New South Wales Supreme Court CITATION : Gate Gourmet Australia Pty Limited (in liquidation) v Gate Gourmet Holding AG & Ors [2004] NSWSC 768 HEARING DATE(S) : 18/08/04, 19/08/04 JUDGMENT DATE : 27 August 2004 JURISDICTION: Equity Division Commercial List JUDGMENT OF : Einstein J DECISION : Subject to one clarification, S.50 application to be allowed. Rulings on privilege. CATCHWORDS : Application to allow summary evidence - Legal Professional Privilege LEGISLATION CITED : Evidence Act 1995 (NSW) Trade Practices Act 1974 (Cth) Australian Securities and Investments Commission v Southcorp Limited (2003) 46 ACSR 438 Attorney-General (NT) v Maurice (1986) 161 CLR 475; 69 ALR 31 Australian Competition and Consumer Commission v Lux Pty Ltd [2003] FCA 89; BC 200300344 Australian Federal Police, Commissioner of v Propend Finance Pty Ltd (1997) 188 CLR 501; 141 ALR 545; 91 A Crim R 451 Dingwall v Commonwealth of Australia (1992) 39 FCR 521 Goldberg v Ng (1995) 185 CLR 83; 132 ALR 57 CASES CITED : Instant Colour Pty Ltd v Canon Australia Pty Ltd [1995] FCA 870; BC9506842 Interchase Corp Ltd (in liq) v Grosvenor Hill (Qld) Pty Ltd (No 1) [1999] 1 Qd R 141 Spassked Pty Ltd v Commissioner of Taxation (No 4) (2002) 50 ATR 70 Temwell Pty Ltd v DKGR Holdings Pty Ltd [2003] FCA 948 Tirango Nominees Pty Ltd v Dairy Vale Foods Ltd (No 2) (1998) 83 FCR 397; 156 ALR 364 Trade Practices Commission v Sterling (1979) 36 FLR 244 Wheeler v Le Marchant (1881) 17 Ch D 675 Gate Gourmet Australia Pty Limited (in liquidation) ACN 089 347 562 (Plaintiff) Gate Gourmet Holding AG, Company Number CH-020.3.003.945-1 (First Plaintiff) Gate Gourmet (Holdings) Pty Limited ACN 004 122 872 (Second Defendant) PARTIES : Odd Gunnar Engebretsen (Third Defendant) Lars Fredrik Larsen (Fourth Defendant) Henning Boysen (Fifth Defendant) Lucas Grolimund (Sixth Defendant) Gate Gourmet Switzerland GMBH (Seventh Defendant) FILE NUMBER(S) : SC 50180/01 COUNSEL : Mr B Coles QC, Ms E Collins (Plaintiff) Mr M Pembroke QC, Mr N Perram (Second, Fifth, Sixth and Seventh Defendants) SOLICITORS : Clayton Utz (Plaintiff) Mallesons Stephen Jaques (Second, Fifth, Sixth and Seventh Defendants) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST Einstein J Friday 27 August 2004 50180/01 Gate Gourmet Australia Pty Limited (In Liquidation) ACN 089 347 562 v Gate Gourmet Holding Ag, Company Number Ch-020.3.003.945-1 & Ors JUDGMENT The notice of motion 1 By motion filed on 11 August 2004 the plaintiff seeks orders that: (a) it be permitted to adduce at trial the contents of approximately 42 volumes of documents in the form of a summary [namely, various spreadsheets annexed to statements made in the proceedings by the liquidator, Mr Sherman (para 3)]; and (b) it be given access to those documents produced to the Court by Mr Paul Carter of Pricewaterhourse Coopers, the subject of a claim for privilege. The Evidence Act section 50 application 2 Section 50 provides: "(1) The court may direct that a party may adduce evidence of the contents of 2 or more documents in question in the form of a summary if: (a) application is made to it by the party before the hearing concerned; and (b) it is satisfied that it would not otherwise be possible conveniently to examine the evidence because of the volume and complexity of the documents in question. (2) The court may only make such a direction if the party seeking to adduce the evidence in the form of a summary has: (a) served on each other party a copy of the summary that discloses the name and address of the person who prepared the summary; and (b) given each other party a reasonable opportunity to examine or copy the documents in question. (3) The opinion rule does not apply to evidence adduced in accordance with a direction under this section." 3 The spreadsheets exhibited to the various statements of Mr Sherman summarise what is voluminous documentary evidence of the plaintiff's financial position in the period 16 February 2001 (the date of the Letter) and 13 September 2001 (the date on which Mr Sherman was appointed administrator). The evidence is relevant to the quantification of the plaintiff's damages under the contractual measure and under the Trade Practices Act 1974 measure. 4 The spreadsheets in respect of which the application is made are as follows: (1) Third Sherman statement dated 7 June 2004; tabs 6, 10, 13 and 15; (2) Fifth Sherman statement dated 10 August 2004; tabs 3, 4 and 5 5 At paragraph 10 of Mr Sherman's statement dated 7 June 2004 he states as follows: "At tabs 4 to 8 are five spreadsheets prepared by my staff under my supervision which summarise the status of general non-priority unsecured creditors' claims as at the date of this witness statement, which has changed from the date of my first witness statement [dated 10 October 2003] due to my Firm now adjudicating on creditors claims. The documents which underlie the spreadsheet at tab 6 have been produced on discovery to the defendants in the plaintiff's third supplementary list of documents dated 28 May 2004 at items 533 to 544, 563 to 566 but are not annexed to this statement due to the fact that they run to approximately 16 volumes of documents". 6 Application is not made in respect of the spreadsheets at tabs 4, 5, 7 and 8 as those spreadsheets merely explain differences between Mr Sherman's evidence as at 7 June 2004 of the plaintiff's liabilities, and his assessment of its' liabilities as recorded in the Report as to Affairs he prepared in late 2001. 7 The relevant spreadsheets exhibited to the Third Sherman statement are as follows: (a) Tab 6: a summary of various proofs of debt lodged by general non-priority unsecured creditors of the plaintiff, which records, inter alia, the name of the creditor, the amount of any proof of debt submitted, and whether and to what extent it has been admitted by the liquidator; (b) Tab 10: a further summary of the various proofs of debt lodged by general non-priority unsecured creditors of the plaintiff. This spreadsheet is different to the one at tab 6 as it lists only those debts incurred by the plaintiff in the period 16 February 2001 to 13 September 2001; (c) Tab 13: a summary of evidence tendered without objection at the first tranche of the trial as to employee entitlements which arose in the period 16 February 2001 to 13 September 2001; and (d) Tab 15: a summary of documents evidencing receipts by and payments of the liquidator for the period 13 September 2001 and 15 May 2004. 8 The relevant spreadsheets exhibited to the Fifth Sherman statement are: (a) Tab 1: an updated version of the summary of general non-priority unsecured creditors of the plaintiff which is tab 6 to the Third Sherman statement; (b) Tab 3: a document which divides the information recorded in tab 10 to the Third Sherman Statement into two categories, namely, general non-priority unsecured creditors incurred in the period 16 February to 7 May 2001, and in the period 8 May 2001 to 13 September 2001; (c) Tab 4: a document which divides the information recorded in tab 13 of the Third Sherman Statement into two categories, namely, employee entitlements accrued in the period 16 February 2001 to 7 May 2001, and in the period 8 May 2001 to 13 September 2001; and (d) Tab 5: an updated version of the summary of receipts and payments of the liquidator for which is tab 15 to the Third Sherman statement, to 31 July 2004. 9 The underlying material in respect of all of the summaries has been discovered in the proceedings. The defendants' objections to the making of the section 50 Order The third objection 10 It convenient to commence with the third of the defendants' objections as it is shortly disposed of. The objection is that the terms of section 50 (2)(a) requires that the party seeking to adduce the summary form evidence must serve on the other party a document being both the summary as well as the disclosure of the name and address of the person who prepared the summary and that this has not occurred presently. Whilst this objection may represent the proper construction of the subsection if it is shown that there was served at the same time as the summary, a disclosure of the name and address of the person who prepared the summary, it would clearly be appropriate to order that that segment of the subsection not apply pursuant to the power granted by the Evidence Act section 190 (3) (a) and/or (b). Provided that the parties accept that what occurred presently satisfied the above described criterion, such an order will be made. The second objection 11 The next objection is that what has been summarised in the documents annexed to the statements of Mr Sherman: · is not in fact the documents contained in the voluminous folders of materials [which occupied a number of shelves in the courtroom]; · comprises no more than summaries of the assessment of Mr Grimshaw [a Senior Manager at Ferrier Hodgson responsible under the supervision of the partners for the day-to-day conduct of the liquidation of the plaintiff company]. 12 Mr Grimshaw has carefully explained the work which he carried out in support of the application that particular spreadsheets and summaries be adduced at the hearing as a summary of the approximately 42 volumes of documents which comprise the proofs of debt and other related documents in relation to the plaintiff's former employees and its general unsecured non-priority creditors. 13 He deposed as follows: "8. I created the spreadsheets referred to above using either of 2 computer programmes namely: (a) Excel, which I have used to create the spreadsheets at tab 14 of the first statement, tabs 10,13 and 15 of the third statement and tabs 3 to 12 of the fifth statement; (b) FIS (which stands for " Ferriers' Insolvency System ", being custom made software used by my Firm) which I have used to create the summaries that appear at tab 16 of the first statement, tabs 4 to 8 of the third statement and tab 1 of the fifth statement. 9. I deal with each in turn below. Excel spreadsheets 10. The spreadsheets can be grouped into the following classifications: (a) tab 14 in the first statement, tab 13 in the third statement and tab 4 in the fifth statement which all relate to employee entitlements (" the Employee Spreadsheets"); (b) tab 10 in the third statement and tab 3 in the fifth statement which dissect GGA's admitted general unsecured creditors between various dates (" the Dissection Spreadsheets"); (c) tab 15 in the third statement and tab 5 in the fifth statement which are summaries of receipts and payments received and made by GGA whilst in administration and then liquidation (" the Receipts and Payments Spreadsheets"); (d) tabs 6 to 12 of the fifth statement which are calculations of interest due on any award of damages that GGA may receive (" the Interest Spreadsheet"). Employee Spreadsheets 11. Following Mr Sherman's appointment as administrator of GGA, I was told by Ms Woodrow and verily believe that Mr Sherman instructed his staff to prepare individualised proofs of debt for each known employee on the basis of each employee's records as held by GGA. Those proofs were then sent to the employees for signature, together with forms required by GEERS to enable payments to be effected under the GEERS scheme. All of the relevant correspondence to which I have referred appears in the approximately 26 volumes of documents that are referred to at paragraph 7 of Mr Sherman's third statement. 12. I prepared the Employee Spreadsheets by reviewing the proofs of debt returned by GGA's former employees and all related correspondence, reviewing payments made to them by GEERS and GGA and then inputting that data into the Employee Spreadsheets under the headings that appears at the top of each column. The Employee Spreadsheets have built in formulae which calculate an employee's entitlements based on such data as, for example, an employee's length of service, commencement of employment date, any relevant industrial relations award or agreement and salary. Dissection Spreadsheets 13. I prepared the Dissection Spreadsheets by: (a) first, looking at the admitted amount of each proof of debt on the relevant FIS Summaries (which I explain below); (b) secondly, going to the individual proof of debt of each admitted creditor and related correspondence (which appear in the approximately 16 volumes of documents that are referred to at paragraph 10 of Mr Sherman's third statement); (c) thirdly, reviewing each proof of debt and supporting documentation to ascertain when a particular debt was incurred or first incurred according to the invoice date or the date of any relevant contract or agreement; (d) fourthly, inputting the data into the Dissection Spreadsheets under the columns shown in those documents. Receipts and Payments Spreadsheets 14. I prepared the Receipts and Payments Spreadsheets by: (a) first, reviewing my Firm's electronic cashbook summaries which record for each category of receipt or payment the amount that has been received or paid in the relevant period; (b) secondly, inputting the data into the Receipts and Payments Spreadsheets and dividing that data between amounts received and paid during the administration and then the liquidation of GGA; (c) thirdly, dividing the various receipts and payments into various sub-categories as shown in the spreadsheets for ease of reference. Interest Spreadsheets 15. I prepared the Interest Spreadsheets by copying the format of the spreadsheets that appear at tabs 18 and 19 of Mr Sherman's third statement, which I am informed and verily believe were created by Clayton Utz on Mr Sherman's instructions. 16. I then updated those spreadsheets by inputting various different principal amounts to calculate the interest that would accrue in the various different scenarios recorded in those spreadsheets. FIS Summaries 17. Following the appointment of Mr Sherman as administrator, I was instructed by Mr Sherman to send proofs of debt to all known creditors and suppliers of GGA. To the best of my recollection, a list of suppliers was sent to my firm by Mr Steve Whyte, a employee of GGA, a copy of which has been produced on discovery (page 144). 18. Following that request for proofs to be lodged, I recall that: (a) some creditors returned the proof of debt form to my firm with supporting documentation; (b) some creditors returned the proof of debt form without any supporting documentation; and (c) some creditors did not respond. 19. On 20 April 2004, on Mr Sherman's instructions, I sent a circular to all known unproven creditors of GGA who had not already lodged a proof of debt, requesting that they lodge a formal proof of debt by no later than 7 May 2004. 20. On or about 7 May 2004, I began to review the proofs of debt that were either already in my files or had been received in response to the circular sent on 20 April 2004. 21. I adjudicated on each proof of debt as follows: (a) first, I have reviewed the actual proof of debt and supporting invoices: (i) to check the amount claimed; (ii) to verify the amounts and nature of any supporting invoices or other documentation; (b) secondly, I have had regard to Schedule H of the report as to affairs, being a schedule of GGA's unsecured creditors provided by Mr Serge Steininger on 27 September 2001 and 5 October 2001 (pages 145 to 146); (c) thirdly, if I am satisfied that sufficient information has been provided to prove a claim, I enter the amount of the claim admitted into FIS, noting any difference that may exist between the proven amount and the amount that appeared on Schedule H; (d) fourthly, if I am not satisfied that the claim is valid, then I reject the claim, enter it into FIS as rejected and then the creditor in question has 14 days to lodge an objection; (e) fifthly, if I am not satisfied that sufficient information has been provided to substantiate a claim, then I write to the creditors and request that further information and evidence be provided and then re-examine the claim once that information has been provided. I also enter the claim into FIS which the programme notes as being under consideration until such time as it is either admitted or rejected. 22. Subsequent to this exercise, I have generated several reports from the FIS programme: (a) to summarise the status of each individual creditor's claim; (b) to divide the creditors between various categories as appear at tabs 4 to 8 of Mr Sherman's third statement." 14 The defendants' proposition is that the vast bulk of the documentation comprise within the 42 volumes of documents comprises not the proofs of debt, but rather the supporting documentation standing behind those proofs of debt [and in certain instances correspondence with the liquidator's office] 15 Hence the proposition is that the plaintiff has not complied with section 50 (1) as the so-called summaries simply do not summarise the contents of the documents. 16 It seems to me that there are a number of answers to this proposition. 17 The first is that a number of the summaries include the prefatory heading: "Folder entitled [the description will be given as for example being 'Unsecured Creditor Proofs of Debt'] containing formal proofs of debt and related material for the following unsecured creditors"-details of which I then provided." [emphasis added] 18 The second is that the proofs of debt documents are nonetheless proofs of debt documents if they happen to include supporting documentation as part thereof. 19 The third is that there is a misconception in the proposition that a party adducing evidence of the contents of two or more documents in the form of the summary must include in the summary every detail or fact or feature of the documents purported to be summarised. Clearly enough the section is intended to achieve the purpose of permitting summary evidence in the event that the Court is satisfied that it would not otherwise be possible conveniently to examine the evidence because of the volume and complexity of the documents in question, as long as the other party had been served with a copy of the summary and given a reasonable opportunity to examine or copy the documents. 20 It has to be said that defendants exposed their anxiety in the course of the submissions advanced, the proposition being that the defendants as third parties are said not to be bound by the fact that the liquidator may have allowed a proof of debt in a particular sum as proving that such an indebtedness had been incurred. 21 Ultimately the section 50 mode of proof of the fact that the liquidator allowed particular proofs of debt and did so on the basis of particular materials too voluminous to permit of independent tender, may or may not carry the plaintiff the distance it may contend for. 22 The determination of issues such as this will require to await the hearing when the precise materials adopted by the plaintiff in endeavouring to prove its case comes forward. 23 In my view subject to the S190(3) order being appropriate qua objection 3, Order 3 in the plaintiffs notice of motion filed on 11 August 2004 should be made. Short minutes of order should be brought in accordingly. Claims for Privilege over Material Produced by Mr Carter 24 On 3 August 2004 a subpoena issued by the plaintiff to Mr Paul Carter, an expert accountant who has provided a report on behalf of the defendants in the proceedings, was returnable. The subpoena sought production of: "1. All documents which are or concern communications with Mallesons Stephen Jacques ("Mallesons") as solicitors for the Second and Seventh Defendants in relation to the analysis and quantification of the loss and damages suffered by the Plaintiff for the purpose of giving evidence in relation to file number 50180 of 2001 before the Supreme Court of New South Wales, including without limitation: (a) records of discussions; (b) instructions from or on behalf of Mallesons as solicitors for the Second and Seventh Defendants, including any supporting documentation; (c) requests for instructions; and (d) any document which records or constitutes any advice or opinion given by you to Mallesons, the Second or Seventh Defendants or anyone on their behalves. 2. In relation to your report to Mr David Price of Mallesons dated 9 July 2004: (a) notes and working papers prepared in connection with that report; and (b) drafts of that report." 25 On that occasion a claim for privilege in respect of some of the documents produced by Mr Carter was made by the defendants. 26 An affidavit of Mr Price, solicitor, setting out the basis of the claim for privilege, was made on 12 August 2004 and served on 13 August 2004. The affidavit disclosed that privilege is claimed over 28 documents, ranging from the description "Draft Report-undated" [3]; "Email from C Hall to P Carter dated 5 July 2004 attaching a draft report [8] and "Email from D Price to P Carter dated 22 June 2004 relating to the preparation of the Report" [27]. In all cases, the documents are said to be a confidential document or communication "for the dominant purpose of the seventh defendant being provided with professional legal services in these proceedings". 27 A further affidavit of Mr Price of 18 August 2004 is also relied upon by the relevant defendants. 28 In ASIC v Southcorp Limited (2003) 46 ACSR 438 Lindgren J set out the relevant principles governing the question of whether material in the possession of an expert witness is properly the subject of a claim for client legal privilege. At 441-442 his Honour set out the principles which for present purposes I adopt as presently representing the state of the law in New South Wales: "[21] I will apply the following principles which I did not understand to be in dispute: (1) Ordinarily the confidential briefing or instructing by a prospective litigant's lawyers of an expert to provide a report of his or her opinion to be used in the anticipated litigation attracts client legal privilege: cf Wheeler v Le Marchant (1881) 17 Ch D 675; Trade Practices Commission v Sterling (1979) 36 FLR 244 at 246; Interchase Corp Ltd (in liq) v Grosvenor Hill (Qld) Pty Ltd (No 1) [1999] 1 Qd R 141 (Interchase) at 151 per Pincus JA, at 160 per Thomas J. (2) Copies of documents, whether the originals are privileged or not, where the copies were made for the purpose of forming part of confidential communications between the client's lawyers and the expert witness, ordinarily attract the privilege: Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501; 141 ALR 545; 91 A Crim R 451 (Propend); Interchase, per Pincus JA; Spassked Pty Ltd v Cmr of Taxation (No 4) (2002) 50 ATR 70 at [17]. (3) Documents generated unilaterally by the expert witness, such as working notes, field notes, and the witness's own drafts of his or her report, do not attract privilege because they are not in the nature of, and would not expose, communications: cf Interchase at 161 – 2 per Thomas J. (4) Ordinarily disclosure of the expert's report for the purpose of reliance on it in the litigation will result in an implied waiver of the privilege in respect of the brief or instructions or documents referred to in (1) and (2) above, at least if the appropriate inference to be drawn is that they were used in a way that could be said to influence the content of the report, because, in these circumstances, it would be unfair for the client to rely on the report without disclosure of the brief, instructions or documents; cf Attorney-General (NT) v Maurice (1986) 161 CLR 475 at 481; 69 ALR 31 at 34 per Gibbs CJ, CLR 487-8; ALR 38-9 per Mason and Brennan JJ, CLR 492-3; ALR 42-3 per Deane J, CLR 497-8; ALR 46-7 per Dawson J; Goldberg v Ng (1995) 185 CLR 83 at 98; 132 ALR 57 at 66 per Deane, Dawson and Gaudron JJ, CLR 109; ALR 75 per Toohey J; Instant Colour Pty Ltd v Canon Australia Pty Ltd [1995] FCA 870; BC9506842; Australian Competition and Consumer Commission v Lux Pty Ltd [2003] FCA 89; BC 200300344 (ACCC v Lux) at [46]. (5) Similarly, privilege cannot be maintained in respect of documents used by an expert to form an opinion or write a report, regardless of how the expert came by the documents; Interchase at 148-50 per Pincus JA, at 161 per Thomas J. (6) It may be difficult to establish at an early stage whether documents which were before an expert witness influenced the content of his or her report, in the absence of any reference to them in the report: cf Dingwall v Commonwealth of Australia (1992) 39 FCR 521; Tirango Nominees Pty Ltd v Dairy Vale Foods Ltd (No 2) (1998) 83 FCR 397 at 400; 156 ALR 364 at 366; ACCC v Lux at [46]." 29 The Southcorp decision was followed by his Honour Ryan J in Temwell Pty Ltd v DKGR Holdings Pty Ltd [2003] FCA 948. It does not appear to have been the subject of judicial consideration elsewhere. However in the Plaintiff's submission his Honour's articulation of the relevant principles represents the current state of the law in New South Wales and should be applied in this case. Dealing with the matter 30 Mr Perram read onto the transcript those sections of the materials were privilege was no longer claimed that it is therefore unnecessary to treat further with those claims. 31 Having examined the documents where the claim was still pursued, the rulings are as follows: Document 1 - The claim to privilege is sustained Document 11 - The claim to privilege is rejected Document 14 - The claim to privilege is sustained Document 15 - The claim to privilege is rejected Documents 16 - The claim to privilege is sustained Documents 17 - The claim to privilege is sustained Document 18 - The claim to privilege is sustained Document 19 - The claim to privilege is rejected Document 20 - The claim to privilege is rejected Document 23 - The claim to privilege is rejected Document 24 - The claim to privilege is allowed Document 26 - The claim to privilege is allowed Document 27 - The claim to privilege is rejected Document 28 - The claim to privilege is allowed Short minutes of order 32 Short minutes of order should be brought in. I certify that paragraphs 1 - 32 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 27 August 2004 ___________________ Susan Piggott Associate 27 August 2004 Last Modified: 09/02/2004 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.