In the matter of Creditors Trust Deed Established in the Administration of Bevillesta Pty Ltd [2011] NSWSC 1419 (25 November 2011)

Last Updated: 28 November 2011

Supreme Court New South Wales

Case Title:	In the matter of Creditors Trust Deed Established in the Administration of Bevillesta Pty Ltd
Medium Neutral Citation:	[2011] NSWSC 1419
Hearing Date(s):	21 November 2011
Decision Date:	25 November 2011
Jurisdiction:	Equity Division - Corporations List
Before:	Ball J
Decision:	(1) The plaintiff be denied access to the documents contained in packets N-1 and N-2 produced in response to the plaintiff's notice to produce returnable on 25 October 2011. (2) The plaintiff pay the first defendants' costs of the application for access. (3) There be no order for costs in relation to the second defendant's costs.
Catchwords:	PROCEDURE - civil - privilege - common interest privilege - communication between administrators' lawyers and former lawyers of company in administration relating to litigation brought by plaintiff against company- anticipated proceedings by plaintiff if its proof of debt rejected - raise same issues - administrators and company have common interest in relation to proceedings
Legislation Cited:	Corporations Act 2001 (Cth) Evidence Act 1995 (Cth)
Cases Cited:	Meteyard v Love [2005] NSWCA 444; (2005) 65 NSWLR 36 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Limited [2006] NSWSC 234 Telstra Corporation Ltd v Australis Media Holdings (1997) 41 NSWLR 147
Texts Cited:
Category:	Procedural and other rulings
Parties:	Ronnat Pty Ltd (ACN 114 482 290) (Plaintiff) Peter Krejci and Martin Green (as Trustees of the Creditors Trust established in the administration of Bevillesta Pty Ltd) (First Defendants) Top Ryde Funding Pty Ltd (ACN 149 816 697) (Second Defendant)
Representation
- Counsel:	Ms S Haddad (Plaintiff) Mr D J Hand (First Defendants) Ms K Forrester (Second Defendant)
- Solicitors:	Spinks Eagle Lawyers (Plaintiff) Bridges Lawyers (First Defendants) Middletons (Second Defendant)
File number(s):	2011/310040
Publication Restriction:

JUDGMENT

1. In these proceedings, the plaintiff, Ronnat Pty Ltd, appeals against the decision of the first defendants, the administrators of a creditors trust established in the administration of Bevillesta Pty Ltd, to reject a proof of debt lodged by the plaintiff on 17 March 2011 for $4,212,818.64. The proof of debt simply states that the amount claimed is a "damages claim".

2. Ronnat served on the first defendants a notice to produce, returnable on 25 October 2011, seeking documents relevant to the first defendants' decision to reject the proof of debt. The first defendants produced a number of documents in response to the notice to produce. They claim privilege in relation to four of those documents. The plaintiff disputes that claim for privilege in relation to three of them. Those documents consist of:

(a) a letter dated 16 March 2011 to Gadens Lawyers from Colin Biggers & Paisley;

(b) a letter dated 17 March 2011 to Gadens Lawyers from Colin Biggers & Paisley;

(c) a letter dated 17 March 2011 to Colin Biggers & Paisley from Gadens Lawyers annexing an expert report.

The current application concerns those claims for privilege.

3. Ronnat commenced proceedings against Bevillesta in about December 2008 in relation to the amount that is now the subject of its proof of debt. Gadens acted for Bevillesta from December 2008 until 12 February 2011, when Bevillesta was placed into voluntary administration. It appears that shortly after Bevillesta was placed into administration, receivers and managers were appointed and Gadens continued to act for those receivers and managers until at least 21 March 2011.

4. The documents in respect of which the first defendants claim privilege contain opinions of Gadens, or were written for the purpose of obtaining opinions from Gadens, concerning the litigation brought by Ronnat against Bevillesta which Gadens had formed in relation to that litigation while acting for Bevillesta and the receivers. According to Mr Fitzpatrick of Gadens, those communications and documents were provided to Colin Biggers & Paisley in response to requests made by them for the purpose of allowing Colin Biggers & Paisley to provide legal advice to the first defendants in relation to Ronnat's proof of debt.

5. Section 118 of the Evidence Act 1995 (Cth) (the Act ) provides:

Evidence is not to be adduced if, on objection by a cl i ent, the court finds that adducing the evidence would result in disclosure of:

(a) a confidential communication made between the client and a lawyer; or

(b) a confidential communication made between 2 or more lawyers acting for the client; or

(c) the contents of a confidential document (whether delivered or not) prepared by the client, lawyer or another person;

for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client.

Section 119 provides:

Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of:

(a) a confidential communication between the client and another person, or between a lawyer acting for the client and another person, that was made; or

(b) the contents of a confidential document (whether delivered or not) that was prepared;

for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party.

6. Section 122(2) of the Act provides:

Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120.

Section 122(5) relevantly provides:

A client or party is not taken to have acted in a manner inconsistent with the client or party objecting to the adducing of the evidence merely because:

(a) ...

(b) ...

(c) of a disclosure to a person with whom the client or party had, at the time of the disclosure, a common interest relating to the proceeding or an anticipated or pending proceeding in an Australian court or a foreign court. ...

7. The first defendants put their claim for privilege in two ways. First, they say that the three documents consisted of confidential documents prepared by the client, lawyer or another person "for the dominant purpose of the lawyer ... providing legal advice to the client" and consequently are privileged under s 118 of the Act. Secondly, they rely on the claim of common interest privilege recognised by s 122(5)(c) of the Act.

8. In my opinion, there are difficulties with the first way in which the first defendants seek to put their case. In Telstra Corporation Ltd v Australis Media Holdings (1997) 41 NSWLR 147 at 149 McLelland CJ in Eq said:

In my opinion par (c) [of s 118], on its true construction, does not apply to a document, the essential character of which is that of a communication made by the lawyer to another person ... , or made by the client to another person ... Such a document must find its claim to protection if at all under par (a) or par (b). ...

That passage was cited with approval by Basten JA (with whom Beazley JA and Santow JA agreed) in Meteyard v Love [2005] NSWCA 444; (2005) 65 NSWLR 36 at [110]. As Basten JA explained, s 118(c) is intended to cover the "work product" of the lawyer. Communications themselves are covered by s 118(a) or (b).

9. The documents in this case clearly have as their essential character communications between the administrators' lawyers and another person - that is, Gadens. For those reasons, they do not attract the protection provided for by s 118(c). Nor do they fall within s 118(a) or (b), since they were not communications between the administrators and their lawyers or between the lawyers acting for the administrators.

10. However, in my opinion, the communications are the subject of common interest privilege. The plaintiff submitted that s 122(5)(c) did not apply because, at the time of disclosure, the first defendants did not have a common interest relating to the proceedings which had been brought by Ronnat against Bevillesta. Those proceedings had been stayed by that time by the appointment of the administrators. Moreover, Bevillesta was not a party to the current proceedings. Ronnat's claim against Bevillesta has been converted into a right to prove a debt against the trust established in the administration of Bevillesta. Neither Bevillesta nor the receivers has any interest in that claim.

11. I do not accept this submission. At the time the communications occurred, it could have been anticipated that Ronnat would lodge a proof of debt in respect of the claim that it had brought against Bevillesta and that that proof of debt would be rejected by the administrators and Ronnat would appeal against that rejection. So much is clear from the report to creditors dated 30 June 2011 under s 439A of the Corporations Act 2001 (Cth) which says in relation to Ronnat the following:

This creditor attended the first meeting of creditors and in the absence of any supporting documents was allowed to vote for $1.00 in respect of an alleged claim that the Company has against Bevillesta Pty Ltd.

Ronnat Pty Ltd has subsequently lodged a proof of debt, without any supporting documents, in the amount of $4,212,818.64.

The Company disputes the veracity of the claim.

We have requested our Solicitors to contact the Solicitors who had been appointed by Bevillesta to defend the proceedings and ascertain the merits of any claim made.

Our solicitors will review documents in the matter prior to a decision being made as to whether Ronnat Pty Ltd will be admitted to vote at the second meeting of creditors and if so the amount that will be apportioned to the vote.

A similar decision will be required regarding the admittance or rejection of any claim submitted by Ronnat Pty Ltd for the purpose of participating in any dividend declared in the proposed creditors' trust.

12. In my opinion, at the time the letters the subject of the claim for privilege were written, Bevillesta and the receivers had a common interest with the administrators in relation to the proceedings that have now been commenced by Ronnat and that were anticipated at that time. The current proceedings raise the same issues that had been raised in the proceedings commenced by Ronnat against Bevillesta. There is a question of what role the receivers played in the proceedings commenced by Ronnat. However, to the extent that the receivers received advice from Gadens concerning Bevillesta's position, it seems to me that they were in no different position from that of Bevillesta. It is true that, as a result of the deed of company arrangement, Bevillesta will not itself have to bear either directly or indirectly any part of Ronnat's claim. But, in my opinion, that does not mean that they do not have a common interest. As Bergin J pointed out in Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Limited [2006] NSWSC 234 at [50], citing Network Ten Ltd v Capital Television Holdings Ltd (1995) 36 NSWLR 275, "a "common interest" is not rigidly defined, and is a question of fact in each case". As between Ronnat on the one hand and the administrators, the receivers and Bevillesta on the other, the administrators, receivers and Bevillesta had the same interest at the time the letters were written - that is, in seeing that the claim made by Ronnat was not paid unless Bevillesta was under a legal obligation to make the payment. That is sufficient to establish a common interest.

13. The orders of the court are:

(1) The plaintiff be denied access to the documents contained in packets N-1 and N-2 produced in response to the plaintiff's notice to produce returnable on 25 October 2011.

(2) The plaintiff pay the first defendants' costs of the application for access.

(3) There be no order for costs in relation to the second defendant's costs.

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