Decisions published in Arnold Bloch Leibler class actions

Both decisions arise from the class action against Arnold Bloch Leibler on behalf of persons who acquired shares in Slate & Gordon Ltd during 2015. Court holds production of Legal Opinion Letter did not constitute associated material waiver.

As noted above, Hall also argued that SGH’s production of the Legal Opinion Letter constituted associated material waiver of all materials associated with ABL’s work that was the subject of the Legal Opinion Letter and the documents cited in it. His Honour did not agree, holding that no associated material waiver had occurred. His Honour reached this position because, according to his Honour, the Legal Opinion Letter itself was not initially confidential and privileged (Hall decision, [51]) and as such its production could not give rise to an associated waiver. His Honour further held that even if the Legal Opinion Letter were privileged, any associated waiver would only extend to DDC documents, and not the documents sought by Hall (Hall decision, [52]).

These two decisions (published contemporaneously) arise from the class action against Arnold Bloch Leibler (ABL) on behalf of persons who acquired shares in Slater & Gordon Ltd (SGH) between 30 March 2015 and 25 November 2015 (ABL Class Action).

A previous class action against SGH (SGH Class Action) was settled in 2017 (Hall v Slater & Gordon Ltd [2018] FCA 2071), which shares the same factual substratum as the ABL Class Action. Before discussing the two decisions, it is necessary to set out the background to the ABL Class Action.

On 30 March 2015, SGH announced to the ASX that it was acquiring the Professional Services Division (PSD) of Quindell plc (PSD Acquisition) and would be offering existing SGH shareholders the opportunity to participate in a rights offering to fund the PSD Acquisition (Entitlement Offer). As the Entitlement Offer was to be made without a prospectus, a due diligence committee (DDC) was set up to ensure that the “Offer Documents” (being the materials published to the ASX announcing the PSD Acquisition), were accurate. ABL had, in effect, two roles in the lead up to the announcement of the PSD Acquisition – the firm acted as SGH’s legal adviser in relation to the acquisition and was a member of the DDC (in which capacity it provided a Due Diligence Report and Legal Opinion Letter to SGH’s Board regarding the accuracy of the Offer Documents, which ABL had said it had verified). Section 11 of the Due Diligence Planning Memorandum (DDPM) required ABL to retain “a file” of documents relating to the due diligence process to allow DDC members to defend any actual or potential claim in connection with the Offer Documents or Entitlement Offer. During the course of the SGH Class Action, SGH produced copies of board reports and due diligence materials (including versions of the DDPM, Due Diligence Report and Legal Opinion Letter) to the applicant (Produced Documents). As part of the settlement of the SGH Class Action, the Court made orders releasing the applicant from the Harman obligation, allowing him to use the Produced Documents in future proceedings (Harman Release Orders), which were a condition precedent to the settlement and which were consented to by SGH. The settlement was structured to release SGH from all future claims but allowed the applicant to bring apportionable ‘permitted claims’ against third parties (such as ABL).

The ABL Class Action alleges that the Offer Documents were not accurate and were misleading, because they omitted to disclose that the PSD was exposed to a significant regulatory risk. It is alleged that this risk was explicitly noted in a due diligence report made available to SGH and the DDC. It is alleged that ABL was both negligent and engaged in misleading or deceptive conduct in respect of its role on the DDC. The Produced Documents are extensively relied upon in the pleadings in the ABL Class Action.

In its proceeding against SGH, ABL sought a declaration from the Court that it be released from its obligations of confidence owed to SGH as a former client in respect of the documents in certain legal files held by ABL regarding the Entitlement Offer, the PSD Acquisition and the DDC and due diligence process. ABL sought such a release to allow it to defend the ABL Class Action. SGH objected, claiming that the material was subject to legal professional privilege. In response, ABL claimed SGH had impliedly waived privilege and that section 11 of the DDPM permitted the use of the documents as “files” for the purpose of defending the ABL Class Action. In the ABL Class Action, ABL produced a list of documents to be discovered, a subset of which SGH claimed legal professional privilege over. Hall claimed, in addition to implied waiver (as argued by ABL), that the production of the Legal Opinion Letter by SGH constituted associated material waiver of any privilege attached to those documents.

Implied Waiver

It was argued that the following conduct by SGH in the SGH Class Action gave rise to implied waiver:

  • the discovery of the Produced Documents;
  • settling the SGH Class Action on the basis of the Harman Release Orders being a condition precedent to the settlement; and
  • consenting to the making of the Harman Release Orders.

In the ABL decision ([2020] FCA 1496), Middleton J discussed the distinction between material over which a duty of confidence is asserted and material over which legal professional privilege is asserted (of which confidentiality is a necessary pre-requisite). Regarding the protection of confidential information not subject to a claim of legal professional privilege, his Honour noted that a balance is to be made between the legitimate interests of the party seeking to maintain the confidence of the information and the legitimate interests of the party seeking to make use of the confidential information (ABL decision, [55]). In contrast, his Honour noted that the test for implied waiver over material over which legal professional privilege is claimed is different. His Honour noted that, per the High Court’s decision in Mann v Carnell (1999) 201 CLR 1; [1999] HCA 66 at [29] where the High Court stated that “[w]hat brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large”. His Honour also cited the High Court’s decision in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303; [2013] HCA 46 at [30] where it was held that the Court “… will impute an intention [to waive privilege] where the actions of a party are plainly inconsistent with the maintenance of the confidentiality which the privilege is intended to protect”. His Honour noted (ABL decision, [71]) that an example of ‘plain inconsistency’ would arise in circumstances where a client brings a professional negligence claim against their solicitor but then attempts to assert legal professional privilege over material sought to be used by the solicitor to defend themselves.

On application to the facts in the proceedings, his Honour held that there had been no implied waiver by SGH. His Honour stated that, regardless of the production by agreement, the discovery of the Produced Documents was in any event an obligation on SGH. Regarding the Harman Release Orders and their status as a pre-condition of the settlement, ABL had argued “arming” Hall with the produced documents was equivalent to a client suing their solicitor, such that there was an implied waiver by SGH. His Honour disagreed, drawing a distinction by noting that the ABL Class Action was not a situation where the Court was being asked to “directly adjudicate” on the client/solicitor relationship (ABL decision, [89]-[93]). As to the consenting to the making of the Harman Release Orders, his Honour again found that there had been no implied waiver on the basis that “it is the court that ultimately determines whether to release the Harman undertaking, and on what terms” (ABL decision, [95]).

The DDPM

Both Hall and ABL argued (albeit for slightly different purposes) that section 11 of the DDPM permitted access to “other documents which are material to the due diligence process” to defend claims. His Honour held that section 11 did not have such a broad application, and that it only related to those documents specifically retained by ABL in “the files” (Hall decision [2020] FCA 1495, [31]-[34]).

Associated Material Waiver

As noted above, Hall also argued that SGH’s production of the Legal Opinion Letter constituted associated material waiver of all materials associated with ABL’s work that was the subject of the Legal Opinion Letter and the documents cited in it. His Honour did not agree, holding that no associated material waiver had occurred. His Honour reached this position because, according to his Honour, the Legal Opinion Letter itself was not initially confidential and privileged (Hall decision, [51]) and as such its production could not give rise to an associated waiver. His Honour further held that even if the Legal Opinion Letter were privileged, any associated waiver would only extend to DDC documents, and not the documents sought by Hall (Hall decision, [52]).

 

Arnold Bloch Leibler (a firm) v Slater & Gordon Ltd [2020] FCA 1496; Hall v Arnold Bloch Leibler (a firm) [2020] FCA 1495
Federal Court of Australia, Middleton J, 16 October 2020
Lead Applicant’s Solicitors: Maurice Blackburn;          
Arnold Bloch Leibler’s Solicitors: Norton Rose;
Slater & Gordon’s Solicitors: Minter Ellison;
Funder: ILP
Austlii link: http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA/2020/1496.html?context=1;query=[2020]%20FCA%201496;mask_path=

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