Body Corporate No 413424R v Sheppard & Anor

[2007] VSC 179

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

No. 5607 of 2005

Body Corporate No. 413424R	Plaintiff
v
Peter James Sheppard & anor	Defendant

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JUDGE:	PAGONE J
WHERE HELD:	Melbourne
DATE OF HEARING:	21 May 2007
DATE OF RULING:	1 June 2007
CASE MAY BE CITED AS:	Body Corporate No. 413424R v Peter James Sheppard & anor
MEDIUM NEUTRAL CITATION:	[2007] VSC 179

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Legal Professional Privilege – Waiver – Fairness – Rules of the Supreme Court, Rule 42A – Subpoena

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M Sifris S.C. & Mr A Trichardt	Corrs Chambers Westgarth
For the Defendant	Mr S Anderson S.C. & Mr P Wallis	Holding Redlich

HIS HONOUR:

1. The defendants have sought to prevent the use in this proceeding of a file note made by Lisa Forstner in her capacity as the former conveyancing solicitor for Mr and Mrs Sheppard of a conversation between her and Mr Sheppard on 28 September 2001.  The file note was said to record legal advice given by her, as solicitor, to Mr Sheppard in connection with the property over which an implied easement is claimed in this proceeding.  The plaintiff disputes that the file note records a privileged communication between Ms Forstner and Mr Sheppard and the parties agree that to resolve that question I may need to examine the file note itself.  I am reluctant to do so, and have decided to proceed upon the assumption that the file note, and the information in it, falls within the class of documents protected by legal professional privilege and to consider the plaintiff’s primary contention, namely, that any privilege in the file note has been waived and, alternatively, that the contents of the file note may not be protected by injunctive relief. 

1. The file note was disclosed to the plaintiffs pursuant to Rule 42A which came into effect on 1 February 2007.  A subpoena for the production of documents to the prothonotary under Rule 42A was issued, amongst others, to the managing partner of Mills Oakley Lawyers (“Mills Oakley”) on 16 April 2007 at the request of the plaintiff through its solicitors, Corrs Chambers Westgarth (“Corrs”).  Amongst the documents sought for production in the subpoena were all documents evidencing communications between Mills Oakley and the defendants.  Notes 7 and 8 attached to the subpoena set out the procedures to be followed if objection was to be taken to the production of documents or to their being inspected by any one or more of the parties to the proceeding in which the subpoena was issued. 

1. Mr Roger Jepson is a partner at Mills Oakley and gave evidence that the subpoena was given to him on 16 April 2007 to deal with as he was one of the litigation partners of that firm.  He then took steps to locate the file which answered the description in the subpoena and on 19 April arranged for the file to be delivered to the prothonotary in accordance with the subpoena.  He then wrote to Corrs advising them that that is what he had done.  At that time he did not communicate with Holding Redlich who Mr Jepson had previously been informed were acting for the defendants in this proceeding.  Mr Jepson’s knowledge of this proceeding, and of Holding Redlich acting for the defendants, dated from at least 11 September 2006.  On that day Mr Howard Rapke of Holding Redlich had a conversation with Mr Jepson concerning this proceeding and specifically asked Mr Jepson to undertake a search of all files, records and archives held by Mills Oakley in relation to the property purchased by the defendants over which an implied easement is sought in this proceeding.

1. Mr Rapke came to know of the issue of the subpoena to Mills Oakley on 19 April 2007 when he received a letter from Corrs attaching copies of subpoenas served upon a number of people including Mills Oakley.  Mr Rapke gave evidence that the first opportunity he had to inspect the Mills Oakley file (which included the file note) was on 3 May 2007.  That was because he had other commitments between the first conceivable date for inspecting the file and 3 May, and because he wanted to inspect the file in the company of a colleague (a Mr Lane) who was unavailable to attend for inspection prior to 3 May.  He and Mr Lane did inspect the file on 3 May and on that day learned that the file had previously been inspected by solicitors for the plaintiff as was permitted by Order 42A.

1. The defendants maintain that the file note is privileged from disclosure and that the privilege has not been lost by its actual disclosure to the plaintiff.  The right to claim privilege may be lost even though there has been an unintended disclosure.  Goldberg J considered the relevant principles in Meltend Pty Ltd v  Restoration Clinics of Australia Pty Ltd[1] and at 523 said that there were circumstances where the privilege might be waived by a solicitor acting within the ostensible authority notwithstanding that the solicitor may not have had actual authority from the client to waive the privilege. In that case his honour found that

“there was only inadvertence or mistake in that he did not direct his attention to the correct principle or the relevant facts

although he did direct his attention to the issue whether the letter should be the subject of a claim for privilege” (my emphasis).

In this case the evidence of Mr Jepson is that he did not direct his attention to whether there were documents in the file being made available which were privileged.  In my opinion he should have done so and his failure to do so may amount to a constructive waiver of privilege by his former clients.  The fact that there are other solicitors acting for the former clients in this litigation does not remove the continuing obligations which a solicitor has to protect a client’s privilege over documents which continue to be held in custody.  In many cases it will only be the former solicitors who dealt with the file being handed over who have enough information of the matter and its content to make a meaningful assessment of whether a claim for privilege can be made; whether any document may be relevant to an issue in a subsequent proceeding in which the subpoena is issued is clearly another matter.

[1](1997) 75 FCR 511.

1. In this case it is not necessary for me to decide whether there was an express waiver of any privilege through the conduct of Mr Jepson in the context of Rule 42A notwithstanding that in making available the file he did not have regard to whether a claim for privilege should have been made.  However, I incline to the view that the conduct is sufficient to constitute an express waiver because:  he, as a partner of Mills Oakley, had a duty to preserve the legal entitlements of his firm’s former clients as, at very least, the custodian of the file and all of the former clients’ rights attaching to the contents of the file; he was directed by the express terms of the subpoena to the need to make objections; he knew the terms of Rule 42A and its operation; he, through his firm, had been left by the defendants in the position of being able to deal with the file and its contents; he knew that the file was sought by the plaintiff for inspection and potential use in these proceedings; his firm was in the best position to evaluate whether any document was privileged; he inspected the file to ensure compliance with the terms of the subpoena; and he produced the file pursuant to the terms of the subpoena and Rule 42A without any claim or objection.  His failure to turn his mind to whether a claim should have been made (despite the notes in the subpoena, the terms of Rule 42A and his firm’s continuing obligation as the holder of documents for a former client) and that his clients had not given express instructions to abandon or waive any claim (although they allowed the file to remain with Mills Oakley) is not sufficient to prevent a conclusion of express waiver in this case any more than the inadvertence was considered by Goldberg J in Meltend  “not enough on its own to reinstate and maintain privilege where a decision has been made not to claim privilege”.

1. In any event I am of the view that loss of privilege is to be imputed or implied by operation of law.  In Meltend his honour went on to say:

“If I am wrong that there was an express waiver I consider that a waiver of privilege should be imputed by operation of law.  Recent cases have shown that waiver will be imputed where the person entitled to claim the privilege has performed some act which renders it unfair to another party that the privilege be maintained: Attorney- General (NT) v Maurice; Goldburgh v Ng. The cases in which imputed waiver has been found have involved a use of the relevant documents which has involved a partial or limited disclosure of the contents of the documents: Attorney–General (NT) v Maurice; Goldburgh v Ng. However the principle does not appear to be limited to such cases”.

In HongKong Bank of Australia Ltd v Murphy[2] Smith J said at 441 that:

“the privilege can only be said to be waived by unintended disclosure if the circumstances are such that the waiver should be implied”.

His honour went on to say that whether waiver should be implied would usually turn on the issue of fairness.  

[2][1993] 2 V.R. 419.

1. In this case consideration of fairness lead me to impute or imply a loss of any privilege there may have been in the file note when Corrs were given access to the Mills Oakley file in the circumstances in which it had been lodged with the prothonotary.  There is no suggestion that the file note was obtained by Corrs through fraud or any other impropriety.  On the contrary they obtained access to the file in bona fide and regular compliance with Rule 42A.  The subpoena was served upon Mills Oakley who had acted as solicitors for the defendants in the previous conveyance of the property which is the subject of this proceeding.  Mills Oakley are an established firm of solicitors and Mr Jepson gave evidence in cross-examination that he was aware of the subpoena procedure provided for in Rule 42A.  He has been in practice since 1975 and accepted that he had read the subpoena including the notes referring to the process providing for objections to production and inspection.  Mr Jepson said that he looked through the file to ensure that what he was producing came within the terms of the subpoena and was aware that the subpoena sought production of communications between solicitors and client.  Such communications were of a kind capable of falling within legal professional privilege.  He accepted that he had read the notes to the subpoena concerned with objections capable of being made on his behalf or on behalf of his firms’ former clients.

1. Senior counsel for the defendants correctly accepted that Mills Oakley continued to have an obligation to their former client notwithstanding that the specific retainer in respect of the conveyance had come to an end.  He also accepted, again correctly, that Mr Jepson should have taken more care when producing the file and that he was in error in not taking steps to preserve any privilege that his former clients, now the defendants in this proceeding, may have had in respect of any documents on the file which was produced to the prothonotary.  It is clear from the terms of the subpoena that the former solicitors of the defendants in this proceeding were on notice that the documents which were to be produced were capable of being inspected by the solicitors for the plaintiffs.  Indeed, it is obvious that the file would be inspected unless objection was taken.  The entire file was produced to the prothonotary in full knowledge of the procedures in Rule 42A. 

1. Mr Rapke was unaware of the existence of the file note until 3 May 2007 but was aware from 19 April 2007 that a subpoena had been issued directed to Mills Oakley in respect of the conveyancing file.  The terms of the subpoena to Mills Oakley was known to Mr Rapke since 19 April and he too was aware of the terms and operation of Order 42.  Although Mr Rapke may not personally have been able to inspect the file before 3 May 2007, it was possible for the file to be inspected before that date and at least since 19 April 2007 the defendants were effectively upon constructive notice that documents in respect of which legal professional privilege might apply were sought for production and inspection.  Mr Rapke may not have been able on 19 May to do much about preventing production of the file which Mills Oakley had produced on that day without reference to Mr Rapke or anyone else at Holding Redlich, but the combination of events make it unfair for the privilege to be maintained.

1. It is next relevant to consider whether I should restrain the use of the information contained in the file note:  see Meltend at 525; HongKong Bank at 441; Calcraft v Guest[3]; Lord Ashburton v Pape[4]; Commission of Federal Police v Propend Finance Pty Ltd[5].  In HongKong Bank Smith J said that privilege not having been waived intentionally or by implication, the plaintiff can seek equitable relief including orders for the return of copies of the document.  His honour set out a number of matters relevant to determine whether such relief should be granted, namely:  how the recipient obtained the document; whether the person seeking to protect the confidentiality of the document had acted expeditiously; whether the document had been obtained by fraud or mistake; whether it would be futile to make the order; and whether the recipient of the documents was aware that the mistake had been made.  The matters which I have set out in paragraphs 8, 9, and 10 above are equally relevant in this context and lead me to conclude that no relief should be given to restrain the use of the file note or the information contained in the file note. 

   [3][1898] 1 QB 759.

   [4][1913] 2 Ch 469.

   [5](1997) 188 CLR 501 at 565.

1. I would not refrain the plaintiff’s use of the file note or copies made of it or of the information in it, even if I were of the view that any privilege should not be imputed or implied to be waived.  The plaintiff has come into possession of the information regularly in accordance with the process of Rule 42A.  Mills Oakley could easily have taken steps to review the file note to form a view about whether specific objection should be made to the production or an inspection of any document on the grounds of legal professional privilege.  That firm was best placed to form a view about whether anything in its file contained a communication evidencing or made for the purpose of giving and receiving legal advice.  The terms of Rule 42A and the subpoena, if not the broader duties of solicitors in respect of former clients, required that they turn their minds to whether specific objections should responsibly be made and the grounds upon which they should be made.  Corrs evidenced an intention to inspect documents produced pursuant to Rule 42A and have done so.  I see no secure foundation to restrain them, or their client, from the use regularly obtained under the procedure provided for by Rule 42A.  In the event I have decided against the claim to prevent disclosure or use of the information.