Cooksley & Associates, Re [1998] QSC 72

IN THE SUPREME COURT OF QUEENSLAND Brisbane O.S. No.6773 of 1996 Before the Hon. Mr Justice Williams [re: Criminal Code (Qld) & Cooksley & Associates] IN THE MATTER of the Criminal Code (Qld) - and - IN THE MATTER of COOKSLEY & ASSOCIATES JUDGMENT - WILLIAMS J Judgment delivered 24 April, 1998 CATCHWORDS: Legal professional privilege - solicitor maintaining one file for lender and borrower - solicitor seeking to recover money from overseas for borrower - no litigation contemplated - no legal advice given as requested - allegation lender defrauded by conspiracy between solicitor and borrower - held borrower not entitled to claim privilege with respect to documents on solicitor’s file - authorities considered. Counsel: Hampson Q.C. and Musgrave for applicant. Plunkett for respondent. Solicitors: Proctor Kehoe for applicant B.T. Dunphy, Crown Solicitor, for respondent. Hearing Date: 16 April 1998 -- 1 of 11 -- IN THE SUPREME COURT OF QUEENSLAND Brisbane O.S. No. 6773 of 1996 Before the Hon. Mr Justice Williams [re: Criminal Code (Qld) & Cooksley & Associates] IN THE MATTER of the Criminal Code (Qld) - and - IN THE MATTER of COOKSLEY & ASSOCIATES JUDGMENT -WILLIAMS J. Judgment delivered 24 April 1998 Pursuant to a search warrant issued by a Magistrate, police officers took possession of a solicitor’s file, but acknowledged at the time of taking possession that a claim for professional privilege was to be made. The documents comprising the file have been at all material times since the seizure in a sealed box and have not been inspected by police officers. Pursuant to the arrangement made at the time possession was taken by the police, Cooksley & Associates (“the applicant”) has brought this application on the basis that it was the relevant client of the solicitor in question and the entity entitled to make the claim of legal professional privilege. The principal respondent is The Commissioner of the Queensland Police Service. By its terms the summons seeks the following orders: “1. That the legal file of Cooksley & Associates held by the Registrar of this Honourable Court be delivered up to Cooksley & Associates and/or their solicitors; 2. That all material contained in the legal file of Cooksley & Associates held by the Registrar of this Honourable Court is the subject of legal professional privilege.” -- 2 of 11 -- 3 Affidavits relied on by the applicant assert that in or about September 1994 it engaged C., a solicitor, to act for it with respect to the collection of certain moneys claimed to be outstanding to the applicant from the Nigerian Government. C. continued to act as solicitor for the applicant with respect to that matter until a receiver was appointed to his practice in about June 1996. The Search Warrant pursuant to which the respondent took possession of the subject file recited that there were reasonable grounds for believing that material in the file would afford evidence as to the commission of the offence that between September 1994 and July 1996 C. conspired with a member of the applicant firm to obtain money from one J M Williams by fraudulent means. Exhibited to an affidavit by the police officer who executed the search warrant is a sworn statement by J M Williams. It swears to the fact that in about mid-1994, Aluma-Lite Products Pty Ltd, of which he is the managing director, indicated to C. that it was interested in giving him some of the company’s investment business. The material before the court indicates that the applicant claimed an entitlement to some $44M from the Nigerian Government for work performed in that country. It also appears that at about the time the applicant engaged C. there were demands from Nigeria that substantial additional funds be paid to procure the release of that $44M. The material prima facie establishes that C. then approached Aluma-Lite for funds to satisfy the outstanding Nigerian demands. In essence Aluma-Lite was to lend moneys to the applicant on terms that a significant profit would be generated on repayment of the loan. C. acted for Aluma-Lite with respect to its part in the transaction; the moneys were initially paid into C.’s trust account. Between 20 September 1994 and 6 February 1996 in excess of $6.7M was advanced by Aluma-Lite in that way. None of the loan has been repaid and that is what has given rise to the police investigation. Material also indicates that C. did not keep a separate file with respect to each of the applicant and Aluma-Lite; there was only one file. It seems clear that at all times C. regarded -- 3 of 11 -- 4 Aluma-Lite as a client. The material clearly supports the inference that in his dealings with persons and entities in Nigeria C. was acting for both the applicant and Aluma-Lite. It is clear that the applicant could only repay its loan from Aluma-Lite if it received moneys from Nigeria. The letter marked ex.1 clearly confirms, in my view, the solicitor-client relationship at all material times between C. and Aluma-Lite. The documents in question have been held either by the Registrar of the Magistrates Court or the Registrar of this Court since their initial seizure. At the outset of the hearing counsel for the applicant conceded that some documents in the box could not be the subject of legal professional privilege. The police were in possession of copies of some documents on the file because C. had given such copies to Aluma-Lite, who in turn had provided them to the police. Those documents were exhibited to an affidavit and marked SRW 2. I gave a direction that solicitors for the applicant and the respondent, together with C., should have access to the box of documents so that those, the subject of the claim for legal professional privilege, could be separated out. The documents, copies of which were found in SWR 2, were placed in an envelope marked “X”. Other documents for which no privilege was claimed were placed in an envelope marked “Y”. The remaining documents, that is those the subject of a claim of privilege, were referred to as bundle “Z”. At the request of counsel for the applicant and the respondent, I inspected the documents in bundle “Z” in order to assist in determining which, if any, were the subject of legal professional privilege. In the course of his submissions senior counsel for the applicant referred more specifically to three categories of documents to be found in bundle “Z”. Firstly, there were documents passing between C. and persons or entities in Nigeria; secondly, there were letters and documents passing between C. and London solicitors who were acting on his behalf in connection with the matter; and thirdly, correspondence passing between the applicant and C. -- 4 of 11 -- 5 It was expressly conceded by senior counsel for the applicant that there was no document in bundle “Z” which contained legal advice from C. to the applicant, nor was there any document from the applicant to C. seeking legal advice. Further, there is no suggestion in the material of there being any actual or contemplated legal proceedings in the relevant sense. With respect to communications between C. and Nigeria, the argument advanced on behalf of the applicant was that C. was endeavouring to obtain the release of money from Nigeria and that was a task which a solicitor was better qualified to perform than other people. The documents coming out of Nigeria raised problems relating to the release of the moneys and frequently demanded either that further money or further steps be taken in order to secure the release. The argument is that such documents were received by C. with a view to his advising the applicant with respect to future conduct; what, if anything, further should be done to secure release of the funds. As counsel put it: “I would submit that the documents coming back from Nigeria where there is some explanation of what the present position is, is really confidential information being given to him as solicitor for the purpose of taking it to his clients and getting them to decide, after appropriate consultation with him, whether or not they will go further”. The position is really the same with respect to communications between the London solicitors and C. Initially, in broad terms, it appears that London solicitors were to hold the funds which originated from Aluma-Lite as part of the bargaining process with Nigeria. At all times it would appear that the London solicitors were merely acting as C.’s agents and were endeavouring to protect the interests of both the applicant and Aluma-Lite. What is significant, in my view, is that there was no suggestion of any advice being given by those London solicitors. It was simply as if the London solicitors constituted a branch office of C.’s practice. The applicant is in possession of copies of all documents in bundles “X”, “Y” and “Z”. That enabled Berni Ford to swear his affidavit of 16 April 1998 which refers in detail to -- 5 of 11 -- 6 documents therein. But despite having access to all of the documents senior counsel for the applicant was unable to identify any particular letter passing between the applicant and C. as illustrative of correspondence which would be privileged. On my perusal of documents in bundle “Z” the correspondence emanating from C. addressed to the applicant primarily passes on information received from Nigeria. Some documents emanating from the applicant and addressed to C. give “instructions” as to what should be done in a particular situation. Whilst in a sense those documents are confidential they relate purely to a commercial transaction (the recovery of money from Nigeria) and in no way raise the question of giving or receiving legal advice or contemplated litigation. The scope of legal professional privilege has been considered by the High Court in a number of authorities: Grant v. Downs (1976) 135 CLR 675, O’Reilly v. State Bank of Victoria (1983) 153 CLR 1, Baker v. Campbell (1983) 153 CLR 52, Attorney-General for the Northern Territory v. Maurice (1986) 161 CLR 475, Waterford v. The Commonwealth (1987) 163 CLR 55, and Commissioner of Australian Federal Police v. Propend Finance Pty Limited (1997) 188 CLR 501. It is a matter of applying the principles derived from those authorities to the facts of this case. In Grant v. Downs Stephen, Mason and Murphy JJ said at 688: “All that we have said so far indicates that unless the law confines legal professional privilege to those documents which are brought into existence for the sole purpose of submission to legal advisors for advices or for use in legal proceedings the privilege will travel beyond the underlying rationale to which it is intended to give expression and will confer an advantage and immunity on a corporation which is not enjoyed by the ordinary individual. It is not right that the privilege can attach to documents which, quite apart from the purpose of submission to a solicitor, would have been brought into existence for other purposes in any event, and then without attracting any attendant privilege.” Dawson J in Baker v Campbell at 122-3 said: -- 6 of 11 -- 7 “ . . . there is no privilege for documents which are the means of carrying out, or are evidence of, transactions which are not themselves the giving or receiving of advice or part of the conduct of actual or anticipated litigation.” To similar effect is the observation of Mason J in O’Reilly at 23 that “there is real doubt whether all the documents involve confidential communications between solicitor and client or whether instead they are documents which merely evidence various transactions.” (see also per Murphy J. in Baker v. Campbell at 86). Senior counsel for the applicant in his submissions referred to the decision of Lockhart J in Trade Practices Commission v. Sterling (1979) 36 FLR 244. Based thereon he submitted that the sole purpose test derived from Grant v. Downs was relevant only to cases of legal professional privilege where the communication was to be used in litigation; he relied on the observation by Lockhart J at 248 that “Grant’s case has nothing to say as to the other well established categories of legal professional privilege.” In my view where the legal professional privilege is claimed with respect to a document, the High Court authorities referred to above establish that the privilege can only be claimed where the document came into existence for the sole purpose of obtaining legal advice or for use in legal proceedings. The court in Grant v. Downs did not, it is true, direct its mind to the various ways in which a document could come into existence with that sole purpose in mind. For that reason the seven categories of documents designated (a) to (g) in the judgment of Lockhart J at 245-6 are relevant. What is of critical importance, in my view, is that in each of those categories there is the qualifying feature that the document must be related to the obtaining or giving of legal advice or for use in legal proceedings. It follows that not every document in the possession of a solicitor on behalf of a client can be made the subject of a claim for legal professional privilege. That is also clearly established by the reasoning in Allen Allen & Hemsley v. Deputy Commissioner of Taxation (1989) 20 FCR -- 7 of 11 -- 8 576 and Packer v. Deputy Commissioner of Taxation [1985]1 Qd.R.275. As McPherson J pointed out in the latter case at 287: “it is only if the relevant communication was made in the context of the professional relationship of solicitor and client that any privilege attaches to it, or to any record of it. The fact that, for example, a solicitor accepts instructions to buy groceries for his client and to pay for them out of funds in trust, would seldom if ever be capable of attracting privilege to the communications involved in that transaction.” Here C. was acting in a commercial transaction on behalf of two clients. The vast majority of the documents in bundle “Z” came into existence in consequence of his attempts to bring that commercial transaction to a satisfactory end so far as his clients were concerned. In my view none of the documents passing between C. and Nigeria or C. and the London solicitors came into existence either with a view to C. giving legal advice to the applicant or with a view to being used in any contemplated litigation. Further, the documents being correspondence from C. to the applicant contained in bundle “Z” were not brought into existence for the purpose of giving legal advice to the applicant. They were prepared and sent primarily to keep the applicant informed of the current factual position; that is to let the applicant know what, if anything, C. had been doing in an endeavour to obtain the funds. Documents being correspondence passing from the applicant to C. fall into the same category. That conclusion also applies to documents giving instructions as to the disposal of the moneys when recovered. The respondent also argued that it would be contrary to the public interest to uphold the claim of privilege made by the applicant. It has generally been recognized that a claim for privilege will not be allowed where there is prima facie evidence of illegal conduct evidenced by the communications in question. In Propend Brennan CJ said at 514:- -- 8 of 11 -- 9 “In determining whether a claim of legal professional privilege be upheld, it is open to the party resisting the claim to show reasonable grounds for believing that the communication effected by the document for which legal professional privilege is claimed was made for some illegal or improper purpose, that is, some purpose that is contrary to the public interest. 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’ and 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 include the furthering of the commission of an offence.” The exception to the claim for privilege was discussed at some length by Gibbs CJ in Attorney-General (N.T.) v. Kearney (1985) 158 CLR 500 at 514-6. (See also per Dawson J at 527-9). Observations to similar effect are to be found in Baker v. Campbell. (See, for example, per Murphy J at 86). In this case the search warrant was based upon a complaint alleging, as previously noted, that between 1 September 1994 and 1 July 1996 C. and Mitchell, a director of the applicant, conspired to obtain money from J M Williams by fraudulent means. That complaint was, and is, based at least in part on the allegation that documents furnished by C. to Aluma-Lite under cover of a letter dated 7 June 1996, and purporting to confirm that substantial funds advanced by Aluma-Lite were secure, were forgeries. That allegation is deposed to in sworn statutory declarations by R J Dark from Metway Bank and A B Butterworth from the National Australia Bank Limited. Those statutory declarations are exhibited to the affidavit of Wild. The documents furnished with the letter of 7 June 1996 prima facie indicated that the National Bank -- 9 of 11 -- 10 held on deposit funds amounting to US$840,000.00 and $4.2M, and that Metway Bank provided guarantees to the value of US$440,000 and US$660,000. Approximately a week later, on or about 13 June 1996, C. informed Aluma-Lite and J M Williams that “all the money was gone”. Particularly given the matters just referred to there is in my view sufficient to establish a prima facie case that the funds advanced by Aluma-Lite were dealt with fraudulently, that is contrary to instructions C. received from the lender. The material is also sufficient to establish a prima facie case that the applicant, or at least some persons associated therewith, were actively involved in that fraud. In all those circumstances it is in the public interest that documents in question, even those which otherwise might attract legal professional privilege, should be examined to establish whether they evidence the conspiracy alleged in the information founding the search warrant. To date I have not relied on the fact that the file in question was more than a file created and kept by C. with respect to the affairs of the applicant. As previously noted, Aluma-Lite and/or J M Williams were also clients of the solicitor and their affairs were the subject matter of material on the file. It has been conceded that at least some documents on the file, bundle “X”, related to the affairs of Aluma-Lite and/or Williams so that privilege could not be claimed by the applicant with respect to them. So much is conceded by the applicant, but the applicant is not the appropriate person or entity to determine where the line should be drawn. The solicitor, and the solicitor alone, is in circumstances such as exist here the only person who could ultimately say whether in creating a particular document he was acting for one or other or both of his relevant clients. I am not prepared in the circumstances to base my decision solely on the basis that Aluma- Lite had such an interest in the file that the applicant could not maintain a claim for legal professional privilege with respect to any document on it. But equally when one is considering -- 10 of 11 -- 11 the extent to which a valid claim of legal professional privilege has been made out with respect to any particular document on the file, and whether or not the exception based on illegality applies, one cannot ignore as an additional relevant circumstance the fact that the file contains documents material to the situation of Aluma-Lite in circumstances where, at least prima facie, there is evidence of fraudulent disposition of its funds by its solicitor. In the circumstances I would therefore make a declaration that none of the seized documents being exhibit “A” (and broken into bundles “X”, “Y” and “Z”) is the subject of a valid claim of legal professional privilege on the part of the applicant. The consequence of that will be that those documents should be returned to the police officers who seized them. Prior to the hearing there was some suggestion from the applicant that some of the documents were not the subject of a claim of legal professional privilege and, as previously indicated, at the outset of the hearing bundles “X” and “Y” were separated out and placed in that category. Counsel for the applicants submitted that the respondent was unreasonable in not agreeing to that course prior to the outset of the hearing and that in consequence, even though unsuccessful, some costs order should be made in favour of the applicant. The hearing was in no way prolonged by the fact that those documents were only separated out at a late stage, and in any event it was necessary to refer to some of them in order to determine the disputed issue. In the circumstances the respondent has been successful and has not prolonged the hearing. The applicant should pay the respondent’s costs of and incidental to the application. My orders will therefore be: 1. Declare that none of the seized documents is the subject of a valid claim of legal professional privilege on the part of the applicant. 2. Order that the applicant pay the respondent’s taxed costs of and incidental to the application, including reserved costs. -- 11 of 11 --