Supreme Court New South Wales Medium Neutral Citation: Sharpe v Grobbel [2017] NSWSC 1065 Hearing dates: 10 August 2017 Date of orders: 15 August 2017 Decision date: 15 August 2017 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: Application to set aside subpoena and alternatively to excuse recipient from producing documents dismissed with costs Catchwords: EVIDENCE – subpoenas – motion to set aside subpoena – where applicant directs subpoena to law firm – where law firm claims privilege on behalf of client – where no privilege as between parties with common interest in subject matter of communications – where reasonable basis for supposing that sought material will likely add to relevant evidence – held, motion dismissed. Legislation Cited: (CTH) Corporations Act 2001, s 198F, s 237, s 247A (NSW) Uniform Civil Procedure Rules 2005 r 33.4 Cases Cited: A v Z [2007] NSWSC 899; (2007) 212 FLR 255 Aerva NC (Australia) Pty Ltd v Summit Resources (Australia) Pty Ltd (No 2) [2008] WASC 10 Attorney-General (NSW) v Chidgey (2008) 182 A Crim R 536; [2008] NSWCCA 65 BBGP Managing General Partner Ltd v Babcock & Brown Global Partners [2011] Ch 296; [2011] 2 All ER 297 Botany Bay Instrumentation & Control Pty Limited v Stewart [1984] 3 NSWLR 98 Brand v Digi-Tech (Australia) Ltd [2001] NSWSC 425 CIA Barca de Panama SA v George Wimpey & Co. Limited [1980] 1 Lloyd's Rep 598 Claremont Petroleum NL, Re (1990) 2 Qd R 31 Commercial Union Assurance Co PLC v Mander [1996] 2 Lloyd's Rep 640 Commissioner for Railways v Small (1938) 38 SR (NSW) 564 Czerwinski v Syrena Royal Pty Ltd [2000] VSC 125 Dennis & Sons Ltd v West Norfolk Farmers Manure & Chemical Cooperative Co Ltd [1943] Ch 220 Eastmark Holdings Pty Limited v Kabraji (No 3) [2012] NSWSC 1463 Edman v Ross (1922) 22 SR(NSW) 351 Farrow Mortgage Services Pty Ltd (in liq) v Webb (1996) 39 NSWLR 601 Fox v Gadsden (2003) 46 ACSR 713 Geffen v Goodman Estate [1991] 2 SCR 353 Re Geneva Finance Ltd (1992) 7 WAR 496; 7 ACSR 415 Hancock v Rinehart (Freehills subpoena) [2017] NSWSC 530 Hanks v Admiralty Resources NL (No 2) [2011] FCA 1464 Hellenic Mutual War Risks Association (Bermuda) Ltd v Harrison (The "Sagheera") [1997] 1 Lloyd's Rep 160 ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWCA 307 Kimber v Brookman Solicitors [2004] 2 FLR 221 Lavallee, Rackel & Heintz v Canada (Attorney-General) 2002 SCC 61. Morgan Grenfell, Ex parte [2003] 1 AC 563; [2002] UKHL 21 National Employers' Mutual General Insurance Association v Waind and Hill [1978] 1 NSWLR 372 Nationwide Building Society v Various Solicitors [1999] PNLR 52 Oswal v Burrupo Fertilisers Pty Ltd (2013) 295 ALR 708 Portal Software v Bodsworth [2005] NSWSC 1115 Prince Jefri Bolkiah v KPMG [1999] 2 AC 222; [1999] 1 All ER 517 R v Central Criminal Court; ex parte Francis & Francis [1989] AC 346 R v Derby Magistrates Court; ex parte B [1996] AC 487 R v Merchant Tailors' Company (1831) 2 B & Ad 115; (1831) 109 ER 1086 R v Saleam [1999] NSWCCA 86 Rowland v Meudon Pty Limited [2008] NSWSC 381 Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365 Schreuder v Murray (No 2) (2009) 260 ALR 139; 41 WAR 169; [2009] WASCA 145 Sharpe v Grobbel [2017] NSWSC 2 Smartec Capital Pty Limited v Centro Properties Limited [2011] NSWSC 495; (2011) 83 ACSR 461 Svenska Handelsbanken v Sun Alliance and London Insurance PLC [1995] 2 Lloyd's Rep 84 Trade Practices Commission v Arnotts Ltd (1989) 88 ALR 90 TSB Bank plc v Robert Irving & Burns [2000] 2 All ER 826 Wilson v Rastall (1792) 4 TR 753 Winterthur Swiss Insurance Company & Anor v AG (Manchester) Ltd & Ors [2006] EWHC 839 (Comm) Yunghanns v Elfic Pty Ltd (No 2) [2000] 1 VR 92 Texts Cited: Passmore, C, Privilege, 3rd ed Phipson on Evidence, 14th ed (1990) Phipson on Evidence, 15th ed (2000) Phipson on Evidence, 18th ed (2013) Thanki B (ed), The Law of Privilege (2006) Category: Procedural and other rulings Parties: Frederick Patrick Sharpe (first plaintiff) Joel Francis Fleming (second plaintiff) Sachil Investments Pty Ltd (third plaintiff) Biosoft Pty Ltd (fourth plaintiff) Christoph Grobbel (first defendant) Renat Heuberger (second defendant) South Pole Holding Ltd (third defendant) Climate Friendly Pty Ltd (fourth defendant) Representation: Counsel: A. Hochroth (plaintiffs/applicants) A. Byrne (defendants/respondent) Solicitors: Birchall Legal (plaintiffs/applicants) Dentons (defendants/respondents) File Number(s): 2016/297894 Judgment 1. Before the Court is an application by the plaintiffs to have a subpoena, addressed to the law firm Baker McKenzie (Bakers) set aside, or the subpoena recipient relieved from producing any documents pursuant to it. Background 1. The first and second plaintiffs (Mr Sharpe and Mr Fleming), and the first and second defendants (Dr Grobbel and Mr Heuberger) are and have at all material times been the directors of the fourth defendant (Climate Friendly). Mr Sharpe owns and controls the third plaintiff (Sachil), which holds 14.88% of the issued shares in Climate Friendly. Mr Fleming owns and controls the fourth plaintiff (Biosoft), which holds 17.55% of Climate Friendly's issued shares. Messrs Grobbel and Heuberger, who both reside in Switzerland, are the directors of and shareholders in the third defendant (South Pole), a Swiss company that owns 63.41% of Climate Friendly's issued capital. 2. In about June 2016, Messrs Sharpe, Fleming, Grobbel and Heuberger, ostensibly in their capacities as directors of Climate Friendly, each signed a document styled "Term Sheet Key Points for Inclusion", which set out the provisions of a contemplated transaction whereby Climate Friendly would sell certain of its businesses to South Pole (or a related entity), South Pole would reduce its shareholding in Climate Friendly to 50.01%, and Climate Friendly's constitution would be amended to remove a casting vote held by directors appointed by South Pole. The Term Sheet contained a statement that it was binding on the parties. 3. Between June and November 2016, Messrs Sharpe, Fleming, Grobbel and Heuberger continued to engage in discussions in relation to implementation of the Term Sheet, including the drafting of a contract of sale between Climate Friendly and South Pole, upon the terms of which Messrs Sharpe and Fleming say that consensus was achieved. However, in November 2016, South Pole sent a letter to Climate Friendly stating that it no longer wished to pursue the proposed transactions. Messrs Sharpe and Fleming took the position that South Pole was bound to the Term Sheet, whereas Messrs Grobbel and Heuberger took the view that the Term Sheet was not binding. 4. On 16 December 2016, the plaintiffs' solicitors sent a letter to South Pole asserting that they acted for Climate Friendly, that there was a dispute between Climate Friendly and South Pole, and that this triggered a clause in the constitution which disqualified the directors appointed by South Pole from voting on any resolution put to any board meeting in respect of the dispute. Dr Grobbel and Mr Heuberger replied on 19 December 2006, querying whether the solicitors were authorised to act on behalf of Climate Friendly. A meeting of the board of directors of Climate Friendly took place on 20 December 2016, at which various resolutions were allegedly resolved upon by Mr Heuberger and Dr Grobbel at the meeting, in purported reliance upon their casting vote. 5. Messrs Fleming and Sharpe, then as the only plaintiffs, commenced these proceedings against Messrs Grobbel and Heuberger and South Pole (then the only defendants). An interim injunction restraining the defendants from acting on the resolutions purportedly carried on 20 December 2016 was granted by Slattery J on 22 December 2016. However, on 9 January 2017, Robb J declined to continue the injunction, observing: [1] [195] In my view, it is most likely to be true that, in reality, the plaintiffs, even in relation to the limited relief they seek in the summons, are seeking relief on behalf of Climate Friendly, in relation to the statutory contract between that company and the other directors (and possibly, though not clearly, the statutory contract between the company and its shareholder, South Pole). If that is so, the claim should fail because leave has not been granted under s 237 of the Act. [196] It is not clear whether Sachil and Biosoft are necessary parties to the proceedings. I am inclined to the view that their absence as parties in reality reflects an illusory position adopted by the plaintiffs that the only parties to any contract created by the Term Sheet are Climate Friendly and South Pole, which is a stance necessary for the plaintiffs to take if they are to have any chance in succeeding in an argument that clause 16.29 of the constitution disqualifies the first and second defendants, but not the plaintiffs. [197] If I am right in my conclusion that Sachil and Biosoft must have been parties to any contract, then it appears to me to be plain that those companies would be proper and necessary parties to the proceedings. 1. In the light of that decision, Messrs Sharpe and Fleming have reformulated their claims, adding Sachil and Biosoft as third and fourth plaintiffs, and Climate Friendly as fourth defendant. In the Amended Statement of Claim, the plaintiffs allege that: 1. the parties to the Term Sheet agreement were: 1. Sachil, Biosoft, Climate Friendly and South Pole; 2. alternatively, Climate Friendly and South Pole; and 3. in the further alternative, Sachil, Biosoft and South Pole; 1. the Term Sheet agreement was binding and enforceable; and 2. alternatively, the parties to the Term Sheet agreement further agreed in November 2016 (November Agreement) that unexecuted "formal legal documents" prepared by Bakers and circulated in early November 2016 became binding, upon the parties having indicated that their terms were agreed. 1. The plaintiffs seek specific performance (or damages for breach of) the Term Sheet agreement and alternatively the November Agreement. Such relief is sought by Sachil and Biosoft, and also on behalf of Climate Friendly (subject to obtaining leave, pursuant to (CTH) Corporations Act 2001, s 237, to bring a derivative action, which leave is also claimed in the Amended Statement of Claim and which the parties have agreed should be heard and determined concurrently with the substantive proceedings. Climate Friendly has filed a submitting appearance, and is not represented in the proceedings. The subpoena 1. Bakers, the recipient of the subpoena, were the firm of solicitors retained by Climate Friendly to prepare the formal legal documents to implement the Term Sheet agreement. The subpoena seeks documents "recording or referring to" advice provided by Bakers "in relation to the proposed buy-back of Climate Friendly shares" to Climate Friendly, Mr Sharpe, Mr Fleming, Biosoft or Sachil. However, the only documents that Bakers have identified in their possession that respond to the subpoena are said to record or refer to advice provided to Climate Friendly, and the defendants did not seek to sustain so much of the subpoena as refers to advice to Mr Sharpe, Mr Fleming, Biosoft or Sachil. The proposed buy-back referred to in the subpoena is the proposed buy-back by Climate Friendly of South Pole's shares, so as to reduce South Pole's interest to 50.01%, as contemplated by the Term Sheet. 2. The plaintiffs' application to have the subpoena set aside, or Bakers relieved from producing any documents pursuant to it, is founded on contentions that: 1. the subpoena is issued for no legitimate forensic purpose; and 2. the documents sought are privileged from production. Privilege 1. It is convenient to deal first with the privilege issue. In this case, the claim for privilege gives rise to three questions: 1. are the documents confidential communications for the purposes of obtaining legal advice and assistance, such as to be entitled to privilege at all; 2. can a claim for privilege be maintained when Climate Friendly is not itself actively propounding it; and 3. can privilege be maintained against South Pole and Messrs Grobbel and Heuberger. Are the documents entitled to privilege? 1. The extent of the evidence necessary to establish that documents for which privilege is claimed were confidential communications for the purposes of obtaining legal advice and assistance varies from case to case, depending on the context. Here, despite the submissions to the contrary, it is not seriously capable of dispute that the documents in question were confidential communications between Climate Friendly and Bakers for the purposes of obtaining legal advice and assistance. Can a claim for privilege be maintained without Climate Friendly? 1. Although Climate Friendly has not itself appeared in the proceedings to advance a claim for privilege – given the deadlock between the directors, it is doubtful that it could – that does not mean that the claim cannot be indirectly advanced, as it was, by the plaintiffs. I do not accept that where a solicitor properly claims privilege on behalf of a client – or former client – the privilege somehow lapses if the client does not itself thereafter appear to prosecute the claim. While authority emphasises that the privilege belongs to the client, that is usually in the context that it can be waived only by the client, and that the court will not order a solicitor to reveal privileged communications without the client's consent. [2] It is well-established that the solicitor is obliged to protect the client's privilege, including by asserting it on behalf of the client if the solicitor is asked to produce privileged documents; thus while the privilege is that of the client and not of the solicitor, it is the solicitor's duty to protect it, unless waived by the client. [3] This extends to circumstances in which the former client may no longer have any interest in maintaining the privilege. [4] The court may itself intervene to prevent a breach of the client's privilege. [5] Any party to proceedings has standing to apply to set aside a subpoena, regardless of whether it has an interest in the documents production of which is sought. [6] But even if the plaintiffs did not rely on Climate Friendly's privilege, the court would be bound to scrutinise it. Can privilege be maintained against the defendants? 1. This issue arises because of the relationship between the parties at the time when the relevant communications took place, and the purpose of those communications. Where solicitors act for multiple parties jointly, there is by reason of the joint retainer no privilege as between those parties. [7] The holders of a joint privilege have no confidence against each other: if they fall out and sue each other, they cannot claim privilege against each other in respect of communications made during the subsistence of the joint retainer before an actual conflict emerged, although they can maintain privilege against the rest of the world. [8] This applies in connection with advice, as well as with litigation. [9] 2. The principle is not confined to where there is a joint retainer, but extends to circumstances in which multiple parties have a common interest in the subject matter of the communication, although only one of them retains the solicitor. This feature was referred to by the Court of Appeal in Farrow Mortgage Services Pty Ltd (in liq) v Webb [10] (emphasis added): [11] Two or more persons may join in communicating with a legal advisor for the purpose of retaining his or her services or obtaining his or her advice. The privilege which protects these communications from disclosure belongs to all the persons who joined in seeking the service or obtaining the advice. The privilege is a joint privilege. So it is also if one of the group of persons in a formal legal relationship communicates with a legal advisor about a matter in which the members of the group share an interest. Communications by one partner about the affairs of the partnership or a trustee about the affairs of the trust are examples. Implicit in the relationship is the duty or obligation to disclose to other parties thereto the content of the communication. Accordingly no privilege attaches to such communications as against others who, with the client, share an interest in the subject matter of communication. But the parties together are entitled to maintain the privilege "against the rest of the world": Phipson, par 20-28 and par 20-29.5 ... 1. The fact that the interests of two parties may potentially conflict does not prevent their having a sufficient common interest in the subject matter of the advice at the time it is sought to bring the principle into operation. [12] If the two parties have a common interest in the communication at the time the relevant communication is created, it does not matter that they subsequently fall out, although each will be able to assert privilege against the other in respect of communications created after the falling out. [13] 2. The principle is sometimes called "common interest privilege", and its invocation in this context has sometimes been described as using common interest privilege "as a sword" rather than as a shield; although the authors of Phipson on Evidence, in which this description originated, [14] have now retreated from it. [15] While the concept is related to "common interest privilege" properly so-called, by which privilege is not waived by disclosure of otherwise privileged communications to those with a "common interest", [16] this is somewhat of a misnomer. [17] Rather, the principle here under consideration describes circumstances in which a claim of privilege cannot be sustained, namely against a party who has a joint interest in the subject matter of the communication at the time that it comes into existence. Its availability depends upon the subject communications having been made by one party in furtherance of a joint interest, and in that sense on behalf of all those who share it. In a case where the documents contain legal advice, that joint interest must exist at the time the advice is sought. [18] Thus both the nature of the relationship between those said to have a "common interest", and the purpose of the communication between one of them and the solicitor, are relevant to determining whether there is a relevant "common interest". [19] 3. Whether there is a sufficient "common interest" in the relevant communications has to be decided on the facts of the individual case. [20] However, the following passage in an earlier (14th) edition of Phipson, [21] which is referred to in many of the authorities, is indicative of the circumstances in which as well as the basis on which a sufficient common interest may be found: No privilege attaches to communications between solicitor and client as against persons sharing a joint interest with the client in the subject-matter of the communication, eg as between partners; a company and its shareholders; trustee and cestui que trust; lord and tenants of a manor as to customs of manor; a lessor and lessee as to production of the lease; reversioner and tenant for life as to common title; two persons stating a case for their joint benefit; or a husband and wife who are not genuinely, but collusively, in contest. Nor does any privilege attach as between joint claimants under the same client – eg between claimants under a testator as to communications between the latter and his solicitor. Thus where two persons agree to divide the profits made by one of them on contracts made with third parties, the person who does not make the contracts is entitled to production from the person who does of, for example, the opinions of counsel relating to litigation between the contractor and a third party. But where the communications relate to matters outside the joint interest, they are privileged even as against a person bearing the expense of the communications – eg communications between a plaintiff corporation and its solicitors, against a defendant ratepayer as to matters not connected with rates; or between a company and its solicitors consisting of confidential advice to the former in an action against a shareholder; or between a trustee and his solicitor as against the cestui que trust, where the communication is not made for the former's guidance in the trust, but to enable him to resist litigation by the latter; or where it concerns his character, not as trustee, but as mortgagee of the client. 1. In the current (18th) edition of Phipson, reference is made to Dennis & Sons v West Norfolk Farmers Manure & Chemical Cooperative Co Ltd, [22] in which Simonds J held that shareholders who alleged that directors improperly exercised their powers were entitled to disclosure of a report by accounts obtained by the company in anticipation of the dispute, notwithstanding that it was privileged, on the basis that a beneficiary was entitled to see cases and opinions taken by a trustee for the purpose of the administration of the trust, though not for the purpose of the trustee's defence against litigation by a beneficiary. Then, in positing the question, what constitutes a joint interest for this purpose, the authors conspicuously refer to "the classic example of a company and its shareholders. [23] 2. That the requisite common interest may exist between a company and its shareholders, but not when those communications relate to a suit between the company and the shareholder, accords with the common law right of a shareholder who has a particular interest in a particular dispute to inspect the documents of a company relevant to that dispute. [24] 3. Moreover, directors are entitled, at common law, to access the books and records of the company as a necessary incident of the office of director, in order that they may properly perform their duties. [25] The statutory right of access under Corporations Act, s 198F, now permits access for the purpose of legal proceedings to which a director or former director is or may become a party, notwithstanding that the director's purpose may be a private one. For present purposes I am content to accept, without deciding, that consistently with the authorities on s 247A, s 198F may not abrogate legal professional privilege and thus may not override legal professional privilege in respect of advice to the company in connection with a dispute between it and the director. [26] But subject to that exception, a company cannot insist on privilege against its director. 4. Can Climate Friendly's privilege prevail against South Pole, Dr Grobbel and Mr Heuberger, in the light of those principles? 5. The Term Sheet was executed by Mr Fleming, Dr Grobbel, Mr Heuberger and Mr Sharpe, each ostensibly in his capacity as a director of Climate Friendly. It contemplated that Climate Friendly would sell parts of its business to South Pole, and that South Pole's interest in Climate Friendly would be reduced, although it would still hold (just) over 50%, and Messrs Grobbel and Heuberger would remain as directors. In substance, it was an agreement between the major interests in Climate Friendly – South Pole, Biosoft and Sachil – about its future direction, although its implementation would necessarily require further transactions, to some of which Climate Friendly would be a necessary party. Importantly, the Term Sheet provided that all legal costs directly related to the transaction were to be borne by Climate Friendly; that all terms in the Term Sheet were to be incorporated in full and without amendment; and that the Term Sheet was designed to capture all material matters agreed, and to act as the basis on which legal documents can be drafted. 6. Bakers were retained after discussion between Messrs Heuberger, Grobbel Sharpe and Fleming, as to their suitability and cost. In the course of those communications, Mr Sharpe dismissed the idea of sourcing a "low cost provider" as follows: But for a deal of this significance, designed to maximise future value creation for all shareholders, I would be concerned that was a false economy. 1. Bakers' "scope of work" reflected that they were to prepare the requisite documents to implement the Term Sheet agreement, and the terms of their retainer included: The above Scope of Work relates solely to representing CF and does not extend to any separate representation of SPG or the other CF shareholders. We are happy to consider this work separately. 1. Usually, Messrs Sharpe and Fleming conveyed instructions to Bakers and received drafts from them, which they then on-forwarded to Dr Grobbel and Mr Heuberger, who responded with comments or suggested changes to Messrs Sharpe and Fleming. Mr Fleming says that he forwarded communications from Bakers to Dr Grobbel and Mr Heuberger only when he considered them not to contain information which was sensitive to Climate Friendly's interests vis-a-vis South Pole, and where he considered that it would assist the transaction for the email to be shared with South Pole. On the other hand it would seem that Dr Grobbel had a broader view of Bakers' role, as expressed in a draft email to Messrs Sharpe and Fleming which he sent to Mr Heuberger on 19 July 2016, though there is no evidence that the email was in fact ever sent to Sharpe and Fleming. 2. On at least one occasion, instructions were given to Bakers by Messrs Grobbel and Heuberger, with the agreement of Messrs Sharpe and Fleming; there is no suggestion that this was pursuant to a separate retainer. 3. Although the transactions envisaged by the Terms Sheet may have included a sale agreement between Climate Friendly and South Pole, I do not accept that Bakers were retained by Climate Friendly to act in the separate interest of Climate Friendly, as a counter-party of South Pole in the proposed transaction. In my view, Bakers were retained by Climate Friendly to implement a deal which had been negotiated between its principal shareholders. In substance, the deal was an agreement between the principal shareholders in Climate Friendly, which they decided to have implemented at the cost of Climate Friendly. Although the interests of the parties were not identical, they were not in dispute. Climate Friendly was the vehicle they together selected for the purpose of obtaining legal assistance to formalise and document their agreement. In so doing, Climate Friendly was acting in furtherance of their joint interest, and in that sense on behalf of all of them. That Bakers' retainer was to represent Climate Friendly and did not extend to any separate representation of South Pole or the other shareholders is entirely consistent with this; Bakers were not separately representing any shareholder, but acting for Climate Friendly to implement a transaction in which all its shareholders were interested. 4. Moreover, South Pole was, and would remain even after implementation, the majority shareholder in Climate Friendly, and had a legitimate continuing interest in Climate Friendly's part in the agreement, as well as in its own. At the time the advice was sought and given, Climate Friendly was in a formal legal relationship with its shareholders, and communicated with its legal advisor Bakers about a matter in which the shareholders shared an interest. Climate Friendly was expected to act for the benefit of its shareholders, including South Pole. The circumstances that, usually, Messrs Sharpe and Fleming conveyed instructions to and received advice from Bakers, which they then conveyed to Dr Grobbel and Mr Heuberger, was a matter of convenience, given that Messrs Grobbel and Heuberger were abroad, and it was not invariable. In any event, the communications between Climate Friendly and Bakers were not exclusively for Climate Friendly's own benefit, but for the benefit of all the interests who had joined in the Term Sheet. In circumstances where Climate Friendly was acting on behalf of the shareholders in obtaining legal advice and assistance in connection with the implementation of their agreement, which related to the interests of all the shareholders, including South Pole, that advice was not confidential as between Climate Friendly and South Pole when it was obtained, and the fact that the plaintiffs and South Pole are now in dispute as to matters that were the subject of the advice does not alter this. 5. So far as concerns Messrs Grobbel and Heuberger, not only were and are they the directing minds of South Pole, but they were, are and even after implementation were to remain directors of Climate Friendly. Although their interests, via South Pole, were not identical with the interests of Climate Friendly, they were not adversaries. As directors, they had (and have) every right to see the advice that was being sought by Climate Friendly to implement the agreement, and Climate Friendly was and is not entitled to withhold it from them. 6. Accordingly, although the communications with Bakers may be privileged against the rest of the world, Climate Friendly cannot maintain legal privilege over them as against the defendants. Legitimate forensic purpose 1. The power of the Court to set aside a subpoena in whole or in part is but an instance of its power to regulate its processes and, in particular, to intervene in a case of abuse of its process. [27] A subpoena will self-evidently be an abuse of process if it is not issued for a legitimate forensic purpose, of which it is an instance if it has not been issued bona fide for the purpose of obtaining relevant evidence. [28] 2. The plaintiffs submitted that an element of legitimate forensic purpose was that it was "likely" – or, "on the cards" – that the documents sought would materially assist the issuing party's case, and that it was insufficient for an issuing party to establish merely that the documents were or might be relevant. [29] 3. In A v Z, [30] I explained why I do not accept that an issuing party is required to show that it is "likely" (or "on the cards") that the documents sought will materially assist its case, as distinct from that they will add, in some way or another, to the relevant evidence in the case, and that rather the question is whether, on the one hand, the documents called for are apparently relevant or capable of providing a legitimate basis for cross-examination, in which case there is a legitimate forensic purpose for the issue of subpoena, or whether on the other, they are manifestly irrelevant and incapable of touching matters of credit, in which case the subpoena would be an abuse of process. In particular, I sought to explain that: 1. a rule originally applicable in the context of discovery, under rules which no longer apply, had apparently migrated into the context of a subpoena for production, without recognition of the distinction of the processes, in a context which has been complicated by an overlapping claim for public interest immunity; 2. National Employers' Mutual General Insurance Association v Waind and Hill, [31] Trade Practices Commission v Arnotts, [32] and Brand v Digi-tech (Australia) Ltd [33] supported the wider test; 3. the stricter test would require an issuing party to be able to predict the contents of potentially relevant documents, and unduly constrain the ability of litigants to investigate the facts. In a medical negligence case, for example, one cannot know in advance whether the doctor's and hospital's notes are likely to assist one party or the other, but no-one would suggest that there would be no legitimate forensic purpose in issuing a subpoena for their production, because they would obviously illuminate the relevant facts. [34] 1. A v Z was referred to, without disapproval, by the Court of Appeal in ICAP; the point of ICAP was the test of "likely" or "on the cards", not on whether "material assistance" and distinct from "apparent relevance" was the test. In my view there is powerful and well-established authority for the view that, at least in the absence of any question of public interest immunity, no more is required to support the issue of a subpoena for production than that there is a reasonable basis for supposing that the material called for will likely add, in the end, in some way or another, to the relevant evidence in the case. [35] This reflects the notions that the documents relate to, throw light on or are sufficiently relevant to the dispute; [36] that they "appear relevant in the sense they relate to the subject matter of the proceedings"; [37] or that they could possibly throw light on the issues in the case. [38] 2. When challenged in correspondence to do so, the defendants' solicitors identified the legitimate forensic purpose of the subpoena as being to obtain documents which would cast light on whether Messrs Sharpe and Fleming were, in seeking leave to bring derivative proceedings on behalf of Climate Friendly, acting in good faith and in the best interests of Climate Friendly for the purposes of Corporations Act, s 237. 3. No doubt, whether Messrs Sharpe and Fleming are, in seeking leave to bring derivative proceedings on behalf of Climate Friendly, acting in good faith and in the best interests of Climate Friendly, are issues in the s 237 application; they are made issues by the terms of the governing legislation, even if not directly raised on the face of the pleadings. The defendants correctly submit that s 237 provides the ingredients of the cause of action for leave, and that those factors include (a) whether the applicants are acting in good faith, and (b) whether it is in the best interests of Climate Friendly that the applicants be granted leave. 4. The question is whether communications between Bakers and Climate Friendly relating to the Terms Sheet and its implementation are likely to shed any light on whether enforcement of the Term Sheet is in Climate Friendly's best interests, or on any other issue in the proceedings. 5. The potential for the subject communications to do so is illustrated by the paradigm, if unlikely case: a memorandum in which Bakers stated "[a]lthough we have not been asked to advise Climate Friendly on the merits of the transaction, we are bound to point out that this is a disadvantageous deal for Climate Friendly and advantageous to Biosoft and Sachil". Although such an opinion would not itself be admissible, it would provide a fertile line of inquiry, and for cross-examination, and thus would add in some way to the relevant evidence in the case. That such a document exists is, of itself, purely speculative. However, examination of the communications between Climate Friendly and Bakers which culminated in the draft November agreement, to which the plaintiffs seek to have the defendants held bound, could conceivably reveal, in a less direct way, that instructions and advice had produced a transaction that was disadvantageous to Climate Friendly and advantageous to Biosoft and Sachil. If it emerged that the transaction was disadvantageous to Climate Friendly and advantageous to Biosoft and Sachil, that may inform a judgment as to whether it was in the interests of Climate Friendly that leave be granted. While whether granting leave is in the interests of Climate Friendly is a judgment to be made on objective analysis of the transaction, rather than on the instructions given or advice received, but bearing in mind that in this context relevance does not depend on admissibility, those instructions and advice could reveal lines of inquiry and cross-examination which could inform whether it was in Climate Friendly's interest to grant leave, and whether in seeking leave the plaintiffs are acting in good faith. 6. More particularly, those communications are likely to cast light on any divergences between the Term Sheet and the November agreement, the existence of and reasons for which might be highly relevant to whether either was intended to be, capable of being, or considered to have been, legally binding. Whether a contract was made is to be determined objectively, from the communications between the parties and the matrix of facts known to both of them, and the advice which one party may have received, to the exclusion of the other, cannot inform that exercise. It is true that while communications between the negotiating parties may well be relevant, and that examination of them may enable the court to discern a point at which consensus was reached, and a point from which the parties regarded themselves as bound, generally speaking communications between one party and its solicitor could not permissibly illuminate that issue. However, in this case the communications with Bakers, though generally made by Climate Friendly, were – as explained above – made on behalf of all parties. Those communications are likely to reveal how the Term Sheet evolved into the November agreement, and as such are "sufficiently relevant" and "could possibly throw light on the issues in the case". 7. Accordingly, there is a reasonable basis for supposing that the material called for will likely add, in the end, in some way or another, to the relevant evidence in the case. The ultimate question is whether the subpoena was issued for a legitimate forensic purpose. My conclusion that it was is fortified by my conclusion, in connection with the privilege point, that the documents are documents in which the defendants have a legitimate interest, and which Messrs Grobbel and Heuberger are entitled to inspect under Corporations Act, s 198F, and to which South Pole would be granted access under s 247A. Conclusion and orders 1. My conclusions may be summarised as follows: 2. On the privilege issue: 1. It is not seriously capable of dispute that the documents in question were confidential communications between Climate Friendly and Bakers, for the purposes of obtaining legal advice and assistance. 2. The solicitors Bakers having properly made a claim of privilege on behalf of their former client, the claim does not lapse just because the client does not itself thereafter appear to sustain it, and the court is obliged to consider it. 3. However, although its communications with Bakers may be privileged against the rest of the world, Climate Friendly's privilege is not maintainable as against South Pole, Mr Grobbel and Mr Heuberger. At the time of those communications, South Pole had a common interest with Climate Friendly in their subject matter: Bakers were retained by Climate Friendly to implement a deal which had been negotiated between its principal shareholders, and Climate Friendly was the vehicle they together selected for the purpose of obtaining legal assistance to formalise and document their agreement. In so doing, Climate Friendly was acting in furtherance of their joint interest, and in that sense on behalf of all of them. The communications between Climate Friendly and Bakers were not exclusively for Climate Friendly's own benefit, but for the benefit of all the interests who had joined in the Term Sheet. Moreover, South Pole was, and would remain even after implementation, the majority shareholder in Climate Friendly, and had a legitimate continuing interest in Climate Friendly's part in the agreement, as well as in its own. Messrs Grobbel and Heuberger not only were and are the directing minds of South Pole, but they were, are and will remain directors of Climate Friendly, and as such had (and have) every right to see the advice that was being sought by Climate Friendly. 1. As to the question of legitimate forensic purpose, it suffices to support the issue of a subpoena for production that there is a reasonable basis for supposing that the material called for will likely add, in the end, in some way or another, to the relevant evidence in the case. The communications between Climate Friendly and Bakers which culminated in the draft November agreement, to which the plaintiffs seek to have the defendants held bound, though generally made by Climate Friendly, were – as explained above – not private communications of Climate Friendly, but were made on behalf of all the parties. Bearing in mind that in this context relevance does not depend on admissibility, they are likely to cast light on any divergences between the Term Sheet and the November agreement, the reasons for which might be highly relevant to whether either was legally binding. They could conceivably reveal, or refute, that instructions and advice had produced a transaction that was disadvantageous to Climate Friendly and advantageous to Biosoft and Sachil, in which case that could illuminate whether it was in Climate Friendly's interest that leave under s 237 be granted. Thus those communications are "sufficiently relevant" and "could possibly throw light on the issues in the case"; there is a reasonable basis for supposing that they will likely add, in the end, in some way or another, to the relevant evidence in the case. 2. The conclusion on the ultimate question, namely that the subpoena was issued for a legitimate forensic purpose, is fortified by my conclusion, in connection with the privilege point, that the documents are documents in which the defendants have a legitimate interest, which Messrs Grobbel and Heuberger are entitled to inspect under Corporations Act, s 198F, and to which South Pole would be granted access under s 247A. 3. The Court therefore orders that: 1. Paragraphs 1(b), (c), (d) and (e) of the subpoena issued by the defendants to The Partners - Baker & McKenzie dated 6 June 2017 be set aside. 2. The plaintiffs' notice of motion filed on 29 June 2017 be otherwise dismissed, with costs. ********** Endnotes 1. Sharpe v Grobbel [2017] NSWSC 2 at [195]-[197]. 2. Wilson v Rastall (1792) TR 753; R v Derby Magistrates Court; ex parte B [1996] AC 487 at 504-5. This paragraph draws considerably on C. Passmore, Privilege, 3rd ed, [1-177]-[1-180]. 3. R v Central Criminal Court; ex parte Francis & Francis [1989] AC 346 at 383; Ex parte Morgan Grenfell [2003] 1 AC 563 at 610; [2002] UKHL 21 at [25]; Prince Jefri Bolkiah v KPMG [1999] 2 AC 222 at 236-7; [1999] 1 All ER 517 at 528-9; Lavallee, Rackel & Heintz v Canada (Attorney-General) 2002 SCC 61. 4. Nationwide Building Society v Various Solicitors [1999] PNLR 52; Winterthur Swiss Insurance Company & Anor v AG (Manchester) Ltd & Ors [2006] EWHC 839 (Comm)at [15] and fn 6; cf Kimber v Brookman Solicitors [2004] 2 FLR 221. 5. Geffen v Goodman Estate [1991] 2 SCR 353. 6. UCPR r 33.4. 7. TSB Bank plc v Robert Irving & Burns [2000] 2 All ER 826 at 831-4 8. CIA Barca de Panama SA v George Wimpey & Co. Limited [1980] 1 Lloyd's Law Rep 598 at 614 (Stephenson LJ), 615 (Bridge LJ); Farrow Mortgage Services Pty Ltd (in liq) v Webb (1996) 39 NSWLR 601 at 608; Hellenic Mutual War Risks Association (Bermuda) Ltd v Harrison (The "Sagheera") [1997] 1 Lloyd's Rep 160 at 165-6; Yunghanns v Elfic Pty Ltd (No 2) [2000] 1 VR 92 (Warren J); Schreuder v Murray (No 2) (2009) 260 ALR 139; 41 WAR 169; [2009] WASCA 145 at [9]; BBGP Managing General Partner Ltd v Babcock & Brown Global Partners [2011] Ch 296; [2011] 2 All ER 297 at [52]; Hancock v Rinehart (Freehills subpoena) [2017] NSWSC 530 at [38]; Thanki B (ed), The Law of Privilege (2006) at [4.71]; Phipson on Evidence, 18th ed (2013), at 725 [24-01]. 9. Svenska Handelsbanken v Sun Alliance and London Insurance PLC [1995] 2 Lloyd's Rep 84 at 88; Commercial Union Assurance Co PLC v Mander [1996] 2 Lloyd's Rep 640 at 645-646 (Moore-Bick J); Winterthur Swiss Insurance Company & Anor v AG (Manchester) Ltd & Ors [2006] EWHC 839 at [79] (Aikens J). 10. (1996) 39 NSWLR 601 at 608 (Sheller JA; Waddell AJA agreeing). 11. The passage cited is from Phipson, 14th ed (1990). See now Phipson, 18th ed, at 726 [24-02]. 12. Yunghanns v Elfic Pty Ltd (No 2) [2000] 1 VR 92 at 103-104 (Warren J) (as her Honour then was). 13. CIA Barca de Panama SA v George Wimpey & Co. Limited [1980] 1 Lloyd's Law Rep 598 (Bridge LJ); Commercial Union Assurance Co PLC v Mander [1996] 2 Lloyd's Rep 640 at 645-646 (Moore-Bick J); Yunghanns v Elfic Pty Ltd (No 2) at [37]. 14. See Phipson on Evidence, 15th ed (2000), p 548-549 [21-08]–[21-09]. 15. Phipson, 18th ed, at 730 [24-05]. 16. As to which see Farrow Mortgage Services Pty Ltd (in liq) v Webb (1996) 39 NSWLR 601 at 608E-612D. 17. Phipson, 18th ed, at 731 [24-06]; Eastmark Holdings Pty Limited v Kabraji (No 3) [2012] NSWSC 1463 at [69] (Hallen J). Although an appeal against his Honour's judgment was partially successful, it did not affect Hallen J's discussion of the authorities and principles, which I have found of great assistance. 18. Commercial Union Assurance Co PLC v Mander [1996] 2 Lloyd's Rep 640 at 645-646 (Moore-Bick J); Yunghanns v Elfic Pty Ltd (No 2) at [37]. 19. Eastmark Holdings Pty Limited v Kabraji (No 3) [2012] NSWSC 1463 at [68]. 20. Winterthur Swiss Insurance Company & Anor v AG (Manchester) Ltd & Ors [2006] EWHC 839 at [80]-[81]. 21. Phipson on Evidence, 14th ed (1990), 515 at [20-28]. For further examples, see also CIA Barca de Panama SA v George Wimpey & Co. Limited [1980] 1 Lloyd's Law Rep 598 at 614; Yunghanns v Elfic Pty Ltd (No 2) at [38]. 22. [1943] 1 Ch D 220. 23. Phipson, 18th ed, at 727 [24-03]. 24. Edman v Ross (1922) 22 SR(NSW) 351 at 358 (Street CJ in Eq); R v Merchant Tailors' Company (1831) 2 B & Ad 115; (1831) 109 ER 1086; Re Claremont Petroleum NL (1990) 2 Qd R 31 at 33; Rowland v Meudon Pty Limited [2008] NSWSC 381 at [35]. This right of a shareholder has now been enlarged by Corporations Act, s 247A, which has "made the discretion wider and uncontrolled": Rowland v Meudon Pty Limited [2008] NSWSC 381 (Bryson AJ) at [35]; cited with approval in Smartec Capital Pty Limited v Centro Properties Limited [2011] NSWSC 495; (2011) 83 ACSR 461 at [65] (Barrett J). However, the "proper purpose" criterion in s 247A may not be satisfied where sought in an attempt to outflank a claim of privilege in other proceedings or to serve as a substitute for discovery: Rowland v Meudon; Czerwinski v Syrena Royal Pty Ltd [2000] VSC 125; Smartec Capital Pty Limited v Centro Properties Limited at [64]-[68]. Section 247A is insufficiently explicit to abrogate legal professional privilege: Hanks v Admiralty Resources NL (No 2) [2011] FCA 1464 at [20] (Gordon J); Eastmark Holdings Pty Limited v Kabraji (No 3) [2012] NSWSC 1463 at [93]-[94]. However, s 247A permits the court, in the exercise of its discretion, to allow a member of a company to inspect the books of a company, on terms the court may impose, including inspection of otherwise privileged documents: Hanks v Admiralty Resources NL (No 2) [2011] FCA 1464 at [21] (Gordon J); Czerwinski v Syrena Royal Pty Ltd (No 1) [2000] VSC 125 at [14] (Warren J); Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365 at [86] (Barrett J); Aerva NC (Australia) Pty Ltd v Summit Resources (Australia) Pty Ltd (No 2) [2008] WASC 10 at [24] (Martin CJ); Eastmark Holdings Pty Limited v Kabraji (No 3) [2012] NSWSC 1463 at [95]. 25. Edman v Ross (1922) 22 SR(NSW) 351 at 361 (Street CJ in Eq); Re Geneva Finance Ltd (1992) 7 WAR 496 at 507; 7 ACSR 415 at 426; Fox v Gadsden (2003) 46 ACSR 713 at [15]; Oswal v Burrupo Fertilisers Pty Ltd (2013) 295 ALR 708 at [32], [78]. 26. Hanks v Admiralty Resources NL (No 2) [2011] FCA 1464 at [20] (Gordon J); Eastmark Holdings Pty Limited v Kabraji (No 3) [2012] NSWSC 1463 at [93]-[94]. 27. Botany Bay Instrumentation & Control Pty Limited v Stewart [1984] 3 NSWLR 98 at 100 (Powell J); Portal Software v Bodsworth [2005] NSWSC 1115 at [19]. 28. Botany Bay v Stewart at 100C; Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 573-575. 29. Citing Attorney-General (NSW) v Chidgey (2008) 182 A Crim R 536; [2008] NSWCCA 65 at [59]-[64] (Beazley JA, James and Kirby JJ agreeing), citing R v Saleam [1999] NSWCCA 86 at [11]; ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWCA 307 at [20]-[21] (Tobias JA; Basten and Handley JJA agreeing). 30. [2007] NSWSC 899; (2007) 212 FLR 255 at [4]-[19]. 31. [1978] 1 NSWLR 372 at 384. 32. (1989) 88 ALR 90. 33. [2001] NSWSC 425. 34. [2007] NSWSC 899; (2007) 212 FLR 255 at [18]. 35. National Employers' Mutual General Insurance Association v Waind and Hill [1978] 1 NSWLR 372 at 384. 36. Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 573-575: "relating to … the matter" (at 573), "throw light on a dispute" (at 573), "relevant" (at 574), "sufficiently relevant" (at 575). 37. National Employers' Mutual General Insurance Association v Waind and Hill [1978] 1 NSWLR 372 at 385 (Moffitt P). 38. Trade Practices Commission v Arnotts Ltd (1989) 88 ALR 90; cf Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 573. 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: 22 August 2017