Lift Shop Pty Ltd v Next Level Elevators Pty Ltd

[2020] FCCA 3063

FEDERAL CIRCUIT COURT OF AUSTRALIA

LIFT SHOP PTY LTD v NEXT LEVEL ELEVATORS PTY LTD & ORS [2020] FCCA 3063

Catchwords:
COPYRIGHT – Discovery – Privilege – legal professional privilege – waiver  – applicant contends respondents waived privilege by paragraphs of solicitor’s letter – whether assertions inconsistent with privilege – privilege not waived.

Cases cited:

Commissioner of Taxation v Rio Tinto Limited [2006] FCAFC 86; (2006) 151 FCR 341

Mann v Carnell (1999) 201 CLR 1

Applicant: LIFT SHOP PTY LTD

First Respondent: NEXT LEVEL ELEVATORS PTY LTD

Second Respondent: COMPACT LIFTS PTY LTD

Third Respondent: NEXT LEVEL COMPACT LIFTS PTY LTD

Fourth Respondent: DANIEL MAWSON

Fifth Respondent: DAMIEN BOYLE

Sixth Respondent: EDWARD HUME

File Number: SYG 1318 of 2020

Judgment of: Judge Baird

Hearing date: 29 October 2020

Date of Last Submission: 29 October 2020

Delivered at: Sydney

Delivered on: 29 October 2020

REPRESENTATION

Counsel for the Applicant: Mr J Hennessy SC

Solicitors for the Applicant: Gilbert & Tobin

Counsel for the Respondents: Mr W Rothnie

Solicitors for the Respondent: Sinisgalli Foster

ORDERS

1. UPHOLDS the First to Fifth Respondents’ claims to legal professional privilege in the documents listed in Part 3, items 1, 2, and 3 of their list of documents dated 22 October 2020.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 1318 of 2020

LIFT SHOP PTY LTD

Applicant

And

NEXT LEVEL ELEVATORS PTY LTD

First Respondent

COMPACT LITS PTY LTD

Second Respondent

NEXT LEVEL COMPACT LIFTS PTY LTD

Third Respondent

DANIEL MAWSON

Fourth Respondent

DAMIEN BOYLE

Fifth Respondent

EDWARD HUME

Sixth Respondent

REASONS FOR JUDGMENT

(ex tempore, revised from transcript)

1. In the context of a disputed discovery application, the issue has arisen whether the first to fifth respondents (1-5 Respondents) have waived legal professional privilege by letter dated 28 May 2020 from their legal representatives, Sinisgalli Foster (SF Letter), specifically at paragraphs 2, 7, and 17.

2. The SF Letter was written in response to letter dated 27 May 2020 from the applicant’s legal representatives, Gilbert + Tobin (G+T Letter).  Certain terms and phrases in the SF Letter are taken from the G+T Letter, and should be understood in that context.

3. The applicant, Lift Shop Pty Ltd, by its Senior Counsel, Mr Hennessy SC, submits that the 1‑5 Respondents have waived legal professional privilege by the SF Letter, and that discovery, without reliance on privilege, should be made of documents falling within certain categories.  He relies in particular on the decision of the Full Court of the Federal Court of Australia in Commissioner of Taxation v Rio Tinto Limited [2006] FCAFC 86; (2006) 151 FCR 341, and draws my attention to [43], [72] and [73], with reference also to [71].

4. Mr Rothnie, counsel for the 1-5 Respondents (and the sixth respondent), submits that by the identified paragraphs of the SF Letter his clients have not waived privilege, and draws my attention similarly to Rio Tinto.

Background

1. Given the context in which this discovery dispute arises, it is unnecessary to set out in great detail the matter’s history or the underlying claims.  In sum, Lift Shop alleges that the 1-5 Respondents (being three corporate respondents - referred by Lift Shop together as the Next Level Entities - and two directors), and the sixth respondent (an employee of the first respondent, and ex-employee of Lift Shop), have infringed copyright claimed by Lift Shop in its quotation document, or documents, by what are described as the Next Level Quotation Documentation (and also as the Next Level Quotation(s)).  Lift Shop also alleges breach of confidential information, and the respondents have cross-claimed, asserting misleading and deceptive conduct by certain alleged safety representations. 

2. The parties have exchanged categories for discovery, and, in an endeavour to progress discovery, have made discovery of some categories of documents.  A number of categories of discovery sought remain in contention, and are the subject of argument before me today, further to applications in a case filed by the parties.

Relevant Discovery Categories

1. In respect of the subject alleged waiver of claim of legal professional privilege, the categories of documents ordered by the Court on 9 October 2020 for discovery from the 1‑5 Respondents (ordered further to Lift Shop’s application in a case dated 22 September 2020) included the following Categories:

   Category 6

   All documents recording, or referring to, the “investigation” and/or “findings” referred to in paragraph 7 of the letter from Sinisgalli Foster Legal to Gilbert + Tobin dated 28 May 2020.

   Category 7

   All documents recording, or referring to, the allegations of copyright infringement by Lift Shop concerning the Next Level Quotation Documentation and the decision by the Respondents to cease using items B1 and B2 in the Applicant’s Confidential Bundle, and/or to adopt the form in item B3 in the Applicant’s Confidential Bundle, from March 2020 to date.

   Category 8

All documents recording, or referring to, any consideration, assessment or comparison by the Respondents of similarities between Lift Shop Template Copyright Works and Next Level Quotation Documentation, including the basis of the statement that the similarities were “less than 40%” in paragraph 2 of the letter from Sinisgalli Foster Legal to Gilbert + Tobin dated 28 May 2020, from January 2018 to date.

1. Further to that order for discovery the 1-5 Respondents provided a List of documents dated 22 October 2020, and in Part 3 of that List claimed that documents produced in answer to the Categories are privileged from production on the itemised grounds there set out.  Relevant to the argument before me are items 1, 2, and 3.  Those items repeat as item 1, Category 6, as item 2, Category 7, and as item 3, Category 8.

2. In the items in response to each of the three Categories, by reference to the Category, the dates of the documents are identified as “various”.  The grounds of privilege are set out in respect of item 1, Category 6, and repeated by the statement “see above” for the other two Categories.  The grounds of privilege claimed are as follows: 

   State grounds of privilege

   All such documents are either:

   (a)professional communications of a confidential nature between the Respondents and their solicitors and documents produced for the dominant purpose of submission to the solicitors for the Respondents for advice in connection with the proceedings then commenced or anticipated;

   b)confidential communications after this proceeding was commenced or anticipated for the purpose of obtaining and furnishing to the solicitors for the Respondents evidence and information as to the evidence to be obtained and otherwise for the use of the solicitors for the Respondents; or

   c)professional communications of a confidential nature between the solicitors and counsel for the Respondents, including, instructions to counsel, counsel's advice and similar papers, relating to the subject matter of this action

3. Whether or not the Categories are the same as, encompass or reference statements made in the SF Letter (and I note that they do not use identical wording), it is the particular paragraphs of the SF Letter which form the basis of the assertion by Lift Shop that privilege has been waived, and on which the Lift Shop relies for its application for production and disclosure of the documents claimed privileged. 

4. The question of waiver of privilege arises by what is stated in each of paragraphs 2, 7 and 17 of Sinisgalli Foster’s Letter of 28 May 2020.  This letter was sent before commencement of the proceeding.  The SF Letter comprises numbered paragraphs.  The relevant paragraphs of the SF Letter are (defined and emboldened terms in the original):

   1.We refer to your letter dated 27 May 2020.

   2.In respect of your claim that “Next Level distributed quotation documentation containing substantially identical text copied from Lift Shop quotation documentation”, we note that while certain portions of the terms and conditions distributed by Next Level (the Relevant Terms) appear to be similar to certain portions of the terms and conditions distributed by Lift Shop (the Claimed Terms), the quotation distributed by Next Level (the Next Level Quotation) is not ‘substantially identical’ to the quotation distributed by Lift Shop (Lift Shop Quotation). Any similarities between the respective Quotations begin and end with similarities between the respective Terms (each of which comprise less than 40% of their respective Quotations).

   (I interpose here that the reference to 40% directs attention that this paragraph 2 finds some reflection in Order 8, and corresponding Part 3, item 3, of the List to which I have already referred).

   7.In respect of your claim that “the full extent of copyright infringements by the Next Level Entities, and their employees, is currently not known to Lift Shop, but there is every reason to expect it to be extensive”, we note that you have in fact provided no actual reasons for such a expectation/suspicion. As a result of the investigation referred to in an email from our office to Mr Katz on 5 May 2020, Next Level has deduced that it only received seventeen (17) executed contracts which contain the Relevant Terms. Of those contracts:

   a)six (6) related to a product (the Ascent Residential Elevator) for which Lift Shop did not offer any competitor/alternative;

   b)seven (7) were executed by customers who were initially provided with a quotation which did not include the Relevant Terms; and

   c)two (2) were executed by returning customers who later executed contracts which did not include the Relevant Terms.

   These findings of the investigation lead to two conclusions:

   a)That there were only two (2) instances of customers proceeding with a purchase ‘from start to finish’ on the basis of a contract which included the Relevant Terms (with an estimated combined profit of just $4,000 to $8,000) in relation to products for which Lift Shop offered an competitor/alternative; and

   b)That customers do not purchase Next Level products (or any similar products) on the basis of standard form terms & conditions. Customers base their purchasing decisions on a host of other factors (including price, product specification, visibility, customer service and convenience), however not on the ‘fine print’. Accordingly, Lift Shop has not suffered any loss (and Next Level has not gained any profit) as either a direct or indirect result of Next Level using the Relevant Terms.

   (I interpose here that paragraph 7 corresponds with Category 6, and Part 3, item 1, of the List.)

   17.Whilst in no way admitting that the Lift Shop Quotation or the Claimed Terms consist of copyrighted or copyrightable material, by removing the Relevant Terms from the Next Level Quotation and by refraining from issuing any further quotations which include the Relevant Terms, our clients have given implied undertakings with substantially the same effect as ‘required undertaking 1’ set out in your letter.

   (Paragraph 17 corresponds, it is said before me, to Category 7, and Part 3, item 2, of the List.)

5. Each of the phrases set out in quotes in the above referenced paragraphs [2] and [7] are directly taken from the G+T Letter.  The G+T Letter commences referring to recent correspondence and identifying the parties.  Under the subheading “Identified conduct” the G+T Letter states (text referenced in the SF Letter is indicated by underlining; definitions in the original):

   Based on its investigations, Lift Shop is aware of a number of instances in which Lift Shop’s proprietary information, including Lift Shop quotation documentation has been used without its authority. While Lift Shop’s investigation into the scope and extent of the suspected misuse is ongoing, Lift Shop is aware of the following:

   (a)from at least March 2020, Next Level distributed quotation documentation containing substantially identical text copied from Lift Shop quotation documentation to customers and potential customers of Next Level (the First Example of Copying);

   (b)Next Level has admitted that it has entered into a number of agreements with customers on the basis of quotation documentation with identical text used in Lift Shop quotation documentation but has refused to withdraw such quotes from the market (email from W Kiernan to L Katz on 5 May 2020 at 4:46pm);

   …

   (d)from at least April 2020, after being contacted by Mr Katz, Next Level distributed to customers and potential customers of Next Level at least one further version of the quotation documentation which contains an express reference to Lift Shop drawings and adopts a similar format and layout to Lift Shop quotation documentation (the Second Example of Copying); and …

6. Under the subheading “Copyright infringement”, after setting out statements as to authorship, ownership of copyright, and references to ss.32, 31 and 10 of the Copyright Act 1968 (Cth), and thence to s.36(1) of the Copyright Act, the G+T Letter continues:

   Therefore any reproduction or communication to the public of the whole or a substantial part of the Lift Shop Copyright Works by any of the Next Level Entities to date will have infringed copyright in the Lift Shop Copyright Works …

   The last paragraph under the above subheading states (text referenced in the SF Letter is indicated by underlining):

   The full extent of copyright infringements by the Next Level Entities, and their employees, is currently not known to Lift Shop, but there is every reason to expect it to be extensive given that the infringements were in relation to the core quotation documentation used by these businesses.

7. The G+T Letter continues with other allegations of breach of contract, tortious inducement of breach of contract claims, and breach of confidence claims, thence to misleading or deceptive conduct and passing off.  Under the heading “Required action” certain demands are made, the first of which, required undertaking 1, is as follows:

   1To immediately and permanently cease to use any Lift Shop Copyright Work and Lift Shop confidential information in their possession, custody or control, including without limitation information used in the preparation of any quotation documentation.

8. By paragraph 2, certain details are required to be verified by affidavit, including:

   (c)a copy of any quotation documents issued by the Next Level Entities to any customers or potential customers, containing text copied from Lift Shop quotation documentation including the First Example of Copying and the Second Example of Copying; …

Relevant principles

1. As I have said, both counsel have drawn my attention to Rio Tinto.  The facts of that decision need not be recited, save as they arise in the paragraphs of the judgment of the Court to which I now refer (citations omitted).

2. At [43], their Honours said as follows: 

   [43]The common law of legal professional privilege governs pre-trial procedures: see Esso Australia Resources Ltd v Commissioner of Taxation.  At common law, a person who would otherwise be entitled to the benefit of the privilege may become disentitled to rely on it by some act of “waiver”, either express or implied.  “Issue waiver”, the subject of this case, is a form of implied waiver.  In [Mann v Carnell] at [29],  a majority of the High Court stated the basic principle of implied waiver, as follows:

   Waiver may be express or implied.  Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect … What brings about the [implied] 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.

   As the majority also said, at [29], where such inconsistency arises, it does not matter that the privilege holder did not subjectively intend to lose the benefit of the privilege.

3. It is apparent from Rio Tinto at [43] that the common law of legal professional privilege governs pre-trial procedures, and, secondly, that where such an inconsistency arises, as is described in that paragraph, it does not matter that the privilege holder did not subjectively intend to lose the benefit of the privilege.

4. In the present case the conduct giving rise to the alleged inconsistency is that referred to or stated in each of [2], [7] and [17] of the SF Letter, considered as separate categories, but also, as I apprehend Mr Hennessy SC to say, in the case of [7], by the references in [2].

5. At [45] of Rio Tinto, the Court said:

   [45]Where, as here, one party alleges that another has impliedly waived legal professional privilege, a court is bound to analyse the acts or omissions of the privilege holder [I interpose, in the present case, the 1-5 Respondents] that are said to be inconsistent with the maintenance of the privilege.  In concluding that the Commissioner had waived the privilege in the eight contested documents, the docket judge in fact applied the “inconsistency” principle of Mann, as he was obliged to do: see Rio Tinto (2) at [20]. Plainly enough, the inquiry that it mandates focuses on the facts of the particular case. It follows that other cases in which implied waiver has been considered provide limited guidance unless they arise out of similar facts.

6. I am also guided by the Court’s discussion in Rio Tinto from [46] through to [50], and the Court’s acceptance as correct the discussion of Thomason v Campbelltown Municipal Council (1939) 39 SR (NSW) 347 by his Honour McLelland J in United States Surgical Corporation v Hospital Products International Pty Limited (unreported, Supreme Court, New South Wales, McLelland J, 13 October 1981).

7. As the Court in Rio Tinto observed at [52]:

   [52]These authorities show that, where issue or implied waiver is made out, the privilege holder has expressly or impliedly made an assertion about the contents of an otherwise privileged communication for the purpose of mounting a case or substantiating a defence.  Where the privilege holder has put the contents of the otherwise privileged communication in issue, such an act can be regarded as inconsistent with the confidentiality that would otherwise pertain to the communication.   

8. A mere reference to legal advice will not amount to disclosure (see Rio Tinto at [53]). Throughout their reasons the Court emphasised that the outcome depends on the particular circumstances (see, for example, Rio Tinto at [58]). See also Rio Tinto at [61]:

   [61]Both before and after Mann, the governing principle required a fact-based inquiry as to whether, in effect, the privilege holder had directly or indirectly put the contents of an otherwise privileged communication in issue in litigation, either in making a claim or by way of defence.  In DSE at [58], Allsop J put the matter somewhat more descriptively, saying waiver arises when

   the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication. (emphasis in the original).  

9. That the relevant question is whether the privilege holder has directly, or indirectly, put the contents of the otherwise privileged communications in issue in the litigation, either in making a claim or by way of defence, is further emphasised by the Court at [65], and at [68] where their Honours stated:

   … The question is whether, by his particulars, the Commissioner made an assertion as part of his case that puts the contents of the privileged scheduled documents in issue, or necessarily lays them open to scrutiny, with the consequence that an inconsistency arises between the making of the assertion and the maintenance of the privilege.  To answer this, the relevant assertions must be considered in their proper context. 

1. The text contended by Rio Tinto to give rise to the waiver (and so put the contents of otherwise privileged documents in issue) was the Commissioner’s response to Rio Tinto’s request for further particularisation of “the facts, circumstances and matters taken into account by the decision maker in exercising the [Commissioner’s] discretion …” that dividend payments made to Rio arose out of dividend stripping.  The Commissioner relevantly replied that:

   The facts, circumstances and matters taken into account by the decision-maker in exercising the respondent’s discretion are, to the best of his recollection, those evidenced by scheduled documents (emphasis added).

   The Court’s consideration and conclusions are set out in Rio Tinto at [71], [72], and [73]. That the Commissioner disclosed that in reaching his state of satisfaction and exercising his discretions he took into account the matters evidenced by the scheduled documents, and did not merely say that the privileged documents were relevant to reaching that state of satisfaction or exercising his discretions was determinative in the Court’s conclusion that privilege was waived.

Consideration

Paragraph 2

1. Guided by the above principles and their explication in Rio Tinto, it is appropriate I now turn to paragraph 2 of the SF Letter.  I do not consider that the statement in [2] put the contents of otherwise privileged documents in issue, or necessarily lays them open to scrutiny, with the consequence that any inconsistency arises between the making of the assertion and the maintenance of the privilege.

2. What [2] says, on its face, by reference to a claim made in the G+T Letter (that the Next Level quotation documentation contains substantially identical text copied from the Lift Shop quotation document), is that the 1‑5 Respondents’ solicitor has identified that certain portions of what he refers to as “Relevant Terms” in the Next Level Quotation appear to be similar to certain portions of the Lift Shop “Claimed Terms”, the Next Level Quotation is not (in the words of the G+T Letter) ‘substantially identical’, and that any similarities between the respective Quotations is limited to similarities between the respective Terms (that is, the Relevant Terms and the Claimed Terms), and those Terms comprise less than 40% of each party’s quotation.  That statement does not disclose either a reference to legal advice, or the content of any legal advice.

3. That “each of which [Terms] comprise less than 40% of their respective Quotations” is an assertion made by the solicitor on looking at each of the identified documents, whether or not Lift Shop agrees with the percentage.

4. I do not accept Mr Hennessy’s submission that by this paragraph, the 1‑5 Respondents put the contents of the documents in Part 3, item 3 of the List in issue, or lays them open to scrutiny, with the consequence that an inconsistency arises between the making of any assertion in the paragraph and the maintenance of the claim to privilege (per Rio Tinto at [68]).

5. It follows that I reject that any claim for privilege has been waived by [2] of the SF Letter.

Paragraph 17

1. I turn next to [17] of the SF Letter.  There is reference in [17] to terms that have been defined in [2] of the SF Letter.  The statement in [17] is that the 1-5 Respondents have given implied undertakings substantially the same effect as the required undertaking 1 in the G+T Letter (which I have set out above, at [14]).  

2. The non-admission in [17], and the steps of removing “Relevant Terms” I find does not disclose the contents of any document over which legal professional privilege is claimed (the Next Level Quotation – which includes the defined “Relevant Terms” - is not claimed privileged), and does not make any assertion that has the consequence set out in Rio Tinto at [68].

3. I do not consider that there is any reference, expressly or impliedly, in [17] to legal advice, nor, pertinently, that the content of any legal advice/ document is put in issue or laid open to scrutiny, and so waived privilege.

4. It follows that I reject Lift Shop’s contention that any claim for privilege of the documents comprised in Part 3, item 2 of the List has been waived by [17] of the SF Letter.

Paragraph 7

1. I next turn to [7] of the SF Letter.  Both counsel have assured me today that I do not need to refer to the email of 5 May 2020 referred to within [7], and I have not sighted any such document.

2. The reference to “Relevant Terms” in [7] refers back to a term defined in [2]. As I have indicated above, I understand the term “Relevant Terms” to mean the terms and conditions set out in the Next Level Quotation(s) distributed by Next Level.  Whilst there is reference to “the investigation” in [7], it is not apparent to me that the reference thereby discloses the content of any legal advice (if any), or other document or material that would otherwise be subject of the claim for privilege.

3. Mr Hennessy SC draws my specific attention to the phrase part way through [7] -“These findings of the investigation lead to two conclusions.”  I read “findings” to be the matters set out in (a), (b) and (c) preceding the phrase, and the two conclusions following the phrase, which read together address the 17 identified executed contracts referred to in the paragraph (see above at [11]). 

4. Before me, the proceeding has been bifurcated, with the consequence that the present discovery is directed to issues of liability.  Guided by their Honours’ consideration in Rio Tinto, particularly at [52], at this stage of the proceeding, and given the matters that are in issue before me, I am not persuaded that there is a waiver of privilege as contended by Lift Shop.

5. I reach this conclusion in relation to [7] on balance, noting that the loss claimed appears to be claimed to arise by use of the “Relevant Terms”, however, I do not understand that the discovery sought by Category 6 is the production of the 17 executed contracts, and the issue of waiver of privilege is not directed to disclosure of those contracts. 

Conclusion

1. I am not persuaded that privilege has been waived in this proceeding by the identified paragraphs of the SF Letter.  It follows that I uphold the claim for privilege in those documents described in Part 3, items 1, 2 and 3 of the List.

I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of Judge Baird

Associate: 

Date: 1 December 2020