Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd

[2011] VSC 406

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
TECHNOLOGY, ENGINEERING & CONSTRUCTION LIST

S CI 2007 6949

DURA (AUSTRALIA) CONSTRUCTIONS PTY LTD (ACN 004 284 191)	Plaintiff
v
HUE BOUTIQUE LIVING PTY LTD (formerly known as SC LAND RICHMOND PTY LTD) (ACN 106 117 506) & ORS	Defendants

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JUDGE:	Randall AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	17 August 2011
DATE OF JUDGMENT:	26 August 2011
CASE MAY BE CITED AS:	Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2011] VSC 406	Revised 5 September 2011

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr T Margetts SC with Mr R Craig	Noble Lawyers
For the Defendants	Dr S McNicol Ms L Kirwan	Freehills Lawyers

HIS HONOUR:

1. There are concurrent proceedings before the Court.  The file numbered S CI 2025 of 2007 relates to what can be described as a “breach of trust” proceeding between the same parties.  Proceeding 6949 of 2007 has come to be known as the “building proceeding”.  The plaintiff, a builder, seeks relief for loss and damage it alleges it has suffered by reason of the defendants’ breaches of a building contract entered into by the plaintiff and the first defendant on 15 December 2004 (“the contract”).  The first defendant, as principal, engaged the plaintiff as contractor pursuant to the contract, to construct 29 residential apartments in Richmond with construction commencing in late 2005. 

1. On 15 November 2010, five subpoenas in the building proceeding were issued at the request of the plaintiff.  The subpoenas were directed to parties involved with the construction of the Richmond apartments.  The defendants claimed that some 729 documents were the subject of client legal privilege. 

1. On 12 July 2011, the plaintiff filed a summons seeking that the documents produced under the subpoena be produced for inspection and photocopying. 

1. At all material times the Richmond land was owned by the first defendant in its capacity as the trustee of the SC Land Richmond Unit Trust (“the trust”).  At all material times, the plaintiff was a unit holder in the trust.  The first defendant, in its capacity as trustee, engaged the plaintiff to construct the 29 residential apartments. 

1. The plaintiff contends that on 20 September 2006, the first defendant served the plaintiff with a notice purportedly under clause 44.4 of the contract taking works out of the plaintiff’s hands.  In the building proceeding, the plaintiff alleges that the first defendant did not have reasonable grounds for doing so and therefore repudiated the contract entitling the plaintiff to damages. 

1. The onus lies upon the defendants to maintain the client legal privilege.  The maintenance of that privilege is attacked by the plaintiff upon two grounds, namely that:

(a)any client legal privilege was a joint privilege reposed in both the plaintiff and the first defendant;

(b)the first defendant had not sufficiently discharged its onus of proving that the communications were undertaken, or the documents were brought into existence, for the dominant purpose of obtaining or giving legal advice or providing legal services in relation to actual or contemplated litigation. 

Joint Privilege

1. Section 118 of the Evidence Act 2008 (Vic) (“the Evidence Act”) protects against the disclosure of:

(a)confidential communications between a client and a lawyer;

(b)confidential communications between 2 or more lawyers acting for the client; or

(c)the contents of a confidential document (whether delivered or not) prepared by the client, lawyer or another person

for the dominant purpose of the lawyer, or one or more lawyers providing legal advice to the client.

(“Advice privilege”).

1. Section 119 of the Evidence Act protects against disclosure of:

(a)confidential communications between a client and another person, or between the lawyer acting for the client and another person that was made; and

(b)the contents of confidential documents (whether delivered or not) that was prepared

for the dominant purpose of the client being provided with professional legal services relating to… [a] proceeding… or an anticipated or pending… proceeding.

(“Litigation privilege”). 

1. Section 124 of the Evidence Act provides as follows:

Loss of client legal privilege – joint clients

(1)This section only applies to a civil proceeding in connection with which 2 or more parties have, before the commencement of the proceeding, jointly retained a lawyer in relation to the same matter.

(2)This Division does not prevent one of those parties from adducing evidence of –

(a)a communication made by any one of them to the lawyer; or

(b)the contents of a confidential document prepared by or at the direction or request of any one of them –

in connection with the matter.

1. The plaintiff submitted that:

(a)At all material times the first defendant entered into the contract in its capacity as trustee and in the present case, the nature and character of the documents described in the privilege table and privilege list relates to the project being conducted by the first defendant on the Richmond land in its capacity as trustee.  There is no evidence to suggest that the first defendant was obtaining documents or advice for its personal benefit.

(b)It is evident from the second Opperman affidavit and the affidavit of Lance Chu that the claims of privilege are made in the context of the first defendant’s management and administration of the project of the Richmond land.  Moreover, it is evident that the first defendant and the plaintiff have a joint interest by reason of their respective roles as beneficiary and trustee of the trust developing that land.

(c)As the first defendant was the developer of the Richmond land, in its capacity as trustee, it cannot be contended that the first defendant was not managing or administering the trust in creating, seeking and obtaining the documents over which the privilege is claimed.

(d)The confidential communications, information or documents relate to legal service in connection with the management or administration of the trust; and

(e)the trustee (in his or her capacity as trustee) and the beneficiary (in his or her capacity as beneficiary, and either alone or as a member of a class of beneficiaries) have a joint interest in the subject matter of those confidential communications, information or documents when they occur or come into evidence.[1]

[1]Schreuder v Murray (No 2) (2009) 260 ALR 139 at [95(d)].

1. In addition to this proceeding and the trust proceeding, the parties have been involved in 14 other proceedings in various courts and tribunals including three adjudications under the Security of Payment Act, VCAT proceedings relating to those adjudications, County Court proceedings and various Supreme Court proceedings relating to various matters including caveats and access to trust documents. 

1. The first defendant submits that:

(a)Joint privilege occurs where it is possible to treat a number of bodies, for advice purposes, as the one entity.

(b)Common interest privilege arises where two or more parties, either individuals or corporations, have a similar or shared interest in obtaining legal advice or representation normally, but not always, with respect to actual or anticipated litigation. 

(c)The essential feature of common interest privilege is that the third party establishes a sufficient indemnity or commonality of interest with the client.  The result of a successful claim to common interest privilege is that each of those with a common interest can avail him or herself of the legal professional privilege enjoyed by the other. 

(d)Documents that relate to the provision of legal advice concerning building disputes between the parties in their capacities as principal and builder will not be subject of joint privilege.

(e)In order for the plaintiff to successfully maintain a joint privilege in this case, is that the trustee and the beneficiary must have a joint interest in the subject matter of those documents when they are created.  This is simply not the case here.  The plaintiff’s interests in the documents and communications is and as a builder in a building dispute which is in direct conflict with the defendant as a developer in the same disputes.  The parties’ interests are antithetical and diametrically opposed. 

(f)Joint privilege may apply to legal advice if one group of persons in a legal relationship communicates with a legal adviser about which all the persons in the group share an interest.  That is not the case here. 

The Law

1. In Schreuder,[2] Buss JA held:

   [2]At [94].

(d)There will be a joint privilege if:

(i)The confidential communications, information or documents relate to legal services in connection with the management or administration of the trust; and

(ii)the trustee (in his or her capacity as trustee) and the beneficiary (in his or her capacity as beneficiary), and either alone or as a member of a class of beneficiaries, have a joint interest in the subject matter of those confidential communications, information or documents when they occur or come into existence. 

…

(f)The beneficiary will not be entitled to a joint privilege with trustee if the confidential communications, information or documents relate to legal services obtained for the benefit of the trustee personally (for example, if the trustee seeks legal advice as to his or her personal rights or liabilities in connection with an alleged breach of trust or threaten legal proceedings against him or her personally.)

1. In Krok,[3] Judd J said:

In my opinion, a trustee’s right to withhold, in the course of litigation, disclosure of a document from a beneficiary, on the ground of client legal privilege, is not to be determined by an analysis of the beneficiary’s proprietary right to trust documents.  The question is to be resolved by reference to the ordinary principles applicable to the protection of privileged information and documents, and obligations of disclosure in litigation.

…

If the advice was sought for the purposes of assisting a trustee to discharge its duty to administer the trust, in contrast to advice sought and obtained for its personal assistance, any privilege subsisting in the advice is held jointly by the trustee and all beneficiaries.  Presumably the trustee felt at liberty to reimburse himself from the trust assets for the cost of the advice.  The evidence does not suggest otherwise. 

[3]Krok v Szaintop Homes Pty Ltd(No 1) [2011] VSC 16 at [14] and [31].

1. The decisions in Schreuder, Krok and Yunganns,[4] related solely to the relationship of beneficiary and trustee and to questions of administration and management of trusts which, in turn, involved an analysis and scrutiny of the trust deeds.  In Krok’s case the documents in contention involved “legal advice about such matters as variations to the trust, the vesting of the trust, legal advice on the trust and taxation implications of the trust vesting.”

   [4]Yunganns v Elfic Pty Ltd (No 2) (2000) 1 VR 92.

1. Albeit, that the first defendant acted pursuant to the contract solely as trustee of the trust, it cannot be said that the documents were created for or the communications emanated for the purposes of the administration of the trust.  Prima facie, each document was created or the communications made, by reason of the dispute or anticipated dispute with the plaintiff builder.  Another way of considering the problem is to ask the question “Did the parties have a common interest in the advice or the representation?”  It is axiomatic that the answer must be no.  At all material times the first defendant was represented by either Gadens Lawyers or its current solicitors.  An explanation of why two firms of solicitors were used at varying times was set out in the affidavit material.  At all material times, the plaintiff had engaged its own solicitors with respect to the disputes or anticipated disputes. The plaintiff’s solicitors communicated with those engaged by the first defendant. The lack of common interest could not be more clearly illustrated than by the separate retainers.

1. Buss JA[5] referred to an English case of Talbot v Marshfield (citation omitted) where:

…  Trustees obtained an opinion from counsel as to whether they should exercise a discretionary power to advance part of the trust fund to some of the beneficiaries.  After other beneficiaries filed a bill to restrain them from exercising this discretion, the trustees obtained a second opinion in relation to their prospects of defending the suit.  The plaintiffs issued a summon for production of the opinions of counsel.  The Vice‑Chancellor Sir R.T. Kindersley, held that all of the beneficiaries (including the plaintiffs) had a right to inspect the first opinion because it had reference to the trustees’ dealings with the trust estate.  However, the plaintiffs had no right to production of the second opinion because it was sought after the suit was commenced. 

[5]Schreuder at [68].

1. I was, by agreement between the plaintiff and the first defendant, to which I will later refer, invited to inspect a sample of 20 documents or thereabouts chosen by each of the plaintiff and the first defendant.  One of those documents demonstrates that from an early stage, 5 May 2006, it was anticipated that legal proceedings may ensue.  The document (No 6) sets out in part:

We wish to call a meeting to discuss the precautionary and active measures that we will need to adopt as Dura [the plaintiff] is obviously gearing up for a major dispute. 

Dura [the plaintiff] [h]as increased their flow of correspondences in an obvious attempt to a (sic) build strong case for themselves.  It is time that we took an active position as opposed to just reacting to their correspondences. 

1. The plaintiff submitted that the initial response to progress payment claims was merely contract administration and fell within the ambit of administration of the trust. However, in light of the transmission of 5 May 2006 it is not possible to characterise the resolution of the claims as anything other than an anticipated or pending Australian proceeding. Albeit that by virtue of s 4, the Evidence Act applies to all proceedings in a Victorian court as defined by the dictionary, s 9 sets out that the Evidence Act does not affect the operation of common law “except so far as this Act provides otherwise expressly or by necessary intendment.”  Accordingly, I am not constrained to conclude that disputes with respect to progress claims not heard in a Victorian court are necessarily excluded from either the common law principles of legal professional privilege nor the statutory principles of client legal privilege. 

1. The plaintiff also adduced evidence that legal services afforded to the first defendant were being paid from trust resources.  The plaintiff submitted that in those circumstances it follows that the legal services were provided for the benefit of both the first defendant and the plaintiff as a beneficiary. 

1. In Krok, Judd J[6] said that:

If the advice was sought for the purpose of assisting a trustee to discharge its duty to administer the trust, in contrast to advice sought and obtained for its personal assistance, any privilege subsisting in the advice is held jointly by the trustee and all beneficiaries.  Presumably the trustee felt at liberty to reimburse itself from the trust assets for the cost of the advice.  The evidence does not suggest otherwise.

[6]Krok at [31].

1. In Schreuder,[7] Buss JA referred to a passage from the judgment of the Vice‑Chancellor Sir R.T. Kindersley in Talbot which concluded:

Besides, if a trustee properly takes the opinion of counsel to guide him in the execution of the trust, he has a right to be paid the expense of so doing out of the trust estate; and that alone would give any scestuis que trust a right to see the case and opinion.

[7]At [68].

1. The trust deed does not require the trustees to act personally but the first defendant was entitled to employ solicitors and the like “… to transact all or any business of whatever nature required to be done in relation to the trust fund and the investments thereof … and the trustees shall decide the remuneration to be allowed and paid and all charges and expenses so incurred.”[8]  Accordingly, the first defendant was entitled to incur and required to meet the expenses of the practitioners and others engaged by it at first instance.  If it is demonstrated otherwise, that will be the subject of the trust proceedings before this Court.  Accordingly, the mere payment out of trust assets is not determinative of the question of whether or not the plaintiff and the first defendant had a joint interest in the litigation advice given to the first defendant. 

   [8]Clause 13.7.

Description

1. The substance of the plaintiff’s submissions in relation to whether or not the description set out in the various affidavits were appropriate was:

(1)the table was unsatisfactory;

(2)the table did not constitute the requisite proof;

(3)the table nor the affidavits deigned to even set out the dominant purpose for which a document was generated;

(4)nothing was disclosed as to why any particular document or communication should be kept confidential from the beneficiary or at all.

1. In support of that submission, reference was made to communications between the client and the superintendent and the architect who were appointed pursuant to the provisions of the contract. 

1. Judd J in Krok said that:

Apart from the ubiquitous incantation of confidentiality in the footnote to the email, there was no evidence directed to confidentiality.  The requirement for evidence going to confidentiality was made more significant because of the “joint privilege” argument advanced by Ms Krok.  Did the retainer require the communications and documents of this kind be kept confidential from Ms Krok, and if so, why?  …  [9]

Later, Judd J said of another email:

That evidence was inadequate to support the claim.  It is not sufficient to assume that merely because there is a communication between a lawyer and a client that it was made pursuant to an express or implied obligation that it was to remain confidential from Ms Krok.[10]

[9]At [21].

[10]At [25].

1. Judd J said:

The trustee’s evidence and submissions did not explain why the advice did not relate to the administration of the trust.  Inspection of the documents indicated otherwise.  To character advice as confidential from beneficiaries merely because it preceded action by the trustee is against the weight of authorities and contrary to logic.[11]

[11]At [31].

1. It is clear that Judd J took a strict view of what was required to demonstrate that either the advice or litigation privilege applied.  However, Vickery J in Hodgson v Amcor[12] said of r 29.04(1)(d):

   It is sufficient statement of the grounds of the privilege.  It is not a statement as to the particulars of the evidence relied upon to support the privilege by, for example, describing the evidence upon which the claim may be founded.  Nor is it necessary to give such description as would enable the other party to test the truth of the claim for privilege.  The exercise involved in stating sufficiently the grounds of the privilege necessarily involves balancing competing considerations. 

   On the one hand the grounds of the privilege claim must be sworn in terms which identify the legal basis upon which the claim is made and provide a sufficient description of the elements of the documents relied upon to support the claim made on that basis. 

   On the other hand, a claiming party cannot be compelled to provide such particularity as would compromise the very privilege that is claimed.  It would defeat two (sic) object of the protection, and hence the public purpose which it seeks to advance, if the description was such as to enable the other party to discover the contents or effect of the document, and thereby compromise its confidential status.  Thus  …  Ormiston J noted that whilst some listing of documents is required, it is not necessary that, “the documents be listed in a manner which would result in the loss of the benefit of the privilege.”[13]

   [12][2011] VSC 204 at [34].

   [13]At [35] – [37].

1. Notwithstanding the plaintiff’s submission with respect to this facet, the plaintiff’s senior counsel invited me to inspect documents. By agreement between the plaintiff and the first defendant a sample of documents were to be inspected by me. Before embarking upon that process I noted that exercising the power under s 133 of the Evidence Act to inspect was the antithesis of the submission that the claims to privilege were not made out.  In any event, I am satisfied that the general description and verification by the junior solicitor are, in the main, sufficient.

Conclusion

1. After inspection of the sample of documents I note that:

(a)Not all documents are adequately described in that, in some instances, it is the email train rather than the final email which is referred to which gives flavour to the characterisation of the purpose for the creation of the document or the making of the communication;

(b)there are a few, but not many, documents with respect to which the claim for privilege cannot be maintained;

(c)some documents which were initially categorised as falling under the advice privilege ought properly have been characterised as falling under the category of litigation privilege.

1. With respect to the document samples, I rule as follows:

The Freehills sample

2.		19 April 2006	Seeks material for a formal reply to a claim assessment.  Litigation privilege.
6.		5 May 2006	Anticipates formal disputes.  Litigation privilege.
25.		17 May 2006	Albeit, that adjudication No. 1 was in progress this document was merely transactional or mechanical in that it enclosed correspondence and submissions.  No client legal privilege.
86.		7 June 2006	During the hiatus period.  A draft which attracted the litigation privilege (it may well be that the final version was provided to the plaintiff’s solicitors in which case no client legal privilege would attach to the original).
116.		19 June 2006	Each of the second adjudication was current and the VCAT proceedings were current.  The communications sought instructions and comments re adjudication responses – litigation privilege.
626.		17 May 2007	VCAT proceedings re taking over the works, caveat proceedings and trust proceedings current - seeking instructions and materials re contract – litigation privilege.
665.		18 June 2007	Caveat, trust & building proceedings current.  However the substance of the communication relates to council hour requirements to which client legal privilege does not attach and, it is prima facie irrelevant.
Noble documents
5.	27 April 2006		Merely considering responses to progress payment claim prior to any anticipation of a dispute as in the letter of 5 May 2006, - no client legal privilege.
8.	10 May 2006		Seeks instructions for response to progress claim – litigation privilege.
14.	See 8.
58.	29 May 2006		Adjudication No 1 current.  It seeks advice with respect to the contract in the context of the plaintiff not fulfilling or providing adequate programs.  There is also advice sought with respect to the Security of Payments legislation – advice privilege.
73.	30 May 2006		First adjudication current.  Draft response prepared by Gadens re contract administration and the program.  Advice privilege.
76.	See 73.
91.	See 86.
242.	11 July 2006		VCAT proceeding re adjudications current.  Advice re possible consequences of change of superintendent – advice privilege.
246.	12 July 2006		VCAT proceeding current.  Re change of superintendent -  advice privilege.
261.	18 July 2006		VCAT proceeding current.  Provision of draft show cause notice – advice privilege or litigation privilege in anticipation of a dispute with respect to the same.
275.	21 July 2006		Dispute 2 and VCAT were current.  However the correspondence relates to an alleged defamation of Charter Kek Cramer.  It is Charter Kek Cramer’s privilege.
286.	31 July 2006		VCAT proceeding current.  Related to a dispute about which mediation had been proposed.  Litigation privilege.
339.	1 September 2006		VCAT proceedings on foot.  Instructions sought re VCAT proceeding/amended points of claim – litigation privilege.
350.	1 September 2006		VCAT proceedings current.  Document to be created as a result of request by Freehills in context of the proceeding – litigation privilege.
351.	See 350.
352.	See 350.
353.	See 350.
354.	See 350.
390.	2 October 2006		VCAT, County Court and VCAT taking over of works proceedings current – litigation privilege.

1. I have adjourned the further hearing to allow the parties to make further submissions as to how the balance of documents with respect to which client legal privilege has been claimed are to be managed.  That hearing will take place on 30 August 2011 in Court 6 at 436 Lonsdale Street, Melbourne at 11.00 am.

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