FEDERAL COURT OF AUSTRALIA

Hooke v Bux Global Limited (No 3) [2018] FCA 1038

ORDERS

THE COURT ORDERS THAT:

1.    By no later than 4.00 pm on 12 July 2018, the defendant do deliver to the Perth Registry copies of the documents numbered 7(a) to (k) (inclusive) (but excluding 7(d)) in the Table attached to the affidavit of Tharun Kuppanda sworn 26 June 2018.

2.    The documents be delivered in a sealed envelope marked as confidential for the attention of the Associate to Justice Banks-Smith, to be opened only by Justice Banks-Smith and a note to the effect that the documents are provided for the purposes of orders made in these proceedings dated 11 July 2018.

3.    The question whether the documents may be withheld from disclosure on the basis that they are subject to legal professional privilege be determined by Justice Banks-Smith on the papers.

4.    The defendant do pay the plaintiffs' costs of the application for orders requiring the delivery of the documents to the Court in order to make a determination whether they are subject to legal professional privilege, such costs to be assessed if not agreed.

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

REASONS FOR JUDGMENT

COLVIN J:

1    The plaintiffs dispute the claim by the defendant, Bux Global Limited, to legal professional privilege to 12 documents. One is a draft prospectus, and the other 11 are email communications in which one of the participants was K&L Gates, the solicitors for Bux Global.

2    The plaintiffs seek an order that the defendant do deliver to the Court copies of the documents so they may be inspected and the Court may make a determination as to whether the documents are subject to legal professional privilege. It is the position of Bux Global that if the documents are to be inspected then the inspection should be undertaken by another judge of this Court in circumstances where the matter is listed for hearing before me later this year.

3    The power of the Court to inspect documents for the purpose of assisting in determining whether there is a valid claim to privilege was considered in Grant v Downs [1976] HCA 63; (1976) 135 CLR 674 at 689 where Stephen, Mason and Murphy JJ stated:

It is for the party claiming privilege to show that the documents for which the claim is made are privileged. He may succeed in achieving this objective by pointing to the nature of the documents or by evidence describing the circumstances in which they were brought into existence. But it should not be thought that the privilege is necessarily or conclusively established by resort to any verbal formula or ritual. The court has power to examine the documents for itself, a power which has perhaps been exercised too sparingly in the past, springing possibly from a misplaced reluctance to go behind the formal claim of privilege. It should not be forgotten that in many instances the character of the documents the subject of the claim will illuminate the purpose for which they were brought into existence.

4    Whilst the ultimate legal onus remains on the party claiming privilege, an evidential onus may be cast upon the party seeking inspection if the claim for privilege is 'apparently proper'. What is required to establish a claim to privilege will vary depending upon the nature of the document and the particular ground. The description of a document as a confidential communication from a lawyer to the client would be capable of sustaining a claim for privilege in the absence of other evidence. However, a bare assertion of a claim to privilege in respect of a document the character of which had no apparent connection with giving or receiving legal advice or actual or anticipated litigation will not be sufficient: as to these matters see Carey v Korda [2012] WASCA 228; (2012) 45 WAR 181 where Murphy JA reviewed the relevant principles.

5    As the claim to privilege the subject of the present application has been raised as part of the pre-trial disclosure process, the merits of the claim are to be determined according to common law principles rather than by reference to the provisions in the Evidence Act 1995 (Cth): Esso Australia Resources Ltd v Commissioner of Taxation (Cth) [1999] HCA 67; (1999) 201 CLR 49 at [17]-[28], [64].

6    As to the adjudication of claims to legal professional privilege, I gratefully adopt the review of the principles to be applied in the recent decision by Thawley J in Kenquist Nominees Pty Ltd v Campbell (No 5) [2018] FCA 853 at [10]-[20].

7    The question for me on the present application is whether there is doubt as to the claim for privilege and whether assessment of the merits of the claim would be aided by requiring Bux Global to produce the relevant documents for inspection by a judge of this Court who would then adjudicate the privilege claim.

Evidence to support the privilege claim

8    The claim to privilege is made by an affidavit of Mr Kuppanda, the Company Secretary of Bux Global. He is also an employee of Boardroom Pty Ltd which provides secretarial services to Bux Global and maintains the share registry of Bux Global.

9    The affidavit of Mr Kuppanda was sworn in compliance with an order that I made on 1 June 2018 in the following terms:

As to the documents the subject of disclosure orders in these proceedings, the defendant do provide to the plaintiffs an affidavit from an appropriate person on behalf of the defendant listing documents in respect of which there is a claim to legal professional privilege or any other basis for non-disclosure and stating the basis on which the defendant claims it is privileged or otherwise not required to be disclosed.

10    The order was made in circumstances where Bux Global maintained that it was not obliged to provide a statement of the basis upon which it claimed privilege because that requirement had not been expressly imposed by the terms of general disclosure orders made by the Court. It was made after Bux Global contested the making of an order in such terms.

11    Therefore, the affidavit was prepared in respect of a specific requirement that the basis for the claim to privilege be exposed by way of affidavit.

12    Mr Kuppanda's affidavit produced a schedule in which there was a description of each document, its date and a description of what was stated to be 'grounds of privilege'. There was otherwise no substantive matter advanced in the affidavit to support the claim to privilege.

13    As to the prospectus, the description was as follows:

14    As to the email communications, each was described as an email to or from K&L Gates. Save for one email (7(d)), all the emails were described as being exchanged with Boardroom and Bux Global. It is the inclusion of Boardroom in the communications that is relied upon by the plaintiffs as providing a reason why the Court should inspect the emails in order to determine whether they are properly the subject of a claim to privilege.

Prospectus

15    The plaintiffs rely upon an investor update circulated by Bux Global at about the date of the draft prospectus as the basis for its claim that there should be an inspection of the document to determine whether it is privileged. The update included a statement to the effect that the board of directors of Bux Global had engaged K&L Gates to start preparation for a compliance listing. The update then stated:

With guidance from bux's advisory committee, K&L Gates, Macquarie Capital, KPMG our audit firm, we have started the process of constructing our prospectus and drafting all required documents for the ASX and a listing.

16    The submission advanced for the plaintiffs is that any draft prospectus was prepared for the purpose of the issue of a prospectus, a process that would include provision of the prospectus to advisors including Macquarie Capital and KPMG and then providing the required documents to the ASX.

17    I do not accept that an inference may be drawn that the particular draft referred to in Mr Kuppanda's affidavit was a draft that was to be provided to third parties and the ASX. The description of the document is in terms that identify it as a document prepared by K&L Gates in respect of Bux Global. There is no suggestion that the particular draft was prepared to be circulated to third parties.

18    In Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325, Anderson J considered cases in which draft agreements, draft letters, draft pleadings and the like had been accepted as privileged. His Honour concluded that this was not so much because they are themselves advice or a communication for the purposes of the privilege but because they will, if disclosed, reveal or tend to reveal the content of privilege communications. The disclosure will reveal the solicitor's mind working on the document in advising the solicitor's client.

19    A claim to privilege based upon a description that a draft of a document of a kind that would usually embody legal advice as to the appropriate content of the document which is identified as having been prepared by a lawyer on behalf of a party would be sufficient evidence to establish a claim to privilege. If there are other circumstances known to those making the claim that may bear upon whether it is privileged then there would be an obligation to disclose those circumstances in making the claim.

20    For those reasons, in my view the content of the client update is insufficient to cast any real doubt upon the claim to privilege. Further, the nature of the document is such that inspection of the document would not assist in any consideration of the claim to privilege. It would not, for example, reveal whether it was intended to be provided to third party advisors or to the ASX. (I note that no argument was advanced to the effect that communications with the third party advisors might be of a character that would not result in a waiver of privilege in any event). I refuse the application for orders in respect of the draft prospectus on the basis that there is no evidence to support a claim that it was prepared for circulation to anyone other than Bux Global.

Boardroom emails

21    As I have noted, the issue raised by the plaintiffs concerning the claim to privilege in respect of the email communications extends from the involvement of Boardroom in those communications. Those submissions were advanced in the following chronological context which was not disputed:

(1)    on 10 May 2018, Bux Global brought an application for summary dismissal of the proceedings on the basis that the plaintiffs are not members of Bux Global;

(2)    on 15 May 2018, the defendant provided by way of disclosure a copy of its share register which did not show any shareholding by the plaintiffs but did show a shareholding described as 'Shampagne Corporation Ltd [non rollover account]'; and

(3)    on 16 May 2018, in answer to a subpoena issued by the plaintiffs, ASIC produced two documents including a holdings report for Bux Global which showed the plaintiffs as shareholders as at 1 May 2018 and did not show any 'non rollover account'.

22    It was submitted for the plaintiffs that it can be inferred that there was a change to the share register of Bux Global sometime between 1 May 2018 and 14 May 2018 by which the plaintiffs' shareholdings were removed from the register and the 'non rollover account' holding was inserted.

23    The plaintiffs had pressed Bux Global for disclosure of a category of documents relating to that change and had been told that the only documents in such a category were privileged.

24    In those circumstances, the plaintiffs submitted that it can be inferred that by reason of the date and description of the documents that they are communications relating to the apparent change in the share register. It was further submitted that the communications were for the purpose of providing instructions to Boardroom concerning changes to the share register, rather than for the purpose of providing legal advice to Bux Global.

25    For Bux Global, it was submitted that because the email communications were created after the present proceedings were commenced by the plaintiffs and that K&L Gates are the lawyers for the defendant and the communications involve K&L Gates and the defendant then it can be concluded without any need to examine the email communications that the documents contain privilege communications for the purpose of giving or obtaining legal advice and litigation.

26    I note that the affidavit of Mr Kuppanda does not condescend to any particulars as to why Boardroom was included in the email communications. The claims to privilege are formulaic and do no more than state the fact that the email communications were confidential and 'made or produced for the dominant purpose of giving or obtaining legal advice and litigation'.

27    No attempt was made to engage with the timing of the email and the apparent changes to the share registry.

28    Counsel for Bux Global made an oral application to adduce further evidence in relation to the claim for privilege concerning the prospectus, but made no such application in relation to the emails. It is not necessary to deal with that application given the view that I have formed in relation to the prospectus. However, as I have noted, the affidavit of Mr Kuppanda was prepared in response to a court order specifically directing Bux Global to state the basis for the claim to privilege in circumstances where it had maintained before the Court that it was not obliged to do so as part of compliance with general disclosure orders that had been made by the Court. In those circumstances, it is to be expected that any matter to support the claim to privilege would be included in the affidavit provided in compliance with the court order.

29    Therefore, save for the email numbered 7(d) (which is a communication between K&L Gates and the defendant only), I am satisfied that the order requiring production of the other email communications to allow them to be inspected by a judge of this Court to adjudicate the claims for privilege should be granted.

Next steps

30    Having regard to the position of the parties, I will make orders for production of the email documents to the Associate to Banks-Smith J in an envelope marked 'confidential' for adjudication by her Honour as to the claim for privilege. The parties having indicated that they are content for that adjudication to occur on the basis of the affidavits relevant to the application, namely the affidavit of Mr Kuppanda and an affidavit of Ms Spencer dated 2 July 2018, the written submissions filed by the parties and the transcript of the hearing in relation to the claim for privilege, I will direct that the claim to privilege in respect of the email communications will be dealt with on the papers.

31    The plaintiffs seek orders that the defendant pay the costs of its application. As the application has been substantially successful, the plaintiffs should have their costs of the application.

Associate:

Dated:    11 July 2018