P & V Industries Pty Ltd v Porto & Ors (No 3)
[2007] VSC 113
•2 May 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 6515 of 2000
| P & V INDUSTRIES PTY LTD | Plaintiff |
| v | |
| ANTHONY PORTO & OTHERS | Defendants |
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JUDGE: | Hollingworth J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 April 2007 | |
DATE OF RULING: | 2 May 2007 | |
CASE MAY BE CITED AS: | P & V Industries v Porto (No 3) | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 113 | |
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Practice and procedure – Discovery – Legal professional privilege – Whether documents privileged – Crime or fraud exception – Whether solicitor’s files created “in furtherance of” or as part of commission of civil fraud
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Dr K P Hanscombe S.C. with Mr T D Cordiner | Madgwicks |
| For the First Defendant | Mr P W Collinson S.C. with Mr R Cameron | Kingdon Lawyers |
For the Sixth Defendant | Mr I G Waller | Isakow Lawyers |
HER HONOUR:
This proceeding concerns a claim by the plaintiff property developer that Anthony Porto, its former business development manager, wrongfully appropriated and exploited an opportunity to buy and develop a large parcel of land at Taylors Hill, in breach of his statutory and fiduciary duties. The other defendants, including a firm of solicitors, Kennedy Guy, and a company called Morton Homestead Pty Ltd (“Morton”), are alleged to have knowingly assisted or aided and abetted Anthony Porto in those breaches of duty.
In its initial affidavit of documents sworn 6 April 2001, Kennedy Guy discovered a large number of files created by that firm, in respect of which it, rather ambiguously, claimed “solicitor-client privilege over the details regarding the files opened on behalf of its clients who are defendants in this action.”[1] After lengthy solicitors’ correspondence and the receipt of instructions from former clients, Kennedy Guy did not persist with the claim for privilege in respect of many of those files in its supplementary affidavit of documents sworn 6 December 2001.
[1]Kennedy Guy’s first affidavit of documents discovered the files in part 1 of schedule 1, the part of the affidavit in which the party is obliged to list relevant documents for which the party makes no objection to production. However, the files were all described as “privileged”, rather than by any reference to their subject matter, and the deponent, Colin Allan Kennedy, said that Kennedy Guy claimed privilege over “the details regarding the files” (whatever that was meant to mean) on behalf of its clients.
By summons dated 19 February 2004[2], the plaintiff sought orders for the production for inspection of some of the Kennedy Guy files in respect of which the claim for privilege was being pressed.[3] Master Evans heard the plaintiff’s application over 6 sitting days between 29 July 2004 and 15 February 2005. On 15 April 2005, the Master published written reasons for decision[4] and made orders in respect of the seven Kennedy Guy files which remained in dispute at that time.
[2]As subsequently amended on 15 April 2005, by leave of Master Evans.
[3]At that time, the plaintiff was the first of 10 plaintiffs, all of whom were parties to the summons. As the second to tenth plaintiffs are no longer parties to this proceeding, I shall simply refer to the application and other documents as if they were made or created by the current plaintiff alone.
[4][2005] VSC 104.
Two of those seven files remain in dispute before me: Anthony Porto, the first defendant, seeks to establish a claim of privilege in respect of the file known as document 15, on the basis of what is often referred to as advice privilege; Morton, the sixth defendant, seeks to do likewise in respect of the file known as document 330, on the basis of litigation privilege.
The Master found that there had been no express or implied waiver of any privilege which might attach to documents 15 and 330, a finding which is not challenged before me and which is undoubtedly correct on the evidence.
In respect of document 15, the Master held that the file was not privileged, because it contained communications made for the purpose of furthering a civil fraud, namely, dishonest breaches by Anthony Porto of his statutory and fiduciary duties.
In respect of document 330, the Master was not satisfied that the claim for privilege had been properly made out by Morton. It was therefore not necessary for him to make any finding as to whether the crime or fraud exception would also apply to that file.
By notices of appeal dated 20 April 2005, Anthony Porto and Morton appeal against the Master’s orders that documents 15 and 330 be produced for inspection. There is no appeal against the Master’s orders in relation to the other Kennedy Guy files which were the subject of his orders. The hearing of the appeals was adjourned on a number of occasions pending the determination of outstanding pleading issues, the most recent of which were resolved by me in March 2007. In the meantime, the operation of the relevant parts of the Master’s orders has been stayed.[5]
[5]By order of Hansen J made on 22 April 2005.
Document 15
Document 15 is a solicitors’ file opened by Kennedy Guy, apparently on 27 September 1999, being file number 997246. The file contains 22 documents, totalling 39 pages, plus a beige cardboard file cover sheet with handwritten notations. The last document on the file, apart from the solicitors’ account, is a file note dated 20 January 2000.
Slightly less than one half of the documents in the file relate to matters which are plainly the subject of this proceeding. The remainder of the file relates to a company called Pathstone Pty Ltd and has no apparent relevance to this proceeding. However, discovery having been given, I will assume that all of the contents of the file are relevant for discovery purposes.
The file was originally discovered by Kennedy Guy in its April 2001 affidavit of documents. According to Kennedy Guy’s December 2001 affidavit, the file was believed to be in the possession of Anthony Porto.
The file was not discovered by Anthony Porto until his further supplementary affidavit of 10 August 2004, sworn after the first day of the hearing before the Master. In that affidavit, Mr Porto itemised the contents of the file in the schedule and made the following general claim for privilege in paragraph 3:
The documents enumerated in the schedule to this affidavit are privileged, and I object to the production thereof. The documents are privileged on the grounds that they consist of:-
(i) professional communications of a confidential nature passing between me and my then legal advisers, Kennedy Guy, in their professional capacity (“Kennedy Guy”);
(ii) documents prepared for obtaining advice from Kennedy Guy; and
(iii) file notes made by Kennedy Guy;
being documents prepared for the dominant purpose of obtaining and/or giving legal advice or assistance.
No further affidavit has been sworn in support of the claim for privilege. However, with the consent of the plaintiff and Anthony Porto, I examined the file myself.
The solicitors’ account
Lawyers’ accounting documents are not ordinarily privileged, although they may be to the extent that they contain or refer directly to information about the nature and subject of legal advice.[6] But, in this case, the description of work in the Kennedy Guy account of 17 February 2000 is framed only in the most general terms. Senior counsel for Anthony Porto properly conceded in the course of submissions that the claim for privilege in respect of this document could not be maintained. This document must be produced for inspection.
[6]Packer v DCT (Qld) [1985] 1 Qd R 275; Allen Allen & Hemsley v DCT (1989) 86 ALR 597; Lake Cumberline Pty Ltd v Effem Foods Pty Ltd (1994) 126 ALR 58; Cook v Pasminco Ltd (2001) 179 ALR 462.
The case slip and file cover sheet
The case slip is a printed form which contains handwritten information such as the client name and contact details, the matter description, solicitor’s initials and date of file creation. The file cover sheet contains handwritten notations as to the client name, the matter description and the file number.
I do not doubt that some of the types of information contained in the case slip and file cover sheet may, in appropriate cases, contain or record a confidential communication made for a privileged purpose.[7] But, in the course of argument, I queried Anthony Porto’s counsel as to why the case slip was said to be privileged in this case. Counsel responded that disclosure of what was written next to the words “matter description” would necessarily disclose instructions provided by the client to the solicitors. I queried whether, in the absence of any evidence whatsoever as to the circumstances in which the case slip was created, I could draw any such inference. For example, who chose those words (the solicitor who received the initial instructions, somebody working under him, or somebody involved in administration), and why (as a result of instructions received, or some – possibly erroneous - assumption as to what the file was about), are matters of pure speculation in this case.
[7]This case is quite distinguishable from the case of Hamdan v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 211 ALR 642, to which Anthony Porto’s counsel took me. In that case, the client had provided her phone number only upon the solicitor’s express undertaking not to disclose it to any other person. Finn J upheld a claim to privilege in respect of the phone number, on the basis that he was satisfied on the evidence that the likelihood of disclosure would have operated as a real deterrent to the client seeking legal advice; that is to say, in the unusual circumstances of that case, the telephone number was provided in confidence in connection with and for the purpose of obtaining legal advice (at [21] and [22]).
As this was a matter which had been raised for the first time by me in the course of the hearing on 18 April 2007, I acceded to Anthony Porto’s application for special leave to file and serve a further affidavit dealing with the circumstances in which the case slip had been created. I adjourned the appeal part-heard to enable him to attend to that matter. On 24 April 2007, the court was informed that Anthony Porto did not wish to file and serve any such affidavit.
Having regard to all these matters, I am not satisfied that the claim for privilege in respect of the case slip or file cover sheet has been established by Anthony Porto. It follows that these two documents must also be produced for inspection.
The crime or fraud exception – legal principles
“Communications in furtherance of a crime or fraud are not protected by legal professional privilege, because the privilege never attaches to them in the first place. While such communications are often described as ‘exceptions’ to legal professional privilege, they are not exceptions at all. Their illegal object prevents them becoming the subject of the privilege.”[8] It is nevertheless convenient to refer to the ”crime or fraud exception”, as that term is commonly used in the cases.
[8]Commissioner ofAustralian Federal Police v Propend Finance Pty Ltd (1996-7) 188 CLR 501 at 556, per McHugh J, summarising the effect of the leading authorities including Varawa v Howard Smith & Co Ltd (1910) 10 CLR 382; Attorney-General (NT) v Kearney (1985) 158 CLR 500.
The Master concluded that there was prima facie evidence of breaches by Anthony Porto of statutory and fiduciary duties of a dishonest nature, and of the involvement of Colin Kennedy, a partner in Kennedy Guy, in those breaches and in measures designed to conceal the breaches from the plaintiff. The Master inspected the file and, having done so, concluded “that the communications were for the purpose of furthering the fraud. Central to that conclusion is the view that to conceal a fraud is to act in furtherance of it (cf. Plumb v Monck (1974) 4 ALR 405; Re Golightly (1974) 2 NZLR 297 at 304, 305).”[9]
[9]At [22].
With the greatest respect to the learned Master, I believe he misstated the law in holding that “to conceal a fraud is to act in furtherance of it”. Nor do the two cases to which he referred stand as authority for such a broad proposition. I will discuss some relevant authorities dealing with the crime or fraud exception, before turning to the pleadings and evidence before me.
The usual starting point in any discussion of the crime or fraud exception is the old case of R v Cox & Railton.[10] After considering earlier and sometimes inconsistent authorities, the court held that no privilege attached where a client sought legal advice “intended to facilitate or to guide the client in the commission of a crime or fraud”.[11] The more modern cases talk of communications “in furtherance of” or as part of a crime or fraud.
[10](1884) 15 QBD 153.
[11]At 165.
It is the client’s state of mind which is relevant, not the solicitor’s.[12] That is to say, did the client intend to obtain the advice in furtherance of a criminal or fraudulent purpose, whether or not the solicitor knew of the unlawful purpose?
[12]R v Cox v Railton, op cit; Baker v Campbell (1983) 153 CLR 52.
Subsequent authorities have held that the exception is not limited to crime or fraud in the technical sense, and may include communications made to further an illegal purpose.[13] In this case, there is no dispute that the alleged breaches by Anthony Porto of his fiduciary and statutory duties would fall within the concept of fraud.
[13]For example, Attorney-General (NT) v Kearney [1985] CLR 500; AWB Limited v Honourable Terence Roderic Hudson Cole (No 5) [2006] FCA 1234.
It is also well-established that, in order to displace the privilege on the ground of the exception, a mere allegation of fraud in the pleading is not sufficient; a prima facie case of fraud must be established by evidence.[14] I assume for present purposes, without deciding, that the voluminous affidavit material filed by the plaintiff is sufficient to establish a prima facie case against Anthony Porto of dishonest breach of his fiduciary or statutory duties, and against Kennedy Guy, for knowing assistance in those breaches. The principal factual dispute here is whether there is a basis for concluding that the advice sought in late 1999 was in furtherance of the commission of that civil fraud.
[14]O’Rourke v Darbishire [1920] AC 581; Attorney-General (NT) v Kearney op cit.
What will be considered a “furtherance” of fraud for the purpose of the exception has never been clearly defined. In Cox & Railton, the court declined to lay down a general rule as to how the question of privilege might be resolved, observing:
… in each particular case the court must determine upon the facts actually given in evidence or proposed to be given in evidence, whether it seems probable that the accused person may have consulted his legal adviser, not after the commission of the crime for the legitimate purpose of being defended, but before the commission of the crime for the purpose of being guided or helped in committing it. We are far from saying that the question whether the advice was taken before or after the offence will always be decisive as to the admissibility of the evidence.[15]
[15]At 175-6.
The distinction between seeking advice for the purpose of being guided or helped to commit a proposed or current fraud (acting in furtherance), and seeking advice for the purpose of being defended against a past fraud (not acting in furtherance), is one which has been endorsed by subsequent authorities. Unfortunately, the court in Cox & Railton did not elaborate on what it meant by the last sentence, which was irrelevant to the facts in that case. Perhaps it meant no more than that the focus should be on the purpose, not the timing, of the communication.
The plaintiff seeks to rely on three single instance cases as authorities to support the Master’s statement that “to conceal a fraud is to act in furtherance of it”: Re Golightly[16]; ASIC v Mercorella (No 3)[17] and Plumb v Monck.[18] In fact, when one examines each of those authorities, they do not support such a broad principle.
[16](1974) 2 NZLR 297, per Mahon J in the Supreme Court of New Zealand.
[17](2006) 58 ACSR 40, per Mansfield J in the Federal Court.
[18](1974) 4 ALR 405, per Forster J in the Supreme Court of the Northern Territory.
In Golightly, the client was charged with crimes which had been committed some years before. In the course of talking to the client’s solicitor about possible defences to those charges, an officer of the client discussed with the solicitor the means by which evidence discovered by an internal auditor could be suppressed or tampered with. The case was actually decided on the basis of waiver of privilege arguments, which are not relevant for our purposes. However, the judge said by way of obiter dicta that, had it been necessary for him to decide, he would have held that the general tenor of the communications demonstrated an attempt on the part of the client to obstruct or pervert the course of justice; therefore, privilege could not attach to the communications. There is nothing novel in that conclusion. The obstruction and perversion of justice is a separate crime to the original crime, and the communications were undoubtedly made in furtherance of the later crime. The case is not authority for the proposition that communications designed to hide the original crime, but made many years after the relevant events, are made in “furtherance of” the original crime and therefore covered by the exception.
Similarly, Plumb v Monck involved two separate acts of criminal conduct. The client had been charged with driving an unregistered and uninsured vehicle on 28 August 1973. At the hearing of those charges, he gave his solicitor a certificate of insurance dated 3 August 1973, which his solicitor handed to the prosecutor in support of the defence to the charge of driving an uninsured vehicle. The prosecutor adjourned the hearing of those charges and laid a new information against the client and an employee of the insurance company, alleging that the certificate of insurance had been issued some days after 28 August and then fraudulently back-dated to the 3rd of that month.
At the hearing of the later charges of conspiracy to prevent or defeat the enforcement of a law of the Northern Territory[19], the prosecutor sought to call the solicitor to give evidence as to where, when and from whom he received the insurance certificate and with what instructions. The client resisted on the basis that his communications with his solicitor were privileged. Forster J held that the communications between the client and his solicitor fell within the crime or fraud exception, as they formed “part of the working out of the conspiracy”.[20] Once again, the communications were clearly made in furtherance of the later crime (conspiracy), not the original ones (the driving offences).
[19]Contrary to s86 of the Crimes Act 1914-1966 (Cth).
[20]At 411.
The third case relied upon by the plaintiff is ASIC v Mercorella (No 3). In that case, the client engaged solicitors for the purpose of preparing documents which had the effect of concealing the true nature of a transaction and which enabled the client to present through the documents a picture that was not true. The judge held that communications made for the purpose of creating sham documents were a “fraud on justice” and were not privileged. The client later sought advice from the solicitors as to how to protect its assets and interests and as to the enforceability of some of the sham security documents; the judge held that these communications were not made in furtherance of the fraud and were therefore protected by privilege. This case does not stand as authority for the general proposition that “to conceal a fraud is to act in furtherance of it.” The concept of “concealment” of the truth merely formed part of the original fraud, being the creation of sham documents.
Application of the crime or fraud exception to document 15
In this proceeding, the plaintiff pleads that during the period in which Anthony Porto was one of its directors and employees (that is, prior to the end of May 1997), Anthony Porto acquired certain information concerning the Taylors Hill opportunity which he did not pass on to the plaintiff. It alleges that he and other defendants used that information to perform certain acts during 1997 and early 1998, which involved wrongfully taking advantage of the opportunity for their own benefit.
On 23 September 1999, the plaintiff’s then solicitors, Secombs, sent a letter to Anthony Porto informing him that they had been instructed to act in relation to “his withdrawal from the Porto & Valente Group”. The letter said that the group regarded the details of any of his activities outside group companies as being “an integral part of this issue and requires them to be fully investigated before any closure can be achieved.” Details were sought of “any dealings” he had outside the group whilst he was an employee or director, or after he ceased to be a director and employee but which were initiated during his time with the group.
It is apparent from the file that Anthony Porto sought advice from his then legal advisers, Kennedy Guy, in relation to the 23 September letter. An annotated copy of that letter is the first substantial communication on the file.
Anthony Porto’s response of 4 October 1999 queried what Secombs meant by the suggestion that he was withdrawing from the Porto & Valente group. He pointed out that he had ceased to be a director or shareholder of group companies by mid 1997. He said that he was therefore at a loss to explain why the group was writing him about his departure from the group, which had occurred more than two years earlier. The letter concluded by saying that he could only surmise that Secombs may be referring to dealings between the Porto & Valente group and companies associated with his father’s family trust.
In their reply of 12 October 1999, Secombs responded that their letter of 23 September was not referring to the family trust matter, but concerned “your dealings with the group in the use of information obtained whilst you were an employee and director of the group companies.” As with the 23 September letter, no mention was made of the Taylors Hill land or any other transactions about which the plaintiff may have had suspicions at the time.
Anthony Porto’s reply of 25 October 1999 said “I have no knowledge of what you may be insinuating and you have not provided any information of your insinuations to me. Therefore, I feel that your request for information relating to my personal affairs is an invasion of my rights of privacy …”.
It is apparent from the file that Kennedy Guy provided legal advice to Anthony Porto in relation to that chain of correspondence.
Finally, on 29 November 1999, Secombs’ correspondence moved from the general to the specific. Their letter of that date to Kennedy Guy, said that they were making enquiries in behalf of their clients in relation to two pieces of development land, one of which was the Taylors Hill land. The letter asked Kennedy Guy to check their records and provide certain information about the firm’s (not Anthony Porto’s) involvement with the two developments. Kennedy Guy replied on 13 December 1999 that it was not their policy to respond to enquiries of that nature and they did not propose to do so.
The plaintiff argues that the two letters drafted by Kennedy Guy for Anthony Porto, being the letters of 4 and 25 October 1999, were made in furtherance of Anthony Porto’s breaches of duty. It was argued that the communications about the letters therefore fell within the crime or fraud exception.
At the time of the hearing before the Master, the statement of claim included an allegation that Anthony Porto owed a fiduciary duty to disclose his past wrongdoing. His failure to provide the information sought in the Secombs’ letters of 23 September and 12 October 1999 was pleaded as constituting a breach of that duty. If such a duty of disclosure of past wrongdoing existed, then legal advice as to how to respond to the Secombs’ letters might have been given “in furtherance of” a breach of that duty.
However, in March 2006, I heard and determined an appeal from Master Kings in relation to an application by the defendants to strike out parts of the statement of claim.[21] On that occasion, I upheld Master King’s decision that, as a matter of law, Anthony Porto did not owe a fiduciary duty to disclose any past wrongdoing by him.
[21]P & V Industries v Porto (2006) 14 VR 1.
There is now no dispute that, at the time of the Secombs’ letters, Anthony Porto owed no duty to provide the information requested by Secombs. The plaintiff’s counsel conceded that, had Anthony Porto responded to the letters by simply refusing to provide the information sought, then any communications between him and Kennedy Guy about how to respond would be privileged. But the plaintiff says that because Anthony Porto’s responses were “dissembling”, they were made in furtherance of the dishonest breaches of duty and were therefore not privileged. If (contrary to my earlier findings) the plaintiff and the Master were correct in saying that to conceal a past fraud is to act in furtherance of it, then it is not clear to me why one would draw a distinction between concealment by an open refusal to answer, and concealment by pretending that one does not know what the enquiry is really about.
Having considered the Secombs’ letters, and having examined document 15 in so far as it reflects advice given by Kennedy Guy as to how to respond to the Secombs’ letters, I do not take such a critical view of Anthony Porto’s replies as the learned Master did. It is clear to me that both sides to this correspondence were engaging in a certain amount of pre-litigation posturing and positioning, as they were entitled to do in the absence of any disclosure obligation on either of them. The relevant Secombs’ letters were cast in very general terms, made no mention of any particular transactions about which they had any suspicions, and purported to be about the finalisation of Anthony Porto’s “withdrawal from the group”. Secombs were clearly casting a wide net, to see what information they might acquire to assist their client. There is nothing wrong with such an approach, although it does run the risk of receiving an unhelpful response. Anthony Porto’s responses were unhelpful. On the limited evidence before me, it seems likely that both sides knew more about each other’s position than they wished to reveal in this correspondence.
But even if Porto’s responses were actually dishonest, because he knew perfectly well what Secombs were really asking about, that does not mean that his communications with Kennedy Guy were made “in furtherance of” the breaches of duty which had occurred two years earlier, as opposed to being in order to defend himself from possible litigation. As the plaintiff’s claim currently stands, its equitable and statutory causes of action against Anthony Porto accrued at the time when he is alleged to have wrongfully taken the Taylors Hill opportunity. Damages may have continued to accrue since that time, as the land continues to be developed, but the civil fraud, if any, committed by Anthony Porto occurred no later than early 1998.
Nor is that conclusion altered by paragraph 15(k) of the current version of the statement of claim. That paragraph pleads that Anthony Porto procured the other defendants, including Kennedy Guy, to conceal the various acts in which they engaged in late 1997 and early 1998. Paragraph (b) of the particulars to that allegation contains a general assertion that Anthony Porto, Garry Lawes and Stephen Lawes did not inform the plaintiff of the various acts; no time period is pleaded.
The plaintiff argues that paragraph 15(k) is a pleading of some sort of ongoing concealment or fraud. Therefore, it is said that the communications between Anthony Porto and Kennedy Guy in September and October 1999 were part of that ongoing concealment or fraud. I do not accept that argument, for the following reasons.
In the second pleading appeal which I determined a few months ago[22], I upheld Master Kings’ decision to strike out certain paragraphs of the statement of claim which had alleged a positive fiduciary duty of disclosure by Anthony Porto, said to be independent of the “no profit” and “no conflict” fiduciary duties. At that time, I refused to strike out paragraph 15(k), because I concluded that it did not allege, and was not dependant on, the existence of any (impermissible) positive duty of disclosure. Instead, I allowed the pleading to stand only as part of a series of factual allegations about the various acts and omissions of Anthony Porto after he acquired the information. I held that the paragraph was at least arguably relevant to the allegations in paragraph 21 that Anthony Porto did certain things for the benefit of himself and others “without the informed consent” of the plaintiff (and thereby breached his fiduciary duty). Nothing in paragraph 15(k) alters my conclusion that the civil fraud, if any, committed by Anthony Porto occurred no later than early 1998.
[22]P & V Industries v Porto (No 2) [2007] VSC 64.
It follows that I am not satisfied that document 15 contains or evidences communications made “in furtherance of” Anthony Porto’s breaches of fiduciary or statutory duties. It is therefore necessary for me to consider whether the contents of the file are otherwise privileged.
Having examined the file myself, I am satisfied that the general privilege claim in the Porto affidavit of 10 August 2004 is accurate and sufficient, and that all documents (save for the account, the case slip and the cover sheet) were created for the dominant purpose of Anthony Porto seeking, and Kennedy Guy providing, legal advice.
In so far as the file contains copy documents, the originals of which would not themselves be privileged, I am satisfied that the copies were created for the dominant purpose of obtaining legal advice and would be privileged under the principles in Commissioner of Australian Federal Police v Propend[23].
[23](1997) 188 CLR 501.
Document 330
Document 330 is a solicitors’ file opened by Kennedy Guy, number 20007171. It contains 15 documents totalling 85 pages, plus a yellow cardboard cover with handwritten notations. The earliest documents are dated 17 July 2000 and the last document is dated 25 August 2000.
As with document 15, the file was listed in Kennedy Guy’s April 2001 discovery, but its contents were not identified until the firm’s December 2001 discovery. In the December 2001 affidavit, the file was described as “Dispute with Porto & Valente”. Unlike document 15, the file was said to be in the possession of the firm, not the client.
Document 330 has never been specifically identified in Morton’s discovery as being a file in its possession or control. Whether it was intended to be included in the general claim for privilege in any of its four affidavits of documents[24] is not clear. Certainly, Morton has not identified who are the “legal advisers” referred to in part 2 of schedule 1 of its various affidavits of documents. Nevertheless, the application before the Master and the appeal before me have, without objection, both been conducted on the footing that Morton has standing to make a claim for privilege in respect of document 330.
[24]Anthony Porto has sworn the following affidavits of discovery on behalf of Morton and the fifth defendant, Lawport Pty Ltd: affidavit of 15 October 2002, supplementary affidavit of 17 September 2004, second supplementary affidavit of 7 June 2006, third supplementary affidavit of 7 February 2007. The last two affidavits were not before the Master and no party sought to rely on them before me.
The only other affidavit which touches upon document 330 is an affidavit sworn by Gerald Peter Davis on 27 July 2004. Mr Davis is a solicitor employed by Isakow Lawyers, Morton’s current solicitors in this proceeding. His only evidence in relation to document 330 is as follows:
I am informed by Anthony Porto and Stephen Lawes and believe that this document consists of a solicitor’s file opened by Kennedy Guy on 17 July 2000 in anticipation of service of the Supreme Court writ in these proceedings. The file contains the writ and statement of claim in this proceeding which was filed on 18 August 2000 and a letter from Kennedy Guy to Mr Stephen Lawes dated 22 August 2000 following service of the writ. The file also contains some company searches.
No past or present officer of Morton, and no solicitor at Kennedy Guy, has ever sworn an affidavit verifying the truth of that paragraph, which contains at least second hand hearsay from an unidentified solicitor at Kennedy Guy. Given that Anthony Porto, Stephen Lawes and Kennedy Guy are all defendants to this proceeding, there is no question as to their availability to swear such an affidavit in support of Morton’s claim. Indeed, Anthony Porto has sworn all of Morton’s four discovery affidavits.
Significantly, the Davis affidavit does not say, even on a second hand hearsay basis, that Kennedy Guy was ever instructed to act for Morton in relation to this proceeding.
In his written reasons, the learned Master was very critical of the lack of evidence justifying the privilege claim in respect of this file. Having examined the file himself, and in the absence of adequate evidence, he held that he could not be satisfied that the solicitor/client relationship had arisen in relation to this proceeding at the time when the file contents were created. It was primarily on this basis that he ordered that document 330 be produced for inspection.
Notwithstanding the Master’s finding, Morton made no attempt to adduce evidence on the appeal to address the matters raised by the Master. Given that the court book for these appeals runs to no fewer than seven lever arch folders of affidavits and other court documents, stretching over a six year period, the fact that nobody with personal knowledge has ever deposed to the circumstances in which the file came into existence (including whether Kennedy Guy ever received instructions to act for Morton in relation to this proceeding) seems curious, to say the least.
I am not suggesting that the lack of affidavit evidence is necessarily fatal to a claim for privilege, as such a claim may be established in a number of ways. Whilst it may be established by evidence, it may also be established by having regard to the nature or character of the documents themselves. In Grant v Downs[25], the majority of the High Court, Stephen, Mason and Murphy JJ, made the following observation about the basis on which the judicial discretion to allow the production and inspection of documents may be exercised:
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. The court has power to examine the documents for itself, a power which has perhaps been exercised too sparingly in the past, springing possibly from a misplaced reluctance to go behind the formal claim of privilege. It should not be forgotten that in many instances the character of the documents the subject of the claim will illuminate the purpose for which they were brought into existence.[26]
[25](1976) 135 CLR 674.
[26]At p689
Morton argues that there is a third way in which privilege may be established, namely by argument alone. The Court of Appeal decision in Mitsubishi Electric Australia Pty Ltd v Victorian Workcover Authority[27] is said to stand as authority for that proposition. In fact, the case does not support such a broad proposition. Batt JA, with whom Charles and Callaway JJA agreed, made the following comment at [11]:
Where a question of legal professional privilege arises, the onus is on the party claiming it to make it out by evidence or argument, even though it is the other party that has applied for relief by way of an order for production for inspection or otherwise: Grant v Downs; Waugh.
[27](2002) 4 VR 332.
It is clear from a fair reading of the case, and of the authorities he relied upon to support that statement, that his Honour used the words “by argument” to refer to an argument as to the nature or character of the documents. Such an argument might be possible because of the way in which documents had been described in an affidavit of documents, or because the court had inspected the documents. But his Honour was clearly not suggesting that such an argument could be had without some factual foundation for it. Nor would the cases of Grant v Downs and Waugh v British Railways Board[28] suggest otherwise.
[28][1980] AC 521.
As has already been mentioned, nobody has deposed that Kennedy Guy was in fact retained to act for Morton in connection with this proceeding. Nor does an examination of the file persuade me that such was the case. For a start, there is no solicitor’s file note, or written communication from Morton, to suggest that such instructions were ever received.
It is true that the solicitors’ case slip, which is dated 17 July 2000, names Morton as the client, but there is no evidence as to who made that annotation or why. This will be discussed further shortly.
The original writ in this proceeding was served at Kennedy Guy’s offices on 22 August 2000, under cover of a letter addressed to “The Secretary, Moreton Homestead Pty Ltd, c/- [the street address of Kennedy Guy’s offices]”. Both of those documents are on the file. The service letter was addressed to the client, not the firm. Service seems to have occurred because Morton’s registered office was at the firm’s address, so the firm was effectively acting as mailbox for the company. Even if “by serving the writ addressed to Morton Homestead at the office of Kennedy Guy, the plaintiffs must have expected that Kennedy Guy might advise Morton Homestead concerning the proceeding just issued” (as Morton baldly asserts in its outline of submissions), that would be irrelevant to the question of whether in fact Morton ever instructed Kennedy Guy to act; the privileged status of a document is not determined by an opposing party’s beliefs. Here, there is nothing to suggest that service of the writ occurred because Kennedy Guy in fact had instructions to accept service as solicitors acting for Morton in relation to this proceeding.
Importantly, Kennedy Guy sent a copy of the writ to Morton under cover of a letter dated 22 August 2000, which concluded with the following paragraph:
If Morton Homestead Pty Ltd proposes to instruct solicitors other than Kennedy Guy, it should do so immediately and ensure that the Notice of Appearance is filed by those solicitors. If Morton Homestead Pty Ltd proposes to instruct Kennedy Guy to act on its behalf in this matter, please advise immediately so that we can file the Notice of Appearance.[29]
[29]I would not ordinarily include in my reasons for decision an extract from a document whose privileged status is under consideration. However, in this case, the substance of the relevant paragraph has already been disclosed by the Master in his reasons.
Morton’s counsel urged me to infer that Kennedy Guy would not have opened the file without being instructed to do so. But, that is not the only reasonable inference open on the material before the court. Morton was a company established by Kennedy Guy, and Colin Kennedy was its sole director, secretary and shareholder at the time of incorporation. It is clear that Kennedy Guy had, from time to time, acted as Morton’s solicitors in relation to a variety of transactions, including some which are the subject of this proceeding. Given that history, it may be that the relevant Kennedy Guy solicitor simply assumed, without receiving any instructions, that the firm would be retained to act for Morton when the anticipated proceeding was commenced.
Why ask Morton whether it proposed to instruct the firm to act for it in this proceeding, if those instructions had already been given? Morton’s counsel argued that the letter of 22 August was in essence just a standard form letter and I should ignore the query about who Morton proposed to instruct. But whilst some parts of the letter might be thought to be standard form, substantial parts of it have clearly been tailored to this particular case. Had instructions to act already been received, it would have been very simple to tailor the letter so as to conclude with confirmation that Kennedy Guy had been instructed to act for Morton in this proceeding.
There is no other document on the file which would tend to suggest that any such instructions had been received. Furthermore, it appears that no account was ever rendered to Morton in respect of the file.
Some of the other documents on the file raise more questions than they answer. The file contains the following search-related documents: ASIC searches conducted on Garry Lawes, Carlo Porto and Harold Parth on 17 July 2000, which show the companies of which they are or have been officers or shareholders; ASIC searches dated 24 August 2000 for Oxford Terrace Pty Ltd and The Sydenham Syndicate Pty Ltd; and Landata Index searches conducted on four other companies on 25 August 2000.
Even though the ASIC and Landata databases are publicly-available databases, I accept in principle that copies of such documents may be privileged if the copies were produced for a privileged purpose. But, here, it is not apparent from an examination of the file who requested any of the searches to be done or why, nor is there any affidavit which sheds any light on this. Garry Lawes is the second defendant and Carlo Investments Pty Ltd was a plaintiff when the proceeding was commenced. But none of the other persons or companies the subject of any of the searches was a party to the proceeding or mentioned in the original writ. What connection, if any, do those searches have with acting for Morton in relation to this proceeding? The presence of these searches on the file raises questions, rather than provides answers, as to why the file was opened in the first place.
For all of these reasons, Morton has not persuaded me that Kennedy Guy were instructed to act as Morton’s solicitors in relation to this proceeding during July and August 2000, when the contents of document 330 were brought into existence. It follows that the claim for privilege in respect of this file must fail and the entire file must be produced for inspection.
Conclusion
For these reasons, there will be orders to the following effect:
(1) The first defendant’s notice of appeal dated 20 April 2005 is allowed in part.
(2) In lieu of order 3 of the orders of Master Evans made on 15 April 2005, there be an order that by [a date to be specified in the order], the first defendant produce to the plaintiff for inspection the following documents in the file described as document 15 in the fourth defendant’s affidavit of documents dated 6 April 2001: the case slip, the file cover sheet and the final account.
(3) The sixth defendant’s notice of appeal dated 20 April 2005 is dismissed.
(4) By [a date to be specified in the order] the sixth defendant produce to the plaintiff for inspection the file described as document 330 in the fourth defendant’s affidavit of documents dated 6 April 2001.
I will hear from the parties as to the precise form of orders and as to costs.
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