New South Wales Supreme Court CITATION : Apple v Wily [2002] NSWSC 855 revised - 20/09/2002 CURRENT JURISDICTION: Equity Division Corporations List FILE NUMBER(S) : SC 2698/02 HEARING DATE(S) : 02/09/02 JUDGMENT DATE : 19 September 2002 Apple Computer Australia Pty Limited - Plaintiff PARTIES : Andrew Hugh Jenner Wily - First Defendant Buzzle Operations Pty Ltd (Receivers Appointed) (In Liquidation) - Second Defendant JUDGMENT OF : Barrett J COUNSEL : Mr C R Newlinds - Plaintiff Mr M R Aldridge SC - Defendants SOLICITORS : Clayton Utz - Plaintiff MBP Legal - Defendants CATCHWORDS : PROCEDURE - evidence - access to documents produced - claim for client legal privilege - who is "client" - confidential communications concerning litigation funding LEGISLATION CITED : Evidence Act 1995 Supreme Court Rules Carter v Managing Partner, Northmore Hale Davy & Leake (1995) 183 CLR 121 Day v Mead [1987] 2 NZLR 443 CASES CITED : Re Global Medical Imaging Ltd [2001] NSWSC 476 Grant v Downs (1976) 135 CLR 674 Maxwell v Chittick (unreported, NSWCA, 23 August 1994) Telstra Corporation v Australia Media Holdings (No 10) (1997) 41 NSWLR 147 DECISION : See paragraph 21 - 11 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J THURSDAY, 19 SEPTEMBER 2002 2698/02 – APPLE COMPUTER AUSTRALIA PTY LIMITED v ANDREW HUGH JENNER WILY AND ANOR JUDGMENT 1 The plaintiff, Apple Computer Australia Pty Ltd ("Apple"), seeks access to documents produced by the first defendant, Mr Wily (liquidator of the second defendant, Buzzle Operations Pty Ltd), in response to a notice to produce and documents produced on subpoena by two firms of solicitors, Isaac Brott & Co ("Brott") of Melbourne and Surry Partners ("Surry") of Sydney. The application for access is, in each case, opposed as to certain documents said to be subject to client legal privilege. The privilege asserted is, in each case, that of Mr Wily. 2 In proceedings part heard in the Commercial List, Apple sues thirteen defendants upon causes of action said to arise from their having guaranteed certain obligations owed by Buzzle to Apple. Brott acts for some of those defendants (referred to, for convenience, as "the Hartono parties"). Brott instructed Surry as its Sydney agents. It is said that Surry on some occasions also acted direct for the Hartono parties. The basis on which client legal privilege is said by Mr Wily to subsist in his favour in relation to the content of certain of the documents produced by himself, Brott and Surry is elucidated in an affidavit of the defendants' solicitor, Mr Griesz of MBP Legal, sworn on 6 August 2002: "4. I am informed by Wily and verily believe that Issac Brott & Co and Surrey Partners Lawyers act for creditors of Buzzle who petitioned to have Wily appointed as the Liquidator of Buzzle and also act for parties providing litigation funding for Wily in his capacity as Liquidator of Buzzle to conduct public examinations to determine if Buzzle has any claims against other persons or entitles which it can pursue to recover monies to repay creditors. 5. Communications and documents have passed between Wily and Issac Brott & Co and between Wily and Surry Partners Lawyers which relate to the litigation funding and to legal strategy, which Wily adopts and/or relates to the confidential communications and the provision of legal services by MBP Legal to Wily and Buzzle. 6. The communications and documents referred to in the preceding paragraph between Wily and third persons, namely Issac Brott & Co or Surry Partners Lawyers, were with reference to anticipated litigation referred to in paragraph 4 above and/or were made for the purpose of being put before MBP Legal with the object of enabling MBP Legal to prosecute such anticipated litigation for the dominant purpose of such anticipated litigation. 7. I am instructed by Wily that he, on behalf of Buzzle and himself, asserts privilege over the communications and documents referred to in paragraphs 5 and 6 above, which are contained in the envelope marked privileged." 3 It will thus be seen that the confidentiality said to be the basis of the privilege in this case is confidentiality as between Mr Wily and Brott and as between Mr Wily and Surry, even though it is also said that the persons for whom Brott and Surry act are the creditors of Buzzle upon whose application Wily was appointed liquidator and parties providing litigation funding to Wily to enable him to conduct examinations of persons against whom Buzzle may be able to pursue claims. It is not said that Brott or Surry acted at any relevant time for Mr Wily. 4 Mr Wily's resistance to Apple's present application is based on Part 36 rule 13(2)(a) of the Supreme Court Rules which applies where a person is required by subpoena or other order by the court or by notice under Part 36 rule rule 16(1) to produce a document to the court. Part 36 rule 13(2)(a) provides: "The Court shall not compel, and rule 16 shall not require, production of a document or an answer to a question, unless and until the Court directs that the production or answer shall not be prevented by this subrule: (a) over the objection of a person if evidence of the document, or of an answer to the question, could not be adduced in the proceedings over the objection of the person, by virtue of the operation of Part 3.10 Division 1 of the Evidence Act; …" 5 The tests to be applied in the present case are thus the tests in Part 3.10 Division 1 of the Evidence Act 1995 in relation to proceedings in "a NSW court" (see s. 4). Those tests emerge from ss.118 and 119 of the Act: " 118. Legal Advice Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of: (a) a confidential communication made between the client and a lawyer, or (b) a confidential communication made between 2 or more lawyers acting for the client, or (c) the contents of a confidential document (whether delivered or not) prepared by the client or a lawyer, for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client." 119. Litigation Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of: (a) a confidential communication between the client and another person, or between a lawyer acting for the client and another person, that was made, or (b) the contents of a confidential document (whether delivered or not) that was prepared, for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party. " 6 Mr Wily maintains that he is, in the particular context, a "client" of not only MBP Legal (as to which there is no question or dispute) but also of Brott and Surry. The submission advanced by Mr Aldridge SC on behalf of Mr Wily is as follows: "A client is any person to whom the express or implied obligation (referred to in the definitions of 'confidential communications' and 'confidential document' in section 117 of the Evidence Act ) is owed. Isaac Brott and Surry Partners are each 'a lawyer' providing confidential communications and documents to Mr Wily and owe him an obligation not to disclose the contents. He is thus the client entitled to the protection of the section. This can be deduced from the documents that are the subject of the claim." 7 There is a definition of "client" in s.117(1). It is, however, the kind of explanatory or enlarging definition that specifies items which are included in the defined term, leaving the core meaning to be discovered by other means. In ordinary parlance, a "client" vis-à-vis a lawyer is a person for whom the lawyer performs legal services. Whether a relationship of that kind exists is to be determined by reference to the intentions of the parties objectively ascertained. This is, I think, recognized in the judgment of Mahoney JA (with whom Priestley and Powell JJA agreed) in Maxwell v Chittick (unreported, NSWCA, 23 August 1994): "It is, of course, to be accepted that persons in the relationship that existed between Mr Maxwell and the plaintiffs may also undertake the relationship of solicitor and client. Whether that relationship existed depends essentially upon whether it was the intention of the parties that it should be created. I am of the opinion that, having regard to the circumstances, no such relationship was intended to be created … [W]hat occurred between them at each of these times did not constitute in terms the making of a contract of the accepting of a retainer so as to create the relationship of solicitor and client. And I do not think that the circumstances require it to be implied that such a relationship was intended to be created between them." 8 The kinds of circumstances from which the existence of the relationship may be inferred are described in the judgment of Somers J in Day v Mead [1987] 2 NZLR 443: "The Judge found in respect of this transaction that Mr Day had not established that Mr Mead was acting as his solicitor. He was much influenced in this by the fact that no account for professional services was rendered by Mr Mead to Mr Day. With respect I must disagree. On this occasion, as on the first, the proposal was made by Mr Mead to Mr Day at his office to which Mr Day had been asked to go for the very purpose of its being put to him. Mr Mead attended to all the legal matters including a temporary mortgage by Mr Day to Mr Mead's nominee company to secure a loan to enable him to invest the full $80,000. The latter sum Mr Mead received into his trust account to Mr Day's credit from which he disbursed it, presumably to the company's account, from whence it was no doubt paid out in part satisfaction of the debenture of the nominee company. Those features, together with the whole background of the relations between Mr Mead and Mr Day both generally and in relation to Pacific Mills in particular, lead me to conclude that the case is one in which although there was no formal or express retainer nevertheless the existence of a retainer in relation to the investment of further moneys and the subscription for increases in capital is to be inferred. That such a contract may be implied seems obvious; an example is Blyth v Fladgate [1891] 1 Ch 337." 9 Regard may also usefully be had to the nature of legal professional privilege at common law, since the Evidence Act provisions reflect the common law principles to a large extent. The underlying concepts were stated thus by Stephen, Mason and Murphy JJ in Grant v Downs (1976) 135 CLR 674: "The rationale of this head of privilege, according to the traditional doctrine, is that it promotes the public interest because it assists and enhances the administration of justice by facilitating the representation of clients by legal advisers, the law being a complex and complicated discipline. This it does by keeping secret their communications, thereby inducing the client to retain the solicitor and seek his advice, and encouraging the client to make a full and frank disclosure of the relevant circumstances to the solicitor. The existence of the privilege reflects, to the extent to which it is accorded, the paramountcy of this public interest over a more general public interest, that which requires that in the interests of a fair trial litigation should be conducted on the footing that all relevant documentary advice is available. As a head of privilege legal professional privilege is so firmly entrenched in the law that it is not to be exorcised by judicial discretion." 10 To the same effect is the observation of McHugh J in Carter v Managing Partner, Northmore Hale Davy & Leake (1995) 183 CLR 121: "By protecting the confidentiality of communications between lawyer and client, the doctrine protects the rights and privacy of persons including corporations by ensuring unreserved freedom of communication with professional lawyers who can advise them of their rights under the law and, where necessary, take action on behalf to defend or enforce those rights. The doctrine is a natural, if not necessary, corollary of the rule of law and a potent force for ensuring that equal protection under the law is a reality." 11 "Client", in its ordinary signification, must therefore be regarded as referring to a person who, in respect of some legal matter within the scope of professional services normally provided by lawyers, has, with the consent of a lawyer, come to stand in a relationship of trust and confidence to the lawyer entailing duties of the lawyer to promote the person's interests, to protect the person's rights and to respect the person's confidences. The privilege exists so that a person may consult his legal adviser in the knowledge that confidentiality will prevail. 12 The formulation advanced by Mr Aldridge SC is, to my mind, too wide. He regards as a "client" any person to whom is owed by a lawyer the express or implied obligation referred to in the definitions of "confidential communications" and "confidential document" in s.117. On this footing, a lawyer who, on behalf of his or her acknowledged client, offered to impart information to another person upon the giving by that other person of an undertaking to maintain confidentiality (which undertaking was given) would thereby cause that other person also to be the lawyer's client. The concept of "client" cannot be that wide. There is no warrant in the terms of the statute, as I read it, to cause every person who becomes bound in confidence to a lawyer, or to whom a lawyer becomes bound in confidence, to be the "client" of the lawyer. Section 118 is concerned with a combination of "confidential communication" or "confidential document" and the relationship of lawyer and client. To regard the latter as merely an incident of the former is to ignore one of the expressed statutory elements. 13 Important aspects of the construction of s.118 are referred to in the judgment of McLelland CJ in Eq in Telstra Corporation v Australis Media Holdings (No 10) (1997) 41 NSWLR 147. In relation to paras (a) and (b) of s. 118, his Honour said: 'The expressions "client" and "lawyer" are given extended meanings by the definitions in s 117. It is clear, in my view, that subject to the adoption of those extended meanings, the client and the lawyer referred to in par (a) must be identical with the client and the lawyer referred to in the concluding part of the section, and the client and the lawyers referred to in par (b) must be identical with the client and the lawyers referred to in the concluding part of the section. In relation to para (c) McLelland CJ in Eq said: "In my opinion par (c), on its true construction, does not apply to a document, the essential character of which is that of a communication made by the lawyer to another person (or at least another person not within the extended definition of "lawyer" in s 117), or made by the client to another person (or at least another person not within the extended definition of "client" in s 117). Such a document must find its claim to protection if at all under par (a) or par (b)." 14 Brott and Surry act for creditors of Buzzle who apparently have an interest in seeing Mr Wily succeed in making maximum recoveries for the benefit of Buzzle's creditors generally, as well as for parties who are prepared to finance the conduct of examinations by Mr Wily. It is acknowledged by Mr Wily that Brott and Surry are playing that role. He does not assert that either Brott or Surry has provided, or is providing, legal services to him; nor, I assume, would he see them as obliged to prefer and promote his interests in the way that a fiduciary must. The creditors of Buzzle for whom Brott and Surry act are allies of Mr Wily in his endeavours to maximize returns for creditors generally. Brott and Surry, in the interests of those clients, are likewise allies of Mr Wily. Those allies may well be disposed to take steps to suggest to Mr Wily how he might approach litigation and be willing also to assist him financially. But none of these circumstances makes Mr Wily, in any sense at all, a "client" of Brott or Surry. 15 For these reasons, I do not regard s.118, as applied by Part 36 rule 13(2)(a), as supporting claims by Mr Wily, Brott and Surry that they are justified in declining to produce documents embodying communications between Mr Wily and Brott or documents embodying communications between Mr Wily and Surry. 16 I turn now to an alternative basis on which certain of the relevant documents are said to be protected by Part 36 rule 13(2)(a), namely, that access to the documents would, as mentioned in s.119 of the Evidence Act, result in the disclosure of a confidential communication between Mr Wily (or a lawyer acting for him) and another person that was made (or the contents of a confidential document that was prepared) for the dominant purpose of Mr Wily being provided with professional legal services relating to a proceeding. 17 Subject to what may be said about the litigation funding aspects (to which I shall turn in a moment), I see no basis on which this approach can avail Mr Wily. The communications between Mr Wily on the one hand and Brott and Surry on the other as to litigation strategies Mr Wily might adopt were not made for the purpose of Mr Wily being provided with professional legal services. Without going into the details of the various documents, I think I can fairly say that their purpose is to provide Mr Wily with suggestions as to courses he may wish to consider taking in relation to the examinations he is to conduct as liquidator. Mr Wily may consult with his solicitors about the suggestions (or may have already done so), but the content of the documents was not provided for a purpose of his being provided with such professional legal services as he may himself choose (or may already have chosen) to seek by reference to that content. 18 Finally, there is the question of the applicability, through Part 36 rule 13(2)(a), of s.119 in relation to the aspects of the documents' content concerning litigation funding which was singled out for special mention in submissions because of the potential relevance to it of the decision in Re Global Medical Imaging Ltd [2001] NSWSC 476. In that case, Santow J held that a litigation funding agreement expressed by its parties to be confidential was within the scope of s.119. His Honour said: "To deny legal privilege to a funding agreement of this sort would fail to give proper weight to its inextricable connection with the very subject matter of the legal advice that might be given and the nature of the professional legal services to be rendered. It has the potential to reveal the litigant's likely legal strategy. The funding agreement in a literal and substantive sense, fulfils the purpose of providing legal services in terms not only of the overall capacity to have them at all, but also their availability at critical junctures in the case. While it may not reveal the content of legal advice, it reveals the confidential circumstances of its availability and throws oblique light on the confidential circumstances to which the advice is directed. One could, for example, infer from a funding agreement the likelihood of tactical advice being given of a particular kind at different stages of the litigation or, for that matter, of the likelihood of an appeal being advised or not advised. I consider this funding agreement could do so." 19 In the present case, the relevant "proceeding" is each of the anticipated or pending examinations to be conducted by Mr Wily as liquidator. I accept that, for the reasons given by Santow J, communications and documents concerning financing of Mr Wily to embark upon such examinations have a dominant purpose of his being provided with the professional legal services of his own lawyers (that is, those of whom he is undoubtedly a client and whose services will be secured through the financing) so that, to the extent that the communications and documents are subject to a non-disclosure obligation of the kind referred to in the definitions of "confidential communication" and "confidential document" in s.117, they are within the protection of s.119. 20 The access the plaintiff seeks to the documents produced by Mr Wily in response to the notice to produce and the documents produced on subpoena by Brott and Surry which Mr Wily seeks to resist on the basis of client legal privilege will therefore be granted except to the extent that resistance is founded on the propositions related to litigation funding and the applicability of s. 119 accordingly brought about by Part 36 rule 13(2)(a). I emphasise that a non-disclosure obligation of the kind referred to in the definitions of "confidential communication" and "confidential document" is an essential element of that applicability. The most appropriate way forward will be for Mr Wily to indicate to me which of the documents to which the privilege claim relates are the subject of a claim based on that ground so that I may then examine those documents only, determine whether the claim is properly made in relation to them, segregate the documents which I am satisfied are protected on that basis and formally grant the access sought in relation to all others in respect of which a privilege claim was originally made. 21 I direct that, within seven days from today, Mr Wily file by delivery to my Associate a list identifying those of the documents the subject to the claim for privilege previously asserted which he claims to attract the protection of s.119 of the Evidence Act, via Part 36 rule 13(2)(a) of the Supreme Court Rules, conformably with these reasons. The list must identify in relation to each document the source and terms of the non-disclosure obligation applying to the document which is of the kind referred to in the s.117 definitions of "confidential communication" and "confidential document". ********** Last Modified: 09/23/2002 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.