Franks v Warringah Council
[2010] NSWSC 1318
•17 November 2010
CITATION: Franks v Warringah Council [2010] NSWSC 1318 HEARING DATE(S): 14 October 2010
JUDGMENT DATE :
17 November 2010JUDGMENT OF: R A Hulme J DECISION: 1. The first defendant's application to set aside the plaintiff's subpoena is granted.
2. The subpoena issued on 12 April 2010 at the request of the plaintiff is set aside.
3. The plaintiff's application for further and better discovery is granted.
4. The first defendant is to serve upon the plaintiff within 14 days of the date of this judgment a supporting affidavit pursuant to UCPR r 21.4 in respect of the lists of documents of 24 August 2010 and 13 October 2010.CATCHWORDS: PROCEDURE - discovery and interrogatories - discovery and inspection of documents - compliance with UCPR - production and inspection - grounds for resisting - legal professional privilege - claim for privilege over documents - further and better discovery - subpoena seeking discoverable documents an abuse of process LEGISLATION CITED: Uniform Civil Procedure Rules 2005
Evidence Act 1995
Local Government Act 1993CASES CITED: ATH Transport v JAS (International) Australia Pty Ltd [2002] NSWSC 956
Attorney General for the Northern Territory of Australia v Kearney [1985] HCA 60; 158 CLR 500
Azzi and Ors v Volvo [2006] NSWSC 283
Bailey v Director-General of Land and Water Conservation [2009] NSWCA 100; 74 NSWLR 333
Baker v Campbell [1983] HCA 39; 153 CLR 52
Barnes v Commissioner of Taxation (Cth) [2007] FCAFC 88; 242 ALR 601
Commissioner of Australian Federal Police and Anor v Propend Finance Pty Ltd and Ors [1997] HCA 3; 188 CLR 501
Council of the New South Wales Bar Association v Archer [2008] NSWCA 164; 72 NSWLR 236
DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384; 127 FCR 499
Fruehauf Finance Corporation Pty Ltd v Zurich Australian Insurance Ltd (1990) 20 NSWLR 359
Grant v Downs [1976] HCA 63; 135 CLR 674
Kang v Kwan & 2 Ors [2001] NSWSC 698
Mann v Carnell [1999] HCA 66; 201 CLR 1
Michael Wilson and Partners Ltd v Nicholls and Others [2008] NSWSC 1230; 74 NSWLR 218
State of New South Wales v Jackson [2007] NSWCA 279
Sugden v Sugden [2007] NSWCA 312; 70 NSWLR 301PARTIES: Phillip Maurice Franks (Plaintiff)
Warringah Council (First Defendant)
Stephen Blackadder (Second Defendant)FILE NUMBER(S): SC 2004/177147 COUNSEL: Mr M G McHugh (Plaintiff)
Mr S Glascott (Defendants)SOLICITORS: DTA Lawyers
DLA Phillips Fox
IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISIONR A Hulme J
17 November 2010
JUDGMENT2004/177147 Phillip Maurice FRANKS v Warringah Council & anor
The proceedings
2. The plaintiff and the first defendant have a protracted history of litigation involving numerous disputes concerning building and construction matters. It is not necessary to descend into the details of such disputes but it is important for present purposes to note that in three of those matters litigated in the Land and Environment Court, the first defendant was awarded costs totalling $187,341.33. The plaintiff failed to satisfy that debt and in December 2002, bankruptcy notices were issued at the behest of the first defendant.1. By further amended statement of claim filed on 7 February 2008, the plaintiff, Phillip Maurice Franks, seeks damages in various forms as a consequence of alleged mala fides and/or misfeasance in the actions of the first defendant, Warringah Council, through its officers, including the second defendant, Mr Stephen Blackadder, who was the general manager.
3. The plaintiff alleges the bankruptcy proceedings were commenced in circumstances amounting to an abuse of process which caused him financial harm, specifically, that he was forced to urgently sell three of his properties at less than market value. It is also alleged that the defendant commenced those bankruptcy proceedings for an “anterior purpose” (sic – ulterior?) with intent to cause harm, without proper authority, and in a way that amounted to a misuse of statutory powers.
Discovery4. The defendants have denied they owed a duty of care to the plaintiff in the circumstances, or if a duty was owed, that it was in breach of it. Specifically, the defendants deny they abused any statutory power by commencing the bankruptcy proceedings.
5. The defendants wrote to the plaintiff on 7 July 2008 suggesting categories of discovery. They included:
1. All documents relating to the properties held by the Plaintiff and/or the Plaintiff’s companies including but not limited to documents relating to the:
i sale or attempted sale of the properties including expressions of interest;
ii valuation of the properties;
iii development or attempted development of the properties.
2. All documents relating to the damages claimed by the Plaintiff from the Defendants.4. All documents relied upon by the Plaintiff to support the allegations of misfeasance, mala fide and the other allegations pleaded in the Further Amended Statement of Claim.3. Documents relating to the proceedings between the Plaintiff and the Defendant in the District Court, the Federal Court and the Land and Environment Court.
6. The plaintiff ultimately (after three follow up letters from the defendants) responded to this request on 15 September 2008 by seeking to expand the categories of discovery to include:
A. “Minutes of all Legal Services Committee Meetings during the period 1 January, 2002 to date;
B. All Warringah Council files relating to the plaintiff and Windy Dropddown Pty Ltd
C. All instructions provided to solicitors acting for Warringah Council during the period 1 January, 2002 to 30 October, 2003 regarding the bankruptcy notices.” (Emphasis added).
(Windy Dropdown Pty Ltd was a company of which the plaintiff was a director, officer and shareholder and it was the registered proprietor of land which was the subject of disputes with the first defendant).
8. On 22 December 2008 the defendants served on the plaintiff their verified list of documents. The list discovered 2,469 documents and claimed privilege over additional documents that were described in very broad terms:
7. The defendants wrote immediately to the plaintiff stating that the further categories were unnecessary and the “documents sought by the plaintiff will be discovered using the categories proposed in our letter dated 7 July 2008 .”
Documents where privilege is claimed
Item No. Nature of document (s) Date/period Correspondence and records of conversations passing between the Defendant and its solicitors solely, or for the dominant purpose of use in legal proceedings or for the purpose of obtaining legal advice. Various Draft letters, notes and memoranda prepared by the Defendant or its solicitors. Various Confidential information held by the Defendant relating to a third party. Various Statements, memoranda, notes and draft court documents all prepared by the Defendant or Defendant’s solicitors. Various Correspondences, instructions and briefs to counsel together with Counsel’s notes, drafts, advices, memoranda and working copies. Various Correspondence and records of conversations passing between the Defendant and its solicitors solely, or for the dominant purpose of use in legal proceedings or for the purpose of obtaining legal advice. Various
9. On 23 and 24 February 2009 the plaintiff inspected the defendants’ discovered documents. There was no challenge or complaint as to the adequacy or form of the defendants’ discovery until April 2010 when the plaintiff sought by subpoena the production of the following documents:
1. All documents including but not limited to files, file notes, letters, memoranda, instructions, and other documents relating to Phillip Maurice Franks. 2. All documents including but not limited to files, file notes, letters, memoranda, instructions, and other documents relating to Windy Dropdown Pty Limited. 3. Minutes of all Legal Services Committee meetings relating to issues concerning Phillip Maurice Franks. 4. Minutes of all Legal Services Committee meetings relating to issues concerning Windy Dropdown Pty Ltd. 5. Letter of 23 April 2003 from Norm Fletcher to Wilshire Webb.
10. On 20 April 2010 the defendants advised the plaintiff that the documents identified by the schedule of the subpoena were those documents already discovered and for that reason the defendants would not produce the same documentation to the Court. The only difference between the documents discovered and those sought by the subpoena was that the plaintiff was now seeking the minutes of all Legal Services Advisory Committee (“LSAC”) meetings as opposed to those from 1 January 2002 onwards. According to the defendants, that distinction was of no significance as privilege had been claimed over all such communications. For these reasons, the plaintiff was invited to abandon the subpoena or else a formal application would be made to the Court to have it set aside. The plaintiff, however, expressed an intention to press for the production of the documents.11. The first defendant filed a notice of motion on 4 May 2010 seeking an order that:First defendant’s motion to set aside subpoena
The subpoena for production issued by the Plaintiff to Warringah Council, which is annexure “R” in the supporting Affidavit of Christine Forostenko, be set aside pursuant to Rule 33.4(1) of the Uniform Civil Procedure Rules .
13. This concern expressed by the plaintiff was reflected in consent orders made by the Registrar on 29 June 2010 which included:
12. On 24 June 2010 the plaintiff advised the first defendant that he pressed only paragraphs 3 and 4 of the schedule to the subpoena (i.e. LSAC meeting minutes) and, in a letter of 25 June 2010, that the “real issue between the parties concerns the claim or claims for privilege … as we do not understand the basis of them or over what documents the claims are made”. The first defendant was invited to identify, specifically, the minutes over which there was a claim of privilege and the basis for that claim.
By 14 July 2010 the Applicant [i.e. the Council] is to identify any Minute(s) of Legal Services Committee meetings relating to issues concerning Phillip Maurice Franks or Windy Dropdown Pty Ltd which is the subject of a claim for privilege in the Defendants’ List of Documents and the basis of any such claims.
14. On 23 August 2010 the first defendant provided to the plaintiff a five page schedule of the documents over which privilege was claimed. It provided a brief description of the document, the basis for the claim of legal professional privilege and the date of the document. On 24 August 2010, it provided an updated schedule, which expanded the list to include the minutes of a further four LSAC meetings.15. By letter of 30 September 2010 the plaintiff expressed concern over the first defendant’s alleged failure to comply with the order of the Court in respect of, first, identifying all minutes of the LSAC meetings (including pre 2002), and, secondly, identifying all documents that were the subject of a claim for privilege. The first defendant’s response, by letter of 5 October 2010, was that it had discovered all documents which it considered were relevant to the issues pleaded and that it did not consider minutes of meetings of council committees prior to 2002 to be relevant to those issues. It invited the plaintiff to advise the relevance of any such documents.
16. On 5 October 2010, the plaintiff filed a notice of motion seeking orders including:Plaintiff’s motion for further and better discovery
1. That pursuant to rule 21.2 of the Uniform Civil Procedure Rules, the defendants give further and better discovery of any Minute(s) of Legal Services Committee meetings relating to issues concerning Phillip Maurice Franks or Windy Dropdown Pty Ltd which is the subject of a claim for privilege in the Defendants’ List of Documents dated 22 December, 2008.
3. That the orders sought in paragraphs 1 and 2 be determined under rule 1.8 of the Uniform Civil Procedure rules and that the documents in question be produced to the Court for inspection.2. That pursuant to rule 21.2 of the Uniform Civil Procedure Rules, the defendants give further and better discovery of any other document in their possession relating to issues concerning Phillip Maurice Franks or Windy Dropdown Pty Ltd which is the subject of a claim for privilege in the Defendants’ List of Documents dated 22 December, 2008.
18. Finally, by letter of 13 October 2010 the first defendant addressed a number of the concerns raised by the plaintiff. Aside from those matters it also provided an additional schedule identifying four earlier minutes of the LSAC meetings in respect of which privilege was also claimed.17. On 11 October 2010 the plaintiff wrote to the first defendant confirming that they sought the production of all documents to the Court – not only the minutes - that related to the relevant decision making processes of the first defendant.
19. The plaintiff offered virtually no resistance to the first defendant’s notice of motion of 4 May 2010 other than to submit that the motion for further and better discovery would decide its outcome and for this reason it should be left in abeyance.
20. Counsel for the first defendant advanced three contentions in support of an order that the subpoena be set aside pursuant to rule 33.4 (1) of the Uniform Civil Procedure Rules 2005 (“ UCPR” ). First, the minutes in relation to matters other than the issue of the bankruptcy notices are of minimal relevance. Secondly, to issue a subpoena for the purpose of seeking documents which ought to have been the subject of discovery represents an abuse of process. Thirdly, the plaintiff’s agreement reflected in the consent orders made by the Registrar on 29 June 2010 represented an acknowledgement that the minutes had been discovered.
22. The order sought by the first defendant that the plaintiff’s subpoena be set aside should be made.21. It is not necessary to decide upon the first contention as it is clear, at least from the judgment of Brereton J in Azzi and Ors v Volvo [2006] NSWSC 283 (see particularly at [4] and [9] – [11]), that a subpoena which seeks documents which are, or could have been, the subject of discovery is an abuse of process. I am satisfied that the minutes clearly formed part of those documents which were discoverable, or potentially discoverable. I am further satisfied that, as the first defendant submitted, the consent orders of 29 June 2010 reflected an acknowledgment by the plaintiff that the minutes were not only discoverable but also that they had in fact been discovered.
23. The plaintiff seeks to inspect documents, or to establish the lack of documents, relating to any authorisation (or lack of authorisation) of the commencement of the bankruptcy proceedings against him. His purpose is to substantiate the allegation that the defendants, in taking such action against him, acted without proper authority and with the intent of causing financial harm to him. The plaintiff’s motion is therefore designed to achieve two results. The first is to penetrate the claim of privilege over the minutes, which brings various substratum issues. Those issues include whether the documents can be properly characterised as privileged documents for the purpose of s118 and 119 of the Evidence Act 1995; whether there has been a waiver of privilege; and the legitimacy of claiming privilege over documents that (allegedly) reveal the deliberate abuse of power by a statutory authority. Secondly, the history of dealings between the parties in relation to this litigation discloses the first defendant’s failure to comply with the orders for discovery. Accordingly, it was contended that the first defendant should be ordered to give further and better discovery of all documents over which privilege is claimed. Presumably, once this is done, the plaintiff will seek to test the claim for privilege on grounds similar to those outlined above.
24. Resolution of these issues requires a determination of the following questions:
b. If not, whether upon inspection of the minutes a claim for privilege is maintainable.a. Whether a prima facie claim of privilege has been made out over the minutes.
c. Whether privilege is displaced by the operation of s 125 of the Evidence Act on the basis of fraud or abuse of power.
d. Whether privilege had been waived by the first defendant having already produced to the plaintiff some of the minutes.
Whether a prima facie claim of privilege has been made out over the minutes?25. The plaintiff advanced various propositions in support of the contention that this Court should not be satisfied on the face of the claims by the first defendant for privilege that such claims had been made out and, accordingly, inspection of the minutes should take place to determine whether the documents are indeed privileged; and for similar reasons, this Court would be satisfied that a claim for privilege is not maintainable.
26. In determining a claim for privilege the court may inspect the relevant documents: for a summary of relevant authorities see State of New South Wales v Jackson [2007] NSWCA 279 at [24]. I have concluded that the minutes should be inspected because of the cumulative effect of the following matters. First, the plaintiff asserted that the first defendant’s instructions, if they exist, to its solicitors to commence the bankruptcy proceedings, and for that matter the minutes containing those instructions, are not confidential. This submission demands a consideration of matters such as the purpose of the meetings; the nature of the discussions that took place; the personnel in attendance; and whether they were under an obligation of confidentiality. Secondly, the plaintiff asserted that the minutes may contain evidence of fraud or abuse of power to the extent they fail to disclose instructions provided by the first defendant to their solicitors requesting bankruptcy proceedings be brought against the plaintiff, or that they indicate that fraud or abuse of power attended any such instructions that were given. Finally, I need to satisfy myself as to whether there is any inconsistency between the minutes that have been produced to the plaintiff and those over which privilege is claimed, given the contention that the disclosure of some, in effect, amounts to waiver of privilege in respect of them all.
Whether the minutes are privileged
28. For the first defendant it was submitted that the minutes are privileged documents pursuant to both ss 118 and 119 of the Evidence Act . Its in-house solicitors sit on the LSAC and provide legal advice to it. The LSAC in turn makes recommendations concerning legal matters to the Council. The minutes also note the advice received from external solicitors as to the status of litigation and other legal matters.27. Whilst accepting legal advice obtained in relation to proceedings, or anticipated proceedings, is the subject of a proper claim for privilege, the plaintiff contended that the instruction provided from the client to the lawyer to institute proceedings is not. It was submitted that an instruction to commence proceedings falls short of the protection of ss 118 and 119 of the Evidence Act for the reasons that it is neither confidential nor legal advice. Accordingly, the plaintiff contends that he should be granted access to those minutes, if they exist, where the instruction was provided to commence the bankruptcy proceedings against the defendant. Counsel for the plaintiff was unable to cite any authority in support of this proposition, apart from relying on a general assertion as to the construction of ss 118 and 119 of the Evidence Act 1995.
30. Section 117 provides the following definitions:29. The parties agreed that the starting point for considering a claim of privilege is Division 1 of Part 3.10 of the Evidence Act : see s 131A. The relevant provisions of that Division are the following.
(a) the person who made it, or
" confidential communication " means a communication made in such circumstances that, when it was made:
(b) the person to whom it was made,(a) the person who prepared it, or
" confidential document " means a document prepared in such circumstances that, when it was prepared:was under an express or implied obligation not to disclose its contents, whether or not the obligation arises under law.
(b) the person for whom it was prepared,
was under an express or implied obligation not to disclose its contents, whether or not the obligation arises under law.
31. Section 118 provides:
118 Legal advice
Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of:
(a) a confidential communication made between the client and a lawyer, or
(b) a confidential communication made 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 of the lawyers, providing legal advice to the client
32. Section 119 provides:
119 Litigation
Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of:
(a) a confidential communication between the client and another person, or between a lawyer acting for the client and another person, that was made, or
(b) the contents of a confidential document (whether delivered or not) that was prepared,
for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party.34. The following is clear from my inspection of the minutes:
33. For present purposes, the subject matter of the claim for privilege is communications, not documents (the minutes) per se: Commissioner of Australian Federal Police and Anor v Propend Finance Pty Ltd and Ors [1997] HCA 3; 188 CLR 501 at 552, per McHugh J (“ AFP v Propend Finance ”). A document that records a confidential communication may attract privilege even though the document itself is not a “communication”: Sugden v Sugden [2007] NSWCA 312; 70 NSWLR 301 at [67] – [69]. It follows that while the minutes are not a communication, they may attract ss 118 and 119 of the Evidence Act if they contain a record of confidential communications for the dominant purpose of either a lawyer providing legal advice to the first defendant, or the first defendant being provided with professional legal services relating to proceedings, or anticipated or pending proceedings, in which it was, or might have been, a party.
a. The meetings took place in closed session pursuant to s 10A of the Local Government Act 1993;
b. The participants at the meetings intended for the communications to be confidential;
d. The meetings involved discussion of instructions to solicitors, anticipated legal actions and the status of existing proceedings.c. An employee and/or a partner(s) of Wilshire Webb, the first defendant’s solicitors, was present at each of the meetings;
36. As to the plaintiff’s contention that an instruction to commence proceedings cannot be privileged as it is neither advice nor confidential, I respectfully disagree. Instructions by a client to a lawyer to commence proceedings are typically given in an environment comprising many factors including legal advice as to issues such as liability and quantum; legal strategies; the strength and persuasiveness of available evidence; personal considerations such as financial constraints; prospects of success or otherwise; and sundry other considerations. To accept otherwise would necessarily involve the erroneous assumption that instructions are provided in a vacuum indifferent to the multifactorial nature of the solicitor/client relationship. I do not believe there is a legitimate basis upon which instructions provided by a client to commence proceedings can be extracted from a document or communication and divorced from its context by an opposing party in an attempt to prove an allegation of fact: see, similarly, ATH Transport v JAS (International) Australia Pty Ltd [2002] NSWSC 956 at [1] - [5]. To do so would undermine one of the fundamental tenants of preserving client legal privilege, namely, to preserve freedom of communication between legal advisers and their clients: Baker v Campbell [1983] HCA 39; 153 CLR 52 per Dawson J at 128. Moreover, mere instructions, without an understanding of the context in which those instructions were given, would unfairly prejudice the party that provided those instructions as he/she may have to defend their course of action which may result in the disclosure of privileged information.35. It can be fairly concluded from the combination of those circumstances that the personnel involved in these meetings were under an obligation not to disclose the content of the discussions. Accordingly the discussions amounted to “confidential communications” within the s 117 definition. It may also be fairly concluded, in my view, that the discussions can be characterised as being within either or both of the situations with which ss 118 and 119 are concerned.
Loss of client legal privilege: misconduct
37. The plaintiff relies on s 125 of the Evidence Act as a basis upon which this Court should reject the first defendant’s claim of privilege. Section 125 provides:
125 Loss of client legal privilege: misconduct
(1) This Division does not prevent the adducing of evidence of:
(a) a communication made or the contents of a document prepared by a client or lawyer (or both), or a party who is not represented in the proceeding by a lawyer, in furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty, or
(b) a communication or the contents of a document that the client or lawyer (or both), or the party, knew or ought reasonably to have known was made or prepared in furtherance of a deliberate abuse of a power.(3) In this section:(2) For the purposes of this section, if the commission of the fraud, offence or act, or the abuse of power, is a fact in issue and there are reasonable grounds for finding that:
(a) the fraud, offence or act, or the abuse of power, was committed, and
(b) a communication was made or document prepared in furtherance of the commission of the fraud, offence or act or the abuse of power,
the court may find that the communication was so made or the document so prepared.
"power" means a power conferred by or under an Australian law.
38. Through various expressions the plaintiff alleges that the Council commenced the bankruptcy proceedings without authority and with malevolent intent. It is therefore contended that it would be contrary to the public interest to allow privilege to be used to protect communications made to further such a deliberate abuse of statutory power. Reliance was placed upon the judgment of Gibbs CJ in Attorney General for the Northern Territory of Australia v Kearney [1985] HCA 60; 158 CLR 500 ( “AG v Kearney” ), particularly the following:
19. The privilege is of course not displaced by making a mere charge of crime or fraud or, as in the present case, a charge that powers have been exercised for an ulterior purpose. This was made clear in Bullivant v. Attorney- General for Victoria , at pp 201, 203, 205, and in O'Rourke v. Darbishire (1920) AC 581, at pp 604, 613-614, 622-623, 632-633. As Viscount Finlay said in the latter case, at p 604, "there must be something to give colour to the charge". His Lordship continued:18. In my opinion the present case comes within the principle which forms the basis of the rule that denies privilege to communications made to further an illegal purpose. It would be contrary to the public interest which the privilege is designed to secure - the better administration of justice - to allow it to be used to protect communications made to further a deliberate abuse of statutory power and by that abuse to prevent others from exercising their rights under the law. It would shake public confidence in the law if there was reasonable ground for believing that a regulation had been enacted for an unauthorized purpose and with the intent of frustrating legitimate claims, and yet the law protected from disclosure the communications made to seek and give advice in carrying out that purpose. ...
"The statement must be made in clear and definite terms, and there must further be some prima facie evidence that it has some foundation in fact ... the Court will exercise its discretion, not merely as to the terms in which the allegation is made, but also as to the surrounding circumstances, for the purpose of seeing whether the charge is made honestly and with sufficient probability of its truth to make it right to disallow the privilege of professional communications."
20. In the present case the finding of Kearney J., confirmed in the Full Court, that there was prima facie evidence that the communications with the legal advisers came into being as part of a plan to defeat the land claims was plainly sustainable. The charge that the power was used for an ulterior purpose was clearly made, and it has sufficient colour to displace the privilege. It should be emphasized, as Kearney J. himself emphasized, that this is no more than a prima facie finding on the present material and reflects in no way any view as to the probable outcome of the litigation.40. The plaintiff submits that access should be granted to all documents over which privilege has been claimed. It was submitted that the Council’s failure to properly particularise the nature of the documents has deprived him of the opportunity of determining which documents would be relevant to the allegation of abuse of process. I do not see this as a basis upon which such wide ranging access could be justified. It cannot be the case that documents brought into existence over many years (the oldest appears to be minutes of a meeting in 1995) can be said to record communications made in furtherance of the institution of bankruptcy proceedings in December 2002.
39. In order for s 125 to be invoked, something more must be shown than simply that the documents or communications are relevant to, or might disclose, a fraud or an abuse of power. The moving party must demonstrate that the communications were made, or the documents prepared, in furtherance of the commission of a fraud or abuse of power. The amended statement of claim outlines the alleged abuse of power as the commencement of the bankruptcy proceedings. If it is accepted for the moment that such actions amounted to an abuse of process, the documents to which the plaintiff should be entitled access to are those which record communications made in furtherance of the institution of those proceedings.
41. The question now is whether there are reasonable grounds for finding that there was an abuse of power in the commencement of the bankruptcy proceedings. A party that seeks to test a claim for privilege bears the onus of establishing that an exception to the general rule applies. In respect of the standard of proof, there must be admissible evidence establishing a prima facie case that a communication was made, or document prepared, in furtherance of the commission of fraud or abuse of process: AFP v Propend Finance per McHugh J at 556; AG v Kearney per Gibbs CJ at 516. The threshold for finding a prima facie case is not necessarily a stringent one and to this end the plaintiff relied on the comments of Santow J in Kang v Kwan & 2 Ors [2001] NSWSC 698 at [37]:
“… Thus if a person challenging privilege is clearly not in a position to lead very much evidence concerning purpose, as where the other party has exclusive access to that evidence, the Court may be satisfied with relatively less evidence”.
43. Those affidavits contain material which may be summarised as follows:42. Evidence was tendered by way of affidavits of the plaintiff of 22 June 2009, Mr Darren Grigor Jones of 2 June 2009, Ms Julie Sutton of 2 June 2009 and Mr Norman Fletcher of 2 June 2009, “to give colour” to the allegations made by the plaintiff against the Council. The plaintiff submitted that there is sufficient evidence of mala fides to at least allow inspection of the documents produced thus far.
b. The affidavit of Ms Julie Sutton, councillor, includes an assertion that the bankruptcy notices were issued in furtherance of malice on the part of the council rather than for any legitimate purpose. Much of her affidavit is concerned with her opinions and theories with little basis given for them other than what, to a large extent, is unspecified hearsay. There is no direct evidence as to the circumstances in which the bankruptcy proceedings were instituted.a. The affidavit of Norman Fletcher includes evidence of a strained relationship generally between Mr Franks and council officers. He adds nothing on the question of why the bankruptcy proceedings were instituted. Reference is made to a decision of the council on 22 April 2003 to defer taking any action in those proceedings until a review of the costs orders in the Land and Environment Court was completed. He communicated that resolution to council’s solicitors by letter the following day. Finally there is reference to Mr Fletcher being unaware as to why a hearing in the Federal Court on 23 July 2003 (presumably in relation to the bankruptcy action) proceeded despite the instructions given to the solicitors three months earlier.
c. The affidavit of Mr Darren Grigor Jones, former councillor, describes the bankruptcy notices as having been issued to cause significant financial damage to the plaintiff. His opinion/theory is that the council used its powers for an improper purpose. He, like Ms Sutton, refers to there being no other occasion known when the council had pursued a ratepayer into bankruptcy but, again, there is no direct evidence as to the circumstances in which those proceedings were instituted.
d. The plaintiff’s affidavit includes a description of a strained relationship with council officers over a considerable period of time. A number of allegations of impropriety are made, including maintaining an interest in his personal life; constant harassment during the course of his developments; inviting a local journalist to report on matters damaging to his reputation and business; bias in the manner in which action was taken against him in contrast to no action being taken in similar circumstances against others; and causing the issue of the bankruptcy notices without authority. There is no direct evidence to support the last of those contentions, rather it seems to be his opinion or theory, based upon the general history of the relationship to which he deposes.
44. Two affidavits were relied upon by the first defendant:
b. The affidavit of Mr Anthony Mark Hudson, solicitor and partner of the firm formerly known as Wilshire Webb, simply sets out the history of proceedings in relation to the bankruptcy notices. This includes that instructions were received in September 2002 to take proceedings to recover the costs awarded in the Land and Environment Court and that bankruptcy notices were prepared and served in January 2003. The affidavit is otherwise silent as to whether, and if so, what, consideration was given by council officers as to the institution of the bankruptcy proceedings. In addition, and like Mr Blackadder, Mr Hudson also clarifies the situation in relation to the “continuation” of the bankruptcy proceedings after the resolution by council of 22 April 2003.a. The affidavit of Mr Stephen Blackadder, former general manager of the council, sworn on 23 October 2009, describes the bankruptcy notices as having been issued for the purpose of pursuing outstanding legal costs. It also sheds some light on the matter raised in the affidavit of Mr Fletcher in relation to the council pursuing activity in relation to the bankruptcy notwithstanding the resolution of 22 April 2003. It appears that all that was done was to carry out activity in order to prepare for, and meet, Mr Franks’ application in the Federal Court to set aside the bankruptcy notices. Nothing was done to proceed beyond the bankruptcy notice stage (i.e. seeking a creditor’s petition).
46. It follows that I am not persuaded that the entitlement to rely upon client legal privilege has been lost through “misconduct” pursuant to s 125.
45. These affidavits were placed before me for a limited purpose which, in shorthand, was referred to as giving “colour to the charge”. I understand it to have been the joint position of the parties that the affidavits would acquaint me as to the competing assertions that have been made so as to permit me to determine whether there is a prima facie case of abuse of power made out. In my view, even on the lower standard of proof suggested by the reference to the judgment of Santow J in Kwan v Kong (above), no such case is apparent. Clearly, the affidavits relied upon by the plaintiff suggest considerable animosity in the attitude of some council members and staff towards Mr Franks that might suggest a motive to act in the manner alleged. The affidavit material to that effect is largely of doubtful admissibility. There is a complete absence of any direct evidence that the bankruptcy proceedings were instituted for a collateral purpose and in circumstances that could be characterised as an abuse of the council’s powers. Moreover, there is a complete absence of evidence that would even suggest that the documents that are the subject of the claim of privilege, or the communications recorded therein, were created or made in furtherance of such an abuse of power, let alone there being “reasonable grounds” for such a conclusion.
48. Waiver of privilege is dealt with in s 122 of the Evidence Act which, relevantly, provides:47. The plaintiff tendered documents described as minutes of the LSAC meetings that took place on 2 June 2003, 5 May 2003, 26 June 2003 and 7 July 2003 (Exhibits B – F). It was submitted that the production of these documents by the first defendant to the plaintiff constituted a waiver of privilege of all documents or, at least, all of the LSAC minutes. Counsel for the plaintiff was unable to cite any authority in support of such a proposition. Further, the first defendant’s state of mind in pursuing proceedings against the plaintiff was also put in issue. This submission was not developed, although the point of making it was to provide an alternative ground upon which this Court may find an implied waiver of privilege.
122 Loss of client legal privilege: consent and related matters
(1) This Division does not prevent the adducing of evidence given with the consent of the client or party concerned.(2) Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120.”
(3) Without limiting subsection (2), a client or party is taken to have so acted if:
(a) the client or party knowingly and voluntarily disclosed the substance of the evidence to another person, or
49. In DSE (Holdings) Pty Limited v Intertan Inc[2003] FCA 384 ; 127 FCR 499, Allsop J (as his Honour then was) stated:
…
(b) the substance of the evidence has been disclosed with the express or implied consent of the client or party.
[24] It should be noted, by way of interpolation at this point, that legal professional privilege in Australia is not a mere matter of evidence; it is a rule of substantive law and an important, indeed fundamental, common law right or immunity: The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 192 ALR 561 at [9], [11], [44], [85], [86] and [132] and the other High Court cases there cited. This is important to recognise in appreciating the operation of inconsistency, as opposed to some more broad ranging notion of fairness informed, perhaps, by the balancing of competing interests in the administration of justice. The confidentiality is in the nature of an entitlement or a right to keep the communications immune from disclosure; it is acting inconsistently with it that destroys that fundamental entitlement: Mann v Carnell, supra at [29] and Daniels, supra.
50. The reference to Mann v Carnell [1999] HCA 66; 201 CLR 1, is to the joint judgment of Gleeson CJ, Gaudron, Gummow and Callinan JJ where they said, in part:
[29] … What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.
51. The documents in Exhibits B - F contain information in respect of the proceedings concerning the plaintiff and/or Windy Dropdown Pty Ltd. That information does not require inspection of other documentation in order that it may be understood nor do the documents reveal that any officer or employee of the council had a particular state of mind that could be relevant to the proceedings. In my opinion, the production of such documents by the first defendant to the plaintiff does not amount to conduct that is inconsistent with the claim of privilege over other documents and does not constitute a waiver of privilege as the plaintiff contends.52. The next matter relates to the submission that the plaintiff has put the first defendant’s state of mind in issue (more aptly the state of mind of its officers and employees) by alleging that it acted with mala fides and therefore, documents relevant to that state of mind cannot be privileged. There is no merit in this contention. In the defence filed on 27 July 2008, the first defendant denied the allegations made about its state of mind without seeking to rely, either expressly or impliedly, on communications made, or documents prepared, as a justification for the actions taken. It follows that the nature of the defence pleaded is not inconsistent with the first defendant’s claim of privilege: Bailey v Director-General of Land and Water Conservation [2009] NSWCA 100; 74 NSWLR 333 per Allsop P at [4] and Tobias JA at [135] – [137] (“ Bailey ”); Council of the New South Wales Bar Association v Archer [2008] NSWCA 164; 72 NSWLR 236 per Hodgson JA at [48].
53. Finally and for the sake of completeness I should indicate that in the list of documents attached to Exhibit 1 (the LSAC minutes produced for inspection), it is stated that privilege has been waived over the minutes of the LSAC meetings on 5 May 2003 and 2 June 2003. Exhibits B – E are said to be the minutes of those meetings which have already been disclosed to the plaintiff. There are differences between the documents relating to those meetings in Exhibit 1 and those in Exhibits B – E. The content of the documents in Exhibit 1, in so far as they relate to Mr Franks and Windy Dropdown Pty Ltd, that is not in the documents in Exhibits B – E, do not appear to be of any particular relevance or significance. Nevertheless, if privilege has been waived in respect of the minutes of these two meetings, then if the first defendant has not already done so, the plaintiff should be provided with the entire set of those documents.
55. The supporting affidavit stated the following as to the basis of the claim of privilege:54. Counsel for the first defendant informed the Court that there are 43 volumes comprising approximately 4,300 privileged documents in total that have been discovered. The verified list that was provided to the plaintiff in December 2008 simply described them in very broad categories (see para 8 above).
5 As to the documents in the list that are claimed to be privileged documents, the facts relied on as establishing the existence of the privilege are that the documents:
5.1 are documents that were prepared for use in anticipated legal or actual legal proceedings;
5.2 record confidential communications between the Defendants and their legal advisors and/or third parties;
5.3 are documents that were prepared for the purpose of obtaining confidential legal advice;
5.4 are documents containing confidential information relating to third parties;
5.6 are documents containing information relating to the commercial interests of entities other than the Plaintiff or Defendants.5.5 are confidential Council documents; and/or
56. The five page list provided to the plaintiff on 24 August 2010 set out with much greater specificity the documents discovered in December 2008 over which privilege was claimed. That list specifically identified 40 documents (including minutes of LSAC meetings) and then identified a further 13 groups or categories of documents. I note that there is no indication of the number of documents within those groups, a requirement of UCPR r 21.3(2)(b).57. The 24 August 2010 list sets out in the case of each document, or group of documents, the basis of the claim for privilege. The following depicts two random examples are typical of the document/group description and the basis for the claim:
No Document(s) Basis of LPP Date 38 Council Minutes Contents refer to Windy Dropdown and communications with solicitors – Advice/Litigation Privilege 22 April 2003 44 Correspondence between Council’s solicitors and Counsel Advice/Litigation Privilege Various dates
58. The further four documents discovered in the 13 October 2010 list are a report of the LSAC of 5 June 1995 and minutes of meetings of that Committee of 1 May 2000, 9 & 24 October 2000 and 3 December 2001. Privilege was claimed in respect of these documents. The only specification of the basis of the claim was in respect of one of the meeting minutes which was described as, “Minutes of Legal Services Advisory Committee meeting regarding legal advice and Court proceedings” .60. The first defendant relied on the proposition that an affidavit for discovery is, save for limited exceptions, conclusive as to the adequacy of discovery. That is, the affidavit is conclusive in identifying all relevant documents within the possession of the first defendant: Fruehauf Finance Corporation Pty Ltd v Zurich Australian Insurance Ltd (1990) 20 NSWLR 359. An order for further and better discovery is made only if the Court is persuaded that the discovery has been shown to be, or manifestly is, incomplete: Michael Wilson and Partners Ltd v Nicholls and Others [2008] NSWSC 1230; 74 NSWLR 218 at 227. There is nothing before me that would indicate that there are documents in the possession of the first defendant which have not been discovered. I understand, however, that the plaintiff is seeking an order that the first defendant provide further particulars as to the documents over which privilege has been claimed, and the basis of these claim.59. The plaintiff seeks further and better discovery of all documents over which privilege has been claimed, is including documents other than the LSAC meeting minutes, for the reason that some of the material may assist the plaintiff in proving that the first defendant intended to injure the plaintiff.
61. The plaintiff submitted that the first defendant had not tendered any probative evidence in support of the claim for privilege nor established the facts from which this Court could determine whether privilege was legitimately claimed. The plaintiff sought to rely on the first defendant’s conduct (as outlined in my summary of correspondence between the parties) as evidence of a failure to comply with the order for discovery. In this regard, reliance was placed on the comments of Tobias JA in Bailey , supra, concerning the importance of a party seeking to maintain a claim of privilege in providing probative evidence in support of that claim:
[40] Of greater significance was his Honour's implicit finding that the evidence
filed in support of the respondents’ application for privilege was manifestly
unsatisfactory and inadequate. The importance of a claim for privilege being
supported by probative evidence was emphasised in Barnes (at 605 [18]; 289
[18]). This notwithstanding, Barnes stands as authority for the proposition that
a judge may inspect the documents in respect of which privilege is claimed and form his or her own view as to whether the legal requirements for privilege are satisfied. His Honour did so in the present case and, as will appear, in my opinion no error was disclosed in his taking that course.
[41] However, it is necessary to sound a warning with respect to the failure of a party to comply with the rule when claiming privilege. Such a failure is in no way to be encouraged. In particular, it would have been open to the primary judge in this case to have adjourned the hearing, directed the respondents to file a new list of documents that complied with the rules and order that they pay the costs, and possibly indemnity costs, thrown away by the need for that adjournment. The rule is there for a purpose and compliance with it is mandatory unless expressly dispensed with by order of the Court pursuant to s 14 of the Civil Procedure Act 2005. Although non-compliance is not fatal to a claim for privilege, the consequences of non-compliance with the rule, some of which I have referred to above, may be significant. This is particularly so where instrumentalities or agencies of the State are involved.
62. It is worth setting out the passage in the judgment of Tamberlin, Stone and Siopis JJ in Barnes v Commissioner of Taxation (Cth) [2007] FCAFC 88; 242 ALR 601 to which reference was made in Bailey :
See also Grant v Downs [1976] HCA 63; 135 CLR 674 at 689.
[18] The authorities emphasise the need for focused and specific evidence in order to ground a claim for legal professional privilege. In Kennedy v Wallace (2004) 142 FCR 185; 213 ALR 108 ; [2004] FCAFC 337 ( Kennedy ), Black CJ and Emmett J reiterated the principles that verbal formulae and bare conclusory assertions of purpose are not sufficient to make out a claim for privilege: see also National Crime Authority v S (1991) 29 FCR 203 at 211 ;100 ALR 151 at 158–60 (per Lockhart J); Grant at CLR 689; ALR 589 (per Stephen, Mason and Murphy JJ). Where possible the court should be assisted by evidence of the thought processes behind, or the nature and purpose of advice being sought in respect of, each particular document. The fact that generalised evidence is not challenged in cross-examination does not mean that such evidence must be accepted, particularly when it is as manifestly inadequate as it is in this case. As in Kennedy , mere general assertions of the purpose of creation of the documents are insufficient to discharge this onus. Even though in that case some evidence as to the purpose of particular records was adduced, Allsop J at [168] considered that the onus had not been discharged because the evidence did not permit a conclusion to be drawn as to the dominant purpose of the creation of any particular document or entry in a document. Simply to show that one purpose for creation of the document was to obtain legal advice or assistance is not good enough.
63. The plaintiff submitted that he is entitled to test the claim for client legal privilege. To do so, it is incumbent on the first defendant to sufficiently particularise its claim for privilege over the documents in accordance with the rules. That involves compliance with UCPR r 21.3 (1)(d) and r 21.4 (2) which, relevantly, provide:
21.3 List of documents to be prepared
(2) The list of documents:(1) Party B must comply with an order for discovery by serving on party A a list of documents that deals with all of the documents (other than excluded documents) referred to in the order.
…
(b) must include a brief description (by reference to nature and date or period) of each document or group of documents and, in the case of a group, the number of documents in that group, and
…
(d) must identify any document that is claimed to be a privileged document, and specify the circumstances under which the privilege is claimed to arise.
…
21.4 Affidavit and certificate supporting list of documents
(1) The list of documents must be accompanied by:
…(a) a supporting affidavit, and
…(2) The affidavit referred to in subrule (1) (a) must state …
…
and must state, in respect of any document that is claimed to be a privileged document, the facts relied on as establishing the existence of the privilege.
64. In reply, the first defendant submitted that there had been adequate compliance with the rules . Whilst it was acknowledged that where a group of documents had been described on the list there is an absence of an indication of the number of documents within the group, it was submitted that this was insufficient to warrant the Court ordering further and better discovery.
65. I am of the view that the original verified list of documents inadequately described the nature of the documents in respect of which privilege was claimed. In excess of 4,000 documents were described in six very broadly described groups. On the other hand, I am of the view that the lists of documents provided to the plaintiff on 24 August and 13 October 2010 did provide an adequate level of detail in the description of both individual documents and groups of documents and the basis of the claim of privilege with the limited exception of three of the documents in the latter list for which there is no indication of the basis of the privilege claim.
66. The problem, however, is that the two lists most recently provided have not been verified as required by UCPR r 21.4. This is, perhaps, understandable as I have the impression that those lists were designed not as compliance with the order for discovery made in 2008 but to provide further information to the plaintiff as to the nature of the documents and the basis of the claim of privilege, a similar step as the one taken by the respondents in Bailey . The judge at first instance in Bailey took the step of inspecting the documents in order to satisfy himself as to the legitimacy of the privilege claim. That is not a task that I am prepared to embark upon, given the large volume of documents involved and the absence of any persuasive reason as to why I should do so.
67. I am concerned about the lengthy delay in this litigation. It is concerned primarily with issue of bankruptcy notices in December 2002. It was initiated by the filing of a statement of claim in the Equity Division in March 2004. Proceedings were transferred to the Common Law Division and the further amended statement of claim filed in February 2008. Since then the only real activity seems to have been devoted to arguments over discovery interspersed with long periods of inactivity (for example, between the inspection of the defendants discovered documents in February 2009 and the issue of the subpoena by the plaintiff in April 2010). The parties are reminded of the “guiding principles” set out in Division 1 of Part 6 of the Civil Procedure Act 2005.
68. Making an order for further and better discovery is discretionary. In all the circumstances it seems reasonable to order that the first defendant prepare and serve upon the plaintiff a supporting affidavit verifying the lists of 24 August and 13 October 2020 of discovered documents over which privilege is claimed. Amongst other things it will need to specifically identify the basis upon which privilege is claimed in respect of documents numbered 1, 2 and 4 of the 13 October 2010 list. Assuming adequate compliance with UCPR r 21.4, the matter, if it is to progress further, should progress without further delay.
Orders69. I will hear the parties as to costs.
1. The first defendant’s application to set aside the plaintiff’s subpoena is granted.
2. The subpoena issued on 12 April 2010 at the request of the plaintiff is set aside.
4. The first defendant is to serve upon the plaintiff within 14 days of the date of this judgment a supporting affidavit pursuant to UCPR r 21.4 in respect of the lists of documents of 24 August 2010 and 13 October 2010.3. The plaintiff’s application for further and better discovery is granted.
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