FEDERAL COURT OF AUSTRALIA Pei Xu v Wan Ze Property Development (Aust) Pty Ltd (in Liquidation) [2013] FCA 676 Citation: Pei Xu v Wan Ze Property Development (Aust) Pty Ltd (in Liquidation) [2013] FCA 676 Parties: PEI XU v WAN ZE PROPERTY DEVELOPMENT (AUST) PTY LTD (IN LIQUIDATION) ACN 131 642 147; KE QIN REN v WAN ZE PROPERTY DEVELOPMENT (AUST) PTY LTD (IN LIQUIDATION) ACN 131 642 147 File numbers: NSD 1339 of 2012 NSD 1341 of 2012 Judge: ROBERTSON J Date of judgment: 10 July 2013 Catchwords: PRACTICE AND PROCEDURE – application to set aside paragraphs of subpoena to solicitors for interveners – relevance – whether oppression – whether fishing – legal professional privilege – whether waiver Legislation: Federal Court Rules 2011 r 24.15 Cases cited: Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1952) 72 WN (NSW) 250 Attorney-General for the Northern Territory v Maurice (1986) 161 CLR 475 Australian Competition and Consumer Commission v Shell Co of Australia Ltd (1999) 161 ALR 686 Azzi v Volvo [2006] NSWSC 283 Mann v Carnell (1999) 201 CLR 1 Osland v Secretary to the Department of Justice (2008) 234 CLR 275 Pei Xu v Wan Ze Property Development (Aust) Pty Ltd (in Liquidation) [2013] FCA 419 R v Cox and Railton (1884) 14 QBD 153 Wren v Mahony (1972) 126 CLR 212 Date of hearing: 8 July 2013 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 35 Counsel for the Applicant: Mr MR Ellicott Solicitors for the Applicant: James Lee Solicitors Counsel for the Respondent: Mr DC Eardley Solicitors for the Respondent: Downeys Lawyers Pty Ltd Counsel for the Interveners: Mr RW Tregenza Solicitors for the Interveners: Austin Haworth & Lexon Legal IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1339 of 2012 BETWEEN: PEI XU Applicant AND: WAN ZE PROPERTY DEVELOPMENT (AUST) PTY LTD (IN LIQUIDATION) ACN 131 642 147 Respondent JUDGE: ROBERTSON J DATE OF ORDER: 10 JULY 2013 WHERE MADE: SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1341 of 2012 BETWEEN: KE QIN REN Applicant AND: WAN ZE PROPERTY DEVELOPMENT (AUST) PTY LTD (IN LIQUIDATION) ACN 131 642 147 Respondent JUDGE: ROBERTSON J DATE: 10 JULY 2013 PLACE: SYDNEY THE COURT ORDERS THAT: 1. Paragraphs 1 and 3 of the subpoena filed on 3 June 2013 be set aside. 2. The interlocutory application to set aside paragraph 6 of the subpoena filed on 3 June 2013 be refused. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1339 of 2012 BETWEEN: PEI XU Applicant AND: WAN ZE PROPERTY DEVELOPMENT (AUST) PTY LTD (IN LIQUIDATION) ACN 131 642 147 Respondent JUDGE: ROBERTSON J DATE: 10 JULY 2013 PLACE: SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1341 of 2012 BETWEEN: KE QIN REN Applicant AND: WAN ZE PROPERTY DEVELOPMENT (AUST) PTY LTD (IN LIQUIDATION) ACN 131 642 147 Respondent JUDGE: ROBERTSON J DATE: 10 JULY 2013 PLACE: SYDNEY REASONS FOR JUDGMENT The issues 1 There are three paragraphs of a subpoena filed on 3 June 2013 which remain in issue. The addressee is Austin Haworth & Lexon Legal (Sydney), solicitors for the interveners. By letter dated 26 June 2013 the solicitors for the issuing party wrote to the solicitors for the interveners saying that they intended to press only paragraph 1. By email dated 5 July 2013 the solicitors for the issuing party notified the solicitors for the interveners that they had reviewed that decision and intended also to pursue paragraphs 3 and 6 of the subpoena. 2 The solicitors for the interveners seek to have paragraphs 1, 3 and 6 of the subpoena set aside. The issuing party, Mr Ren, does not seek to enforce the remaining four paragraphs of the subpoena. 3 I explained the general nature of the proceedings and the position of the interveners in my earlier reasons for judgment: Pei Xu v Wan Ze Property Development (Aust) Pty Ltd (in Liquidation) [2013] FCA 419. 4 The solicitors for the interveners submit that the material sought in the three paragraphs is irrelevant; to produce that material would be oppressive; that the three paragraphs constitute fishing; that these paragraphs of the subpoena are bad as a substitute for discovery or are in the nature of an interrogatory; that compliance would involve much work and, in any event, the material is the subject of legal professional privilege. 5 As will appear, in my view the issue of most substance is whether legal professional privilege has been waived. In submissions the parties took me to Attorney-General for the Northern Territory v Maurice (1986) 161 CLR 475. As I indicated in the course of the hearing, the more recent statement of relevant principle by the High Court is Mann v Carnell (1999) 201 CLR 1 at [29]: "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." See also Osland v Secretary to the Department of Justice (2008) 234 CLR 275. 6 The communications sought by paragraphs 1 and 6 of the subpoena were referred to in other documents used in related Supreme Court proceedings and this was said to constitute a waiver. 7 The substantive proceedings are set down for final hearing on 31 July 2013, the subpoena issued on 3 June 2013 and the argument took place on 8 July 2013. There was not the usual evidence of the detailed circumstances in which the relevant communications were made or deployed. The parties involved seemed content to proceed on this basis. 8 I next explain or set out the paragraphs of the subpoena which remain in issue. Paragraph 1 9 This paragraph refers to "notes" and seeks the production of the "notes" referred to in an entry in a tax invoice from the solicitors for the interveners to one of their clients, the entry being dated 21 May 2012 as follows: Telephone to Mrs Hong Jiang to seek clients' instructions on better evidence for the loan of RMB1.5 million as per counsel's advice and clarified instructions from the client about what the defendants said to them, if anything, regarding "payment" or "consideration" for the purchase of townhouses 16 and 20, see notes Paragraph 3 10 This paragraph seeks the following: All documents (including but not limited to emails, correspondence, bank statements and file notes) recording the results of any consideration by any member of, any partner/principal or any solicitor or paralegal employed by your firm… of the issue as to whether any consideration was paid for Townhouse 16/52-54 Dobson Crescent, Baulkham Hills NSW 2153 and/or Townhouse 20/52-54 Dobson Crescent and/or any tracing exercise conducted in relation to payment for those townhouses. Paragraph 3 also seeks documents recording the results of any consideration by Hong Jiang and Yongan Xie of that issue. Paragraph 6 11 As amended this paragraph seeks the following: All documents recording or relating to evidencing the assertion that is referred to in the email from Annette Leung of your firm to Doran Cook of Counsel dated 20 May 2012 at 8:38 pm.… that each of the First/Second and Third Defendants "paid" for the units by first withdrawing monies of similar amounts out of Wan Ze Property Development (Aust) Pty Ltd's account, then deposit [sic] them into their own bank accounts, and thereafter "pay" them to the Wan Ze Property Development (Aust) Pty Ltd's accounts upon settlement, including but not limited to that said email. 12 The relevant context is as follows. In the email referred to, under the heading: "Question: where is the proof of that payment of RMB 1.5 million" it appears that counsel said "Another matter concerns me: [have] we checked all the bank accounts to see if the purchase price for Units 16 and 20 were paid? This is very important: if the consideration was paid, then there is not much for the court to get excited about unless we say the sale was at undervalue (which we haven't said)." It appears the solicitor's response was: Our clients' assertion is that each of the First/Second and Third defendants "paid" for the units by first withdrawing monies of similar amounts out of the company's account, then deposit [sic] them into their own bank accounts, and thereafter "pay" them to the company's accounts upon settlement. Consideration 13 As to relevance, the submission of the solicitors for the interveners was that the material sought by the subpoena was not directly relevant to the transactions founding the debt. However the issuing party, Mr Ren, wishes to attack the judgment on the basis that it was obtained by fraud or in bad faith and the material sought is on the face of it sufficiently relevant to that issue. I would not set the paragraphs aside on the basis of lack of relevance. Neither would I set aside the paragraphs on the basis that the Supreme Court, in different circumstances, dismissed an application to set aside the judgment for fraud. This interlocutory hearing is not the occasion to consider the merits of the matters which the issuing party, Mr Ren, will seek to raise at the final hearing by reference to Wren v Mahony (1972) 126 CLR 212. 14 As to oppression, I was taken to the judgment in Australian Competition and Consumer Commission v Shell Co of Australia Ltd (1999) 161 ALR 686 especially at [53] where Cooper J said that a subpoena was oppressive if it required the recipient to make fine judgments regarding the relevance of documents or if it required a recipient to undertake a search of an excessively large amount of documents or did not specify the documents with reasonable particularity. 15 As to paragraph 1 of the subpoena, in my view there is no substance in these complaints. The paragraph seeks only "notes" referred to in a specific document. Also I was told by counsel for the interveners that a document which may answer paragraph 1 had been located. 16 As to paragraph 3 of the subpoena, I do not read it as requiring each or any of eight solicitors or other employees of the firm of solicitors to be asked questions about whether they considered the subject-matter referred to: rather the paragraph proceeds by reference to documents recording the results of any such consideration. I am of the same view in relation to consideration of the issue by Hong Jiang and Yongan Xie. The same applies to any tracing exercise conducted. 17 As to paragraph 6 of the subpoena, again I do not think oppression is established on the evidence. All that is being sought is documents recording or evidencing the clients' assertion of a particular specified matter. 18 I was also taken to Azzi v Volvo [2006] NSWSC 283 at [20] but the facts of that case were quite different. 19 Australian Competition and Consumer Commission v Shell Co of Australia Ltd also dealt with the relationship between discovery or further discovery and the issue of a subpoena to a party. In the present case, in form the interveners are not parties so that the issue of a subpoena to them would not obviously be an abuse of process, but more importantly the subpoena was not issued to the interveners but to their solicitors. I reject the submission that the paragraphs of the subpoena are an abuse of process or should be set aside on the basis that the documents should have been obtained by discovery. 20 The solicitors for the interveners also contended that the three paragraphs constituted fishing but the argument was not developed. In any event, the documents required are identified with some specificity and, in my opinion, the paragraphs individually or collectively do not constitute a fishing expedition to discover whether there was a case at all: Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1952) 72 WN (NSW) 250 at 254. 21 I turn finally to consider the question of legal professional privilege and waiver. 22 I note that counsel for the issuing party expressly disavowed any reliance on the principle associated with R v Cox and Railton (1884) 14 QBD 153 that legal professional privilege does not apply to communications made in furtherance of an improper purpose. Counsel accepted there was no evidence going to that issue. 23 As to the existence of legal professional privilege it is to be recalled that the subpoena is issued to a firm of solicitors. 24 Paragraph 1 on its face seeks communications made in and for the purpose of litigation or for the purpose of obtaining or giving instructions. 25 Paragraph 3 also on its face seeks such communications. In relation to consideration of the issue by Hong Jiang and Yongan Xie, on the face of it such a communication would only be in the possession of the solicitors for such a purpose. I reach the same conclusion about any tracing exercise referred to in this paragraph. 26 Paragraph 6 also on its face seeks such communications. 27 The waiver asserted was the use, in the Supreme Court proceedings, of the documents which referred to the documents sought by subpoena. 28 As to the "notes" the subject of paragraph 1, the tax invoice which refers to the "notes" was received by the solicitors for the applicant Mr Ren from the solicitors for the interveners by letter dated 5 September 2012 which enclosed various tax invoices, including this one. The letter was in consequence of the Supreme Court orders made on 19 July 2012 that, amongst other things, in those proceedings the defendants pay the plaintiffs' costs, the plaintiffs in that proceeding being the interveners in this Court. The letter dated 5 September 2012 asked the solicitors for Mr Ren and others to advise within 14 days their clients' attitude to the bills: if no reply was received the costs would be forwarded to the Supreme Court to be assigned to a costs assessor. The relevant tax invoice then became part of exhibit JL 7 referred to in an affidavit of Mr Lee, acting as solicitor for Mr Ren and filed in the Supreme Court. At the hearing in the Supreme Court on 10 December 2012 that affidavit was read and exhibit JL 7 was admitted into evidence without objection by the present interveners. I see no inconsistency between the conduct of the interveners or either of them and the maintenance of the confidentiality: they did not seek to make use of the tax invoice in a manner inconsistent with the maintenance of the privilege in the "notes". 29 To the extent that it was put on behalf of the issuing party that the mere provision of the tax invoice by letter dated 5 September 2012 to his solicitors constituted waiver of the privilege in the notes I reject that submission. In my opinion there has not been waiver of the content of the instructions given but merely an identification of the subject-matter. It follows that the mere provision of the tax invoice did not waive privilege in the "notes". 30 As to paragraph 3 of the subpoena, I do not understand it to be suggested that there had been any waiver of the privilege in this material. 31 As to paragraph 6 of the subpoena, although this was not developed in submissions, the evidence was that on 22 December 2012 the solicitor for the applicant, Mr Ren, received a series of emails from the solicitors for the interveners attaching various documents, including an affidavit of Daniel Sheen dated 22 December 2012 and exhibit DS 1 referred to in that affidavit. (Five pages of that exhibit are annexure B to the subpoena and supply the point of reference for the document or documents sought in paragraph 6 of the subpoena.) Thereafter, at the hearing of the Supreme Court matter on 14 February 2013 the affidavit of Daniel Sheen dated 22 December 2012 was read and exhibit DS 1 was tendered by counsel for the present interveners. 32 It is not clear to me for what purpose Mr Sheen's affidavit was read and the exhibit tendered on an application which appears to have been under s 471B of the Corporations Act 2001 (Cth) for leave to bring proceedings against Wan Ze Property Development (Aust) Pty Ltd (in liq) seeking to set aside the judgment of the Supreme Court delivered on 24 May 2012. Nevertheless, the exhibit was deployed, including the material which supplies the point of reference for paragraph 6 of the subpoena. Because legal professional privilege attaches to communications and the communication, the clients' assertion, had been deployed it follows that there would be inconsistency between the conduct of the interveners or either of them and the maintenance of the confidentiality in that communication and therefore the privilege has been waived. 33 I reject the submission put on behalf of the solicitors for the interveners that if the document referred to was not called for at the time the primary document was adduced into evidence then there can be no waiver. 34 In the result, under r 24.15 of the Federal Court Rules 2011, I set aside paragraphs 1 and 3 of the subpoena but dismiss the interlocutory application to set aside paragraph 6. 35 I will hear the parties on costs. I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson. Associate: Dated: 10 July 2013