Reported Decision : 41 ACSR 66 (2002) 20 ACLC 1003 New South Wales Supreme Court CITATION : HIH Insurance Ltd [2002] NSWSC 243 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 1799/01 HEARING DATE(S) : 28/03/02 JUDGMENT DATE : 28 March 2002 PARTIES : Anthony Gregory McGrath and Alexander Robert Mackay Macintosh as Liquidators of HIH Insurance Ltd (In Liquidation) - Applicants JUDGMENT OF : Barrett J COUNSEL : Mr B.W. Collins QC - Applicants SOLICITORS : Blake Dawson Waldron - Applicants CATCHWORDS : CORPORATIONS - winding up - directions to liquidators - direction given LEGISLATION CITED : Corporations Act 2001 (Cth) Royal Commissions Act 1902 (Cth) DECISION : Direction given - 4 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BARRETT J THURSDAY 28 MARCH 2002 1799/01 - ANTHONY GREGORY McGRATH and ALEXANDER ROBERT MACKAY MACINTOSH IN THEIR CAPACITY AS LIQUIDATORS OF HIH INSURANCE LTD AND SUBSIDIARIES (IN LIQ) JUDGMENT 1 In the course of observations made on 25 March ([2002] NSWSC 231), I referred to the possibility of action by the HIH liquidators to determine, in appropriately constituted proceedings, the question whether they could lawfully refuse to deliver documents to the HIH Royal Commission in response to a notice under s.2(3A) of the Royal Commissions Act 1902 (Cth) where those documents were the subject of legal professional privilege. 2 The liquidators do not wish to pursue that course, particularly as they consider that it would probably not produce any clear-cut resolution, at a commercial level, of the concerns that prompted them to approach the court for directions last Friday, 22 March. However, the significance of that possibility has now receded, in view of the results of further discussions between representatives of the liquidators and representatives of the HIH Royal Commission. Those discussions have produced a revised basis for a protocol to be applied to documents produced by the liquidators, in compliance with the s2(3A) notice, where it appears that legal professional privilege belonging to the relevant HIH company subsists in those documents. 3 The proposed new protocol is outlined in a letter of 26 March 2002 from Mr Daley, principal solicitor assisting the Commission, to Mr Mainsbridge of the liquidators' solicitors, Blake Dawson Waldron. Omitting formal and introductory parts, the letter reads as follows: "Having canvassed various alternative approaches I confirm that the Commission would agree to the following revised protocol. In the ordinary course, the Commission will specifically identify the materials held by the liquidators which the Commission wishes to obtain. At least in the first instance, that material will then be delivered to the Commission without the need for the liquidators to first inspect it. The Commission will maintain a register of the materials received under this arrangement which will record identifying details and allow for the tracking of boxes, files and, where necessary, individual documents. Where the Commission identifies a document which potentially might be the subject of a legal professional privilege claim by the liquidators, the Commission will return that document to Blake Dawson Waldron and not retain a copy of it. The Commission's records will note that the document has been returned to the liquidators and a document recording the removal of the potentially privileged document will be inserted into the original file. Where it is not possible for the Commission to identify with precision boxes of material it might wish to obtain, for example because indices listing the material are not sufficiently descriptive for an assessment of potential relevance to be made, the Commission will be able to inspect the material wherever it may be located. In the event that any such material is potentially relevant, it will be identified and provided to the Commission to be dealt with in accordance with the arrangements already described. If the above arrangements do not prove to be practical, the Commission would be prepared to agree to alternative arrangements whereby materials are kept at HIH premises, but made available for inspection by Commission staff as they may require, so that they can identify the material to be delivered to the Commission's offices. This would exclude material identified as material in respect of which the liquidators potentially may wish to claim legal professional privilege. Insofar as some of the material which the Commission wishes to obtain from the company is in electronic format, different arrangements will need to apply. This material is very extensive and there is no practical way to extract and return potentially privileged material. Accordingly, the Commission will electronically 'tag' any potentially privileged material it identifies during the course of searching the electronic data, so that any such material can be excluded from any copies the Commission makes of potentially relevant electronic data. In this way, once the searching of a particular tape etc is completed, the original tape with the potentially privileged material will be returned to the liquidator." 4 These foreshadowed arrangements entail a very substantial reduction in the risk of waiver of legal professional privilege about which I expressed some reservations on the last occasion. I would go further and say that I consider any residual risk to be one which the liquidators have good grounds for regarding as more than offset by the advantages in avoiding the need to have lawyers examine every piece of paper in each of 60,000 boxes. 5 I am therefore content to make a direction under s.479(3) of the Corporations Act 2001 in the form proposed in the application I heard on 22 March, with two alterations: first, the substitution of a reference to a regime constructed in accordance with the letter of 26 March 2002 from Mr Daley to Mr Mainsbridge for the reference to the regime referred to in the letter of 20 March 2002; and second, the addition at the end of a proviso as I foreshadowed at paragraph 21 of the observations of 25 March. 6 The direction I now make is accordingly as follows: "That the liquidators of the company are justified in giving access to the HIH Royal Commission ('Commission') to the corporate records of the HIH Group of companies from 1 January 1995 to 15 March 2001, in response to a Notice to produce Documents or Things issued by the Commission to the liquidators on 1 March 2002, which may include documents over which a claim for legal professional privilege may be maintained by the liquidators, pursuant to a regime constructed in accordance with the letter from Simon Daley of the Commission addressed to Ray Mainsbridge of Blake Dawson Waldron dated 26 March 2002, provided that the liquidators form the view in good faith that the documenting and implementation of such a regime is or may be in the interests of the company or creditors of the company." 7 I add, for the purpose of clarification, that this direction is given to Mr McGrath and Mr Macintosh in their capacity as liquidators of each of the 20 relevant companies, being HIH Insurance Limited and subsidiaries of HIH Insurance Limited, and that the reference in the direction to "the company" is, in each case, a reference to the relevant member of that group of 20 companies of which they are liquidators. 8 In connection with the proviso to the direction, I note that the distinct prospect of benefit to creditors from the work of the HIH Royal Commission was mentioned by Santow J when he gave a direction to the liquidators about cooperation generally on 5 November 2001: see (2001) 39 ACSR 645. ********** Last Modified: 04/02/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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