Actone Holdings Pty Ltd v Gridtek Pty Ltd
[2012] NSWSC 991
•30 August 2012
Supreme Court
New South Wales
Medium Neutral Citation: Actone Holdings Pty Ltd v Gridtek Pty Ltd [2012] NSWSC 991 Hearing dates: 23 August 2102 Decision date: 30 August 2012 Jurisdiction: Common Law Before: Harrison J Decision: The defendant's notice of motion filed 10 August 2012 is dismissed with costs.
Catchwords: EVIDENCE - client legal privilege - waiver of privilege - where service of expert's report refers to report of another expert whose report is not served - whether privilege waived by the plaintiff - privilege not waived Legislation Cited: Civil Procedure Act 2005
Evidence Act 1995Cases Cited: Akins and Others v Abigroup Ltd [1998] NSWCA 8; (1998) 43 NSWLR 539
Gillies v Downer EDI Ltd [2010] NSWSC 1323
New Cap Reinsurance Corporation Ltd (in liq) v Renaissance Reinsurance Ltd [2007] NSWSC 258
Sevic v Roarty (1998) 44 NSWLR 287Category: Procedural and other rulings Parties: Actone Holdings Pty Ltd (Plaintiff)
Gridtek Pty Ltd (in liquidation) (Defendant)Representation: R O'Keefe (Plaintiff)
D M Loewenstein (Defendant)
Vardanega Roberts (Plaintiff)
Hunt and Hunt (Defendant)
File Number(s): 2007/265199
Judgment
HARRISON J: The defendant seeks an order that the plaintiff provide it with a copy of an expert's report prepared by the late Dr K A Walshe in February 2002. The plaintiff opposes the order upon the basis that the report is a privileged document and that the privilege has not been waived.
Background
The circumstances that give rise to the claim are uncontroversial. They are as follows. In October 2001 a fire destroyed or damaged part of a shopping complex at St Ives in Sydney. The plaintiff has sued the defendant alleging that it negligently caused the fire. The defendant disputes that claim. Experts have been marshalled by both sides proffering opinions about that issue. Directions for the service of reports were made by consent on 8 February 2008 in accordance with which the plaintiff was required to serve expert evidence by 16 July 2008. That was later extended by consent to 19 December 2008 and then to 29 May 2009. Finally, a consent order was made requiring the plaintiff to serve its expert evidence by 18 September 2009. The plaintiff would appear to have served at least some of the following reports in accordance with those directions:
(a) Dr Colin Grantham dated 3 September 2009 - served 16 September 2009.
(b) Dr Colin Grantham dated 25 June 2012 - served 3 July 2012.
(c) Mr David Plaister dated 1 July 2009 - served 6 July 2009.
(d) Mr David Plaister dated 29 November 2009 - served 9 December 2009.
(e) Mr David Plaister dated 6 August 2012 - served 8 August 2012.
Dr Grantham and Mr Plaister refer to Dr Walshe's report in some, but not all, of their reports. It is important to record the terms of these references.
In his 3 September 2009 report, Dr Grantham says this at paragraphs 17, 18 and 25:
"WALSHE AND ASSOCIATES REPORT
17 The report of the late K A Walshe dated February 2002, at page 7 states as follows:
'Given the problems in the News Agency, including a fresh occurrence of flickering lights on the morning of the fire, I am of the opinion that
water ingress into a light fitting junction box in the ceiling space of the News Agency caused a low level electrical fault either to ground or to neutral,
heating associated with this leakage current caused insulation material to ignite,
fire flowing along the cables to the top of the cable duct from were [sic, where] burning plastic carried the fire down to the main switchboard below'.
18 Whilst I agree that water ingress most probably initiated an electrical fault I do not believe the fire started in the ceiling space of the News Agency...
*****
25 Despite the electrician's assurance it would appear that everything was not OK because the fire started shortly afterwards. As stated at lines 131-132 of the Walshe and Associates report, the electrician should have carried out an insulation resistance test on the electrical installation."
In his 25 June 2009 report, Dr Grantham says this at paragraph 6:
"ANSWERS TO QUESTIONS
Dr Walshe's Report
6 I did not rely upon the contents of any of the late Dr Walshe's report in forming my opinion on the cause of the fire. I restate Conclusions (d) and (e) of my report dated 29 October 2009 as follows:
(d) There was electrical arc evidence at the cable entry area at the right hand side of the enclosure and also burnt insulation on the cables above the right hand side of the enclosure to suggest that the fire started at, or towards, the right side of the switch enclosure.
(e) Fire damage above the switch enclosure, although severe, was restricted to a relatively narrow band directly above the switch enclosure. This, in my opinion, is clear evidence that the fire had spread from the switch enclosure, where it started, to the area above."
Mr Plaister referred to Dr Walshe's report in his report dated 1 July 2009 as follows:
"20 I refer to the report of Dr K A Walshe February 2002 Item 5.2 Circumstance of the Fire and note the following:
In the days prior to the fire, high winds and rain had caused water ingress into the ceiling space above the News Agency resulting in electrical problems. The News Agency proprietor had reported this to the site manager who had in turn arranged for an 'electrician' to attend the News Agency to fix things up...
After the repairs, the News Agency proprietor noted voltage flicker on circuits in his shop."
The evidence also reveals that Dr Grantham relied on a letter of instruction from the plaintiff's solicitor when preparing his 3 September 2009 report. The letter of instruction from the plaintiff's solicitors to Dr Grantham dated 18 May 2009 included the following:
"We confirm that Dr Grantham has been provided with the following annexures:
(a)...
(b) Copy of report of the late Dr Walshe dated February 2002 and annexures thereto..."
Dr Grantham recorded the following acknowledgment at paragraph 9 of his 3 September 2009 report:
"DOCUMENTS PROVIDED
9 To help with the preparation of this report I have been supplied with the documents listed in the Vardanega Roberts letter of instruction dated 18 May 2009, which is included at Appendix A."
At paragraph 37 of his 3 September 2009 report Dr Grantham acknowledged that his conclusions were based in part upon "the additional information" that had been provided to him.
In contrast, Dr Grantham says at paragraph 6 of his 25 June 2009 report that he "did not rely upon any of the contents of the late Dr Walshe's report in forming [his] opinion on the cause of the fire". It should be observed, however, that Dr Grantham's report was not served upon the defendant until after the plaintiff had been requested to provide a copy of Dr Walshe's report. It is conceded that Dr Grantham's reference to the use he made of Dr Walshe's report was inspired by the defendant's request.
Discussion
The plaintiff's resistance to production of Dr Walshe's report is based on two propositions. The first is that any report referring to it was provided to the defendant under compulsion of law so that no waiver of any privilege otherwise attaching to it has occurred in the circumstances: see Sevic v Roarty (1998) 44 NSWLR 287. The second is that the plaintiff has not yet sought to tender any of the reports of Dr Grantham or Mr Plaister that contain a reference to Dr Walshe's report, so that the time has not yet arrived when the plaintiff can be said to have waived any privilege at all. The second proposition seems to me to be in truth not a separate ground at all but rather a function of the reasoning process adopted in some of the authorities upon which the plaintiff relies in support of the first.
"Under compulsion of law"
Section 119 of the Evidence Act 1995 is relevant and provides as follows:
"119 Litigation
Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of:
(a) a confidential communication between the client and another person, or between a lawyer acting for the client and another person, that was made, or
(b) the contents of a confidential document (whether delivered or not) that was prepared,
for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party."
It is accepted for the purposes of my deliberations that Dr Walshe's report is a document that falls within the terms of that section.
Section 122 is the source of the expression "under compulsion of law". It is in the following relevant terms:
"122 Loss of client legal privilege: consent and related matters
(1) This Division does not prevent the adducing of evidence given with the consent of the client or party concerned.
(2) Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120.
(3) Without limiting subsection (2), a client or party is taken to have so acted if:
(a) the client or party knowingly and voluntarily disclosed the substance of the evidence to another person, or
(b) the substance of the evidence has been disclosed with the express or implied consent of the client or party.
(4) ...
(5) A client or party is not taken to have acted in a manner inconsistent with the client or party objecting to the adducing of the evidence merely because:
(a) the substance of the evidence has been disclosed:
...
(iii) under compulsion of law..."
In Akins and Others v Abigroup Ltd [1998] NSWCA 8; (1998) 43 NSWLR 539, the Court of Appeal determined that the disclosure of an otherwise privileged witness statement in accordance with an order of a court, even if the order is termed a procedural direction, is a disclosure under "compulsion of law" within the meaning of s 122(2)(c), so that client legal privilege is not thereby waived. Mason P said this at 550-551:
"Senior counsel for Deloittes submits that the disclosure of the statements was not under compulsion of law because the usual order made pursuant to Practice Note 39 left it open to the parties in the directors' proceedings to choose whether or not they wished to disclose the information contained in the disclosed statements or the statements themselves. It was further submitted that the usual order merely brought forward the time at which the parties to the directors' proceedings would have waived any privilege touching the contents of the statements when they decided to tender those statements or called the makers of them as witnesses (cf Comfort Hotels Ltd v Wembley Stadium Ltd [1988] 1 WLR 872 at 877-8).
I would reject these submissions. In my view any disclosure by delivery of copies of the statements was "under compulsion of law" within s 122(2)(c)."
Sevic v Roarty was decided later the same year. Sheller JA expressed his conclusion at 300 as follows:
"The application of the decisions in Akins v Abigroup Ltd and Adelaide Steamship Co Ltd & Australian Securities Commission v Spalvins to this appeal means that the provisions of the Act determine whether the respondent, despite the filing of a report from Dr Tinning which referred to other documents, was entitled to resist the appellant's call for the production of those documents on the basis that legal professional privilege in them had been waived. Under the provisions of the Act, legal professional privilege had not been waived by the respondent."
Powell JA expressed his views at 301:
"Whatever may earlier have been the position...the position would seem now to be that waiver is not to be implied or imputed where the document the delivery of which is relied upon to found the implication, or to support the imputation, of waiver, was delivered - whether to the other party to the litigation or to a third party - pursuant to an order of a court or otherwise under compulsion of law unless the document be later tendered in evidence on the hearing of the proceedings in which the parties are involved, or otherwise used in such a way on the hearing of those proceedings as would make it unfair to the other party not to treat the privilege as having been waived."
His Honour concluded his analysis at 308 in these terms:
"In the present case, Dr Tinning's report was filed, and a copy served, in pursuance of a direction given by the Court. As is clear, that report has not yet been, and may never be, tendered in evidence, nor has it been used in any way which would, in my view, make it unfair for the appellant, at this stage of the proceedings, to be denied access to the documents to which it refers. What course should be taken if, and when, it is sought to tender Dr Tinning's report in evidence, or to have Dr Tinning give evidence to the effect of that contained in his report, is not a matter which this Court is called upon to determine and can only properly be determined in the circumstances existing at the time."
Recently in Gillies v Downer EDI Ltd [2010] NSWSC 1323, Garling J expressed some doubt at [46] about the continuing significance of these decisions:
"[46] That line of authority should be treated with some caution for the following reasons:
(a) It has recently been subject to criticism from the Full Court of the Federal Court of Australia in Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) 218 ALR 283 at [24]-[27] per Branson, Sundberg & Allsop JJ; and by the Court of Appeal in Dubbo City Council v Barrett [2003] NSWCA 267 at [20] per Young CJ in Eq.
(b) Sevic v Roarty applied an earlier version of s 122, the terms of which are different from the current section. The relevant sub-paragraph at that time provided:
'(2) Subject to subsection (5), this Division does not prevent the adducing of evidence if a client or party has knowingly and voluntarily disclosed to another person the substance of the evidence and the disclosure was not made:
...
(c) under compulsion of law...'
(c) Section 131A, which was introduced by the Evidence Amendment Act 2007 and came into force on 1 January 2009, and thus did not exist at the time of the decisions of Akins and Sevic, effectively requires the Court to determine a pre-trial claim for privilege as though the claim was made in the course of adducing evidence at trial. It seems at least arguable that, for the purposes of determining whether privilege is lost, there should no longer be a distinction between an expert report served pursuant to case management orders prior to the commencement of a trial and the calling of witnesses, and an expert report relied upon during the trial once a witness has been called.
(d) The consequences of the decision in Sevic were most impractical from the perspective of the efficient running of the litigation, including the proper and efficient preparation for trial and the taking of evidence at the trial. Those consequences do not fit comfortably with modern case-management practices, and in particular the '... just, quick and cheap ...' principle to which litigation is subject in this Court."
White J also considered the question in New Cap Reinsurance Corporation Ltd (in liq) v Renaissance Reinsurance Ltd [2007] NSWSC 258 at [53] as follows:
"[53] The question is not merely whether it could be said that the privileged materials were used in such a way that they could be said to influence the content of the report, but whether it could be said that they influenced the content of the report in such a way that the use or service of the report would be inconsistent with maintaining the privilege in those materials, such as, where it would be unfair for the party to rely on the report without disclosure of those materials. Where an expert's report is submitted to a party's legal advisers so as to be put into a form which will ensure that it is admissible, it can be said that the privileged communications between the expert and the lawyers have influenced the content of the report, in the sense of its form, although not in the sense of the formulation of the substantive opinions expressed by the expert. Likewise, privileged communications between an expert and the party's lawyers whereby material information is provided to the expert in the form of assumptions or documents may well influence the content of the report. However, an expert's report is required to state what material and assumptions are relied on. Use of a final report, which refers to such materials and assumptions, is not inconsistent with maintaining confidentiality in the communications which produced the final product."
Counsel for the defendant embraced the significance of the rules relating to the preparation of experts' reports in aid of his submission that the privilege in Dr Walshe's report had been lost. UCPR 31.27(1) provides as follows:
"31.27 Experts' reports
(1) An expert's report must (in the body of the report or in an annexure to it) include the following:
(a) the expert's qualifications as an expert on the issue the subject of the report,
(b) the facts, and assumptions of fact, on which the opinions in the report are based (a letter of instructions may be annexed),
(c) the expert's reasons for each opinion expressed,
(d) if applicable, that a particular issue falls outside the expert's field of expertise,
(e) any literature or other materials utilised in support of the opinions,
(f) any examinations, tests or other investigations on which the expert has relied, including details of the qualifications of the person who carried them out,
(g) in the case of a report that is lengthy or complex, a brief summary of the report (to be located at the beginning of the report)."
The defendant argued that it was not enough for the report simply to refer to the materials utilised in support of the opinion but that it must provide or furnish copies of any such materials. This is said to follow from the phrase "an expert's report must ... include any literature or other materials utilised in support of the opinions". Neither party was able to take me to any relevant authority dealing with the proper interpretation of this rule.
The defendant also embraced the proposition adverted to by Garling J in Gillies, to the effect that the s 56 Civil Procedure Act2005 imperative meant that it was potentially inconsistent with the overriding purpose for there to be any delay between the service of a particular report and the determination of whether or not privilege over it or its contents had been waived. In particular it was said to be inimical to the just, quick and cheap resolution of proceedings for there to be any possibility that a trial, for which all parties may have prepared at great length and considerable expense, might be derailed by an argument, or the outcome of an argument, about such an issue. The defendant contended that the combination of s 56 and UCPR 31.27 supported the notion that (in this case) the plaintiff's as yet unknown decision at the trial about whether or not to tender any expert's report that refers to Dr Walshe's report should not be the event triggering the earliest consideration of the issue. In lay terms, the earlier the issue is decided, the better for all concerned.
Consideration
In my view the difficulty with the defendant's contentions is that they are currently not only not supported by authority but they are in any event contrary to authority from the Court of Appeal that I am bound to follow and to apply. If the reports referred to earlier that have been served by the plaintiff were served in accordance with directions of the Court, made by consent of both parties, they were provided under compulsion of law.
I was at one point attracted to the proposition that compliance with a direction or a practice note for the pre-trial service of experts' reports was not something that occurred under compulsion of law, in the sense that the party concerned was free to make its choice, and could choose without penalty or sanction to serve or not to serve a particular report. The only restriction that applied in such a case was that any party that chose not to serve, and thereby to "disclose", a report or reports in accordance with the direction or practice note, would thereafter be precluded from later being able to do so without leave. Put another way, it could be argued that a party could not be compelled by law or otherwise to disclose any report by way of service in compliance with a direction or practice note if that party decided that it did not want to do so and was at the same time content to accept the consequences.
However, the cases that bind me proceed upon the basis that any party wishing later to rely upon an expert's report in the proceedings is in that sense at least compelled by law to disclose it. In other words, every party is compelled by law to serve its experts' reports in accordance with a direction or practice note, if it is ever to be able to rely upon them, even if it later decides not to tender the report at the trial.
This approach is wholly and consistently explicable by reference to the test of fairness that informs the concept of waiver. For example, in the particular circumstances of this case, the defendant cannot complain of any unfairness simply because it is currently faced with the prospect of confronting a report which, for all it yet knows, may be founded or based upon opinions expressed by Dr Walshe that cannot presently be verified or even understood. This is for at least two reasons. First, neither Dr Grantham nor Mr Plaister purports in any way to rely upon Dr Walshe's report or to incorporate his reasoning or analysis in the opinions or conclusions at which they arrive. There is in that sense, therefore, no inconsistency between reliance upon anything contained in Dr Walshe's report and the maintenance of the privilege. Secondly, however, putting aside the possibility of procedural dislocation at the trial, to which no doubt the trial judge, with or without the urging of the defendant, will be alive, the defendant is not prejudiced, and in that sense faces no unfairness, unless or until the plaintiff seeks to introduce the reports of Dr Grantham or Mr Plaister into evidence.
It is in that sense that cases such as Sevic and Atkins strike the balance between applying and enforcing the case management techniques and interventions that characterise modern commercial litigation on the one hand and the adjudication of what is fair to the parties to the litigation on the other hand. It was submitted to me by the plaintiff in this case that the time to determine the issue of waiver was at the trial. That seems to me with respect to be no more or less than a tacit recognition and acceptance by the plaintiff of the fact that the question of whether or not it will have waived the privilege it seeks to maintain over Dr Walshe's report will necessarily attend the plaintiff's ultimate decision about whether or not to utilise or employ any of its experts' reports that refer to it at the trial.
I am also of the view that the defendant's argument based on UCPR 31.27(1) cannot assist. It relies on paragraph (e) and requires it to be interpreted or construed in a way that would have meant that Dr Walshe's report should have been annexed to the reports that refer to it. If the paragraph were to be interpreted in that way it would necessitate ignoring the effect of the words in parentheses that clearly provide the author of an expert's report with the option of either physically annexing the item in question to the report or of simply referring to it in the body of the report. It seems plain enough that Dr Grantham and Mr Plaister each opted for the latter approach and cannot therefore be said to have offended the provision.
Conclusion
The plaintiff has not waived privilege over the February 2002 report of Dr K A Walshe, referred to in the reports of Dr Grantham and Mr Plaister. It follows in my view that the defendant's notice of motion filed 10 August 2012 should be dismissed with costs.
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Decision last updated: 30 August 2012
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