Bedford Resources Holdings Ltd v Ironbark Zinc Ltd - [2012] WASC 286

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: BEDFORD RESOURCES HOLDINGS LTD -v- IRONBARK ZINC LTD [2012] WASC 286

CORAM: MASTER SANDERSON

HEARD: 4 JULY 2010

DELIVERED : 14 AUGUST 2012

FILE NO/S: CIV 2975 of 2010

BETWEEN: BEDFORD RESOURCES HOLDINGS LTD (A company incorporated pursuant to the laws of the British Virgin Islands)
Plaintiff
AND
IRONBARK ZINC LTD
Defendant

Catchwords:

Practice and procedure - Whether implied waiver of privilege by defendant allowing plaintiff to inspect legal advice - Turns on own facts

Legislation:

Nil

Result:

Inspection permitted

Category: B

Representation:

Counsel:

Plaintiff: Mr N Ekanayake
Defendant: Mr D M Fairweather

Solicitors:

Plaintiff: Lavan Legal
Defendant: Diverge Litigation

Case(s) referred to in judgment(s):

Ampolex Ltd v Perpetual Trustee Company (Canberra) Ltd (1996) 137 ALR 28
Macquarie Bank Ltd v B [2006] Fam CA 1052
Mann v Carnell (1999) 201 CLR 1
Seven Network Ltd v News Ltd [2006] FCA 348
Switchcorp v Multimedia Ltd [2005] VSC 425

MASTER SANDERSON: On 5 July 20011, the plaintiff issued a subpoena in these proceedings directed at Mr Jonathan Heath Stuart Murray, a solicitor who acted for the defendant. On or about 21 July 2011, Mr Murray produced documents in answer to the subpoena, but objected to the plaintiff inspecting those documents on the basis they were subject to legal professional privilege. By this application, the plaintiff seeks an order it be permitted to inspect the documents. In support of that application, the plaintiff relies upon an affidavit of Gordon Edward Babe, sworn 28 May 2012. In response, the defendant relies upon two affidavits of Mr Murray, the first sworn 21 May 2012, the second sworn 8 June 2012.
It is convenient to begin with a brief outline of the nature of the dispute between the plaintiff and the defendant. This summary of facts is taken from the amended statement of claim. The plaintiff alleges on or about 1 March 2007, the plaintiff and the defendant entered into a written Share Sale Agreement (the agreement). Pursuant to the agreement, the defendant was to purchase from the plaintiff the plaintiff's entire shareholding in Bedford (No 3) Ltd. The plaintiff alleges the agreement contained express terms to the effect the plaintiff was entitled to nominate one director to the board of the defendant and, provided the nominee was acceptable to the defendant, the individual so nominated would be appointed.
The plaintiff pleads it paid for the shares pursuant to the agreement. It says in about October of 2010, it nominated an individual to join the board of the defendant. The board of the defendant declined to appoint the plaintiff's nominee. The plaintiff says this is a breach of the agreement and it seeks certain relief.
The defendant admits the agreement as pleaded by the plaintiff, but says there was a variation to the agreement. It says by this variation the plaintiff waived its right to nominate a director to the board of the defendant if the defendant agreed to remove a then incumbent director. The defendant pleads this was done and therefore the plaintiff did not have the right to nominate a director. It is clear the dispute has a very narrow compass.
At all material times, Mr Murray was a partner of the law firm, Steinepreis Paganin. Between 29 October 2010 and 25 November 2010, Mr Murray provided advice to the board of the defendant regarding the appointment of the plaintiff's nominee to the defendant's board. As I understand the plaintiff's position, it is conceded legal professional privilege would attach to the advice given by Mr Murray to the defendant. However, the plaintiff says the defendant has waived such privilege by discovering documents that disclose the gist, substance and conclusion of any advice Mr Murray has given.
Unfortunately, there is not an interlocutory process in this matter. It is not clear why that is the case ‑ perhaps the matter arose in the course of the case management of the file by the registrar. In any event, the plaintiff has lodged a minute of proposed orders. That proposed order reads as follows:
1.That legal professional privilege has been waived over:
1.1all documents that evidence, record or refer to legal advice given to the Defendant by Mr Jonathan Murray regarding the Plaintiff's nomination of Mr Vincent John Paul Fayad to the Defendant's board of directors, including, but not limited to any waiver and/or variation of the Plaintiff's right pursuant to clause 5.6 of the Share Sale Agreement entered into between the parties dated 1 March 2007; and
1.2any documents that were provided by the Defendant to Steinepreis Paganin or any principal, employee or agent thereof for the dominant purpose of obtaining the legal advice referred to in order 1.1 above.
2.The Plaintiff be permitted to inspect the documents produced by Mr Murray pursuant to a subpoena issued to him on 5 July 2011.
3.The Defendant pay the Plaintiff's costs fixed in the sum of $10,230 forthwith.
There was no dispute between the parties as to the relevant principles to be applied in determining whether or not legal professional privilege has been waived. Of course, here the question is not actual waiver, but implied waiver. A party will be taken to have waived any legal professional privilege attaching to particular documents if the party's conduct is, or has been, inconsistent with the maintenance of the confidentiality which the privilege is intended to protect: see Mann v Carnell (1999) 201 CLR 1 [29] (Gleeson CJ, Gaudron, Gummow & Callinan JJ).
The mere reference to the obtaining or existence of legal advice is not sufficient to imply a waiver of privilege. Rather, the relevant test is whether the party, in the course of referring to the advice, has disclosed the substance, conclusion or gist of the advice, even if only summarily.
In his outline of submissions, counsel for the plaintiff made reference to the principles applicable in cases such as this as set out by Le Poer Trench J in Macquarie Bank Ltd v B [2006] Fam CA 1052 [50]. His Honour said the following matters were to be considered by a court in the course of determining whether documents produced by a third party in response to a subpoena were privileged:
(a)there must be an identified issue clearly requiring determination by the court (that is, an issue in proceedings before the court).
(b)the evidence relied on by a party must have a relevant disclosure of communications which would normally be the subject of legal professional privilege.
(c)waiver of legal professional privilege may arise as a result of a passage in a pleading or an affidavit, oral evidence in a hearing, or through the contents of a document provided by one party to another whether as part of a formal discovery process or not.
(d)the disclosure of the communication may be made as part of the evidence in support of the case being relied upon by the party who is entitled to claim legal professional privilege in relation to that communication.
(e)the disclosure must be seen as relevant or potentially relevant to an issue to be determined by the court.
(f)the disclosure must illustrate conduct which demonstrates inconsistency between a party seeking to maintain legal professional privilege in relation to some communications pertaining to or touching upon an issue in the case, but not others relating to the same issue.
In his submissions, counsel for the plaintiff refers to what he defines as 'Advice'. He defines this to mean the legal advice directly relating to matters concerning the nomination of Mr Vincent Paul Fayed to the defendant's board of directors. The plaintiff submits the defendant has waived any privilege over the documents because it has voluntarily disclosed the gist, substance or conclusion of the advice to which the documents relate, such advice being directly relevant to the central issues in dispute in the proceedings.
In particular, there are three documents or sets of documents upon which the plaintiff places reliance. The first is what is referred to as the 'Downes Letter'. A copy of this document is found as annexure GEB 7 to the affidavit of Gordon Edward Babe sworn 28 May 2012 and filed in support of the application. The Downes Letter appears as an attachment to an email sent by a Mr Robert Orr to board members of the defendant prior to a meeting of the board on 25 November 2010. The Downes Letter refers to the plaintiff's request for the appointment of Mr Fahad to the board. The penultimate paragraph reads as follows:
I have sought advice that suggests Bedford had the right to nominate a Board representative, but that they waived that right when they stated that no replacement would be sought for Vince Hyde. If they do still have that right then it is a decision for the Board to consider the nomination on its merit. Bedford cannot force the Board to appoint their nominee.
The second relevant document is what is referred to by counsel as the 'Board Minutes'. These are the minutes of the meeting of the board of the defendant which was held on 25 November 2010. These minutes appear as annexure GEB 10 to Mr Babe's affidavit. Relevantly, in part they read as follows:
The Board had received verbal legal advice that this action by Bedford had resulted in the nomination right under clause 5.6 being extinguished.
The third document is described as 'meeting notes' and appears as annexure GEB 11 to Mr Babe's affidavit. These notes appear to be the handwritten notes which subsequently led to the typed Board Minutes. The third point in these meeting notes reads as follows:
The Board concluded based on legal advice nomination right under 5.6 no longer exists.
It is the plaintiff's position these three documents do more than merely evidence the receipt of advice by the defendant. In fact, they disclose the gist, substance or conclusion of the advice. As these matters go to the very heart of the substantive dispute between the parties, the advice ought be discovered.
In his submissions, counsel for the defendant sought to distinguish advice which he described as advice on the 'Extinguishment Issue' and the 'Nomination Issue'. The Extinguishment Issue, counsel submitted, arises from the reference in the meeting notes to the conclusion of the board based on legal advice the nomination right under cl 5.6 had been extinguished. Counsel submitted any waiver of privilege is limited to the Extinguishment Issue and there was nothing in the evidence to suggest there are or were any documents relating to any advice about the Extinguishment Issue. Rather, the Board Minutes indicate such advice was verbal.
On the other hand, the Nomination Issue as defined by counsel picks up the wider class of documents as set out in par 1.1 of the plaintiff's minute of proposed orders. It is the defendant's position there is nothing in the discovered or subpoenaed documents relied upon by the plaintiff which refers to the gist, substance or conclusion of any legal advice received in relation to the Nomination Issue.
With respect, I am not satisfied this matter can be broken down in the manner suggested by counsel for the defendant. In my view, a reasonable analysis of the three documents in question suggests the defendant had legal advice and what is disclosed is the gist of that advice. After all, what is at issue is a simple matter. Was there an oral variation of the written agreement? Clearly the defendant took advice on that matter and the advice was provided by Mr Murray. The documents in question disclose effectively what that advice was. In my view, that is a waiver of privilege and the documents should be available for inspection.
In this area, a reference to decided cases where the fact situation varies significantly is not always helpful. But there are three cases mentioned by the plaintiff in its submissions which present a similar fact situation. In Switchcorp v Multimedia Ltd [2005] VSC 425, Whelan J considered whether there had been any waiver of privilege by the statement '[t]he Board's lawyers have been instructed to vigorously defend the claim and have advised that the plaintiff's claim will not succeed' [3]. His Honour found there had been a waiver of legal professional privilege over the advice on the basis the statement gave a clear and deliberate disclosure of the gist or conclusion of the legal advice.
In Seven Network Ltd v News Ltd [2006] FCA 348, the court considered the statement 'our legal advice is that the risk of damages being awarded against Optus is low' amounted to a waiver of privilege both with respect to the document where the disclosure had been made and the advice. Sackville J concluded there had been a voluntarily disclosure of the gist or conclusion of the legal advice.
In Ampolex Ltd v Perpetual Trustee Company (Canberra) Ltd (1996) 137 ALR 28, Kirby J held that disclosure by way of the statement '[the party] has legal advice supporting this position' constituted a waiver of legal professional privilege on the basis that it disclosed the ultimate conclusion.
In the light of these decisions and based upon the applicable legal principles, I am satisfied I should make orders in terms of the minute as proposed by the plaintiff. However, I will give the defendant the opportunity to make submissions as to the form of orders and as to the quantum of costs.