Admark Property Group Pty Ltd v GJ Building and Contracting Pty Ltd

[2016] NSWSC 1885

Supreme Court

New South Wales

Medium Neutral Citation:	Admark Property Group Pty Ltd v GJ Building and Contracting Pty Ltd [2016] NSWSC 1885
Hearing dates:	Monday, 27 June 2016
Date of orders:	27 June 2016
Decision date:	27 June 2016
Jurisdiction:	Equity - Corporations List
Before:	Brereton J
Decision:	Objection to production of documents fails. Applicant pay defendant’s costs of the motion.
Catchwords:	PROCEDURE – subpoena for production – privilege – whether director entitled to privilege in communications between company and its solicitors
Cases Cited:	Farrow Mortgages Services (in liq) v Webb [1995] NSWSC 1787 Farrow Mortgage Services v Webb (1996) 39 NSWLR 601 Ingram v Y Twelve Pty Limited [2013] NSWSC 928
Category:	Procedural and other rulings
Parties:	Vito Pennimpede (applicant) GJ Building & Contracting Pty Limited (respondent)
Representation:	Counsel: M J Dawson (applicant) D Sulan (respondent)   Solicitors: Maguire & McInerney (applicant) Bridges Lawyers (respondent)
File Number(s):	15/ 367939

Judgment (EX TEMPORE)

1. HIS HONOUR: The present applicant Mr Vito Pennimpede is a respondent to a notice of motion for committal for contempt filed on 20 May 2016, which alleges that he impeded or interfered with the administration of justice by failing to cause the plaintiff Admark Property Group Pty Limited – of which he was at the relevant time the sole director – to pay into its solicitor's controlled moneys account a sum of $606,595, and thereby causing or permitting Admark to fail to comply with an undertaking given by it to the Court on 18 December 2015 that until further order, the amount of $606,595 from the proceeds of the sale of units in a certain property development would be paid into its solicitor's controlled moneys account. Admark has since gone into liquidation; although there seems to be some contradictory material, so far as I can tell on the evidence presently before me, it is a members’ voluntary winding up.

2. The proceedings in which the undertaking was given were proceedings brought by Admark, as developer of the property, against the defendant GJ Building & Contracting Pty Limited (“GJ Building”) to restrain GJ Building from remaining in possession of the development site. The undertaking was apparently given as part of a compromise whereby, in return for GJ Building undertaking to vacate the site, Admark undertook in effect to preserve the sum of money to which I have referred, so that claims could be made against it in due course.

3. Messrs Maguire & McInerney, solicitors, acted for Admark in those proceedings. They received their instructions from Admark's sole director, Mr Pennimpede. Although Mr Pennimpede had guaranteed Admark's liabilities to GJ Building, and although in more recent proceedings he has been sued on that guarantee, he was not personally a party to the proceedings that were on foot in December 2015. Messrs Maguire & McInerney were acting in those proceedings for Admark, not for him. Even though Mr Pennimpede was the agent by which Admark gave and received instructions, their retainer was with Admark, not with him. The interests in the proceedings then on foot were Admark's interests in obtaining possession of the site and in receiving the proceeds of sale of the units. The undertaking given was an undertaking by Admark.

4. On 27 May 2016, in aid of the contempt application, GJ Building issued a subpoena for production addressed to the partners of Maguire & McInerney requiring production of various documents relevantly (as a result of a modification made by order earlier today), including:

All documents between 15 December 2015 and 18 January 2016 referring to the undertaking given by Admark in order 3 of the orders, or communicating to Admark or Mr Pennimpede the fact of that undertaking.

5. Plainly enough, these documents are sought in order to elicit evidence of Mr Pennimpede's knowledge of the undertaking.

6. Mr Pennimpede claims privilege from production of three letters sent to him by Maguire & McInerney, respectively on 22 December 2015, 12 January 2016 and 13 January 2016. Those letters were addressed to "Vito Pennimpede Esquire, Admark Property Group Pty Limited". For Mr Pennimpede, it is submitted that although Maguire & McInerney's retainer was with Admark alone, the circumstances were those of a closely held corporation where the sole director, the corporator and the corporation itself were substantially identical, so that it was artificial to dissect those entities and to say that the company alone had privilege in communications from lawyers which the company intended would be obtained for the benefit both of itself and of the director: see Farrow Mortgages Services (in liq) v Webb [1995] NSWSC 1787 per Young J. His Honour's judgment was upheld by a majority in the Court of Appeal, in Farrow Mortgage Services v Webb (1996) 39 NSWLR 601. Sheller JA referred (at 620) to Young J's finding that the information and advice was sought on behalf of both the company and its directors, which meant that there was a joint privilege, and that it was artificial to dissect the entities and say that the company alone had privilege in communication from lawyers "which the company intended should be obtained for the benefit of both itself and the directors". Sheller JA proceeded to accept that the evidence overwhelmingly supported the trial judge's conclusion that instructions were given and advice obtained on behalf of both the companies and the respondents.

7. As Hammerschlag J explained in Ingram v Y Twelve Pty Limited [2013] NSWSC 928, at 22 to 25, Farrow Mortgage Services was a case in which the subject matter of the advice sought and given included the duty of the directors of the company and the potential liability of directors to third parties; and there was a plain interest of the directors in knowing their duties and their potential liabilities as well as of the company itself. As Hammerschlag J also pointed out, that was not so in the case before him.

8. Nor is it so in the present case. Here, for reasons I have already explained, the issues in suit in December 2015 were not issues that affected or concerned Mr Pennimpede personally. The undertaking was not given by him personally, and the issues in the 2015 litigation did not involve his personal liability. The evidence does not sufficiently establish that the solicitors were acting – even in an informal way – for him as well as for the company.

9. I am not satisfied that the documents are privileged in the hands of Mr Pennimpede. Any privilege that subsists in them is that of Admark, and not of Mr Pennimpede. Accordingly, the objection to production of the documents fails.

10. The small amount of success gained by the applicant in modifying para 4 of the subpoena does not detract from the position that, in substance, the applicant has failed today. The Court orders that the applicant pay the defendant's costs of the motion.

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