Barnes and Barnes & Anor (No. 2) - [2017] FamCA 675

FAMILY COURT OF AUSTRALIA

BARNES & BARNES AND ANOR (NO. 2)

[2017] FamCA 675

FAMILY LAW – DISCOVERY – Legal professional privilege claimed – where the court examines whether the wife acted inconsistently with the maintenance of the privilege – where it is held that no waiver has occurred.

FAMILY LAW – INJUNCTIONS – COSTS – Where the wife alleges collusion to obtain injunctive relief but then subsequently withdraws the allegation – costs application against the wife successful.

Family Law Act 1975 (Cth)

Archer Capital No 4A Pty Ltd v Sage Group PLC (No 3) [2013] FCA 1160
Burakiewicz and Muscatel [2014] FamCA 1126
Commissioner of Taxation v Rio Tinto Limited [2006] 151 FCR 341
Counsel of the New South Wales Bar Association v Archer [2008] 72 NSWLR 236
Gilbert and Gilbert [1988] FamCA 48; (1998) FLC 91-966
Liquorland (Australia)Pty Ltd v Anghie [2003] 7 VR 27
Macquarie Bank Limited and V & B [2006] FamCA 1052
Mann v Carnell (1999) 201 CLR 1
Osland v Secretary, Department of Justice [2008] HCA 37, (2008) 234 CLR 275

APPLICANT:

Ms Barnes

RESPONDENT:

Mr Barnes

2^ND RESPONDENT:

Mr Harris

FILE NUMBER:

MLC

4997

2016

DATE DELIVERED:

21 July 2017

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

Cronin J

HEARING DATE:

6 June 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT:	Dr Ingleby
SOLICITOR FOR THE APPLICANT:	Nedovic Lawyers

COUNSEL FOR THE RESPONDENT:

Ms Renwick

SOLICITOR FOR THE RESPONDENT:

Taussig Cherrie Fildes

COUNSEL FOR THE INTERVENOR:

Mr Tatarka

SOLICITOR FOR THE INTERVENOR:

Hall & Wilcox

Orders

That the application of the second respondent filed 29 September 2016 is dismissed as to the issue of discovery.
That the wife pay the costs incurred by the second respondent and by the husband in responding to her abandoned allegations of collusion.
That the costs associated with the hearing before Registrar Marrone on 25 January 2017 (culminating in the judgment of 23 February 2017) and this review are to be dealt with by written submissions and determined in chambers.
Should any party seeks such costs, they be by written submission filed and served on the other party no later than 4.00pm on 28 July 2017 and any response thereto shall be filed and served by no later than 4 August 2017.

IT IS CERTIFIED:

That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend upon the hearing on 6 June 2017.
That the applications for interlocutory orders are otherwise dismissed.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Barnes & Barnes and Anor (No. 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 4997 of 2016

Ms Barnes

Applicant

And

Mr Barnes

Respondent

And

Mr Harris
2^nd Respondent

REASONS FOR JUDGMENT

On 23 February 2017, Registrar Marrone ruled that documents sought in discovery by the second respondent were protected by legal professional privilege. The hearing before me was a review of that decision but by way of a de novo hearing.
The applicant in respect of the discovery is the second respondent Mr Harris who, by profession, is a valuer. He seeks a variety of documents:
(a)file notes of the legal practitioners for Ms Barnes (the wife) from a mediation conducted between she and Mr Barnes (the husband); and
(b)any correspondence or communication between the wife and her legal advisors in relation to the mediation, the financial agreement of the husband and wife, the settlement of the property proceedings of the husband and wife or, the value of the real property owned by the husband and wife.
On 28 August 2015, Benjamin J made final orders between the husband and wife.
On 1 June 2016, the wife filed an application under s 79A(1)(a) of the Family Law Act 1975 Cth (“the Act”) to set aside those orders.
In those current proceedings, the wife joined the second respondent seeking damages against him on the basis that, as a valuer, he had breached his duty of care to her by providing a “gross under-valuation” of the real property he was asked to value for the husband and wife as the single expert.
Having been so joined, the second respondent now maintains that he cannot file a defence without knowing what is alleged against him to give rise to the wife’s cause of action. The events that follow give context to this interlocutory dispute.
The second respondent, as the appointed single expert witness, valued the property in March 2014 determining that, by using a midpoint of the range he had assessed, the value was $4.7 million. He revalued the property in July 2015 and this time, opined that its value was $4.9 million.
Dissatisfied with the valuation, the wife appointed her own valuer, although no application for the admission of any expert valuation was sought by her. This other valuer, Mr K, valued the same property at $6.1 million in August 2015, having valued it in April 2013 at $5.8 million (again as an expert advisor to the wife).
There appears to have been a request by Mr K in August 2015 for the second respondent to discuss their disparate values but the second respondent (presumably quite properly) required the consent of the husband and the wife.
In 2015 at the time all of this was happening, Bennett J was the trial judge. On 19 August 2015, her Honour ordered the second respondent to answer questions sent by the wife’s solicitor on the day before. Indeed, the second respondent complied that same day. Two days later, a mediation was conducted by Mr Peter Young QC. Obviously, the second respondent was not a party to that mediation but it would seem that the husband and wife settled and then days later, consent minutes were put before Benjamin J who made the orders. I have been handed a transcript of that hearing at which both husband and wife were represented by counsel.
In June 2016, the husband, who retained the property in the settlement, sold it for $8.03 million.
There is evidence about the husband’s evasive responses to the wife immediately after the sale that apparently brought about an urgent interlocutory application by her, for orders requiring that the second respondent not dispose of documents. One basis of those orders was that the husband, who works in the real estate industry, had colluded with the second respondent to undervalue the property. That allegation was subsequently withdrawn but as I understand it, it certainly formed the foundation for the initial injunctive relief applied for by the wife. Ultimately, the wife filed a statement of claim against the second respondent in August 2016 and pleaded breach of duty of care but no allegation of collusion was raised. The abandonment of the collusion allegation gave rise to an order for costs against the wife because the second respondent and the husband responded to her allegation. The order for costs against the wife was made by the registrar on 23 February 2017 and the wife seeks to review that order.
Having been served with a statement of claim in August 2016, the second respondent sought discovery of the nature described earlier and the wife took the legal professional privilege stance. Insofar as the written pleadings indicate how the wife is to put her substantive claim, she said:
·(As at 1 June 2016 by her application):
in reaching the agreement at mediation…the wife took account of the value of the [Suburb C] property as expressed in the 24 July 2015 valuation of (the second respondent);
·In her affidavit supporting the application of 1 June 2016:
I relied on the accuracy and truth of (the second respondent’s) valuation and his answers to the questions posed (these were the questions that Bennett J ordered the second respondent to reply to) when I agreed to the settlement with (the husband);
and
·On 12 August 2016 by her statement of claim at paragraph 25:
[25]In reaching the Agreement at mediation including the orders (which were earlier set out in the pleading), the wife took account of the value of the [Suburb C] property as expressed in the 24 July 2015 valuation of (the second respondent).
The use of the words “took account of” on a number of occasions must indicate that the wife contemplated other matters as well. At [27] of her statement of claim, the wife asserted that the second respondent breached his retainer and/or had been guilty of negligence in the performance of his valuation services and to that allegation, she set out a number of particulars. Amongst those particulars were:
(a) valuing the (property) at a gross undervalue;
(b)failing to take into account adequately or at all the comparables referred to in the statement of claim;
(c)failing to provide a proper basis for his valuation;
(d)failing to revise his valuation after being provided with the questions posed by the applicant’s solicitors;
(e)failing to consult with the adversarial witness prior to the appointed mediation date;
(f)failing to revise his valuation after receiving a copy of the (Mr K) report including the references therein to the comparables.
It will be evident from those particulars that the wife had the answers of the second respondent as ordered by Bennett J when she went to the mediation. It will also be evident that she was aware at the time of the mediation that there had been no discussion between the second respondent and Mr K. It will also be obvious that she had been aware that the second respondent had received the K report with reference to comparable sales or properties.
None of pleadings or documents make any reference to discussions or communications she had with the lawyers who were acting for her.
The second respondent argues that:
·He is not seeking all of the wife’s legal file but rather the document specific to the event (the mediation);
·He cannot fairly be required to file a defence without knowing what occurred at the mediation to give rise to the wife “taking into account” his valuation; and
·The wife’s allegations are inconsistent with the maintenance of the legal professional privilege to which she is otherwise entitled.
For her part, the wife says there was no implied waiver of the privilege. Her submission is that what must be shown to satisfy the inconsistency test is whether or not she has exposed her legal advice to scrutiny. She concedes there is an unfairness to the second respondent but she maintains there has been no inconsistency with the maintenance of her privilege by her conduct.
A waiver of privilege may occur wherever a person entitled to it has engaged in conduct inconsistent with the maintenance of the confidentiality that the privilege protects (Mann v Carnell (1999) 201 CLR 1).
In Mann v Carnell (supra), Gleeson CJ, Gaudron, Gummow and Callinan JJ observed:
28.At common law, a person who would otherwise be entitled to the benefit of legal professional privilege may waive the privilege. It has been observed that "waiver" is a vague term, used in many senses, and that it often requires further definition according to the context. Legal professional privilege exists to protect the confidentiality of communications between lawyer and 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. Examples include disclosure by a client of the client's version of a communication with a lawyer, which entitles the lawyer to give his or her account of the communication, or the institution of proceedings for professional negligence against a lawyer, in which the lawyer's evidence as to advice given to the client will be received.
29.Waiver may be express or implied. Disputes as to 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. When an affirmative answer is given to such a question, it is sometimes said that waiver is "imputed by operation of law". This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege. Thus, in Benecke v National Australia Bank, the client was held to have waived privilege by giving evidence, in legal proceedings, concerning her instructions to a barrister in related proceedings, even though she apparently believed she could prevent the barrister from giving the barrister's version of those instructions. She did not subjectively intend to abandon the privilege. She may not even have turned her mind to the question. However, her intentional act was inconsistent with the maintenance of the confidentiality of the communication. What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large. (Footnotes omitted).
Where there is an allegation of implied waiver, the court must look to see whether the wife has acted inconsistently and in this case, whether she made an assertion about the contents of an otherwise privileged communication (see Commissioner of Taxation v Rio Tinto Limited [2006] 151 FCR 341).
The role of the court is to assess the conduct of the wife having regard to her entitlement to the privilege. As the High Court of Australia (Gleeson CJ, Gummow, Heyden and Kiefel JJ) said in Osland v Secretary, Department of Justice [2008] HCA 37, (2008) 234 CLR 275, all of these questions are matters of fact and degree.
Whilst previously there was a view that putting one’s state of mind in issue, that might have amounted to a waiver of privilege; that is no longer the case (see Archer Capital No 4A Pty Ltd v Sage Group PLC (No 3) [2013] FCA 1160 at [24]).
To establish conduct or facts as may amount to a waiver, the wife must either directly or indirectly put the contents of the privileged communication in issue (Commissioner of Taxation v Rio Tinto Limited (supra)).
It is not a matter simply of applying some general notion of fairness as would occur here (and is conceded by the wife) because the second respondent was not party to, or even involved, in the mediation but rather, conduct akin to express or implied assertions about the content of a privileged communication (Counsel of the New South Wales Bar Association v Archer [2008] 72 NSWLR 236 at 252). Reference was made to a judgment of Burakiewicz and Muscatel [2014] FamCA 1126 where I scrutinised the conduct of the wife in relation to the filing of an affidavit and an amended application both of which she maintained were drawn by her lawyers but which did not reflect her position. At [12], I referred to the affidavit of the applicant who said that she remembered reading parts of the document but those parts that she did not remember reading, did not accurately reflect her position. In the end, I ruled that whilst waiver was a broad and wide-ranging concept, the applicant had not put in issue any of her communications with her lawyers prior to that particular period of time (see [31]). Of assistance is the judgment of Byrne J in Liquorland (Australia)Pty Ltd v Anghie [2003] 7 VR 27 where at [42] his Honour said that the chronological coincidence of the legal communication and the establishment of that state of mind does not of itself determine the question. His Honour said:
The application of the test of unfairness, as expounded by the High Court (in Mann v Carnell), involves an examination of the precise nature of this pleaded state of mind and of the impact of the particular communication upon it. It is only where this examination shows that there will arise an unfair inconsistency between the position of the client setting up this state of mind and its maintenance of the privilege that waiver will arise and, then, only to the extent necessary to avoid the unfairness.
Counsel for the second respondent relied on the judgment of Le Poer Trench J in Macquarie Bank Limited and V & B [2006] FamCA 1052 where his Honour ruled that a particular affidavit by the person entitled to the privilege did give rise to a waiver. An examination of the paragraph in the affidavit [225] said:
I understand, from advice provided to me by my previous solicitor, that [Mr S] was required to return a Form of Application for Consent Orders Terms of Settlement and Form of Transfer to [the husband] [overseas] on several occasions between June 2004 and July 2004, and consequently I was not able to bring my Application for the division of property to this Court earlier and my legal costs in connection with a division of our property were increased greatly.
It will be evident from what Le Poer Trench J was examining, the deponent of that affidavit had put not only his state of mind in issue but that the state of mind arose from advice provided by the solicitor.
Here, no reference is made to documents by the wife’s legal advisors nor even to the fact that they were present when the mediation occurred. While the wife’s state of mind is indicative that she relied upon the opinion of the second respondent, nothing I can see indicates that she has laid open to scrutiny that her state of mind came from any communication with her legal practitioners. As was said in Mann v Carnell (supra), waiver can also be implied but I could not imply here that there was any discussion with her lawyers or that she relied upon anything that they may have said.
In my view, there is no indication from the pleadings or the affidavit material that the wife has directly or indirectly put the contents of any privileged communication in issue and as such, the documents specifically sought by the second respondent as to the lawyer’s file notes and any consequential communications up to and including 28 August 2015 must remain privileged.
The second respondent also sought a number of documents under the heading of “Matters that were not covered by legal professional privilege or which were exchanged between the husband and wife on a “without prejudice basis”. My understanding is that the husband agrees for the second respondent to have those documents and to the extent that it is suggested by the wife that there is some privilege in relation to the negotiations, that is a matter relating to the adducing of evidence rather than discovery. I see no reason why those documents should not be provided to the second respondent if they have not been provided by the husband.
Another issue relates to the wife’s request that the court review the registrar’s decision relating to costs.
The wife made her allegation relating to collusion in an affidavit filed 1 June 2016 and the husband replied. The second respondent was a person against whom orders were sought by the wife based on the assertion of collusion. That allegation was later abandoned.
Section 117 of the Act provides that “each party to proceedings under this Act” shall bear his or her own costs. It is said that the proceedings against the second respondent were not proceedings under the Act. In my view that is not a satisfactory answer to the allegation.

Section 117(2) provides:
If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to (other sub-sections including (2A)) and the applicable rules of court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise as the court considers just.
Whilst the proceedings as identified vis a vis the husband may be under s 79A of the Act, that is sufficient nexus for the court to read s 117(2) as unlimited and even if that were not so, by virtue of exercising its accrued or associated jurisdiction, the court would have the power to make an order for costs (see Gilbert and Gilbert [1988] FamCA 48; (1998) FLC 91-966).
Whether the court exercises a power under s 117(2) or some associated jurisdiction, both would require a finding that there were circumstances to justify an order for costs being made. The circumstances here were that the wife made an allegation of a very serious nature that seems to have been the foundation for the proceedings that started the current litigation. The response to that serious allegation gave rise to the husband, and the second respondent incurring significant legal costs. In my view, those were sufficient, circumstances to justify an order for costs against the wife.
To the extent that it is necessary to make a finding under s 117(2A) of the Act, these are proceedings around property of some millions of dollars and nothing suggested that any party was impecunious. The conduct of the wife in respect of her allegation is a matter that the court is entitled to take into account but otherwise, other matters are not particularly relevant. Taking those matters into account, this is a case where there is a justification for an order for costs against the wife.
To avoid further dispute as to costs, I shall make provision for written submissions.

I certify that the preceding Thirty-Eight (38) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 21 July 2017.

Associate:

Date: 21 July 2017