CBX2 Pty Ltd v National Australia Bank

1. [1]

   HER HONOUR: There were numerous motions before this Court in relation to notices to produce and subpoenae for production. After discussion between the parties, only one notice to produce to the Court remained in issue, one issued by the defendant to the plaintiff dated 4 June 2015.

2. [2]

   The plaintiff is CBX2 Pty Limited (“CBX2”). Mr Charles Blinkworth (“Mr Blinkworth”) is the sole director and shareholder of CBX2.

3. [3]

   The defendant is National Australia Bank Limited (“NAB”). CBX2 relied on the affidavit of its solicitor Terrence Sullivan (“Mr Sullivan”) filed 8 July 2015 and tendered another affidavit of Mr Sullivan filed 22 May 2015 (Ex 1).

The pleading in the statement of claim

1. [4]

   These proceedings concern claims brought by CBX2 against NAB in respect of dealings in respect of CBX2's account with NAB (“the account”).

2. [5]

   On 19 August 2014, CBX2 filed a statement of claim. The pleaded claims can be summarised as follows:

The notice to produce

1. [6]

   The notice to produce issued by NAB addressed to CBX2 dated 4 June 2015 relevantly seeks the following documents:

2. [7]

   While the notice to produce does not stipulate the periods of time for which the documents are sought, Mr McQuillen of counsel was briefed in about November 2014 and Mr Sullivan was instructed in April 2015, so the documents sought are from those dates respectively.

The law

1. [8]

   So far as the notice to produce is concerned, rule 1.9 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) relevantly reads:

2. [9]

   CBX2 has produced the documents it claims are privileged to this Court.

3. [10]

   UCPR 34.1 relevantly reads:

4. [11]

   In Norris v Kandiah [2007] NSWSC 1296 at [3] Brereton J stated:

5. [12]

   Similarly, Barrett J stated in Patonga Beach Holdings Pty Ltd v Lyons [2009] NSWSC 869 at [12] that, in relation to a notice to produce issued pursuant to UCPR 34.1:

6. [13]

   NAB has filed a notice of motion seeking security for costs from CBX2 on the basis that it has reason to believe that CBX2 will be unable to pay NAB’s costs if NAB is successful in its defence. NAB requires sufficient security to be given for those costs and a stay of proceedings until the security is given: see s 1335 of the Corporations Act 2001 (Cth). Counsel for NAB submitted that the documents referred to in this notice to produce are relevant to the security for costs motion, which has been listed for hearing on 17 August 2015.

7. [14]

   Some of the factors that the Court may consider on the application for security for costs include whether CBX2’s impecuniosity was caused by NAB’s conduct, whether Mr Blinkworth is a person standing behind CBX2 who is likely to benefit from the litigation and if so whether he is willing to provide the necessary security, and whether the order would stultify these proceedings: see KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 196F - 198C.

8. [15]

   Mr Sullivan in his earlier affidavit at [5], [8], [9] and [11] sets out the financial position of CBX2 and Mr Blinkworth as follows:

9. [16]

   According to NAB, the evidence showing that CBX2’s solicitors, Sullivan Fernan Lawyers (“Sullivan Fernan”), are holding funds on trust for CBX2 and/or Mr Blinkworth, and that payments have been made on their behalf to Sullivan Fernan, goes directly to the substantive issues that arise on the security for costs application. In particular, NAB argued that they go to a legitimate forensic purpose, namely, the financial position of CBX2, the worth of any undertaking given by Mr Blinkworth, and whether security would stultify the proceedings.

10. [17]

    NAB submitted that having squarely put the financial position of CBX2 and Mr Blinkworth in issue, (i) whether Sullivan Fernan holds any funds for them, (ii) whether past payments have been made to Sullivan Fernan, and (iii) the quantum of any funds held or paid, are relevant issues which Sullivan Fernan’s bank account statements and trust account ledger for CBX2 and Mr Blinkworth bear upon. NAB said that these documents are also relevant for the purposes of cross examining Mr Sullivan, having regard to the statements made by him concerning the extent of the assets of CBX2 and Mr Blinkworth.

11. [18]

    The categories of documents sought in the notice to produce include copies of the retainer and costs agreement between Sullivan Fernan and Mr McQuillen on the one hand and CBX2 on the other, together with invoices issued to date and evidence of payments made.

12. [19]

    The costs agreement, invoices and evidence of payment sought in categories 1 to 4 of the notice to produce cast light upon whether CBX2 has access to funds to maintain the litigation irrespective of its impecuniosity. It is my view that the documents sought in the notice to produce are sought for a legitimate forensic purpose and it is on the cards that they will materially assist NAB’s case. These documents go to the issue of the impecuniosity of CBX2 and its sole director Mr Blinkworth, Mr Blinkworth’s credit and whether an order for security would stultify the proceedings: see Norris v Kandiah at [3].

The Evidence Act

1. [20]

   However, counsel for CBX2 claimed that the documents sought in paragraph [1] to [4] of the notice to produce are confidential communications under s 119 of the Evidence Act 1995 (NSW). NAB argued that there is no client legal privilege in relation to those documents.

2. [21]

   Section 119 of the Evidence Act reads:

3. [22]

   “Legal services” is not defined in the Evidence Act. However, s 4 of the Legal Profession Act 2004 (NSW) defines “legal services” as work done, or business transacted, in the ordinary course of legal practice. Counsel for CBX2 submitted that retainers and costs agreements are documents produced in the ordinary course of legal practice.

4. [23]

   Mr Sullivan (Aff, 8 July 2015 at [6] - [7]) expressed his opinion that the documents referred to in categories (1) to (4) of the notice to produce are confidential documents that were prepared for the dominant purpose of CBX2 being provided with professional legal services relating to the proceeding before the Court, and that his client, CBX2, has instructed him to object to the production of these documents. However, Mr Sullivan’s opinion does not necessarily fulfil the “dominant purpose” test.

5. [24]

   Southland Coal Pty Ltd (rec and mgrs apptd) (in liq) (2006) 203 FLR 1; [2006] NSWSC 899, set out some uncontested principles concerning client legal privilege. At [14] Austin J said:

6. [25]

   Later, Austin J referred to whether a solicitor’s belief as to dominant purpose is sufficient, and stated at [28]:

7. [26]

   Section 119 of the Evidence Act creates a privilege for confidential communications made, and confidential documents prepared, for a lawyer providing professional legal services relating to litigation. The making of the communication and the contents of the document prepared must be for the dominant purpose of providing those legal services. While Mr Sullivan has expressed the view that the documents sought were created for the dominant purpose of the provision of legal services, that in itself is not sufficient to establish the dominant purpose of the communication.

8. [27]

   Counsel for CBX2 submitted that neither the context nor the content of s 119 provide any justification for reading down the expression “relating to” these proceedings with “legal services”. According to CBX2, any documents of the description set out in NAB’s notice to produce, and the subject of the claim for privilege, would not have come about were it not for this litigation and accordingly, the dominant purpose test is satisfied.

9. [28]

   Counsel for NAB submitted that no issue of privilege should arise in relation to the costs agreement because costs agreements are not normally privileged. This is because the dominant purpose of the creation of such documents is typically to record the terms of the retainer, or to request payment from the client for work done, which is not a purpose that would attract privilege. NAB accepted that in some circumstances, a detailed narrative on a memoranda of fees might contain a description that might reveal the substance of advice or otherwise attract privilege. NAB’s position was that if this is the case, it would have no objection to the relevant privileged portion being redacted, because what is of relevance here is the fact and quantum of payment of fees, not the content of any advice.

10. [29]

    In Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (t/as Uncle Ben’s of Australia) (1994) 126 ALR 58 at 68, it was held that memoranda of fees, bills of costs and solicitors trust account ledgers are not normally privileged (the reason being that the dominant purpose of the creation of such documents does not attract privilege).

11. [30]

    In CSR Ltd v Eddy (2008) 70 NSWLR 725; [2008] NSWCA 83, the Court of Appeal per Basten JA at [62] stated:

12. [31]

    Finally, in Cross on Evidence (9th Aust Ed, 2013) at [25225], the learned author says in relation to confidential communications:

13. [32]

    As Effem Foods, Eddy and Cross on Evidence say, memoranda of fees, bills of costs, solicitors trust account ledger entries, costs agreements and retainers are not normally privileged. Such is the case here.

14. [33]

    Hence, it is my view that the copies of the retainer and costs agreement between CBX2 and its solicitor and barrister, and tax invoices, remittance advices and trust account ledger entries received or issued in relation to legal services provided to CBX2, do not result in the disclosure of confidential communications. I have examined the documents produced by CBX2 to this Court. I do not think that they include any legal advice given.

15. [34]

    I propose to make an order that access to those documents be granted to NAB, but before I do so, I would like to afford CBX2’s legal representatives the opportunity to check the documents in the envelope to ascertain whether any portion of those documents pertain to client legal privilege and may need to be redacted.

16. [35]

    Costs are reserved.