Kaza Investments Pty Ltd v Stirnemann - [2008] SADC 16

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
KAZA INVESTMENTS PTY LTD v STIRNEMANN
[2008] SADC 16
Ruling of His Honour Judge Chivell
25 February 2008
EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INJUNCTIONS FOR PARTICULAR PURPOSES - TO RESTRAIN BREACH OF CONFIDENCE
PROCEDURE - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - PRODUCTION AND INSPECTION - GROUNDS FOR RESISTING PRODUCTION - LEGAL PROFESSIONAL PRIVILEGE - WAIVER OF PRIVILEGE
Trevorrow v State of South Australia (No 4) (2006) 94 SASR 64, applied.
Balabel v Air-India [1988] 2 All ER 246; Webster v James Chapman & Co [1989] 3 All ER 939; Kabwand Pty Ltd v National Australia Bank Ltd (1987) 16 FCR 85, considered.

KAZA INVESTMENTS PTY LTD v STIRNEMANN
[2008] SADC 16

In this matter the defendant seeks further discovery and production of certain documents which have been marked exhibit VD‑P1. This application was made on the morning that the trial was scheduled to commence, Tuesday, 19 February 2008. The commencement of the trial has been delayed because the outcome of the application will have far‑reaching consequences in terms of the way the trial will proceed.
The plaintiff’s claim is based upon a written contract which the plaintiff alleges was entered into on or about 9 December 2002, by which the defendant agreed to sell to the plaintiff a certain house property at Christies Beach (Statement of Claim, paragraph 2).
Discovery and inspection of documents between the parties had taken place in the usual way prior to the matter being set down for trial.
The defendant’s solicitor, Mr John Royle, deposed in an affidavit sworn on 6 February 2008 that on 24 or 25 January 2008 he received a book of documents from the plaintiff’s solicitor, Ms Loretta Polson. In an accompanying letter, Ms Polson indicated that the documents would be tendered at the trial, and invited Mr Royle to inspect the contents of the book and make comments.
Included within the book of documents was a letter from the plaintiff’s then solicitor, Mr Andrew Sim of R J Cole & Partners, which firm has been joined as a third party in this action by the defendant, dated 10 January 2003. Mr Royle deposed that he had an imperfect recollection of the letter. He acknowledged that he did not copy the letter, and would not do so without the permission of the plaintiff’s solicitor. He recalled that it contained a statement to the effect that the plaintiff had not, at that stage, signed the contract. Clearly, such a statement goes to the heart of the plaintiff’s assertion that a written contract was entered into on or about 9 December of the previous year.
I have already given the defendant leave to amend his Defence to raise the issue, thereby withdrawing his admission that the contract was entered into that day. The admission by the defendant in his Defence was based upon information which could only have been known to the plaintiff.
At the request of Ms Polson, Mr Royle returned the book of documents to her, and in due course, Ms Polson claimed legal professional privilege in relation to that letter, and the two other documents which form the exhibit VD‑P1.
The defendant seeks formal discovery of those documents, and production of them, so that they may be used at the trial of the action.
Ms Polson swore an affidavit describing the circumstances in which the documents were disclosed to Mr Royle. She said that she initially compiled the book of documents on the basis of subject matter and date, so that she could gain an understanding of the chronology of the litigation. She then provided Mr Royle with a copy of the book without giving further consideration to whether or not any of the documents might be the subject of legal professional privilege. It was only when she reviewed the file that she realised that she had included the privileged documents.
After having heard argument from counsel, on 21 February 2008 I upheld the submission of Mr Magarey, counsel for the plaintiff, that the documents were properly the subject of a claim for legal professional privilege applying the principles outlined by the English Court of Appeal in Balabel v Air-India [1988] 2 All ER 246 at 254. That decision makes it clear that the concept of legal professional privilege has long since been extended to non‑litigious business being conducted in the course of a solicitor’s practice. I refer to the ex tempore reasons I gave on that day, commencing at p61 of the transcript.
The parties then argued whether privilege had been waived.
I had at that time not been referred to the judgment of the Full Court of the Supreme Court of South Australia in Trevorrow v State of South Australia (No 4) (2006) 94 SASR 64.
On 21 February 2008, I upheld the plaintiff’s claim that the documents in dispute were the subject of legal professional privilege. The remaining question was whether the documents remained the subject of a claim to legal professional privilege. I accepted that there was an inadvertent disclosure by Ms Polson to Mr Royle in the book of documents.
In Trevorrow’s case, the court approached this task not on the question of waiver, but on the question whether the documents retained a confidential nature. Debelle J said at [79]:
Where a document is privileged but that document or a copy has come into the possession of a party to litigation, the court will in an appropriate case prevent the use of the document, not because it is privileged, but because it is a confidential document: Istil Group Inc v Zahoor [2003] 2 All ER 252 at 274. A document the subject of legal professional privilege is a form of confidential document. A privileged communication which has come into the possession of a third party can no longer be subject to privilege. The privilege by then has been lost: Guinness Peat Properties Ltd v Fitzroy Robinson Partnership [1987] 1 WLR 1027 at 1044 per Slade LJ. It is, therefore, more appropriate that the question whether a privileged document which has been disclosed can be used should be determined according to the principles of equity relating to confidentiality of documents: Newbold. Given that the plaintiff has possession of copies of 11 documents for which legal professional privilege is claimed, it is necessary therefore to determine this appeal by reference to the equitable principles protecting the use of confidential documents or confidential information.
Later, at [81], his Honour said:
Inadvertent disclosure of privileged documents is to be determined by the application of the principles established in such cases as Goddard v Nationwide Building Society [1987] 1 QB 670; English & American Insurance Co Ltd v Herbert Smith & Co [1988] FSR 232; Guinness Peat; Webster v James Chapman & Co [1989] 3 All ER 939 and Istil Group. The party seeking to restrain the use of such documents will be subject to the principles relating to injunctive relief, summarised in these terms in Istil Group (at [74]):
The position on the authorities is this. First, it is clear that the jurisdiction to restrain the use of privileged documents is based on the equitable jurisdiction to restrain breach of confidence. The citation of the cases on the duty of confidentiality of employees makes it plain that what the Court of Appeal was doing in Lord Ashburton v Pape was applying the law of confidentiality in order to prevent disclosure of documents which would otherwise have been privileged, and were and remained confidential. Second, after a privileged document has been seen by the opposing party, the court may intervene by way of injunction in exercise of the equitable jurisdiction if the circumstances warrant such intervention on equitable grounds. Third, if the party in whose hands the document has come (or his solicitor) either (a) has procured inspection of the document by fraud or (b) on inspection realises that he has been permitted to see the document only be reason of an obvious mistake, the court has the power to intervene by the grant of an injunction in exercise of the equitable jurisdiction. Fourth, in such cases the court should ordinarily intervene, unless the case is one where the injunction can properly be refused on the general principles affecting the ground of a discretionary remedy, eg on the ground of the delay.
In Trevorrow, Doyle CJ also approached the issue on the basis of equitable protection of confidentiality. At [14], his Honour said:
However, the claim of legal professional privilege remains in the background. If the documents are subject to a valid claim of legal professional privilege, despite their disclosure to the plaintiff’s solicitor, and if the disclosure of the documents was by mistake, there are decisions that suggest that ordinarily a court should prevent the plaintiff from using those documents: see Istil Group Inc v Zahoor [2003] 2 All ER 252 at [74]. That is because usually (although not always) a document subject to a valid claim of legal professional privilege will be of a confidential nature as between the provider of the advice it contains and the recipient of that advice, and because ordinarily (although not always) the confidential nature of that document will be protected by the court, exercising the court’s equitable jurisdiction to restrain breach of confidence: Istil (at [74]).
White J wrote to similar effect at [173].
In considering the question from the point of view of protection of confidential information in the exercise of the equitable jurisdiction of the court, the decision in Webster v James Chapman & Co [1989] 3 All ER 939 at 946 is instructive. In that case, Scott J was considering whether the court should prohibit the use of an expert’s report, which was inadvertently disclosed to the other side in the course of professional injury litigation. The report was inconsistent with a later report written by the same expert. His Honour said:
The question then will be what protection the court should provide given that the document which will have come into the possession of the other side will be confidential and that use of it will be unauthorised. If the document was obviously confidential and had been obtained by a trick or by fraud, it is not difficult to see that the balance would be struck in favour of the party entitled to the confidential document. If the document had come into the possession of the other side not through trick or fraud but due to a mistake or carelessness on the part of the party entitled to the document or by his advisers, the balance will be very different from the balance in a fraud case.
After pointing out that the exercise of the equitable jurisdiction in this regard is discretionary, and outlining the obvious relevance of the document to the issues to be ventilated in the litigation, his Honour said:
The expert will be amenable to cross‑examination. He is likely to be asked his opinion on causation and contributory negligence. He may say that he has previously expressed an opinion on those matters. He may deny it. Whichever way it goes, it seems to me the conduct of the defendant’s case would be seriously embarrassed if the defendant and its legal advisers were not able to make use of their knowledge of the contents of the original report, knowledge that has come into their possession through no fault of theirs.
I can see no injustice to Mr Webster if both reports are in evidence; if there is an explanation which the expert can give of the difference between the reports, so be it, he can give it. If there is no explanation he can give, it does not seem to me that to allow that to become apparent would represent injustice.
In Kabwand Pty Ltd v National Australia Bank Ltd (1987) 16 FCR 85 at 87, Pincus J refused to order the production or inspection of documents which had been produced by mistake in the course of litigation on the basis that the documents should be protected by the court, even though the privilege had been “waived” to the extent that the other side had acquired knowledge of them. If the other side had acquired full knowledge of the document, his Honour held that protecting the documents would have been futile, but as their knowledge was only partial, the protection was given.
In this case, the defendant’s solicitor received, and was able to read, the full text of the documents claimed to be privileged.
In my opinion, the situation before me is very similar to that before Scott J in Webster’s case. The question whether a contract was entered into between the plaintiff and the defendant, and if so, on what date, is central to the litigation. The letter sought to be protected contains a passage written by the plaintiff’s then solicitor, which is, on its face, inconsistent with the plaintiff’s pleading that the contract was entered into on or about 9 December 2002.
The defendant having acquired knowledge of the existence of that letter by virtue of its inadvertent production, will be put at a considerable disadvantage if he is prevented from using it.
There may be an explanation for the inconsistency, and if so, that should be before the court. If there is no satisfactory explanation for the inconsistency, that would be a matter of concern.
It is for the plaintiff to establish that this is a proper case for the court to grant it equitable relief.
While giving great weight to the need to protect confidential documents, on the facts of this case, I decline to exercise the equitable jurisdiction of the court to prevent the use of the documents comprising exhibit VD‑P1 for the purpose of this litigation.
There will be an order that the plaintiff produce those documents to the defendant and allow inspection and, if sought, copying thereof for the purposes of the action.
The question of costs of and incidental to this application are reserved.