FEDERAL COURT OF AUSTRALIA
Arnold Bloch Leibler (A Firm) v Slater & Gordon Limited [2020] FCA 1496
ORDERS
Applicant | ||
AND: | SLATER & GORDON LIMITED (ACN 097 297 400) Respondent | |
DATE OF ORDER: |
THE COURT ORDERS THAT:
1. The Declaration made on 8 May 2020 be varied by deleting the words ‘subject to further order’.
2. Other than the Declaration made on 8 May 2020 as varied, the proceeding be dismissed.
3. The parties file and serve an agreed position on costs, or in default of agreement, a short written submission on or before 4.00pm on 27 November 2020, which dispute will the determined on the papers.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
MIDDLETON J:
INTRODUCTION
1 The Applicant claims in this proceeding the following declaration in paragraph 1 of the Originating Application:
A declaration that no breach of any obligation of confidence owed by the Applicant (ABL) to the Respondent (Slater & Gordon) would arise from or, alternatively, Slater & Gordon would not be entitled to restrain the disclosure and/or use by ABL (including its partners, employees, agents and legal representatives) of:
(a) all documents and communications, and all information contained in the documents and communications, that comprise the ABL legal files bearing nos 011838870 and 011848618;
(b) all communications, oral or written, between:
(i) ABL and Slater & Gordon; and/or
(ii) ABL and Slater & Gordon’s other professional advisors,
in connection with:
(iii) the Entitlement Offer (as defined in the statement of claim filed in Proceeding No VID 1010 of 2019);
(iv) the Acquisition (as defined in the statement of claim filed in Proceeding No VID 1010 of 2019); and
(v) the due diligence committee and the due diligence process (referred to in the statement of claim filed in Proceeding No VID 1010 of 2019); and
(c) all documents, and information contained in the documents, that respond to order 2 of the orders made by the Honourable Justice Middleton in Proceeding No 1010 of 2019 on 6 December 2019
(together, Relevant Material) for the purpose of ABL conducting its defence and prosecuting any cross-claims in Proceeding No VID 1010 of 2019 (Hall v ABL Proceedings), including (without limitation) by ABL:
(d) disclosing the Relevant Material to:
(i) any legal advisors retained by ABL in the Hall v ABL Proceedings;
(ii) any experts retained by ABL for the purposes of the Hall v ABL Proceedings; and
(iii) any witnesses proposed to be called by ABL in the Hall v ABL Proceedings;
(e) considering, pleading and pursuing its Defence and any Cross-claim, including for the purpose of alleging that SGL and/or its directors or officers are liable to the Applicant and other group members in the Hall v ABL Proceedings and/or to ABL;
(f) serving Relevant Material in the Hall v ABL Proceedings that is intended to be adduced into evidence;
(g) adducing Relevant Material into evidence;
(h) otherwise referring to Relevant Material in the course of the hearing of the Hall v ABL Proceedings, including by way of address, cross-examination and/or written submission;
(i) referring to Relevant Material in the course of any mediation and other settlement negotiations (in writing or orally) in respect of the Hall v ABL Proceedings; and
(j) otherwise using the Relevant Material for the purpose of defending or negotiating the settlement of the Hall v ABL Proceedings.
2 From the outset, I note that the Declaration is wide-ranging in its terms and primarily focuses on the potential for a breach of confidence owed by ABL to Slater & Gordon. The Declaration if made could relate to thousands of documents. However, it was not suggested in this proceeding (at least) that the Court should be seeking to identify specific “documents” or “communications” or “information” that may be specifically covered by the generic Declaration sought, other than in relation to ‘associated waiver’ which may arise from inspection of the documents the subject of the Declaration made by the Court on 8 May 2020 (to which I will come). It was also submitted by ABL that ABL was entitled to use the Relevant Material as between ABL and Slater & Gordon in the Hall v ABL Proceedings, but otherwise the Relevant Material has not lost its status as privileged in relation to Mr Hall. It was for this reason that ABL focussed on the loss of confidentiality in respect of Slater & Gordon’s conduct in relation to ABL, and not loss of confidentiality to the world at large, or to Mr Hall.
3 The dispute between the parties arises because Slater & Gordon, which is a former client of ABL, has refused to grant its consent to ABL using the Relevant Material for the purposes requested by ABL in connection with its defence of the Hall v ABL Proceedings brought against ABL in this Court by Mr Hall.
4 ABL contends that it may use and disclose the Relevant Material, being information obtained by ABL in the course of its legal work for Slater & Gordon, the subject of the Hall v ABL Proceedings, in the ways set out in prayers 1(d) to (j) of the Originating Application, each of which is said to be necessary for ABL to effectively conduct its defence and bring possible cross-claims in those proceedings, including against Slater & Gordon.
5 Slater & Gordon resists such use and disclosure as it maintains that the Relevant Material, other than 51 documents which were produced to Mr Hall in the course of proceedings brought by Mr Hall against Slater & Gordon (‘Produced Documents’), is confidential. There is no dispute over the Produced Documents themselves: their use is not to be restrained or sought to be restrained by Slater & Gordon. As there is no dispute over the confidentiality of or access to the Produced Documents, the term ‘Relevant Material’ as used in these reasons does not include the Produced Documents.
6 ABL submits that Slater & Gordon has waived confidentiality over part or all of the Relevant Material for the purposes set out in prayers 1(d) to (j) of the Originating Application. ABL submits that such waiver arises in the following circumstances :
(1) three instances of past conduct by Slater & Gordon which are said to have armed Mr Hall with the information necessary to commence the Hall v ABL Proceedings, being the Produced Documents, and being inconsistent with Slater & Gordon maintaining confidentiality over the Relevant Material so as to prevent ABL from using the Relevant Material in the ways set out in prayers 1(d) to (j) of the Originating Application;
(2) s 11 of the Due Diligence Planning Memorandum executed by Slater & Gordon and ABL on 29 March 2015 (the ‘DDPM’) which is said to be:
(a) express consent to the use of part of the Relevant Material, being the category of documents referred to in s 11 of the DDPM, in “defending” Mr Hall’s claims in the Hall v ABL Proceedings (which ABL submits includes each of the uses in prayers 1(d) to (j) of the Originating Application); and
(b) viewed either on its own or together with the other conduct of Slater & Gordon referred to in paragraph 6(1) above, inconsistent with Slater & Gordon maintaining confidentiality over the Relevant Material so as to prevent ABL from using the Relevant Material in the ways set out in prayers 1(d) to (j) of the Originating Application.
7 Despite a submission to the contrary by Slater & Gordon, I am satisfied that there is a dispute amenable to the jurisdiction of the Court and it is appropriate for the Court to determine the current controversy between the parties. The Declaration sought is not divorced from the facts; nor is it a dispute based on hypothetical facts. The Declaration will also serve a practical purpose in relation to litigation pending in this Court: see generally Edwards v Santos Ltd (2011) 242 CLR 421 and National Australia Bank Limited v Nautilus Insurance Pte (No 2) (2019) 377 ALR 627.
8 On 8 May 2020, after considering argument on the aspect of the relief sought relating to the documents referred to in s 11 of the DDPM, I made a Declaration that:
No breach of any obligation of confidence owed by the Applicant (ABL) to the Respondent (Slater & Gordon) would arise from or, alternatively, Slater & Gordon would not be entitled to restrain the disclosure and/or use by ABL (including its partners, employees, agents and legal representatives) of all documents in the Due Diligence Committee due diligence files which, under section 11 of the Due Diligence Planning Memorandum, were required to be collated and retained for at least 7 years, for the purpose of ABL defending the Applicant's claim against ABL in Proceeding No VID 1010 of 2019, subject to further order.
9 I set out the basis for the making of that Declaration, as well as for dismissing the remainder of the proceeding, in the following reasons.
10 This proceeding was heard concurrently with Hall v Arnold Bloch Leibler (a firm) [2020] FCA 1495, and the reasons in this proceeding are to be read in conjunction with the reasons in that proceeding.
RELEVANT FACTUAL BACKGROUND
11 ABL’s Points of Claim in this proceeding set out in detail the facts giving rise to this dispute. The following is a statement of the critical facts which are not in contention and are primarily taken from the Points of Claim.
Legal work performed by ABL for Slater & Gordon
12 In the period leading up to and as at 29 March 2015, ABL:
(1) acted as Australian legal adviser to Slater & Gordon in relation to a proposed pro-rata accelerated renounceable entitlement offer (the ‘Entitlement Offer’) by Slater & Gordon, intended partly to finance the purchase price for the proposed acquisition by Slater & Gordon of the legal and ancillary professional services division of Quindell Plc (the ‘Acquisition’);
(2) in addition and separately, participated as a member of the Due Diligence Committee (sometimes referred to as the ‘DDC’) established by Slater & Gordon in relation to the Entitlement Offer;
(3) in addition to acting as Australian legal adviser to Slater & Gordon, was retained to provide a legal opinion to the DDC in respect of the contents of:
(a) a notice prepared in compliance with s 708AA(7) of the Corporations Act 2001 (Cth) (the ‘Corporations Act’) to be lodged with the Australian Securities Exchange (the ‘ASX’) at the outset of the Entitlement Offer (the ‘Cleansing Notice’);
(b) an offer booklet setting out the terms of the Entitlement Offer to be sent to Slater & Gordon’s eligible retail shareholders (the ‘Offer Booklet’);
(c) an ASX announcement in respect of the Entitlement Offer and the Acquisition and a presentation pack for institutional shareholders and other exempt investors (the ‘Investor Presentation’)
(collectively, the ‘Offer Documents’); and
(4) was to perform the other work referred to in paragraph 1 of the letter from ABL to the Board of Slater & Gordon (copying Citigroup Global Markets Australia Pty Limited, Macquarie Capital (Australia) Limited (together, the ‘Underwriters’), the representatives of the Underwriters, Greenhill Co Australia Pty Ltd (‘Greenhill’) and the members of the DDC) dated 29 March 2015 (‘Opinion Letter’),
(collectively, ‘ABL’s Legal Work’).
13 Whilst it is convenient to describe ABL’s Legal Work in this general way, it is important to appreciate that ABL had at least two roles in its providing legal advice— one directly to Slater & Gordon and one to and as a member of the DDC. The Relevant Material in its terms includes documents relating to work performed by ABL in both of these roles. Further, s 11 of the DDPM (which relates to the DDC’s due diligence files) refers to documents going beyond communications arising out of ABL providing legal advice directly to Slater & Gordon. That is, documents going to work performed in ABL’s role as advisor to and member of the DDC.
14 There is in all probability an overlap between the various categories of documents referred to in the Originating Application. This is both in the sense that there may be documents that fall within multiple categories, and in the sense that there is an overlap of the content and information that is contained in various documents. Of course, one version of a document may be privileged and another version may not be privileged. Apart from files arising from the due diligence process, the contest is over the legal files of ABL (known as the ‘Project Malta Legal Files Documents’) which include communications, documents, work products and records in connection with ABL’s role advising Slater & Gordon. The contest here concerns the communications made for the dominant purpose of Slater & Gordon obtaining, and ABL providing, legal advice in the course of ABL’s retainer, and not communications (or documents) prepared, created or held by ABL as a member of or in its role for the DDC.
15 It is clear that the legal (as distinct from commercial) due diligence review was to be conducted by ABL as a member of the DDC. It is also clear that the DDC proceeded on the basis that Slater & Gordon could undertake the Entitlement Offer in reliance on s 708AA of the Corporations Act, as modified by Australian Securities and Investments Commission Class Order 08/35, without the need to lodge a prospectus. To assist in meeting the requirements of the law, the DDC was to establish the accuracy of the information contained in the Offer Documents. This is the central issue (namely the accuracy of the Offer Documents) in the Hall v ABL Proceedings. The Opinion Letter was addressed to the Board of Directors of Slater & Gordon, but was copied to each member of the DDC, the Underwriters, the Underwriters’ representatives and Greenhill. This was done as part of the due diligence process, as required by cl 6.3(c) of the DDPM (to which I will be coming to in more detail). The important matter to observe is that these communications were made under the auspices and confines of the due diligence process as set out in the DDPM. There could be no common interest legal privilege arising in relation to those parties to whom the Opinion Letter was copied, and none was claimed.
16 Returning then to the narrative, on or about 29 March 2015:
(1) ABL provided the Opinion Letter pursuant to s 6.3(c) of the DDPM; and
(2) the DDC issued a report, the purpose of which was to consolidate the findings of the due diligence process and to convey the final conclusions of the DDC to the Board of Slater & Gordon in relation to the due diligence process (the ‘DDC Report’).
17 The Opinion Letter stated:
1. We have:
(a) acted as Australian legal advisers to Slater & Gordon in relation to the proposed Entitlement Offer;
(b) participated as a member of the Due Diligence Committee established in relation to the Entitlement Offer (“DDC”) and attended all meetings of the DDC;
(c) recommended and provided advice on the design of an appropriate due diligence program and assisted, in conjunction with others, in the implementation of that due diligence program;
(d) drafted and assisted in settling the due diligence planning memorandum, a final version of which was adopted on 29 March 2015 (“DDPM”);
(e) made inquiries and investigations in relation to legal matters relevant to implementation of the due diligence program (as set out in the DDPM) and reported on those inquiries and investigations to the Due Diligence Committee and the Underwriters;
(f) provided advice on the Australian legal requirements in relation to the Offer Documents and the Entitlement Offer;
(g) advised on the Australian legal matters arising in connection with the due diligence program and the Entitlement Offer;
(h) provided a legal opinion to the Due Diligence Committee and the Underwriters in respect of the content of the Offer Documents and the due diligence program;
(i) reviewed drafts and final forms of questionnaires and certificates by management of Slater & Gordon and other reports and sign-offs;
(j) reviewed all documents released to ASX by Slater & Gordon from 5 February 2015, Slater & Gordon’s continuous disclosure policy and all minutes of Slater & Gordon’s board meetings from 5 February 2015, and all correspondence between Slater & Gordon and ASIC and ASX in relation to continuous disclosure matters from 5 February 2015 and, where necessary, highlighted matters and received confirmation from Slater & Gordon that those matters were not of a nature that the Company was relying on any carve-outs to the ASX Listing Rule 3.1, that would require disclosure under section 708AA of the Corporations Act;
(k) reviewed and commented on successive drafts of the Offer Documents;
(l) co-ordinated the verification of the Offer Documents, conducted an audit of the verification materials and reported to the Due Diligence Committee on the results of such audit and delivered a verification report, as provided in the DDPM, and verified certain provisions of the Offer Documents and accompanying materials (as evidenced by the verification notes);
(m) advised on and co-ordinated obtaining of any necessary ASIC and ASX relief and confirmed that Slater & Gordon may rely upon the Rights Issue Exception; and
(n) co-ordinated the obtaining of foreign legal advice to the extent required.
Scope of this Opinion
2 This letter relates only to:
(a) the Offer Documents and the due diligence program in relation to the Entitlement Offer and does not relate to any additional statements concerning the Offer Documents that may be made by any person, or any other conduct that any person may engage in concerning the Offer Documents; and
(b) the laws applicable within Australia, its States and Territories ("Relevant Jurisdictions") and is given on the basis that it will be construed in accordance with those laws. We express no opinion in relation to the laws of another jurisdiction or (except as expressly provided in this letter) factual matters.
3 In giving this opinion we only hold ourselves out as having skills and expertise with respect to the laws of the Relevant Jurisdictions. We specifically disclaim any skills or expertise in any other capacity, financial, investment or otherwise.
Opinion on Offer Documents
4 We believe that Slater & Gordon and the Entitlement Offer satisfy the conditions in section 708AA(2) of the Corporations Act such that the offer of New Shares for issue under the Entitlement Offer does not need disclosure under Part 6D.2 of the Corporations Act.
5 There is no matter known to us that would cause us to believe, and we do not believe, that the Cleansing Notice does not comply with section 708AA(7) of the Corporations Act or is defective within the meaning of section 708AA(11) of the Corporations Act, or that Slater & Gordon is (for any other reason) not entitled to make the offer made pursuant to the Entitlement Offer by issuing the Cleansing Notice (when read together with the Investor Presentation) in accordance with section 708AA(7) of the Corporations Act.
6 Nothing has come to our attention that causes us to believe, and we do not believe, that the Offer Documents contain any statement that is false, misleading or deceptive or likely to mislead or deceive (including by way of statements included in or omissions from the Offer Documents), or that there is an omission of material from the Offer Documents having regard to the content requirements of section 708AA(7) of the Corporations Act.
Opinion on due diligence program
7 Nothing has come to our attention which causes us to believe, and we do not believe, that the due diligence program and the scope of the due diligence inquiries as described in the DDPM (the "Due Diligence Process"):
(a) has not been implemented, completed or conducted, as the case may be, in accordance with the terms of the DDPM in all material respects (or that there were any material deviations from it not approved by the DDC); or
(b) would not be appropriate to ensure that the Offer Documents meet the disclosure requirements of section 708AA(7) of the Corporations Act for the Entitlement Offer.
8 In our opinion, the Due Diligence Process should constitute the taking of reasonable steps for the purposes of sections 1308(4), 1308(5) and 1309(2) of the Corporations Act and to ensure that the Offer Documents are true and not misleading or deceptive and that there are no omissions from the Offer Documents that are required to be included by the Corporations Act.
18 The Opinion Letter further stated that:
12 This letter:
(a) is addressed to the Directors of Slater & Gordon, each member of the DDC and each firm or company that those members represent, the Underwriters and their representatives and Greenhill & Co. Australia Pty Ltd and may not, without our prior written consent (or, in the case of an Underwriter, as permitted by the Underwriting Agreement between Slater & Gordon and the Underwriters dated on or about 30 March 2015), be:
(i) relied on by another person;
(ii) disclosed, except:
(A) to persons who in the ordinary course of their business have access to the papers and records of an addressee and then only on the basis that they will make no further disclosure;
(B) by the Underwriters to their legal advisers to obtain legal advice in relation to the Entitlement Offer or associated due diligence program;
(C) as required by law, a court, the rules of any stock exchange, government body, regulatory or selfregulatory body; or
(D) in connection with any actual or potential claims, investigations or other proceedings involving any member of the DDC or an observer (including the Underwriters) or their representatives in relation to the Entitlement Offer or the Offer Documents;…
19 The DDC Report annexed the DDPM. Critically for the purposes of this proceeding, in the way it was argued, s 11 of the DDPM stated that:
11 Finalisation of Due Diligence Committee’s due diligence files
The due diligence process is to be documented to provide evidence of the enquiries which have been made (and by whom), the basis on which opinions have been formed and to provide reasonable grounds for belief in the completeness and accuracy of all statements in the Offer Documents.
Reports, comments on those reports and revisions made to them, sign-offs and opinion letters, copies of the verification notes and supporting material and minutes of all Due Diligence Committee meetings, documents tabled at those meetings, all documents generated by Slater & Gordon as part of the due diligence process and any other documents which are material to the due diligence process will be collated in files by the secretary of the Due Diligence Committee and retained by ABL for at least 7 years or until the time limit for a possible cause of action has expired (or, if a proceeding has commenced but not been finally judicially determined by that time, until such time as that has occurred).
Slater & Gordon and all those involved in preparing the Offer Documents, as well as the Underwriters and Greenhill, will, at their request, have reasonable access to those files at any time up to completion of the issue of New Shares under the Entitlement Offer.
After that time, members (and their representatives) and members of the Board will have access to the files for the purpose of defending any actual or potential claim against them arising out of or in connection with the Offer Documents or the Entitlement Offer.
20 Consistently with the definition in paragraph 12(3) above, “Offer Documents” in s 11 of the DDPM refers to the Cleansing Notice, the Booklet and the Investor Presentation.
21 There were other sections in the DDPM that are relevant for present purposes relating to the due diligence process. These sections are significant having regard to the scope of documents sought in prayer 1(c) of the Originating Application, which refers to Order 2 of the orders made on 6 December 2019 and requires the Court to consider the ambit of material before the DDC. It is particularly important to appreciate, as set out in the following sections, the role and responsibilities of ABL in the context of the due diligence process.
1 Introduction
...
This Memorandum will be formally adopted by each member of a committee established by this Memorandum for the purposes of due diligence (“Due Diligence Committee”) and will be approved by the board of directors of Slater & Gordon (“the Board”).
The Memorandum also provides some background information on the Due Diligence Committee and the objectives it aims to achieve. This Memorandum includes an outline of:
(a) the way in which the due diligence process will proceed;
(b) how the legal due diligence review will be conducted by Arnold Bloch Leibler (“ABL”);
(c) how the commercial due diligence will be conducted by Slater & Gordon, with the assistance of Greenhill & Co. Australia Pty Ltd (“Greenhill”).
This Memorandum also outlines how those activities will fit within the Due Diligence Committee's programme and the culmination of the due diligence program in the execution of the report of the Due Diligence Committee ("Due Diligence Committee Report") by each member of the Due Diligence Committee.
…
5 Due Diligence Committee
5.1 Purpose
The Due Diligence Committee is established to oversee and co-ordinate the due diligence process in accordance with this Memorandum and will report periodically to the Board on the conduct of the due diligence process. The Due Diligence Committee is not a sub-committee of the Board and is not performing a management function.
The use of a committee structure is intended to achieve the following:
(a) provide a structured, coordinated system of enquiry;
(b) avoid the duplication and unnecessary cost and inconvenience which would arise if each person with potential liability conducted their own separate due diligence enquiries;
(c) enable enquiries requiring specific expertise or knowledge to be conducted by people with appropriate expertise or knowledge;
(d) facilitate the making of enquiries of those whose knowledge is relevant in terms of the content of the Offer Documents;
(e) facilitate the preparation of Offer Documents which comply with the Corporations Act and any applicable ASIC policy;
(f) provide adequate supervision of the proper carrying out of the process;
(g) enable the resolution of enquiries which arise at the time of issue of the New Shares under the Entitlement Offer;
(h) maintain a register of all material issues raised;
(i) determine the manner in which issues arising from reports should be addressed in the Offer Documents;
(j) ensure that a complete understanding of all relevant issues has been obtained before finalising the Offer Documents;
(k) ensure all potentially material issues are addressed in the Offer Documents or resolved as not being material;
(l) ensure that, to the best of the collective knowledge of the Due Diligence Committee, the statements included in the Offer Documents are accurate and not misleading or deceptive and that the Offer Documents do not omit any material required by the Corporations Act;
(m) provide a framework within which the persons with responsibility for the Offer Documents (or part of them) can satisfy themselves that all reasonable steps have been taken to ensure that the Offer Documents do not contain any statements that are misleading or deceptive and that the Offer Documents do not omit any material required by the Corporations Act; and
(n) minimise the risk of Slater & Gordon, members of the Board, members of the Due Diligence Committee (and their representatives) and others incurring liability in connection with the Offer Documents.
At the end of the due diligence process, the Due Diligence Committee will provide the Board with a separate Due Diligence Committee Report.
It is important that each director of Slater & Gordon and each member of the Due Diligence Committee accepts the due diligence system in its entirety and is comfortable with the scope of the Due Diligence Committee Report which will be provided at the end of the due diligence process.
…
5.2 Membership
The Due Diligence Committee will be comprised of the entities who may have liability in respect of the Offer Documents. These parties, and the relevant representatives, are:
Member of DDC | Role | Representative(s) |
Slater & Gordon | Director and CEO | Andrew Grech |
Slater & Gordon | CFO and Joint Company Secretary | Wayne Brown |
ABL | Australian legal adviser to Slater & Gordon | Jonathan Wenig |
Representatives of each of the above members will attend all meetings of the Due Diligence Committee where possible. However, if this is not possible, alternate members (appointed to attend in place of absent members) will be acceptable.
…
Jonathan Wenig will be the Chairman of the Due Diligence Committee. The responsibilities of the Chairman are to ensure that:
(a) the meetings of the Due Diligence Committee are properly conducted;
(b) all members of the Due Diligence Committee are appropriately heard; and
(c) all agenda items and issues are adequately discussed.
A representative of ABL will act as secretary to the Due Diligence Committee. The secretary is responsible for convening meetings, circulating agendas, keeping minutes and, to the extent necessary, maintaining action lists.
…
5.3 Responsibilities
The overall responsibility for the due diligence process lies with the Board who will rely on a report from the Due Diligence Committee supplemented by their own enquiries as they see fit and having regard to their obligations under Part 2D.1 of the Corporations Act and at general law.
The Due Diligence Committee in turn will rely on reports from various entities and persons responsible for the various aspects of the business of Slater & Gordon, supplemented by its own enquiries as it sees fit.
The responsibilities of the Due Diligence Committee will be to:
(a) determine the due diligence process and recommend their approval by the Board;
(b) identify key issues and risk factors on which the due diligence process will focus;
(c) allocate responsibility for investigating each relevant area (including appointment of experts);
(d) ensure that there is adequate supervision at all stages of the due diligence process so that a complete and thorough understanding of all relevant issues have been obtained prior to finalising each Due Diligence Committee Report and the Offer Documents;
(e) receive and adopt reports and sign-offs from reporting experts;
(f) maintain a register of material issues which constitutes a register of all material issues raised, identifies the nature of the issue and how it has been resolved;
(g) supervise and assist in the drafting of the Offer Documents and, in particular ensure that:
(i) the Cleansing Notice, when read together with the Investor Presentation contains all the information required to satisfy the content requirements set out in the Corporations Act;
(ii) there are no material misstatements in or omissions from the Offer Documents; and
(iii) the Offer Documents otherwise comply with the Corporations Act and are not misleading or deceptive (including by omission);
(h) consider Slater & Gordon’s current and ongoing continuous disclosure systems including identifying all information which has been withheld from disclosure to ASX by Slater & Gordon in accordance with its continuous disclosure obligations;
(i) ensure that the due diligence process is documented to provide evidence of the enquiries have been made and the basis on which opinions have been formed;
(j) review the scope of work provided by ABL in relation to the legal due diligence and ensure that the scope and conduct of the legal due diligence is adequate based on the scope of work provided;
(k) co-ordinate and supervise the verification of statements contained in the Offer Documents in accordance with this Memorandum;
(l) report to the Board from time to time and provide a final Due Diligence Committee Report on the due diligence process to the Board and for the benefit of each member of the Due Diligence Committee (and their representatives) as contemplated by this Memorandum;
(m) following lodgement of the Offer Documents, continue to receive and assess information about new circumstances that come to a member’s attention and which may necessitate the issue of supplementary disclosure in accordance with clause 12; and (n) retain due diligence materials (including minutes, reports and verification notes) for an appropriate period of time.
5.4 Reporting Persons
To provide for an efficient and expert enquiry system, the Due Diligence Committee will delineate and delegate the task of investigating and reporting on specified identified issues to specific members and others selected by the Due Diligence Committee (“Reporting Persons”).
The roles of each Reporting Person are as follows:
(a) ABL will:
(i) recommend and provide advice on an appropriate due diligence system;
(ii) provide Australian legal advice on the AREO, Offer Documents and legal matters arising in connection with the due diligence process;
(iii) undertake due diligence in relation to legal matters in accordance with the work program agreed with the Due Diligence Committee, the Underwriters and Greenhill, and report to Slater & Gordon and the Due Diligence Committee (including the Underwriters and Greenhill as observers) on that review;
(iv) maintain a register of material issues;
(v) conduct a review of Slater & Gordon’s continuous disclosure system, and a review of Slater & Gordon’s Board minutes since 5 February 2014 in conjunction with a review of ASX disclosures and all correspondence between Slater & Gordon and ASIC and ASX during that time, and, where necessary, highlighting matters and receiving confirmation from Slater & Gordon that those matters were not of a nature that Slater & Gordon was relying on any carve-outs to the ASX Listing Rule 3.1 that would require disclosure under section 708AA of the Corporations Act, and report to the Due Diligence Committee on that review;
(vi) review responses from Slater & Gordon management to the Due Diligence Questionnaire (as defined below);
(vii) review and comment on successive drafts of the Offer Documents, including the final drafts;
(viii) coordinate the verification process; and
(ix) provide a written Legal Due Diligence Report and a written opinion/signoff on the Offer Documents and the due diligence process relating to the AREO (which will also be provided to, and may be relied upon by, the Underwriters), except ABL will express no opinion on any acquisition advice provided in relation to Slater & Gordon’s proposed acquisition of Quindell.
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5.5 Conduct
Subject to this section 5, the conduct of the Due Diligence Committee will be based on the following principles:
(a) the due diligence process must ensure that all appropriate steps are taken to ensure that the Offer Documents are true and not misleading and that there are no material omissions (where applicable);
(b) all reports, sign-offs and opinions provided to the Due Diligence Committee are provided to, and may be relied on by, the Board, all members of the Due Diligence Committee, the Underwriters and Greenhill;
(c) each member of the Due Diligence Committee will participate in the due diligence process having regard to their area of skill, knowledge, expertise and their accepted area of responsibility. Where a member lacks particular expertise on a matter, they may rely upon those members with the expertise (and those with expertise may rely on another member with expertise to the extent a matter has been specifically delegated to the latter);
(d) each member has an individual responsibility to decide whether the material provided to the Due Diligence Committee is adequate for the members, the Board, the Underwriters and Greenhill to rely upon and may request that further information be supplied to the Due Diligence Committee or changes be made to the Offer Documents;
(e) each member should raise with other members any matter that they believe requires investigation (or further investigation) as part of the due diligence process;
(f) each member must apply an independent and inquiring mind to the Offer Documents and the due diligence inquiries;
(g) all decisions of the Due Diligence Committee must be made unanimously. If a decision is not able to be made unanimously, it should be referred to the Board for determination;
(h) copies of all materials provided to and produced by the Due Diligence Committee (including minutes of all meetings, expert reports, verifications questions and answers) will be provided to the Board, each member of the Due Diligence Committee, the Underwriters and Greenhill;
(i) each Due Diligence Committee member will:
(i) apply an independent and inquiring mind to the Offer Documents and due diligence inquiries;
(ii) satisfy themselves that reliance on work done by others is reasonable in the circumstances;
(iii) raise any matters not adequately dealt with or material departures from this Memorandum; and
(j) each member must satisfy themselves of the following:
(i) all potentially material issues identified during the course of the due diligence process are appropriately disclosed in the Offer Documents, if the content requirements set out in the Corporations Act requires such disclosure, and that there are no outstanding issues at the end of the due diligence process;
(ii) the member has no query concerning any statement included in, or any matter omitted from, the Offer Documents or the material generated in the course of implementing the due diligence process;
(iii) to the best of the knowledge of the member, the Cleansing Notice when read together with the Offer Documents contains all the information required to satisfy the content requirements set out in the Corporations Act including the Disclosure Exemption; and
(iv) to the best of the knowledge of the member, there is no statement in the Offer Documents that is misleading or deceptive (including by omission), or which is likely to be misleading or deceptive (including by omission) and every expert or other person whose statements are relied upon is competent and trustworthy to make those statements.
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6.3 Enquiry and reporting
This involves:
(a) relevant experts carrying out due diligence enquiries on matters specified in the scoping stage and providing reports to the Due Diligence Committee;
(b) analysis of disclosures required in the Offer Documents;
(c) each Reporting Person providing an appropriate “sign off” opinion addressed to the Board, each member of the Due Diligence Committee, the Underwriters and Greenhill so that the opinion can be relied on by the Board, each member of the Due Diligence Committee, the Underwriters and Greenhill;
(d) a separate Due Diligence Committee Report being submitted to, and formally adopted by, the Due Diligence Committee for the due diligence process.
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6.6 Reporting – Due Diligence Committee Report
The party responsible for managing the due diligence process, namely ABL, will maintain separate files of all reports received in relation to the due diligence process.
The Due Diligence Committee will, upon completion of the due diligence process, give a consolidated Due Diligence Committee Report to the Board. The drafting of this Due Diligence Committee Report should commence early in the due diligence process. The Due Diligence Committee Report will be signed by all members of the Due Diligence Committee and be addressed to, and provide reliance to, each member of the Due Diligence Committee, the Underwriters, Greenhill and to the Board.
6.7 Confidentiality
Confidentiality and security of sensitive non-public information must be emphasised to all due diligence team members.
All reports and materials produced for circulation and consideration by the Due Diligence Committee are not to be reproduced or used for purposes other than:
(a) that a member or observer to the Due Diligence Committee or their respective representatives may provide them to its legal advisers on a confidential basis;
(b) for purposes which directly relate to the preparation of the Offer Documents or the due diligence process (which includes disclosure to a person who is a related body corporate of a person or who in the ordinary course of the business of that person has access to the papers and records of the other person and on the basis that the person will make no further disclosure of it);
(c) as are required to be produced by law or regulation, a court, the ASX Listing Rules or the requirements of any regulatory or self-regulatory authority;
(d) as permitted to be disclosed by any Underwriting Agreement entered into by Slater & Gordon and the Underwriters;
(e) as needed by a member or observer to the Due Diligence Committee or their respective representatives in relation to the Entitlement Offer and any actual or potential claim or proceedings against, by or involving the member or observer in relation to the issue of the Offer Documents or the due diligence process or in relation to any regulatory or self-regulatory investigation, inquiry or hearing; or
(f) where the reports or materials:
(i) are in or become part of the public domain other than through a breach of any paragraph of this document;
(ii) were already in the lawful possession or were already lawfully known to a member or observer to the Due Diligence Committee or any of their representatives at the time of receipt by that member or observer to the Due Diligence Committee or their representatives in connection with the Offer; or
(iii) were disclosed to a member or Observer to the Due Diligence Committee or their representatives by a third party who, to that member, observer or representative’s knowledge, is not in breach of any obligation of confidentiality in disclosing such report or material,
without the consent of the person responsible for production of the report or material.
The obligations under this section 6.7 apply until, and terminate upon, the earlier of the date the relevant information is no longer confidential (in accordance with each of the points listed above) and the date which is 2 years from the date of adoption of this Memorandum.
7 Materiality
...
7.4 Recording due diligence decisions
Where the Due Diligence Committee decides that a financial or any other issue or item raised need not be included in the Offer Documents on the grounds of materiality, such decisions and their bases should be recorded in the minutes of the relevant Due Diligence Committee meeting.
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10 Verification
10.1 Purpose
Verification of the accuracy of statements in the Offer Documents will be carried out by Slater & Gordon and ABL under the supervision of the Due Diligence Committee, and is an important element of the due diligence process. All statements in the Offer Documents must be verified.
The objective of the verification process is to provide reasonable assurance that there are no statements in the Offer Documents that are misleading or deceptive. The basic approach is to determine whether there is adequate documentation and support for all the information contained in the Offer Documents. All members of the Due Diligence Committee should be satisfied that this has occurred.
As an incidental matter, verification can assist in minimising the risk of omissions of required material from the Offer Documents. However, this function should be a primary objective of the due diligence process, which involves, among other matters, checking that the Offer Documents are regularly updated to incorporate information discovered during the due diligence process.
ABL will allocate responsibility amongst members of the Due Diligence Committee for the verification of all statements in the Offer Documents.
At the conclusion of the verification process, ABL will prepare a Verification Report that will contain verification notes on each statement contained in the Offer Documents. The Due Diligence Committee must then satisfy itself that all questions in the due diligence checklist and questionnaires have been appropriately dealt with.
10.2 Verification Procedure ABL will identify:
(a) the material statements in the Offer Documents;
(b) the persons responsible for verifying those statements; and
(c) where possible, the sources of verifying material.
ABL will also conduct a random audit of the verification materials (in relation to at least 15 material statements in the Offer Documents) to ensure the integrity of the verification process and will report to the Due Diligence Committee on the results of that audit. In respect of the random audit, ABL will ascertain:
(a) whether responses have been provided;
(b) whether those responses (on their face) appear to be appropriate responses to verify the underlying statement; and
(c) where a document was stated to be attached, a document was attached and that document (on its face) appears to be an appropriate document to verify the underlying statement.
If there is doubt as to the verification materials, ABL will liaise with the person responsible for verifying the statement to produce satisfactory verification materials. ABL will seek the assistance of other Due Diligence Committee members where it is not in a position to determine if certain verification materials, on their face, are adequate. If the random 'audit' results in ABL forming the opinion that verification by a particular person is not adequate, ABL will advise the Due Diligence Committee. The Due Diligence Committee may then request ABL to undertake a more comprehensive 'audit' of the verification materials supplied by that person.
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10.4 Verifying Materials
Where possible, statements must generally be verified by reference to independent objective evidence and by cross referencing to source documents. Where that is not possible or practicable, the person verifying the statement must be satisfied that the level of verification is appropriate and must refer any areas of doubt to the Due Diligence Committee.
Where statements as to future matters are made, evidence must be gathered to demonstrate the grounds on which that statement has been made with a view to establishing that those grounds are reasonable.
The types of documents that are generally used to verify statements are:
(a) due diligence reports;
(b) government and industry reports;
(c) experts reports;
(d) material contracts;
(e) a historical outline of Slater & Gordon, its business and structure;
(f) the annual business plan and projections of Slater & Gordon;
(g) consents to be named (if applicable);
(h) secretarial records of Slater & Gordon;
(i) the terms of issue of the new securities;
(j) constitution of Slater & Gordon; and
(k) board minutes.
10.5 Statements of Individuals
Frequently there will be statements which are not capable of being verified by a document. In such cases, they must be verified by a written statement signed by the appropriate person on which reliance is being placed. There must be reasonable grounds for each such statement and those grounds should be articulated in the verification. A written verification note should in each case be prepared which contains the name of the person making the statement, their position, the matter being verified and should be signed and dated by the person making the statement.
Procedural history
Hall v Slater & Gordon Proceedings
22 On 12 October 2016, Mr Hall commenced a representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth) in the Federal Court of Australia against Slater & Gordon (the ‘Hall v Slater & Gordon Proceedings’) by filing an Originating Application in which he claimed by way of substantive relief (on his own behalf and on behalf of group members):
(1) an order pursuant to s 1317HA of the Corporations Act that Slater & Gordon compensate Mr Hall and other group members for the loss allegedly suffered by them as a result of an alleged contravention by Slater & Gordon of s 674(2) of the Corporations Act;
(2) further or alternatively, an order that Slater & Gordon pay to Mr Hall and other group members statutory compensation pursuant to s 1041I of the Corporations Act, s 12GF of the Australian Securities and Investment Commission Act 2001 (Cth) (the ‘ASIC Act’) and/or s 236 of the Australian Consumer Law, being Schedule 2 to the Competition and Consumer Act 2010 (Cth) (the ‘Australian Consumer Law’);
(3) further or alternatively, an order under ss 1325(2) and 1325(5)(b) of the Corporations Act that Slater & Gordon refund all monies paid by Mr Hall and group members to Slater & Gordon pursuant to the Entitlement Offer.
23 The contraventions alleged by Mr Hall in the Hall v Slater & Gordon Proceedings set out in the preceding paragraph were alleged by Mr Hall to have arisen from Slater & Gordon’s conduct in misleading the market by failing to disclose information of which Slater & Gordon was or ought to have been aware on four occasions in 2015.
24 On 2 December 2016, at a case management hearing in the Hall v Slater & Gordon Proceedings:
(1) Slater & Gordon stated to the Court (through its Senior Counsel) that Slater & Gordon agreed to provide two categories of initial discovery that had been sought by Mr Hall, which were:
(a) a copy of the purchase agreements through which the Professional Services Division (the ‘PSD’) was acquired by Slater & Gordon and any related side letters or agreements; and
(b) Slater & Gordon Board papers related to the acquisition of PSD, particularly in relation to approval of the acquisition by the Slater & Gordon Board; and
(2) the Court indicated that it did not require that matter to be formalised in an order.
25 On 2 February 2017, Mr Hall and Slater & Gordon adopted an Electronic Document Management Protocol (the ‘EDM Protocol’) for the purposes of the Hall v Slater & Gordon Proceedings.
26 Between 14 February 2017 and 15 March 2017, relevantly to this proceeding, the Produced Documents were produced for inspection electronically by Slater & Gordon to Mr Hall pursuant to the EDM Protocol. There is insufficient evidence to indicate whether all the Produced Documents were initially privileged. However, in relation to the Opinion Letter, there is no evidence to suggest that it was a communication that was privileged or confidential to Slater & Gordon or that any claim of privilege was made in relation to the Opinion Letter when produced to the Court. This will be relevant when I address ‘associated waiver’ in relation to the Opinion Letter.
27 The parties in the Hall v Slater & Gordon Proceedings settled the dispute and entered into a Settlement Deed, dated 21 September 2017, which was entered into by Slater & Gordon, Mr Hall (in his personal capacity and as a representative for group members of the Hall v Slater & Gordon Proceedings), and various lenders and insurers in respect of all disputes between the parties in respect of certain “Released Persons” (the ‘Settlement Deed’). However, the Settlement Deed provided that its terms did not prevent “Shareholder Claimants” from pursuing “Permitted Claims”.
28 Under the Settlement Deed, Permitted Claims are those claims which are brought against a third party who is not a Released Person (as defined in the Settlement Deed), arising out of or in connection with a claim against a Released Person, and which are apportionable claims by operation of the proportionate liability legislation. ABL was not a Released Person under the Settlement Deed.
29 On 25 September 2017, the Court made an order (the ‘Harman Release Order’) that:
[P]ursuant to ss.23, 33ZF and/or 37P of the [Federal Court of Australia Act 1976 (Cth)],the Applicant and all Group Members be released from the implied undertaking not to use documents discovered to them or otherwise produced to the Applicant (or Maurice Blackburn [the solicitors for Mr Hall]) in the present proceedings to the extent necessary to enable them (or any of them) to commence and prosecute “Permitted Claims” (as defined in the Deed of [S]ettlement which is Confidential Annexure AJW-34 to the Watson Affidavit (Settlement Deed)).
30 The Harman Release Order was:
(1) a condition precedent to the effectiveness of the Settlement Deed;
(2) agreed to by Slater & Gordon in the Settlement Deed; and
(3) consented to by Slater & Gordon at the hearing of 25 September 2017.
31 Orders were made regarding the settlement of the Hall v Slater & Gordon Proceedings on 25 September 2017. Some of the orders (but not the Harman Release Order) were vacated on 8 November 2017 and 16 November 2017 and settlement was finally approved by the Court on 14 December 2017.
Hall v ABL Proceedings
32 On 17 September 2019, Mr Hall commenced the Hall v ABL Proceedings in which he claimed by way of substantive relief (on his own behalf and on behalf of group members):
(1) an order that ABL pay to Mr Hall and group members statutory compensation pursuant to s 1041I of the Corporations Act, s 12GF of the ASIC Act and s 236 of the Australian Consumer Law; and
(2) damages.
33 The relief claimed by Mr Hall against ABL in the Hall v ABL Proceedings arises as a consequence of the alleged contravention by ABL of s 1041H of the Corporations Act, s 12DA of the ASIC Act, s 18 of the Australian Consumer Law and a common law duty of care alleged to be owed by ABL to Mr Hall and other group members (the ‘Alleged ABL Contraventions’).
34 The Alleged ABL Contraventions are alleged by Mr Hall in the Hall v ABL Proceedings to have arisen from statements in the Opinion Letter (and what is alleged to be an unsigned version of the Opinion Letter sent to the Board prior to 29 March 2015 (the ‘Unsigned Opinion Letter’)) to the effect that:
(1) ABL believed that Slater & Gordon and the Entitlement Offer satisfied the conditions in s 708AA(2) of the Corporations Act;
(2) there was no matter known to ABL that would cause ABL to believe, and ABL did not believe, that the Cleansing Notice does not comply with s 708AA(7) of the Corporations Act or was defective within the meaning of s 708AA(11) of the Corporations Act;
(3) nothing had come to ABL’s attention that caused ABL to believe, and ABL did not believe, that the Offer Documents contain any statement that is false, misleading, or deceptive, or likely to mislead or deceive (including by way of statements included in or omissions from the Offer Documents), having regard to the content requirements of s 708AA(7) of the Corporations Act; and
(4) nothing had come to ABL’s attention that caused ABL to believe, and ABL did not believe, that the Due Diligence Process, and the scope of the due diligence inquiries as described in the DDPM:
(a) had not been implemented, completed or conducted, as the case may be, in accordance with the terms of the DDPM in all material respects (or that there were any material deviations from it not approved by the DDC);
(b) would not be appropriate to ensure that the Offer Documents met the disclosure requirements of s 708AA(7) of the Corporations Act;
(c) should constitute the taking of reasonable steps for the purposes of ss 1308(4), 1308(5) and 1309(2) of the Corporations Act, and to ensure that the Offer Documents are true and not misleading or deceptive and that there are no omissions from the Offer Documents that were required to be included by the Corporations Act,
(collectively, the ‘Impugned ABL Opinions’).
35 The Impugned ABL Opinions are alleged by Mr Hall in the Hall v ABL Proceedings to have been made without a reasonable basis and therefore to amount to the Alleged ABL Contraventions.
Access to the Relevant Material
36 On 12 November 2019, the solicitors for ABL sent a letter to the solicitors for Slater & Gordon in which they sought, on ABL’s behalf, that Slater & Gordon release ABL from any obligation of confidence that would otherwise prevent ABL from:
(1) disclosing the Relevant Material obtained by ABL in connection with ABL’s legal work to the solicitors and counsel briefed for ABL in the Hall v ABL Proceedings and any witnesses called by ABL (including experts);
(2) using the Relevant Material to consider, together with ABL’s legal advisers, whether there may be any defences (including apportionment defences) or cross-claims available to ABL, which defences or cross-claims may include allegations that Slater & Gordon or its directors or officers are liable in respect of the matters raised in the Hall v ABL Proceedings and advancing any such defences or cross-claims;
(3) serving the Relevant Material on other parties as evidence in the Hall v ABL Proceedings;
(4) tendering the Relevant Material into evidence or otherwise referring to it in Court in any pleadings, evidence, cross-examination or submissions; and
(5) otherwise using the Relevant Material in the course of defending the Hall v ABL Proceedings or negotiating their resolution.
37 On 20 November 2019, the solicitors for Slater & Gordon sent a letter to the solicitors for ABL in which they stated that:
We are instructed that our client does not object to ABL providing documents and information it holds in connection with its retainer in VID1213/2016, including material that may be the subject of claims for privilege by our client (Relevant Material), to solicitors and counsel briefed by ABL in this Proceeding:
- for the purpose of ABL obtaining advice in relation to its defence and the claims made against it in the proceeding; and
- on the basis that ABL provides access to the Relevant Material, and that solicitors and counsel briefed on its behalf continue to treat the Relevant Material, in a manner that is not inconsistent with the maintenance of our client’s claim for privilege.
Our client otherwise maintains its claim to privilege over the Relevant Material.
Our client is open to revisiting its privilege claims at the appropriate time and potentially in respect of specific documents identified by ABL as being required to support its defence in the proceeding.
For the avoidance of doubt, our client does not release ABL from any obligation of confidence that would otherwise prevent ABL from using the Relevant Material as set out in paragraph 7 of your letter (with the exception of the provision of it to solicitors and counsel briefed by ABL in the Proceeding on the basis set out in this letter).
38 On 27 November 2019, the solicitors for ABL sent a letter to the solicitors for Slater & Gordon in which they:
(1) sought clarification of the scope of the consent proffered by Slater & Gordon in the passage set out in the preceding paragraph; and
(2) stated that confidentiality and privilege in the Relevant Material has been lost as a result of Slater & Gordon’s conduct in permitting, as part of the settlement of proceedings against it, Mr Hall to use in proceedings against ABL information disclosed by Slater & Gordon to Mr Hall.
39 In further correspondence between the solicitors for Slater & Gordon and the solicitors for ABL, Slater & Gordon indicated that it:
(1) did not make a claim for privilege or confidentiality over the Produced Documents;
(2) maintained the position that all communications between Slater & Gordon and ABL entered into in the course of ABL’s legal work remained privileged and confidential save for the Produced Documents;
(3) did not otherwise accept that there had been any waiver of or loss of any confidentiality otherwise attaching to those communications;
(4) consented only to ABL’s solicitors and counsel being provided with a copy of Slater & Gordon’s file held by ABL for the purpose of ABL obtaining advice in relation to its defence and the claims made against it in the Hall v ABL Proceedings and on the express basis that the documents and information be treated in a manner that is not inconsistent with Slater & Gordon’s claim for privilege and confidence; and
(5) failed to consent to the material otherwise being used in the ways set out in ABL’s letter of 12 November 2019 (to which I referred earlier).
CONTENTIONS OF ABL IN RELATION TO WAIVER
40 It was contended by ABL that:
(1) the information contained in the Produced Documents, including the Opinion Letter and the Unsigned Opinion Letter:
(a) forms the basis of the claim brought by Mr Hall against ABL in the Hall v ABL Proceedings such that Mr Hall would not be able to maintain the claims made in the Hall v ABL Proceedings without that information and the right to use it in proceedings against ABL; and
(b) is relied upon by Mr Hall in support of the claims advanced by him against ABL in the Hall v ABL Proceedings; and
(2) Slater & Gordon’s conduct in:
(a) discovering the Produced Documents to Mr Hall in the Hall v Slater & Gordon Proceedings; and
(b) settling the Hall v Slater & Gordon Proceedings on the basis that the Harman Release Orders would be a condition precedent to the settlement; and
(c) consenting to the Harman Release Orders so as to permit the Produced Documents to be used by Mr Hall in proceedings other than the Hall v Slater & Gordon Proceedings (including the Hall v ABL Proceedings),
enabled or materially assisted Mr Hall to assert the claims made by him against ABL in the Hall v ABL Proceedings; and
(3) Slater & Gordon’s conduct is therefore inconsistent with Slater & Gordon asserting that ABL is restrained by any obligation of confidence from disclosing or using the Relevant Material in the ways contemplated by prayers 1(d) to (j) of the Originating Application.
41 Then it was further contended that the statements in s 11 of the DDPM:
(1) had effect as a waiver by Slater & Gordon of such rights as it may otherwise have had to prevent ABL from accessing the documents referred to in s 11 of the DDPM for the purpose of defending any actual or potential claim against it arising out of or in connection with the Offer Documents or the Entitlement Offer; and
(2) is therefore inconsistent with Slater & Gordon asserting that ABL is restrained by any obligation of confidence from disclosing or using the Relevant Material in the ways contemplated by prayers 1(d) to (j) of the Declaration sought.
42 ABL also put a separate (although related) argument on the basis of s 11 of the DDPM. Section 11 of the DDPM expressly authorised ABL (which was a member of the DDC) to have access to the files for the purpose of defending any actual or potential claim against them arising out of or in connection with the Offer Documents or the Entitlement Offer.
43 On the basis that the claim made by Mr Hall in the Hall v ABL Proceedings is a claim against ABL arising out of or in connection with the Offer Documents or the Entitlement Offer, it was submitted by ABL that Slater & Gordon has consented to ABL having access to “the files” for the purpose of defending Mr Hall’s claims. It was submitted this includes each of the uses proposed in prayers 1(d) to (j) of the Originating Application.
44 ABL referred to “the files” as the documents referred to in s 11 of the DDPM as (it emphasised):
Reports, comments on those reports and revisions made to them, sign-offs and opinion letters, copies of the verification notes and supporting material and minutes of all Due Diligence Committee meetings, documents tabled at those meetings, all documents generated by Slater & Gordon as part of the due diligence process and any documents which are material to the due diligence process…
45 ABL observed that the breadth of the definition of “the files” was to be noted, particularly the emphasised passage. I will return to this observation later.
46 On 6 December 2019, the Court made an order (‘Order 2’) in the Hall v ABL Proceedings that ABL serve a discovery list of certain categories of documents identified in Schedule A to the order:
SCHEDULE A
1. All documents in the Due Diligence Committee due diligence files which, under section 11 of the Due Diligence Planning Memorandum (DDPM), were required to be collated and retained for at least 7 years including, without limitation, the DDPM; any reports delivered to the DDC and any comments and revisions made to those reports; any sign-offs and opinion letters delivered to the DDC; copies of the verification notes and supporting materials; minutes of all Due Diligence Committee Meetings and documents tabled at those meetings; all documents generated by Slater & Gordon as part of the due diligence process; and any other documents material to the due diligence process.
2. All documents comprising Verifying Materials as defined in section 10.4 of the DDPM, Statements of Individuals as defined in section 10.5 of the DDPM, and the results of the random audit of verification materials required by section 10.2 of the DDPM.
3. All drafts of, comments on, and correspondence regarding the Offer Documents (as defined in the DDPM and the Arnold Bloch Leibler (ABL) Legal Sign-Off Letter dated 29 March 2015), the ABL Due Diligence Questionnaire, and the Underwriters Management Due Diligence Questionnaire (both as annexed to ABL’s Legal Due Diligence Report) that were circulated or exchanged among DDC members, observers, and/or invitees.
4. The register of material issues as defined in and required by sections 5.3(e) and 5.4(a)(iv) of the DDPM.
5. Records of any decisions relating to materiality as contemplated in section 7.4 of the DDPM.
47 It was submitted by ABL that paragraph 1 of Schedule A to the orders of 6 December 2019 called for the files referred to in s 11 of the DDPM to be discovered. It was submitted by ABL that paragraphs 2 to 5 of Schedule A called for categories of documents referred to or contemplated by other parts of the DDPM that are “documents generated by Slater & Gordon as part of the due diligence process and any documents which are material to the due diligence process” and therefore fall within the broad definition of “the files” in s 11 of the DDPM.
48 It was submitted by ABL that prayer 1(c) of the Originating Application covers the documents that respond to the discovery order made on 6 December 2019. Therefore, it was submitted that the documents the subject of prayer 1(c) fall within the definition of the files that ABL is permitted to access and use for the purpose of defending the Hall v ABL Proceedings by reason of the consent given by Slater & Gordon in s 11 of the DDPM.
49 ABL then submitted that the documents referred to in prayer 1(c) are a subset of the documents covered by prayers 1(a) and (b) of the Originating Application. It was submitted that it cannot have been the parties’ intention nor would it be practically feasible for ABL to be limited to using the documentary “files” described in s11 of the DDPM to defend the Hall v ABL Proceedings in isolation from other relevant information acquired in the course of its retainer. For example, it was submitted that to “use” the documentary files in any effective manner it would be reasonably necessary for ABL’s solicitors to obtain instructions from ABL as to conversations between representatives of ABL and Slater & Gordon and to review and potentially use in the proceedings other relevant written communications.
50 In the end, ABL contended that the consent granted in s 11 of the DDPM goes beyond the documents themselves and extends to all relevant communications made in the course of ABL’s retainer, including each of the categories of information in prayers 1(a) to (c) of the Originating Application.
51 Therefore, it was submitted by ABL that no breach of any obligation of confidence owed by ABL to Slater & Gordon would arise from or, alternatively, Slater & Gordon would not be entitled to restrain the disclosure, and use by ABL of, the Relevant Material in the ways contemplated by prayers 1(d) to (j) of the Originating Application.
RELEVANT PRINCIPLES
52 For the purposes of this proceeding, I do not need to elaborate on the limits of the duty of confidence owing by a solicitor to a client and the general principles of legal professional privilege, and the use that may be made of confidential information.
53 However, I make this initial observation.
54 The desire to use confidential information will normally be motivated by a self-interest as it is in this proceeding: ABL seek to use confidential information in order to pursue or protect their legal rights against other parties and to defend itself.
55 In the context of protecting confidential information (not protected by legal professional privilege) a balance is to be made between the legitimate interests of Slater & Gordon in seeking to keep the confidential information suppressed, and the legitimate interests of ABL to make use of the confidential information in the various ways sought in the Originating Application.
56 Of course, a client may consent either expressly or implicitly to their lawyer disclosing confidential information, and various principles will apply to determining which such consent has been given.
57 Where though the confidential information is also the subject of legal professional privilege (as is the situation in this proceeding relating to the Relevant Material), no balancing of interests of the lawyer and client arises. Once the privilege is established, then the confidentiality which Slater & Gordon seeks is to be protected, absent waiver.
58 As Lord Taylor CJ said in R v Derby Magistrates’ Court Ex p B (1996) AC 487 (‘Derby’), at 508-9:
… no exception should be allowed to the absolute nature of legal professional privilege, once established.
59 The mere fact (without more) that a solicitor faces a civil claim from a third party (other than the client) does not mean that the solicitor is entitled to disclose the client’s privileged information even if required for the solicitor’s defence. This is on the assumption that there has been no waiver, or no implied term in the retainer between the solicitor and the client allowing disclosure in these circumstances. Circumstances would be different if, for instance, a plaintiff (being a client) in proceedings opens up the question of the authority of her lawyers to act as they did on a previous occasion— see Benecke v National Australia Bank (1993) 35 NSWLR 110 (‘Benecke’).
60 It is not to be forgotten that a solicitor will have both a contractual and equitable duty to keep the information given to her or him by a client confidential or secret. This relates to all information obtained by the solicitor in that capacity, irrespective of its source. Of course, a client can expressly or impliedly consent to their solicitor’s disclosure of confidential information. The scope of the duty of confidence and the scope of legal professional privilege overlap — confidentiality is a pre-requisite of legal professional privilege. Without the implied or express consent of the client, a lawyer who discloses confidential information may breach the confidence and privilege.
61 ABL’s case is that Slater & Gordon’s prior conduct is inconsistent with Slater & Gordon’s present insistence that ABL refrain from taking the steps set out in the Originating Application. ABL accepts that it is obliged to maintain any confidentiality in communications entered into by ABL and Slater & Gordon in the course of ABL’s retainer to perform the relevant work unless Slater & Gordon’s right to require ABL to do so has been lost.
62 The test for whether such a right has been lost was stated by a majority of the High Court (Gleeson CJ, Gaudron, Gummow and Callinan JJ) in Mann v Carnell (1999) 201 CLR 1 (‘Mann’) at [29]), as being whether there has been conduct by the client to whom the obligation of confidence is owed that is inconsistent with them insisting on the maintenance of the confidentiality. This test may apply even in the circumstances concerning the issue of waiver in relation to confidentiality generally: see Richards v Kadian [2005] 64 NSWLR 204.
63 The High Court identified, at [28], an example of inconsistent conduct of this nature to arise when a lawyer is required to use a client’s otherwise confidential information in order to defend an allegation made against the lawyer by the client (citing Lillicrap v Nalder & Son (a firm) [1993] 1 WLR 94; [1993] 1 All ER 724). It is well-established that it is inconsistent with the client’s conduct in making such an allegation for the client also to prevent the lawyer from using the client’s confidential information to defend himself or herself. The effect of the inconsistency is that the solicitor cannot enforce the lawyer’s obligation of confidence so as prevent the lawyer from disclosing or using information relevant to the client’s allegation in order to defend against it.
64 The High Court formulated the test for waiver as follows (at [29]) (footnotes omitted):
Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that the waiver is “imputed by operation of law”. This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege. Thus, in Benecke v National Australia Bank, the client was held to have waived privilege by giving evidence, in legal proceedings, concerning her instructions to a barrister in related proceedings, even though she apparently believed she could prevent the barrister from giving the barrister’s version of those instructions. She did not subjectively intend to abandon the privilege. She may not even have turned her mind to the question. However, her intentional act was inconsistent with the maintenance of the confidentiality of the communication. What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.
65 In DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499, Allsop J (as his Honour then was) usefully summarised the position as to implied waiver as follows, stressing that inconsistency is the touchstone, not any broad concept of fairness, although inconsistency may be informed by considerations of fairness:
11 At this interlocutory stage in the proceedings, the common law governs the disposition of the issues raised by the notice of motion: Mann v Carnell at 12 [27], 16-17 [41], 45 [143] and 45 [144]; Esso Australia Resources Ltd v Commissioner of Taxation Cth (1999) 201 CLR 49 at 59 [17], 59-60 [18] to 63 [28], 73-74 [64]; and Northern Territory v GPAO (1999) 196 CLR 553.
12 Waiver at common law occurs where the party entitled to the privilege performs an act which is inconsistent with the maintenance of the confidentiality, assessment of such inconsistency being informed, where necessary, by considerations of fairness; though the assessment is not by reference to some overriding principle of fairness operating at large: Mann v Carnell at [29].
…
14 The overriding guiding principle is that stated in Mann v Carnell at [29]. The expression of that principle and the subordination of the notion of “fairness” to possible relevance in the assessment of the inconsistency between the act and the confidentiality of the communication produces, it seems to me, an important change to the existing law. In order to explain why I think this to be so it is necessary for me to examine the pre-existing authorities. This will also illuminate the operation of the principle as expressed in Mann v Carnell at [29], and the importance of the recognition that it is the inconsistency between the relevant act of the holder of the privilege and the maintenance of the confidence that is essential, not a broad balancing process based on fairness. (emphasis in original)
66 It is to be recalled that legal professional privilege is an important common law right. Implied waiver of that right is not to be lightly imposed. The party challenging the privilege claim carries the onus of demonstrating any asserted waiver: Archer Capital 4A Pty Ltd as trustee for the Archer Capital Trust A4 v Sage Group plc (No 2) (2013) 306 ALR 384 at [100] citing New South Wales v Betfair Pty Ltd (2009) 180 FCR 543 at [54].
67 In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303 (‘Expense Reduction’) at [30], French CJ, Kiefel, Bell, Gageler and Keane JJ (citing Mann at [29]) stated that the Court:
… will impute an intention [to waive privilege] where the actions of a party are plainly inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. (my emphasis)
68 The High Court observed that the law looks chiefly to the conduct and position of the person who is said to have waived privilege in order to see whether that person has approbated so as to prevent him or her from reprobating: Expense Reduction at [31] citing Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305 at 326.
69 The enquiry is not simply whether ABL as a respondent in the Hall v ABL Proceedings is able to obtain a fair trial with the constraint it has imposed upon it by any valid claim for legal professional privilege. As Lord Taylor CJ stated in Derby, no exception can be made to the absolute nature of legal professional privilege once it is established. Then there is, as I have alluded to, a difference between the obligation of confidence and the existence of legal professional privilege. Communications protected by confidentiality are more extensive than those that are privileged, so any loss of privilege may not automatically destroy that obligation of confidence if it has arisen independently of the privilege. Of course, non-privileged confidential information may be subject to compulsion of disclosure, as the public interest may prevail over the private duty in respect of confidence.
70 Then it is important to recall that a document that records legal advice will be privileged notwithstanding that the document is communicated to a third party unless the communication to the third party constitutes a waiver of the privilege. For example, privilege may not be waived if the disclosure of the document to the third party was for a limited and specific purpose, and upon terms that the third party would treat the information disclosed as confidential: Goldberg v Ng (1995) 185 CLR 83 (cited by Gleeson CJ, Gaudron Gummow and Callinan JJ in Mann at [30]).
71 As I have indicated, if a client brings a professional negligence claim against solicitors, or otherwise invites the court to determine an issue relating to the conduct of the solicitors, the client cannot assert privilege to prevent the solicitors from deploying confidential material to the extent reasonably necessary to defend themselves. Lord Bingham in Paragon Finance Plc v Freshfields [1999] All ER (D) 251 gave a clear exposition of this principle:
When a client sues a solicitor who has formerly acted for him, complaining that the solicitor has acted negligently, he invites the court to adjudicate on questions directly arising from the confidential relationship which formerly subsisted between them. Since court proceedings are public, the client brings that formerly confidential relationship into the public domain. He thereby waives any right to claim the protection of legal professional privilege in relation to any communication between them so far as necessary for the just determination of his claim; or, putting the same proposition in different terms, he releases the solicitor to that extent from the obligation of confidence by which he was formerly bound. This is an implication of law, the rationale of which is plain. A party cannot deliberately subject a relationship to public scrutiny and at the same time seek to preserve its confidentiality. He cannot pick and choose, disclosing such incidents of the relationship as strengthen his claim for damages and concealing from forensic scrutiny such incidents as weaken it. He cannot attack his former solicitor and deny the solicitor the use of materials relevant to his defence. But, since the implied waiver applies to communications between client and solicitor, it will cover no communication to which the solicitor was not privy and so will disclose to the solicitor nothing of which he is not already aware.
72 Generally where a client has made a claim against a lawyer, the client’s waiver of its right to require the lawyer to keep its information confidential extends to all information that is relevant to the client’s suit or the lawyer’s defence. That includes facts and documents relating to the retainer pursuant to which the work the subject of the claim was done and potentially earlier retainers to the extent that information obtained in the earlier retainer may be relevant to the case against the lawyer.
73 In Lillicrap v Nalder & Son [1993] 1 All ER 724 at 729, Lord Dillon of the Court of Appeal said on this topic:
The waiver can only extend to matters which are relevant to an issue in the proceedings and, privilege apart, admissible in evidence. There is no waiver for a roving search into anything else in which the solicitor or any other solicitor may have happened to have acted for the clients. But the waiver must go far enough, not merely to entitle the plaintiff to establish his cause of action, but to enable the defendant to establish a defence to the cause of action if he has one. Thus, it would extend to matters under earlier retainers, as in the hypothetical example I have given, which established that the experience of the client was, to the knowledge of the solicitor, such that the solicitor was not in breach of duty as alleged.
74 In other professional relationships (such as a banker, doctors, and accountants), an adviser may be entitled to use information imported to them confidentially, if reasonably necessary for them to do so in protection of their own legitimate interests: see eg Tournier v National Provincial and Union Bank of England [1924] 1 KB 461; Duncan v Medical Practitioner’s Disciplinary Committee [1986] 1 NZLR 513; R v Institute of Chartered Accountants of England and Wales Ex p. Brindle [1994] BCC 297 at 312. However, the restriction imposed on lawyers goes beyond any equitable principle of confidence, and arises because of the privileged nature of the information, and hence it is necessary to apply the principles in Mann and show plain and relevant inconsistency.
CONSIDERATION
75 The Originating Application seeks declarations in relation to categories of information formulated (in prayers 1(a) to (c)) so as include information acquired by ABL in the course of ABL’s retainer by Slater & Gordon. Prayer 1(a) covers the client files maintained by ABL in relation to its work done for Slater & Gordon in connection with the Acquisition and the Entitlement Offer. Prayer 1(b) covers communications between ABL and Slater & Gordon made in the course of ABL’s retainer. Prayer 1(c) covers specified documents the subject of a discovery list served by ABL in the Hall v ABL Proceedings. As I have already indicated, there is likely to be very considerable overlap between the three categories.
Alleged instances of inconsistent conduct relating to the Produced Documents
76 Putting aside the operation of s 11 of the DDPM, the relevant conduct of Slater & Gordon in the Hall v Slater & Gordon Proceedings which is said to give rise to the relevant inconsistency is:
(1) discovering the Produced Documents to Mr Hall;
(2) settling the Hall v Slater & Gordon Proceedings on the basis that the Harman Release Order would be a condition precedent to the settlement; and
(3) consenting to the Harman Release Order.
Discovery of the Produced Documents
77 Focusing on the discovery of the Produced Documents, I find that Slater & Gordon’s initial production of the Produced Documents (and subsequent steps) contributed to the ability of Mr Hall to commence the Hall v ABL Proceedings. In fact, by reference to the particulars of the statement of claim in the Hall v ABL Proceedings, it is apparent that without some or all of the Produced Documents, the pleading could not have been formulated in its current form. Slater & Gordon has assisted Mr Hall in commencing and prosecuting the Hall v ABL Proceedings by the discovery of the Produced Documents in the first place. This would not have been sufficient or of any assistance in itself without the Harman Release Order, to which I will come.
78 I should mention that I do not characterise the production of the Produced Documents as voluntary because they were produced by agreement rather than formal order. In the context of the litigation whilst no formal order for production and inspection was made, Slater & Gordon had an obligation to discover those documents, and effectively under coercion. In any event, the Produced Documents were produced at the time for the limited purpose of the Hall v Slater & Gordon Proceedings. The production of the Produced Documents in itself could not amount to any relevant inconsistency (and certainly no relevant unfairness).
79 However, the production of the Produced Documents put in train the other steps said to give rise to the inconsistency. Therefore, the main focus of any inconsistency should be upon the settlement of the Hall v Slater & Gordon Proceedings and the Harman Release Order, keeping in mind the inconsistency must arise from the conduct of Slater & Gordon.
Entry into the Settlement Deed
80 So the next matter to focus upon is Slater & Gordon’s conduct of entering into the Settlement Deed, one term of which related to consenting to the Harman Release Order.
81 It is important to consider the alleged inconsistent conduct of Slater & Gordon in relation to the Settlement Deed in context, and not just by reference to the obligation to consent to a Harman Release Order. It is also important to understand exactly what Slater & Gordon were contractually obliged to consent to, and any relevant limitation upon this obligation.
82 Looking first at the Settlement Deed, the objectives of the relevant parties are significant:
2 Parties’ objectives
2.1 Slater and Gordon
Slater and Gordon’s objectives are to:
…
(d) ensure that Released Persons will be held harmless and immune from any adverse financial consequences if claims for indemnity or contribution are made by Third Party Respondents against Released Persons in relation to Shareholder Third Party Claims other than claims against Officers for conduct which is fraudulent or in bad faith;
…
2.2 Hall Proceeding Claimants
The Hall Proceeding Claimants’ objectives are to:
…
(b) preserve, consistent with this Deed, the ability to pursue Permitted Claims against Third Party Respondents in respect of conduct by those Third Party Respondents that is related to the conduct that is the subject of the Statement of Claim filed in the Hall Proceeding and which may give rise to liability on the part of Third Party Respondents in respect of losses suffered by the Hall Proceeding Claimants.
83 This was the bargain between the relevant parties. Then there are the “Conditions Precedent”:
3 Conditions precedent
3.1 Conditions Precedent
(a) Settlement as between all parties to this Deed is subject to and conditional upon each of the following conditions precedent being satisfied (Conditions Precedent):
…
(ii) the Court making the Harman Relief Orders;
…
3.2 Obligation to satisfy Conditions
Slater and Gordon must use all reasonable endeavours (other than waiver) to ensure that the Conditions Precedent are satisfied.
84 Then there are obligations in relation to the Court approval of the settlement of the Hall v Slater & Gordon Proceedings, relevantly:
5 Court Approval of Settlement of Hall Proceeding
…
(c) At the time of seeking Court Approval, or as otherwise necessary or appropriate, the Applicant will also make (and Slater and Gordon will consent to) an application for Harman Relief Orders and Settlement is conditional on the Court making the Harman Relief Orders.
(d) For the avoidance of any doubt, Slater and Gordon and its Officers do not consent to produce documents in answer to any subpoena or other coercive process that Hall Proceedings Claimants or any other parties may issue to obtain documents from them. Those matters will be dealt with on their merits in the future and all parties [sic] rights to oppose, consent, strike out, set aside, assert their privileges or challenge those processes are expressly reserved by Slater and Gordon and its Officers.
(e) The Parties agree that no further steps are to be taken in the Hall Proceeding, other than those provided for in this Deed or ordered by the Court.
85 Then there were the releases:
9 Releases
...
9.2 Third Party Respondent Releases and Indemnities
(a) The Hall Proceeding Claimants will not pursue a Claim against a Third Party Respondent unless it is a Permitted Claim.
(b) On and from the Effective Date, each Hall Proceeding Claimant fully releases Third Party Respondents from all Shareholder Third Party Claims which are not Permitted Claims.
(c) Any Hall Proceeding Claimant or Shareholder Claimant that commences a Shareholder Third Party Claim will proffer an undertaking (including an undertaking to the Court in that proceeding) to the effect that:
(i) the Shareholder Third Party Claim is subject to the operation of the Proportionate Liability Provisions; and
(ii) if a Court determines that any Shareholder Third Party Claim is not subject to the operation of the Proportionate Liability Provisions or those provisions are not taken into account in the exercise of the Court’s discretion to make orders sought by claimants in a Shareholder Third Party Claim, claimants will only seek damages and/or compensation in an amount not exceeding that which they would receive if the Proportionate Liability Provisions applied to the making of any such award, in a form to be agreed or, failing agreement, as determined by the Court.
(d) If any Third Party Respondent has a contractual right to be indemnified by a Released Person for liability in respect of a Shareholder Third Party Claim, provided such a right existed prior to the commencement of the Hall Proceeding, that Shareholder Third Party Claim will not be pursued by Hall Proceeding Claimants or Shareholder Claimants in any Shareholder Third Party Claim.
(e) Hall Proceeding Claimants and/or Shareholder Claimants will, in any settlement of Shareholder Third Party Claims:
(i) use their best endeavours to ensure that, as a condition of settlement, the relevant Third Party Respondent provides a release to Released Persons in respect of any contractual or other right the Third Party Respondent may have against them including for reimbursement of legal (or other) costs, if any, arising out of or as a result of a Shareholder Third Party Claim (Third Party Release); or
(ii) in the event that the relevant Third Party Respondent, best endeavours notwithstanding, refuses to provide the Third Party Release, seek and obtain orders from the Court pursuant to Court approval of the settlement of the Shareholder Third Party Claim, or as otherwise necessary or appropriate, to obtain the Third Party Release. For the avoidance of doubt, if the Court refuses to make orders granting the Third Party Release, the settlement will not take effect.
(f) For the avoidance of doubt, the provisions set out in sub-paragraphs (b), (c), (d) and (e) above will apply to the Hall Proceeding Claimants pursuant to this Deed and to all other Shareholder Claimants pursuant to the Shareholder Claimant Scheme.
86 Then there was the non-disparagement clause:
14 Non Disparagement
14.1 Subject to sub-clause 14.2, each Party severally promises to each of the other Parties to this Deed not to disparage the Parties and their Released Persons or any of them in respect of or in connection with:
(a) the facts, matters and circumstances the subject of the dispute;
(b) the facts, matters and circumstances giving rise to the dispute;
(c) the conduct or settlement of the dispute; or
(d) entry into this Deed.
14.2 This clause:
(a) does not apply to a person giving evidence in court; and
(b) does not prevent the Hall Proceeding Claimants from alleging and/or proving contraventions by Released Persons of the Corporations Act, the Australian Securities and Investments Commission Act 2001 (Cth), the ASX Listing Rules or other applicable laws and regulations in Permitted Claims against Third Party Respondents, regardless of whether the Released Persons are released from liability in respect of any such contraventions.
87 It can thus be observed that the Settlement Deed involved compromise; the Hall Claimants wanted the opportunity to pursue other permitted claims, whilst Slater & Gordon wanted (to the extent possible) to resist any further exposure to liability through indemnity or contribution proceedings. In this context, and in view of sub-clauses 5(c) and (d), clearly Slater & Gordon did not want to be forced to produce any further documentation other than that already subject to the proposed Harman Release Order. I accept that sub-clause 5(d) relates to the Hall v Slater & Gordon Proceedings, but in itself indicates a limitation on the extent of the Harman Release Order.
88 Then the Harman Release Order in the Settlement Deed was defined as:
… orders that the Hall Proceeding Claimants and Maurice Blackburn be released from the implied undertaking not to use documents discovered or otherwise produced to the Applicant (or to Maurice Blackburn) in the Hall Proceeding to the extent necessary to enable the Hall Proceeding Claimants (or any of them) to commence and prosecute Permitted Claims.
89 The proposed Harman Release Order was confined in two important ways: it only related to documents discovered or otherwise produced in the Hall v Slater & Gordon Proceedings up to 25 September 2017, and then only to the extent necessary to enable them to commence and prosecute “Permitted Claims”. Obviously, the Harman Release Order would not practically concern any documents which were discovered that were protected by legal professional privilege and not given up for inspection. It is important to remember that the ambit of the Harman undertaking and the scope of legal professional privilege have two distinct operations.
90 The Hall v ABL Proceedings do not fall within the category of a proceeding where a client is suing their lawyer and then seeking to prevent the lawyer from defending themselves by using the client’s confidential information or the situation that arose in Benecke. Nevertheless, it is said by ABL that similar considerations arise: Slater & Gordon’s past conduct in arming Mr Hall with the information necessary to sue ABL is said to be inconsistent with Slater & Gordon’s present insistence that ABL refrain from using Slater & Gordon’s information to defend itself in the Hall v ABL Proceedings.
91 The proceedings brought by Mr Hall against ABL is not the same as a client suing a solicitor or calling into question the actions of a solicitor in a public proceeding. There the client invites the Court to adjudicate directly on a dispute between the client and solicitor, and by instituting a proceeding brings their relationship open to scrutiny in the public domain. The claim relevant to this proceeding is that of Mr Hall in the Hall v ABL Proceedings. The contest between Mr Hall and ABL was facilitated by the initial production of the Produced Documents and the Harman Release Order, but there is to be no adjudication on the confidential relationship between client and solicitor. There is no current substantive dispute in the Hall v ABL Proceedings between Slater & Gordon and ABL. This is not a situation (yet at least) where Slater & Gordon is picking and choosing between attacking ABL and at the same time seeking to conceal relevant (albeit confidential) information.
92 In the circumstances, I do not accept that the conduct of Slater & Gordon in agreeing or consenting to the making of the Harman Release Order amounted to any waiver of confidentiality or waiver of legal professional privilege in respect of privileged documents not actually already produced to Mr Hall.
93 Further, it is important to recall that the Deed of Settlement was carefully structured; it provided certain documentation to Mr Hall in a prescribed ambit and for a prescribed purpose. There was a carefully thought out compromise. Slater & Gordon gave up the opportunity to keep the Produced Documents from being used in other proceedings; but did not give up the opportunity to keep the other documents now sought confidential. It could not be said that Slater & Gordon acted in a way which was inconsistent with maintaining confidentiality over all privileged communications not disclosed to Mr Hall. There is no unfairness in this, or in the situation now confronting ABL, to the extent fairness is relevant in assessing the position. Whatever way you look at it, Slater & Gordon is not taking two inconsistent positions, nor is there any relevant and plain inconsistency in its approach to now claim privilege over the documents sought in the Originating Application.
Consenting to the Harman Release Order
94 I now come to the third alleged act of inconsistency, and that is consenting to the Harman Release Order on 25 September 2017.
95 It must be recalled that the so-called “implied” or “Harman” undertaking is not one that can be unilaterally waived by a party without court intervention. I accept that if the party who under coercion produced a document consents to a release from the undertaking this is a significant factor (perhaps overriding factor) that may persuade a court to give a release. After all, if the party which was coerced into producing a document to the court consents to the release, it is difficult to see how there could be an injustice by releasing the parties from the implied undertaking. Once the release is given, then the parties can use the documents and the information contained therein in other proceedings. However, it is the court that ultimately determines whether to release the Harman undertaking, and on what terms.
96 In Hearne v Street (2008) CLR 125 the Court (Hayne, Heydon and Crennan JJ, Gleeson CJ agreeing) observed as follows at [107]-[108]:
The expression “implied undertaking” is thus merely a formula through which the law ensures that there is not placed upon litigants, who in giving discovery are suffering “a very serious invasion of the privacy and confidentiality of [their] affairs”, any burden which is “harsher or more oppressive ... than is strictly required for the purpose of securing that justice is done.” [Harman v Secretary of State for Home Department [1983] 1 AC 280 at 308]. To that statement by Lord Keith of Kinkel of the purpose of the “implied undertaking” may be added others. In Riddick v Thames Board Mills Ltd [1977] QB 881 at 896], Lord Denning MR said:
“Compulsion [to disclose on discovery] is an invasion of a private right to keep one’s documents to oneself. The public interest in privacy and confidence demands that this compulsion should not be pressed further than the course of justice requires. The courts should, therefore, not allow the other party – or anyone else – to use the documents for any ulterior or alien purpose. Otherwise the courts themselves would be doing injustice.”
In Harman v Secretary of State for the Home Department [[1983] 1 AC 280 at 300], Lord Diplock said:
“The use of discovery involves an inroad, in the interests of achieving justice, upon the right of the individual to keep his own documents to himself; it is an inroad that calls for safeguards against abuse, and these the English legal system provides ... through its rules about abuse of process and contempt of court.”
In Watkins v A J Wright (Electrical) Ltd [1996] 3 All ER 31 at 42], Blackburne J said:
“In my judgment, a serious inroad into [the safeguards referred to by Lord Diplock] and, therefore, into the utility of the discovery process in the just disposal of civil litigation would occur if it were open to a litigant (or his solicitor) to enjoy the fruits of discovery provided by the other side, but avoid the risk of committal for contempt for acting in breach of the countervailing implied obligation on the ground that he was unaware of the existence of the undertaking. I take the view that it does not lie in the mouth of a person to plead ignorance of the legal consequences of the discovery process.”
To speak in terms of “undertaking” serves:
“a useful purpose in that it confirms that the obligation is one which is owed to the court for the benefit of the parties, not one which is owed simply to the parties; likewise, it is an obligation which the court has the right to control and can modify or release a party from. It is an obligation which arises from legal process and therefore is within the control of the court, gives rise to direct sanctions which the court may impose (viz contempt of court) and can be relieved or modified by an order of the court [Prudential Assurance Co Ltd v Fountain Page Ltd [1991] 1 WLR 756 at 764-765; [1991] 3 All ER 878 at 885 per Hobhouse J].”
Staughton LJ said, “[A]lthough described as an implied undertaking it is a rule which neither party can unilaterally disclaim” [Mahon v Rahn [No 1] [1998] QB 424 at 453]. The importance with which the courts have viewed the obligation under discussion is indicated by the fact that although it can be released or modified by the court, that dispensing power is not freely exercised, and will only be exercised where special circumstances appear [Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 37].
“Circumstances under which that relaxation would be allowed without the consent of the serving party are hard to visualise, particularly where there was any risk that the statement might be used directly or indirectly to the prejudice of the serving party” [Prudential Assurance Co Ltd v Fountain Page Ltd [1991] 1 WLR 756 at 775; [1991] 3 All ER 878 at 895 per Hobhouse J].
Hence Hobhouse J was correct to conclude:
“The expression of the obligation as an implied undertaking given to the court derives from the historical origin of the principle. It is now in reality a legal obligation which arises by operation of law by virtue of the circumstances under which the relevant person obtained the documents or information.” [Prudential Assurance Co Ltd v Fountain Page Ltd [1991] 1 WLR 756 at 764; [1991] 3 All ER 878 at 885, approved in Mahon v Rahn [No 1] [1998] QB 424 at 454 per Staughton LJ]
97 In any event, the fact that Slater & Gordon consented in fact to the Harman Release Order on 25 September 2017 takes the matter no further than its conduct which gave rise to the obligation to so consent: the entry into of the Settlement Deed with an obligation to consent to the Harman Release Order. As to that conduct, I have already indicated I do not regard such conduct in context as giving rise to any inconsistency with maintaining the right to claim legal professional privilege in the Hall v ABL Proceedings in relation to the documents sought in this proceeding.
Section 11 of the DDPM
98 I now turn to the arguments of ABL relating to s 11 of the DDPM as argued in this proceeding. Arguments relating to the DDPM were also addressed in the Hall v ABL Proceedings.
99 The first point to make is that s 11 is directed to actual “files” (whether electronic or otherwise), and not as ABL has focussed on in its submissions, generally “other documents which are material to the due diligence process” which have not been collated in the “files”.
100 The declaration made by the Court on 8 May 2020 was directed to “the files” and by reference to the wording in s 11: these will not necessarily include all documents material to the due diligence process if such documents have not been collated in files by the secretary of the DDC and retained by ABL. The DDC had the responsibility to retain due diligence materials, and ABL had the responsibility to collate the necessary documents and place in files for the purposes of s 11.
101 Section 11 is concerned (as the heading indicates) with the finalisation of the DDC’s due diligence files for future reference. During the due diligence process ABL was to maintain all reports received in relation to the due diligence process.
102 It may be that the finalisation does not include every document (in draft or otherwise) that was brought into existence during the due diligence process. The secretary to the DDC for the purposes of s 11 would collate and then put in “the files” the documents that came within the generic description set out in s 11. This may involve some subjective analysis, such as determining whether a document was “material” to the due diligence process.
103 It was on this basis I made the declaration on 8 May 2020, as Slater & Gordon either waived or consented to ABL having access to “the files” for the purpose of defending certain claims, including the claim in the Hall v ABL Proceedings.
104 On its own, or in conjunction with the other alleged conduct of inconsistency, I do not accept that s 11 in the context of the DDPM gave rise to any inconsistent conduct relating to maintaining confidentiality in relation to other documentation sought in the Originating Application. In my view, giving limited and circumscribed access to “the files” does not mean that Slater & Gordon gave up by its conduct (by agreeing to s 11) the confidentiality of the documents not in “the files” now sought in the Originating Application.
105 As with the Settlement Deed, s 11 of the DDPM is confined in its terms granting access to certain files and retained by ABL for a certain period of time, and for the purpose of “defending” certain claims (relevantly here against ABL). To that extent, either by express consent or waiver, Slater & Gordon has ABL access to “the files” to use them for the designated purpose.
106 This purpose would include all the purposes set out in paragraphs (d) to (j) in the Originating Application in relation to ABL’s Defence. My tentative view is that it would also include all of the purposes set out in paragraphs (d) to (j) as relating to any cross-claim. In view of my conclusions as to waiver set out above, and as the Declaration made on 8 May 2020 will stand in its existing terms, I need say no more about the extent of the ambit of s 11 of the DDPM. If this remains in dispute, this can be raised separately as a discrete matter in the Hall v ABL Proceedings (as no argument was addressed on this particular aspect of s 11). Further, if there remains a dispute as to associated waiver in relation to the documents inspected pursuant to the Declaration made on 8 May 2020, this can also be agitated in the Hall v ABL Proceedings.
107 As to the argument that only having access to “the files” is not practically feasible as a way of allowing ABL to ‘defend’ the claim brought by Mr Hall, I do not accept that argument. Section 11 provides access to certain specified documents in “the files” for the purpose of defending such a claim. It assists to that extent but goes no further. Section 11 focused on the documented due diligence process. Litigation is not always conducted on the basis of all relevant information, or access to all potential witnesses.
108 Having addressed the issues as raised by the parties in this proceeding, I do wonder whether or not in the circumstances there has not been created a rather large storm in a tea cup. The real contest concerns the Project Malta Legal Files Documents. However, putting aside the debate about s 11 of the DDPM, as to the documents otherwise relating to the DDC and the due diligence process, these seem to have been made available for inspection or will be made available for inspection. In other words, to the extent that documents relate to ABL as a member of or its role for the DDC, the documents are or should be available for inspection. It seems that in the context of discovery, and proportionate discovery, that the information in the available documents will be expected to be coextensive with that in the Project Malta Legal Files Documents. To that extent, that information can be used without limitation in the Hall v ABL Proceedings by ABL. The solicitors for ABL who may be asked for instructions to defend the Hall v ABL Proceedings, who were involved directly in the retainer with Slater & Gordon in relation to the due diligence process, need have no concern in giving instructions in relation to information and communications relevant to the due diligence process and what basis ABL had for the Opinion Letter based on that due diligence process.
109 To a large extent the dispute over the ambit of s 11 of the DDPM is of little practical importance, if the position being taken by Slater & Gordon is that documents prepared, created and held by ABL as a member of or in its role for the DDC are not protected by legal professional privilege.
110 I should also indicate that the position I have taken in this proceeding relates to the circumstances existing at this time. Circumstances may well change in the course of preparation for trial and during the trial itself. No defence has been filed yet in the Hall v ABL Proceedings. It may be that in due course steps are taken that will raise other inconsistency issues.
111 The other observation to make is this. During the course of the trial, it may be that to a lesser or greater extent ABL, or the witnesses it calls, are constrained in giving evidence by the legal professional privilege claimed by Slater & Gordon. The Court, mindful of this constraint will be able to make allowances if the ‘whole story’ cannot be presented by way of evidence. Undoubtedly ABL (as respondent and possible cross-claimant) may be in a different position from the other parties, including Mr Hall. One cannot anticipate now the course of the trial, or the extent of any claim to legal professional privilege or waiver, but the Court has various mechanisms to ensure a fair trial. For instance, if certain information relevant to ABL’s defence is not available on the basis that information is privileged in the hands of Slater & Gordon, no inference adverse to ABL may legitimately be drawn for failure to adduce evidence of that information at trial. This is not a matter that can or need be further elaborated on at this time.
DISPOSITION
112 The application will be dismissed, other than in respect of the Declaration made on 8 May 2020 (as varied). The issue of costs will be dealt with on the papers as set out in the order of the Court.
I certify that the preceding one-hundred and twelve (112) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton. |
Associate:
