Gippsreal Ltd v Action Cycles Pty Ltd

[2012] VSC 279

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

No. 2626 of 2012

GIPPSREAL LTD ACN 005 443 292	Plaintiff
v
ACTION CYCLES PTY LTD ACN 076 779 630 & ORS	Defendants

---

JUDGE:	JUDD J
WHERE HELD:	Melbourne
DATE OF HEARING:	15 June 2012
DATE OF JUDGMENT:	27 June 2012
CASE MAY BE CITED AS:	Gippsreal Ltd v Action Cycles Pty Ltd
MEDIUM NEUTRAL CITATION:	[2012] VSC 279

---

Practice and procedure – client legal privilege – loss of privilege – ‘issue waiver’ – mediation – validity of deed of settlement challenged – ss 118, 122, 131 and 131A of the Evidence Act 2008 (Vic).

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J L Evans of counsel with Mr C R Brown of counsel	Oakleys Legal
For the First to Third Defendants	Ms C M Kenny, Senior Counsel with Ms F J Bentley of counsel	Ian Symonds & Associates
For the Fourth and Fifth Defendants	Mr J D S Barber of counsel with Mr J Kohn of counsel	Leonard Legal

HIS HONOUR:

1. The plaintiff, Gippsreal Ltd, has brought this proceeding to enforce a Deed of Settlement made with the defendants dated 28 February 2012.  The first to third defendants, Action Cycles Pty Ltd, Darren Lionel Clifford Gellie and Lorelle Lee Gellie, have applied by counterclaim to set aside the Deed.  The fourth and fifth defendants were receivers appointed by Gippsreal of assets charged in its favour to support advances made to the Gellies.

1. Documents have been produced pursuant to a subpoena directed to Nicholas De Young, barrister.  Mr De Young was engaged by the Gellie defendants for the purposes of a mediation that resulted in the execution of the Deed.  The mediation took place before an associate justice on 15 February 2012. 

1. The Gellie defendants seek to prevent Gippsreal and the former receivers, from having access to the documents.  They object to the disclosure of some of the documents on the grounds that they are subject to a valid claim to legal privilege that has not been waived by them in this proceeding. 

1. Their claim and contentions were formulated and argued (in written submissions) as if Mann v Carnell[1] had not been decided and the Evidence Act 2008 had not been enacted.  The Gellie defendants invoked notions of ‘fairness’ derived from Attorney-General (NT) v Maurice[2] which have been replaced by the ‘inconsistency’ test in Mann v Carnell.  No mention was made by the claimants of the provisions of the Evidence Act or of the Civil Procedure Act 2010 (Vic), that may be applicable to their claim and contentions.

   [1](1999) 201 CLR 1.

   [2](1986 161 CLR 475.

1. Section 118 of the Evidence Act 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.

1. 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.

1. Section 122 relevantly provides:

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.

…

1. Section 131 relevantly provides:

131     Exclusion of evidence of settlement negotiations

(1)Evidence is not to be adduced of—

(a)a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute; or

(b)a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute.

(2)Subsection (1) does not apply if—

…

(e)the evidence tends to contradict or to qualify evidence that has already been admitted about the course of an attempt to settle the dispute; or

(f)the proceeding in which it is sought to adduce the evidence is a proceeding to enforce an agreement between the persons in dispute to settle the dispute, or a proceeding in which the making of such an agreement is in issue; or

(g)evidence that has been adduced in the proceeding, or an inference from evidence that has been adduced in the proceeding, is likely to mislead the court unless evidence of the communication or document is adduced to contradict or to qualify that evidence; or

…

1. Section 131A enables a claimant to object to production of a document as if objecting to the adducing of the document in evidence.

1. There was no mention in submissions of s 67 of the Civil Procedure Act which provides:

67Evidence of things said and done in appropriate dispute resolution which is judicial resolution conference

If a court orders that a judicial resolution conference be conducted in relation to a civil proceeding, no evidence shall be admitted at the hearing of any proceeding of anything said or done by any person in the course of the conduct of the judicial resolution conference unless the court otherwise orders, having regard to the interests of justice and fairness.

1. The court was provided with copy documents and a numbered list describing each document and its date.  The list is as follows.

Description	Date
1	Letter from Victorian Mortgage Investments Limited to Action Cycles Pty Ltd	19 January 2012
2	Letter from Lendlaw Commercial and Finance Lawyers to Bicycle Logic Pty Ltd	2 February 2012
3	Letter from Lorelle and Darren Gellie to Caroline Kenny;  cc’ing Nicholas De Young;  by fax	1 February 2012
4	Email from Darren Gellie to Caroline Kenny;  cc’ing Nicholas De Young	1 February 2012
5	Handwritten file notes of attendance at mediation	15 February 2012
6	‘Not in default’ schedule prepared by Gellies for mediation	15 February 2012
7	Email from Darren Gellie to Peter Hateley, and Ian Symonds;  cc’ing Nicholas De Young	16 February 2012
8	Handwritten file note of discussion with Darren Gillie	16 February 2012
9	Email from Nicholas De Young to Darren Gellies forwarding the proposed Deed of Settlement and Draft Orders	22 February 2012
10	Handwritten file note of discussion with Darren Gellie	22 February 2012
11	Email from Nicholas De Young to Darren Gellie attaching proposed amended Deed of Settlement	22 February 2012
12	Email from Nicholas De Young to Darren Gellie forwarding various versions of the proposed ‘final draft’ of the Deed of Settlement	23 February 2012
13	Handwritten file note of discussion with Darren and Lorelle Gellie	24 February 2012
14	Email from Nicholas De Young to Caroline Kenny SC	27 April 2012
15	Email from Nicholas De Young to Caroline Kenny SC	30 April 2012

1. The claimants do not accept that privilege has been lost in respect of any of the documents, insofar as they are privileged at all from disclosure; but contend that if the privilege has been lost by waiver in respect of some documents, the waiver does not extend to all documents.  I will endeavour to put that contention into context.

1. The Deed of Settlement purports to compromise claims made between the parties in an earlier proceeding (No 4416 of 2011).  The Gellie defendants were plaintiffs.  They sought to prevent Gippsreal from exercising its rights under security documents.  There is a substantial overlap between the allegations made by the Gellies in their counterclaim in this proceeding and their case in the earlier proceeding.

1. Mr De Young attended a mediation with the Gellies on 15 February 2012, although at the time they were not represented by solicitors.  He thereafter provided some legal advice and assistance to them resulting in their execution of the Deed.

1. The Gellie defendants seek to have the Deed set aside on various grounds, including unconscionability, arising out of their unequal bargaining positions with Gippsreal at mediation.  They also rely on the conduct of Gippsreal in appointing the receivers under security documents, the conduct of the receivers as well as the conduct of Gippsreal in the earlier litigation.  There are other grounds.  Relevant to this application is paragraph 14A of their further amended defence and counterclaim in this proceeding dated 1 June 2012, in which the Gellie defendants allege,

14A.At all relevant times the First to Third Defendants were in an significantly unequal bargaining position because of financial need and lack of legal representation and were, therefore, under a special disability/disadvantage in dealing with Gippsreal and the Former Receivers by reason of the following facts and circumstances:

…

(d)the fact that they did not receive the final version of the Deed of Settlement containing the Consent Orders until the morning on which it was executed;

(e)they had insufficient time to obtain independent legal advice about the Deed of Settlement before it was executed;

1. Gippsreal contended that any client privilege in the documents has been lost because the Gellie defendants have made allegations that are inconsistent with the maintenance of the privilege.[3]  The waiver upon which Gippsreal relied was traditionally known as ‘issue waiver’, where an assertion made by a party in litigation put the content of a document in issue, or necessarily opened the document to scrutiny, with the consequence that an inconsistency arose between making of the assertion and maintaining the privilege.[4]

   [3]Section 122(2) of the Act.

   [4]Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341; (2006) FCAFC 86 at [68].

1. Section 67 of the Civil Procedure Act may be relevant to the Gellie defendants’ objection. The mediation was ordered by the court. Some of the documents purport to record things that were said and done at the mediation. Section 67 does not, however, seem apt to deal with issues concerning the disclosure of subpoenaed material recording a lawyer’s communications with his client or the client’s strategic positions and objectives. Nor is it presently proposed to adduce any such material in evidence. Accordingly, the ‘interests of justice and fairness’ do not yet arise, although that position may change in the future.

1. As for s 131 of the Evidence Act (when read with s 131A), some of the documents produced fall within the category of those to which s 131(1)(b) relates. Insofar as that form of privilege might have been invoked in this case, which is not at all clear because of the central concept of an ‘attempt to negotiate a settlement’,[5] s 131(2)(f) provides that the protection afforded under s 131(1) does not apply to a proceeding in which the making of an agreement to settle the dispute is in issue.

   [5]But see s 131(2)(f) of the Evidence Act which presupposes the existence of an agreement.

1. Turning next to s 118 of the Evidence Act, I am persuaded that any client legal privilege attaching to documents 5 – 15 inclusive has been lost by reason of the Gellie defendants’ pleading, mentioned above, in which they allege an unequal bargaining position because of financial need and a lack of legal representation.  The special disability they claim depends on the circumstances in which they came to receive the final version of the Deed and access to independent legal advice.  Those allegations open up the whole of Mr De Young’s role as their counsel in relation to the mediation, execution of the Deed, his communications concerning the execution of the Deed, and his reporting to the Gellies’ senior counsel concerning the circumstances in which they came to execute the Deed.

1. If I understand the submission of the Gellie defendants correctly, they seek to have the question of inconsistency decided by reference to the extent to which the content of the document might have any bearing on their state of mind in relation to the settlement.  In my opinion that is to misunderstand the nature of the inquiry to be made.  An issue, squarely raised by the Gellie defendants, is the availability of legal advice at the mediation and in relation to their execution of the deed of settlement.  Documents 5 to 15 bear directly upon that issue.  To withhold disclosure of those documents would be inconsistent with the Gellies’ contentions in their defence and counterclaim which opens to scrutiny the legal advice and assistance they were given. 

1. On the other hand, the issues raised by the Gellie defendants in their defence and counterclaim do not put the contents of documents 1 to 4 in issue.  It is unnecessary to decide whether the copy letters, being documents 1 and 2, were privileged as copies in the hands of Mr De Young.  Documents 3 and 4, on their face, appear to constitute communications between the Gellies and their counsel.  Unfortunately no evidence was adduced to describe the circumstances in which those, or indeed any of the documents came into existence, and why it is that client legal privilege attached.  Nevertheless, Gippsreal did not contend that the documents were not prima facie privileged and, accordingly, I am prepared to proceed on the basis that all of the documents were subject to client legal privilege. 

1. I find that any client legal privilege attaching to documents numbered 5 to 15 inclusive has been lost, and I direct that copies of those documents be made available to the plaintiff and to the fourth and fifth defendants.

---