Fowles & Fowles (No 6)
[2018] FamCA 1181
•25 June 2018
FAMILY COURT OF AUSTRALIA
| FOWLES & FOWLES (NO. 6) | [2018] FamCA 1181 |
| Application to compel production of documents - legal professional privilege – agency – common interest privilege – documents not to be produced |
Evidence Act 1995 (Cth)
| Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405 Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49; [1999] HCA 67 Hansfield Developments v Irish Asphalt Ltd [2009] IEHC 420 Cross on Evidence, Heydon, J D, 2017, 11th Edition | |
| APPLICANT: | MS FOWLES |
| RESPONDENT: | MR FOWLES |
| INDEPENDENT CHILDREN’S LAWYER: | MARY LONERGAN |
| FILE NUMBER: | MLC | 8587 | of | 2015 |
| DATE DELIVERED: | 25 June 2018 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Bennett J |
| HEARING DATE: | 26 March 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Sheales with Dr Smith |
| SOLICITOR FOR THE APPLICANT: | Lander & Rogers |
| COUNSEL FOR THE RESPONDENT: | Mr North SC with Mr Salamanca |
| SOLICITOR FOR THE RESPONDENT: | Taussig Cherrie Fildes |
Orders
The application of the wife for production of documents by the husband, being copies of all communications between the husband and J Lawyers (in their capacity as solicitors for Mr G Fowles) in relation to the claim by Mr G Fowles regarding the alleged “loan agreement” between H Inc and the husband dated 21 November 2000, be and is hereby refused.
Exhibit “H5” be removed from the Court file and handed to the solicitors for the husband at the conclusion of the proceeding.
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 Fowles & Fowles 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 8587 of 2015
| MS FOWLES |
Applicant
And
| MR FOWLES |
Respondent
REASONS FOR JUDGMENT
I am part heard in the final hearing of financial matters between Ms Fowles (“the wife”) and Mr Fowles (“the husband”). The trial commenced on 19 March 2018 and the parties, and the Independent Children’s Lawyer, negotiated parenting arrangements about D, who is 14 years old. The next day, I made parenting orders by consent of the parties, excused the Independent Children’s Lawyer from further attendance, and the focus moved to financial matters and a final resolution of the parties’ competing applications in that regard.
On the third day, counsel for the mother, Mr Sheales, indicated that there remained a controversy about production by the husband of documents that were requested by the wife as part of the pre-trial discovery process. Prior to the trial, the husband had claimed common interest privilege over certain documents; on 22 March, four days into what was supposed to be a five day trial, there was an indication that the documents had not yet been collated, and that the claim for privilege may widen. The substantive proceedings are adjourned part heard to 25 June 2018 when, I estimate, they will take not less than another five sitting days.
The wife’s initial request for the documents claimed to be privileged by the husband was made through her solicitors by letter dated 27 February 2018[1]. Relevantly, the documents sought were:
13. Copies of all communications between your client and [J Lawyers] (in their capacity as solicitors for [Mr G Fowles][2]) in relation to the claim by [Mr G Fowles] regarding the alleged “loan agreement” between [H Inc] and your client dated 21 November 2000.
For ease of reference, I will refer to them as “the documents”.
[1] Exhibit W5
[2] The husband’s father
On the same date, the wife filed an application in a case seeking amongst other matters not presently relevant, orders for discovery in relation to financial matters. The husband filed a response on 7 March 2018. I heard those applications on 9 March 2018 and the wife pressed her application in respect of paragraph 13 of the letter 27 February 2018. The husband’s solicitors had, on 1 March 2018, not unreasonably long after the request was made, sent a response to the wife’s solicitors stating that in respect of paragraph 13, “the requested communications are the subject of common interest privilege”. On 9 March 2018, I ordered that:
By not later than Thursday 15 March 2018 at 12.00 noon the husband provide particulars in writing to the wife, via their respective solicitors, of the common interest privilege claimed in relation to documents in the proceedings between [Mr G Fowles] and the wife.
Mr G Fowles is the husband’s father. In paragraph 22 of my ex tempore reasons given that day, I said:
There are two things which must obviously happen. One is that [Mr G Fowles] needs to be put on notice that the documents are sought. Secondly, in my view, it would make for a smoother running of the case if the particulars of the common interest privilege were provided prior to the trial so that they may be addressed in either preliminary argument or argument during the trial. I’m assuming it’s common interest privilege because the interest is in common between the father and his father, but particulars would help…
The husband’s solicitors by letter dated 15 March 2018[3] to the wife’s solicitors, particularised the husband’s claim in relation to common interest privilege.
[3] Exhibit H2 which is extracted as to part at paragraph 41 of these reasons.
On Friday 23 March, I ordered that the husband provide to the wife’s legal practitioners by Sunday 25 March, details of any privilege claimed in relation to J Lawyers and the husband in relation to the Supreme Court proceedings between the wife and the husband’s father.
On 26 March, I heard submissions from the parties on the matter.
The relevance of the documents sought is not contested. The factual context is that the husband alleges that his father, Mr G Fowles, is entitled to a charge, being an interest in the land, over the former family home being the apartment at X Street, Melbourne, (“the Melbourne apartment”) pursuant to a loan agreement and deed of charge. It is far from a straight forward series of transactions which commenced with an advance of $1,155,000 in September 2000 with the husband’s receipt of $1,155,000 and the husband entering into a loan agreement with the entity H Inc. in November 2000. The husband alleges, but the wife puts in issue, that the loan was allegedly assigned to the husband’s father by an Amended and Restated Promissory Note dated 1 January 2001. The husband alleges that in January 2001 he signed an amended loan agreement. The Melbourne apartment was acquired in the husband’s sole name in 2001 using the $1,155,000. Later in 2001, SS Company, a company owned or controlled by the husband, acquired H Inc by virtue of which the wife contends that any obligation for the husband to repay the $1,155,000 became the property (a chose in action) owned by the husband through SS Company. In March 2002 Westpac Banking Corporation Limited (“Westpac”) registered a mortgage over the Melbourne apartment. In 2002, the parties commenced cohabitation and D was born in 2003. The parties married in 2005.
The Melbourne apartment has an agreed value of $2,375,000 for the purpose of this proceeding. It is the only significant asset of the parties (or either of them) situated in Australia. Westpac a first registered mortgage over the Melbourne apartment securing $502,446. The husband contends that $2,683,833 is currently owing to his father, Mr G Fowles by way of capital and interest.
The parties and D lived in the Melbourne apartment until separation on 8 July 2015. Since separation, the Melbourne apartment has been occupied by the wife and the child D.
In March 2014, which was around the time of separation, a caveat was lodged on behalf of Mr G Fowles over the Certificate of Title to the Melbourne apartment. The husband’s contention is that the loan agreement includes a charge over the Melbourne apartment that gave his father the right to lodge a caveat over the Melbourne apartment. The wife made an application to the Registrar of Titles for the removal of the caveat. Mr G Fowles then issued proceedings in the Supreme Court of Victoria (“the Supreme Court proceedings”) in which he sought a declaration that he had a caveatable security interest in the Melbourne apartment pursuant to the deed of charge. The wife defended that claim.
In 2017, on the first day of the trial of the Supreme Court proceedings, Mr G Fowles application for a declaration was withdrawn. Mr G Fowles had travelled from the United States to Australia for the trial in the Supreme Court. The parties of those proceedings, namely Mr G Fowles and the wife came to an agreement about costs.
Mr G Fowles had engaged J Lawyers to represent him in the Supreme Court proceedings. It is not in dispute that there were communications between J Lawyers and the husband. On the fifth day of trial, before me, the husband produced a lever arch folder of those communications with an index and I was informed that these are the documents. The documents comprise 465 pages.
In his evidence, the husband said that to the best of his knowledge, apart from disputed costs outstanding to J Lawyers, of about $45,000, he had paid all of Mr G Fowles’ legal cost to J Lawyers for the Supreme Court proceedings in the sum of around $135,000. The husband gave evidence that he paid his father’s legal costs without asking his father whether he could pay his own legal bills or asking if the legal fees so paid could be offset against the monies allegedly owing by him to his father and secured by the equitable charge to which the caveat relates.
The husband’s claim of privilege was initially put on three bases:
1.Legal professional privilege at common law
2.Common interest privilege at common law
3.Common interest privilege as it applies in the Evidence Act 1995 (Cth) (“the Evidence Act”)
The third basis was put as an alternative to the second and was ultimately not argued because the wife accepted that the Evidence Act did not apply. That is so because what is sought by the wife is discovery of documents, not the adducing of evidence and, save for a few exceptions that do not apply here, chapter 3 of the Evidence Act only applies to the admissibility of evidence[4]. Accordingly, I will only look at the first two claims.
[4] per Gleeson CJ, Gaudron and Cummow JJ in Esso Australia Resources Ltd v Commissioner of Taxation. [2001] NSWSC 698
The husband’s claim of legal professional privilege at common law
The husband claims that the documents are privileged in respect of Mr G Fowles and the communications to the husband were made in circumstances that were not inconsistent with the maintenance of that privilege. It was put, and not disputed, that the documents sought were made for the dominant purpose of Mr G Fowles seeking legal advice in the Supreme Court proceedings.
It is the wife’s submission that the documents are discoverable because Mr G Fowles has not asserted privilege and it is not possible for the husband to assert such privilege on behalf of his father.
It is common ground that during the hearing, notice has been given by the wife to Mr G Fowles that she sought the documents and that communication was received by Mr G Fowles. Counsel for the wife, Mr Sheales, described the response from Mr G Fowles as “odd”, and said the wife has since sent another communication but at the time arguments were put to me, the wife was yet to receive a response. In those circumstances, it was put that legal professional privilege is not asserted by Mr G Fowles or that there is no evidence before the Court that Mr G Fowles has claimed privilege over the documents. In response, the husband’s position is that he, as someone akin to an intermediary, cannot produce the documents to the wife and/or abandon a claim of legal professional privilege unless he was satisfied that his father has waived the privilege, and he is not so satisfied.
Specifically, Mr North SC, senior counsel for the husband, put to me, that the husband was an agent for Mr G Fowles, or an intermediary, or at any rate a “conduit” for Mr G Fowles in obtaining legal advice and therefore had to assert or maintain privilege unless privilege had been waived.
Mr North SC relied on Kang v Kwan[5] where Santow J considered whether documents produced under subpoena by the Second and Third Defendant’s lawyers, were subject to privilege in circumstances where the Second and Third Defendants were not participating in the proceedings. Santow J observed:
28. The Plaintiff contends that as the [Second and Third Defendants] have played no part in the present proceedings once their solicitor ceased to act and in particular have not appeared either personally or through current legal representatives to make specific objection to the adducing of the relevant evidence. Accordingly, that it must follow that the pre-condition for the privilege to be invoked has not been made out. For this, the Plaintiff relies upon the unsuccessful efforts to communicate with the Second and Third Defendants, their filing of a sworn defence, their avoidance of discovery and the fact that Verekers [the solicitor for the appellant], who originally acted for them upon the relevant conveyancing and mortgage, have no current retainer. These are said to constitute consent for purposes of s122(1) of the Evidence Act by way of imputed waiver. These circumstances are said to preclude any effective objection for purposes of s118 on the [Second and Third Defendants’] behalf by either Verekers (in relation to their production) or Mrs Champion [of Counsel appearing on behalf of the subpoenaed parties Schraders’ and Mr Davidson] (in relation to Mr Davidson and Schraders’ production).
29. I consider that this contention by the Plaintiff fails. It must be remembered that the privilege is that of the client. Neither solicitor nor an intermediary (who is the agent of either the client or the solicitor) can without the client’s authority either consent to the material being adduced or, again without instructions, abandon that obligation that goes with a solicitor’s retainer, to maintain the privilege. The powers and duties of the solicitor and the agent are not affected by the termination of the solicitor-client relationship or the agency; see Attorney General (NT) v Maurice (1986) 65 ALR 230 at 235 per Woodward J.
30. It is not enough that the solicitor refrain from disclosing a privileged communication. It is well-settled that if he or she does disclose, that solicitor may be liable to the client for damages for breach of duty; see “Cross on Evidence” (Butterworths) 4th ed by D Byrne and J D Heydon at 707. The lawyer’s duty goes further than this. It is to do that lawyer’s best to ensure that a valid claim for privilege is not lost; see Rosenberg v Jaine [1983] NZHC 6; [1983] NZLR 1 at 7 per Davison CJ; Commissioner of Taxation (Cth) v Citibank Ltd (1989) 85 ALR 588 at 596 per Bowen CJ and Fisher J; State Drug Crime Commission v Larsson (1991) 53 A Crim R 131 at 134 per Newman J; Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 91 A Crim R 451 at 522 per Kirby J. Cf Tuckiar v The King [1934] HCA 49; (1934) 52 CLR 335 at 346 per Gavan Duffy CJ, Dixon, Evatt and McTiernan JJ.
31. Indeed in a Canadian case, it was held that legal professional privilege is of such importance to the administration of justice and held in such high regard by the courts that it is not even necessary that the client personally object to the disclosure of the material; that a court may, of its own motion, raise the matter of privilege in order to protect the sanctity of the solicitor-client relationship. See Stevens v Canada (Privy Council) (1998) 161 DLR (4th) 85 at 99 per Linden JA.
32. For whatever reason the Second and Third Defendants have chosen not to participate further in these proceedings. There is nothing in their actions which allows the court to infer that they have authorised the solicitors that they had previously retained or their counsel to fail to take such action as would be necessary to maintain the privilege, being in the present case to make objection as would satisfy s118 of the Evidence Act.
[5] [2001] NSWSC 698
Mr Sheales, for the wife, submitted that Kang has no application because in that case, it was the Second and Third Defendant’s lawyers who were called upon to produce the documents, whereas here, the husband is a third party. As Santow J pointed out, the obligation to maintain privilege is part of the lawyer’s retainer and cannot be abandoned without the client’s authority. The concomitant is that privilege cannot be asserted without the client’s instructions to do so or for so long as is necessary for the solicitor to make contact with the client for the purpose of obtaining instructions. The only other situation in which a person would be obligated to maintain privilege (unless it has been expressly or impliedly waived) would be if the person was an agent of the client or an agent of the solicitor. Mr North SC did not submit that anyone else apart from an “agent” would owe such a duty, though he did use the term “intermediary” interchangeably with “agent”. The language does not assist as, if it comes from Santow J, the term “intermediary” is simply one used to encompass both agents of the client and agents of the solicitors.
The husband’s assertion of legal professional privilege simpliciter then, can only succeed if he establishes that he is an agent of Mr G Fowles. As indicated, Mr North SC submitted that the husband was an agent, intermediary or ‘conduit’ for Mr G Fowles in obtaining legal advice. I asked Mr North for evidence of agency. Mr North SC responded that, if I was to inspect the documents over which the privilege has been claimed, they would show that the husband was an agent or intermediary or conduit for Mr G Fowles in obtaining that legal advice in proceedings against the wife.
Was the husband an agent of Mr G Fowles?
As the High Court (Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ) observed in International Harvester Co of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Co,[6] “[a]gency is a word used in the law to connote an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties.”
[6] (1958) 100 CLR 644
Mr North submitted that there are many forms of agents and that the husband was a person through whom Mr G Fowles and his solicitors chose to communicate. That the husband was “assisting and offering support” to Mr G Fowles by being present (though in the electronic sense) in the giving of instructions and the receiving of advice. Mr North relied on the circumstance that Mr G Fowles is overseas. I queried how much of an impact that now makes having regard to email, video conferencing and telephone connectivity. Mr North said the difference in time zone could affect the giving and receiving instructions “from time to time”.
When I asked for evidence of the agency, Mr North SC said the husband had given evidence about it. However when I said that my recollection was that there had not been any evidence about agency, either in the witness box or as part of the husband’s evidence-in-chief, Mr North agreed. He repeated that a perusing the documents over which privilege had been claimed, would establish that connection. It is notable in my view that Mr North is prepared to rely on allegedly privileged material to prove a component of his case, that of agency, and yet none of Mr Sheales, the wife or the wife’s solicitors are permitted to inspect the documents or a selection thereof for the purpose of me determining the agency issue. It remains unclear to me how J Lawyers could open and conduct a file, of the nature alleged by the husband, without obtaining from Mr G Fowles at the earliest juncture an authority to deal with the husband as his agent for specific or all purposes. Mr North has complete dominion over the documents and could, if he saw fit, extract individual documents from the documents which illustrate his point but he has not done so. The documents are numerous. It is not for me to wade through the documents unassisted for the purpose of trying to find material to support or disprove this preliminary point in the husband’s legal professional privilege argument.
There was considerable cross-examination about what the husband role in financing his father’s claim in the Supreme Court proceedings against the wife and about why his father was not participating, either as a witness or as an intervening creditor, in the proceedings in this Court. The husband’s evidence was that in relation to his father’s asserted interest in the Melbourne apartment, his father had written through J Lawyers, to the husband’s lawyers making a claim for a charge over the Melbourne apartment. The husband gave evidence that his father was not well enough to come back to Australia. When I pointed out that that was likely unnecessary, as he could have given evidence from the United States, the husband’s evidence was that his father “doesn’t want anything more to with the Australian court system. He doesn’t want to get – come down here and be involved or he doesn’t want to have to give testimony. He just wants to be with his wife now [who is sick]. So he relied on [J Lawyers] to write the letter and he said, “[Mr AD], take care of it as best you can.” And I think he’s sick.” This is the only part of the husband’s evidence I could find that refers to some kind of authority or instruction given to anyone. Moreover, the context of the husband’s response in giving evidence of that statement was a question about his father’s participation, or lack thereof, in these proceedings, not those conducted in the Supreme Court.
Mr Sheales, for the wife, submitted that, without any evidence of a relationship of agency, setting out the nature of that agency, I could not be satisfied that the husband was an agent of his father. Mr Sheales submitted that for me to be satisfied that such an agency existed, the husband would need to depose to that in an affidavit that set out the nature and parameters of the agency. It seems to me that the evidence would best come from Mr G Fowles and the solicitor who has personal knowledge of and had conduct of the file.
Establishing agency is a matter of examining the relationship between the relevant parties to see if there is a relationship of principal and agent and consent for the agent to occupy the position of the principal for all or any purposes. The husband’s evidence does not establish a relationship of agency, as between his father, as principal, and himself, as agent.
Mr North referred me to a number of cases where the court was concerned with the doctrine of implied waiver of legal privilege. The case that received the most attention was Spotless Group Ltd v Premier Building and Consulting Group PtyLtd[7]. In that case, the plaintiff had communicated legal advice received by it in relation to the proceedings to third parties including its financier, a bank, and a company it employed to handle its public relations (“Royce”). The defendant subpoenaed those communications and the plaintiff claimed privilege had not been waived and even if it had, the third parties shared a common interest with the plaintiff such that the communications were privileged anyway. There Chernov J, whom Warren CJ agreed, applied the test in Mann v Carnell[8] and found that there was no implied waiver because the act of disclosure to the financier and Royce was not inconsistent with the maintenance of privilege. Mr North’s submission was that it would be curious if the confidential communication of privileged documents to a financier and public relations consultant for a non-privileged purpose is not conduct amounting to waiver, yet confidential communication to his client of Mr G Fowles’s legal advice, which he characterised as communication to facilitate the giving of advice and the provision of services, is to be characterised as a waiver of Mr G Fowles’s privilege.
[7] (2006) 16 VR 1; [2006] VSCA 201
[8] (1999) 201 CLR 1; [1999] HCA 66
In my view, Spotless, in so far as it deals with the doctrine of implied waiver, and cases like it, have no application here. That is because in all those cases, the person to whom the privilege is owed, that is the ‘client’ has objected to the disclosure of those documents. Here, Mr G Fowles, who the husband accepts is the ‘client’, has not asserted a claim for privilege. If privilege is not claimed, questions of waiver are irrelevant.
I am not satisfied that Mr G Fowles asserts legal professional privilege in relation to the documents personally. It would not have been difficult for him to do but he has not done so. Neither am I satisfied that the husband asserts legal professional privilege over the documents as his father’s agent. The husband’s first argument about privilege therefore fails.
The husband’s claim of common interest privilege at common law
The husband makes an alternative or additional claim for privilege through the doctrine of “common interest privilege”. That concept was described by Sheller JA in Farrow Mortgage Services Pty Ltd (in liq) v Webb[9], citing Thomason v Campbelltown Municipal Council[10], as a circumstance where disclosure, of communications between one or more parties and a legal adviser, amongst parties who have a shared or similar interest in the subject of those communications, results in an entitlement of the clients to refuse to disclose documents on discovery. In Network Ten Ltd v Capital Television Holdings Ltd[11], Giles J described the doctrine as follows “if two parties with a common interest exchange information and advice relating to that interest, the documents or copy documents containing that information will be privileged from production in the hands of each; thus, if one of the parties obtains a letter of advice attracting legal professional privilege and provides it to the other, the other can also claim legal professional privilege.” Giles J went on to observe that, although some of the earlier English cases suggested that the parties must also have the same solicitor, he did not think that was a necessary circumstance.
[9] (1996) 39 NSWLR 601at 608
[10] (1939) 39 SR (NSW) 347 at 354
[11] (1995) 36 NSWLR 275 at 279
The New South Wales Court of Appeal concurred with Giles J in the subsequent case of Marshall & Prescott. [12] Barrett JA, with whom McColl and Ward JJA agreed, described the doctrine as operating as follows: [13]
If a document in which legal professional privilege subsists is given to someone else so that the content ceases to be confidential, the privilege is usually lost. This is because the act of giving is, in the particular circumstances, inconsistent with any continuing intention to maintain confidentiality. An exception operates, however, where the person entitled to the privilege and the person to whom the content of the document is made known have such a commonality of interest in relation to the subject matter of the privilege that the sharing of the content is consistent, rather than inconsistent, with an ongoing intention to preserve confidentiality and privilege…
[12] [2013] NSWCA 152 at [60]
[13] [2013] NSWCA 152 at [57]
Barrett JA, citing McKechnie J in Hansfield Developments v Irish Asphalt Ltd,[14] went on to describe the necessary process of analysis:
The first step, it was said, is to determine by normal standards whether the document would be privileged in the hands of the party communicating the information, assuming that no disclosure had in fact been made if it is found that the documents would be so privileged, the court must proceed to the second step which is to ask whether the relationship between the parties was sufficiently close that the transmission of documents should not be held to amount to an implied waiver of the privilege. The nature of that assessment was described in this way:
“In considering this the Court should take into account the relationship between the parties, as well as the nature and purpose of the disclosure and whether there could be held to be an objective intention to waive privilege on the part of the holder.”
McKechnie J continued:
“Privilege should not be overborne lightly, and therefore the ultimate question must be whether it is reasonable in the circumstances to conclude that there was an implied waiver of the privilege. If such an implied waiver cannot be found, the Court should not otherwise interfere.”
[14] [2009] IEHC 420 at [63]-[64]
Barrett JA concluded that:[15]
This formulation in terms of implied waiver and intention to waive represents, in my opinion, an accurate summation of the relevant principle. Normally, disclosure of protected content by the holder of the privilege causes the privilege to be lost. This is because of the inherent inconsistency between failing to safeguard the confidentiality essential to privilege and, at the same time, seeking to maintain the immunity that the privilege confers. Where there is, in relation to actual or pending litigation (or its course or outcome), a commonality of interest between, on the one hand, a party to the litigation who is also the holder of the privilege and, on the other, the person to whom disclosure of the privileged content is made by that party for a purpose relevant to that litigation, the commonality of interest supplies a rational basis for inferring an intention that the party’s confidentiality should continue and the party’s privilege should be maintained, even though the subject matter of the disclosure has passed into the hands of the other person.
[15] [2013] NSWCA 152 at [65]
The unusual features of the present case are that:
a)The client to whom the privilege is owed (Mr G Fowles) has not asserted that the documents are privileged despite being alert to the possibility of disclosure; and
b)The proceedings in which the documents are sought are proceedings as against the party to whom the documents were disclosed (the husband) and not the person who would otherwise be the holder of the privilege (Mr G Fowles).
Whilst those features make considerations of implied waiver irrelevant, in that the privilege has not been asserted by or on behalf of Mr G Fowles in the first place, I would not hold that the absence of a claim of privilege by Mr G Fowles would preclude the husband from relying on common interest privilege provided that I was also satisfied that there is commonality of interest between the husband and his father. That is because, to use the words of Barrett JA, the communications between Mr G Fowles and J Lawyers, if made for the dominant purpose of providing legal advice to Mr G Fowles, would be “document[s] in which legal professional privilege subsist” (emphasis added).
I turn then to the claims of the husband, which is that he has a common interest with his father in the documents and is entitled to resist production of the documents on the basis of common interest privilege. As stated earlier, the description of the documents is “communications between [the husband] and [J Lawyers] (in their capacity as solicitors for [Mr G Fowles]) in relation to the claim by [Mr G Fowles] regarding the alleged “loan agreement” between [H Inc] and [the husband] dated 21 November 2000.” The common interest asserted by the husband, through the submissions of Mr North, is that both the husband and Mr G Fowles recognise and acknowledge that each of them have an interest in the Melbourne apartment. That was articulated slightly differently in the letter of 15 March 2018 from the husband’s solicitor’s to the wife’s where at paragraph 4, it asserted that the husband had a common interest claim with Mr G Fowles in the proceeding because:
a)both [Mr G Fowles] and our client had a common interest in [Mr G Fowles] establishing that he had a caveatable interest in the [Melbourne apartment] so that this asset would be available to [the husband] for the repayment of the loan to his father;
b)the proceeding sought a declaration that [Mr G Fowles] had a caveatable security interest in respect of the [Melbourne apartment] to secure repayment of the alleged loan;
c)in the event that [Mr G Fowles] was not able to substantiate that he had a caveatable security interest in the [Melbourne apartment]:
i)[Mr G Fowles] would be left as an unsecured creditor of [the husband] in respect of the alleged loan agreement; and
ii)If it were determined by the Family Court that the wife receive the benefit of the [Melbourne apartment], this asset would not be available to our client for the repayment of the loan which would prejudice his ability to repay the loan.
In submissions, Mr North contended that if the Supreme Court proceedings had been determined in favour of Mr G Fowles, the husband would have directly benefitted from that determination because that determination would have been consistent with the husband’s belief and position that both he and Mr G Fowles had an interest in the property. Mr North submitted that had Mr G Fowles not instituted the Supreme Court proceedings, the husband could have made an application to uphold Mr G Fowles’ caveat asserting that he had granted a prior interest in favour of Mr G Fowles.
Mr North submitted that the commonality of interest is also borne out by the commonality of the issues between what was to be determined in the Supreme Court proceedings, and the issues which are now being litigated in these proceedings. He referred me to Mr G Fowles’ amended statement of claim and the wife’s proposed amended defence in the Supreme Court proceedings.[16] Relevantly, those documents show that, in the Supreme Court proceedings, the wife denied that the monies lent to the husband to complete the purchase of the Melbourne apartment were lent by his father and not the entity H Inc and that the wife denied that the husband acknowledges and accepts that the debt is due and payable or that the loan agreement gives rise to a charging clause that confers a right to Mr G Fowles to lodge a caveat over the property. In these proceedings, the wife asserts that there is no loan between the husband and Mr G Fowles with respect to the purchase of the X Street property and that this is a sham transaction constructed by the husband to reduce the equity of the X Street property to zero.[17] It is the wife’s assertion that the husband obtained a loan from H Inc in November 2000 and though she has not discovered who owned and controlled H Inc at that time, by October 2001, the husband owned and controlled H Inc until its liquidation in 2008.[18] She asserts that at the time of liquidation, all of the assets of H Inc were transferred to SS Company which was also solely owned and controlled by the husband.[19]
[16] Tendered by the Wife as Exhibit “W15” and Exhibit “W16” respectively
[17] See para 21 of the wife’s outline of case
[18] See para 22 of the wife’s outline of case
[19] See para 22 of the wife’s outline of case
It was submitted by Mr North that the commonality and similarity of allegation made against the husband in this proceedings and those made against Mr G Fowles in the Supreme Court proceeding are such that they all form part of the same justiciable controversy. With respect to the facts, the husband and Mr G Fowles’ position are the same. Mr North submitted that both, or each, had an interest in the matter being determined in their favour, whether in the Supreme Court proceedings or here. He submitted that though Mr G Fowles has abandoned his claim, the husband is asserting the same position in these proceedings. Mr North submits that in the Supreme Court proceedings therefore, both had a common interest in a determination that Mr G Fowles’ claim of a charge over the Melbourne apartment exists, and could be secured by a caveat on title.
Cross on Evidence, to which Mr North referred, describes the enquiry this way:[20]
Where in circumstances of a mutual interest in a particular transaction or transactions the recipient of legal advice relating to such transactions passes documents or information containing that advice to someone who shares that interest, the essential question in each case is whether the nature of their mutual interest in the context of their relationship is such that the party to whom the documents are passed receives them subject to a duty of confidence which the law will protect in the interests of justice.
[20] At [25265] Common interest and joint interest privilege, citing Formica Ltd v Export Credits Guarantee Dept [1995] 1 Lloyd’s Rep 692 at 699
The authorities are consistent in expressing that “common interest is not in this context a rigidly defined concept. A mere common interest in the outcome of litigation will be sufficient to enable any party with that interest to rely on it”.[21]
[21] Buttes Gas and Oil Co v Hammer (No 3) [1981] QB 223; repeated in Bulk Materials (Coal Handling) Services Pty Ltd v Coal & Allied Operations Pty Ltd (1988) 13 NSWLR 689, Farrow Mortgage Services v Webb (1996) 39 NSWLR 601at 608 and [2013] NSWCA 152 at [61]
There are numerous examples of what constitutes commonality of interest considered in the authorities, chief among which is the situation of an insurer and insured. In Marshall v Prescott, Barrett JA explained[22] that insurers have a common interest with their insured in litigation because they, as underwriters of the insured’s liability, have an interest in seeing the insured mount the most effective defence. He observed that insurers have that interest even before they decide to indemnify the insured because, upon the making of that decision, they become subject to steps taken earlier in the litigation. Some other examples previously considered or discussed include:
a)Where a published book allegedly contains libel, the author and publisher have common interest even if only one is a defendant;[23]
b)Where a landlord takes proceedings against a particular tenant and the dispute concerns a term of the lease which is common to all the tenancies in the block of flats owned by the landlord, the tenants have a common interest and may share the legal advice they obtain;[24]
c)Where the sovereign state claims a jurisdictional right to grant the right to access mineral resources, a company asserting rights to mineral resources granted by that sovereign state was held to have a common interest with the sovereign state;[25]
d)Where the liquidator of a company received advice about the company’s potential claim against another company, the creditors of the company were held to have a common interest in the advice obtained;[26] and
e)Where a parent company of the defendant company had provided assurances to the plaintiff company in respect of an agreement between the plaintiff and defendant (subsidiary company), the parent and subsidiary company were held to have a common interest in the advice received by the parent company about the matter.[27]
[22] [2013] NSWCA 152 at [60]
[23] Considered by Lord Denning MR in Buttes Gas & Oil Co v Hammer (No 3) [1981] QB 223 at 243
[24] Considered by Donaldson LJ in Buttes Gas & Oil Co v Hammer (No 3) [1981] QB 223 at 252
[25]Buttes Gas & Oil Co v Hammer (No 3) [1981] QB 223
[26]Southern Cross Airlines Holdings Ltd (in liq) v Arthur Anderson & Co (a firm) (1998) 84 FCR 472
[27] Rank Film Distributors Ltd v ENT Ltd (1994) Supreme Court of Tasmania, Crawford J, 5 November 1994, unreported
In Lee v South West Thames Regional Health Authority,[28] a young boy was injured whilst being transferred between two hospitals by an ambulance provided by the authority (“SWT”). One of the hospitals (“H”) obtained from SWT, a report from the ambulance crew with a view to obtaining legal advice on its liability. During the discovery process SWT claimed privilege over the document. The court held that SWT could claim common interest privilege over the document. Donaldson MR said:[29]
The principle is that a defendant or potential defendant shall be free to seek evidence without being obliged to disclose the result of his researches to his opponent. [H] can certainly waive its rights and, were it to do so, the memorandum would clearly be disclosable by [SWT]. However, it has not done so. Furthermore, it would, we think, be impossible to seek in this case to impose a term that disclosure should take place after all proceedings against [H] are terminated or abandoned. If [H] is to be sued as well as [SWT], the actions must be tried together. [SWT] and their employees have no rights as witnesses, but we can see no way of protecting the rights of [H] as potential defendants if disclosure is ordered against [SWT].
In Farrow Mortgage Services, Sheller JA, quoting the editors of Phipson, noted that:[30]
In many if not all of the cases cited…there was the potential for disputes between the parties with the common interest. In Lee’s case, [H] and [SWT] had a common interest in defeating the plaintiff’s claim. The fact that the attacks by [H] on [SWT] or vice versa were among the defences that might be advanced at a later stage can hardly affect the overall commonality of [H’s] and [SWT’s] interests, especially as it was a matter of pure speculation whether or not they would be.
[28] [1985] 1 WLR 845
[29] [1985] 1 WLR 845 at 840
[30] (1996) 39 NSWLR 601at 611
In Network Ten,[31] Giles J summarised the case of Bank of Nova Scotia v Hellenic Mutual War Risks Assn (Bermuda) Ltd (The Good Luck),[32] where a debtor (the owners of The Good Luck vessel) and creditor (the plaintiff bank) were found not to have a common interest where the creditor had taken up proceedings against the debtor’s insurers. Giles J’s summary was as follows:[33]
In Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd (“The Good Luck”), the owners of the vessel unsuccessfully brought proceedings against an insurer under a policy of insurance. The owners' bank then brought proceedings against the insurer, alleging breaches of contract and of duty on its part in failing to inform the bank that the vessel was uninsured at the material time whereby the bank made or continued to make advances to the owners. The bank claimed legal professional privilege in respect of documents containing or revealing details of the legal advice which the owners had received from their lawyers about the owners' claim against the insurer, which legal advice had been passed on to the bank by the owners. After referring to Buttes Gas & Oil Co v Hammer (No 3) and expressing the view that the fact that the bank and the owners did not share a common solicitor did not in itself preclude common interestprivilege, Saville J said (at 542):
“What to my mind is required, however, is an identity of interest so close that the parties concerned could (had they chosen to do so) have used the same solicitor or other lawyer. It seems to me that such a limitation provides not only a relatively simple rule which lawyers can apply when seeking to discharge their duty regarding discovery, but also reflects what seems to me to be implicit in the judgments of the Court of Appeal, particularly that of Lord Denning. At 243 of the report the Master of the Rolls said that in cases where the parties had ‘the self-same interest’ the Courts should — for the purposes of discovery — treat all the persons interested as if they were partners in a single firm or departments in a single company. It seems to me therefore that the Master of the Rolls was envisaging only cases where the interests of the parties were so close that they could properly be regarded (for discovery purposes) as one and the same.
In the present case it cannot be disputed that the plaintiffs had the greatest possible interest in the owners' action against the defendants. The owners were deeply indebted to the plaintiffs and it was agreed between them that the plaintiffs would be entitled to any proceeds of that action. Furthermore, the plaintiffs' own claim against the defendants would be affected by this litigation, for if the owners were successful in their claim under the insurance policy, it would follow that the plaintiffs' complaint against the defendants (that the latter had failed to inform the plaintiffs that the owners were uninsured) would necessarily fail.
In my judgment however the interest of the plaintiff bank and that of the owners of Good Luck in the action of the latter against the defendants is not a common interest sufficient to found the claim to common interest privilege. It could hardly be suggested (and indeed it was not suggested) that the plaintiffs and the owners could have shared the same solicitor or other lawyer. The plaintiffs were creditors of the owners; their interest was to recover any fruits of the owners' action so as to reduce or at least service that indebtedness; and furthermore their interest in those proceedings generally was by way of assisting them to decide how best to continue to deal with the arm's length commercial relationship between themselves and the owners. The owners' interest, on the other hand, was to prosecute the litigation with a view to reducing their indebtedness to the plaintiff bank; and generally no doubt with a view to persuading the plaintiff bank to continue to finance them. The interests of the plaintiffs and the owners could not have been dealt with by the same solicitors or other lawyers for the respective interests were (at the lowest) likely to conflict. They could not, in my judgment, be regarded as so close that the Courts could, again using the words of Lord Denning MR, treat the plaintiffs and the owners as partners in a single firm or department in a single company. In my view, therefore, the claim for common interest privilege fails in this case.”
Giles J later commented that the bank in the Good Luck case “had a commercial interest which in general terms was in accord with that of the owners, because success in the owners’ proceedings against the insurer would provide money to pay the bank, in a closer analysis there were significantly different commercial interests and his Lordship’s decision went accordingly.”[34]
[31] (1995) 36 NSWLR 275
[32] [1992] 2 Lloyd’s Rep 540
[33]Network Ten Ltd v Capital Television Holdings (1995) 36 NSWLR 275 at 280-281
[34]Network Ten Ltd v Capital Television Holdings (1995) 36 NSWLR 275 at 282
In Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd,[35] Giles JA articulated that from The Good Luck case and Network Ten, there emerges a principle that “two persons interested in a particular question will not have a common interest for the purposes of common interest privilege if their individual interests in the question are selfish and potentially adverse to each other. In such a case there will not be the necessary identity of interest.”
[35] (1995) 37 NSWLR 405 at 410
In Inlon Pty Ltd v Celli SPA, Parker J discussing that statement, said:[36]
What did his Honour mean by referring to the parties’ interests being “potentially” adverse to each other? In the Ampolex case, the agreement between the relevant parties which gave rise to the alleged common interest was confidential and the judgment contains only the most general description of it. I think, however, that his Honour was not referring to the mere possibility that at a later point the parties’ commercial interests might come into conflict; rather, I think the reference to “potential” adversity of interest was a reference to an adversity of interest which potentially existed at the time, depending upon the advice that might be given. This is consistent with the approach by Katzmann J in Media Ocean Ltd v Optus Mobile Pty Ltd (No 10). I also think it is important to bear in mind, consistently with the statement of the [Barrett JA in Marshall v Prescott] which I have quoted above, that the ultimate question is whether, at the time the communication is made, there is an express or implied obligation of confidentiality. If the parties’ interests are adverse in the relevant sense, then it will not be possible to imply an obligation of confidentiality; but in my view the Court should not refuse to imply such an obligation if the circumstances otherwise justify it, merely on account of the potential for some sort of change in the parties’ relationship at a later point. (references omitted.)
[36][2017] NSWCA 569 at [107]
In Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd, Bergin J[37] interpreted the statement by Giles JA to mean that a common interest in relation to proceedings is “an identity between genuine interests, and should be distinguished from contingent intersection of selfish interests.”
[37] (2006) NSWSC 234 at [50]
The thrust of the wife’s argument against a finding of common interest between the husband and Mr G Fowles, is that their relationship, in the relevant sense, is one of creditor and debtor. It was submitted that the husband had no interest in the Supreme Court proceedings, because Mr G Fowles’ claim in the Supreme Court was effectively an endeavour to seek priority in respect of repayment of the husband’s debts and there was no evidence that the husband is unable to meet all his debts. It was submitted that, in any event, the priority or otherwise of repayment of the husband’s debt to Mr G Fowles, if the debt exists, is of no consequence to the husband in the sense of establishing a community of interest. In considering whether the husband could claim common interest privilege, Mr Sheales submitted that I need only consider the following facts (not in issue in these proceedings):
1.This issue arises as a request for discovery by the wife.
2.The subject matter in which the common interest in claim (being defined in its parameters by the statement of claim and defence from the Supreme Court proceedings which I summarised earlier).
3.The withdrawal by [Mr G Fowles] of his claim on the steps of the Supreme Court on the first day of trial and the fact that the claim was struck out; thereby, Mr Sheales submits, preventing the wife, if she was successful, from raising issue estoppel in this Court if she were to join the husband’s father as a party.
4.The client owed the legal privilege is [Mr G Fowles]; who was the plaintiff in the Supreme Court proceedings, and not the husband, who did not participate as a party in those proceedings.
5.The husband admits that he met the legal expenses of his father with respect to his representation by [J Lawyers], and barristers retained by [J Lawyers], in the Supreme Court proceedings.
6.The husband has produced a folder of documents to the Court in answer to the wife’s request for discovery.
7.In respect of those document, the husband makes no claim in his own right for legal professional privilege simpliciter in this Court.
Mr Sheales submitted that a common interest could not be established in respect of Mr G Fowles and the husband in the Supreme Court proceedings because what was sought by Mr G Fowles there was a declaration that he had a caveatable interest in the Melbourne apartment, the effect of which would have been to give Mr G Fowles priority of his debt, amongst the husband’s debts. It was Mr Sheales submission that the husband had no “self-same” interest in giving priority to Mr G Fowles’ debt over any of his other creditors.
Mr Sheales referred me to the Spotless case[38] where Chernov JA briefly considered, and dismissed, a claim of common interest privilege by the plaintiff in respect of documents it disclosed to its financier and Royce, a company that handled its public relations. Chernov JA consideration of their interests were as follows: [39]
I consider, however, that there is no relevant community of interest between the parties in respect of the litigation such as to found such privilege. So far as the financiers are concerned, it is true that they and the respondent had an interest in the litigation. But their respective interests in it were relevantly different. The [plaintiff] had a direct interest in the outcome of the litigation as plaintiff whereas the financier’s interest was indirect, being that of a creditor. Such commonality of interest is, in my view, not sufficient to attract common interest privilege. And it is plain enough that Royce had no relevant interest in the outcome of the litigation. Thus, there could not have been sufficient community of interest between those parties to found the privilege contended.
[38] (2006) 16 VR 1; [2006] VSCA 201 at [34]
[39] (2006) 16 VR 1; [2006] VSCA 201 at [34]
Mr Sheales submitted that the above passage said, in “black and white”, that a creditor and debtor could never have a common interest. That is not how I read that paragraph. In Spotless, the financier was a creditor of the plaintiff and its interest in the plaintiff’s success in litigation was found by his Honour to be indirect. That is because the plaintiff’s success would have resulted in the payment of damages by the defendant which would better the plaintiff’s financial position and improve the plaintiff’s ability to repay its debt to the financier. The situation between the husband and Mr G Fowles is not analogous.
In the Supreme Court proceedings, it was the creditor (Mr G Fowles) who was the party litigating against the wife to assert security over property legally owned by the debtor (the husband), in which the wife also claimed an (equitable) interest. In this case, it was the creditor who disclosed privileged documents to the debtor; and now the debtor, facing the possibility of the alteration of his interests in property in favour of the wife, who asserts the privilege.
Assessment of a common interest between the husband and his father is nuanced. They did not share a solicitor but they could have, for the purpose of the proceedings in which the documents were created. Insofar as the husband and his father are, allegedly, debtor and creditor, they have different interests which are potentially adverse to one another. However, I have no doubt that in seeking declaratory relief to maintain the caveat in the face of the wife’s application to remove it, the husband and his father shared a commonalty of interest in both substantiating the nature of Mr G Fowles’ caveatable interest in the land and in the outcome of the Supreme Court proceedings. It does not matter that the husband and his father failed in their endeavour. The fact of the matter is that Mr G Fowles received legal advice to which the husband had complete access, together with documents and information which, I am satisfied, would not have been shared with the husband but for the fact that the husband, his father and J Lawyers considered that the documents, information and advice were subject to a duty of confidence which the law would protect. Likewise, the husband shared information with his father and his father’s lawyers which he would not have imparted if he considered that his confidences would not be protected. This is the essence of legal professional privilege of which common interest privilege is a category. In this case, it entitles the husband, for whom J Lawyers did not act, to claim legal professional privilege in the documents even in the absence of any claim of privilege by his father.
Accordingly, I will not order production of the documents and I will direct that the folder containing the documents, Exhibit “H5”, be removed from the Court file and handed back to the husband’s practitioners at the end of the proceedings with the effect that the Court will not then hold any documents in which privilege subsists.
I have not looked at the documents.
I certify that the preceding fifty-nine (59) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bennett delivered on 25 June 2018.
Associate:
Date: 25 June 2018
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