New South Wales Supreme Court CITATION : ATH Transport v JAS (International) [2002] NSWSC 956 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 4832/02 HEARING DATE(S) : 10/10/02, 11/10/02 JUDGMENT DATE : 11 October 2002 PARTIES : ATH Transport Holding SA - Plaintiff JAS (International) Australia Pty Limited - Defendant JUDGMENT OF : Barrett J COUNSEL : Mr D E Grieve QC/Ms P E McDonald/Ms P Ryan - Plaintiff Mr M L D Einfeld QC/Mr K L Andronos - Defendant SOLICITORS : Blessington Judd - Plaintiff Cara Marasco & Company - Defendant CATCHWORDS : PROCEDURE - evidence - client legal privilege - "fraud" exception considered LEGISLATION CITED : Evidence Act 1995 Corrs Pavey Whiting & Byrne v Collector of Customs (1987) 14 FCR 434 CASES CITED : Gartside v Outram (1856) 26 LJ Ch (NS) 113 Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 222 Kang v Kwan [2000] NSWSC 698 DECISION : Access to privileged documents denied - 2 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BARRETT J FRIDAY 11 OCTOBER 2002 4832/02 - ATH TRANSPORT HOLDING SA v JAS INTERNATIONAL (AUSTRALIA) PTY LIMITED JUDGMENT 1 The plaintiff's solicitors have produced certain documents in response to a subpoena issued on the application of the defendant. Among these are documents in respect of which the plaintiff invokes s.118 of the Evidence Act 1995. The plaintiff therefore resists the defendant's claim to be granted access to those documents. 2 My inspection of the documents the subject of the client legal privilege claim leaves me in no doubt that they are "confidential documents" as defined by section 117, having regard to the circumstances in which they were obviously prepared and the persons by whom they were prepared. The documents record confidential communications made between representatives of the plaintiff and the plaintiff's solicitors. 3 The defendant nevertheless says two things: first, that it is entitled to inspect so much of each document as identifies any date that the document bears or the date on which the communication it records took place; and, second, that s.125 operates in any event to preclude the operation of s.118. 4 As to the dates, the documents called for by the subpoena are identified in it by reference to subject matter and a period of time. There are several separate but related descriptions of subject matter. The plaintiff says that if the dates of documents are made available, there will be disclosure of the fact that something or other within the global combination of descriptions was communicated on a particular day; and that this should not be permitted since it will, in effect, facilitate the drawing of wrong or unwarranted inferences as to the timing of communication about particular matters. 5 It seems to me that any dates appearing in these documents are within the s.118 protection. Each document, as I have said, is within the s.117 definition of "confidential document". Each was prepared for a dominant purpose as described in s.118. As a result, s.118(c) protects the entire content of the document, so that if the document bears a date, that date, being part of the content, is within the protection. 6 As to s.125, the submission advanced on behalf of the defendant is that the operation of s.118 is in any event precluded because the subject matter in issue is "the contents of a document prepared by a client or lawyer (or both) in furtherance of the commission of a fraud". The focus is on the expression "fraud". 7 The fraud the defendant asserts is, in essence, what it classifies as a clandestine plan by the plaintiff and its associated interests to bring about the commercial downfall of the defendant and then to take steps to introduce itself into the commercial position the defendant had previously occupied or, perhaps more accurately, to introduce its associated interests into that position. The defendant says, in effect, that the plaintiff, as a shareholder in the defendant, has manufactured claims of mismanagement or worse within the defendant to ground the present application for the appointment of a provisional liquidator, that an associate of the plaintiff purported to terminate its commercial agreement with the defendant without cause and in breach of that agreement in order to harm the defendant and that these things were done to destabilise the defendant so that the plaintiff's group could, as it were, appropriate its position and goodwill. 8 The plaintiff puts quite a different complexion on matters. It asserts genuine grievances about alleged irregularities in the conduct of the affairs of the defendant, and within the defendant, and a loss of mutual confidence among the shareholders of the defendant, of whom there are three, one of them being the plaintiff. There is evidence to warrant the inference that there were discussions about a buy-out of one faction's shares by the other (that is, buy-out of the two by the one, or the one by the two) with liquidation of the company and division of the net surplus among the three having been mentioned as an alternative solution if that could not be worked out. 9 In those circumstances, says the plaintiff, the steps that were taken by its associated interests to register a trademark in Australia and to form a company with a "JAS" name was no more than a preparation or precaution for the future, added to which, as I understand it, there is no suggestion that the applicant for the trademark is not properly regarded as the proprietor of it and no suggestion that the "JAS" company which has been formed has traded or done anything apart from being held on the shelf. 10 The s.125 issue raises two questions: first, as to the meaning of "fraud" in that context; and, second, as to the degree of proof required. 11 As to the first matter, I was taken to various cases culminating in the decision of Santow J in Kang v Kwan [2000] NSWSC 698, where his Honour quoted part of a passage in the Australian edition of Cross on Evidence as to the meaning that should be given to "fraud" in s.125. The full passage, or at least a larger passage than was quoted by Santow J, is at paragraph 25,290 as follows: "It [ie, fraud] has been said to apply to 'all forms of fraud and dishonesty such as fraudulent breach of trust, fraudulent conspiracy, trickery and sham contrivances', for example an employee who schemes to take other employees and customers into a business competing with the employer's after termination of the employment, or the effecting of transactions at an under value with the purpose of prejudicing a creditor's interests, but not to the tort of inducing breach of contract by non-fraudulent conspiracy or trespass and conversion; nor to conduct which is merely disreputable or fails to maintain good ethical standards." 12 I accept the submission of Mr Grieve that the s.125 exception or negation activated by "fraud" is a statutory emanation of the principle that there is no privilege in iniquity. The basis of client legal privilege is, after all, the confidentiality that exists between lawyer and client based on a species of obligation of confidence well known to equity. I would therefore be inclined to equate the "fraud" to which s.125 refers as the kind of fraud referred to by Gummow J in Corrs Pavey Whiting & Bryrne v Director of Customs (1987) 14 FCR 434 when discussing the principle emerging from Gartside v Outram (1856) 26 LJ Ch (NS) 113: "That principle, in my view, is no wider than one that information will lack the necessary attribute of confidence if the subject-matter is the existence or real likelihood of the existence of an iniquity in the sense of a crime, civil wrong or serious misdeed of public importance, and the confidence is relied upon to prevent disclosure to a third party with a real and direct interest in redressing such crime, wrong or misdeed." 13 I would also agree with Santow J in following the view tentatively expressed by Hodgson JA, when Chief Judge in Equity, in Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 222 that a finding of fraud in the s.125 sense must involve an element of dishonesty. 14 As to the second matter, that is to say the extent of showing or proof, I accept, as did Santow J, that the test is one of evidence sufficient to give "some colour to the charge", that is some evidence at a prima facie level. 15 Applying the relevant tests here, I do not consider that s.125 is activated to preclude the operation of s.118. On the material available, I do not characterise the conduct to which I have referred as being infected by dishonesty as distinct from being legitimate business tactic, even if a hard one. 16 My ruling therefore is that the documents in respect of which client legal privilege has been claimed are not documents to which the access sought by the defendant is available, the ground being that the giving of access would result in disclosure contrary to s.118. ********** Last Modified: 10/16/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.