiffs reject any flimsiness in their claim, and seek to establish the claim by reference to the following:

6.1    the minutes of the board meeting of the first defendant, held on 15 August 2012

Manufacturing scale-up is being planned and will need to be pushed forward when funds allow.

The appointment of the VP Operations has been put on hold until further funding has been secured. They will be instrumental in pushing forward the scale-up of our Manufacturing capabilities.

…

The role of VP Operation for Celxcel was to be offered to Helen Wray is currently on hold in line with Forecast 2012/13. This is an essential appointment to enable robust scale-up of manufacturing and processes. Lane affidavit, 7 November 2014, pp.311 (sub nom. "Commercial Activities") and 316 (sub nom. "6.2 Staffing");

6.2    the board report of the first defendant's CEO, Bob Atwill, dated 10 April 2013:

THE KEY GOALS AND FOCUS REMAIN

…

•    Planning and implementing manufacturing scale up of Cardiocel,

…

MANUFACTURING, SCALE UP & LAB

…

•    Commissioning of owned facilities is under discussion with Biotech Corporation ... EDB ... and with Sanofi/Genzyme. This process will take 18 months to 2 years and is why we need to also undertake the CMO [contract manufacturing] route as well.

•    We will be hiring a production manager as soon as we have chosen where we will be manufacturing. (Emphasis added).

Lane affidavit, 7 November 2014, pp.594-5. The first defendant was thus holding discussions with 3 entities for the purchase of manufacturing facilities. One of those was the Sanofi/Genzyme Group, from which the second defendant purchased Admedus Bio. Although pleaded with some obfuscation in relation to which entities the relevant representatives of the first defendant were representing at material times, the second and third defendants admit that (a) the first defendant needed to scale up the manufacturing of CardioCel®; (b) the first defendant had employed Wray to implement those plans; (c) Wray, the Vice President of Operations of the first defendant, was the person who first approached Admedus Bio (then named Verigen); and (d) Wray then introduced Atwill and Rodne, directors of the first defendant, to representatives of the Sanofi Group; FASOC, [55]-[57], [60]; Amended Defence, [44]-[46], [49]. Most of the allegations in the Amended Defence in relation to this issue are gainsaid by the knowledge of the first defendant's CEO, at 10 April 2013, (6.2 above) which was communicated to the other directors, including Rodne.

6.3    the draft minutes of the board meeting of the first defendant, held on 12 June 2013:

The Sanofi Perth facility is caught up in a potential sale of one of their whole divisions but we've been invited to submit an expression of interest (EOI) on acquiring this facility which we're in process of doing by the 14th of June.

Lane affidavit, 7 November 2014, p.600 (sub nom. "Manufacturing, Scale-up & Lab"). This was consistent with the board report of the first defendant's CEO, referred to in 6.2 above; and

6.4    the second defendant's ASX announcement, dated 12 December 2013, that Admedus Bio had been purchased "to facilitate scale-up production of ... CardioCel®" and that it allowed "Admedus to accelerate its manufacturing capabilities in anticipation of growing CardioCel® sales ... ", precisely the plan and business of the first defendant.

7.    The real defence of the second and third defendants in relation to the acquisition of Admedus Bio appears to be that the first defendant did not have the financial capacity to acquire Admedus Bio, which is bad in law; Streeter v Western Areas Exploration Pty Ltd [no 2] [2011] WASCA 17 at [64], [367], [369], [379], [381 ]-[385]; [397]-[399], [487] and the cases referred to therein. No particulars were provided of the first defendant's financial capacity or the actual cost of the acquisition of the shares in Admedus Bio; cf Reply, at [4].

8.    In relation to the Distribution Agreement, the allegations as to breach of fiduciary duty by 2 of the directors of the first defendant, Rodne and Atwill, and the manifest uncommerciality of the terms of the Distribution Agreement, which were heavily skewed in favour of the second and third defendants, speak for themselves. Significantly, the second and third defendants have withdrawn their defence that the terms of the Distribution Agreement were "in accordance with industry standards"; FASOC, [41]-[54]; Amended Defence, [35(i)] (deleted), [43(b)(iii)] (deleted).

84    The second and third defendants contend (by email) that the material relied upon by the plaintiffs to support the claim is incomplete and inaccurate. The defendants assert as follows:

2    Para. 6.1: The quote is referred to out of context. The preceding paragraph reads

"Discussion with potential contract manufacturers have progressed with Sydney Cell and Gene Therapy, Genzyme/Verigen facility WA, QIMR Qld Lonza in Singapore. At this stage others are still being contacted as well."

3    Para. 6.2: This misquotes documents or omits information:

(a)    see paras. 44(a)(i) and 44(a)(iii)(A) of the Second and Third Defendants' Amended Defence filed on 31 July 2015 (Amended Defence);

(b)    para. 46(b)(i) of the Amended Defence refers specifically to contract manufacturing, not to the purchase of manufacturing facilities;

(c)    the omitted sentences set out in para. 2 above demonstrate that the First Defendant was in discussions with 3 entities about contract manufacturing, not the purchase of manufacturing facilities; and

(d)    in para. 3 of the Plaintiffs' Reply to the Second and Third Defendants' Defence and Defence to Cross Claim filed on 17 April 2015, the Plaintiffs plead a positive case that Helen Wray was employed by the Second Defendant; this is inconsistent with their submission that Ms Wray was employed by the First Defendant.

4    Para. 6.3 refers to draft board minutes. The Second and Third Defendants rely on the final signed minutes of the First Defendant's board meeting held on 12 June 2013, as set out in the particulars to para. 51(d) of the Amended Defence. The final signed minutes record that Sanofi invited the Second Defendant, not the First Defendant, to submit an expression of interest.

5    Para 7: the Amended Defence is not limited to the lack of financial capacity of the First Defendant to acquire Admedus Bio. Paras. 51 to 53 of the Amended Defence plead that the Second Defendant was invited by Sanofi to submit an expression of interest to purchase the entire Cell Therapy business, and was approached again by Sanofi in September 2013 to purchase Admedus Bio. The particulars to paras. 50(a}, 50(b), 76 and 90 of the Amended Defence particularise the First Defendant's financial capacity. The cost of the acquisition is also set out in the particulars to para. 50(a) of the Amended Defence.

85    Absent more complete evidence as to the context in which the statements in the documents were made, it is not possible to determine which, if either, account by the parties is correct. What can be said is that the small amount of information referred to very late in the piece on this application falls well short of setting up an enquiry as to the existence of the fraud exception and any consequent waiver of privilege.

86    As indicated above, I do not propose to reach any conclusion in favour of the plaintiffs’ assertion that any claim for privilege should be eroded on the basis of equitable fraud. Numerous communications were exchanged prior to the hearing of this application and including letters, emails and submissions. The topic was raised as a last minute thought, apparently in a further communication on the day preceding the hearing. Quite properly, the defendants objected to the plaintiffs’ reliance upon it at the hearing. No fraud has been pleaded by the plaintiffs. The foundation for the argument is not only flimsy but has been pursued far too late in the piece. The plaintiffs’ contentions on this ground cannot succeed.

CONCLUSION

87    In my view the method by which Admedus Regen’s documents were discovered did not constitute a waiver for the reasons indicated above.

88    As to whether all the documents concerned attracted common interest privilege, this is more difficult to ascertain in the absence of examination of a sample. The position is finely balanced, but I consider the interests of justice would best be served by accepting the defendants’ offer to examine the 21 sample documents which have been proposed, constituting three samples within each of the seven categories. Those documents or others agreed by the parties will be examined by another Judge of this Court who is not the docket/trial judge with a view to ascertaining whether the documents attract common interest privilege. To facilitate that exercise, each of the parties should have the opportunity to make very short submissions (many of the submissions having been made) in relation to each document. Again, those submissions should be provided to the Judge reviewing the documents. It follows that, as the matter is not fully resolved, any costs of this hearing will be reserved.

Associate:

Dated:    1 August 2016

SCHEDULE OF PARTIES