Newsflash: Centro settlement approved by the Court this morning

It has been reported that the $200 million Centro class action settlement reached in early May was approved this morning by Middleton J of the Federal Court of Australia. None of the shareholders participating in the class action objected to the settlement. The judgment is not up on Austlii yet, but you can read the full article on the Age website here.

It is reported that of the $200 million, $67 million will be paid by former auditors PricewaterhouseCoopers, with the balance to be paid by Centro-related companies. After legal costs and after the commission to litigation funders, it is said that shareholders are likely to share in a pool of just over $120 million.

You can read my earlier post of 8 May about the settlement reached here, my post of 17 April about some developments in the case which took place that day here, and my post of 27 February giving a brief background of the case and reporting on developments and an interesting Centro decision on the question of legal professional privilege here.

Breaking news: Centro $200m settlement reached

It is being reported that the class action against the directors of Centro is to settle for $200m. The full article on the Age website can be read here.

Highlights, according to this report, are –

  • A global settlement has been reached that takes in Centro, its directors and auditor PricewaterhouseCoopers,
  • It is suggested in the Age that PwC might pay as much as a third of the settlement, although it is difficult to assess how reliable that detail may be, given that apparently discussions finalising details of the deal are ongoing,
  • It is believed to be the largest settlement ever reached in an Australian shareholder class action.
  • Shares of litigation funder IMF, which is backing the class action claim run by Maurice Blackburn, entered a trading halt this morning, pending the earlier of an announcement as to the Centro settlement or the start of trade Thursday morning,
  • Centro Retail Australia has also requested a trading halt for its shares.

My previous posts regarding the Centro class action can be read here and here.

Dramatic developments in Centro – (a) PwC admissions and (b) warning on costs against their lawyers personally

In case anyone has missed it, the past 24 hours have seen some dramatic developments in the Centro class action currently being heard in the Federal Court by Justice Gordon. (For a brief summary of what this case is about, see the first paragraphs of my previous post about the Centro class action here.)

It has been reported in the Age and the Australian that yesterday, counsel for PwC made some significant, limited admissions as to negligence, although not as to liability. The Australian reports that PwC, through counsel Richard McHugh SC, now concedes that it should have identified the $3.1billion in short-term debts that had been incorrectly classified as non-current in the company accounts for 2007. It is reported that Mr McHugh said –

“My client accepts for the purposes of the proceeding that audit staff were provided with information at a particular date which means more should have been done in relation to the classification….And that amounts to a breach of retainer and a breach of duty.”

However PwC has argued that the accounting errors did not cause the loss alleged to have been suffered by shareholders. Mr McHugh reportedly argued that the cause of the loss was, rather, the refinancing problems Centro was experiencing and not revealing, “and everything that went with it”, as well as shareholders investing based upon Centro’s history of paying considerable distributions. (I note in passing that the Full Federal Court recently handed down its decision on causation and shareholder losses claimed to be caused by misleading and deceptive conduct in De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) & Ors [2012] FCAFC 28.)

Somewhat curious is the argument advanced for PwC yesterday, as reported by the Age, that it was not PwC but rather its individual audit partner, Stephen Cougle, who made inaccurate representations about the quality of Centro’s flawed 2006/2007 audit. According to the Australian, PwC’s counsel Mr McHugh also argued that Mr Cougle was not directly responsible for the errors in the accounts, because when the first $1bn-plus error was discovered by PwC staff, Mr Cougle asked his staff if there were further issues in the accounts and was assured there were not.

Both papers report that Justice Gordon pressed Mr Hugh on these arguments, described by the Age as a “blistering exchange”, and that Justice Gordon warned PwC that if it persisted in holding a position that she ultimately found had no basis, the court could order costs against PwC’s counsel and lawyers personally. It appears that Mr Hugh took umbrage at this, remarking that her Honour’s reference to the issue of costs was “grossly inappropriate”.

It is not the first time Justice Gordon has warned parties in the expensive Centro class action that provisions of the Federal Court Act allow courts to award costs against lawyers personally if they have not acted to resolve disputes quickly, efficiently and inexpensively. Indeed her Honour has good cause to remind parties of this. Historically such orders have been unusual, but it may be that we can now expect to see more of them. Just a month ago, Gray J of the Federal Court ordered costs to be paid by a solicitor personally under s 43(3)(f) of the Federal Court Act, in Modra v State of Victoria [2012] FCA 240. In that case, there had been a history of deficient pleadings and several hearings concerning them, culiminating in an order for a further amended statement of claim to be filed and for the costs thrown away and of the last hearing to be borne by the applicant’s solicitor. In holding that the applicant’s solicitor should bear the costs personally, Gray J examined ss 37M and 37N of the Federal Court Act. His Honour held at [31] that since 1 January 2010, the duty of a legal practitioner in a proceeding in the Federal Court has been changed significantly: he or she must now conduct a proceeding in a way that is consistent with the overarching purpose referred to in s 37M, which has objectives that include efficiency, timeliness and economy, as well as justice. Whilst he accepted that the question of whether a lawyer should be ordered to pay costs personally should be determined by the principles found in the decided cases, his Honour observed that his so accepting was subject to the significant qualification of the changes to a legal practitioner’s duty effected by the introduction of ss 37M and 37N. (Note that the overarching purpose introduced in the Federal jurisdiction is of course broadly echoed in Victoria in the Civil Procedure Act 2010 (Vic) – see in particular Chapter 2 as to the overarching purpose and overarching obligations).

There have been further developments on this costs warning issued by the judge in Centro, this morning. The Age has reported that PwC’s counsel Mr McHugh informed her Honour in Court that her comments about possibly awarding costs against PwC’s counsel and lawyers  personally had put them in a difficult position. Mr McHugh said that her Honour’s comments may give rise to a conflict of interest between the lawyers’ own concerns and those of their client PwC. He reportedly said the “making of the threat” may interfere with the proper conduct of the defence by PwC, although he said the members of the legal team needed to make it clear that the defence they were putting to the court was “not without foundation”. It is reported that twice Mr McHugh asked Justice Gordon to withdraw her comments about costs. On the first occasion, her Honour declined to withdraw them but agreed to stand the case down while PwC and its lawyers considered their position.  Subsequently, another barrister representing PwC, Cameron Moore SC briefly returned to Court and asked for five more minutes. Mr Moore reportedly informed the Court that when he returned PwC would have “something to announce to the Court.”

When the hearing resumed at noon, counsel for PwC reportedly again asked Justice Gordon to withdraw the costs comments. Her Honour replied that she would consider the matter. Curiously, Mr McHugh reportedly then said that members of the legal team might have to withdraw, but immediately stopped himself, withdrew the comment, and said PwC’s defence would continue.

PwC’s auditing partner Stephen Cougle has since taken the stand.

Centro class action developments – (a) privilege and (b) a bombshell

* An updated version of this article was republished with my permission in the December 2012 issue of the Australian Corporate Lawyer’s quarterly journal, the Australian Corporate Lawyer, volume 22, issue 4, pp 26-31.

There have been some interesting developments this month in the lead up to the big Centro class action trial, which is due to commence in the Federal Court in just a few weeks (early March) before her Honour Justice Gordon and is expected to run for at least 15 weeks.

By way of background, there are 5 class actions issued in 2008 and 2010 by different sets of Centro investors, variously represented by Maurice Blackburn and Slater & Gordon. Broadly – and I stress the use of that term – the investors are suing the old Centro Properties group over the events of 2007 shortly before the group’s collapse, when they failed to disclose approximately $3.1billion of short-term debt. Centro’s then auditors PricewaterhouseCoopers were joined as a co-defendant by Centro Properties and in turn, PwC has cross-claimed against Centro. The investors are also suing the auditors PwC  directly, and in those proceedings too there are cross-claims by PwC against Centro. Indeed there are a multitude of cross-claims as between Centro and PwC.

To address the interesting developments occurring this month (February) in reverse order –

The bombshell – Centro Retail Australia’s “no liability” defence

In October 2011, Barrett J of the New South Wales Supreme Court approved a new corporate group structure for Centro. Subsequently, it appears that in or about December 2011, Centro Retail Australia Ltd took over as the responsible entity (RE) for the Centro group from Centro MCS Manager Ltd.

However, it is reported that submissions made in Court on Thursday suggest that this change in RE may not have been disclosed to the market and for some time remained unknown to the parties to the class action. Michael Lee SC, counsel for the Centro investors represented by Maurice Blackburn, reportedly said that the new RE was only discovered “by happenstance” by lawyers acting for PricewaterhouseCoopers, who ran repeated corporate searches of the new Centro Group structure after it was approved in October. PricewaterhouseCoopers has now successfully applied to join Centro Retail Australia to the class action.

On Thursday in Court, Centro Retail Australia revealed what its defence would be. It was something of a bombshell revelation. Certainly Centro Retail Australia was only newly joined to the action (on 14 February), however its predecessor as RE cannot claim the same. In Court, Counsel for PwC demanded to know if Centro Retail Australia would stand in the shoes of the old RE and assume its liabilities. Pressed by Gordon J, counsel for Centro Retail Australia Norman O’Bryan SC is reported as having said that it was “highly likely” the new entity would argue that it was excluded from certain liabilities of the old Centro. He reportedly indicated reliance would be placed upon Corporations Act provisions to argue these types of liabilities were not inherited by the new responsible entity in the restructuring.

Mr Lee is quoted as having described this new defence as “a matter of potentially extraordinary significance”. If successful, it could have the effect that the shell that is Centro MCS Manager Ltd retains the key liability, such that if the class action were successful, judgment might be made against an entity without assets. Concerns were also reportedly raised in Court by Mr Lee as to whether this proposed defence had been disclosed to the NSW Supreme Court on the restructure.

The orders made by Gordon J as shown on the Federal Court portal include that Centro Retail Australia must file its defence and any cross claim by 29 February and responding pleadings be filed by 2 March. For the full article discussing last week’s hearing see the Age article here.

Kirby v Centro Properties Limited (No 2) [2012] FCA 70 – Legal Professional Privilege

On 10 February, Bromberg J handed down his reasons on an application by PricewaterhouseCoopers that various Centro companies be compelled to produce specified documents for inspection. Centro had resisted inspection on the basis that the documents or part of them were subject to legal professional privilege. His Honour had heard and determined the application urgently in November 2011, dismissing PwC’s application and giving short reasons then; full reasons now. Bromberg J, not being the trial judge allocated the various proceedings, considered and determined these questions of privilege in order to avoid the trial judge (Gordon J) being exposed to documents the subject of privilege claims.

To explain the privilege claims it is useful to give a more detailed overview of the claims made in these proceedings. It is also useful, as his Honour did, to divide the related Centro corporations concerned in the litigation into two groups. The first is the Centro Properties Group (CNP) and the second the Centro Retail Group (CER).

The first principal claim made against CNP relates to what is referred to by the parties as the ‘classification issue’. The investors allege that in publishing its financial statements for the year ending 30 June 2007, CNP misclassified debt such that its current debt was understated and its non-current debt overstated. This is claimed to be in breach of the Corporations Act 2001 (Cth), the ASIC Act 2001 (Cth) and the Fair Trading Act 1999 (Vic). CNP admits the misclassification, and its failure to comply with accounting standard AASB101, however it denies liability on various grounds.

The second principal claim made against CNP relates to what has been termed the ‘refinancing risk issue’. The gist of this claim is that CNP should have, but failed to, disclose to the market that it had short-term debt about to become due which it either could not refinance or could only refinance at greater cost. This is said to be in breach of the continuous disclosure obligations of the Corporations Act.

CNP (and CER) have claimed against CNP’s auditors PricewaterhouseCoopers on a number of bases, including claims of misleading and deceptive conduct by making various representations to CNP concerning its 2007 financial statements. CNP alleges that PwC represented that the financial statements were appropriate for approval by the CNP Board in that they complied with the Corporations Act and relevant accounting standards, including AASB101, when in fact they did not. PwC denies liability to CNP on a number of grounds, including that any such misrepresentation was caused by CNP’s failure to disclose relevant material to PwC. CNP, in turn, denies that.

The investors also make claims directly against PwC in relation to the classification issue. They assert that PwC represented that CNP’s financial accounts gave a true and fair view of CNP’s financial position, when they did not, and complied with the Corporations Act and relevant accounting standards, when they did not. PwC admits that accounting standard AASB101 was not complied with, but denies liability on other grounds.

Bromberg J noted that PwC’s application for inspection of documents – opposed on grounds of privilege – fell to be determined under the common law rather than the Evidence Act 1995 (Cth) (at [10]). His Honour cited the “12 principles” distilled by Young J in AWB Ltd v Cole and Another (No 5) [2006] FCA 1234; (2006) 155 FCR 30 at [44]. They are, in summary –

(1) The party claiming privilege bears the onus of proving that the communication was undertaken, or the document was brought into existence, for the dominant purpose of giving or obtaining legal advice.

(2) The purpose for which a document is brought into existence is a question of fact that must be determined objectively. Evidence of the intention of the document’s maker, or of the person who authorised or procured it, is not necessarily conclusive.

(3) The existence of legal professional privilege is not established merely by the use of verbal formula. There will be cases in which a claim of privilege will not be sustainable in the absence of evidence identifying the circumstances in which the relevant communication took place and the topics to which the instructions or advice were directed.

(4) Where communications take place between a client and his or her independent legal advisers, or between a client’s in-house lawyers and those legal advisers, it may be appropriate to assume that legitimate legal advice was being sought, absent any contrary indications.

(5) A “dominant purpose” is one that predominates over other purposes; it is the prevailing or paramount purpose.

(6) An appropriate starting point when applying the dominant purpose test is to ask what was the intended use or uses of the document which accounted for it being brought into existence.

(7) The concept of legal advice is fairly wide. It extends to professional advice as to what a party should prudently or sensibly do in the relevant legal context; but it does not extend to advice that is purely commercial or of a public relations character.

(8) Legal professional privilege protects the disclosure of documents that record legal work carried out by the lawyer for the benefit of the client, such as research memoranda, collations and summaries of documents, chronologies and the like, whether or not they are actually provided to the client.

(9) Subject to meeting the dominant purpose test, legal professional privilege extends to notes, memoranda or other documents made by officers or employees of the client that relate to information sought by the client’s legal adviser to enable him or her to advise. The privilege extends to drafts, notes and other material brought into existence by the client for the purpose of communication to the lawyer, whether or not they are themsleves actually communicated to the lawyer.

(10) Legal professional privilege is capable of attaching to communications between a salaried legal adviser and his or her employer, provided that the legal adviser is consulted in a professional capacity in relation to a professional matter and the communications are made in confidence and arise from the relationship of lawyer and client. Some cases have added a requirement that the lawyer who provided the advice must be admitted to practice. However in other cases, the Court has not regarded the possession of a current practising certificate as an essential precondition.

(11) Legal professional privilege protects communications rather than documents, as the test for privilege is anchored to the purpose for which the document was brought into existence. Consequently, legal professional privilege can attach to copies of non-privileged documents if the purpose of bringing the copy into existence satisfies the dominant purpose test. In Propend at 512, Brennan CJ added a qualification: the otherwise privileged copy may lose its protection if the original unprivileged document cannot be found and no other evidence is made available to prove the contents of the original.

(12) The Court has power to examine documents over which legal professional privilege is claimed. Where there is a disputed claim, the High Court has said that the Court should not be hesitant to exercise such a power.

For greater detail of each principle and the authorities cited for each , see Bromberg J’s judgment where he sets out Young J’s 12 principles in full at [11].

Observing that a practical and cost efficient approach is to be encouraged when it comes to issues relating to the discovery of documents, Bromberg J then turned to consider each class of documents in question.

Retainers and Related Documents

PwC contended that a retainer was not a document generally protected by legal professional privilege. However his Honour noted that this proposition is not absolute and the specific content of a retainer must be examined. Some communications contained within a retainer may be protected from disclosure because they are “within the sphere of protection provided by the privilege”. Centro contended that insofar as the retainers identified the nature of the legal advice sought, they were privileged to that extent.

Bromberg J agreed with Centro. His Honour also rejected PwC’s contention that privilege had been waived by Centro (see below). He also rejected PwC’s contention that legal professional privilege did not extend to a retainer because a retainer pre-dates the formation of the solicitor-client relationship.

Documents Provided by Centro to ASIC  

There were two categories of these – (1) the “subpoenaed documents” provided by Centro to ASIC in the course of ASIC’s proceedings agianst Centro, and produced by ASIC pursuant to subpoenas issued in these proceedings at the behest of PwC;  (2) the “other ASIC documents” – those provided by Centro to ASIC but at a later time than the subpoenas to ASIC were issued and returned.

The Subpoenaed Documents – the Hourigan Records

The vast bulk of these comprised handwritten notes taken by Elizabeth Hourigan,  the Company Secretary of CNP and CER and each of their controlled entities at the relevant time. They were notes taken at Board meetings or Board Audit and Risk Management Committee meetings of the various Centro companies.

The parts of Ms Hourigan’s notes that were in issue comprised what Ms Hourigan  deposed to be records of either (i) confidential communications between Board members and Centro’s General Counsel at the meeting for the dominant purpose of the General Counsel giving and the Board receiving legal advice on behalf of Centro; (ii) confidential communications between Board members and Centro’s external lawyers at the meeting for the same dominant purpose; or (iii) confidential communications between Board members at the meeting which disclosed legal advice obtained by Centro from its external lawyers. Centro’s General Counsel Mr Hutchinson gave similar evidence, including that his communications were for the sole or dominant purpose of giving legal (and not commercial advice) and that the advice he gave was independent, objective advice given in his professional capacity.

PwC did not cross-examine either Ms Hourigan nor Mr Hutchinson, but argued Centro had adduced insufficient evidence to discharge its burden of demonstrating that the documents in question were privileged. PwC contended that Centro had adopted a formulaic approach which failed to provide evidence about any particular communication, identify any author or source of each communication and provide evidence from the author or source as to the purpose of their communication.

Bromberg J rejected PwC’s arguments. He was satisfied that Ms Hourigan’s approach was not “formulaic” in the sense that no more than a bare assertion of privilege being made.  It was true that evidence was not provided by the multiple authors of each separate conversation made in the multiple conversations in question, however his Honour did not deem that necessary in the circumstances. His Honour pointed to Young J’s principles 4 and 10. His Honour observed that here the calling of direct evidence from each author of a part of the conversations in question would “unduly complicate, extend and render unacceptably expensive, the process of determining privilege issues…”, and was satisfied that the evidence established that the exchanges covered by all 3 of the categories listed above came into existence for the dominant purpose of a client seeking or obtaining legal advice from that client’s lawyer, or disclosed that legal advice.

The Subpoenaed Documents – the Hutchinson Records

These were the notes prepared by Mr Hutchinson of Board meetings he attended. Privilege was claimed in respect of extracts of these. Mr Huthinson deposed that the notes were prepared by him in his capacity as General Counsel of CNP and CER and other Centro companies, for the benefit of their use by Centro as a record of what occurred at those meetings. The redacted extracts comprised his notes of confidential communications between Board members and himself which occurred for the dominant purpose of him giving legal advice to Centro, and the Board receiving it on behalf of Centro. Mr Hutchinson also deposed that these communications were made for the sole or dominant purpose of him giving and Centro receiving legal and not commercial advice or assistance and that the advice provided by him was independent objective advice given in his professional capacity.

PwC argued this evidence was too general, and there was a failure to identify the nature of the communication or whether it was a communication to Mr Hutchinson or from him. PwC also contended generally that Mr Hutchinson was unable to speak to the dominant purpose of others, for instance those that communicated with him.

Bromberg J again upheld the claim for privilege. He considered that the evidence before the Court in relation to the Hutchinson Records demonstrated that the challenged communications occurred between Centro and its independent legal adviser in uncontroversial circumstances, and provided a sufficient basis upon which the Court could be satisfied that the communications in question came into existence for the dominant purpose of Centro seeking and obtaining legal advice from its lawyer.

The Subpoenaed Documents – the Reid/Stawell Documents

There were two emails from Ashley Reid of Centro to Peter Stawell, a partner of Freehills. Their attachments had been discovered (an earlier email and attachment sent from BNP Paribas to Mr Reid). Mr Stawell gave evidence that during 2007 he provided advice to CNP and CER in relation to banking facilities with BNP Paribas and that the emails in question were forwarded to him by Mr Reid for the sole purpose of Mr Stawell providing legal advice to Centro.

PwC contended this was just a bare assertion by a lawyer as to somebody else’s purpose. However Bromberg J was satisfied that Mr Stawell’s evidence was sufficient evidence of the circumstances in which the communications were brought into existence, and that the communications by Mr Reid came into existence for the relevant dominant purpose.

The Other ASIC Documents

His Honour was satisfied that for similar reasons as for categories of the subpoenaed documents, these documents too – revealing the content of legal advice provided to Centro variously by Freehills and Middletons – were protected from disclosure by legal professional privilege.

The Investigation Documents

These documents sought by PwC comprised “file notes of interviews, witness statements and any draft or final reports” relating to any investigations conducted in or about the period December 2007 to February 2008 by any of KPMG, Middletons and/or Freehills, into the classification of the interest bearing liabilities of CNP and/or CER and related matters.

A large number of lawyers involved as either the maker or receiver of a communication with Centro in relation to these investigations gave evidence, each of whom deposed that his or her sole or dominant purpose was to give, and for Centro to obtain, legal advice and assistance under the terms of their firm’s retainer.

Aside from communications passing between Centro and its external lawyers or Centro and its internal lawyers, the Investigation Documents also included –

  • notes taken by Freehills and Middleton solicitors of interviews and meetings,
  • internal communications between solicitors at Freehills,
  • internal communications between solicitors at Middletons,
  • communications between Freehills or Middletons and KPMG,
  • communications bewteen Middletons and Freehills, or Middletons and Gadens, or Middletons and Strongman & Crouch.

PwC called evidence directed to show that Centro had a multiplicity of purposes in reviewing the classification issue including, primarily, the conduct of an accounting disclosure exercise to determine for operational purposes the correct classification of the debt which may have been misclassified. Even if there was an additional, legal purpose, PwC argued that the Court ought not be satisfied on the evidence before it that this was Centro’s dominant purpose.

Essentially, PwC hinted darkly that the involvement by Centro of Freehills and Middletons was a sham, contrived to cloak their investigations into what had happened with the protection of legal professional privilege, although his Honour noted they stopped short of making that submission. PwC contented that CNP and CER had statutory accounting obligations which had required the inquiry to take place, and that the belated involvement of Freehills and Middletons did not of itself cloak the entirety of that process with legal professional privilege. Nor, so PwC argued, could a factual inquiry conducted so that CNP and CER could form a view as to an accounting position, be rendered privileged just because the factual inquiry was undertaken by external lawyers or an external accounting firm.

Bromberg J accepted PwC’s contention that Centro had an additional purpose rather than just to obtain legal advice, in retaining each of Freehills/KPMG and Middletons/KPMG – the conduct of an accounting enquiry or investigation independent of management to determine the correct classification of debt. However, his Honour stated this did not persuade him that the prima facie position as to Centro’s dominant purpose having been to obtain Freehills and Middleton’s legal advice should be displaced.

Bromberg J noted that the facts of this case are readily distinguishable from a case upon which PwC placed much reliance – Robson J’s decision in Perry v Powercor Australia Ltd [2011] VSC 308, upheld by the Court of Appeal of the Supreme Court of Victoria in Powercor Australia Ltd v Perry [2011] VSCA 239. Powercor concerned investigative reports prepared by technical experts into the course of a major bushfire, which were held in the circumstances of that case not to have been privileged. Bromberg J opined that Powercor is best understood as an example of the kind of non-privileged investigation carried out for the purpose of arming central management of a corporation with actual knowledge of what its agents had done. Here, Bromberg J considered, the evidence showed that the involvement of Freehills and Middletons in the investigation of the correct classification of debt was not artificial, contrived or objectively unjustified.

As to waiver, his Honour summarised the three key principles on the implied or imputed waiver of privilege drawn from the recent judgment of Keane CJ, Downes and Besanko JJ British American Tobacco Australia Limited v Secretary, Department of Health and Aging [2011] FCAFC 107; (2011) 195 FCR 123, by reference to the two High Court decisions of Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 and Osland v Secretary, Department of Justice [2008] HCA 37; (2008) 234 CLR 275

(1) Legal professional privilege will be waived, whatever the intention of the person whose conduct is in question, if the conduct of the person seeking to rely upon the privilege is inconsistent with the maintenance of the privilege,

(2) The focus is now upon inconsistency of conduct, but in determinnig whether there has been an inconsistency of conduct, considerations of fairness are still relevant, and

(3) It is now clear that disclosure of the gist of a privileged communication does not necessarily effect a waiver of legal professional privilege. Whether it does in a particular case will depend on whether, in the circumstances of the case, the requisite inconsistency exists, between a disclosure on the one hand and the maintenance of confidentiality on the other. There is no necessary inconsistency in stating the effect of advice and maintaining a claim of privilege. The purpose for which the privilege-holder made the disclosure is highly relevant including whether or not the disclosure was deployed for a forensic or other advantage.

In relation to the Freehills and Middletons Retainers – PwC pointed to the fact that in the affidavit material filed by Centro in support of its claim for privilege, the task for which the solicitors had been engaged was disclosed. However, His Honour took the view that the descriptions in the affidavits as to the tasks Centro gave its solicitors were general and unspecific, when compared to the terms of the retains themselves. Even if the gist of the advice sought by Centro was disclosed, partial disclosure is not necessarily inconsistent with maintaining a claim for privilege. Indeed the objective purpose of any partial disclosure here was to persuade the Court to protect the retainers from disclosure – entirely consistent with the maintenance of confidentiality. His Honour held there was no waiver in relation to the retainers.

As to the Subpeonaed Documents and Other ASIC Documents – These documents came into ASIC’s hands by virtue of notices issued under s 30 of the ASIC Act requiring their production by Centro. Section 30 provides for a coercive process requiring production under compulsion. However ASIC had sent the notices in each case with a covering letter recognising that Centro may have a valid claim of legal professional privilege with respect to some of the documents, and was not obliged to provide such documents, although it must provide detailed information in support of that claim. Centro provided documents to ASIC in response under covering letters expressing their provision to be on a confidential basis, with an express reservation of privilege and an express lack of intention to waive privilege.

Centro sought to claim privilege in these proceedings over redacted portions of some of those documents which had been provided to ASIC with no parts then redacted. Evidence was given that the documents had been provided to ASIC unredacted for reasons of the large volume of numbers, the shortness of time in which production had had to occur, and mistakes made by inexperienced lawyers or law graduates or Mr Hutchinson working in difficult conditions.

PwC argued that the provision of the disputed extracts to ASIC was a voluntary act of disclosure to a third party which is inconsistent with the maintenance of privilege in the documents. Bromberg J acknowledged that there might have been a limited waiver by Centro as against ASIC, but not necessarily as against another person like PwC. It is not the case that voluntary disclosure to a third party necessarily waives privilege. Disclosure to a third party for a limited and specific purpose did not lead to a loss of the privilege as against a person opposed in litigation in Mann or in any of the cases referred to in Mann at [32].

As to the Investigation Documents – PwC argued that Centro had waived privilege in respect of these because its directors had made submissions relating to the investigations by Freehills, Middletons and KPMG in the course of the penalty phase of the ASIC proceeding. However Bromberg J was not prepared to impute to Centro an understanding that its directors were about to be involved in making a disclosure of the Investigation Documents, and rejected PwC’s contention that the directors did disclose the substance of the legal advice contained in the Investigation Documents.

Thus PwC wholly failed in their application, privilege in all of the documents challenged was upheld, and PwC was ordered to pay costs. The judgment may be read in full here.

His Honour made an order allowing PwC 14 days to file a written application for leave to appeal, meaning a deadline of Friday 24 February. I stand to be corrected, but my search today of the Federal Court portal discloses no such application as having been filed in any of the five proceedings concerned.

With regards to the class actions and the fast-approaching trial, we can all await further developments with interest.