NMFM Property Pty Ltd v Citibank Savings Ltd
[1998] FCA 1207
•23 SEPTEMBER 1998
FEDERAL COURT OF AUSTRALIA
PRACTICE AND PROCEDURE – subpoena – claim of client legal privilege – common interest privilege – waiver – relationship between ss 118, 119 and 122 of Evidence Act 1995 (Cth) and common law principles – limited role of “common interest” under Act.
Evidence Act 1995 (Cth) ss 118, 119, 122
Adelaide Steamship Company Limited v Spalvins (1998) 152 ALR 418, applied
Akins v Abigroup (unreported, NSW Court of Appeal, 1 June 1998), applied
Telstra Corporation Ltd v BT Australia Pty Ltd (unreported, FCA/FC, 24 July 1998), applied
NMFM PROPERTY PTY LTD v CITIBANK SAVINGS LTD
NG 765 of 1994
LINDGREN J
SYDNEY
23 SEPTEMBER 1998
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 765 of 1994
BETWEEN:
NMFM PROPERTY PTY LIMITED (FORMERLY NATIONAL MUTUAL PROPERTY SERVICES (AUSTRALIA) PTY LIMITED)
FIRST APPLICANTNATIONAL MUTUAL ASSETS MANAGEMENT LIMITED
SECOND APPLICANTTHE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED
THIRD APPLICANTAND:
CITIBANK SAVINGS LIMITED
RESPONDENTJUDGE:
LINDGREN J
DATE OF ORDER:
23 SEPTEMBER 1998
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1. Subject to order 2, further consideration of the claim of client legal privilege be stood over to the resumption of the trial on 13 October.
Each party have liberty to restore the matter on 24 hours’ notice during the week commencing Tuesday 6 October.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 765 of 1994
BETWEEN:
NMFM PROPERTY PTY LIMITED (FORMERLY NATIONAL MUTUAL PROPERTY SERVICES (AUSTRALIA) PTY LIMITED)
FIRST APPLICANTNATIONAL MUTUAL ASSETS MANAGEMENT LIMITED
SECOND APPLICANTTHE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED
THIRD APPLICANTAND:
CITIBANK SAVINGS LIMITED
RESPONDENT
JUDGE:
LINDGREN J
DATE:
23 SEPTEMBER 1998
PLACE:
SYDNEY
REASONS FOR JUDGMENT
(ex tempore)
What I am about to say will not be a final ruling on the claims of privilege. Time has not permitted that. I am presently on annual leave and a final ruling would (and will) have to await my return. In addition, as will become clear, I would need to have some further submissions if the general principles which I am about to enunciate do not enable the parties to resolve the privilege claims during my absence.
The issue before the Court is one of compelling production for inspection of documents produced on subpoenas. The subpoenas are addressed to Arthur Robinson & Hedderwicks, the solicitors for the underwriters for the applicants (“the National Mutual Companies”, or, more simply, “National Mutual”), and Molomby & Molomby, the solicitors for National Mutual. What I propose to do is to indicate in 10 sections my approach to the questions which have been raised.
There is no challenge to the validity of the two subpoenas. There is no motion to set them aside. No case is made, for example, that they are oppressive or fishing or an abuse of process. The matters to which I have just referred are often spoken of as arising at Stage 1 in the subpoena process. What I am concerned with here is Stage 2, that is, whether the Court should make the documents produced available for inspection (Stage 3 is concerned with admissibility into evidence). One issue which sometimes arises under Stage 2 is that of apparent relevance, and there is no argument here that the documents do not have apparent relevance as that notion is understood in the present context. However, another issue which sometimes arises in Stage 2, and which is very much alive here, is that of client legal privilege. It is to the existence of client legal privilege and waiver of it that the following comments are addressed.
The question arises as to the applicable principles. I am bound by the line of authority indicated by reference to Adelaide Steamship Company Limited v Spalvins (1998) 152 ALR 418, Akins v Abigroup (unreported, NSW Court of Appeal, 1 June 1998), and Telstra Corporation Ltd v BT Australia Pty Ltd (unreported, FCA/FC, 24 July 1998) (special leave to appeal to the High Court granted on 7 August 1998), to hold that the law directly applicable to this ancillary process (as distinct from an attempt to adduce evidence in the trial) is the common law rather than the terms of Division 1 of Part 10.3 of the Evidence Act 1995 (Cth) (“the Act”), but that the applicable common law principles are modified by reference to the provisions of that Division. Accordingly, the difficult question arises as to precisely what are those modified common law principles. I will return to this question.
I have great difficulty in applying the terms of ss 118 and 119 of the Act to the documents. In her affidavit sworn 17 August 1998, subparagraphs 7(d) and (e), Irene Susan Trethowan, a Senior Associate with Arthur Robinson & Hedderwicks, seeks to make out a claim for client legal privilege. Those two subparagraphs describe the documents as follows:
“(d)communications of a confidential nature passing between this firm and National Mutual or its external solicitors made for the sole purpose of enabling us to provide legal advice to our clients; and
(e)copies of documents created for the sole purpose of use in relation to actual or anticipated litigation or to obtain or provide legal advice, which were provided to us by National Mutual or its external solicitors for the sole purpose of enabling us to provide legal advice to our clients.”
It seems that subparagraph 7(d) is an attempt to invoke s 119 of the Act. I am far from clear as to whether subparagraph 7(e) is an attempt to invoke one or other or both sections. What must be remembered is that I have not read the documents or any of them. I have been asked not to do so and have not done so. All that I have is the very general descriptions of the nature of them in the affidavit, the relationship between National Mutual and the underwriter as deposed to, and my imagination.
Neither subparagraph 7(d) or (e) is easily accommodated to the terms of ss 118 and 119. While I do not suggest that it is necessary for a party claiming client legal privilege to use the precise terms of ss 118 and 119, and, indeed, to do so without more might be subject to criticism, it is necessary to show that the particular documents, or groups of documents, in respect of which the claim is made, fall within the terms of one or both of those sections.
In summary, without at least perusal of the documents, I do not find it possible upon a reading of the affidavit material, notably subparagraphs 7(d) and (e), to know whether the underwriters had client legal privilege in respect of all or any particular documents which their solicitors have produced to the Court in compliance with the subpoena.
Under the Act, only the “client” of a lawyer has client legal privilege; a person having a common interest with that client does not do so. I find it convenient to express this by saying that there is no “cross-over” of privileges. Accordingly, let it be assumed that National Mutual enjoys client legal privilege in respect of some documents produced to the Court by Molomby & Molomby and that there is a common interest relating to this proceeding between National Mutual and the underwriters. Nonetheless, the underwriters do not thereby enjoy that privilege. In the case mentioned, the sections provide for privilege of National Mutual arising out of the relationship between National Mutual and Molomby & Molomby, but that privilege does not cross-over to National Mutual’s underwriters.
Similarly, let it be assumed that the underwriters have client legal privilege in respect of some documents produced to the Court by Arthur Robinson & Hedderwicks and that there is a common interest relating to this proceeding between the underwriters and National Mutual. National Mutual does not thereby enjoy that privilege in those documents in respect of which the underwriters acquired privilege as clients of Arthur Robinson & Hedderwicks.
The only function of “common interest” under the Act is by way of providing an exception to the “waiver” provided for in subsections 122(2) and (4). Common interest is referred to in subsection 122(5)(b). Let it be assumed that National Mutual enjoys client legal privilege in respect of certain documents: disclosure of their contents by it or with its express or implied consent to its underwriters is not a disclosure which activates subsections 122(2) and (4). Similarly, let it be assumed that the underwriters enjoy client legal privilege in respect of documents, the contents of which have been disclosed to National Mutual by them or with their express or implied consent: because of the common interest between those parties that disclosure does not cause the underwriters to lose the privilege.
A “waiver” by National Mutual, while it prevents National Mutual from relying on its own privilege arising out of its relationship with Molomby & Molomby, does not prevent its underwriters from relying upon any client legal privilege which they may have arising out of their relationship with their own solicitors, Arthur Robinson & Hedderwicks. Similarly, a waiver by the underwriters (none is suggested here) has no effect on National Mutual’s own client legal privilege.
The question arises of what constitutes a waiver by National Mutual. This question is to be determined now by reference to the various forms of “consent” spoken of in section 122. The matter was addressed in the Telstra case. I will return to the effect of the terms of section 122 in the context of the present case shortly.
I turn to the question what is to be gained from a study of the pleadings, the affidavit of Ross Alexander McDonald, senior solicitor for National Mutual, sworn 12 June 1997, and the opening address of Mr Kelly SC for National Mutual. In short, it does seem to me that National Mutual has put in issue the question whether it settled with the Citibank investors in good faith. Since this is not anything more than an indication of my present thinking, so that the parties may be able to apply what I am saying in an attempt to resolve to some extent, at least, the issues between them, I will not refer to the pleadings, affidavit and opening in detail.
However, it is important to note that in paragraphs 38 and 95 of the fourth further amended statement of claim, National Mutual pleads expressly that the Jones investors and the Kelly investors, respectively, made claims on National Mutual which were “bona fide settled” by National Mutual. This is not admitted by Citibank in its defence. It is true that in its defence, Citibank, in addition to not admitting, goes further by pleading that National Mutual’s purpose in making the offers and payments of compensation “included” the “purpose” of dissuading the Australian Securities Commission from proceeding with further investigative and other action against National Mutual in relation to the conduct of its investment advice business. This is as it were a “particular” of the non-admission. I think, however, that Citibank is correct in its submission that National Mutual has squarely raised the issue, as it had to do in its claim for contribution under s 23B(4) of the Wrongs Act 1958 (Vic), whether the settlements were made bona fide.
Mr McDonald’s affidavit is directed to showing the course of negotiation which led to the settlement. It is not in dispute that National Mutual paid out the investors’ claims in full, subject only to checking monetary amounts and checking that particular alleged heads of loss were compensable ones. The point is that there was not a negotiation with the investors by reference to prospects of success or loss.
I do not, of course, decide that if National Mutual had the purpose identified by Citibank, this would necessarily signify that its settlements with the investors could not have been bona fide - this issue will be a matter for decision later.
Consistently with the judgment of the majority (Branson and Lehane JJ) in the Telstra case, it is appropriate to regard National Mutual as having, by raising the issues to which I referred, given an implied consent for the purpose of subsection 122(1) of the Act. A narrower construction of the word “consent” had been adopted by Sackville J at first instance.
It is, perhaps, not a straightforward matter to make the express terms of the various sections in Division 1 of Part 10.3 apply to ancillary proceedings. For example, one might reasonably think that in order to make subsection 122(1) work in the present context, one would substitute the words “compelling of production for inspection” for the words “adducing of evidence given”, so that the reconstructed subsection 122(1) would read:
“(1) This Division does not prevent the compelling of production for inspection with the consent of the client … concerned.”
It may seem artificial to say that National Mutual is consenting to the compelling of production for inspection of documents produced by Molomby & Molomby in response to the subpoena addressed to that firm. But, attempting to make the result of the law reformer work in a fair way, the majority in the Telstra case was able to view the antecedent “putting in issue” as a “consent”. Following their Honours, I take the view that, by putting in issue the bona fide nature of the settlements, National Mutual has consented to my compelling Molomby & Molomby to produce for inspection the documents to which the consent applies. As I hope I indicated earlier, I find it impossible at present to identify those documents.
I hope it is clear from what I have said that the waiver by National Mutual is not a waiver by the underwriters and that any disclosure by National Mutual to its underwriters is excluded from the operation of subsections 122(2) and (4) by paragraph 122(5)(b).
Citibank submits that if I should hold that the underwriters retain whatever client legal privilege they may have had, notwithstanding a waiver by National Mutual, nonetheless they should in some way specify with greater particularity the documents in question so as to enable Citibank to find their counterparts held by National Mutual or by its solicitors. I do not agree: I know of no basis for compelling the underwriters or their solicitors to diminish the benefit that the underwriters have from their privilege by assisting Citibank in that way.
I have tried to make clear more than once that what is before me is a claim of client legal privilege, that is, a claim that on that ground access should not be granted to Citibank; and that I am not deciding finally that claim today. In the time available, I have attempted to state the governing principles in the hope that during the next 2 or 3 weeks before the case resumes on 13 October, the parties may be able to resolve, at least to some extent, the issues between them as to privilege and waiver.
I propose to grant leave to the parties to restore the matter on 24 hours’ notice during the week preceding 13 October, but otherwise to stand over the claim for privilege to the first day of the resumed hearing.
In the event that it should emerge that one or other party had in the meanwhile, and in the light of the principles stated, not attempted to apply those principles in a reasonable manner, the case could be one in which there should be a special order as to costs. I do appreciate, however, that the principles which I have stated are necessarily of a general nature and that there may remain some room for argument as to their application.
The formal orders then are that:
Subject to order 2, further consideration of the claim of client legal privilege be stood over to the resumption of the trial on 13 October;
Each party have liberty to restore the matter on 24 hours’ notice during the week commencing Tuesday 6 October.
I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren
Associate:
Dated: 28 September 1998
Counsel for the Applicant: Mr JT Gleeson Solicitors for the Applicant: Cutler Hughes and Harris Counsel for the Respondent: Mr SD Epstein with Ms RP Rana Solicitors for the Respondent: Holmes and Bevan Counsel for the Underwriters: Mr DEJ Ryan Solicitors for the Underwriters: Arthur Robinson and Hedderwicks Date of Hearing: 23 September 1998 Date of Judgment: 23 September 1998
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