Atha Cliath Pty Ltd as Trustee for the BDSM Trust trading as Only One Realty Sunshine Coast v Only One Franchising Pty Ltd
[2010] QDC 26
•16 February 2010
DISTRICT COURT OF QUEENSLAND
CITATION:
Atha Cliath Pty Ltd as Trustee for the BDSM Trust trading as Only One Realty Sunshine Coast v Only One Franchising Pty Ltd & Anor [2010] QDC 26
PARTIES:
ATHA CLIATH PTY LTD ACN 113 318 317 AS TRUSTEE FOR THE BDSM TRUST TRADING AS ONLY ONE REALTY SUNSHINE COAST
Plaintiff/Applicant/Respondent
v
ONLY ONE FRANCHISING PTY LTD ACN 123 990 170
First Defendant/First Respondent/First Applicant
and
DONALD GERARD EDWARDS
Second Defendant/Second Respondent/Second Applicant
FILE NO:
147/2009
DIVISION:
Civil
PROCEEDING:
Application/Cross Application
ORIGINATING COURT:
District Court at Maroochydore
DELIVERED ON:
16 February 2010
DELIVERED AT:
Maroochydore
HEARING DATE:
29 January 2010
JUDGE:
K S Dodds, DCJ
ORDER:
The defendants’ application is dismissed.
Regarding the plaintiff’s application, order in terms of paragraphs 1 to 5 inclusive of the plaintiff’s application filed 6 January 2010.
The costs of and incidental to the plaintiff’s application filed 6 January 2010 are ordered to be the plaintiff’s costs in the cause.
Order the defendants’ pay the plaintiff’s costs of and incidental to the defendants’ application filed 28 January 2010.
CATCHWORDS:
PROCEDURE – DISCOVERY AND INTERROGATORIES – DISCOVERY AND INSPECTION OF DOCUMENTS – PRODUCTION AND INSPECTION – Legal professional privilege – Waiver of privilege – where disclosure of document to other party accidental – whether privilege has been expressly or impliedly waived – where defendants refused to sign request for trial date on the basis it should be determined whether privilege had been lost regarding the document before the proceeding was ready for trial
PROCEDURE – DISCOVERY AND INTERROGATORIES – DISCOVERY AND INSPECTION OF DOCUMENTS – PRODUCTION AND INSPECTION – Grounds for resisting production – relevance – where plaintiff’s action seeks to recover price paid for purchase of franchise – where plaintiff alleges breach of duty by defendants because of false representations – where plaintiff alleges misleading and deceptive conduct in breach of the Trade Practice Act 1974 – where no claim for loss of profits nor for costs incurred in attempting to sell the franchise – whether financial documents relating to the plaintiff’s conduct of the franchise business purchased are directly relevant to an allegation in issue in the pleadings – where defendants refused to sign a request for trial date
Trade Practices Act 1974 (Cth) s 52
Uniform Civil Procedure Rules 1999 (Qld) r 211, r 214(1)(a), r 214(1)(b)
Cases cited:
GT Corporation Pty Ltd v Amare Safety Pty Ltd [2007] VSC 123
Hong Kong Bank Australia Ltd v Murphy & Ors [1993] 2 VR 419
Mann v Carnell (1999) 201 CLR 1
COUNSEL:
T Nielsen for the plaintiff
N Stubbins for the defendants
SOLICITORS:
Schultz Toomey O’Brien Lawyers for the plaintiff
John Joyce Solicitors for the defendants
There are two applications before the Court:
by the plaintiff, filed on 6 January 2010, returnable on 29 January 2010 by the plaintiff for:
§an injunction to restrain the defendants by themselves, their solicitors, barristers, servants, agents or otherwise howsoever from using or divulging to any third person, copies of or information derived from a statement of the members of the plaintiff company, from making any copies of the statement or divulging to any third party or entity the contents of the statement;
§an order that the defendants cause all copies of the statement to be delivered to the plaintiff’s solicitors;
§an order that the defendants’ signature on a request for trial date be dispensed with and the matter be set down on the callover list;
§in the alternative, directions regarding the future conduct of the plaintiff’s claim;
§costs,
by the defendants, filed on 28 January 2010, returnable on 29 January 2010 for orders:
§Pursuant to rules 221 and 371 of the Uniform Civil Procedure Rules 1999 the plaintiff discharges it duty of disclosure by delivering a supplementary list of documents to the defendants;
§such further or other order this Honourable Court deems appropriate;
§costs.
Each application was supported by affidavits from the solicitor acting for each party.
The Injunction Application
It seems clear from the affidavit of Mr Shultz, a principal of the firm of solicitors acting for the plaintiff, although it is not explicitly set out therein, that the statement referred to in the plaintiff’s application is a copy of a statement brought into existence for the purpose of legal advice or perhaps the proceeding in which the application is brought. The plaintiff’s solicitor has deposed to the circumstances in which it came into the hands of the defendants’ solicitor. He had never received instructions from the plaintiff to waive privilege for the statement.
It may be accepted that the way in which a copy of the statement came to be in the hands of the defendants’ solicitor is as follows:
After the statement of claim and defence had been delivered, a staff member in the plaintiff’s solicitors office prepared a list disclosing documents in the possession or under the control of the plaintiff directly relevant to an allegation in issue in the pleadings.[1] Mr Schultz reviewed and sent that list to the defendants’ solicitors under cover of a letter dated 31 August 2009. Despite that review he did not notice that the statement in question, in error, had been included in part one of the list instead of part two, which was the part relating to disclosure of documents for which privilege was claimed. He was away on leave between 22 October 2009 until 1 November 2009 and a locum was employed. Whilst away a letter was received from the defendants’ solicitors requesting a copy of nominated documents in the list, one of which was the statement in question. Staff at the plaintiff’s solicitors’ office prepared a letter dated 29 October 2009 which was signed by the locum and sent to the defendants’ solicitor accompanied by copies of the documents requested. By letter dated 5 November 2009, the defendants’ solicitors wrote to the plaintiff’s solicitors referring to the statement and asserted there were significant discrepancies between parts of the statement and allegations in the statement of claim. The letter included the following paragraph “having received this document it is apparent that either your client has specifically waived privilege or it has been provided to our office through the error of your firm. In either event, our position is that privilege has been waived.”
[1] Uniform Civil Procedure Rules 1999 rule 211.
Mr Schultz responded by letter dated 6 November 2009 in the following terms:
“You are quite correct in pointing out that the statement of Robert and Siobhan Davies was listed as document 52 when it was intended to be included as a witness statement in Part 2 of the list of documents. It is clearly a document which has come into existence solely for the purposes of the litigation. The fax that you sent on 27 October 2009 arrived whilst the writer was on leave and our letter of 29 October 2009 sent in his absence – as a result the error was not detected.
Could you please return the original statement and give the usual undertaking not to take copies or permit the document to be shown to any other person.”
Correspondence followed between the solicitors in which the plaintiff’s solicitor continued to assert the document should be returned and its content not be used in the proceeding, while the defendants’ solicitor continued to assert that privilege had been waived.
The solicitor for the defendants, Mr Young has deposed in his affidavit that upon receiving the list of document, he considered it unusual that a statement of the plaintiff’s principal should be disclosed and not the subject of privilege. He considered that if a mistake had been made, the error would be identified and corrected in response to his request for a copy. When provided with the copy on his request and having read it, it became apparent to him that it would normally be privileged. However since it had been provided, he considered the plaintiff’s solicitors had turned their attention to the question prior to providing the copy. As a matter of courtesy, he brought the matter to the attention of the plaintiff’s solicitors. He considered that if the plaintiff’s intended to claim privilege still existed a determination should be made pre-trial whether privilege had been waived. He contended privilege attaching to the statement had been lost.
Counsel for the defendants submitted that the plaintiff, through its solicitor had expressly waived privilege in the statement because rule 214(1)(a) and (b) UCPR provided that the duty of disclosure was performed by delivering a list of documents to which the duty related, with the documents in relation to which privilege from disclosure was claimed identified and at the other party’s request delivering to that party, copies of the documents in the list of documents other than those in relation to which privilege was claimed. By delivering a copy of the statement the plaintiff expressly waived privilege.
Alternatively, counsel submitted that the defendants’ solicitors in their letter of 27 October 2009 to the plaintiff’s solicitors requesting copies of certain documents from the list of documents including the statement in question, also asked for the basis of the claim of privilege for certain documents in the list of documents for which privilege was claimed. By that, attention was directed to the question of privilege. In the plaintiff’s solicitors reply dated 29 October 2009 enclosing copies of documents requested, the writer informed the basis of the claim of privilege was that the documents came into existence for the dominant purpose of litigation either anticipated or pending. It should be inferred that the writer having turned his mind to documents being privileged, privilege had been expressly waived in the statement in question.
I do not think it is shown privilege has been expressly waived. It seems to me that once Mr Schultz on reviewing the list failed to notice that the statement was in the list of documents in the part which did not contain documents for which privilege was claimed, the most likely course of events which followed in the circumstances is that nobody else in the plaintiff’s solicitors office who had any hand in what followed, turned their mind to the question of privilege, rather proceeded according to what the list seemed to indicate.
Alternatively, counsel submitted waiver of privilege should be implied.
It is trite that privilege may be lost, although the party whose privilege it was never intended to waive the privilege. In Mann v Carnell (1999) 201 CLR 1, in a majority judgment in the High Court it was said that “Legal professional privilege exists to protect the confidentiality of communications between lawyer and a client. It is the client who is entitled to the benefit of such confidentiality and who may relinquish that entitlement. It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilege--- Waiver may be express or implied. Disputes as to an implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect--- What brings about the waiver is the inconsistency, which the courts where necessary, informed by considerations of fairness perceive between the conduct of a client and maintenance of the confidentiality; not some overriding principle of fairness operating at large”.[2]
[2] At page 13.
In Hong Kong Bank Australia Ltd v Murphy & Ors [1993] 2 VR 419, Smith J at 441 speaking of unintended disclosure of a privileged document said “Applying Australian case law it seems to me that the better view is that the privilege can only be said to be waived by unintended disclosure, if the circumstances are such that the waiver should be implied. Whether that waiver should be implied will usually turn on the issue of fairness, referred to in Maurice’s case--- Thus if the party who acquired knowledge of the privileged document would have difficulty conducting its case while trying to ignore the content of the document, there would be an argument that fairness required that the party that inadvertently disclosed the privileged document should bear the consequences of its mistake---”.[3]
[3] At page 441.
In GT Corporation Pty Ltd v Amare Safety Pty Ltd [2007] VSC 123 Hollingworth J said “In determining what fairness requires in each case, the courts have had regard to such matters as: how the recipient obtained the document; how quickly the party claiming privilege acted once it learned of the mistake; what, if any, use had been made of the information; what prejudice might flow to either side from the waiver or non-waiver of privilege; whether the inspecting party would have difficulty conducting the case while trying to ignore the contents of the documents”.[4]
[4] At paragraph 12.
There have been other cases in the courts where inadvertent disclosure of privileged documents has led to a determination whether waiver of privilege should be implied. The factual situations are diverse. As a general proposition, in cases where disclosure cannot be said to be anything other than due to inadvertence, the court will assist the disclosing party to retrieve the situation, except where that would result in prejudice to the other party.
In the present case, the defendants’ solicitor plainly initially suspected that the disclosure in the list may have been inadvertent, although he has deposed that he was aware of some facts which may have explained it. Once, however, he received the statement, he realised that in all probability the disclosure was in error. In his affidavit he has deposed that the statement revealed inconsistencies between its content and parts of the statement of claim. These alleged inconsistencies are not disclosed.
Whilst it was careless to allow the present situation to arise in the first place, I do not think it is shown that it would be unfair to the defendants to assist the plaintiff in retrieving the situation so far as possible.
Request for Trial Date
This part of the plaintiff’s application is connected with the defendants’ application.
The pleadings closed on 22 July 2009. A request for trial date was first served by the plaintiff on 26 October 2009 in an unsigned form and later on 25 November 2009 in signed form.
One of the bases upon which the defendants’ solicitor would not sign the request for trial date was because he considered it should be determined whether privilege in the statement had been lost before the proceeding was ready for trial. He also asserted that full disclosure by the plaintiff had not occurred.
I think the defendants’ solicitor, in considering the privilege issue needed to be resolved, was correct. The defendants’ preparation for trial required the question be resolved before the trial date.
The other issue is whether certain documents relating to earnings are required by the Uniform Civil Procedure Rules 1999 (UCPR) to be disclosed by the plaintiff.
The duty of disclosure is set out in Rule 211 UCPR. It is to disclose documents in the possession or under the control of a party directly relevant to an allegation in issue in the pleadings.
The plaintiff’s claim arises out of the purchase from the first defendant for $200,000 of a regional franchise for real estate sales and leasing.
It was not in dispute this had occurred and that the second defendant was the sole director of the first defendant and was involved in the day to day management of and many other transactions of it. The amount claimed was $200,000 being the price paid for the franchise.
It was pleaded:
§that the second defendant made representations about the growth prospects and profitability of the regional franchise to the plaintiff which were relied upon by the plaintiff in purchasing the regional franchise;
§that the plaintiff would not have purchased the regional franchise but for those representations;
§that the first and second defendants owed a duty of care to the plaintiff to ensure the representations were truthful and accurate and could be relied upon;
§that the representations were wrong;
§that the first and second defendants breached the duty of care;
§that as a result, the plaintiff suffered loss of the purchase price;
Alternatively it was pleaded that the making of the representations by the defendants was misleading and deceptive conduct in breach of the Trade Practices Act 1974:
§the plaintiff relied upon the representations and never would have purchased the regional franchise but for reliance upon the representations, consequently had suffered loss of $200,000 purchase price.
The defendants’ defence denied that the representations particularised in the statement of claim were made. Documents signed by the plaintiff showed that the representations were not made and that the plaintiff did not rely upon any representations in purchasing the regional franchise for $200,000. Their counterclaim alleged:
§the plaintiff engaged in misleading and deceptive conduct in contravention of section 52 of the Trade Practices Act 1974 in bringing its claim based upon the alleged misrepresentations;
§the plaintiff was in breach of the franchise agreement in failing to pay membership and ongoing fees.
It sought an order restraining the plaintiff from asserting or pursuing its claim and damages including the amount outstanding ($14,534.46) for membership and ongoing fees.
In response to the tender of a signed request for trial date by the plaintiff’s solicitors, the defendants’ solicitors by letter dated 8 December 2009 declined to sign the document asserting inadequate disclosure by the plaintiff, asserting documents such as invoices to franchisees and from suppliers, trust account statements, bank statements for the period of the plaintiff’s trading activities, any valuation or market appraisal of the business of the regional franchise, were documents which required disclosure as directly relevant to the plaintiff’s claim for damages.
The plaintiff’s solicitor rejected this on the basis that there was no claim for loss of income as a result of misrepresentation nor for costs incurred by the plaintiff in attempting to sell the franchise as a going concern.
The defendants’ solicitors responded by asserting that in a claim such as the plaintiff was prosecuting, the overall financial position must be assessed in determining the amount of loss or damage suffered by the plaintiff. Full disclosure of the plaintiff’s financial and trading records was necessary. Profit and loss statements for March to June 2008 and July to May 2009 had been disclosed and foundation documents supporting the statements should be disclosed. Disclosure of all financial information relevant to the trading activities of the regional franchise during the period it was operated by the plaintiff was required by the duty of disclosure. Documents of a nature previously requested, plus copies of file notes or internal memoranda relating enquiries from prospective purchasers of franchises were relevant to both the plaintiff’s claim and defendants’ counterclaim.
By letter dated 18 December 2009 from the plaintiff’s solicitors to the defendants’ solicitors some further documents were disclosed “out of an abundance of caution; the sales register, account transactions, supplementary list of documents. The letter advised that as no claim for loss of profits had been made, individual invoices and accounts and bank statements were not relevant. There were no other valuations and market appraisals to be disclosed nor any documents relating to a trust account operated by a regional franchise. That was a matter for individual franchisees. There was a further request, the request for trial date be signed.
The object of damages for the causes of action pleaded by the plaintiff in this proceeding is to compensate the plaintiff for the loss it has suffered so far as money can do it. The plaintiff’s case as pleaded is that it would not have purchased the regional franchise, but for the defendant’s misrepresentations, its misleading or deceptive conduct. Because of that it has lost all the money it paid over.
The plaintiff’s claim, both tortious and statutory is for the amount paid for the franchise in reliance on misrepresentations about prospects and profitability. The claim is, that but for the misrepresentations, the plaintiff would not have purchased the franchise. If it establishes those matters it will be entitled to recover what it paid.
As the pleadings stand, the additional documents which the defendants’ assert should be disclosed are not directly relevant to any allegation in issue in the pleadings. The issues on the pleadings are whether the misrepresentations were made, whether but for the misrepresentations the plaintiff would not have purchased the regional franchise. The counterclaim includes a claim for some unpaid fees which the plaintiff has admitted are not paid. Liability for payment follows on determination of the plaintiff’s claim.
Orders
The defendants’ application is dismissed. Regarding the plaintiff’s application, order in terms of paragraphs 1 to 5 inclusive of the plaintiff’s application filed 6 January 2010.
The costs of and incidental to the plaintiff’s application filed 6 January 2010 are ordered to be the plaintiff’s costs in the cause.
Order the defendants’ pay the plaintiff’s costs of and incidental to the defendants’ application filed 28 January 2010.
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