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Deppro Pty Ltd v Hannah[2008] QSC 193

Reported at [2009] 1 Qd R 1

Deppro Pty Ltd v Hannah[2008] QSC 193

Reported at [2009] 1 Qd R 1

 

 

SUPREME COURT OF QUEENSLAND

 

PARTIES:

FILE NO/S:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

DELIVERED ON:

1 September 2008

DELIVERED AT:

Brisbane 

HEARING DATE:

6 August 2008

JUDGE:

Daubney J

ORDER:

  1. I declare that the Notice of Non Party Disclosure issued on 23 June 2008 to the respondent, Eagar & Buck Patent Attorneys, be taken to be effectual
  2. I order that the respondent produce to the applicants within seven days of today the documents over which the respondent has otherwise claimed privilege pursuant to s 200(2) of the Patents Act 1990 (Cth)
  3. I further order that the applicants pay the respondent’s costs of and incidental to this application (including any reserved costs)

CATCHWORDS:

PROCEDURE – DISCOVERY AND INTERROGATORIES – DISCOVERY AND INSPECTION OF DOCUMENTS – PRODUCTION AND INSPECTION – Grounds for resisting production – Legal professional privilege – particular cases – where Notice of Non Party Disclosure given under Uniform Civil Procedure Rules 1999 (UCPR) r 242 – where respondents claim privilege under s 200(2) of Patents Act 1990 (Cth) – where applicants allege communications with the respondent  were for the purpose of furthering an improper purpose – whether the documents over which the respondent claimed privilege should be disclosed

PROCEDURE – DISCOVERY AND INTERROGATORIES – DISCOVERY AND INSPECTION OF DOCUMENTS – PRODUCTION AND INSPECTION – Documents in possession of person not a party – where documents sought pursuant to Notice of Non Party Disclosure under UCPR r 242 – where Notice referred to numbered paragraphs and enclosed copies of the pleadings – whether notice complied with UCPR r 243

Patents Act 1990 (Cth)

Uniform Civil Procedure Rules 1999 (Qld)

AWB Limited v Cole (No 5) (2006) 155 FCR 30

Commissioner of Australian Federal Police v Propend

Finance Pty Ltd (1997) 188 CLR 501

Exequatur Pty Ltd v Advanced Components & Peripherals Pty Ltd [1999] VSC 547

Leighton Contractors Pty Ltd v Western Metal Resources Ltd [2000] QSC 27

Wundowie Foundry Pty Ltd v Milson (1993) 44 FCR 474

SOLICITORS:

Tucker & Cowen for the applicants

RJ Winter & Associates for the respondents

[1] This application concerns a Notice of Non Party Disclosure (‘the Notice’), under Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”) rule 242, issued on 23 June 2008 and served by the cross-claimants  in the proceeding (‘the applicants’) on Eagar & Buck Patent Attorneys (‘the respondent’). 

[2] The Notice relevantly stated:

 

‘Between 7 and 14 days after the day of service of this notice on you, you must (for the purpose of the court determining this proceeding) produce the documents mentioned or described in the Schedule to the Plaintiffs and Cross Claimants (in this notice called “the requesting party”) in accordance with this notice.

 

The allegations in the pleadings to which the documents are relevant are as follows:

 

1.The matters pleaded at paragraphs 16 to 21 of the Defendants’ and Cross Claimants’ Further Amended Defence and Counterclaim filed on 17 March 2008 (a copy of which is served with this Notice and marked “A”):

 

2.The matters pleaded at paragraphs 14 to 18 of the Cross-Defendant’s Amended Defence filed on 9 April 2008 (a copy of which is served with this Notice and marked “B”):

 

Schedule of documents

 

The following documents must be produced –

 

No.

Date

Description

1.

Various

In relation to patent application no. 2005204219 lodged on behalf of the Second Plaintiff and Mr Alvin Teo, any instructions provided to the nominated party, any advice provided by the nominated party to the inventors, and correspondence, memoranda, notes or other documents relevant to the allegations in dispute.

2.

Various

In relation to patent application no. 2004105444 lodged on behalf of Urban Consulting Pty Ltd, any instructions provided to the nominated party, any advice provided by the nominated party to the inventors, and correspondence, memoranda, notes or other documents relevant to the allegations in dispute.

3.

Various

Any and all correspondence passing between the nominated party and Urban Consulting Pty Ltd, or the nominated party and Mr Alvin Teo, or between the nominated party and Mr Paul Bennion, relevant to the allegations in dispute in this proceeding.

4.

Various

Any instructions provided by Mr Paul Bennion, or Mr Alvin Teo, or Urban Consulting Pty Ltd, to the nominated party as to the business of Urban Consulting Pty Ltd.

[3] The Notice was served on the respondent on 26 June 2008. On 2 July 2008 the respondent sent a letter to the applicants’ solicitors, saying:

 

‘We have considered the “Schedule of Documents” on page 3 of the Notice.  Unfortunately, based on the description of the documents to be produced, it is difficult for us to determine which material is “relevant to the allegations in dispute” as far as items 1 to 3 are concerned.

 

Furthermore, as far as item 4 is concerned, it is not clear to us what is meant by “instructions ... as to the business of Urban Consulting Pty Ltd”.

 

Accordingly, we object to production based on Rule 245(4)(c) of the Uniform Civil Procedure Rules.

 

Section 200(2) of the Patents Act 1990 sets out that:  “A communication between a registered patent attorney and the attorney’s client in intellectual property matters, and any record or document made for the purposes of such a communication, are privileged to the same extent as a communication between a solicitor and his or her client.

 

We submit that all communications and related records or documents between ourselves and our client were in connection with intellectual property matters.  You will therefore appreciate that it is our understanding that we are not obliged to produce the documents described in the Notice of Non-Party Disclosure.

 

Accordingly, we object to production based on privilege as set out in Rule 245(4)(c) of the Uniform Civil Procedure Rules.’

[4] By rule 246, service of this objection operated as a stay of the Notice.

[5] The applicants then filed an application under rule 247(1) for the Court to make a decision about the respondent’s objection.  I note in passing that subrules 247(2), (3) and (4) provide:

 

‘(2)The court may make any order it considers appropriate including, but not limited to an order –

 

(a)lifting the stay;  or

 

(b)varying the notice of non-party disclosure;  or

 

(c)setting aside the notice.

 

(3)Unless the court otherwise orders, each party to an application to decide an objection must bear the party’s own costs of the application.

 

(4)The court may make an order for subrule (3) if, having regard to the following, the court considers that the circumstances justify it –

 

(a)the merit of the objector’s objections;

 

(b)the public interest in the efficient and informed conduct of litigation;

 

(c)the public interest in not discouraging objections in good faith by those not a party to the litigation.’

[6] On 18 July 2008, the respondent provided some disclosure to the applicants of documents which the respondent believed it was able to provide in accordance with the obligations of privilege conferred on the respondent by s 200 of the Patents Act 1990 (Cth) (discussed below).

[7] On 21 July 2008, which was the first return date of the application, orders were made by consent which required the respondent to deliver an affidavit listing the contents of its files and identifying the documents over which privilege was claimed.  In satisfaction of that order, an affidavit of one of the respondent’s principals, Mr Barry Eagar, was sworn and served on the applicant on 28 July 2008.  Exhibited to this affidavit was a list which identified and indexed the contents of the respondent’s files ‘in relation to Mr Paul Ronald Bennion, Mr Alvin Teo and Urban Consulting Pty Ltd’.  (As will be discussed below, Mr Bennion is the cross-defendant to the applicants’ counter-claim in the proceeding, Urban Consulting Pty Ltd (‘Urban Consulting’) is a company established by Bennion, and Mr Teo is the present director of Urban Consulting.)

[8] Mr Eagar’s exhibited list also identified the documents in respect of which privilege was claimed and those which had already been provided to the applicants’ solicitors. 

[9] The principal issue argued before me was whether the respondent’s claim for privilege was displaced by the so-called ‘fraud exception’.

[10] The form, and degree of particularity, of the Notice was also the subject of some debate.

The cross-claim

[11] At the risk of over-simplification, the backdrop to the present application may be painted in a few broad brush strokes.  The applicants together and the defendant to the cross-claim, Mr Bennion, were 50/50 shareholders in Deppro Pty Ltd (formerly known as Valuers International Pty Ltd) (‘Deppro’) between 24 October 2001 and 22 October 2004.  (For convenience, I will simply refer to Deppro.)  Deppro had been established by the applicants for conducting a business of providing expert commercial property and plant valuations, primarily for tax depreciation purposes.  It is alleged by the applicants (and disputed by Mr Bennion), in effect, that in return for his 50 per cent shareholding, Mr Bennion would transfer to Deppro all of his rights in a spreadsheet program he had developed for use in calculating tax depreciation in the residential property market.  The applicants contend that, by reason of their and Bennion’s shareholding in Deppro, there was (by operation of s 140(1) of the Corporations Act) a contract between them, an implied term of which was that, in their dealings with one another as shareholders, the parties would act reasonably and honestly and in good faith.  The applicants contend that, from September 2003, and while still a shareholder in Deppro, Bennion set up Urban Consulting and, through that entity, enticed employees and customers away from Deppro and carried on business in competition.  This was done, it is alleged, without the knowledge and consent of the applicants.  In October 2004, the applicants sold their shares in Deppro to Bennion for $1,850,000.  It is alleged that the sale at this price was preceded by a series of actions by Bennion, including threats against the applicants, which effectively compelled the applicants to sell their shares at that price rather than what they contend were the true values of their interest in and outstanding entitlements from Deppro.  The difference between the sale price and the alleged true values is claimed by the applicants against Bennion as damages for breach of the implied terms of the contract between them as shareholders.

[12] One of the products used and marketed by Urban Consulting was a software program apparently utilised in connection with depreciation schedules for residential properties.  According to Urban Consulting’s website at www.taxshield.com, ‘TaxShield (patented) is your ATO compliant & recognised tax depreciation schedule’.  Not surprisingly, there is a real issue between the applicants and Bennion as to the circumstances of the creation and use of this program, given the applicants’ assertion to the effect that the consideration for Bennion receiving shares in the company was his transfer of his rights in precisely such a program to the company.

[13] The respondent patent attorneys acted in connection with the filing of patent applications in respect of this program.

The present application

[14] There was no real contest before me as to the necessity for the respondent to make non-party disclosure.  Indeed, as already noted, numerous documents had already been disclosed prior to the application being heard.

[15] The real argument was whether the respondent could withhold production of certain documents on the ground of privilege.  The members of the respondent are not legal practitioners, but s 200(2) of the Patents Act 1990 (Cth) provides:

 

‘A communication between a registered patent attorney and the attorney’s client in intellectual property matters, and any record or document made for the purposes of such a communication, are privileged to the same extent as a communication between a solicitor and his or her client.’

[16] When discussing the ambit of the protection afforded by this privilege, French J in Wundowie Foundry Pty Ltd v Milson (1993) 44 FCR 474 observed at 478:

 

‘In Australia, the privilege extends to communications passing between a patent attorney in his capacity as such and the patent attorney’s client which would be privileged if the attorney were a solicitor.  It is not limited to communications made in the course of conduct of activities under the Patents Act but covers the legitimate professional activities of a patent attorney:  Sepa Waste Water Treatment Pty Ltd v JMT Welding Pty Ltd (1986) 6 NSWLR 41 at 43 (McLelland J) approved by Gummow J in Pfizer Pty Ltd v Warner Lambert Pty Ltd (1989) 24 FCR 47 at 49-50.  Each of these decisions related to s 134(1A) of the Patents Act 1952.

 

...

 

Section 200(2) defines a class of communication and records or documents which are the subject of privilege and also the extent of that privilege.  The privilege applies to communications between patent attorney and client and any record or document made for the purpose of such a communication.  But it operates only “to the same extent as a communication between solicitor and client” (emphasis added).  This suggests that records or documents made for the purpose of a privileged communication are only privileged if directly related to that purpose.  There is a distinction to be made between records or documents which involve confidential communications between patent attorney and client and those which merely evidence various transactions:  O'Reilly v Commissioners of State Bank of Victoria (1983) 153 CLR 1 at 22 (Mason J);  Allen Allen & Hemsley v Deputy Commissioner of Taxation (1989) 20 FCR 576.

 

While design and development documents in relation to a particular invention may be confidential, it does not follow form their nature that they are brought into existence for the purpose of communication with patent attorneys.’

[17] It is accepted by the respondent, however, that the privilege which it seeks to maintain in respect of the specific documents identified in the list exhibited to Mr Eagar’s affidavit may be lost if the applicants succeed in rebutting the privilege on the basis that the otherwise privileged communication was made for some illegal or improper purpose, that is, some purpose contrary to the public interest.[1]  This is the so-called ‘fraud exception’.

[18] Young J in the Federal Court of Australia recently essayed the nature and ambit of the ‘fraud exception’.  In AWB Limited v Cole (No 5) (2006) 155 FCR 30, his Honour said at [210] – [212]:

 

‘210Communications between a lawyer and client which facilitate a crime or fraud are not protected by legal professional privilege.  This principle is often referred to as the “fraud exception” to legal professional privilege, but this does not capture its full reach:  Attorney-General (NT) v Kearney (1985) 158 CLR 500 at 515;  Propend at 546;  Clements, Dunne & Bell Pty Ltd v Commissioner of Australian Federal Police (2001) 48 ATR 650;  188 ALR 515 at [30].

 

211The principle encompasses a wide species of fraud, criminal activity or actions taken for illegal or improper purposes:  see North J’s review of the authorities in Clements at [35] – [44].  The scope of conduct caught by the principle has been articulated in a variety of ways, often without particular precision:  Propend at 545.  Classic formulations have spoken of communications in furtherance of a “crime or fraud”:  R v Cox (1884) 14 QBD 153 at 165;  a “criminal or unlawful proceeding”:  Bullivant v Attorney-General (Vic) [1901] AC 196 at 201;  “any unlawful or wicked act”:  Annesley v Anglesea (1743) 17 State Tr 1139 at 1229;  and “all forms of fraud and dishonesty such as fraudulent breach of trust, fraudulent conspiracy, trickery, and sham contrivances”:  Crescent Farm (Sidcup) Sports Ltd v Sterling Offices Ltd [1972] Ch 553 at 565.  In Kearney, the High Court applied the principle to deny legal professional privilege to legal advice obtained by the Northern Territory Government which was prima facie a “deliberate abuse of statutory power” to defeat a land claim under the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth).  In his reasons for judgment, Gibbs CJ (With whom Mason and Brennan JJ agreed) stated at 515 that “legal professional privilege will be denied to a communication which is made for the purpose of frustrating the processes of the law itself, even though no crime or fraud is contemplated”.  Some authorities have expressed the principle as applicable to prevent a “fraud on justice” in a broad sense.  The concept of a “fraud on justice” was adopted by Lander J in Gartner v Carter [2004] FCA 258 to deny protection to a communication between a lawyer and client for the purpose of the client putting assets beyond the reach of the legitimate claims of secured creditors:  at [130] and [139] – [140].

 

212The principle extends to “trickery” and “shams”.  A “sham” refers to steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences:  Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2005) 218 CLR 471;  see also Beazley v Steinhardt (1999) 106 A Crim R 21;  affirmed on appeal in Beazley v Steinhardt [1999] FCA 1255 (Beazley).  The recent case of Australian Securities and Investments Commission v Mercorella (No 3) (2006) 58 ACSR 40 provides an example of the denial of legal professional privilege to documents in furtherance of a sham transaction.  In that case, creditors of a managed investment scheme claimed privilege over documents relating to securities obtained from the defendant and certain companies in the scheme.  The transactions were allegedly entered into so as to advance those creditors’ interests over the interest of other creditors to the scheme.  Mansfield J found that the communications were prima facie in furtherance of a sham and, as such, were not privileged.  After referring to Lander J’s decision in Gartner v Carter and Barclays Bank plc v Eustice [1995] 1 WLR 1238, his Honour stated (at [95]):

 

It is a short step from those decisions to the present facts, as prima facie found.  The [creditors] engaged in the transactions reflected in the Deed, and the granting of the securities within the structures it created, to secure or advance their interests over others who had advanced money to [the first defendant] or to the Scheme.  There is a prima facie case that the “restructure” of the advances so that they appear as advances to the partnership of Ajay and Opey is a sham.’

[19] As to the case which a party seeking to rebut the privilege is required to demonstrate, Brennan CJ in Commissioner of Australian Federal Police v Propend Finance Pty Ltd[2] cast it in terms of the party showing reasonable grounds for believing that the relevant communication was made for an illegal or improper purpose, saying[3]:

 

‘I state the criterion as “reasonable grounds for believing” because (a) the test is objective and (b) it is not necessary to prove the ulterior purpose but there has to be something “to give colour to the charge”, a “prima facie case” that the communication is made for an ulterior purpose.  The purposes that deny the protection of privilege for a communication (whether documentary or oral) between a client and the client’s solicitor or counsel including the furthering of the commission of an offence.’

[20] Gaudron J in Propend[4] said that illegality is not a true exception to legal professional privilege, and it is therefore not necessary for the illegality to be positively establishing, saying:

 

‘On the other hand, a mere allegation of illegal purpose is not of itself, sufficient.  There must be “not merely an allegation ... of a fraud, but ... something to give colour to the charge”, “some prima facie evidence that it has some foundation in fact”.  The reason for this is obvious.  Persons are presumed innocent, not guilty.  And, thus, there must be evidence to raise a sufficient doubt as to a claim of privilege to cast a further evidentiary onus on the person making the claim to show that, in truth, the privilege attaches.’  (references omitted)

[21] In AWB Limited v Cole (No 5), Young J said at [217] – [219]:

 

‘217For the principle to apply, there must be more than a mere assertion or allegation of fraud or impropriety:  Bullivant at 201, 203 and 204-205.  In Propend at 514, Brennan CJ expressed the test as being one of “reasonable grounds for believing” that the relevant communication was for an improper purpose.  The requirement has also been described as one of a “prima facie case”:  Butler v Board of Trade [1971] Ch 680 at 689;  cf Baker v Evans (1987) 77 ALR 565 at 574.  In Kearney at 516, Gibbs CJ approved the test formulated in O'Rourke v Darbishire [1920] AC 581 at 604, namely that “there must be something to give colour to the charge”;  “the statement must be made in clear and definite terms, and there must further be some prima facie evidence that it has some foundation in fact”.  The High Court in Propend applied this test:  at 514 per Brennan CJ, 521 per Dawson J, 534 per Toohey J, 546 per Gaudron J, 556 per McHugh J, and 592 per Kirby J.

 

218It is not necessary to prove an improper purpose on the balance of probabilities.  The “prima facie” test arguably reflects the fact that issues of legal professional privilege are usually dealt with in the interlocutory stages of a proceeding, but the authorities have not departed from that formulation where a declaration is sought in relation to privilege issues:  ButlerPropendBeazley.  It must also be established, on the same prima facie basis, that the communication which is the subject of the claim for privilege was made in furtherance of, or as a step preparatory to, the commission of the fraud or wrongdoing.  In Butler, Goff J found at 687 that a letter written by the plaintiff’s lawyer which volunteered a warning that the plaintiff may incur serious consequences if he did not take care was now shown to be “in preparation for or in furtherance of or as part of any criminal designs on the part of the plaintiff”:  see also Zemanek v Commonwealth Bank of Australia (unreported, Federal Court, Hill J, 2 October 1997).

 

219In Propend, the High Court considered whether a charge of improper purpose must be based on evidence that is admissible in the proceeding.  The only evidence of alleged illegality before the trial judge in Propend was the sworn information which supported the issue of a search warrant for the relevant documents.  The Court held that, while the sworn information was admissible to establish the basis upon which the warrant was issued, it was not admissible to show that the copy documents were not privileged:  see at 514 per Brennan CJ, 557 per McHugh J, 576 per Gummow J, 547 per Gaudron J, and 593 per Kirby J.’

[22] In the present case, the applicants’ charge is, in effect, that Bennion improperly, in breach of his implied shareholder’s contractual obligations of reasonableness, honesty, and good faith to the applicants, engaged in a course of conduct which led to the applicants suffering loss by selling their shares for less than their actual value.  It was argued that the material raises a sufficient prima facie case for present purposes so as to form a reasonable basis for believing that communications with the patent attorneys were for the purpose of furthering this improper purpose.

[23] The applicants’ solicitor carefully took me through a litany of facts admitted in the cross-claim between the applicants and Bennion, documents which have already been produced in the course of disclosure, and also matters which are the subject of allegation on the pleadings but not strictly proved before me.  The purpose of this was not merely to give the necessary colour to the charge against Bennion but, importantly, to seek to persuade me that there were reasonable grounds for believing that the communications with the respondent patent attorneys were infected by that charge.

[24] The matters which seem most germane to me in that regard are set out in the following chronology:

 

    Date                             Event

 

02.09.2003Bennion causes Urban Consulting to be incorporated

 

04.05.2004Bennion resigns from Deppro

 

04.05.2004Bennion’s solicitor advises him that ‘should make full disclosure of [his] intention to enter into any new business which may be likely to compete, even in party, with Deppro before putting any new business on foot’.

 

19.05.2004Bennion offers his 50 per cent interest in Deppro to a third party for $2,000,000.

 

14.06.2004Bennion emails his solicitors from an Urban Consulting email address advising, inter alia, that he is aiming to have his new website completed by the following Wednesday morning and asking for the names of ‘a couple of patent solicitors’.

 

18.06.2004This is the date of the first document in the respondents’ file.

 

17.07.2004Bennion establishes the internet domain name ‘www.urbanconsulting.com.au’ and the internet domain name ‘www.taxupdate.com.au’.

 

19.08.2004A software engineer on behalf of Urban Consulting sends a document (over which privilege is claimed) to the respondent.

 

24.08.2004Bennion offers to purchase the applicants’ 50 per cent stake in Deppro for $1,900,000 (indicating that he may pay a higher price, subject to due diligence).

 

31.08.2004Bennion offers to purchase the applicants’ 50 per cent stake in Deppro for $2,000,000.

 

14.09.2004Email correspondence exchanged between Urban Consulting and the respondent patent attorneys, with flow charts, screen shots and other documents (over all of which privilege is claimed).

 

20.09.2004Urban Consulting instructs the patent attorneys to file a patent application.

 

21.09.2004Bennion offers to purchase the applicants’ 50 per cent stake in Deppro for $1.7 million, on the further condition that no further dividends would be paid or profits of the business distributed pending settlement.

 

22.09.2004The respondents lodge, on behalf of Bennion and Mr Teo, patent application no 2004905444 relating to ‘determining transaction values’, and in particular determining rates of depreciation able to be claimed by an owner of residential real estate.

 

23.09.2004Bennion offers to purchase the applicants’ 50 per cent in Deppro for $1,850,000 on the further condition that no further dividends be paid or profits of the business distributed.

 

23.09.2004Bennion corresponds with his solicitors concerning a letter drafted by his solicitors in relation to the offer made to the applicants.  Bennion says to his solicitors ‘I just realised that the letter does not disclose any details about the Urban Consulting business.  As shareholder and director of Deppro do I have any duty of disclosure to [the male applicant] or can we just not mention it??’

 

05.10.2004Bennion writes to his solicitors, saying:

 

‘Just to recap, when I resigned from Deppro as an employee, and offered my shares for sale, I started up a company with Alvin Teo.  Between May and now we have developed an on-line DIY form of producing depreciation schedules.  It is due to go on-line in a couple of weeks.  At the moment we only have an advertising banner on the website.

 

These services will complement the Deppro service, however [the male applicant] would certainly see it as a direct competitor if he was to stay on at Deppro.’

 

20.10.2004The applicants and Bennion execute a share sale agreement at the price of $1,850,000.

[25] I have included in this catalogue only matters which are either admitted by Bennion on the pleadings or for which there is documentary support.  I have not included numerous matters also sought to be relied on by the applicants, which appear as allegations in the applicants’ case against Bennion but which are in issue and for which no evidence was adduced.

[26] There was also evidence before me of the advertising by Urban Consulting on its website of the ‘TaxShield’ program in the terms to which I have referred above.  Also before me was a deed of assignment dated 18 August 2005 which evidenced the transfer by Mr Bennion and Mr Teo to Urban Consulting of all of Bennion and Teo’s interests in the invention described in Provisional Patent Application No 2004905444 (this being the invention which was the subject of the relevant instructions to the respondent patent attorneys).

[27] The solicitor for the respondents submitted that I would not be satisfied to the requisite degree either of the charge of Bennion’s improper purpose or that the respondents’ otherwise privileged communications with its client (said to be Urban Consulting) was thereby tainted.  It was argued, relying on the judgment of Warren J (as she then was) in Exequatur Pty Ltd v Advanced Components & Peripherals Pty Ltd [1999] VSC 547, that the present application is ‘presented simply on the basis of suspicion and assertion’.  With respect, I disagree.  The Exequatur case was quite different to the present.  In that case, as her Honour observed at [24], the applicant plaintiffs, in particular by their solicitor’s affidavit, only went ‘so far as to express suspicion, assertion, and assumption’.

[28] It seems to me, for the purposes only of the present application, that the applicants, by reference not merely to suspicions and assertions but to admitted facts and documentary evidence, have given the necessary colour to the charges they make against Bennion.  The admitted establishment of the Urban Consulting business, the retainer of the patent attorneys, the making of the offer by Bennion on 31 August 2004, the coincidence of the dates on which Urban Consulting instructed the patent attorneys to file the patent application, on which Bennion made a significantly lower offer to the applicants, and the patent attorneys actually lodging the application (20, 21 and 22 September respectively), followed then on 23 September by Bennion making a further offer for the applicants’ shares and also, on that same day in correspondence with his solicitor concerning a draft of a letter to the applicants’ then solicitors about the offer to purchase the applicants’ shares, noting that the letter ‘does not disclose any details about the Urban Consulting business’ and asking ‘as shareholder and director of Deppro do I have any duty to disclose to [the male applicant] or can we just not mention it’ (from which the reasonable inference is that it had not been previously mentioned) all combine to satisfy me, for present purposes, that the material discloses reasonable grounds for believing that the communications with the patent attorney were to assist Bennion to further an improper purpose, namely conduct in breach of his contractual obligations of honesty and good faith with the applicants.  Notwithstanding that Urban Consulting is contended by the patent attorneys to be entitled to the benefit of the privilege, it is clear on the material that Bennion was personally involved with the respondent at the relevant time.  So much is clear, indeed, from the fact that the patent was applied for in his name and Mr Teo’s name and was subsequently assigned to Urban Consulting.

[29] Accordingly, I would overrule the respondents’ objection to production based on the privilege conferred by s 200(2) of the Patents Act, and order that the respondents produce the documents over which the respondent has otherwise claimed privilege within seven days.

Form of the notice

[30] By the time the matter came on for hearing before me, the parties had sufficiently identified as between themselves the disputed documents and the issues to which it was said those documents are relevant.

[31] I was told in the course of argument, however, that it has become relatively commonplace for notices of non-party disclosure to assert, as the notice in this case did, that the documents sought are relevant to allegations in the pleadings simply by referring to numbered paragraphs in the pleadings and serving copies of those pleadings with the notice on the non-party.

[32] It seems to me that such a practice does not comply either with the letter of the Uniform Civil Procedure Rules nor the approach I would consider appropriate when dealing with third parties to litigation.

[33] Rule 243(1)(b) relevantly provides that a notice of non-party disclosure must ‘state the allegation in issue in the pleadings about which the document sought is directly relevant’.  This rule is mandatory in its terms.  It specifically requires the notice to state the relevant ‘allegation in issue in the pleadings’.  That necessarily calls for the party issuing the notice to distil from the pleadings, and articulate in the form of a statement, the ‘allegation in issue’ about which it is said the document held by the third party is directly relevant.  This requires something more than the issuing party simply referring the recipient to paragraphs in the pleadings.  A non-party, on whom a notice of non-party disclosure is served, should not be put in the position of having to interpret pleadings in an attempt to divine the allegations which the issuing party contends are at issue and about which the non-party’s documents are supposed to be directly relevant.  As Mackenzie J said in Leighton Contractors Pty Ltd v Western Metal Resources Ltd [2000] QSC 27 at [10]:

 

‘The provision relating to the contents of the notice requires an applicant to restrict the ambit of disclosure to documents directly related to allegations in issue in the pleadings and thereby relieves the non-party of the oppressive need to make a judgment as to which of his documents may relate to an issue in the pleadings.’

[34] Similarly, in my view, a non-party should not have cast on it the burden of having to discern for itself the allegations in issue on the pleadings.  In a case in which the pleadings have any degree of complexity, a non-party may prudently have to retain the services of a lawyer to interpret and advise on the pleadings to enable the non-party to understand what allegations are in issue for the purpose of complying with a notice.  That consequence would be obviated if the issuing party did what the rules require, and state expressly what are the allegations in issue to which the non-party’s documents are said to be relevant.

[35] The form of the notice issued by the applicants in this case did not comply with Rule 243(1)(b).  Given, however, that the parties, by the time of the final hearing, were apprised of the relevant issues, and the principal objection relating to the respondent’s privilege was able to be argued fully before me, there is no point in having the applicants issue a fresh, fully-compliant notice. Accordingly, I would declare the Notice effectual pursuant to Rule 371(1)(d).

Costs

[36] The primary position under Rule 247 is that each party to an application such as this should bear its own costs.  The applicants and the respondent, however, have each applied for an order for their costs. 

[37] Despite the fact that I have overruled the respondents’ objection to production, I am firmly of the view that, in the circumstances of this particular case, the applicants should pay the respondents’ costs of and incidental to this application.  This is for the following reasons:

 

(a)The raising of the objection to production on the grounds of privilege was neither misconceived nor obdurate.  On the contrary, it was quite proper for the respondent to claim privilege.  It was then for the applicants to persuade the Court of the applicability of the ‘fraud exception’ for the purposes of rebutting the claim of privilege.  Nor do I regard the manner in which the respondent resisted the application in argument before me, or the matters relied on to resist the application, as completely untenable or unreasonable.  The fact that the applicants were effectively required to bring this application to overcome the respondent’s lawful claim of privilege also tends to support the notion that the applicants should bear the cost incurred by the respondent in relation to the application.

 

(b)Whilst I am, in the circumstances of the present case, prepared effectively to waive the applicants’ non-compliance with the formal requirements of Rule 243(1)(b), it is apparent to me, on a review of the correspondence which passed between the parties’ solicitors after the notice was served, that the respondent’s objections, initially at least, were properly founded in the applicants’ non-compliance.  It is to the parties’ credit that they were able to distil the issues for argument in the hearing before me, but the point nevertheless remains that the applicants’ Notice was, in my opinion, defective in form, and survives only because of my making a declaration in relation to its effect pursuant to Rule 371(2)(b).

[38] Accordingly:

 

(a)I declare that the Notice of Non Party Disclosure issued on 23 June 2008 to the respondent, Eagar & Buck Patent Attorneys, be taken to be effectual.

 

(b)I order that the respondent produce to the applicants within seven days of today the documents over which the respondent has otherwise claimed privilege pursuant to s 200(2) of the Patents Act 1990 (Cth).

 

(c)I further order that the applicants pay the respondent’s costs of and incidental to this application (including any reserved costs).

Footnotes

[1] Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1996-1997) 188 CLR 501, per Brennan CJ at 514.

[2] (1997) 188 CLR 501

[3] At 514, and omitting references.

[4] At 546.

Close

Editorial Notes

  • Published Case Name:

    Deppro Pty Ltd & Ors v Hannah & Ors

  • Shortened Case Name:

    Deppro Pty Ltd v Hannah

  • Reported Citation:

    [2009] 1 Qd R 1

  • MNC:

    [2008] QSC 193

  • Court:

    QSC

  • Judge(s):

    Daubney J

  • Date:

    01 Sep 2008

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2009] 1 Qd R 101 Sep 2008-

Appeal Status

No Status

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