Austpipe Plumbing Services Pty Ltd v Doyle

By way of very brief background, the plaintiff company runs a business which primarily provides plumbing and air-conditioning services. The first defendant was originally an employee of the plaintiff, but later also became a director. The other defendants are associated with the first defendant. The fifth defendant is the first defendant’s spouse.

The first defendant’s association with the plaintiff began in 2011 and ended in April 2022. In these proceedings the plaintiff alleges that the first defendant, before his separation from the plaintiff, conducted himself in breach of the fiduciary duty he owed to the plaintiff. In effect, the first defendant allegedly diverted “a significant amount of work, customers and staff to a separate company which negatively impacted the Company’s financial performance.”

The plaintiff now seeks damages and declarations arising from the alleged improper conduct of the first defendant. The proceedings were commenced in July 2022.

In the course of the preparation of this matter the parties’ issued subpoenas. One of the recipients of a subpoena from the defendants was a firm of solicitors, located in Queensland, called DuxRoe Pty Ltd (DuxRoe). A Mr Jeff Chung is a principal of this firm. DuxRoe produced documents to the court but made a claim for privilege in respect of the documents.

Some of the documents produced by DuxRoe were later agreed to be available for access. The claim for privilege was however maintained in respect of the balance of the documents. These have been conveniently referred to as the documents in Packet S-7.

On 23 August 2024, the first and third to sixth defendants filed a notice of motion challenging the claim for privilege and seeking access to the documents contained in Packet S-7.

The motion is supported by an affidavit of Mr Christopher Nielson dated 23 August 2024. Mr Nielson is the solicitor for the first and third to sixth defendants. The second defendant is in liquidation and has taken no active part in the proceedings. I will refer to the first and third to sixth defendants as ‘the defendants’.

The plaintiff relies on an affidavit of Mr Michael Chisholm dated 4 October 2024. Mr Chisholm is a director of the plaintiff company.

According to Mr Chisholm the plaintiff engaged DuxRoe to provide legal advice in September 2023.

In G&S Engineering Services Pty Ltd v MACH Energy Australia Pty Ltd (No 16) [2024] NSWSC 955, from [60] McGrath J conducted a comprehensive examination of the principles concerning a claim for legal professional privilege, including quoting at [81] from Kenny J in Commissioner of Taxation v Pratt Holdings Pty Ltd (2005) 225 ALR 266; [2005] FCA 1247:

In relation to “dominant purpose” McGrath J said at [71]-[72]:

According to Mr Chisholm:

The phrase “legal advice in relation to certain taxation and other legal matters” is repeated seven times in Mr Chisholm’s affidavit. I asked plaintiff’s counsel what the phrase meant. His response did not provide an answer; rather he said that the meaning was not important. He emphasised that the important issue was whether or not the relevant communications had the dominant purpose of legal advice. While I agree with the statement of principle, I do not agree that the failure to explain “certain tax matters and other legal matters” was not relevant. I will return to this point below.

The defendants primary submission was that the plaintiff had failed to discharge its onus to establish the claim for privilege. It was submitted that the evidence relied upon, effectively Mr Chisholm’s affidavit and its annexures, were not enough to overcome the onus.

I was first of all referred to Barnes v Commissioner of Taxation [2007] FCAFC 88, in particular at [18]:

The type of evidence relied upon in Barnes is described at [15]-[16]. Notably the court observed that there was no evidence from the solicitor involved and no evidence from any of the persons whose communications were included in the subpoenaed documents. The Court said, of the evidence at [16]:

The plaintiff responded by referring me to the decision of Beazley P (as her Excellency then was) and MacFarlan JA in Hastie Group Ltd (in liq) v Moore [2016] NSWCA 305, initially at [12]:

And then at [33]-[34]:

I do not think that Hastie helps the plaintiff. I think Mr Chisholm’s evidence is of the type described in Barnes as “assertions, conclusions and generalised comments.” This observation is highlighted by the phrase I have referred to above, namely “legal advice in relation to certain taxation and other legal matters.” The same level of generality can be seen in the Schedule of Privileged Documents where the basis of every claim is precisely the same, namely “Confidential communications made for the purpose of obtaining legal advice.”

There is no evidence from Mr Chung, who apparently provided the advice and there is no evidence from any of the other persons with whom Mr Chung communicated, namely Mr Heaney of ReGroup Solutions, Mr Keramos of McLeod’s Accounting or Mr Kershler of Rose Litigation Lawyers.

The plaintiff submitted that I could draw inferences from Mr Chisholm’s affidavit. I agree that inferences are available, but cannot say that they would be the only reasonable inferences that might be available.

The base facts found in paras 13 to 19 of Mr Chisholm’s affidavit, which would be the source of any inferences, are far too general and vague to permit the drawing of the inferences suggested by the plaintiff.

Therefore, I think the defendants succeed on their primary point.

The defendants enumerated a number of secondary points, essentially based on an analysis of different categories into which the documents fell. I do not think it necessary to deal with these points nor do I think it necessary to examine the question of waiver. There are however, two points that I do think should be examined.

First, it was submitted that any advice being given by DuxRoe was not actually advice to the plaintiff, but rather advice to Mr Chisholm, not in his capacity as a servant of the company but rather as an individual who had dealings with the company, in particular the treatment of a loan he had made to the company.

The submission arose from the contents of the Engagement Letter and the Costs Agreement with DuxRoe.

Under the heading “Work we will do” the Engagement Letter states:

Clause 3(a) of the costs agreement states:

The defendants’ argument was that notwithstanding that the Engagement Letter and the Costs Agreement were addressed to, and between, the plaintiff and DuxRoe, in reality the description of the work to be done was the provision of advice to Mr Chisholm and not to the plaintiff.

I think that the “you” referred to in the letter and in the agreement, as quoted above, are references to Mr Chisholm and to advice for his benefit. There is no reason why a company cannot obtain legal advice on behalf of one of its officers or employees. The distinction here however is that the claim for privilege is not being made by Mr Chisholm, rather it is being made by the company. As Mr Chisholm states in his affidavit, at [31]:

I think there is some merit in the point although I have some reservations about it, in particular as I understand the company, at least since the departure of the first defendant, to effectively be the alter ego of Mr Chisholm. Without more, I do not think the point would have defeated the plaintiff’s claim for privilege.

The second point is the plaintiff submitted that I should inspect the documents (85 pages) in order to see whether the claim for privilege was justified. The defendants said that was not appropriate because the plaintiff had failed to overcome the primary obstacle of proving the dominant purpose of the communications.

I agree with the defendants. Production of documents cannot be used to establish a claim which has otherwise not been proved. The point was summarised by Brereton J in Hancock v Rinehart (Privilege) [2016] NSWSC 12 at [35]:

I do not suggest that the plaintiff was necessarily wrong to produce the documents to the court. What I do take from Hancock is that inspection of the documents is not a substitute for the plaintiff’s otherwise held obligation to prove the existence of the privilege.

I will therefore make the orders sought by the defendants. As to costs, I can see no reason why the plaintiff should not pay the defendants’ costs of the motion.

Orders