Supreme Court New South Wales Medium Neutral Citation: Kellert v Foate [2015] NSWSC 954 Hearing dates: 21 May 2015 Date of orders: 17 July 2015 Decision date: 17 July 2015 Jurisdiction: Common Law Before: Harrison AsJ Decision: The Court orders that: In proceedings 2014/75345: (1) I decline to make an order as sought in paragraph [3] of the plaintiff's notice of motion filed 3 February 2015. (2) The proceedings are dismissed as against the first defendant. (3) The statement of claim, so far as it relates to the second defendant, is stood over for directions before the Registrar at 9.00 am on 31 July 2015. (4) The plaintiff is to pay the first defendant's costs of the proceedings on an ordinary basis as agreed or assessed. The Court further orders that: In proceedings 2008/289756 and 2008/281722: (1) The notices of motion filed 3 February 2015 are listed for directions before the Registrar at 9.00 am on 31 July 2015. (2) I decline to make the consolidation order in paragraph [2] of the notices of motion filed 3 February 2015. (3) Costs are reserved. Catchwords: SUMMARY JUDGMENT – whether the proceedings or the statement of claim disclose a reasonable cause of action – costs claimed against legal representation under s 348 Legal Profession Act 2004 (NSW) and s 99 Civil Procedure Act 2005 (NSW) - whether statutory claims for costs should be made by way of notice of motion in the original proceedings – whether an action for collateral abuse of process can be brought against a party's solicitor – subpoena to produce documents from a deregistered company – whether privilege can survive deregistration – whether proceedings should be consolidated Legislation Cited: Civil Procedure Act 2005 (NSW) Corporations Act 2001 (Cth) Federal Court Act 1976 (Cth) Legal Profession Act 1987 (NSW) Legal Profession Act 2004 (NSW) Migration Act 1958 (Cth) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: A Goninan & Co v Atlas Steels [2003] NSWSC 956 Attorney-General (NT) v Maurice (1986) 161 CLR 475; 69 ALR 31 Ballina Shire Council v Ringland [1999] NSWSC 11 British American Tobacco (Australia) Ltd v Peter Gordon [2006] NSWSC 1473 General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 Grant v Downs (1976) 11 ALR 577; (1976) 135 CLR 674 Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (t/as Uncle Ben's Australia) (1994) 126 ALR 58 Leerdam v Noori & Ors (2009) ALJR 553; [2009] NSWCA 90 Lloyd Foyster v ANZ Banking Group Ltd (Supreme Court (NSW), 8 December 1997) Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300; [2005] NSWCA 153 Maple v David Syme & Co [1974] 1 NSWLR 290 McHenry v Lewis (1882) AC 397 New Cap Reinsurance Corporation Ltd (in liq) v Daya [2008] NSWSC 763 O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71 Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 Swaab v Commissioner of the NSW Police Service [2005] NSWSC 901 Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509 Category: Procedural and other rulings Parties: Susan Melinda Kellert (Plaintiff) Anthony Stuart Foate (First Defendant) David George Brooks (Second Defendant) Representation: Counsel: R Jefferis (Plaintiff) M Darke SC (First Defendant) Solicitors: Kenneth Harrison (Plaintiff) HWL Ebsworth Lawyers (First Defendant) File Number(s): 2008/281722, 2008/289756, 2014/75345 Publication restriction: Nil Judgment 1. HER HONOUR: There are three proceedings before this Court in which notices of motion are to be determined. Substantive judgments have been delivered in the earlier proceedings 2008/289756, Australian Beverage Distributors Pty Ltd v Susan Kellert ("the appeal proceedings") and 2008/281722, Australian Beverage Distributors Pty Ltd v Susan Melinda Kellert ("the statutory demand proceedings"). The third proceedings are new, 2014/75345, Susan Kellert v Anthony Stuart Foate ("the new proceedings"). 2. It would be an understatement to say that there was procedural confusion at the commencement of the hearing. The best way to set out this judgment, I think, is to first deal with the new proceedings, followed by the notices of motion in the appeal proceedings and the statutory demand proceedings. In the new proceedings, I will deal with the first defendant's notice of motion seeking summary judgment, then the plaintiff's notice of motion seeking production of documents. 3. After judgment was reserved, by agreement, the parties forwarded supplementary submissions concerning the production of the documents of Australian Beverage Distributors Pty Ltd. I have now received written supplementary submissions from the plaintiff and first defendant. (1) The new proceedings (2014/75345) 1. In the new proceedings, the plaintiff is Susan Melinda Kellert ("Mrs Kellert"). The first defendant is a solicitor, Anthony Stuart Foate. The second defendant is David George Brooks ("Mr Brooks"). Mrs Kellert relied on her affidavit affirmed 19 March 2015 and two affidavits of her solicitor Kenneth Harrison sworn 19 March 2015 and 15 May 2015. Mr Foate relied on the affidavit of his solicitor Alisha Sarah Hutchinson sworn 18 September 2014. Mrs Kellert was represented by Mr Jefferis of counsel. Mr Foate was represented by Mr Darke SC. For convenience and ease of understanding, I shall refer to Mr Foate as "the solicitor". 2. Mr Brooks was the alleged authorised officer or employee and director of Australian Beverage Distributors Pty Ltd ("Australian Beverage"). To date, Mr Brooks has not been served with the statement of claim. Not surprisingly, he did not attend this hearing. Hence, no orders have been made in relation to him. These proceedings, so far as they refer to him, have been stood over to a future date. On 15 November 2009, Australian Beverage was deregistered (Ex 1D/1). 3. So far as the solicitor is concerned, the new proceedings involve his alleged conduct when he represented Australian Beverage in relation to the original Local Court proceedings ("the Local Court proceedings"), the appeal proceedings and the statutory demand proceedings, all involving Mrs Kellert. The proposed amended statement of claim (Ex A) 1. The factual background to Mrs Kellert's claims against the solicitor, as pleaded in the proposed amended statement of claim ("PASC"), is as follows: (a) Mrs Kellert is a former employee of Australian Beverage: PASC, [1]. (b) The solicitor was, at all material times, a solicitor conducting legal practice under the name "Catalyst Legal" from premises in Newcastle, and was engaged to act as a solicitor for and behalf of Australian Beverage: PASC, [2]. (c) On 6 December 2006, Australian Beverage terminated Mrs Kellert's employment without notice: PASC, [6]. The Local Court proceedings 1. On 14 March 2007, Mrs Kellert commenced proceedings in the Local Court against Australian Beverage for breach of contract in relation to her dismissal: PASC, [7]. 2. On 15 February 2008, the Local Court gave judgment in favour of Mrs Kellert in the sum of $11,819.94 plus interest, and also indicated that Mrs Kellert was to be awarded costs although the costs order was not finally made until 21 April 2008: PASC, [9]-[11]. The appeal proceedings 1. On 17 March 2008, the solicitor filed, on behalf of Australian Beverage, a summons in the Supreme Court of New South Wales appealing the decision of the Local Court, the solicitor having certified, for the purposes of s 347 of the Legal Profession Act 2004 (NSW), that there were reasonable grounds for believing that the appeal had reasonable prospects of success: PASC, [12]-[13]. 2. On 24 September 2008, at the hearing of the appeal proceedings, Australian Beverage was granted leave to file an amended summons which replaced all previous grounds of appeal with new grounds, the solicitor having again certified that there were reasonable grounds for believing that Australian Beverage's appeal had reasonable prospects of success: PASC, [16]-[18]. 3. On 29 October 2008, the Supreme Court dismissed Australian Beverage's appeal and ordered it to pay Mrs Kellert's costs of those proceedings as agreed or assessed: PASC, [19]. 4. On 11 November 2008, Mrs Kellert caused a statutory demand seeking payment of $14,026.07, being the amount of the Local Court judgment in her favour plus interest to 4 November 2008, to be served on Australian Beverage pursuant to s 459E of the Corporations Act 2001 (Cth): PASC, [25]-[26]. The statutory demand proceedings 1. On 27 November 2008, the solicitor filed or caused to be filed on behalf of Australian Beverage in the Supreme Court an originating process seeking to set aside the statutory demand, supported by an affidavit of Mr Brooks, that raised issues and allegations which it had propounded against Mrs Kellert in the Local Court proceedings or raised in the appeal proceedings: PASC, [27]-[29]. 2. On 12 February 2009, before its application to set aside the statutory demand had been determined, and unbeknownst to Mrs Kellert, Australian Beverage's directors resolved to wind up Australian Beverage: PASC, [33]. 3. On 16 February 2009, the originating process was dismissed with costs. The pleaded causes of action 1. Against that background, Mrs Kellert pleads four claims against the solicitor in the new proceedings. They are: 2. First, Mrs Kellert alleges that, on 17 March 2008, when the solicitor filed and arranged for service of the summons commencing the appeal proceedings, he breached and/or disregarded the provisions of ss 345 and 347 of the Legal Profession Act and continued to disregard or to be in breach of those provisions: PASC, [21]. I shall refer to this as the first s 347, Legal Profession Act claim. It is based on the summons being reformulated shortly before the hearing of Australian Beverage's appeal. 3. Secondly, Mrs Kellert alleges that by commencing the statutory demand proceedings on behalf of Australian Beverage and thereafter, when he continued to act for Australian Beverage, the solicitor was in breach of ss 345 and 347 of the Legal Profession Act. I shall refer to this as the second s 347, Legal Profession Act claim: PASC, [36]. 4. Thirdly, Mrs Kellert alleges that the solicitor breached s 99(1) of the Civil Procedure Act 2005 (NSW) by certifying the summons commencing the appeal proceedings for the purposes of s 347 of the Legal Profession Act, and filing and arranging for service of that summons: PASC, [23]. I will refer to this as the first s 99(1), Civil Procedure Act claim. Mrs Kellert asserts that the solicitor was negligent, incompetent or guilty of misconduct in certifying that Australian Beverage's appeal had reasonable prospects of success. 5. Fourthly, Mrs Kellert alleges that the solicitor breached s 99(1) of the Civil Procedure Act when, on 27 November 2008, he commenced the statutory demand proceedings on behalf of Australian Beverage and, thereafter, when he continued to act in those proceedings. I will refer to this as the second s 99(1), Civil Procedure Act claim. Mrs Kellert alleges that, in so acting, the solicitor was negligent, incompetent or guilty of misconduct. In the particulars to this claim, Mrs Kellert further asserts that the solicitor caused Australian Beverage to rely on an issue or issues, which to his knowledge, it had abandoned before or during the Local Court proceedings and the appeal proceedings: PASC, [37]. 6. Fifthly, Mrs Kellert alleges that the solicitor's actions in commencing the statutory demand proceedings were an abuse of process and designed to delay, defeat and/or deny her entitlement to the judgment awarded to her in the Local Court proceedings: PASC, [39]. I will refer to this as the tort of abuse of process claim. Relief sought 1. Mrs Kellert seeks the following relief: 2. Firstly, pursuant to s 99 of the Civil Procedure Act, that she be indemnified by the solicitor with regards to the costs she incurred in the appeal proceedings and in the statutory demand proceedings. 3. Secondly, similar relief for an indemnity as to costs in relation to the proceedings mentioned above sought against the solicitor, pursuant to s 348 of the Legal Profession Act. 4. Finally, Mrs Kellert seeks an award for damages and wasted costs from the solicitor arising from his alleged abuse of court process. Notices of motion 1. There are two notices of motion to be determined in the new proceedings, one by the solicitor filed 18 September 2014 seeking summary judgment, and the other by Mrs Kellert filed 3 February 2015 seeking orders that the solicitor produce specified documents for inspection (paragraph [3]), and leave be granted to file an amended statement of claim (paragraph [10]). Other orders sought in this notice of motion were not pressed. Paragraphs [11] and [12] relate to the second defendant and they have been stood over to a future date. Summary judgment 1. The solicitor's notice of motion seeks orders summarily dismissing the proceedings against him, pursuant to rule 13.4 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), or striking out the statement of claim insofar as it pleads claims against him, pursuant to UCPR 14.28, together with orders for costs. The basis on which the solicitor seeks these orders is that the proceedings and the statement of claim do not disclose any reasonable cause of action against him. 2. For the purposes of his motion, the solicitor takes the allegations pleaded in the PASC against him at their highest. However, if the proceedings were to continue to trial, I accept that a number of those allegations would be vigorously disputed. The law 1. UCPR 13.4(1) provides that the Court may dismiss proceedings generally, or in relation to any claim for relief, in three circumstances. These are, if the proceedings are frivolous or vexatious, if no reasonable cause of action is disclosed or if the proceedings are an abuse of the process of the court. 2. UCPR 14.28(1) provides that the Court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading firstly, discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, secondly, has a tendency to cause prejudice, embarrassment or delay in the proceedings, or thirdly, is otherwise an abuse of the process of the court. 3. UCPR 14.28(2) provides that the court may receive evidence on the hearing of an application for an order under subrule (1). 4. In O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71 the Court of Appeal applied the High Court decision of Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118. In Spencer the High Court was concerned with s 31A(2) of the Federal Court Act 1976 (Cth) but the following principles are of general application (at [3] in O'Brien): "(a) On a summary judgment application, the real issue is whether there is an underlying cause of action or defence, not simply whether one is pleaded (at [23]). (b) The critical question can be expressed as whether there is more than a 'fanciful' prospect of success (at [25]) per French CJ and Gummow J) or whether the outcome is so certain that it would be an abuse of the process of the court to allow the action to go forward (at [54] in the judgment of the plurality). Demonstration of the outcome of the litigation is required, not an assessment of the prospect of its success. (c) Powers to summarily terminate proceedings must be exercised with exceptional caution (at [55], French CJ and Gummow J at [24])." 1. See also General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129. 2. I shall discuss the statutory claims first, followed by the tort of abuse of process to ascertain whether or not the pleading discloses reasonable statutory claims and causes of action against the solicitor. The statutory claims in the PASC 1. The relevant statutory provisions are ss 347 and 348 of the Legal Profession Act and s 99 of the Civil Procedure Act. They are as follows. 2. Sections 347 and 348 of the Legal Profession Act relevantly read: "347 Restrictions on commencing proceedings without reasonable prospects of success (1) The provision of legal services by a law practice without reasonable prospects of success does not constitute an offence but is capable of being unsatisfactory professional conduct or professional misconduct by a legal practitioner associate of the practice who is responsible for the provision of the service or by a principal of the practice. (2) A law practice cannot file court documentation on a claim or defence of a claim for damages unless a principal of the practice, or a legal practitioner associate responsible for the provision of the legal service concerned, certifies that there are reasonable grounds for believing on the basis of provable facts and a reasonably arguable view of the law that the claim or the defence (as appropriate) has reasonable prospects of success. … 348 Costs order against law practice acting without reasonable prospects of success (1) If it appears to a court in which proceedings are taken on a claim for damages that a law practice has provided legal services to a party without reasonable prospects of success, the court may of its own motion or on the application of any party to the proceedings make either or both of the following orders in respect of the practice or of a legal practitioner associate of the practice responsible for providing the services: (a) an order directing the practice or associate to repay to the party to whom the services were provided the whole or any part of the costs that the party has been ordered to pay to any other party, (b) an order directing the practice or associate to indemnify any party other than the party to whom the services were provided against the whole or any part of the costs payable by the party indemnified. (2) The Supreme Court may on the application of any party to proceedings on a claim for damages make any order that the court in which proceedings on the claim are taken could make under this section. (3) An application for an order under this section cannot be made after a final determination has been made under this Part by a costs assessor of the costs payable as a result of an order made by the court in which the proceedings on the claim concerned were taken. (4) A law practice or legal practitioner associate of the practice is not entitled to demand, recover or accept from a client any part of the amount for which the practice or associate is directed to indemnify a party pursuant to an order under this section." 1. There are two claims made pursuant to s 99 of the Civil Procedure Act. Section 99 relevantly reads: "99 Liability of legal practitioner for unnecessary costs (cf Act No 52 1970, section 76C; SCR Part 52A, rules 43 and 43A) (1) This section applies if it appears to the court that costs have been incurred: (a) by the serious neglect, serious incompetence or serious misconduct of a legal practitioner, or (b) improperly, or without reasonable cause, in circumstances for which a legal practitioner is responsible. (2) After giving the legal practitioner a reasonable opportunity to be heard, the court may do any one or more of the following: (a) it may, by order, disallow the whole or any part of the costs in the proceedings: … (ii) in the case of a solicitor, as between the solicitor and the client, (b) it may, by order, direct the legal practitioner: … (ii) in the case of a solicitor, to pay to the client the whole or any part of any costs that the client has been ordered to pay to any other person, whether or not the client has paid those costs, (c) it may, by order, direct the legal practitioner to indemnify any party (other than the client) against costs payable by that party. …" 1. Senior counsel for the solicitor's main submission in relation to the statutory claims for costs is that the two s 347, Legal Profession Act claims should be made by way of notice of motion in the original proceedings. Notices of motion have been filed by Mrs Kellert in both the appeal and statutory demand proceedings. 2. As authority in support this proposition, he relied upon Lemoto v Able Technical Pty Ltd (2005) 63 NSWLR 300; [2005] NSWCA 153. In Lemoto, a solicitor sought leave to appeal from a costs order made by a District Court judge against a solicitor pursuant to s 198M of the Legal Profession Act 1987 (NSW). The Legal Profession Act 1987 was repealed by the Legal Profession Act 2004 in order to adopt national model legal profession provisions. Section 198M is the predecessor of s 348 of the Legal Profession Act 2004 and is in almost identical terms. In Lemoto, McColl JA under the heading "Procedural matters" at [143] and [145] stated: "[143] The primary judge noted, correctly, that there is no formal procedure for dealing with a s 198M application. In the absence of regulations to the Legal Profession Act or District Court Rules regulating the procedure to be adopted when an issue arises under s 198M, the procedure to be adopted was a matter for the judge: see Brendon v Spiro [1938] 1 KB 176 at 192, per Scott LJ; Bahai v Rashidian [1985] 1 WLR 1337. The procedure must be devised having regard to the principles of natural justice. It should be fair and "as simple and summary as fairness permits": Ridehalgh (at 238). … [145] Where the application is made by a party, it should be made by notice of motion supported by an affidavit: see Sorridimi v Moro & Anor [2004] NSWCA 168." 1. So far as the new proceedings are concerned, after hearing the submissions for the solicitor, counsel for Mrs Kellert submitted that he was not going to vigorously argue against the proposition that the applications under s 99 of the Civil Procedure Act and s 347 of the Legal Profession Act should not be determined by way of notice of motion in their original proceedings (T32.11-16). 2. It is an abuse of process to have sets of proceedings that seek the same relief, as I discussed in Lloyd Foyster v ANZ Banking Group Ltd (Supreme Court (NSW), 8 December 1997). In that judgment, I referred to McHenry v Lewis (1882) AC 397 and Maple v David Syme & Co [1974] 1 NSWLR 290. In McHenry v Lewis, a plaintiff attempted to sue a defendant for the same matter in two courts in England. Jessel MR at 400 said: "In this country, where the two actions are by the same man in Court governed by the same procedure, and where the judgments are followed by the same remedies, it is prima facie vexatious to bring two actions where one will do. And, indeed, this has been recognised, I believe, for ages by the practice of the old Court of Chancery, which always put a Plaintiff to his election by an order of course if he was suing for the same cause of action both at Law and in Equity." 1. In Maple v David Syme & Co, the plaintiff brought concurrent defamation proceedings in New South Wales and Victoria. Master Cantor held that the action in New South Wales should be stayed as being vexatious and an abuse of process of the Court. In argument, reference was made to McHenry v Lewis. The Master concluded that in light of the undoubted hardship to which the defendant would be subjected by having to defend himself in two courts, it seemed to be proper to stay the proceedings in New South Wales. There is force in this argument. Having concurrent proceedings on foot subjects the solicitor to additional costs and resources in meeting identical claims in a number of proceedings. Seeking the same orders in the notices of motion in the appeal proceedings and the statutory demand proceedings as in the new proceedings is an abuse of the process of the Court. 2. Applications in relation to s 348 orders should be made by way of notice of motion in the original proceedings. It follows that the same procedure should also be adopted in relation to costs applications pursuant to s 99 of the Civil Procedure Act. 3. It is my view that these applications for costs should be dealt with by the motions already filed in the appeal proceedings and the statutory demand proceedings. In the new proceedings, the costs claims pleaded in the PASC, so far as they relate to the solicitor, should be struck out and dismissed. Abuse of process 1. The next issue in the new proceedings is whether the tort of abuse of process is maintainable against the solicitor who acted for a party in legal proceedings. 2. In Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509 at 526-527, the High Court held that proceedings may be stayed as an abuse of process: "…when the purpose of bringing the proceedings is not to prosecute them to a conclusion but to use them as a means of obtaining some advantage for which they are not designed or some collateral advantage beyond what the law offers." 1. It is well established that a party alleging that proceedings are an abuse of process bears a heavy onus: see Ballina Shire Council v Ringland [1999] NSWSC 11, Hidden J at [47]. Consideration of Leerdam v Noori 1. Senior counsel for the solicitor drew this Court's attention to the Court of Appeal's decision in Leerdam v Noori & Ors (2009) ALJR 553; [2009] NSWCA 90 per Spigelman CJ (with whom Allsop P and MacFarlan JA agreed) which he submitted is fatal to Mrs Kellert's pleaded cause of action of abuse of process. 2. In Leerdam, the brief facts are that Noori sought a protection visa under the Migration Act 1958 (Cth) upon his arrival from Afghanistan in 1999. The Minister for Immigration and Multicultural and Indigenous Affairs ("the Minister") refused to issue a visa. Noori sought review of that decision in the Administrative Appeal Tribunal ("the AAT"). Leerdam acted as the Minister's solicitor for the AAT hearing. The AAT affirmed the Minister's decision. Noori contended that Leerdam did not provide any or sufficient particulars at the AAT. The Full Court of the Federal Court held that Noori had been denied procedural fairness. After a rehearing in the AAT, Noori was issued a protection visa and was also released from immigration detention. Noori commenced proceedings in the Supreme Court alleging that Leerdam, Sparke Helmore Lawyers (being vicariously liable for the actions of Leerdam) and the Minister, by their conduct in connection with the first AAT proceeding, committed the torts of misfeasance in public office and collateral abuse of process, rendering them liable in damages. Leerdam and Sparke Helmore Lawyers sought leave to appeal from the decision of the primary judge declining to summarily dismiss or strike out the claims against them. Leave to appeal was granted and the appeal was allowed. 3. In Leerdam, Spigelman CJ dealt with the issue of abuse of process. At [29] to [32], [35] to [40] and [44] Spigelman CJ stated: "[29] The principal submission advanced on the part of appellants on the collateral abuse of process issue was the proposition that the tort can only be committed by a party to proceedings. The tort cannot, the appellants submitted, be committed by a legal representative of the party. It was common ground that there was no case which extended liability for this tort beyond a party in Australia, or in other common law nations in which the tort has developed such as New Zealand, Canada or England. There were, however, cases in the United States of America which did so. [30] On one view it could be said that, because there was no authority of the relevant character, it would not be appropriate to decide the matter on a strike out basis. However, alternatively, it may well be that the reason there is no relevant case law is precisely because the conclusion is obvious. [31] It is necessary to distinguish the tort from the broader based concept of 'abuse of process' which arises in the context of stay applications or assertions of miscarriage of justice. (See most recently PNJ v The Queen [2009] HCA 6; (2009) 83 ALJR 384 at [3].) Although cases on the tort may inform the broader concept (see Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509 at 522-523), the reverse does not necessarily work. [32] Significantly for present purposes, the issue has been considered and determined by the Full Federal Court in Emanuele v Hedley (Federal Court of Australia, 19 June 1998, unreported). In a joint judgment Wilcox, Myles and Nicholson JJ said: '… It seems clear that … an action for abuse of process is available only against the party who actually instituted the proceedings: See Williams v Spautz … This is logical because the essence of the tort is that the proceeding was instituted for an improper purpose. If the person who actually instituted the proceeding had a proper purpose, the claim of an abuse of process must fail irrespective of the motives and conduct of people who enforce the decision to institute the proceedings. No doubt a person may act through a servant or agent in instituting a proceeding, in which case the purpose of the principal will be the relevant purpose.' … [35] The passages in Williams v Spautz… to which their Honours referred in Emanuele v Hedley supra were: • 'Central to the tort of abuse of process is the requirement that the party who has instituted proceedings has done so for a purpose or to effect an object beyond that which the legal process offers' (at 523). • ' … This Court has regarded the purpose of the party instituting the proceedings as of crucial importance' (at 524). • See also the references to 'the purpose in bringing proceedings' (at 526). [36] This and other relevant authorities all focus on the conduct of a party, generally the plaintiff. This Court has accepted that a defendant can commit the tort. (See Hamer-Mathew v Gulabrai (No 2) (1994) 35 NSWLR 92 and on appeal Gulabrai v Hamer-Mathew (New South Wales Court of Appeal, 26 June 1997, unreported). See, however, R P Balkin and J L Davis Law of Torts (3rd ed) (2004), Butterworths Australia at [25.24].) [37] The history of the tort of collateral abuse of process was discussed by Priestley JA in Spautz v Gibbs (1990) 21 NSWLR 230 at pp 270-280 and by Clarke JA in Hanrahan v Ainsworth (1990) 22 NSWLR 73 at 115-120. It is pertinent to note that their Honours made reference to the leading American text Prosser and Keeton on the Law of Torts, then in its 5th edition, and to United States case law. [38] It is sufficient for present purposes to state that the matter has been determined by an intermediate court of appeal in Emanuele v Hedley, although the United States authorities, upon which the first respondent relied in this Court, were not considered by the Full Federal Court. [39] The proposition for which the first respondent contends involves a significant expansion of the tort into spheres of conduct that are otherwise regulated, particularly by professional ethical standards. Issues of coherence of the law arise, which have not been fully agitated in this Court. [40] I am not prepared, in the absence of any authority from jurisdictions that are directly appropriate in the Australian context, to determine that the decision of the Full Federal Court is clearly wrong. (See Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 at [135].) In my opinion, it is not clearly wrong. … [44] As I am of the opinion that Emanuele v Hedley is not clearly wrong, both the trial judge and this Court would follow it. The contingency of a special leave application is not sufficient to refuse to apply the strike out test." 1. On 2 November 2009, the High Court dismissed Leerdam's special leave application. 2. Mrs Kellert submitted that the conduct of the solicitor, in taking steps to proceed with the application to set aside the statutory demand may, after examination of relevant records and documents of Australian Beverage Distributors, amount to an abuse of process. 3. Leerdam establishes that the tort of collateral abuse of process can only be committed by a party to the proceedings. Leerdam is clear authority that the cause of action for the tort of collateral abuse of process cannot be brought against a party's solicitor. This claim is doomed to fail and should be dismissed. 4. Counsel for Mrs Kellert submitted that I should not strike out the PASC for a set period of time in order to give them time to see if they can obtain the files from Australian Beverage, which would include the solicitor's advice from ASIC, the appropriate authority. Counsel for Mrs Kellert submitted that if they did not obtain the files after a period of 30 or 42 days the PASC could be guillotined as against the solicitor (T34.19-21). 5. The basis for this submission was that something may come to light if ASIC consented to waiving legal professional privilege over the documents of Australian Beverage and those documents produced and examined by Mrs Kellert's solicitor. Accordingly, at this stage, although I am of the view that the PASC is doomed to fail, I will first deal with Mrs Kellert's application for production of documents, because it may change this position. Application for production of the files of Australian Beverage Distributors 1. Mrs Kellert seeks (in her notice of motion at [3]) an order that the solicitor produce to her the following documents for inspection: "3(a) All correspondence (of whatever type and nature emanating from Catalyst Legal Pty Ltd ACN 109 948 692 (Catalyst Legal) or the First Defendant (b) All correspondence from Australian Beverage Distributors and or any of its officers and/or directors to Catalyst Legal and/or the First Defendant (c) All briefs to counsel prepared by Catalyst Legal or by the First Defendant (d) All advices from counsel (e) All memoranda and notations and/or records of attendances on any party in relation to the First Defendant's conduct of the followers matters: (i) Local Court proceedings No 2007/2357 (Susan Melinda Kellert v Australian Beverage Distributors (ii) Supreme Court proceedings No 2008/289756 (Australian Beverage Distributors v Susan Melinda Kellert) (iii) Supreme Court proceedings No 2008/281722 (Australian Beverage Distributors v Susan Melinda Kellert)." 1. These documents are currently in the physical possession of the solicitor. On 15 November 2009, Australian Beverage was deregistered pursuant to s 601AB of the Corporations Act. 2. On 18 May 2015, subsequent to the hearing and after this judgment was reserved, Mrs Kellert's solicitor, Mr Harrison, wrote to ASIC to ascertain its position on this issue of client legal privilege. ASIC was advised that Mrs Kellert was seeking production of the solicitor's files relating to the appeal proceedings and the statutory demand proceedings. Mr Harrison requested ASIC to advise of its position and indicate if there was any objection on its part to the production of these documents and if so, the nature of that objection. 3. On 27 May 2015, Ms Denise Kelly, Analyst Property Law Group of ASIC wrote to Mrs Kellert's solicitors in the following terms: "… Effect of deregistration I confirm the company was deregistered on 15 November 2009 under s 601AB of the Corporations Act 2001 (the Act). As a result of deregistration: a) all property the company held on trust at deregistration belongs to the Commonwealth b) all non-trust property the company owned at deregistration belongs to ASIC c) ASIC is generally the only party legally able to deal with the property of the company. ASIC's policy regarding books and records generally ASIC does not take possession of a deregistered company's books. Nor does it grant access to a deregistered company's books in another party's possession. This is because: a) while ASIC may be vested with a company's books due to deregistration, it has no specific knowledge of their existence and the circumstances surrounding their creation b) the documents may be the subject of legal professional privilege and it is not appropriate for ASIC to determine whether or not the nature of those documents is such as to attract the privilege (c) it is ASIC's policy to neither assert nor waive privilege on behalf of deregistered companies d) other remedies are available and more appropriate z(eg service of a subpoena on the party in actual possession of the documents and/or reinstatement of a deregistered company). e) Finally, ASIC does not object to parties seeking a court order that: i. the documents sought do not attract legal professional privilege ii. the party in possession produce the documents to the applicant." 1. Hence, ASIC is the only party legally able to deal with the property of Australian Beverage. From the schedule reproduced earlier, most if not nearly all of the documents sought by Mrs Kellert are the subject of client legal privilege. ASIC's policy is to neither assert or waive privilege on behalf of the deregistered Australian Beverage. In other words, ASIC does not waive privilege, but rather takes a neutral position. However, ASIC does not object to Mrs Kellert seeking from this Court an order that the solicitor produce the documents to her. 2. Mrs Kellert says that in these circumstances, it is now open to the Court to determine if production should be ordered and whether the circumstances are such that it is in the interests of justice to make such an order. 3. Counsel for Mrs Kellert argued that the documents in Australian Beverage's legal files ought to be produced because they are relevant to the facts in issue. In support of this proposition he referred to New Cap Reinsurance Corporation Ltd (in liq) v Daya [2008] NSWSC 763, where Austin J considered the question of what a "fact is in issue" citing British American Tobacco (Australia) Ltd v Peter Gordon [2006] NSWSC 1473, where Brereton J stated that a fact is in issue if it is in the field of contest between the parties. 4. Mrs Kellert says that each of the court documents filed by Australian Beverage were verified by the solicitor. According to Mrs Kellert, the material to be produced from the solicitor's files forms the basis for the actions involving the conduct of the solicitor, who conducted the three matters for Australian Beverage. She says that the material and correspondence contained in the solicitor's files will demonstrate what transpired and goes to the facts in issue. 5. The solicitor submitted that if the documents had some potential relevance to an issue in the proceedings, that would not warrant an order that they be produced if they are privileged. Further, according to senior counsel for the solicitor, the relevance of the documents is said to be that they go to the special costs orders claimed in the current statement of claim. 6. I am of the view that the PASC, as it stands, is doomed to fail, and the special costs orders should be sought in the other two proceedings. Even if I take a wider view and assume these documents are relevant to the special costs orders, the solicitor's files are the subject of client professional privilege. 7. The solicitor is the legal practitioner to whom the privileged communications had been made by Australian Beverage. While the privilege is not his, neither is it for him to waive it. Absent instructions from his client, he is not entitled to disclose any privileged communications: see Grant v Downs (1976) 11 ALR 577; (1976) 135 CLR 674 at 686. 8. In Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (t/as Uncle Ben's Australia) (1994) 126 ALR 58 at 64, Tamberlin J pointed out that there is little or no direct authority as to what happens to a claim for client legal privilege after dissolution of a company. His Honour referred to Attorney-General (NT) v Maurice (1986) 161 CLR 475; 69 ALR 31 at 40-41 where Deane J said this of legal professional privilege: "…[It] is a substantive general principle of the common law and not a mere rule of evidence that, subject to defined qualifications and exceptions, a person is entitled to preserve the confidentiality of confidential statements and other materials which have been made or brought into existence for the sole purpose of his or her seeking or being furnished with legal advice by a practicing lawyer or for the sole purpose of preparing for existing or contemplated judicial or quasi-judicial proceedings … Indeed, the plain basis of the decision of the majority of this court in Baker v Campbell [(1983) 153 CLR 52 ; 49 ALR 385] was the acceptance of the principle as a fundamental principle of our judicial system … Like other traditional common law rights, it is not to be abolished or cut down otherwise than by clear statutory provision. Nor should it be narrowly constructed or artificially confined." 1. In Lake Cumbeline, Tamberlin J continued at 65, that on the assumption that the documents attracted legal professional privilege: "… Therefore, in my view, as at the date of dissolution of Trawl, the documents were privileged and the privilege was that of Trawl and that privilege subsists until it is waived by a person or entity competent and able to waive. Under the provisions of the Corporations Law this privilege passed to the Commission which is the successor to Trawl in respect of claims relating to the documents. The Commission has decided not to assert or waive the privilege. In my opinion, once it is established that the documents are privileged then the privilege is not lost unless there is a waiver express or implied by the person entitled for the time being to that privilege. In the present case it is clear that Trawl has not waived the privilege. It is also clear in the letter from the Commission that the Commission has not waived the privilege nor does it intend to. Furthermore, the applicants in the present proceedings cannot waive the privilege because it is not their privilege. It is that of Trawl. Accordingly, nothing which they do or have done or which they say can have the effect of waiving the privilege that was originally vested in Trawl and now vests in the Commission. I do not think that the right of confidentiality and privilege which the principle embodies has been lost as a result of the circumstance that Trawl has been dissolved. Indeed, in my opinion the right has survived and has passed to the Commission." 1. In Lake Cumbeline, Tamberlin J concluded that the privilege had not been lost as a result of the dissolution of the company and declined Uncle Ben's Australia's permission to inspect the documents. 2. Similarly, in Swaab v Commissioner of the NSW Police Service [2005] NSWSC 901, Hidden J answered the question as to whether privilege can survive deregistration. His Honour at [16] was not persuaded that deregistration extinguishes the privilege and, adopted the reasoning of Tamberlin J in Lake Cumbeline, where his Honour considered that there were circumstances in which privilege can still be asserted. 3. The reason Tamberlin J upheld the claim for the company's legal professional privilege after it had been deregistered in Lake Cumbeline is that, "like other traditional common law rights [legal professional privilege] is not to be abolished or cut down otherwise than by clear statutory provision. Nor should it be be narrowly constructed or artificially confined" (at [65] citing Deane J in Maurice at 41). 4. I adopt the reasoning of Tamberlin J in Lake Cumbeline and Hidden J in Swaab. Client legal privilege involves confidential communications between solicitor and client. The client legal privilege of Australian Beverage has not been extinguished by its deregistration, nor has it been waived by any person or legal entity competent to do so. For these reasons, I decline to make an order that the solicitor produce the documents referred to in paragraph [3] of Mrs Kellert's notice of motion filed 3 February 2015 in the new proceedings. 5. Since the claim for client legal privilege in relation to Australian Beverage's solicitor's files has been upheld, no new information has come to light which would change my position regarding the PASC. In my view, it is doomed to fail insofar as it relates to the solicitor, the first defendant. 6. The result is that proceedings 2014/75345 as against the first defendant are dismissed. 7. So far as paragraph [10] of Mrs Kellert's notice of motion seeking an order that she be granted leave to file an amended statement of claim is concerned, I am of the view that the PASC, as it relates to the solicitor, is doomed to fail, there is no utility in making this order. (2) The appeal proceedings (2008/289756) and the statutory demand proceedings (2008/281722) 1. In the appeal proceedings and the statutory demand proceedings, the plaintiff is Australian Beverage and the defendant is Mrs Kellert. 2. As previously stated, in these proceedings Mrs Kellert has already filed almost identical but case specific notices of motion. 3. In the statutory demand proceedings, Mrs Kellert seeks by way of notice of motion filed 3 February 2015 the following orders: "1. An order that pursuant to Section 14 of the Civil Procedure Act 2005 the Court dispense with any rules of the Court. 2. An order pursuant to Rule 28.5 of the Uniform Civil Procedure Rules 2005 that these proceedings be consolidated with proceedings numbered 2008/281722 and 2014/75345. 3. An order that this motion be heard together with any motions and or other proceedings to be heard in proceedings 2008/281722 and 2014/75345. 4. An order pursuant to Section 98(1)(b) of the Civil Procedure Act 2005 that Anthony Stuart Foate pay or indemnify the defendant, Susan Melinda Kellert for legal costs which she incurred in proceedings 2008/281722. 5. In the alternative to 4 above, an order pursuant to Section 99(2)(c) of the Civil Procedure Act 2005 that Anthony Stuart Foate indemnify the defendant, Susan Melinda Kellert for legal costs which she incurred in proceedings 2008/281722. 6. In the alternative to 4 and 5 above, an order pursuant to Section 348(1)(b) of the Legal Profession Act 2004 that Catalyst Legal Pty Ltd ACN 109 948 692 and/or Anthony Stuart Foate indemnify the defendant, Susan Melinda Kellert for legal costs which she incurred in Supreme Court proceedings 2008/289756. 7. An order that the defendant be granted any necessary extension of time for the hearing of this motion. 8. An order that the respondents pay the costs of this motion." 1. In the appeal proceedings, by way of notice of motion filed 3 February 2015, Mrs Kellert seeks the same orders as in the statutory demand proceedings. 2. The orders concerning the costs claims in these proceedings are to be stood over for directions before the Registrar. Accordingly, the final issue for determination is that of consolidation. In each of the three proceedings, Mrs Kellert seeks this order. Consolidation 1. UCPR 28.5 deals with consolidation. It reads: "28.5 Consolidation etc of proceedings (cf SCR Part 31, rule 7; DCR Part 12, rule 7) If several proceedings are pending in the court and it appears to the court: (a) that they involve a common question, or (b) that the rights to relief claimed in them are in respect of, or arise out of, the same transaction or series of transactions, or (c) that for some other reason it is desirable to make an order under this rule, the court may order those proceedings to be consolidated, or to be tried at the same time or one immediately after another, or may order any of them to be stayed until after the determination of any other of them. …" 1. Mrs Kellert submitted that UCPR 28.5 is not limited in any specific way. There is no principle requiring it or any limitation on when it may be exercised: see A Goninan & Co v Atlas Steels [2003] NSWSC 956. 2. As there are notices of motion on foot in each of the statutory demand and appeal proceedings, there is no utility in consolidating the proceedings. However, I will make an order that Mrs Kellert's notices of motion in the appeal proceedings and the statutory demand proceedings be heard together. Conclusion 1. Proceedings 2014/75345 as against the first defendant are dismissed. Proceedings 2008/289756 and 2008/281722 are listed for directions before the Registrar. 2. Costs are discretionary. Costs follow the event. The plaintiff is to pay the first defendant's costs on an ordinary basis as agreed or assessed. The Court orders that: In proceedings 2014/75345: (1) I decline to make an order as sought in paragraph [3] of the plaintiff's notice of motion filed 3 February 2015. (2) The proceedings are dismissed as against the first defendant. (3) The statement of claim, so far as it relates to the second defendant, is stood over for directions before the Registrar at 9.00 am on 31 July 2015. (4) The plaintiff is to pay the first defendant's costs of the proceedings on an ordinary basis as agreed or assessed. The Court further orders that: In proceedings 2008/289756 and 2008/281722: (1) The notices of motion filed 3 February 2015 are listed for directions before the Registrar at 9.00 am on 31 July 2015. (2) I decline to make the consolidation order in paragraph [2] of the notices of motion filed 3 February 2015. (3) Costs are reserved. ********** 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. Decision last updated: 17 July 2015