Argyle Brewery P/L trading as the Craig Brewery Bar & Grill v Darling Harbourside (Sydney) P/L
[1993] FCA 1025
•23 DECEMBER 1993
ARGYLE BREWERY PTY LIMITED trading as THE CRAIG BREWERY BAR AND GRILL v.
DARLING HARBOURSIDE (SYDNEY) PTY LIMITED and ORS.
No. NG247 of 1992
FED No. 1025/93
Number of pages - 9
Discovery and Inspection of Documents
(1993) 120 ALR 537
(1993) 48 FCR 1
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
BEAUMONT J
CATCHWORDS
Discovery and inspection of documents - legal professional privilege - waiver - whether intention to waive the privilege as a whole - imputation made where fairness requires - "draft" writ or statement of claim produced in settlement discussions - whether privilege waived - onus of proof
Attorney-General (NT) v Maurice (1986) 161 CLR 475.
Southern Equities Corporation Ltd v Western Australian Government Holdings Ltd unreported, 16 June 1993 Western Australia Supreme Court (Full Court).
Sicpa North America Inc. v Donaldson Enterprises Inc NJ Super L, 430 A 2d 262 (1981).
Dubai Bank Ltd v Galadari and Ors (1990) 1 Ch 98.
HEARING
SYDNEY
#DATE 23:12:1993
Counsel and Solicitors M R Ellicott
for Applicant instructed by
Corrs Chambers Westgarths
Counsel and Solicitors Mr W G Hodgekiss
for Respondent instructed by
Harris and Company
ORDER
The Court orders that:
1. The applicant produce to the respondent the "draft writ" referred to in the reasons for judgment for inspection and for copying.
2. The applicant pay the respondent's costs of this application.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
REASONS FOR JUDGMENT
(On application to inspect document for which a claim of legal professional privilege is made)
INTRODUCTION
BEAUMONT J Before the Court is a notice of motion in proceedings arising out of a dispute between the landlord and the tenant of commercial premises. In the principal proceedings, a claim for damages is made by the tenant, Argyle, for allegedly misleading conduct; and a cross-claim is made by the landlord, Darling Harbourside, for rent allegedly due. In support of Argyle's claim in the principal proceedings, not yet dealt with, reference has been made in affidavit evidence filed on its behalf, to the production, by a director of Argyle, of a "draft" writ or draft statement of claim ("the draft writ") in the course of negotiations between the parties. Darling Harbourside now seek to inspect the document; Argyle resists this, claiming legal professional privilege.
THE BACKGROUND FACTS
2. In the affidavit of Angelo George Pippos, a director of Argyle, sworn 23 July 1993, Mr. Pippos referred to negotiations which took place in June 1991 between representatives of the parties to the principal proceedings: Mr. Pippos and Mr John Anton Szangolies, another Argyle director, represented Argyle at this discussion; Darling Harbourside were represented by Messrs. Starkey and Gardner. In para.78 of his affidavit, Mr. Pippos said:
"On 25 June 1991 I, Szangolies and, to the best of my recollection, McGregor met with Starkey and Gardner at the office of Darling Harbourside. At the meeting, the following conversation took place:
Gardner said: 'Well gentlemen here we are yet again. I don't know what we are going to be able to achieve today but let's hope its something constructive.' I said: 'Listen Gardner we're sick of you blokes stuffing us around. We're sick of your intimidatory behaviour and you're holier than thou attitude. You guys seem to think that you can keep hitting us around the head and we'll sit here and take it. You treat us like all those countless number of failed tenants who you have treated so unmercifully. If you want to fight, you'll get one. We've got the resources to fight this to the death, and I'm not joking. I have here with me a draft Statement of Claim prepared by our solicitors and we're ready to move. So don't think I've come here cap in hand as I've done so many times in the past and that I'll sit here and listen to your endless bullshit and associated threats. You want to talk about some rental
relaxation based on justifiable claims please tell me because I don't think we should all be sitting here wasting our respective times. We came here in late May and you sent us away to put forward a proposal which we did in an atmosphere of conciliation which I thought we had
achieved. I sent you a letter on 7 June with an offer which I thought was more than fair in the circumstances and you Gardner came back on 17 June with your usual jackboots threatening to throw us out. That's hardly in conformity in the atmosphere of conciliation when we last had our parting. I'm not going to sit here and go through all the old reasons - here's our figures, they tell the story now what are you going to do?' (Emphasis added) Gardner said: 'You don't expect the landlord to subsidise your business and livelihood.' I cut him short and said:
'Cut the bullshit, I don't think there's any need to stay here any longer. Go for your life and see if you can get us out.' At that point Starkey said:
'Come on gentlemen we are here to reach some sense of agreement.'
I said: 'You've got our proposal in writing. I sent it to you on 7 June. That's the best we can offer and I think it's still far too much. I certainly believe that for the business to be viable the offer is far too generous. I told you our position. We can serve this writ tomorrow it's
already to go. The balls in your court. We've been trying to negotiate with you fellas for two years and all we get are stalling tactics designed to frustrate any sort of amicable settlement of our
differences. All we get are offers of deferment which are purely cosmetic and don't address the problem. (Emphasis added) ..."
In his affidavit sworn 23 July 1993, Mr. Szangolies said (para.200):
"After some posturing by both sides I, together with Pippos and McGregor, met with Starkey and Gardner at the landlord's office on 25 June 1991. I recall that Pippos was very forceful and said:
'We are not going to sit here and listen to your rubbish anymore. You keep putting us off with intimidatory behaviour. If you want to go to court I'm happy to accommodate you. It's not an option that I want to pursue but I have the resources to use if I have to.'
Pippos then produced a Writ and put it on the table. Gardner said: 'That doesn't scare us. We're not here to subsidise your business.
..." (Emphasis added)
In a subsequent affidavit sworn 22 October 1993, Mr. Pippos said:
"I refer to paragraph 18 of Mr Pentecost's 27 August 1993 Affidavit. A draft writ was displayed to Mr Pentecost but never shown to him in the form of tabling the document and allowing him to read it."
THE EVENTS LEADING TO THE PRESENT NOTICE OF MOTION
5. By facsimile transmission dated 25 August 1993, addressed to the solicitors for Argyle, the solicitors for Darling Harbourside called for a copy of the writ as a discoverable document. The solicitors for Argyle responded on 27 August, contending that the document fell within the class of document to which legal professional privilege extended. Reference was made to Trade Practices Commission v Sterling (1978) 36 FLR 244.
By notice of motion filed on 8 October 1993, Darling Harbourside seeks (para.2) an order that its solicitor be permitted to inspect, and to copy, the draft writ. The only evidence before the Court on the notice of motion is the affidavit material set out above. The respondents were not cross-examined.
THE CONTENTIONS OF THE PARTIES
7. On behalf of Darling Harbourside, it is apparently accepted that the draft writ was a privileged document. However, Darling Harbourside contends that, the document having been displayed to its representatives at the meeting, any privilege was waived by Argyle. For its part, Argyle disputes that its conduct amounted to a waiver or that fairness in the sense explained in Attorney General (NT) v Maurice (Maurice's Case) (1986) 161 CLR 475 now requires the production of the writ for inspection by Darling Harbourside.
THE AUTHORITIES
8. The principles to be applied in this area are well settled. The leading authority for present purposes is Maurice's Case, reference should also be made to a recent decision of the Supreme Court of Western Australia; and to an American case dealing with facts with some similarity to the present matter.
In Maurice's Case, the claims book was handed to the Commissioner and the other parties. In the course of the proceedings, the claimants made incidental reference to its contents. The Commissioner ruled that he should not require production of source materials used in preparing the book. A challenge by way of judicial review of the Commissioner's ruling failed.
Gibbs CJ said (at 480):
"The matter was argued as though the question in issue was whether source material is waived by a waiver of the privilege in respect of a document derived from that source material. Although it does not matter, it does not seem to me right to suggest that the 1982 Claim Book was privileged. It was not a document which had been brought into existence for the sole purpose of being submitted to legal advisers for advice or use in legal proceedings: see Grant v Downs ... On the contrary the completed claim book (any drafts were no doubt in a different situation) was intended to be, and was, communicated to all the parties concerned and it was open to any party to make any proper use of it. However, if the claim book had been privileged, there can be no doubt that the distribution of the copies would have waived the privilege. On either view the question is whether the publication and use of the claim book constituted a waiver of the privilege in respect of the documents which formed some of its sources."
Having said that there was no express waiver and no actual intention to waive, Gibbs CJ said (at 481):
"...the question whether a waiver should be implied depends on whether it would be unfair or misleading to allow a party to refer to or use material and yet assert that that material, or material associated with it, is privileged from production."
With reference to some of the decided cases, Gibbs CJ said (at 481):
"These cases may be explained by saying that it is not unfair or misleading to refer to a document in a pleading or affidavit which is not put into evidence but that if the document is set out in full the privilege is waived. A fortiori, of course, privilege in respect of materials used in drawing a pleading or an affidavit and not referred to therein, would not lose their privilege because they had been used in that way."
Gibbs CJ went on to say (at 483):
"The 1982 Claim Book was in some respects analogous to a pleading; it served to state the case which the claimants intended to present although it went into much more detail than would be expected of a formal pleading. So long as the claim book was not used in any other way, it is impossible to say that it was in any respect unfair or misleading to lodge it with the Commissioner and to distribute it to the parties without making available the sources from which it was derived.
The 1982 Claim Book was a document of a kind that would not be admissible in ordinary proceedings, but if it had been admissible in the proceedings before the Aboriginal Land Commissioner, and if it had in fact been admitted as evidence, the appellant would have been entitled to test its accuracy and weight, and since that could hardly be done unless it was known on what sources it was based, considerations of fairness might have required those sources to have been produced."
Mason and Brennan JJ said (at 487-8):
"An implied waiver occurs when, by reason of some conduct on the privilege holder's part, it becomes unfair to maintain the privilege. The holder of the privilege should not be able to abuse it by using it to create an inaccurate perception of the protected communication."
Their Honours went on to say (at 489):
"It is well settled that a litigant of course does not waive his legal professional privilege to research materials, directly or by implication, by merely submitting a pleading..."
Deane J said (at 493):
"If ... a party sets forth part of the contents of a particular identified document or communication or asserts the effect of or his reliance upon a particular identified document or communication, it may be that considerations of fairness might require that he be treated as having waived any legal professional privilege in relation to the whole document or communication: ... Where, however, he does no more than make use of privileged material (e.g. legal advice, expert opinion or statements of potential witnesses) for the purpose of formulating the statement in such a document of the details of the case which he proposes to make, it would be an affront to ordinary notions of fairness to hold that the effect of his compliance with that procedural requirement was that he has waived his legal professional privilege in relation to such material."
Dawson J said (at 495) that it was -
"... inappropriate to speak in terms of waiver of privilege in relation to the claim book."
His Honour went on to say (at 496):
"Until it is placed in evidence, which never occurred with the 1982 Claim Book, it remains no more than a statement of the claimants' case for use in the relevant proceedings by all parties. It is a document which is intended to be communicated to the Commissioner and other participants in the hearing. It is not in any sense a confidential communication nor is it intended to be. In those circumstances I am unable to see how it is a document to which legal professional privilege attaches. Before it emerges in its final form, successive drafts of a claim book may be privileged but this is not because of any privilege attaching to the final product. Draft pleadings in an action may be privileged, but I have never heard it suggested that a statement of claim or a defence or a reply is privileged so that the privilege is waived when it is filed or delivered to the other side. The reason why the draft may be privileged before the document is completed was early explained in Walsham v Stainton..., upon the basis that, although after a pleading has been filed it becomes publici juris, the drafts 'might disclose the precise character of confidential communications with the solicitor, by showing the alterations made from time to time'. In the same way a letter to the other side in litigation which is drafted in a solicitor's office may be privileged before it is sent because it may reveal confidential communications between the solicitor and his client. Once it is sent, however, it ceases to be confidential and there is not privilege in it, not because privilege in the document is waived, but because no privilege attaches to it. (Emphasis added)
When the claim book in this case reached final form or, at all events, when it was put to the use for which it was intended, it was not a confidential communication and not a privileged document. Legal professional privilege exists to secure confidentiality in communications between a legal adviser and his client but it can have no application in relation to a document the purpose of which is to communicate information to others. Of course, what is contained in such a document may reveal some confidential communication between a legal adviser and his client, but if it does do so and so waives privilege, the waiver is of the privilege in the anterior communication and not in the document itself."
Dawson J concluded with these observations (at 499):
"The fact that the claim book may have drawn upon information contained in communications which were themselves privileged, being made solely in contemplation of litigation, involves no violation of the confidence in which those communications were made. That is obvious. There would be little point in communications made in contemplation of litigation if they could not be used for the purposes of the litigation. What is important is that the 1982 Claim Book, while its source may be information imparted upon a privileged occasion, does not disclose the content of any privileged communication and so does not abandon the element of confidentiality which the privilege protects. There was, therefore, no waiver of privilege."
In Southern Equities Corporation Ltd v Western Australian Government Holdings Ltd, unreported, 16 June 1993 (1993 SAWAJB 70), the Full Court of the Supreme Court of Western Australia upheld a claim of legal professional privilege in respect of a witness's affidavit obtained by solicitors with an intention to use it at trial if the gravely ill witness should die beforehand. The Full Court disagreed with reasoning at first instance to the effect that, as the affidavit was created in order to be filed, it could not be equated to a proof of evidence and attracted no privilege because it lacked confidentiality. The High Court, having granted leave, has reserved its decision on an appeal from the Full Court's decision.
In Sicpa North America Inc. v Donaldson Enterprises Inc., NJ Super L, 430 A 2d 262 (1981), it was held that a limited disclosure of information, which was supplied to an adversary for settlement purposes only, can result in a waiver of the protection afforded to such information by the "attorney - client" privilege. Martin JSC said (at 265):
"The result is the same where the client discloses, or consents to counsel's disclosure, of some of the privileged information where the purpose of such disclosure is to advance the client's own self-serving objectives. It makes no difference in such a situation that only a part of the privileged information is disclosed, as a partial waiver of a privileged communication effectively waives the entirety thereof......A party cannot choose to disclose only so much of an allegedly privileged matter as is helpful to his case; once a party begins to disclose a confidential communication for a purpose outside the scope of the privilege, the privilege is lost......In Burlington Industries, a patent infringement action where the defendant moved to compel discovery, the court held that a disclosure of confidential information during settlement negotiations is a waiver as to the limited information disclosed. This court finds that Burlington should control in the present situation, notwithstanding plaintiff's attempt to limit the scope of the disclosure by contract."
THE RELEVANT PRINCIPLES
22. The above authorities support the following propositions for present purposes:
(1) A draft of a pleading, as distinct from the pleading itself, will, ordinarily, be protected by legal professional privilege as containing confidential information not intended to be disclosed to an adversary.
(2) This privilege may be waived, wholly or in part, where the party entitled to the privilege intends to waive it, wholly or in part.
(3) Where the privilege is intended to be waived in part only, the law may nonetheless impute an intention to waive the privilege as a whole, whatever the actual intention. The imputation will be made, as a matter of implied waiver, where the "fairness" of the situation, in the sense described by Wigmore, requires.
FINDING OF MATERIAL FACTS
23. As has been noted, none of the deponents was cross-examined. However, for present purposes, from the evidence in their affidavits, the following findings of primary fact should be made with respect to what occurred at the meeting held on 25 June 1991:
(1) The representatives of Argyle produced a document which they described as a "draft" statement of claim or writ.
(2) The document was placed upon the table.
(3) The representatives of Argyle indicated that the "draft" pleading was ready to be filed, and would be filed, on the following day, if necessary.
In the circumstances, the following inferences should, I think, be drawn from these primary facts:
(4) Although described as a "draft", the document was to be treated as a pleading in its final form which was ready to be filed and served on the adversary.
(5) That Argyle consented, indeed invited, the representatives of Darling Harbourside to read the document at the meeting.
(6) This was done by Argyle in order to secure a perceived advantage in the bargaining process.
CONCLUSIONS
25. In my opinion, an order for the disclosure of the document now in dispute should be made, on two grounds.
In the first place, it is well-established that the onus is on Argyle: it is for the party refusing disclosure to establish his right to refuse (see, e.g. Waugh v British Railways Board (1980) AC 521 at 541.) As Dawson J, in the passage cited from Maurice's Case (at 496) has pointed out, a statement of claim is not privileged, even if drafts of it, before it reaches its final form, may be. But it is not clear on the evidence whether the present document was, or was not, in its final form: although it was described as a "draft", it was also said to be ready to be filed. The present case is thus on all fours with Dubai Bank v Galadari and Ors (1990) 1 Ch 98 where it was held that the evidence did not clearly establish the true character of the document in dispute as one that would attract privilege.
Alternatively, if I am wrong in the foregoing conclusion, there remains the question whether, as a matter of fairness, a waiver of the privilege should be imputed. In my view, for the reasons given in Sicpa, it should. In the present case, Argyle invited its adversary to take note of, and by implication, if necessary to read the document, as part of Argyle's bargaining strategy. In those circumstances, in return for the perceived bargaining advantage to Argyle of making that offer, it is only fair, in my view, that Argyle should not now be permitted to withdraw its earlier invitation. In my opinion, the privilege should be treated as waived, even if there was no actual intent to waive. Yet, as has been seen, the evidence available is consistent with the existence of such an intention.
For all these reasons, the claim for privilege should be rejected.
PRIVILEGE IN AID OF SETTLEMENT
29. Although the draft writ was produced during settlement discussions, Argyle has confined its claim to one of legal professional privilege and has not suggested that "without prejudice" privilege is available, possibly because of the limits on the ambit of such a claim concluded in the Field v Commissioner for Railways for New South Wales (1955) 99 CLR 285 at 291-3; (see the discussion in McNicol, The Law of Privilege, at 475-8.) It is not necessary for me to pursue the question.
I propose to make the following orders:
ORDERS PROPOSED
1. Direct that the applicant produce to the respondent the "draft writ" referred to in the reasons for judgment for inspection and for copying.
2. Order that the applicant pay the respondent's costs of this application.