GT Corporation Pty Ltd v Amare Safety Pty Ltd
[2007] VSC 123
•25 May 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
| AT MELBOURNE COMMERCIAL AND EQUITY DIVISION COMMERCIAL LIST |
No. 2110 of 2005
F5899
| GT CORPORATION PTY LTD | Plaintiff |
| v | |
| AMARE SAFETY PTY LTD | Defendant |
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| JUDGE: | HOLLINGWORTH J |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 16, 28 February 2007 |
| DATE OF RULING: | 25 May 2007 |
| MEDIUM NEUTRAL CITATION: | [2007] VSC 123 |
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Legal professional privilege – Electronic discovery – Inadvertent discovery of privileged documents – Inspection and copying by opposing lawyers – Whether privilege waived – Whether opposing lawyers should be prevented from continuing to act – Appropriate relief
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J W S Peters S.C. | Norton White |
| Ms F Forsyth | ||
| For the Defendant | Mr R C Macaw QC | Russell Kennedy |
| Ms S L Turner | ||
| HER HONOUR: |
During the course of discovery in this proceeding, the defendant (“Amare”) inadvertently provided the plaintiff (“GT”) with discovery and electronic copies of certain documents in respect of which Amare now seeks to claim legal professional privilege. GT’s lawyers subsequently looked at some of those documents and referred to a number of them in correspondence between the solicitors.
GT issued a summons on 12 February 2007, seeking orders that Amare file and serve an affidavit describing every electronic document over which Amare now seeks to claim privilege and which are located in eight specified computer images.[1] Amare says it does not need to provide such an affidavit, as the documents are “clearly” privileged. Although GT’s summons also sought an order that Amare provide an affidavit which describes how the relevant documents came to be provided to GT, this was not pressed at the hearing of the summons.
[1] The circumstances in which Amare came to provide discovery and inspection of the eight computer images which are items 290-293 and 337-340 in the non-privileged part of Amare’s discovery will be discussed later in these reasons.
By summons filed on 13 February 2007, Amare seeks an order restraining GT’s solicitors, Norton White, and current counsel, Mr Tim North S.C. and Mr Simon McGregor, from acting or continuing to act for GT in this or any related proceeding. GT says that such relief is unwarranted and a disproportionate response to what has occurred.
Amare’s summons also seeks the return of all printed or electronic copies of the documents referred to in part 2 of schedule 1 to the affidavit of Tony Riddell sworn 23 January 2007 (“the part 2 documents”). Without making any admission of wrongdoing, GT says that it is prepared to return those of the part 2 documents which are properly the subject of a privilege claim; however, it disputes that a claim for privilege has properly been established at this point in time and presses for the provision of an affidavit before it returns such documents. GT does oppose the return of a handful of documents (“the excluded material”) which were attached to what is referred to later in these reasons as the 7 February letter.
GT and its lawyers are also prepared to undertake to the court not to discuss with or communicate to any other person the contents of any of the part 2 documents, and to make no further use of any privileged documents or any information contained therein or derived therefrom at the trial or otherwise, save for the excluded material.
The summonses are supported by the following evidence: an affidavit of Anthony James Spear Massaro, a solicitor at Russell Kennedy, Amare’s solicitors, sworn 13 February 2007; two affidavits of Grant Dewar, a solicitor at Norton White, the solicitors for GT, sworn 16 and 22 February 2007 respectively; and oral evidence given by Mr Dewar on 28 February 2007.
Before examining in detail the relevant conduct of the parties, their lawyers and IT consultants, it is desirable to consider the applicable legal principles.
Waiver of privilege
Waiver of legal professional privilege may be express or implied (or imputed), intentional or unintentional. Here, it is not suggested that there has been any express waiver of privilege over any relevant document, only an implied waiver.
One common form of implied waiver occurs where it would be unfair or misleading to allow a party to refer to or use material and yet assert that the material, or material associated with it, is privileged.[2] In such a case, the subjective intention of the party is irrelevant and the waiver arises because of some conduct on the privilege holder’s part, which would make it unfair to allow it to maintain the privilege. In Mann v Carnell[3], the majority in the High Court stressed that what brings about the waiver in such a case is the inconsistency which the court, informed by considerations of fairness, perceives between the client’s conduct and the maintenance of the privilege,
“not some overriding principle of fairness operating at large.”[4]
[2] Attorney-General for the Northern Territory v Maurice (1986) 161 CLR 475.
[3] (1999) 201 CLR 1.
[4] Per Gleeson CJ, Gaudron, Gummow and Callinan JJ at 13. The inconsistency test and its proper application were also discussed at some length in the recent Court of Appeal decision in Secretary to the Department of Justice v Osland [2007] VSCA 96.
Another situation in which waiver may be implied is where there has been no such conscious or voluntary act, only an inadvertent disclosure of privileged material.
In Guinness Peat Ltd v Fitzroy Robinson[5], a privileged document was inadvertently listed in the non-privileged part of the affidavit of documents, and inspected and copied by the other side. The Court of Appeal in the United Kingdom held that “a mere plea of inadvertence does not by itself necessarily enable a party to litigation to avoid a loss of privilege. Privilege may be lost by inadvertence.”[6] The court stressed the need for parties to take great care in preparing their lists of documents and providing inspection. That is because, ordinarily, a party who sees a document which has been listed or produced without a claim for privilege, “is fully entitled to assume that any privilege which might otherwise have been claimed has been waived.”[7] However, the court held that although the general rule was that once a document had been inspected it was too late to claim privilege, the court has power to intervene under its equitable jurisdiction if either the inspection had been procured by fraud, or the inspecting party realised, on inspection, that he had been
permitted to see a confidential document only because of an obvious mistake.[8]
[5] [1987] 2 All ER 716.
[6] At 729.
[7] At 730.
[8] At 730-1.
The principles in Guinness Peat have been applied in a number of Australian decisions in which privileged documents have been inadvertently produced. In determining what fairness requires in each case, the courts have had regard to such matters as: how the recipient obtained the document; how quickly the party claiming privilege acted once it learned of the mistake; what, if any, use had been made of the information; what prejudice might flow to either side from the waiver or non-waiver of privilege; whether the inspecting party would have difficulty conducting the case
whilst trying to ignore the content of the documents.[9]
[9] Hooker Corporation Ltd v Darling Harbour Authority (1987) 9 NSWLR 538; Meltend Pty Ltd v Restoration Clinics of Australia Pty Ltd (1997) 145 ALR 391; Hongkong Bank of Australia Ltd v Murphy [1993] 2 VR 419; Key International Drilling Company Ltd v TNT Bulkships Operations Pty Ltd [1989] WAR 280.
Restraining lawyers from acting
Amare’s application to restrain GT’s solicitors and barristers from further acting for GT is based on two grounds:
(a) The court’s inherent power to restrain officers of the court, in the interests of the administration of justice; (b) Misuse of confidential information.
It is common ground that the court has inherent jurisdiction to restrain GT’s lawyers from acting further in this proceeding. The nature and extent of that jurisdiction has been the subject of previous judicial consideration.
In Grimwade v Meagher[10], Mandie J held that the court has inherent jurisdiction to ensure the due administration of justice and to protect the integrity of the judicial process. As part of that jurisdiction, the court may prevent a lawyer from acting, in order that justice not only be done, but be seen to be done. His Honour held that the objective test to be applied was whether a fair-minded, reasonably-informed member of the public would conclude that the proper administration of justice required that the lawyer be prevented from acting, at all times giving due weight to the public interest that a litigant should not be deprived of his or her choice of lawyer without good cause.
[10] [1995] 1 VR 446 at 452.
The Grimwade decision has been approved in a number of subsequent decisions of this court, including by Byrne J in Caruso v Tartaglia[11], Nettle J in Sent v John Fairfax Publication Pty Ltd[12] and Brooking JA in Spincode Pty Ltd v Look Software Pty Ltd[13]. Spincode involved a firm of solicitors which had acted for a company since its incorporation. When disputes arose between shareholders, the solicitors continued to act for the company, whilst covertly advising one group of shareholders. They subsequently acted for one of those shareholders, who was seeking to wind up the company. The Court of Appeal held that an injunction had properly been granted to restrain the solicitors from acting, on the ground that in their capacity as company solicitors they had received confidential information, which there was a real and sensible possibility of their misusing.
[11] [2002] VSC 91 at [9].
[12] [2002] VSC 429 at [114].
[13] (2001) 4 VR 501.
Although Ormiston and Chernov JJA limited their decision to the confidential information ground, Brooking JA identified three possible grounds for restraining the solicitors from acting:
(a) The danger of misuse of confidential information; (b) Breach of a fiduciary duty of loyalty not to act against the former client; (c) The court’s inherent jurisdiction to control the conduct of solicitors as officers of the court.
In relation to the third ground, Brooking JA said that no experienced solicitor of sound judgment would have done what the solicitors in that case did, and the whole of the solicitors’ conduct was “so offensive to common notions of fairness and justice that they should, as officers of the court, be brought to heel.”[14] The observations by Brooking JA as to the court’s inherent jurisdiction have been approved and applied
in subsequent decisions.[15]
[14] At [58].
[15] Including Adam 12 Holdings Pty Ltd v Eat & Drink Holdings Pty Ltd [2006] VSC 152; Pinnacle Living Pty Ltd v Elusive Image Pty Ltd [2006] VSC 202. However, Brooking JA’s second observation, namely that the duty of loyalty survives the termination of the relationship with the client, has been more controversial and does not reflect the law in the United Kingdom or New South Wales, as to which see the helpful discussion by Young J in Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404.
More recently, in Kallinicos v Hunt[16], Brereton J undertook a comprehensive examination of the authorities concerning the court’s supervisory jurisdiction over lawyers. His Honour concluded by helpfully summarising the following principles from the authorities:
[16] (2005) 64 NSWLR 561.
(a)
The test to be applied in this inherent jurisdiction is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a lawyer should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice.
(b) The jurisdiction is exceptional and is to be exercised with caution. (c)
Due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause.
(d)
The timing of the application may be relevant, in that the cost, inconvenience and impracticality of requiring lawyers to cease to act may provide a reason
for refusing to grant relief.[17]
[17] At 582-3.
Most of the cases in which lawyers have been restrained from acting are, like Grimwade and Spincode, cases in which a lawyer is seeking to act against a former client. I was only referred to two Australian cases which have considered an application to restrain lawyers from acting because of the disclosure of privileged material: H Stanke & Sons Pty Ltd v Von Stanke, O’Meara[18] and Kingston v State Fire Commission[19]. In neither case were the lawyers in fact restrained from acting.
[18] [2006] SASC 308.
[19] (1998) 8 Tas R 152.
Obviously, each case must depend on its own facts, but there are several features of those two cases which are particularly relevant here. In Stanke, the privileged documents had been used in the preparation of a counterclaim and had been so used despite a request for their return. Nevertheless, the court held that the recipient’s conduct had not been so opportunistic as to deprive the client of solicitors who had been acting for it for some time. In Kingston, the court seems to have been influenced by the fact that the client himself had been made aware of the privileged material and that could not be redressed by preventing his solicitors from acting.
Amare’s counsel referred me to three Canadian cases in which solicitors were removed for reviewing privileged material. Each of them turns on its own facts. For example, in Celanese Canada v Murray Demolition Corp[20], the Supreme Court of Canada ordered the removal of lawyers who had obtained the privileged documents when executing an Anton Pillar order; that is to say, they had themselves caused the disclosure of privileged material. The court stressed the need for lawyers to be very careful in executing the “exceptional remedy” of an Anton Pillar order. In that case, the litigation was still at a very early stage, so the impact of removing the lawyers would be less. In the other two cases[21], the Supreme Court of Ontario held that no other remedy except the removal of the lawyers was possible on the particular facts.
[20] [2006] SCC 36.
[21] Chan v Dynasty Executive Suites [2006] CanLII 23950; Ontario Inc v Ontario Limited [2006] CanLII 37124.
This case also raises the dilemma which confronts solicitors when confidential information is inadvertently disclosed to them. In 1993, the Law Institute of Victoria promulgated the current “Inadvertent Disclosure Guidelines”[22], which set out solicitors’ ethical duties in such a situation. Those duties include a duty to pass on to a client and use all information which is material to the client’s interests regardless of its source, unless the solicitor knows it has been obtained unlawfully, improperly or surreptitiously.[23] If privileged information inadvertently comes to the solicitor’s knowledge, the solicitor is entitled and may have a duty to use the information for the client’s benefit.[24] If it is obvious that confidential documents have been mistakenly disclosed, the solicitor should consider whether to obtain instructions from the client to read or continue to read the material and should advise the client that the court may enjoin any overt use of any such information.[25] In seeking those instructions, the solicitor should point out to the client the risk that a court may grant an injunction prohibiting a solicitor from continuing to act, and the possible costs of
retaining new solicitors.[26]
[22] (1993) 67(3) LIJ p146.
[23] Guideline 1.
[24] Guideline 3.
[25] Guideline 4.
[26] Guideline 5.
I turn to consider the conduct of the respective lawyers, in the light of those principles.
Amare’s discovery
The proceeding was commenced in October 2005. In January 2006, both sides provided their initial affidavits of discoverable documents. Amare has subsequently filed and served five further affidavits of documents, dated 1 May 2006, 7 August 2006, 8 September 2006, 27 October 2006 and 23 January 2007, respectively.
Amare’s first four affidavits of documents only referred briefly to privilege. In the body of each affidavit, it was said that the documents listed in part 2 of schedule 1 were privileged only on the basis that they were communications passing between Amare and its solicitors for the sole or dominant purpose of obtaining and giving legal advice. However, in some of those affidavits, part 2 of schedule 1 then sought to claim privilege for a wider range of documents, on both advice and litigation bases, namely:
(1) All original and copies of correspondence between Amare and its solicitors for the sole or dominant purpose of obtaining and giving legal advice or for the purpose of these proceedings. (2) Statements, notes, drafts, reports and other documents prepared by or for Amare and its legal advisers for the sole or dominant purpose of obtaining and giving legal advice or for the purpose of these proceedings.
On 15 September 2006, Dodds-Streeton J ordered Amare to provide further discovery, including discovery of computers used between 10 October 2001 and 31 December 2005 by the following Amare employees: Tony Riddell, Ron Williams, Geoff Pizzey, Michelle McKitterick and Moira Ryan. In early October, Amare engaged PPB Forensics (“PPB”) to obtain forensic images of those computers for discovery purposes.
Amare’s fifth affidavit, dated 27 October 2006, included a consolidation of the documents listed in the first four affidavits, as well as listing in part 1 of schedule 1 the following documents:
No Date Original/ Details copy
290 12/10/06 Original Forensic image of personal computer serial number 43338569K, a laptop computer which has been used by Tony Riddell between 10 October 2001 and 31 December 2005 291 12/10/06 Original Forensic image of personal computer serial number 607B93DY200076X, a laptop computer which has been used by Tony Riddell between 10 October 2001 and 31 December 2005 292 12/10/06 Original Forensic image of personal computer serial number 246193CL600029J, a laptop computer which has been used by Tony Riddell between 10 October 2001 and 31 December 2005 293 12/10/06 Original Forensic image of personal computer serial number 04230214, a laptop computer which has been used by Tony Riddell between 10 October 2001 and 31 December 2005
For the first time in the course of Amare’s discovery, part 2 of schedule 1 of the 27 October affidavit listed some specific documents, 16 in number, in respect of which privilege was claimed. Part 2 also repeated the two general paragraphs which appeared in earlier schedules. However, no claim for privilege was made in respect of the forensic images which were numbered 290-293 inclusive; it is now apparent that these forensic images in fact contained both privileged and non-privileged material.
Paragraph 8 of the 27 October affidavit also contained the following express waiver of privilege:
[Amare] has waived privilege in relation to all documents between 1 September 2001 and 31 December 2001 inclusive which would otherwise have been subject to legal professional privilege. All such documents have already been discovered and are to be found in part 1 of schedule 1.
This waiver of privilege related to communications between Amare and Davies Elliott, who were its solicitors in late 2001. In an earlier discovery affidavit, Amare had discovered an item of correspondence between Davies Elliott and Amare in the non-privileged part of its affidavit. Thereafter, GT had asserted that Amare had thereby impliedly waived privilege over the whole of the Davies Elliott file dealing with that subject matter. Paragraph 8 of the 27 October affidavit seems to reflect Amare’s acceptance that it had indeed waived privilege over the solicitors’ file. In assessing the reasonableness of later events, it is necessary to have some regard to what had happened in relation to this earlier waiver.
The 27 October affidavit clearly did not comply with her Honour’s orders in relation to computers used by employees other than Tony Riddell. Apparently, PPB did not copy the computer hard drives for those other employees, because they were duplicated on two servers used by Amare. Because the two servers were not the subject of specific orders, Amare did not discover the other employees’ hard drives in its affidavit.
On 27 October 2006, the same day as the fifth affidavit was sworn, Amare’s solicitors wrote to GT’s solicitors, advising them of the existence of the servers and the fact that the computers used by Messrs Pizzey, Williams, McKitterick and Ryan had not been discovered. The letter noted that a preliminary keyword search had indicated that there were “over 900,000 files which are potentially subject to legal privilege”, which would need to be reviewed before discovery of the server contents was provided.
In a letter dated 20 November 2006, GT’s solicitors noted that they still had not received the further electronic discovery which had been promised. The letter said:
We assume that your assertion of the application of legal professional privilege to some of the documents means that you will be providing us with a list of those documents. If not, please be advised hereby that we require same.
By 28 November 2006, PPB was dealing directly with GT’s IT consultants, Ernst & Young, in relation to the exchange of each side’s electronic discovery. On 30 November 2006, PPB delivered Amare’s electronic discovery to Ernst & Young (“the electronic discovery”). It seems that the electronic discovery contained “154,692 files and thousands of emails”. No index was prepared of the electronic discovery at that time, or subsequently.
The enormous electronic discovery was not presented in a way which allowed the reader to readily ascertain what documents there were, or from whose computer any particular document had originally come. I have no doubt that the manner in which Amare’s electronic discovery was provided, together with the complete lack of any index, has contributed significantly to the problems which have subsequently arisen.
Unbeknown to Amare’s solicitors, PPB had not removed from the electronic discovery all the documents in respect of which privilege was sought to be claimed. Whilst I accept that some privileged documents were provided inadvertently, no explanation has been provided to the court as to how or why that occurred.
When Mr Dewar first started looking through the electronic discovery on the afternoon of 8 December 2006, he assumed that all privileged documents had been removed. That was a perfectly reasonable initial assumption, given the previous correspondence.
However, once Mr Dewar started noticing some sensitive solicitor-client communications, he realised that some apparently privileged material had been provided. From the hundreds of emails that he looked at that afternoon, he looked at about 20 emails and 5 email attachments of that nature. I accept that on this occasion he stopped reading each document when he realised it was potentially privileged.
Grant Tuckett, an employee of GT, was in the room when Mr Dewar undertook this initial inspection. However, the only potentially privileged documents which Mr Tuckett saw and read that day were an email from Mr Massaro to Mr Riddell dated 4 October 2006[27] and a witness indemnity attached to an email from Ms Stojanovski to Mr Riddell dated 19 October 2005.[28] The latter of these two documents is in the excluded material.
[27] The email appears to be document 360 in part 2. A copy was enclosed with the 7 February letter.
[28] The indemnity is not specifically listed in part 2. The document appears to be an attachment to document 110 in part 2. A copy was enclosed with the 7 February letter.
Mr Dewar agreed in cross-examination that when he first saw the 25 or so documents, he believed they had been provided inadvertently, but he was not sure what to do. He thought there might have been a waiver of privilege. He was also aware that he had potential duties to his client. So he sought advice from others. Two senior lawyers at Norton White told him they thought that Amare had waived any claim to privilege, but advised him to seek counsel’s advice. Mr Dewar sought advice from the counsel already briefed in the matter, Mr North and Mr McGregor. Counsel recommended he write to Amare’s solicitors seeking to clarify the situation.
On 12 December 2006, GT’s solicitors wrote to Amare’s solicitors, asking a number of questions about the electronic discovery and the extent to which it did or did not comply with Dodds-Streeton J’s orders. Their letter concluded with the following:
Further, are we to assume from your letters of 15 and 16 November 2006, that you completed a process of removing data subject to [privilege] from the data that was provided to our client’s IT expert? We note that you have not provided us with an enumerated description of what you assert to be [privileged] material despite our insistence upon you providing such a list in our letter of 20 November 2006. Please provide that list within seven days or we will list this matter seeking such an order.
The letter was far from direct. It made no mention of the fact that apparently privileged documents had already been found amongst the electronic discovery. Rather, it sought information which might enable GT to mount an argument that there had been a waiver of privilege.
Whilst waiting for a response to that letter, Mr Dewar said that he did not intentionally look at any other documents which might have been privileged. However, in the course of looking at other documents in the electronic discovery, which did not seem from their description to be privileged, he would occasionally come across an attachment or part of an email chain which did appear to be privileged. He said that when he came across such a document, which he estimated to total around 10 in number, he would stop reading once he realised what it was.
On 15 December, Amare’s solicitors wrote to GT’s solicitors, saying that a list of documents which had been excluded from the electronic discovery was in the process of being prepared and should be available by close of business on the 18th.
On 19 December, Mr Dewar arranged for documents in the electronic discovery which referred to Davies Elliott, Amare’s previous solicitors, to be printed out, and a copy of the 15 or so such documents to be sent to counsel. He did this at the request of junior counsel, Mr McGregor, which request seems to have been made some time prior to the 19th. The documents were selected by electronically searching for “Davies Elliott”, and nobody at GT’s solicitors read them at that time. The documents were delivered to Mr McGregor’s chambers on 20 December 2006.
Four of the Davies Elliott documents which were copied on 19 December have since been put into the supplementary court book, being emails dated 10, 23 and 30 March 2005 and a solicitors’ invoice. None of those four documents was listed in part 2, none was enclosed with the 7 February letter, and Amare does not press a claim for privilege in respect of them.
Under cover of an email dated 19 December 2006, Amare’s solicitors provided to GT’s solicitors two “pdf” format files, which were said to list the electronic files that had been excluded from the electronic discovery on the basis of privilege. It has since become apparent that these two pdf lists do not contain all of Amare’s privileged documents. Nor are all the documents in the pdf lists clearly privileged by reason only of their description. Amare has not explained to the court the process by which these lists came to be prepared or why they are inaccurate.
GT’s solicitors responded the following day. They identified several files in the pdf lists which they said did not appear from their description to be privileged documents, and asked Amare’s solicitors to review the pdf lists as soon as possible. The letter concluded with the following:
Finally, we are in the process of cross checking these lists against the [electronic discovery] you have provided and we will advise you as soon as possible whether any waiver has occurred.
Amare’s solicitors reviewed the pdf lists and replied on 22 December 2006. They enclosed the two pdf lists marked with yellow highlighter to show those documents in respect of which Amare no longer proposed to maintain a privilege claim. Their letter said nothing, and asked no questions, about the waiver issue raised by GT’s solicitors.
In the meantime, on 21 December, Mr Dewar had arranged for documents in the electronic discovery which referred to Russell Kennedy, Amare’s current solicitors, to be printed out and copies put into folders for counsel. He did this at the request of senior and junior counsel. The volume of material produced on this occasion filled three lever arch folders. Once again, the documents were located by electronic search and not read by Mr Dewar or anybody else at GT’s solicitors.
Mr North and Mr McGregor read these folders of documents together at Mr North’s house on 28 December. Mr Dewar was not present on that occasion. Counsel have informed Mr Dewar that, for about 10 documents, counsel formed the immediate view that they may have undermined aspects of Amare’s defence. For the remaining documents, they formed the view that Amare should be allowed to “revive” a claim of privilege. I do not have the benefit of any direct evidence from counsel as to what occurred or precisely how much of each document they read. But, having regard to the nature and contents of the documents which counsel selected for inclusion in subsequent correspondence, I infer that, in order to locate those documents, they must have read a substantial amount of the documents in the three folders.
On 29 December, GT’s solicitors wrote to Amare’s solicitors. In fact, GT’s counsel drafted and settled the letter and selected the enclosures. The letter referred to the process by which privilege had been claimed for the non-highlighted files listed in the pdf lists and asserted that “it follows” that Amare had waived privilege over every other document in the electronic discovery. It then said as follows:
Nonetheless, we enclose certain documents that we presume you have inadvertently disclosed to us. These are:
[14 items listed and copies enclosed]
Please advise us if your client wishes to claim privilege over these documents.
In respect of those documents described in the two pdf files not highlighted in yellow, we dispute that the following documents, which are to be found in the electronic data provided to us on 30 November 2006, can be the subject of privilege:
[20 items listed]
Alternatively we maintain that your client has waived privilege over these documents by disclosing them to us in the manner in which it did.
We intend to use these documents in the conduct of the trial.
Should it be that your client disagrees with this, your client should promptly make application to court for appropriate orders. Our client reserves its rights fully in this regard.
On 2 January 2007, Amare’s solicitors replied that all the documents referred to in the letter of 29 December had been disclosed inadvertently through the electronic discovery process and privilege was claimed in respect of all of them. The letter required the return of all copies of those documents and an undertaking not to seek to rely upon the documents in the proceeding.
The next three weeks saw a flurry of increasingly-heated correspondence between the solicitors. In general terms, Amare’s solicitors kept insisting that privilege had not been waived and that the hard drive of all electronic discovery should be immediately returned. GT’s solicitors said that they would not press a waiver argument over material that was patently privileged. But GT’s solicitors continued to insist on Amare’s solicitors providing a list of every privileged document that Amare said had been inadvertently provided and an explanation as to how the documents came to be “inadvertently disclosed”, given the process of preparation and amendment of the pdf lists. There was also discussion as to how any privileged material could be extracted from the electronic discovery and who would pay for the costs of that exercise.
After initially agreeing to provide a list of all documents in respect of which privilege was claimed, by 5 January, Amare’s solicitors were refusing to provide such a list on the following basis:
If we are to provide you with a list of inadvertently discovered privileged documents contained on the hard drive prior to your returning the hard drive, the only function this would appear to serve is to alert you to any other
privileged material which you may not already have read.
They eventually did provide such a list, when Amare swore its sixth affidavit of documents on 23 January 2007. Paragraph 6 was in the following terms:
The documents listed in items 2 through to 380 in Part 2 of Schedule 1 are stored electronically on the hard disks which are listed at items 290, 291, 292, 293, 337, 338, 339 and 344 [sic – this should have read 340] of the defendant’s discovery. I am informed by the solicitor for the defendant and I believe that these documents were provided inadvertently to the solicitor for the plaintiff, contrary to the specific instructions of the defendant.
Documents 337 to 340 inclusive were described in the non-privileged part as:
No Date Original/copy Details 337
17/11/06
Original
Forensic image titled WD-WM8J2400175, being an image of the hard drive of the desktop computer used by Michelle McKitterick between 10 October 2001 and 31 December 2005
338
Original
Forensic image titled 3HSCKF5N, being an image of the hard drive of the desktop computer used by Moira Ryan between 10 October 2001 and 31 December 2005
339
12/10/06 Original
Forensic image titled RAID, being an image of the defendant’s applications server used by all employees of the defendant between 10 October 2001 and 31 December 2005
340 12/10/06 Original Forensic image titled 3JV58CG8, being an image of the defendant’s communications server used by all employees of the defendant between 10 October 2001 and 31 December 2005
Part 2 of the first schedule made a general claim for privilege and then listed 379 specific documents. Rather confusingly, these were numbered 1 to 380, reproducing numbers already used in the non-privileged part of that and earlier affidavits.
On 24 January, Grant Dewar spoke to Anthony Massaro of Amare’s solicitors about the return of the hard drive. Mr Massaro asserts that Mr Dewar said that he was happy to give the hard drive back. Mr Dewar says that he did not put it that strongly, and only indicated that he did not think there would be a problem in returning the documents. The precise words are not important, because later that afternoon, Mr Dewar emailed Mr Massaro and informed him that counsel had advised him to reserve GT’s position in relation to whether there had been a waiver of privilege and as to whether certain documents were in fact privileged.
In late January, Mr Dewar looked at the documents which had been printed out and sent to counsel, for the purpose of comparing them with part 2 of Amare’s 23 January discovery affidavit. His explanation as to precisely what he did and why was not entirely satisfactory and requires further consideration.
In his first affidavit[29], Mr Dewar said that the solicitors’ correspondence, particularly emails of 25 and 29 January, set out Mr Massaro’s “agreement” that he look at the documents and prepare a list showing which documents were still the subject of a privilege dispute. In his second affidavit, Mr Dewar repeated that Mr Massaro’s emails had concurred with the suggestion that he look at the documents. He repeated this assertion under cross-examination. On their face, Mr Massaro’s emails do not suggest that the recipient should look at the documents, and I have no doubt that Mr Massaro did not intend to suggest that Mr Dewar do so. Whilst I do not believe that it was reasonable for Mr Dewar to interpret the emails in the way in which he did, I do accept that he genuinely believed that he could not prepare a list of which documents were still in dispute without at least comparing the documents in the three folders against the list in part 2.
[29] Paragraph 50 of the affidavit of 16 February 2007.
In his first affidavit, Mr Dewar had said that he “could not prepare that list without reading the documents and forming a view about them.” In his second affidavit, Mr Dewar went on to explain the manner in which he had “read” the documents:
I needed to skim read the titles, letterheads, dates (and on occasion the time that the document was sent) or descriptions of the authors and recipients of the documents, in order to check the accuracy of the description in [part 2] and whether a document was in fact listed in [part 2]. I did this task on my own. I read them only for long enough to ascertain this. I did not analyse the
contents of the documents.[30]
[30] Paragraph [37].
Mr Dewar was cross-examined about the extent to which he had read or looked at the documents. His evidence remained consistent with what he had said in his second affidavit, and I accept that he only looked at the documents in the limited manner described above and did not have regard to their contents.
After he completed that exercise, Mr Dewar knew that nobody on behalf of GT had viewed about 150 of the part 2 documents. He also noted that 34 of the documents which had been sent to counsel were not listed in part 2.
On 29 January, Mr McGregor asked Mr Dewar to take instructions from Mr Tuckett in relation to two documents which were in the folders sent to counsel, but not listed in part 2. They were draft statements by Mr Riddell and Mr Pizzey. Mr Dewar faxed Mr Tuckett 3 pages of extracts from those documents and later obtained his instructions about the matters referred to in those extracts. Neither of these statements is in the excluded material.
On 31 January, GT’s solicitors wrote to Amare’s solicitors describing what they believed to be errors in the 23 January discovery affidavit and indicating that they regarded privilege as having been waived in respect of any documents not listed in part 2. This letter had been drafted and settled by counsel.
The next letter of importance is from GT’s solicitors to Amare’s solicitors, dated 7 February 2007. Once again, it had been drafted and settled by GT’s counsel, who had looked again at some of the documents in their folders for this purpose. The letter was also sent to Mr Tuckett, without the enclosed documents, for his approval.
The 7 February letter included the following introductory remarks:
On 30 November 2006, you provided us with un-enumerated electronic data for inspection. Documents we located therein in our opinion, impugn your client’s amended further defence dated 7 July 2006 to the extent that no reasonable practitioner could advise a client to maintain those pleadings. In particular we have considered [certain named documents]. We suggest your client take this opportunity to now abandon the pleadings described below without incurring further wasted expense and costs.
The next 4 pages of the 7 February letter were devoted to a more detailed analysis of the specific pleadings which GT asserted ought to be abandoned, based on specific discovered documents. Copies of those documents were enclosed (“the 7 February documents”[31]); they include the excluded material. The letter concluded by inviting Amare to withdraw the specific pleadings and stating that “in the event of the failure to abandon these unfounded claims, then this letter will be produced on the question of costs.”
[31] As far as I can tell from their description, 15 of the 7 February documents are listed in part 2, namely 86-89, 101-2, 106-8, 110, 150, 152, 326, 360 and 372. The remaining 7 February documents (11 in number) are not individually listed in part 2. Some of them may well be enclosures to part 2 documents, but it is not possible to reach any definite conclusion on the material before me.
The next few days saw further correspondence between the solicitors, containing accusation and counter-accusation and pre-summons positioning on both sides. Amare’s solicitors demanded that GT’s solicitors cease to act; GT’s solicitors declined to do so. GT’s solicitors persisted in arguing that there had been some waiver of privilege. Amongst that correspondence, Amare’s solicitors made the following response to the substance of the 7 February letter:
Your letters make a series of allegations about our client’s pleadings. These are based on privileged material and, whether by reference to that material or otherwise, are without foundation. We will respond to your client’s new legal advisers as to those issues in a separate letter without prejudice save as to costs.
It is not clear to me how Amare’s solicitors proposed to deal with those issues with new lawyers, without disclosing the previous correspondence and privileged documents to them.
I turn to consider what consequences should flow from what has occurred.
Should Amare be required to swear a further affidavit claiming privilege?
GT seeks an order compelling Amare to swear an affidavit which describes every electronic document contained in the eight computer images over which Amare seeks to claim privilege. Amare resists such an order.
A claim for privilege may be established by evidence or by having regard to the nature or character of the documents themselves. In Grant v Downs[32], the majority of the High Court, Stephen, Mason and Murphy JJ, said that:
It is for the party claiming privilege to show that the documents for which the claim is made are privileged. He may succeed in achieving this objective by pointing to the nature of the documents or by evidence describing the circumstances in which they were brought into existence. But it should not be thought that the privilege is necessarily or conclusively established by
resort to any verbal formula or ritual. [33]
[32] (1976) 135 CLR 674.
[33] At p689.
Except for documents 152 and 234, which Amare now says ought not to have been included in part 2, Amare argues that:
(a) The privileged status of documents 2, 4-16, 26, 47, 85, 104 and 184-186 is apparent from reading them; and (b) The privileged status of the remainder of the part 2 documents is apparent “on their face”, that is to say, by their description.
Although I have, with the consent of both parties, inspected the 7 February documents, they do not appear to include the documents listed in sub-paragraph (a) above. I am therefore unable to say whether their privileged status would in fact be apparent from reading them.
It is true that many of the part 2 documents are described as communications between Amare and its solicitors during the period in which this proceeding has been on foot, and therefore may well be privileged. But part 2 does not describe any attachments over which privilege is claimed, nor does it even identify which documents have attachments. Furthermore, as already mentioned, it is far from clear to me that all of the 7 February documents have in fact been discovered in part 2.
I also note that at least one of the 7 February documents which I have inspected does not appear on its face to be privileged. It appears to be a printout from a PowerPoint presentation, being a one page document headed “Growth, Growth & More Growth.” There is nothing in the materials before me which explains what this document is or why it is said to be privileged.
Amare also concedes that documents 152 and 234 in part 2 are not privileged. This is on top of its earlier abandonment of a claim to privilege in respect of quite a few of the documents in the two pdf lists.
In these circumstances, I propose to require Amare to swear a further affidavit which lists each and every document, including each attachment, contained in its electronic discovery in respect of which it wishes to claim privilege. The affidavit will also need to specify the precise basis on which privilege is claimed in respect of each document, that is to say, whether under the advice and/or litigation limb of privilege. If the claim for privilege cannot be established merely from the description of a particular document, then the affidavit will need to depose to sufficient facts to establish the claim in respect of that document.
Upon receipt of such an affidavit, GT can determine whether it wishes to challenge the privileged status of any such document, based only on what is in the affidavit. GT accepts that, if it does seek to challenge privilege in that way, it cannot and will not seek to rely on any information which it has obtained through the inadvertent provision of electronic documents.
The excluded material
Although in earlier correspondence and its written outline GT had argued that Amare had waived privilege in respect of a much larger number of documents, it now only presses a waiver argument in respect of the excluded material, namely:
(a)
An email between Amare’s general manager, Tony Riddell, and an Amare employee, Michelle McKitterick, dated 15 August 2006.[34] The email requests Ms McKitterick to provide Mr Riddell with certain information requested by Amare’s solicitors.
(b)
An email from Ron Williams, a former Amare employee and prospective witness, to Mr Riddell, dated 19 October 2005, about Mr Williams’ draft
[34] This is the top email on the page with a fax header numbered 17. This email is not listed in part 2.
statement.[35]
(c) An email from Alex Stojanovski, a legal secretary at Amare’s solicitors, to Mr Riddell, dated 19 October 2005, about Mr Williams’ amended statement,
together with what appears to be the enclosed indemnity document.[36]
[35] This is the bottom email on the page with a fax header numbered 24, together with the two pages numbered 25 and 26. Neither the email nor the draft statement is listed in part 2.
[36] The email is document 110 in part 2. The attached unsigned indemnity is not listed in part 2. These two pages bear fax header numbers 32 and 33.
Each of these documents is one of the 7 February documents.
In the first instance, GT argues that documents (a) and (b) are not privileged, as they are communications between witnesses. Alternatively, if they are privileged, then GT argues that privilege has been waived.
Having examined document (a) and the solicitor’s email which preceded it, I am satisfied that a claim for privilege has been made out in respect of it. Communications between two officers or employees of a client, made for the dominant purpose of obtaining information to provide to the client’s solicitors for use in this litigation, are clearly privileged.
The position is less clear in relation to document (b). A communication between a client and a non-party, including a witness, may be privileged if made for the dominant purpose of obtaining information for use by the client’s lawyers. The problem here is that I have no evidence as to why the witness was communicating with the client. Mr Williams may have been communicating with Mr Riddell for a privileged or non-privileged purpose. The further affidavit which I propose to require Amare to swear should address this matter. For the purpose of considering the waiver argument, I will assume that document (b) is privileged.
GT seems to accept that the email part of document (c) is privileged. But GT disputes that the enclosed unsigned indemnity is privileged unless somebody makes a proper claim for privilege in an affidavit. There is no evidence before me as to whether the indemnity was in fact ever executed by Amare. If any such indemnity was executed, then the executed document ought to be discovered in the non-privileged part of Amare’s discovery. Amare’s affidavit will need to establish a claim to privilege for this part of document (c). I will assume for the purpose of considering the waiver argument that document (c) is privileged.
I find that there has been no implied waiver of privilege in relation to the excluded material. The documents were disclosed through inadvertence. Amare has acted reasonably promptly in seeking the return of all privileged documents once it became aware of the disclosure. Apart from using them in this application, the only use so far made of the excluded material is in the 7 February letter. In opposing the removal of its lawyers, GT accepts that it and they will be able to conduct the trial without recourse to any privileged documents. The prejudice which might flow to Amare from the loss of privilege outweighs any forensic advantage which GT might obtain from retaining the excluded material. In my opinion, fairness does not require that any privilege which attaches to the excluded material be waived. In so holding, I bear in mind that legal professional privilege is a substantive right, not merely a rule of evidence.
Should GT’s lawyers be restrained from acting?
Although there is now only a waiver argument in respect of the small amount of excluded material, the fact remains that discovery and inspection have been given of hundreds of potentially privileged documents. The question I have to consider is whether the conduct of GT’s solicitors and counsel been such as to justify the court restraining them from acting. Having carefully considered all the evidence I see quite a difference in the position of GT’s solicitors and counsel.
On the one hand, it is clear that Mr North and Mr McGregor must have had extensive regard to the contents of the folders of documents, which they had specifically requested to be copied and provided to them. For the reasons given earlier, I conclude that they could not have drafted the various letters, or selected the enclosures, without doing so. It seems clear on the evidence before me that counsel, and not the solicitors, were driving GT’s response to the inadvertent disclosure. The court has not heard from them as to precisely what documents they have read or what they can now recall. But, as the persons who would be cross-examining Amare’s witnesses, there must be very real concerns about their capacity to put out of their mind everything they have seen in the folders of privileged documents. Mindful of the exceptional nature of the order, I have nevertheless come to the conclusion that a fair-minded, reasonably-informed member of the public would conclude that those counsel should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice.
In coming to that conclusion, I do not intend to make any comment about the ethical aspects of counsels’ conduct, as I am not privy to all their communications with the Bar Ethics Committee about this matter.
The position is somewhat different in relation to GT’s solicitors, Norton White. As discussed earlier, I am satisfied that they have far more limited knowledge of the contents of the documents than counsel. It seems that the firm, in the form of Mr Dewar, essentially accepted counsel’s drafting of the most significant correspondence. Indeed, much of Mr Dewar’s conduct throughout this matter was heavily influenced by the advice he received from far more experienced practitioners than him. Whilst not suggesting that solicitors can absolve themselves from responsibility simply by relying on counsel, I am not persuaded that the solicitors’ conduct has been such as to justify the exceptional remedy of depriving GT of its choice of solicitors.
In coming to that conclusion, I also have regard to the stage which the proceeding has reached. The proceeding was commenced in October 2005 and Norton White have acted for GT throughout that period. At the last directions hearing, held in December 2006, orders were made for the filing and service of witness statements and court books. It is clear that Norton White have undertaken substantial work in attending to these tasks. In refusing to restrain the solicitors from acting, I bear in mind the cost, inconvenience and impracticality of requiring them to cease to acting at this relatively late stage of the proceeding.
I am also satisfied that Norton White could effectively act as solicitors in the trial without disclosing the contents of any privileged documents to new counsel retained on behalf of GT. The position is less satisfactory in relation to any settlement discussions which might occur prior to trial. In so far as the 7 February documents might disclose possible flaws in Amare’s defence, the solicitors cannot put that knowledge out of their mind in any negotiation. But removing the solicitors would not remove that problem, as it is clear that GT is itself aware of the nature and contents of the 7 February letter. Furthermore, Amare vehemently denies that the 7 February documents actually disclose weaknesses in its case, a position which it would presumably continue to press in any settlement negotiation.
For these reasons, I conclude that an appropriately drafted injunction or undertakings, to prohibit any further use of privileged material by GT or its solicitors, would be the most appropriate remedy in the case of the solicitors.
Conclusion
I will hear from the parties as to the precise form of orders and as to costs. The orders will, inter alia, need to make provision for the return of all privileged documents in the possession of GT and its lawyers and the sealing up of all privileged exhibits.
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