Falland v Symbion Health Ltd - [2010] SASC 119

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
FALLAND & ORS v SYMBION HEALTH LTD & ANOR
[2010] SASC 119
Judgment of The Honourable Justice Bleby
28 April 2010
PROCEDURE - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - PRODUCTION AND INSPECTION - GROUNDS FOR RESISTING PRODUCTION - OTHER GROUNDS
Plaintiff sought production of certain documents disclosed by second defendant – second defendant claimed documents subject to without prejudice privilege – documents said to be produced for the purpose of without prejudice negotiations – whether documents subject to an express or tacit agreement that they should not be used to the prejudice of either party – whether r 160 of the Supreme Court Civil Rules 2006 applies – whether r 161 can be retrospectively relied upon.
Held: no evidence to show documents subject to an express or tacit agreement that they should not be used to the prejudice of either party – no evidence to show documents used in any without prejudice communications or offers of settlement – documents not subject to without prejudice privilege – documents properly described as expert reports within the meaning of r 160 – not subject to legal professional privilege.
Supreme Court Civil Rules 2006 (SA) r 4, r 117(2)(b), r 160, r 161; Supreme Court Rules 1987 (SA) r 38.01, referred to.
Field v Commissioner for Railways for New South Wales (1957) 99 CLR 285, applied.
Rabin v Mendoza [1954] 1 WLR 271, distinguished.
State Bank of South Australia v Ferguson (1995) 64 SASR 232, not followed.
Cutts v Head [1984] Ch 290; Hong Kong Bank of Australia v Murphy (2992) 28 NSWLR 512; Davies v Nyland (1975) 10 SASR 76; Rush & Tompkins v Greater London Council [1989] 1 AC 1280; Unilever Plc v Procter & Gamble Co [2000] 1 WLR 2436, considered.

FALLAND & ORS v SYMBION HEALTH LTD & ANOR
[2010] SASC 119
Civil

BLEBY J. By a list of documents filed on 16 February 2010, the second defendant, Toll Ipec Pty Ltd (“Toll”), claims privilege from production in respect of six documents. The main ground of privilege said to be relied upon is without prejudice privilege, but reliance is also placed on legal professional privilege. The plaintiffs (“Falland”) dispute this claim and seek the production of these documents.
Background
This action concerns industrial premises at 7 Hudson Court, Netley (“the Netley premises”), which were leased by Falland to the first defendant, then known as Mayne Group Ltd, and subsequently to Toll. Falland is seeking to recover from both lessees the costs of reinstatement and repair of the premises undertaken at the end of the leases.
Prior to the commencement of these proceedings, between October 2002 and March 2003, negotiations took place between representatives of Falland and Toll with a view to reaching a settlement. These negotiations resulted in a partial settlement but failed to resolve the entire dispute.
The documents which Toll objects to produce are described in its list of documents as follows:
1.Document titled “Building Condition Report – Astra Building Report Services” [2 October 2002]
2.Quotation Letter from Arthur Bousdoukas (of Astra Building Services Pty Ltd) to Victoria Padey [22 October 2002]
3.Letter from Napier & Blakeley Pty Ltd to Victoria Padey attaching bound spreadsheet titled “Calculation” together with CD labelled “7 Hudson Ct Netley SA” [8 March 2005]
4.Letter from Napier & Blakely Pty Ltd to Victoria Padley (sic) [28 February 2007]
5.Email from Michael Ross (of Napier & Blakely) to Victoria Padey with attached schedule with handwritten amendments [9 March 2007]
6.Document titled “Updated costs report as basis of claim – building works reinstatement R98 – Trade costs summary” with handwritten amendments and highlighting [Undated]
Toll submitted that it commissioned the Astra Building Report Services (“Astra”) documents so that Toll and its legal advisers could evaluate Toll’s position and facilitate its participation in the without prejudice negotiations. Having reached agreement on certain matters not now in dispute, it was submitted that Toll and Falland agreed, in an endeavour to settle the remaining issues in dispute:
a)that Falland would make available to Toll documentation relating to the actual cost Falland incurred in making good the premises;
b)that those documents would be inspected by quantity surveyors retained by Toll; and
c)following review by Toll’s quantity surveyors, Toll and Falland would attempt to settle the remaining issues in dispute.
Napier and Blakeley were the quantity surveyors instructed by Toll. Counsel for Toll conceded that both Astra and Napier and Blakeley are properly described as experts in their respective fields. Counsel for Toll contended that these documents were brought into existence for the purpose of bona fide negotiations with a view to compromise, and that they therefore enjoy protection from production by virtue of the without prejudice privilege.
There is sufficient evidence before me to make good the factual contentions set forth above. The question is whether that is sufficient to justify privilege from production of the documents on the ground of without prejudice privilege.
Without Prejudice Privilege
The underlying purpose of without prejudice privilege is to encourage negotiated settlements as between parties. In the leading case of Field v Commissioner for Railways for New South Wales,[1] Dixon CJ, Webb, Kitto and Taylor JJ said:
As a matter of policy the law has long excluded from evidence admissions by words or conduct made by parties in the course of negotiations to settle litigation. The purpose is to enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose upon them. The law relieves them of this embarrassment so that their negotiations to avoid litigation or to settle it may go on unhampered. [2]
[1](1957) 99 CLR 285.
[2] Ibid 291. See also Cutts v Head [1984] Ch 290, 306; Hong Kong Bank of Australia v Murphy (1992) 28 NSWLR 512, 522; Davies v Nyland (1975) 10 SASR 76, 105.
This sentiment is echoed in the judgment of Griffiths LJ in Rush & Tompkins v Greater London Council,[3] his Lordship describing the basis of the privilege as “founded on the public policy of encouraging litigants to settle their differences rather than litigate them to a finish.”[4] Consequently, as the Court of Appeal in Unilever Plc v Procter & Gamble Co[5] concluded, the protection of admissions against interest is the most important practical effect of the privilege.[6]
[3][1989] 1 AC 1280.
[4] Ibid 1299.
[5] [2000] 1 WLR 2436.
[6] Ibid 2448.
As the Court of Appeal noted, the privilege is founded partly in public policy and partly in the agreement of the parties.[7] Consequently, the parties can agree, either expressly or by implication, on what is to be protected under the privilege. However, the words “without prejudice” in a communication cannot be used indiscriminately as a cloak over communications and documents where the privilege is not appropriate. The net cast by without prejudice privilege is not without bounds:
This form of privilege, however, is directed against the admission in evidence of express or implied admissions. It covers admissions by words or conduct. For example, neither party can use the readiness of the other to negotiate as an implied admission. It is not concerned with objective facts which may be ascertained during the course of negotiations. These may be proved by direct evidence. But it is concerned with the use of the negotiations or what is said in the course of them as evidence by way of admission.[8]
[7] Ibid.
[8] Field v Commissioner for Railways for NSW (1957) 99 CLR 285, 291-2.
It is also clear that without prejudice privilege is not merely restricted to documents explicitly marked as such. Nor is it restricted solely to admissions against interest. To attempt to dissect out particular admissions from communications would not only be practically difficult but contrary to the public policy of enabling the parties to “speak freely about all issues in the litigation both factual and legal when seeking compromise and, for the purpose of establishing a basis of compromise, admitting certain facts.”[9]
[9] Rush & Tompkins v Greater London Council [1989] 1 AC 1280, 1300. See also Unilever Plc v Proctor & Gamble Co [2000] 1 WLR 2436, 2448-9.
What is clear, therefore, is that without prejudice privilege is directed at communications between the parties, primarily in the form of admissions, although not necessarily limited to that. The underlying principle behind the privilege is to ensure that any admissions or communications directed at settling a matter do not prejudice either party should such an admission, for example, be admitted into evidence in any eventual trial.
The documents produced by Aston and by Napier and Blakeley were expert reports as defined in r 4 of the Supreme Court Civil Rules 2006 (SA) (“the 2006 Rules”) and r 38.01(6) of the Supreme Court Rules 1987 (SA). I reject Toll’s argument that, because they did not comply with the form prescribed in the Rules, they were not expert reports. The reports themselves and associated documents referred to in the Rules are required to be produced in accordance with r 160 and r 38.01 of those respective Rules.
Those rules, in the interest of transparency in litigation and to avoid ambush at trial, abolished privilege from production of such reports and associated materials which would otherwise have come under the umbrella of legal professional privilege. The clear policy behind such rules is to require production of any such material, whether intended to be used at trial by the party responsible for its preparation or not, and whether helpful or harmful to that party’s case. If production of an expert’s report and associated material is to retain any privilege from production it can only be where there is clear agreement to that effect by the parties or where, under the 2006 Rules, a shadow expert report is engaged.[10] Where without prejudice privilege is relied on it must be quite clear that the express or implied agreement that documents should not be produced extend to the expert’s report in question.
[10] See [29]-[30] below.
Toll’s contention
I have already summarised Toll’s contention with respect to those documents. If it is to succeed, it must go further and establish not only that the documents were produced for the purpose alleged but that there was some agreement between the parties that they could not be produced in the litigation.
Particular emphasis was placed on the judgment of the Court of Appeal in Rabin v Mendoza.[11] In that case the defendants were a firm of surveyors sued by the plaintiff in negligence. The plaintiff’s solicitor met with a partner of the defendant firm before the action was commenced. The interview was without prejudice. The parties reached an understanding that the defendants would make enquiries about the possibility and cost of obtaining insurance cover concerning possible risk of damage to the plaintiff’s house. The defendants instructed another firm of surveyors to report with a view to putting a proposition to insurers. The report was obtained but no settlement was reached. The purpose of the report was in order to pursue without prejudice negotiations in settlement with a view to putting a proposition to insurers about cover. The defendants claimed privilege on the ground that the report was “prepared and made as a result of and in pursuance of … a without prejudice discussion between the plaintiff’s solicitors” and the partner of the defendant firm. Upon an application to produce the report, the Court of Appeal held that the report was privileged from production by virtue of without prejudice privilege.
[11] [1954] 1 WLR 271.
The ratio decidendi of the case is to be found in the following passage of the judgment of Denning LJ:
[I]f documents come into being under an express, or, I would add, a tacit, agreement that they should not be used to the prejudice of either party, an order for production will not be made.[12]
[12] Ibid 273.
Toll submitted that the documents in question in this case were properly within that protected category. To support this submission, counsel for Toll referred to facsimile correspondence from late 2002 to early 2005 between the parties as evidence of the agreement as to the process to be adopted.
From that correspondence, there does appear to be a level of agreement as to the process to be adopted for the purposes of achieving a possible compromise in negotiations. There are numerous references to a process “as agreed” which appears best outlined in a facsimile from Kym Falland to Michael Fox of Toll dated 26 February 2003. That facsimile contains the following paragraphs:
e)After completion by [Falland] of all Repair and Reinstatement work at 7 Hudson Court Netley … [Falland] will have available comprehensive documentation relating to the costing of the Repair and Reinstatement obligations of Toll Ipec Pty Ltd and/or Mayne Nickless Limited arising from the period from 01/10/1988 to 31/12/1998 … collated, presented in a proper and coherent format and then made available for inspection and review by Quantity Surveyors nominated by Toll at a mutually agreed time and place.
…
f)Following the Quantity Surveyor’s review, Toll and [Falland] will settle the outstanding cost issues/reimbursement …
These paragraphs on the facsimile provided have been initialled “OK”, apparently indicating Toll’s concurrence. I consider this falls short of what Denning LJ referred to as an express or tacit agreement that the documents in question should not be used to the prejudice of either party. These paragraphs show an agreement as to the process which includes the creation of, or at least some of, the documents in question. However, they are silent on how the documents were to be treated. There is no agreement that the documents are to enjoy the sort of protection now claimed for them.
The affidavit of Ms Victoria Padey, filed on behalf of Toll, sheds no further light on this aspect. Ms Padey deposes that the documents in question were, in turn, commissioned so that Toll “could evaluate [it’s] position and facilitate [it’s] participation in the without prejudice negotiations” and so that Toll could “understand and prepare a response to the Scott Schedule”. In his affidavit, Mr Falland does depose to one meeting where it was agreed to be conducted on a without prejudice basis, on 24 October 2002. Mr Falland deposes that, in that meeting, Mr Fox of Toll refused to produce “a report from Astra Building Services”. Both Mr Falland and Mr Carn depose to the nature of the meetings with the quantity surveyor, Napier & Blakely, as involving an exchange of documents, the responses to those and the preliminary opinions of those involved.
Nowhere in the material before me is there evidence of an intention to produce the quantity surveyor’s report for the purposes of the settlement negotiations with, for example, an undertaking that such a production would only be for the purposes of without prejudice negotiations. Furthermore, there is no evidence to show, as counsel for Toll conceded, that these documents comprised part of any offer of settlement. It might well be different if, for example, Toll had made a without prejudice offer to settle on the basis of the figures contained in one or other of the reports.
Consequently, the materials produced do not provide the basis for an express or even tacit agreement that the documents in question were not to be used to the prejudice of either party. I do not consider mere agreement that the documents were to be produced in the course of negotiations to be sufficient for protection under without prejudice privilege.
Counsel for Toll also relied on State Bank of South Australia v Ferguson.[13] It was submitted that this case echoed the sentiments of the Court of Appeal in Rabin. In Ferguson, the plaintiff, in the course of a pre-trial conference under r 56 of the 1987 Rules, commissioned an expert report as a result of receiving an offer from the defendant. The defendant subsequently sought access through r 38.01. Legoe AJ considered that r 38.01 had no application to reports that were obtained during a pre-trial conference as the reports were not obtained “in the action” as the terms of r 38.01 indicated.
[13] (1995) 64 SASR 232.
However, r 38.01(1) provided:
Within 28 days after the time limited by the Rules for making discovery in the action each party in an action shall deliver to all other parties a full copy of every expert report in the party's possession or power relating to any matter in issue in the action.
The phrase “in the action” qualifies the expression “any matter in issue”. It does not qualify the expression “expert report”. In other words, an expert report that is caught by r 38.01 is one which relates to “matters in issue in the action”. It does not, as Legoe AJ appears to have found, speak to how or when a report was obtained. In my opinion Ferguson was wrongly decided. In any event, I find it difficult to accept that a report prepared for the purpose of a pre-trial conference, especially where pleadings had already been filed, could be classified as being anything but “in the action”.
Conclusion
I am unable to accept Toll’s contention that the documents in question are subject to without prejudice privilege. The fundamental policy behind the privilege is to encourage and facilitate negotiations by protecting communications and admissions by the parties from being adduced in any later litigation. In the present case there was no suggestion that the reports in question were used in any offer of settlement or, indeed, in any communication between the parties designed to reach a settlement. Further, there is nothing to suggest that there was an agreement, express or otherwise, that the documents in question should be treated confidentially.
The principles of full and frank disclosure of directly relevant documents and especially that of expert reports are important to ensure the integrity of the process of litigation. If Toll’s argument were to succeed, all a party need do, in order to avoid the obligation to produce an expert report, would assert that the report was obtained for the purpose of conducting settlement negotiations. That would make a mockery of the principles surrounding r 160.
Consequently, I consider that the six documents are not subject to without prejudice privilege.
Other matters
As I have already observed, r 160 of the 2006 Rules and its predecessor r 38.01 of the Supreme Court Rules 1987 removed the protection of legal professional privilege from an expert report and from associated documents referred to in those rules. Legal professional privilege cannot assist Toll in relation to these documents.
Counsel for Toll submitted, in the alternative, that an extension of time pursuant to r 117(2)(b) ought to be granted in order for Toll to rely on the operation of r 161, which provides for the obtaining of shadow expert reports which need not be produced. However the terms of r 161 appear to predicate against such a retrospective application. Subrule (2) provides:
An expert will not be regarded as a shadow expert unless at or before the time the expert is engaged, the expert gives a certificate, in an approved form, certifying that—
(a) the expert understands that it is not his or her role to provide evidence at trial; and
(b) the expert has not been previously engaged in any other capacity to give advice or an opinion in relation to the party’s case or any aspect of it.
[Emphasis added]

It was conceded that at the time that Napier & Blakely was engaged by Toll, r 161 did not exist, whereas the predecessor to r 160 did. It follows that the expert report could not have been prepared as a “shadow expert report”, being a concept introduced into the Rules after the report was commissioned. As the requirements under r 161 are to be met before the report is commissioned, I consider that Toll cannot retrospectively rely upon the Rule.
For the foregoing reasons there will be an order that the documents in question be produced by Toll for inspection by Falland.